The New York Times

November 18, 2002

Success Hurts Cellphone Service

By SIMON ROMERO

Americans' use of cellphones has increased so quickly that wireless
networks are becoming overloaded, causing a growing number of customers
to complain about calls that are inaudible or are cut off or are never
connected in the first place.

And things could get worse before they get better, industry experts say,
because even as cellphone companies are rolling out fancy features like
digital photography and Internet-based games, they are hard-pressed to
spend the money needed to improve basic service.

"This is a situation in which the wireless industry is a victim of its
own success," said James D. Schlichting, a deputy chief of the wireless
communications bureau at the Federal Communications Commission.

Many of the industry's service problems are a result of a huge growth of
new customers. In 56 percent of the nation's households, someone now
subscribes to wireless phone service, more than double the percentage in
1995.

The surge in users is overwhelming the capacity to handle calls on
wireless systems - whether because local transmitters are too few or too
small, or because the local airwaves have become too crowded and carriers
are unable to obtain larger swaths of radio frequencies.

The problems are compounded by basic economics. Customers have been
attracted by the plunge in prices for wireless service. The average
per-minute cost has dropped to 11 cents this year from 56 cents in 1995.
For the phone companies that has meant a decline in average revenue per
customer to $61 a month, from $74 in 1995.

And so, just when the wireless companies need to invest more money to
accommodate all those new users, the companies are under increased
financial strain.

As a result, the complaints are piling up.

The F.C.C. tracks only the few hundred complaints it receives each
quarter - it recently reported fewer than in past years - but
acknowledges that an increase in subscribers had worsened service
problems. And surveys conducted for the industry itself show that
complaints are rising.

"If I make 10 calls, at least three have to be redialed because they
don't go through," said Orville Mills, who lives near Van Cortlandt Park
in the Bronx and recently switched carriers to Sprint from T-Mobile. "The
new services are just a distraction from not having the basics down."

The percentage of all wireless subscribers who have called
customer-service centers at least once in the last year to complain about
service or because they had other problems has climbed to 61 percent,
from 53 percent in 2000, according to J. D. Power & Associates, a company
that measures customer satisfaction in many industries and sells it to
the companies being scrutinized.

The level of such calls is higher than for many other consumer-service
providers, including land-line telephone companies, cable-television
operators and stockbrokers, according to Power. About 30 percent of the
calls to customer-service centers were complaints related to dropped
calls, bad reception or calls not going through, up from 19 percent in
2000. Other reasons included complaints and questions about billing,
equipment and services.

The author of the study, Kirk Parsons, said the wireless companies are
aware of the problem. He said he expected complaints to grow as the
companies add new services, contributing to stress on the networks and
subscribers' confusion.

"It's important to remember that cellphones are glorified radios," said
Travis Larson, a spokesman for the Cellular Telecommunications and
Internet Association, the wireless industry's main trade group. "They're
subject to interference from a lot of things, from building walls to
sunspots to the weather. There will always be a trade-off between
mobility and call quality."

Meanwhile, the stock prices of AT&T Wireless Services and Sprint PCS, the
two largest stand-alone publicly traded carriers, are down more than 45
percent this year on investor concern about revenues. And the two largest
carriers, Verizon Wireless and Cingular Wireless, which are controlled by
regional Bell companies, are struggling to find and pay for additional
swaths of airwaves to carry calls.

The industry received something of a financial reprieve last Thursday
from the Federal Communications Commission, which ruled that wireless
companies would not have to pay the $16 billion they had offered for
additional airwave licenses during a bidding process that is now being
contested. The licenses had been seized by the F.C.C. from NextWave
Communications and auctioned after NextWave filed for bankruptcy
protection. But the licenses, and the airwave capacity they represent,
are tied up by NextWave's appeal of that seizure, which is now pending
before the Supreme Court.

Another industry problem is the sheer technical complexity of sending and
receiving wireless calls. Unlike conventional telephone systems, in which
every customer is hardwired to the network, wireless systems rely on a
delicate mesh of thousands of antenna towers - which often face
resistance from local governments - and cellular relay stations.

The stations can easily be flooded by an increase in calling volumes.
That vulnerability became clear in the hours after the Sept. 11 terrorist
attacks in New York and Washington, when the local wireless networks were
effectively shut down by the surge of attempted calls.

