THE EMERGING WIRELESS INDUSTRY : PacBell Wants Back Into Game
Four months after spinning off its cellular phone unit, Pacific Telesis Group said Friday that it will return to the mobile communications arena and compete with its former subsidiary, now known as AirTouch Communications.
Pacific Telesis, through its newly formed Pacific Bell Mobile Services unit, said it will bid aggressively for licenses enabling it to offer so-called personal communications services, a new type of wireless technology that could pose a major challenge to existing cellular networks. The Federal Communications Commission plans to auction the licenses for so-called wide-band PCS this winter.
In addition, Pacific Bell Mobile Services intends to act as a reseller of conventional cellular services. That would enable the company to get into the wireless communications business much more quickly, because PCS services are not expected to be fully operational until 1997.
The California Public Utilities Commission expected Pacific Telesis’ action and said it was pleased to see further competition in the fast-growing wireless market.
“The commissioners are unhappy with the duopoly structure,” Douglas Dade, supervisor of the PUC’s Telecommunications Branch, said in reference to rules that now allow just two cellular carriers in each market. “They are looking for PCS to provide additional competition.”
Lyn Daniels, president of Pacific Bell Mobile, said in an interview that his unit plans to “spend hundreds of millions of dollars” over the next three years to create a PCS network. And he indicated that he will bring a hefty checkbook to the PCS auctions, which are expected to raise as much as $10 billion for the federal government.
Lyn said the company will bid on the big Southwestern PCS license covering Southern California and Las Vegas, the license covering the Bay area and a few other licenses covering smaller areas of the state.
“This is important to our overall position in California,” Daniels said. “We have the highest value to bring to the market, so we are in a position to pay the highest prices.”
Established cellular carriers are barred from bidding for PCS licenses in major markets, so Pacific Telesis would not be able to go ahead had it not spun off AirTouch.
The wireless market in California is growing at a rate of 45% a year, and analysts say there is room for dozens of new wireless services. With a denser urban antenna network to relay signals, PCS will feature transceivers smaller and cheaper than cellular phones. Proponents say PCS technology will eventually enable users to make and receive calls anywhere, including inside office buildings.
But Pacific Bell Mobile faces an uphill battle in becoming a serious player in the market. Its lawyers are still fighting government regulators for the right to bid on a key Southern California PCS license, which had initially been granted to one of the PCS technology “pioneers.” Some skeptics doubt PCS will ever compete head to head with full-fledged cellular phone companies.
“I don’t see anyone becoming a major wireless provider in competition with cellular using PCS licenses,” said Herschel Shostek, whose research company focuses on cellular services.
Shiver reported from Washington and Helm from San Francisco.
