Usurping Wired Services: Lofty Goal, But ...

When Mark Kelley told a roomful of wireless industry execs about Leap Wireless luring customers from wired local services, it sounded like the beginning of a revolution. But in reality, a landline-displacement revolution probably will not take place, at least not in the near future.

Kelley, Leap CTO, was speaking during the Landline Displacement session at PCIA GlobalXChange. And the story he told was about how Leap won non-traditional wireless customers with a flat-rate pricing plan in which local wireless services are paid for a month in advance of usage as cable bills are typically paid. To illustrate the magnitude of the company's success, he revealed that 60% of Leap's U.S. customers use their cellular phones as their primary phones.

But other speakers during the session said the probability of widespread landline displacement is both unlikely in the near future and undesirable for many wireless providers.

Today, displacement sits at a paltry 4% for PCS providers and 2% for cellular providers, according to Mark Lowenstein, Yankee Group global wireless research & consulting program senior vice president. That figure will increase, Lowenstein said, if wireless airtime charges drop to less than three times than those of wireline.

However, prohibitive pricing represents only one of many obstacles. Lowenstein's list also included the absence of calling-party pays. He noted that as long as wireless consumers foot the bill for incoming calls, they'll be reluctant to distribute their numbers widely.

Another barrier is that the United States boasts landline services more reliable and ubiquitous than today's wireless equivalents. Various network challenges, including incomplete national coverage and incompatible RF technologies, reduce wireless providers' competitive edge. Plus, in-building coverage is still not good, Lowenstein said. In addition, prepaid wireless, an avenue to non-traditional customers, remains a minimal market, and cellular-phone batteries still die much too quickly.

Lowenstein said that wireless providers can inflate wireline displacement by offering lower prices and flat rates. He also recommended increasing inbound traffic with incentives such as omitting charges for the first two minutes of incoming calls.

But even if the industry could clear the existing hurdles tomorrow, many wireless providers would prefer to complement landline services rather than replace them.

"We're not ready to write off landline," said James Johnson, AT&T Wireless Services vice president & general manager, adding that wireless companies have tapped only into approximately one-third of the U.S. telecom market. "Ninety-five percent of all wireless calls start or end with a landline connection."

Further, Johnson opined that the popularity of wireless services has expanded the consumer market for wired services. He listed connections between wired and wireless that included wireless providers paying access fees to local-exchange carriers and fixed wireless expanding the reach of the Internet. The Inter-net, he concluded, will connect wireless and wireline for some time.

Johnson also made clear that AT&T has no plans of putting itself out of the landline business, a well-taken point considering that most large wireless-service providers also play in the wired arena.