CPP Lost Appeal

If calling party pays (CPP) does not progress past its orphan status in the United States, proponents will no longer be able to blame government inaction. The FCC has declared CPP a commercial mobile radio service and adopted a rulemaking proposal to encourage CPP billing. But the viability of CPP in the United States hinges on a variety of factors other than a government-guided uniform billing and collection system. Despite pockets of enthusiasm, a growing number of carriers say CPP's time has come and gone while it was sitting on the regulatory backburner.

"When we first started working on it two years ago, CPP seemed to be extremely popular with all of the carriers as well as CTIA," said Jim Thompson, Illuminet senior manager of wireless technology. "As time has gone on, it has had less and less support from carriers."

BellSouth offered CPP in Honolulu for nearly three years before discontinuing the service in December 1997 because there was not enough customer support.

"We found there was more interest in some of the packaged plans and special offers than CPP," said Art Morrison, BellSouth Cellular manager of federal regulatory strategy. According to Morrison, research shows carriers will have a hard time creating a business plan for the service, because the effects of competition and competitive rate plans make the market case for CPP less attractive.

"We are all for providing it, if we can make money," he said. "But we've done studies that lead us to believe now we could not make a business out of it."

Similar reports chime in from other carriers, including AT&T Wireless and GTE Wireless, which have conducted trials and echo concerns about making the CPP business model work under current conditions. The Yankee Group came to a similar conclusion in its 1999 Mobile User Survey.

"CPP is an idea whose time came five years ago, and we missed the boat," said Mark Lowenstein, Yankee Group senior vice president. "The market has moved on."

SUPPORTING THE CAUSEIn June, CTIA -- which has been steadily beating the CPP drum for three years -- canceled its proposed CPP Forum scheduled for July 7-8. According to Thompson, a notice from CTIA said a CPP forum now would be untimely.

"CTIA has delayed again, and with carrier support waning, it is going to be difficult to generate a lot of carrier excitement," Thompson said.

In July 1997, CTIA put together a steering committee to look at CPP issues. In January 1998, the technical work group completed an initial service-requirements document, which it sent to the appropriate standards bodies. Despite the cancelled forum, which was scheduled to revisit the technical specifications, the organization maintains it still encourages the opportunity to give CPP a shot.

So do several carriers, including Bell Atlantic Mobile (BAM) and Omnipoint.

BAM, a long-time CPP proponent, even issued a public statement last month to support the FCC's decisions.

"The leadership of Chairman Kennard and the commissioners on CPP is a giant step forward for wireless consumers ... ," said Dennis Strigl, Bell Atlantic Wireless Group president & BAM CEO. "CPP will make wireless immediately more valuable for current consumers, more affordable to those who do not yet have wireless, and more competitive with landline service."

According to Jerry O'Brien, Omnipoint senior director of legal and regulatory affairs, it all comes down to wanting an equal playing field.

"We're talking about competition and giving something to the people and still making money," he said.

O'Brien noted that introducing a nationwide CPP option would do wonders for Omnipoint. He said that although on a phone-per-month basis wireless is cheaper than wireline, and it has a larger calling area, it is at a disadvantage because customers have to pay for incoming calls.

"Being one of the few companies in telecom that is not owned by something else, this is our only business, and we are advocating statewide overlays," he added.

O'Brien admitted Omnipoint's CPP trial in Allentown/Bethlehem, PA, turned up little support from wireless customers ensconced in the current system where users pay for both incoming and outgoing calls. In many cases, he said, when callers heard the notification that they would be charged for placing a call, they simply hung up.

However, he pinned the problem on billing and said a kick-start from the FCC is just what the telecom industry needs to move CPP forward.

"Allowing for CPP would add subscribers and give true competition to the LECs. They could then easily be able to enter the long-distance market, which is what they want to do," O'Brien added.

WANING SUPPORTOther carriers aren't as optimistic. AT&T Wireless' current trial in Minnesota is a case in point. For the trial, the carrier doles out numbers with a 500 prefix, which it secured five years ago. The prefix enables a customer to be billed under that number automatically without cumbersome notification and confusion. Yet, the service has received only moderate interest, according to Dan Youmans, AT&T spokesman.

"For some people it works really well," he said. "But for others, since they are not used to it, they prefer to pay for the call themselves."

