Wireless for the 21st century

Drew Hart has an original philosophy on what mass-market customers are looking for in a wireless service."If it works in the Winn-Dixie and the filling station, I strongly believe there's a market for it," he says.

That may sound entirely too simple, but it is a conclusion Hart and his colleagues reached after studying the personal communication services marketplace for four years with the help of a group of experienced telecommunications engineers and telephone companies.

The result is 21st Century Telesis, which shelled out $98 million for 17 market licenses in the Federal Communications Commission's C block auction to become the auction's eighth-highest bidder. The company was founded by Hart, now chairman and chief executive officer, and backed by 40 Independent telcos and a bevy of other investors.

But unlike many of the entrepreneurial participants of the C block auction, 21st Century is not poised to enter the wireless market with what Hart calls a "me-too" strategy-one that mirrors what is already being offered. Rather, the company has devised a plan to deliver wireless services to those who have never thought they needed or could afford it.

"We're not going after cellular customers," says Phil Chasmore, co-founder of 21st Century who serves as the company's secretary. "They're not our target, but everyone else is."

21st Century Telesis did not start out with the notion that it could not compete on a larger, higher-mobility scale with other wireless providers. Only after carefully studying all of the available market research-and commissioning some of its own-did the company decide it would have to carve its own niche."We had the high-tier business plans made, and they really didn't look very good," Hart says.

That conclusion was based in part on feedback from potential investors that looked at the existing wireless market situation, then added the A and B block license holders to that equation.

"Our investment bankers have said that the fourth guy to market is going to have a tough time," says Chasmore. "We certainly did not want to be the fifth guy."

So, rather than build another high-power, high-mobility wireless system in markets in which others like it already exist, the company decided it would form partnerships with wireline providers and build from what those companies already had embedded in their networks. One-third of the company's 40 telco investment partners have exchanges in 21st Century's license areas, Chasmore says, and the company is in discussions with 40 more potential investors.

Hart believes that strategy has multiple advantages. First, it allows the company to become a wireless provider and ride the tremendous popularity of wireless. But by focusing on voice quality and features rather than on mobility and roaming capabilities, the strategy also positions 21st Century to reap the burgeoning but relatively untapped second-line and wireless local loop markets.

"We can give people alternative dial tone, forgetting about wireless for a moment," Hart says, referring to the ability of low-tier wireless access architectures to provision fixed wireless systems. "Our goal is to become an alternative local exchange carrier."

To attain that goal, 21st Century is leveraging a nascent North American technology called personal access communication system (PACS). The company struck a multimillion-dollar deal last year with Siemens Stromberg-Carlson, Bellcore and Hughes Networks Systems-partners in the PACS Edge consortium-and became the first U.S. wireless provider to adopt the PACS technology (Telephony, Dec. 18, 1995, page 9).

PACS can provide high-quality voice, data and potentially video over a 32 kb/s channel, Hart says. And because the wireless system exploits existing wireline architecture, intelligent network features can be made available.

"Most of the technologies being introduced tend to be a variant of cellular," says John Tebes, director of wireless at SSC, which manufactures the infrastructure equipment and acts as the systems integrator for PACS Edge. "The PACS Edge offering builds off Class 5 offices so you can have a combination wireless/wireline offerings. We have built in a lot of [Advanced Intelligent Network] capabilities, which will allow a lot of features to be added quickly and easily."

In providing wireline-quality and wireline-featured service at a low cost to the provider-the radio configuration for a PACS system is simple, and the cost of the radio ports and radio port control units is low compared with higher-tier equipment-21st Century can provide a service that encompasses all the benefits of wireline and adds a little more freedom.

"That's really the strength of it," Tebes says. "Most of us are wireline customers, and we'd like to see something that enhances that."

In fact, the carrier's target customer profile is a cordless phone user in the home who needs a low-power, low-mobility sort of "neighborhood phone."

The model for the neighborhood phone can be found in Japan, where the personal handy-phone system-on which PACS technology is based-is a huge success. "The usage is exactly what we envision here: young people, mass market," says Tebes. "We see a lot of similar applications here."

"It's a unique market situation, and we've learned a lot from what's happened in Japan," says Hart. "Our investors are seeing the synergy between this and what's going on in Tokyo."

Hart estimates that the vast majority of the potential customers in 21st Century's markets would forgo the wide area coverage benefits of cellular in favor of a PACS phone offering a flat rate and no per-minute usage charges. 21st Century is considering such a pricing model and, for those who decide they do require wide area roaming, the carrier could eventually offer dual-mode phones and strike agreements with cellular resellers, Hart says.

Because it is by definition a mass-market effort, the company will primarily use billboards and other direct marketing efforts and will also attempt the door-to-door efforts that helped popularize cable TV in its early stages. In addition, the company may use the kiosk distribution approach, he says.

The logic in 21st Century's approach to the wireless market may be catching on. Recently, C block entity Windkeeper Communications signed a deal with the PACS Edge consortium and announced initial plans to offer PACS-based service in its market in the U.S. Virgin Islands (Telephony, July 1, page 9), and SSC has hinted that it is in discussions with still more providers. But with its ambitious plans and the help of its wireline partners, the networks of 21st Century Telesis may prove to be the first test of whether this new brand of wireless communications will find a home in the U.S.

"We'll be offering the American people portable phones that operate where they spend their lives," Hart says. "We hope to be the telephone company of the 21st century."