Subject: [NEXTEL-1] Wireless 2003: Boom or Bust? - 6 January 2003

From: Marcel <[email-masked]>
Date: Mon, 06 Jan 2003 16:47:46 -0500

Wireless 2003: Boom or Bust?

2002 was not kind to most of the telecom sector, nor to wireless in particular. Wall
Street decided that wireless was no longer an important sector and that the wireless
industry was bound and determined to drive margins down, thus reducing ARPU. Net adds were
all over the map--up for some, way down for others--and the word "saturation" was bandied
about. Spectrum issues loomed large on the horizon. The Supreme Court heard the
FCC/NextWave arguments and while we are waiting for that final shoe to drop, the FCC and
the feds in general have promised (yet again) more spectrum coming to an auction near you
real soon now (RSN), meaning that we probably won't see any "new" spectrum until at least
2006 or 2008.

Based on the FCC's "hands off" policy, many states have taken on wireless providers as
complaints from customers apparently increase in number. The states are itching to play a
role in "regulating" the wireless industry which has been off limits to all but the feds.
Meanwhile, the FCC and others on a federal level seem to come up with new spectrum plans
or policies on a weekly basis, in some cases offering to auction spectrum that has already
been auctioned and talking about new ways of measuring interference and usage.

Wireless operators have become the "bad guys," providing service that is not reliable,
with lots of coverage holes and forcing folks into multi-year contracts. While most folks
don't want a wireless tower anywhere near their homes, they demand coverage. And many
cities have decided to halt all wireless tower construction while at the same time
demanding better coverage for their citizens.

So here we are, entering a new year--a year that should be great for the wireless
industry. We now have data services available on most of the networks, new devices that
sport color screens, cameras and keyboards and are capable of Java and/or BREW. The price
of wireless data services is becoming more realistic, the content is better and
corporations are more interested in providing voice and data services for their mobile
workforces than ever.

This should, therefore, be a great year for wireless voice and data. But unless the
wireless industry goes on the offensive with a dedicated public relations campaign I am
not convinced that it will be. More needs to be done for the good of the entire industry,
and it must be done quickly. The good news is that the CTIA, led by Tom Wheeler, has
stated that it will get involved not only on a federal level but on a state level as well.

The industry needs to take a page out of the cable TV industry's PR pages. Remember how
bad its reputation for service was only a few years ago? How it went on the offensive and
ran ads about being on time, offering free installation if they were late at your home and
giving better customer service? While it didn't fix all of the problems, the fact that it
took the offensive and worked on fixing customer service perceptions made a big
difference. I think the wireless industry needs to do the same thing.

Non-techies I talk to who complain about wireless coverage don't understand the
correlation between cell sites and coverage, and they certainly don't understand why, if
there is a site near them, they still may lack coverage. The idea that each network has
its own towers and that being near an AT&T tower doesn't help if they're a Verizon
customer is foreign to them. Unfortunately, it's the same when talking to zoning folks at
various cities and counties. What I get is, "Why does Company X need a tower when Company
Y already has one in that area?"

From the public's perspective, the issues have to do with coverage (or lack of it),
contracts that cannot be cancelled if coverage is found to be lacking, poor customer
service (one attorney firm with more than 100 phones recently cancelled service because of
billing problems and the inability to get any customer service representative to figure
out how to authorize international calls) and the fact that soon after entering into an
agreement there are better deals available.

My son and daughter-in-law recently moved to Georgia and are now "stuck" with two wireless
phones that do not provide coverage at their new home, even though they were told they
would. It seems that the operator convinced them to sign up for a two-year contract to get
a better deal on the phones (no, they did not check with me). When they went back to the
store they were told, "Sorry, you signed the contract. If you want out you will have to
pay the (huge) penalty fee." They intended to use wireless phones only and not install a
wired phone but now they have no choice. And we wonder why the wireless industry has a bad
reputation

I believe that now is the time for the industry to come together to work toward changing
its image and changing the public's view in an effort to help the industry grow. The CTIA
has been doing some of this and several wireless operators have joined together to work
with the California PUC after it threatened to enact new consumer protection laws. And
there are industry and network specific ads about using a phone in a car responsibly, but
that is are far as it has gone.

I'd also like to dust off my idea about holding a Wall Street analyst day that is not
about numbers and forecasts but about educating these folks about the wireless industry,
how important it is now and how much more important it will be moving forward as our
society grows ever more mobile. We would emphasize that in order to provide the services
customers want now and into the future there have to be large investments and while they
are building for the future, wireless operators might not be rolling in cash.

Every time I go to an event as a Forbes newsletter editor and mingle with investment
advisors, gurus and soothsayers, I am amazed at how little they really know about the
wireless business. If they cannot reduce it to income versus expenses or some other
formula that might apply to other industries they are totally lost. I have spent hundreds
of hours trying to explain why this industry is so important and different. Those who
listen to me seem to "get it" but I can't afford to talk to every Wall Street analyst and
explain the basics of our industry. We need to do it as an industry, and we need to do it
soon.

The Bottom Line

Today 140 million of us in the U.S. have a wireless phone (more than 50% of the
population) and as our contracts expire we will: 1) pay less for our next contract; 2)
change networks because we believe our network signed us up under false pretenses or has
lousy customer service; and 3) won't try new services such as data and messaging because
our wireless voice service provider has really ticked us off!

I meet a lot of people and when they find out what I do, I have to stand back and listen
to their anger, frustrations and beefs about poor coverage and poor customer service. At
least I dont have to listen to them complain about high pricing. When I explain the
realities of cell towers and how there cannot be better coverage without them, and tell
them that more and more towers are being used as shared sites, they at least begin to
understand the issues. But I still don't have a good explanation for contracts that cannot
be cancelled without penalties and poor customer service.

I was recently in a Circuit City in California. A woman came in and complained that her
phone did not provide coverage where she lived and her contract was finally up. The
salesperson told her she could change from Cingular to T-Mobile and that would fix her
problem. I admit I blew a fuse and butted in. You see, in California, Cingular leases its
network to T-Mobile so the network is the SAME! I explained this and the sales guy was
upset with me when the woman decided to try another network provider. When I asked him if
he could provide her with a trial phone or a 30-day return deal he said no, she would have
to sign up for another one or two year contract!

 I believe that the wireless industry had better start the year off by being proactive if
  2003 is to be a good year and band together to explain the issues. I also believe that
 many of the network operators' top management ought to place a call to their own customer
  support folks once a month and see how they are treated! Or go into one of their stores
 and see what kind of (dis)information they are given by the sales clerk who is on a quota
   and only cares about selling a phone and service, not about taking care of customers!

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