GTE Wireless turned up inconclusive evidence during its mid-1990s CPP trial in Hawaii. The carrier determined the marketplace was not ready for it and that the elements needed to roll out a successful service -- customer demand, regulatory support and technical infrastructure -- didn't exist.

"In the United States when people make calls from a landline phone, the expectation in most cases is they have unlimited free calls to local numbers," said Ira Gorelick, group manager, new products and services. "When you start adding costs to those bills, we found the marketplace was just not comfortable with that as opposed to other places in the world where metered billing is the norm."

But GTE is not ready to sound the death knell on CPP.

"A big element is obviously the cost of those calls," Gorelick added. "When we did our trials, wireless was still fairly expensive. At some point -- and we feel we are approaching that horizon -- the cost per minute will come down so much that it will be much easier to get used to a non-flat rate. Consumers may not be upset about payingfor a call if it is a matter of pennies."

TRANSLATING INTERNATIONAL SUCCESSProponents often tout international success in Latin America and Europe as proof that U.S. carriers need the CPP option. BellSouth, for example, provides CPP in 12 countries and has seen subscriber spikes in all of them. After implementing CPP in Uruguay, BellSouth realized a 30% increase in minutes of use (MoU).

So, why is the United States different? U.S. callers are not used to metered calling. And in countries where CPP is succeeding, typically there are only one or two LECs and just a few wireless carriers compared with the United States where some markets are home to six or seven carriers. The lack of carriers makes the clearinghouse process much easier; provides for more seamless billing, recording and operations; and decreases leakage risks.

Additionally, the majority of U.S. markets lack dedicated wireless numbers, which exist in other countries, that signal a consumer would pay for a call under the CPP billing structure. The current infrastructure requires an up-front announcement to the calling party, which is not favorably received.

"In Europe, the cell phone is not as much a luxury as a necessity. They've grown up with the pay structure the way it is now. In the United States cell phones were looked at as luxury. With CPP, people think, 'Why should I pay for your luxury?'" Illuminet's Thompson said.

Luxury or not, there are plenty of wireless interests that believe the United States must perpetuate competitive freedom, a philosophy strongly espoused at CTIA.

"When you have a situation where 60% of consumers in America can choose from six wireless carriers, and prices have decreased over 50% over the last four years, it is imperative that those competitors start looking for other competitive tools," said Tom Wheeler, CTIA president. "It is ridiculous to deny one of those competitors the option to offer something like CPP just because some of the other competitors may think they don't want to do it."

Wheeler believes it is incumbent on the FCC to jumpstart the business. He said U.S. consumers should have the same competitive alternatives that consumers in other countries have.

"If it doesn't work in the marketplace, so be it. If it does work, so be it. The problem now is all we have is opinion because the government has not taken the necessary steps to permit a competitive marketplace," Wheeler said.

The first steps are being taken in the Notice of Proposed Rulemaking, which ideally will get at the details of billing and collection. It will address issues such as who pays for the caller alert, who eats the cost for the time the announcement is played, and how to handle calls originated from payphones.

If there is any hope for CPP, a lot of work is needed to fix the telecom market's fragmented billing systems. According to Lowenstein, CPP implementation is a significant billing and back-office challenge.

"There has to be consistent billing and collection across the marketplaces, and we would like to see the FCC help us with that," GTE's Gorelick agreed. "If the FCC can make rules that make it easier to form billing and collection agreements, the easier it will be for marketplace to accept."

A LOW PRIORITYUltimately, all carriers must consider customer demand in their own markets. The real question is: Given flat-rate calling models, bucket calling plans and free incoming minutes, would CPP actually increase subscriber numbers and/or MoU?

The Yankee Group argued that domestic growth is doing just fine without CPP. Research showed PCS carriers are reporting 300 MoU per month, which is triple historical levels and higher than most of Europe.

AT&T Wireless' Youmans said although it continues to assess CPP, its priorities are elsewhere. It will rely on solutions such as Digital One Rate and find enhancements that allow it to be more cost-effective within its current billing structure.

"There are a lot of opportunities for wireless carriers to provide services to customers that we are all pursuing. CPP is just another one," Gorelick said. "We need to put it in proper perspective in terms of how aggressively we solve that when there are other problems (such as) nationwide 911 that are more pressing. The marketplace has already spoken. In the United States, CPP is not on top of people's agendas."