Mixed blessings

The entrance of the RBOCs into long-distance won't hit wireless operators by surprise. In fact, many may have been preparing for approval for some time, and the increased competition will have positive and negative effects on the wireless industry.

Powertel believes the entrance of the RBOCs - Bell Atlantic being the first - into long-distance can only be positive. Increased competition will lower interconnection prices for independent wireless operators such as Powertel. "The more people who compete for long-distance minutes, the lower the minutes get and the more creative the packages get," said Jim Murrell, vice president of business development for Powertel. "It serves to reduce our wholesale price per minute."

Growing competition in the long-distance industry until now, even before the entry of Bell Atlantic, has proved that. Today, wholesalers bid on the block of minutes that Powertel must buy to deliver calls for its customers outside its territory. Bidding against each other, those wholesalers lower prices for Powertel.

Medium-sized operators such as Powertel and small operators should benefit from increasing competition in the long-distance industry, Murrell said.

Larger operators and those with multiple service offerings may have the most to lose, and as a result, may have done the most to prepare for the RBOCs' entrance into long-distance. For example, some believe that AT&T Wireless' Digital One Rate plan may have been AT&T's strategy to combat increasing competition in long-distance. With the potential to lose long-distance customers to new players, AT&T may have hoped to grab a share of local traffic via the Digital One Rate plan.

"The long-range plan [for the Digital One Rate] in my mind was the idea that you want to bundle long-distance and wireless. The [company] that could come to market with that [offering] first, by definition, should be able to retain the long-distance business," said Joseph Bonocore, partner and national industry director for KPMG's communications practice.

The huge customer response to the Digital One Rate plan may prove AT&T's strategy successful. "The AT&T One Rate has been a local play for them - one that doesn't require them to have interconnection charges," said Andrew Cole, vice president for Renaissance Worldwide. "It's a huge win."

The one-rate plans that AT&T, and subsequently several other operators introduced, will accelerate the move away from access charges and roaming charges, Bonocore said. "We'll move further away from a distinction between long-distance and local," he said.

As competitive long-distance charges force operators to decrease charges for end users, operators will look for other revenue streams. "A lot of these companies have almost planned that the cost of long-distance will continue to go down," Bonocore said. "As this starts moving, we're going to see these cellular companies focus a lot more on additional revenue streams."

One way may be by offering bundled services. "There's no question that bundles will be key," Cole said.

AT&T Wireless, which primarily has focused on competing with other wireless carriers, now is looking at wireless as a piece of the larger AT&T. Bundling is increasingly important as AT&T competes against more companies that also offer a wide range of services, an AT&T spokesman said.

Data services offer other options for new revenue streams. Some operators have been planning to offset the loss of growth in voice revenues with data, Bonocore said.

"E-commerce is going to be big - much bigger than access has ever been," Cole said. Virtual carriers will enter the U.S. wireless market offering voice services for free and earning revenue from e-commerce services, he said. Such strategies may force existing operators to follow suit.