Talking on Car Phone Isn’t Cheap, but L.A. Still Buys It
We never were as laid-back as they said we were, and now we even work in our cars.
In just five years, the cellular car phone has gone from executive toy to “necessary business tool,” as its promoters describe it. How can you work in Los Angeles without one?
Traffic has a lot to do with it. Stuck for an hour between the Valley and Orange County? Get on the horn and make an appointment, or close a deal, or check your message machine, or sweet-talk a sales prospect. It’s more productive than listening to the radio.
Sure, it’s expensive. But, these days, the boss is apt to ask just how much you accomplished during that hour’s drive. An increasing number of people are finding car phones worth the relatively high monthly and per-minute charges.
If you buy a portable model, which more and more people are doing, you can take the phone with you to the beach, to lunch, to the airport or even to the restroom. Connect your laptop word processor to the car phone and you can transmit that sales report on your way to an appointment. Install a fax machine in your car, and your office can send that document you forgot.
How very L.A.
“It was originally seen as something nice to have, and only top executives had them,” says Wayne Nanna, director of marketing for Los Angeles Cellular. “Then those people saw how much more productive their sales people or their field technicians could be if they had car phones.”
Technically, car and other portable phones are radios. Calls are transmitted through a grid of antennas, each covering a small geographic area called a cell. As you travel, your call automatically switches from cell to cell.
Herschel Shosteck, an industry analyst, figures that the Los Angeles-Orange County area, which had about 10,000 cellular telephone subscribers five years ago, will have roughly 329,000 by December. That makes it the largest market in the country, followed by Chicago (320,000), New York (306,000) and Detroit (222,000).
Both PacTel Cellular and Los Angeles Cellular, the competitors who serve the Los Angeles region, have doubled the number of cells they operate within the past two years; PacTel now has 170; Los Angeles Cellular has more than 190.
But even with this rapid expansion, both companies are barely keeping up with demand. Some even believe that, despite the phenomenal growth, the cellular phone business here isn’t coming close to meeting its potential.
“In the number of phones, (Los Angeles) is the biggest market, but in terms of phones per capita it’s a mediocre market,” says Shosteck, who owns a cellular phone consulting business in Silver Spring, Md.
He figures that only 2.25% of the people in greater Los Angeles will have a cellular phone by year’s end. That compares to 3.85% in Chicago and more than 4% in Detroit. Nationally, it’s nearing 2%.
Why is the market share here, in the nation’s car capital, lower than in those cities? In large part, it’s because cellular service remains more expensive than in most other places.
According to Shosteck, Los Angeles is the most expensive of the 10 biggest cellular markets in the country. He figures that it costs $157 a month for 250 “prime-time minutes” (between 7 a.m. and 7 p.m.), including the access fee. In Chicago, it’s as low as $77 for the same service.
“If you look beyond the growth in actual numbers, you see that demand for cellular phone service in Los Angeles isn’t growing as strongly as it is in places where the price is cheaper,” Shosteck says.
But, in an example of a Catch-22, Los Angeles-style, if the local cellular companies cut prices to gain more subscribers, they would be hard-pressed to handle the increased volume.
The Los Angeles area covers more than 10,000 square miles. That means that there are many more geographic “cells” here than in more compact cities, such as Chicago. The places where usage is heaviest--West Los Angeles and downtown--are also the places that cost the most to install the antennas and radio equipment in each cell.
It’s getting harder to find affordable antenna sites, and delays in getting necessary permits and approvals for construction are also holding things up, according to John Lister, president of the Los Angeles-area market for PacTel Cellular. Therefore it’s more expensive and more difficult to engineer a system here.
Then there are some problems unique to the area: All those new, mirrored-glass skyscrapers in Los Angeles cause interference. (Older buildings in older cities don’t have quite the same effect.) Also, it’s hard to transmit from your portable phone if you’re in one of the many canyons around here. And freeway interchanges cause “hot spots” when too many people try to talk at once--especially during a traffic jam--and overload a cell.
All this has created the problems that have kept the price of our cellular service the highest in the nation. No one seems to be profiteering. It’s just a tough place to do business, especially one that requires construction permits and government approval.
The industry is counting on a switch to digital radio equipment next year and beyond to vastly increase the number of calls that can be handled by each cell. Indeed, some say digital equipment will increase current capacity anywhere from three to 20 times.
That, industry experts say, may finally bring enough excess capacity to the system in Los Angeles to spur the kind of rate cutting seen in Chicago and Detroit.
It seems likely that the local companies will need all that extra capacity and more. Prices of portable cellular phones have dropped substantially, from more than $2,000 several years ago to as low as $400 today. New, smaller products that fit in a pocket or purse are coming to market. Car phones may be the next videocassette recorders or compact disc players.
And traffic is getting worse.
