Paging's Midlife Crisis

For some, it's a very expensive, very fast, very snazzy sports car. For the paging industry, it's a very expensive, very snazzy, very risky 2-way wireless network. Paging -- having enjoyed a care-free youth complete with fast growth and little thought beyond the present -- has been brought up short with a reality check. It has reached middle age, and suddenly the wireless arena isn't what it used to be.

Paging has received a lot of press lately, much of it less than upbeat. >From this dubious attention, two camps have emerged: industry prognosticators espousing the belief that paging is dying or, at the very least, declining rapidly, and those who vehemently reject the death threat, saying that growth potential still is there. Are the latter in denial? Or are the former full of unwarranted gloom and doom?

I say the answer is a little of both. It is no secret that the industry has suffered some setbacks -- from intense competition that drove prices too low for profit to a less-than-lukewarm reception of advanced paging services. So it's little wonder that market forecasters see red when looking at market numbers. It's also little wonder that those immersed in paging want to put their best foot forward.

I suggest that the paging industry, instead of lying on its deathbed, is in the throes of a midlife crisis. It's having difficulty adjusting to a changing environment and pinpointing its role in a wireless industry that has grown up rapidly around it. Competition is fierce and will become fiercer. Data, Internet access and unified messaging are hot topics on the cellular and PCS front, and all pose a threat to the direction the paging industry has determined it must take to survive -- advanced 2-way messaging.

The Wall Street Journal reported recently that only one of the seven largest paging companies was operating profitably. Perhaps by gaining some focus and cinching their belts, paging companies can pull out of the crisis and relive some of the glory days of their lost youth.

There are signs that some carriers already are taking such measures:

*PageNet's reorganization, which includes an expanded sales organization, elimination of redundant regional administrative operations and consolidation of support functions

* Mtel's name change to Skytel to unify the company's image and brand name

* SkyTel's completion of an interest-rate swap that will save it $8 million a year in cash interest payments through 2000

* Metrocall's acquisition of AT&T's Advanced Messaging Division

* Metrocall's announcement of a relationship with America Online, which will market Metrocall's pagers and service exclusively.

So what of this midlife crisis? Does it mark the industry's halfway point? Perhaps. Paging as we know it will die, eventually. It will evolve or be absorbed into another technology at some point. There are far too many R&D folks churning out improved designs for any technology to remain static. But the change will be gradual. Consumers aren't ready to give up their simple pagers; nor are paging carriers ready to give up their fight for market share.

Carriers are insistent on building out their 2-way networks. The trick is offering a service that solves a problem better than other wireless offerings do. Although competition is too intense for advanced, 2-way messaging to be pervasive, it could work for niche markets within the business sector.

Whatever routes carriers take along the 2-way road, it would be a mistake to lose sight of the paging industry's core -- simple, inexpensive paging. Complicated products with multiple bells and whistles abound in the marketplace and on the drawing board, but there are a lot of people who simply don't want to deal with a complicated product or service. Regardless of how simple many wireless devices are supposed to be, many are not. Paging will lose many customers to cellular and PCS as they migrate to smart phones and the like. Short message service will attract some paging users who will enjoy the convenience of receiving a message and returning the call with the same device. But there are many consumers out there who don't need or want a wireless phone, and there are a lot more who like having a variety of options.

The paging industry doesn't have to give up its very expensive, very snazzy, very risky 2-way wireless network. But it should proceed with caution.