Finding a Fit

When the rotary phone first came to market, there was no guarantee of success. Al-though AT&T was pretty sure of the potential of the telephone, there were no guarantees that the business world would bite. Through the years the industry has continued to push forward with new developments, such as the Princess phone, the first cellular phones in the early 1980s and now multimode wireless handsets. Even though most of these developments have found their place in the market, multimode phones are just beginning the trek to figure out where they fit in.

Initially, for most carriers and vendors multimode phones serve to fill in coverage gaps in areas where build-out is several or many years away. While carriers race to expand their networks and provide nationwide coverage, roaming agreements and partnerships abound in the effort to build this patchwork of complete coverage. For example, PrimeCo recently signed a roaming agreement with Canada's ClearNet and plans to offer North American coverage by the first quarter of this year. And Ericsson recently introduced its triple-band-capable system, which will operate at the GSM 900, 1,800 and 1,900 frequency bands.

These efforts send an obvious message of why multimode phones have entered the market -- carriers are reaching for the seemingly intangible ubiquitous coverage -- but it's not yet clear what effect these phones will have on the market or how they will fit in further down the road.

No matter how uncertain the market is, most carriers are starting to offer multimode products. They want to reach the traveling salesperson, the commuter and the technology-oriented rural customer. After all, the No. 1 target customer is the business subscriber. And although not all of the kinks have been worked out, many customers fitting these demographic profiles will be happy users of these extended-range phones.

According to Phil Redman, senior analyst at The Yankee Group, there's more behind multimode phones and roaming agreements than just "meeting customers' needs."

"The initial reason often stated is expanded coverage," he said, "but when you look at the money changing hands as analog carriers work up roaming agreements with digital carriers, money does enter into the equation."

According to Redman, carriers partner up for two reasons: to attract customers by offering expanded coverage and to make money from the partnerships.

But what happens when consumers question why their carriers are saying, "Digital is best, but we also offer analog?"

"You have to wonder why digital carriers are touting the superiority of digital voice quality, yet they also offer analog service," Redman said.

For Sprint PCS, this is all part of the game plan. The multimode concept strategically fits into its long-term marketing goals. Offering analog roaming gives customers a first-hand opportunity to see that their home digital networks truly offer a better-quality service.

"Once the consumer switches off the digital network onto the analog network, he is going to hear all the reasons why digital is the preferred provider: snap, crackle and pop," said Tom Murphy, media relations for Sprint PCS. "In addition to more static and crosstalk, there is greater risk of cellular fraud; battery life is shorter; and some features, such as caller ID and message waiting, are not available."

Regardless of the reason and strategy behind carriers' high demand for multimode products, one thing is clear: They are coming into the market full force. Most major phone vendors -- including Audiovox, Ericsson, NEC America, Nokia, Qualcomm and Sony -- already have launched their first multimode products domestically.

Some also offer multimode phones for the European (GSM) market. For example, Motorola offers the dual-band MicroTAC International 8900 cellular phone, allowing use on both GSM 900 and GSM 1,800 frequency bands. Motorola also offers the dual-band 880 that operates on both GSM and PCS networks, an important feature in Asian markets.

Other vendors plan to enter the arena soon. Siemens Wireless' CDMA products will be on the market this year and will include multimode capabilities. Global-star plans to introduce its global satellite phone network in 1999. It plans to have all 48 satellites deployed by the first half of 1999, and Ming Louie of Globalstar predicted that dual-mode phones (those running on both GSM and CDMA networks) will account for half of company sales.

Technology vs. Quality So how will these multimode launches affect sales of single-mode phones? Many consumers are attracted to the newest toy on the market. And it does satisfy that ongoing itch of incomplete coverage. Multimode phones offer consumers the reassurance that they have coverage no matter where they are.

But after the initial burst of post-launch sales, wireless subscribers will continue to buy and use single-mode phones, according to Catarina Wiley, marketing communications head for PrimeCo. Single-mode phones always will appeal to average consumers who want something low-cost and simple. And most people just don't travel enough to truly fit the niche market of multimode phones.

"Many people say they want roaming, but they actually don't roam very much," she said. "When they see the difference in cost, what was a need-to-have is now a nice-to-have."

Multimode needs also will depend on individual markets. According to Wiley, consumers will have to be more aware of what their actual needs are before choosing between a single-mode and multimode handset.

"For example, with PrimeCo, the entire state of Texas is a local call because it constitutes a home service area," she said. "We offer statewide calling. But, in Florida, where there are many fragmented MTAs, roaming becomes more critical, and multimode phones are more of a necessity there."

And if carriers in some markets can satisfy customers' basic needs for clear, easy and complete communications, they may not necessarily need to market multimode phones. No carrier wants to stand on the sidelines while other service providers jump into the fray offering the latest high-tech phones. There is a race to capture and establish a customer base using any and all means. Because that customer base is still in a high state of flux, bran d loyalty has not been locked into place, and the target customer (primarily the business consumer) is up for grabs. In an industry where perceived value and branding are extremely influential in consumer purchases, all carriers want to have the technological advantage.

And there is a definite advantage to being first. Consumers tend to associate "first" with "only" or "best." Consider the change in toll-free service from 800 to expanded 888 and 877. Thanks to its advertising campaign, many consumers assumed AT&T orginated what was actually a federal mandate. As always, being first is good for business.

