The Commercial Market
CTIA Releases Year-end Wireless Statistics
The Cellular Telephone Industry Association's (CTIA) year-end, semi-annual survey of the US mobile communications market indicates that 17 percent of the US population now uses wireless phones. The survey reports that 1996 saw the net addition of more than 10,250,000 phone subscribers compared to just over 9,650,000 in 1995. A total of 44,042,992 subscribers were on the rolls as of December 31, 1996 and new subscribers are signing up at the rate of 28,025 per day.
While the average call length rose from 2.15 minutes in December 1995 to 2.32 minutes in December 1996, the average monthly phone bill continued its decline as it fell from $51.00 to $47.70 during 1996. These figures include both business and personal users. Industry revenues grew more than $4.5 B in 1996 and, for the first time in a calendar year, exceeded $20 B at $23.6 B. Roamer revenues grew over $200 M in 1996 to $2.8 B.
The wireless industry added nearly 16,000 new employees, finishing the year with 84,161 individuals employed directly. The industry's capital investment totaled $8.4 B in 1996, raising its total investment to $32.5 B. At the end of 1996, there were 30,045 cell sites in use, an addition of 7,382 to the December 1995 total.
The CTIA statistics include both cellular and personal communications service (PCS) systems. The employment and capital investment data reflect some under reporting due to the fact that the survey collects information only from companies in operation and providing service. The survey does not include new ventures in build-out that are not yet accepting subscribers. Since most PCS providers were in the latter category during 1996, the data are primarily from the cellular market.
World Trade Organization Agrees to Liberalize Global Telecommunications Traffic
The World Trade Organization signed an agreement on February 15 that liberalizes worldwide telecommunications services significantly. The agreement will make worldwide communications less expensive and will liberalize trade in technology products and services.
Competitive restrictions on international and domestic trade in fax, voice and data transmissions; leased line services; satellite communication; mobile telephony; and paging have been removed or relaxed by the agreement. Foreign ownership of carrier restraints has been eliminated or eased, predatory and discriminatory pricing have been banned, and firms competing with national telephone companies now have clear rights to interconnection with the established companies.
The agreement increases free access for international carriers from their present 17 percent market share to nearly all of the 20 largest world telecommunications markets. One estimate forecasts that the agreement will reduce the cost of phone calls by 80 percent and create up to one million jobs in the US. The agreement is scheduled to take effect January 1, 1998, and 65 of the 69 signatory countries will be bound by law to its terms. The governments involved represent 95 percent of the world trade in telecommunications, and account for an estimated $650 B a year.
However, some obstacles are expected to remain in the liberalization process. The US will continue to pressure Canada and Japan to stop insisting that foreigners not own controlling stakes in telephone companies.
Forecast Puts Total Wireless Phone Subscribers at 84 Million by 2002
A new forecast from the Yankee Group estimates that there will be 84.4 million US subscribers to cellular/PCS services by the end of 2002. Of these, 41.1 million are expected to be analog system users and 43.3 million are expected to be digital system subscribers.
The report predicts that most of the US will have digital service available by the end of this year as cellular operators respond to PCS rollouts by accelerating their digital offerings. Currently, approximately 30 PCS markets are being launched. APC, Western, BellSouth and Omnipoint are offering Global System for Mobile communications (GSM) technology in widely scattered areas, including Baltimore/Washington, Honolulu and New York City. Powertel, Pacific Bell Mobile and Microcell are launching GSM service in several areas, including San Diego, Memphis and Montreal. PrimeCo and Sprint PCS are marketing code-division multiple access (CDMA) service in several cities, including Miami, Houston and Milwaukee.
Cellular providers are busily launching digital alternatives to their existing analog networks. AT&T Wireless is offering IS-136 service in cellular markets with 70 million POPs. AirTouch, GTE, 360 Comms and BANM are marketing CDMA on the West Coast and in the Northeast.
According to the report, PCS introductions are successful for a number of reasons. Pricing plans are usually simpler than cellular, there are fewer plans, there is less distinction between peak and off-peak, calling areas are larger and long distance is more integrated. In addition, there are usually no contracts, there are attractive bundled features and the phone has value.
The analog market is forecast to rise from its 41.6 million subscribers at the end of this year to a peak of 47.5 million subscribers in 1999 before declining to 41.1 million by the end of 2002 as digital cellular and PCS become available. During that same period, digital subscribers are expected to increase from 4.3 million to 43.3 million, a compound annual growth rate of 58 percent per year.
Study Shows Wireless Customers Happy but Expecting More
A study conducted by Peter D. Hart Research Associates for the CTIA, "Competition in the Wireless Market," finds that wireless customers are generally satisfied with their service providers but are expecting more from the industry in terms of service and price. The study covers both cellular and PCS users. The study reveals that wireless customers are becoming increasingly sophisticated and that measurable differences exist in the demographics of cellular and PCS users.
While cellular service is clearly established, the emerging PCS system is proving attractive, particularly to users who are predominantly male, younger and more often professional than their cellular counterparts. Both cellular and PCS calling patterns indicate a majority of personal rather than business calls and local rather than long-distance use. Cellular users appear more apt to initiate calls while PCS users appear more likely to receive calls. Approximately 50 percent of the PCS users have used cellular service. Of that 50 percent, 58 percent simply added a PCS phone to their household and 42 percent switched from cellular to PCS.
Both cellular and PCS users give the industry good marks for improvements over the past few years. Approximately 67 percent of cellular and 73 percent of PCS users indicate that they are extremely or very satisfied with their service. More than 70 percent of all cellular and PCS users believe that wireless providers should concentrate on the basics of reliable and dependable service at the expense, if necessary, of developing and offering new features. Price appears to be an extremely important consideration to all wireless users. Approximately 40 percent of users say that time rates and monthly charges are the most important cost elements. In addition, 70 percent of users say that those cost elements were keys to their selection of a wireless service.
Overall, the results of the study revealed that cellular users are perceived as being more comfortable with an established provider while PCS prospects want the latest in technology. Price is a major concern. Users feel that prices went up last year and will go up again this year. Neither cellular nor PCS users are interested in bundled services -- they want flexible pricing, not long-term contracts. Users know what they want from their phones, feel knowledgeable and comfortable shopping for them, and should be treated accordingly. Users are most concerned with poor transmission and disconnections, about the fact that the receiving party must pay and that some phones cannot be used outside their home area.