Upping the ante in the war for cellular phone customers, Los Angeles' digital carriers Pacific Bell Mobile Services and Sprint PCS will announce this week sharply discounted per-minute rates for customers who use their cell phones outside their local calling area.
The scramble by cellular carriers to reduce per-minute fees for customers who use their phones outside their home area--a feature known as roaming--is one of the primary drivers of competition in the wireless market today, analysts said.
Wireless companies are betting that revenue loss from steeply discounted roaming fees will lead to long-term gains in customers and better retention rates for those who use their service. They also hope to persuade customers to use their phones more often.
The move is also an attempt by carriers to set themselves apart in a market where competition is fairly new. Sprint PCS and PacBell joined AirTouch Communications and L.A. Cellular in Southern California last year to vie for the 85% of residents who do not own a cell phone.
"What free roaming is all about is really a marketing game," said Phil Asmundson, a partner in Deloitte & Touche's telecommunications division in Dallas. "It's an ability to demonstrate a larger home area and can be a big competitive advantage."
But beware of the hype surrounding "free" roaming: These services still carry a charge.
Digital carriers plan to use discounted roaming rates to entice customers to try new digital networks--which operate on a piece of the radio spectrum auctioned off by the federal government in 1995.
Sprint PCS and PacBell, which spent millions to build their digital networks, are still trying to match the roaming capabilities of AirTouch and L.A. Cellular, which upgraded their analog networks with digital technology.
In addition, AirTouch and L.A. Cellular have roaming agreements with other cellular companies to service their customers when they travel outside the home area, allowing them to extend their networks into rural areas where digital companies have yet to venture.
"On the analog side, the system is very well-built-out," said Melissa May, manager of public relations and promotions for AirTouch. "And all our digital phones are dual mode, so you can switch from analog to digital."
Even though roaming accounts for only 21% of a businessperson's cell phone usage and about 14% of personal usage, according to a survey by the Washington-based Strategis Group, it's been a big moneymaker for wireless carriers. Roaming revenues in the U.S. reached $2.8 billion in the year from June 1996 to June 1997, according to the Cellular Telephone Industry Assn.
PacBell will announce today that customers can use free minutes they receive with each plan when they roam in California or Nevada, said Stephen Krom, vice president of marketing for PacBell Mobile Services. The expanded service is an extension of a discounted roaming rate plan PacBell launched when it debuted its service in Southern California last July.
Customers will be charged a 15-cent-per-minute long-distance fee when they use minutes that come with their plan. If consumers use up their free minutes, they will be charged their home rate plus a 15-cent long-distance fee per minute to roam.
On April 1, Sprint PCS will roll out in Southern California its Home Rate USA program, which allows customers to double the number of free minutes they have on their calling plan for an additional $4.99 monthly fee, said Rod Egdorf, Los Angeles area vice president for Sprint PCS Southern California/Nevada.
For example, a customer who pays $75 a month for 600 free minutes will pay an extra $4.99 a month to receive an additional 600 minutes to use only for roaming. Sprint customers can roam in areas where there is a Sprint PCS network.
In addition, starting April 1, Sprint PCS customers can eliminate long-distance fees by paying an additional $9.99 monthly fee for 500 minutes of free long-distance as part of its Toll Free USA program. If a customer pays for both packages, 500 free long-distance minutes will be applied to the roaming package.
The prices for Home Rate USA and Toll Free USA are good until May 31. Those who sign up will be locked into these rates for a year.
AirTouch and L.A. Cellular, meanwhile, let their analog and digital customers use free minutes to roam in Southern California, but charge roaming fees for Northern California, Nevada and other states.
AirTouch offers a plan that allows its customers to use their free minutes to roam from San Luis Obispo to the Mexican border. Consumers are charged long-distance fees of 10 cents a minute only if they call outside their service area. The company charges a 79-cent-per-minute roaming fee for calls from Northern California, and a 99-cent-per-minute roaming fee for calls outside the state.
L.A. Cellular allows its customers to use their free minutes when they're traveling in Southern California. When customers leave the four-county area (Los Angeles, Orange, Riverside and San Bernardino counties), they pay per-minute long-distance rates.
Times staff writer Jennifer Oldham can be reached via e-mail at email@example.com