Pre-emptive Strike

In his State of the Union address, President Bush warned of terrorist attacks “vastly more deadly” than those of Sept. 11. This prediction and subsequent “axis of evil” warnings from Secretary of Defense Donald Rumsfeld dealt crushing blows to the already-crippled air travel industry. In doing so, it also landed a glancing blow to wireless carriers.

Business and personal air travel are in the toilet and are likely to take up residence there through the rest of this year. Roughly translated: No travelers, no roamers. No roamers, no roaming revenue.

Early in 2001, the case for roaming, particularly of the international class, was compelling. Between 1997 and 1999, international travel grew 7.1%. In 2000, 522 million international airline trips were booked. Carriers expectantly planned for stellar roaming growth with a big kick coming from international business travel. The industry even publicly noodled potential case studies on napkins to get a sense of the size of the market. For example, a few years ago, the then TSI director of wireless marketing looked at the nearly 24.6 million individuals who traveled between Asia Pacific and North America in 2000. He assumed that 20% of these individuals had wireless devices and would make five three-minute calls per day on average five-day trips. If that conservative scenario held true, carriers could realize $185.6 million in international roaming activity.

That would have been a lovely scenario for wireless carriers. But then world events stepped in and scrambled the picture. Sept. 11 reined in the free-wheeling days of jet-setting and globe-trotting. Customers just aren't flying like they used to. It was evident in fourth-quarter losses across the travel and hospitality sectors. All of the major airlines suffered staggering losses in spite of the federal bailout funds they received. This has resulted in fewer flights and significant employee layoffs. UAL, the parent company of United, reportedly is burning cash at a rate of $10 million a day.

For this reason, wireless carriers need to act quickly to prepare for declines in roaming revenue on their balance sheets. One solution: Intercarrier short message service (SMS) offers a timely trade-in opportunity. In addition, the service itself caters to global marketplace even while its subscribers may be staying close to home; carriers can make money on the short messages of other carriers' customers wherever they may be. (See “Cross-Carrier Viral Infection” on page 28.)

Vodafone in its 2000 statement of revenues revealed that SMS accounted for nearly 9% of revenues quarterly. If wireless carriers can shift into high gear with SMS and establish intercarrier relationships around the globe, they could replenish their draining roaming coffers with positive figures.

Of course, this will not be easy. Arranging gateways across CDMA, TDMA and GSM technologies, negotiating monetary units and establishing interconnection rate tables will pose challenges. But, the wireless roaming experience provides insight.

Early in the 1980s, carriers faced the complex and confusing puzzle of interconnections and settlements for customers traveling outside their home coverage areas. Eventually, the EDS and GTE clearinghouses helped move roaming to the fine-tuned mechanism it is today. The basic precepts of SMS are quite similar to roaming's interconnection and billing settlements.

Billing and settlement companies have been quick to see the value in SMS. They have developed and promoted similar gateways and clearinghouse functions to manage more granular.

Intercarrier SMS is one reality carriers can bank on to recover from the hit roaming will take. While there's not much the communications sector can do about the plans of enemies and destroying the axis of evil, wireless carriers can anticipate and defend their bottom lines with a pre-emptive strike of their own.