Carriers are using new technology to attract customers, hoping they will ride out the wave of technical hurdles, such as dropped calls. Across-the-board quality is just not expected. If you step back and view product-development cycles as a whole, time to market has become increasingly shorter. Even with the emphasis on quality brought into focus by programs such as the Malcolm Baldridge award and TQM, quality is still not as important as being first to market. Cursory glances at The Wall Street Journal tell you that the need to be first to market often is viewed, even by the consumer, as the most important thing, and many consumers are willing to wait out the technical hiccups.

With that in mind, multimode phones should be a part of any carrier's marketing scheme, according to Jonathan Osmundsen of Ericsson.

"Everyone is going for the new customer. There's a one-upmanship," he said. "We'll give you all that our competitor is offering plus short messaging or whatever feature the competitor does not have. Multimode phones are the great equalizer for two reasons: They allow for nationwide coverage, and they allow for complete coverage within a consumer's MTA."

Tapping the Market That may be the case, but studies show that the need for multimode use is still untapped or unrealized. Recent demographic data shows that although carriers are chasing business users, they still are not the largest purchasers of the product and do not necessarily see roaming or expanded modes as a "need-to-have."

According to a March 1997 survey by Peter D. Hart Research, only 30% of all PCS subscribers use wireless phones for business. Hart also found that most (84%) of PCS subscribers' calls are local, and the ability to roam is not even listed in the "Services Most Desired."

This data suggests that the marketing departments of various vendors and carriers have not yet created a firm awareness and therefore a need in the business consumer's mind for multimode phones. This is not to say that business consumers are entirely unaware and that they do not often request the ability to roam. According to vendors and carriers, business consumers want the ability to roam and have been frustrated with the limited, sporadic and often spotty coverage offered to date. So, selling the ability to roam or switch between digital and analog should have great appeal.

But given the overwhelming data that shows that most users (84%) make local calls, the consumer who truly needs roaming/multimode capabilities ultimately may comprise a market microniche. For now, marketing spin doctors just may be able to create a perceived need for multimode, which could drop once the initial launch frenzy subsides.

According to a survey from J.D. Powers and Associates (Wireless Consumer Satisfaction Study, 1996), consumers in 18 of the largest markets evaluated their wireless carriers on a total of 27 attributes that were grouped into six major categories. Roaming comprised only 6% of the important factors that determine overall customer satisfaction.

And, as savvy as marketing spin doctors can be, price is still a deciding factor. According to the Hart survey, "The bottom line for this industry is price. Some 40% of both types of users (cellular and PCS) say that cost per minute and monthly charges count the most. The acceptance of an industry often depends on the consumer's feelings about thevalue of its products."

In order for multimode phones to truly fit, carriers will have to market multimode phones so that the perceived value matches the actual price. In addition, invoice charges must make sense to this value-added equation.

Finally, it is hard to ignore a business basic: Keep it simple. The key to winning consumers is to concentrate on the basics, first and foremost. The Hart survey stated, "Whether conservative or daring, cellular or PCS, all wireless users believe that the basics of reliable and dependable service should come first. With an industry that is growing and changing as fast as the wireless industry is, it is easy to forget what counts."

According to the survey, more than seven in 10 cellular users and PCS users think that wireless companies should focus on improving their basic services by ensuring reliable transmission of calls and having phones that are easy to use. This is compared with the just one in five who favor expanded services with new features, such as call forwarding, voice mail and 3-way conference calling.

"This belief in the importance of the basics spans all demographic groups," the survey stated.

Prudential Securities agreed with this same concept in its Broadband Wireless report. The four C's of wireless -- clarity, cost, coverage and capacity -- build a strong foundation for any carrier.

While vendors and carriers alike scurry to capture the attention of key target audiences with various new and often "whiz-bang" technologies, most consumers just want a phone that offers consistently high-quality service that includes seamless handoffs, consistently available service and clear voice transmission.

And although it is pretty clear just where those basic features fit in, only time will tell whether multimode phones are temporary gap fillers or a permanent fixtures in carriers' product offerings.

Beyond multimode capabilities, the other threat to single-mode phones may be all-in-one communications phones, such as the Nokia 9000 Communicator, which serves as a palmtop computer, pocket-size organizer and an all-digital phone. In early December, BellSouth Mobility DCS became the first carrier in its region (Carolinas, eastern Tennessee and coastal Georgia) to offer customers the Nokia 9000. In just one month, the carrier had seen "a lot of interest," according to spokesperson Kristie Madara. But BellSouth isn't expecting this new advanced product to have any effect on the products it already offers, especially at the current price point of $849.95.

"It's a completely different product than our single-mode phones," she said. "Someone is not going to say, 'I want a Nokia 9000 instead (of a single-mode product).' They have to specifically want the features of a Nokia 9000."

There are plenty of consumers who want all the bells and whistles of the Nokia 9000, Madara said, but even as the price point comes down, these advanced products won't hurt sales of today's typical wireless phone.

"You might get a few people to switch over, but I don't think the average consumer who just wants wireless voice will want that (Nokia 9000)," she said. "It'll certainly get some interest, but it's still complicated ... some people just want to be able to talk on it. They don't need all these fancy things."