Various new companies are trying to develop towers and other forms of
transmission technologies that could handle such surges. But so far
carriers remain reliant on systems that, in some ways, still resemble
radio communications networks that were first developed in World War II.

Because of brisk demand, financial problems at wireless carriers are not
as severe as those in other areas of telecommunications, where large
companies like WorldCom and Global Crossing have sought bankruptcy
protection. Even so, some investors think the only way to ensure industry
stability will be to winnow the competing wireless players. Instead of
six nationwide carriers, they say, a more economically feasible number
might be three or four.

"Consolidation among wireless companies can't fix these problems, but it
can make them less severe," said Frank J. Governali, an analyst at
Goldman, Sachs.

For months, investors have been waiting for mergers that would shrink the
number of large competitors. No deals have yet materialized, though,
partly because of technical obstacles. Unlike nations in Europe and Asia
with higher wireless usage rates, the United States does not have a
single wireless technical standard that would make it easy for carriers
with different systems to combine operations.

Verizon and Sprint, for instance, employ an American-designed standard
called code division multiple access, or C.D.M.A. Meanwhile, AT&T
Wireless, Cingular Wireless and T-Mobile, formerly known as VoiceStream,
use the global system for mobile communications, or G.S.M. format, common
in Europe and Asia. Another large American carrier, Nextel, uses its own
technology, called Iden.

Carriers have also resisted measures that would make the industry more
consumer-friendly. In response to industry lobbying, for example, the
F.C.C. has postponed until next fall a deadline for companies to start
allowing "number portability" - letting customers keep their cellphone
numbers even when they switch providers. The companies are reluctant to
implement the measure, fearing it will create new costs while also
encouraging customer defections.

"I've had the same number for three years," said Sarah Vanderslice, a
student at the Benjamin N. Cardozo School of Law in New York who
subscribes to Sprint's service. "The fear of losing it is the only thing
that keeps me from dropping my cellular company."

The F.C.C. has also repeatedly extended the industry's deadlines for
improving emergency-call abilities for wireless phones. Calls from
cellphones are still much more difficult for emergency officials to
pinpoint than calls from land-line phones. And the issue has become more
pressing as the number of emergency calls from cellphones has grown to
the current rate of more than 30 percent of 911 calls.

"The wireless industry is in need of a stricter taskmaster," said David
Heim, the managing editor of Consumer Reports magazine, which publishes
an annual feature each year on cellular service problems. Although the
F.C.C. has jurisdiction on certain operational matters, the wireless
industry remains largely unregulated.

But few people expect the Bush administration's F.C.C. to try to exert
significant new authority. And even a former F.C.C. chairman from the
Clinton years says that, in the main, it would be prudent to avoid more
regulation.

"We have a robustly competitive wireless industry," said Reed E. Hundt,
the former F.C.C. chairman, who is now a senior adviser on information
technologies for the management consultant firm McKinsey & Company.
"Younger people recognize this in opting for wireless over wire line and
putting up with some flaws in exchange for freedom of movement."

Like their counterparts in Europe, carriers in the United States are
hoping new services like text messaging and transmission of digital
photos will eventually generate the additional revenue they need to put
their finances on stronger footing. But aside from a small but loyal
following of mainly younger subscribers that exchange text messages, none
of the new services have attracted a large number of users.

And anyone who expects competitive market forces to quickly improve
cellphones may be overly optimistic, some experts say. They note that the
conventional wired telephone system has been evolving for more than a
century and became widely dependable only in recent decades.

"Don't hold your breath," said Jeffrey Kagan, an independent
telecommunications analyst in Atlanta. "Service and the economic
evolution of wireless are works in progress - it might be years before
customers are truly satisfied."

Copyright The New York Times Company | Permissions | Privacy Policy


VICUG-L is the Visually Impaired Computer User Group List.
To join or leave the list, send a message to
[log in to unmask]  In the body of the message, simply type
"subscribe vicug-l" or "unsubscribe vicug-l" without the quotations.
 VICUG-L is archived on the World Wide Web at
http://maelstrom.stjohns.edu/archives/vicug-l.html