The Hot Seat

The cabbie on the way from the San Antonio airport to SBC Wireless' headquarters took a philosophical view on whether wireless phones cause cancer.

"One minute they're telling you that coffee causes cancer," he said. "The next they're telling you it doesn't. I quit paying attention to what causes cancer."

That nettlesome question is just one of many faced by Stan Sigman, who ends his tenure as CTIA board of directors chairman in June.

"It's a fun job in many respects, and it's a gut-wrenching job in many respects," said Sigman, SBC Wireless president & CEO since 1995. "As chairman, you have to provide leadership for what's good for the association, and what's good for the association at times could conflict with what's good for your particular company."

Both have been enjoying good times of late as wireless continues its tear through the telecom marketplace. The next proving ground is Wall Street, where many carriers, SBC included, are set to offer tracking stocks for their wireless units. The trend is partly an attempt to capitalize on the nascent convergence of wireless and the Internet. But assessing just how much value the Internet adds to wireless' stock remains anyone's guess.

"I don't think Wall Street nor the carriers have quantified exactly how much this is going to enhance the value of the assets," Sigman said. "I think that you can look at the phenomenon in Europe, penetration in Finland and the increase in ARPUs that they're (experiencing), and I think you can say there's absolutely no reason why the United States won't experience those same types of (increases), which are all upside to Wall Street."

If there's anything that might sour Wall Street's love affair with wireless, it's spectrum, which must be in ample supply to sustain growth. The biggest crunch is in major urban centers, precisely where it makes the most business sense to begin deploying 2.5G and 3G networks, which already have investors excited.

Relief may come from some of the 60MHz currently used for TV channels 60 to 69. Congress mandated that the spectrum be auctioned and licensed by October, but even with that deadline, there's no guarantee that broadcasters will be out in time.

"That spectrum has to be cleared by 2006," Sigman said. "It concerns me that it's that far out. If the industry isn't able to work with the broadcast industry to get that spectrum cleared, I certainly don't want to see the delay of 3G out at five, six years. We would be behind the European market for sure if that was the case."

His concern is well-founded: In a move that almost certainly would delay digital TV's (DTV's) roll-out, some 400 TV stations have asked the FCC to revise the DTV standard.

"For (DTV) to succeed, we must fix the flaws," Nat Ostroff, Sinclair Broadcast Group vice president for new technology, told BusinessWeek in January. "If DTV fails, that spectrum can't be vacated."

The CTIA board has discussed working with the National Association of Broadcasters to ensure a timely exit but hasn't made any overtures.

"It's something that we're talking about," Sigman said. "But we have to get through the auction and rules before we start the process with the broadcasters to clear the spectrum."

REALISTIC ABOUT DATA Even with the additional spectrum and 3G's vastly improved efficiencies and features, Sigman doesn't see wireless replacing wireline anytime soon -- if ever. That position seems almost heretical for a carrier executive, let alone a CTIA executive, but Sigman is candid about wireless' limitations.

"I don't believe that wireless will ever be a blanket replacement for wireline," he said. "I think it will be a displacement for some of wireline, but I don't think it's going to cause disconnection of main telephone lines into the home and business. 3G will be an extension of what's going on in the wireline market: Access to the Internet will be an extension of what you're doing at home or in your place of business."

Wireless data often is rapped as too pokey, particularly by the mainstream press. With 2.5G, rates should rival those of most current wireline connections. Sup porting higher rates means first assessing whether enough customers are willing to pony up and what role throughput plays in the overall user experience.

"I think wireless data is where wireline data was 18 to 36 months ago, when the Internet phenomenon was just beginning," Sigman said. "Two years ago, you couldn't put forth a business case to support billions of dollars of DSL deployment. However, the Internet is what's caused that revenue opportunity to support the investment to do that. I think wireless data is on the same evolutionary path today: There's not a marketplace that supports big investments in wireless data, but with the portal and messaging services that are coming out today, as more consumers use them with more regularity, they'll be demanding more speed, more features, more functionality. That's what creates the momentum."

BATTLING BUREAUCRACY Spotty coverage could stymie that momentum, so CTIA plans to highlight siting during its second annual "Lobby Day" in April. Although Rep. Bernard Sanders (I-VT) and Sen. Patrick Leahy (D-VT) have introduced bills to clarify the power that state and local authorities have over siting, Sigman has noticed no movement in Washington to give local governments more authority.

"I don't think we'll ever be unanimous in Washington about where that authority should reside," he said. "I don't think that there's a movement to extend that authority down. Obviously, Leahy believes that it needs to and has expressed his opinion by the bill he's introduced. We need to take those things seriously. We need to understand what his issues are, and we need to continue to educate, educate, educate the regulatory bodies both at the local level and the federal level and the community in general about the value of wireless."

CTIA already has an opportunity to educate via E-911, where tying coverage to safety and partnering with public-safety advocates helped convince zoning boards and legislators to grant more leeway.

"I think we've done a good job in the past in that regard, and I think we need to continue that," Sigman said. "The reason we've brought in other agencies and constituents to express their views and support our view is so that it doesn't look like it's an owner's self-serving position. Non-stakeholders are taking a position on this issue. We educate and create validity in what we're saying by other voices affirming our position."

