C block players see hope in Horizon

Horizon Personal Communications, based in Chillicothe, Ohio, made a name for itself last August as the first C block license winner to commercially launch code division multiple access service, an important distinction in an industry in which an ounce of differentiation equals a pound of success.

But its parent company, Horizon Telcom, has played a much longer role in telecom history. Founded as the Home Telephone Co., it began offering communications services to rural Ohio in 1895. Horizon isn't shy about boasting its long history, recounting stories from 100 years ago on its Web site-including one about its first operator who doubled as a bill collector.

Horizon Telcom entered the PCS fray so that Chillicothe Telephone, its affiliate local exchange carrier, could expand its presence beyond 35,000 access lines.

"We had been blocked out of getting cellular licenses, but we felt we needed a wireless play," says Bill McKell, president of Horizon Personal Communications. "PCS gave us the opportunity to have a wireless presence locally and expand our services area beyond the confines of our [LEC] area."

Since Horizon Personal Communications debuted a short eight months ago, the company has had to rethink its strategy because of financing problems that hit potential partner Nextwave, but the company has devised a solid new plan-built around partnering with a larger provider-for future success. Along with other C block license winners affiliated with small LECs, Horizon will stay true to its deep small town roots, and it intends to flourish in its region with little or no competition.

Plan B Horizon owns five C block licenses that cover one million pops (Figure 1). Although the region covered by its licenses may be limited, Horizon originally hoped to resell PCS service in neighboring areas, including Columbus-an important city for Horizon customers.

"We thought we'd have a Nextwave servicing Columbus," McKell says. "When they bottomed out, it made it difficult for us. We had to take a different strategy for providing service into Columbus."

Instead of selling single-band phones and offering a unified PCS service outside of its home region, Horizon turned to cellular providers to expand its coverage area. Horizon now sells dual-band phones almost exclusively and plans to introduce roaming to Columbus in April through an agreement with Ameritech. Following the rollout with Ameritech, Horizon expects to announce new roaming partnerships every two weeks during the summer of 1998.

Sprint PCS soon may be offering CDMA services may be available soon in Columbus and Cincinnati from Sprint PCS. Because Horizon and Sprint PCS markets share borders, "there will be synergies we'll both want to explore," McKell said.

Expansion plans Ultimately, Horizon hopes to form a significant relationship with a major carrier. "We feel the best thing to do is to find a regional or national CDMA player whose coattails we can ride on," McKell says. "Our feeling has always been that the key to success will be to have a local presence with a national name or service mark."

He points to the relationship between Cincinnati Bell and AT&T Wireless as a successful partnership between a small company and a national operator. As part of their agreement, AT&T Wireless will build and maintain a time division multiple access network. Cincinnati Bell will market the PCS services under the Cincinnati Bell Wireless name with a tagline reference to AT&T Wireless Services.

Such an agreement offers customers in the Cincinnati area the feel of working with a locally established company with a recognized brand backed by a strong national company. "To us, that's the best of both worlds," McKell says.

McKell likes the model Cincinnati Bell and AT&T followed, and he hopes to form a similar agreement with a national CDMA operator. But he is open to other partnership models, including a major roaming agreement involving little mention of the partner or a relationship with a carrier such as Ameritech or AirTouch.

LEC affiliation: Good or bad?

Although many C block license winners are struggling to obtain financing, Horizon and similar companies with affiliations to telephone companies-Wireless North in Minnesota and Ameritel in Louisiana-have an advantage.

"What separates us from other C block winners is that we can rely on debt financing and on the Rural Telephone Finance Cooperative," McKell says. "This comes from our status as telephone companies."

In addition, Horizon and its peers have succeeded because they are building out PCS in rural areas where their landline affiliates conduct business. In these areas, PCS operators likely face little or no competition.

Horizon's relationship to an LEC also allows the company to take advantage of a strong existing local presence. In addition to more than a century of serving southern Ohio, Horizon Telcom has been run by the McKell family since the first McKell became president in 1902.

Horizon hopes to foster this "down home" feel for its customers through its two company stores, says Gary Burmaster, director of marketing for Horizon. The company's customers are very selective about how they spend their money, and they can find educational information and personal contact at these stores. "Our sales people are very familiar with names and faces," Burmaster said.

A relationship with an LEC can have its disadvantages too. For Horizon, this disadvantage is the competition between PCS and landline. "We've differentiated ourselves from other [wireless] providers by looking at an entirely different pricing structure," McKell says.

However, this pricing structure, which includes unlimited local calling for $39.95 a month as part of a launch promotion, may compete directly with Chillicothe Telephone's landline service in Ross County, Horizon's first PCS launch area. The service plan is especially competitive because the basic trading area that comprises the local calling area for PCS is larger than the local calling area for the LEC. For this reason, Horizon rolled out a "soft launch" in Ross County, focusing on existing cellular users.

"We've targeted people familiar with wireless products," Burmaster says. The ads touted PCS features, such as caller ID and voice mail. Horizon also has targeted its existing paging or Internet service users with bill inserts.

"In other markets, we'll be able to go after the second line market," Burmaster says. Delayed by roaming issues, Horizon only recently launched its second market in Zanesville, Ohio, and expects to roll out its entire territory by this spring. In Zanesville, advertising efforts will focus on the unlimited calling plan to encourage use as a second line or landline replacement. Users who want to replace their landline phone service with PCS are usually singles who don't share phone service with anyone else, according to Burmaster. Families might have difficulties replacing landline phone service with mobile service because different members might want to use the phone simultaneously at home and while mobile.

The local edge In Zanesville, Horizon competes directly with GSM operator Aerial Communications, but Burmaster lists several advantages his company has. In addition to its unlimited use package, Horizon's coverage area is more extensive in Zanesville-so much more that

Aerial will refer potential customers to Horizon if they express concern about coverage needs. Horizon also offers paging and Internet service and can deliver a single bill for paging, Internet and PCS to Zanesville customers.

While the company does not yet offer discounts to subscribers of multiple services, it hopes to do so in the future. Horizon Telecom is positioned to become a one-stop shop, offering a full suite of communications services. Through its affiliates, the company offers local, long-distance, Internet, paging, PCS and answering services.

With a broad range of services, no PCS competition and solid roots in its operating region, Horizon fits the model of a convergent, bundled services carrier, a model likely to have great future viability.

Still, much of that future hinges on McKell's hopes to partner with a larger carrier within the next 12 to 18 months. "After that, we've either made it or not," he says.