But larger issues loom. Carriers easily could spend themselves scarlet trying to meet the evolving E-911 mandate. In October, CTIA began soliciting proposals for a system that would listen for 911 calls on all carriers' control channels in a market so that each carrier wouldn't have to deploy its own system. Also, few public-safety answering points (PSAPs) have technology that can accommodate that detailed location information.

"Cost recovery obviously is an issue because in the PSAPs' case, if there's not a cost-recovery mechanism, it really poses difficulties for them being able to upgrade their systems to receive that data," Sigman said. "The FCC kind of changed the rules in eliminating the cost-recovery mechanisms, but CTIA and the PSAPs are appealing that."

Whether those appeals will be successful remains to be seen.

"I gave up a long time ago speculating what the federal bureaucracies may or may not do," Sigman said. "But I think it's responsible on our part to clearly express what our views are."

'IT'S BEEN A LONG YEAR' CTIA likely will get a chance to express its views on another public-health issue: the concern about whether wireless phones cause cancer. In October, Sen. Joseph Lieberman asked the General Accounting Office (GAO) to review the existing research and determine if the federal government or the industry should take additional steps to ensure that wireless phones are safe. The request came the same week as a "20/20" program on the debate, and mainstream media outlets continue to keep the issue on the public's mind. The programs haven't done for wireless what Marathon Man did for dentistry, but they remain a source of irritation.

"Truthfully, I don't know what we would do differently," Sigman said. "We did what the GAO asked of us in 1994. We funded the research. We created the firewalls. Unfortunately, we don't have the answer yet. What we could do different, I don't know. What we could do in the future is continue what we're doing."

If one San Antonio cabbie and eight million new subscribers over the past six months are any barometers, the public's concern might not be as great as some suggest.

"My interpretation of the research that's been done is that there's no proof that it causes cancer," Sigman said. "There's just no proof that it doesn't. But there's no proof, I guess, that bubble gum doesn't cause cancer."

The cancer scare is one of the more high-profile issues Sigman has faced as chairman. "I'm sure there were times during my tenure that Andy Sukawaty was glad he wasn't chairman," he said with a laugh. "I have absolutely no regrets. I'm thankful that my constituents felt that I had the experience and the skills and the leadership to bring to it. It's been a long year."

Conventional wisdom holds that wireless carriers tend to buy only those carriers that use the same technology. So why did SBC Wireless, a TDMA carrier, buy Pacific Bell Wireless, which uses GSM, and Ameritech, a CDMA carrier? More importantly, what does that say about the role that technology plays when choosing acquisition candidates?

"With each acquisition, we reassess the technologies out there," Sigman said. "With Pacific Bell, the previous owner made a GSM selection. We assessed all the technologies at that time to see if our viewpoint was current and accurate. We came away believing that over time, no one technology is going to have a significant advantage in terms of features, functionality and price point."

The next step is deciding whether the two technologies are compatible. Last year, the GSM Association and the UWCC announced plans for GSM/TDMA interoperability.

"At the time we assessed it, we couldn't see the path to bring that together with CDMA," Sigman said. "So we have to make a decision: Do we want to support three technologies and never be able to fully create the synergies that you would through a merger? Or do we want to support two technologies because TDMA and GSM are coming together and that in essence is one technology?

"TDMA/GSM continues to be the technology of choice for SBC. Will that keep SBC or any other carrier from doing acquisitions in the future because someone else has a different technology choice? I think it comes down to a business model. If the business model can be put together that shows there's a reason for that acquisition, the technology won't be the reason that would prevent it."

That's a far cry from the digital-technology holy war that began nearly a decade ago. "That was a very emotional thing," Sigman said. "There's still a lot of emotion by some people about which technology is best. My opinion: There's no one technology that will have a significant advantage over another in feature, functionality and price point."

CTIA is fond of touting wireless as a model of competitive telecommunications. But like a growing number of carriers, SBC Wireless is a company built through acquisitions. With the recent spate of mergers showing no signs of subsiding, what role will small carriers play?

"There will continue to be national carriers and regional carriers," Sigman said. "Many of our customers have no need for a national network. Regional carriers will be able to satisfy that segment. In the United States, we've had a 'national network' for well over 10 years where customers can roam irrespective of who owns the network. It's just that the marketing of those networks has changed with 1-rate plans."

Another criticism of competition is that it's created a hodge-podge of standards. At Wireless I.T. '99, Bill Joy, Sun Microsystems chief scientist & CEO, argued that North America lagged behind Europe because there are too many wireless choices. A fair criticism?

"I respect his opinion because it's more difficult to manufacture to multiple standards," Sigman said. "Saying the United States is behind the European model in terms of penetration because of the multiple standards we have is unfair. I do think that Europe is 12 to 15 months ahead of us in the data phenomenon, but I don't think that it's because they have an advanced technology. It's that they've penetrated the teenage market quicker than we have."

Another difference is that U.S. local-wireline infrastructure is flat-rate and tends to be more pervasive and of better quality. No wonder, then, that Europeans signed up for wireless in droves. If U.S. wireless is hamstrung by anything, it's wireline's head start and not multiple standards.

"I think it's unfair to compare us to the European model in saying that our multiple technologies have held back the growth," Sigman said. "It's more because our wired networks are more advanced and priced less."