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Competitive marketplace makes cellular phones a good bargain

Growing number of business folks cutting the landline cord

Sharon McIntyre and Tom Turner have cut the cord.

McIntyre, a computer networking teacher at Keesler Air Force Base in Biloxi, and Turner, an attorney in Flowood, have given up traditional landline telephones in favor of wireless communication.

“We have a cable modem, so there was really no need to have the landline with BellSouth,” said McIntyre, mother of two teenage sons. All three have cell phones. “Saving money was a major reason to make the decision.”

Turner had two cell phones and a landline phone until he signed up for RoadRunner, a cable access provider, for his home computer.

“At that point, we asked ourselves if we really needed a landline,” he said. “Was it just because that’s the way it had been done in the past? We analyzed our bills and discussed what we would be giving up by going totally wireless. We went with a cellular plan for non-long distance rates in Mississippi, and the only thing that was going to hurt us was that our out-of-state long distance bills would be a little higher. When we balanced the total package, we determined we’d be just as well off with cellular phones. We wanted to eliminate redundancy.”

McIntyre and Turner are part of a growing trend of the 5% of Americans who only have a wireless phone with no landline, according to research conducted by the Cellular Telecommunications & Internet Association (CTIA). In Europe the trend is much more prevalent.

A recent USA Today/CNN Gallup survey revealed that nearly 20% of those polled considered their wireless phone as their primary phone. Of those converted, more than 50% made the switch in the last two years and national analysts believe that within a decade a majority of Americans will utilize a wireless handset as their primary phone.

“It’s not surprising that more and more people are switching their primary phone use to wireless,” said Jana Long, director of marketing for Cellular South. “Wireless convenience is tailored to today’s on-the-go society. Consumers are finding rates competitive and with innovative and cost-effective features, such as free incoming calls, free long distance and nationwide calling.”

According to a study by the International Data Corporation (IDC), 10 million access lines were displaced by wireless from 1995 to 2001. That number is expected to grow by another 10 million by 2005, predicts IDC.

The survey also reported a 40.9% increase between 1999 and 2000 in the number of wireless users who used a wireless handset at home. The number of wireless customers who used their wireless phones at work jumped 58.8%.

Overall, wireless usage continues to rise with 60% of Americans now using wireless service, up from 50% the previous year.

“Wireless is simply a niche market that is more affordable,” said Cindy Sturdivant, marketing manager for Cingular Wireless in Louisiana. “For instance, parents are buying teenagers phones when they go to college.”

Because it is a highly competitive industry, cellular companies are marketing innovative plans to lure customers. For example, Cingular, a subsidiary of BellSouth and Southwest Bell, recently launched a national rate plan with no roaming or long distance and low price points with more minutes.

“People don’t like confusing bills,” said Sturdivant. “They don’t want to worry about roaming, long distance, how many minutes are left. They want simplicity. That’s been a real key in bringing customers in and migrating to those plans.”

Yet Cingular doesn’t have free incoming calls. Two years ago, Cellular South introduced the first Free Incoming Calls plans in the Southeast region.

“My sons have probably 600 or 700 minutes per month of free incoming calls and their friends know to call them,” said McIntyre.

Ram Kasargod, CFA, a senior analyst with Morgan Keegan in Memphis, said in the last couple of years, there’s clearly been a lot of wireless substitution for wirelines partly because wireless provides additional flexibility.

“Wireless carriers have been really aggressive in pricing,” he said. “There’s so much competition that there’s no need to replace it as a way to gain market share.”

On April 15, WorldCom’s MCI Group launched The Neighborhood, a new long-distance and local telephone service package, in 32 states, with 48 promised by the end of the year. Value-added features, such as call waiting, voice messaging and caller ID, are included on one bill for a fixed monthly price of $49.99 to $59.99, depending on the state in which the service is offered. Industry watchers expect to see similar plans emerge from other carriers.

“For the first time, a major wireline carrier came out with a simple plan,” said Kasargod. “Some of these wireless plans are very complicated, with peak minutes and off-peak minutes. Wireline is still a higher quality service. It’s going to be interesting to see how successful WorldCom is with this new plan on two issues — stanching the competition against wireless, and preparing for competing aggressively with incumbent phone companies on long distance. It’ll be interesting to see how consumers balance between wireline and wireless.”

BellSouth isn’t concerned.

“BellSouth is very aware of and excited about the changing habits going on in the marketplace for a couple of reasons,” said Patsy Tolleson, BellSouth Mississippi spokesperson. “One, we’re getting ready to enter the long distance market as soon as we get approval from the FCC and continue to provide long distance services to Cingular Wireless, our wireless company. Two, right now, we’re one of Cingular’s largest sales channels to sell wireless cell phones. So, between the combination of selling those products and entering the long distance business, the more usage there is locally and nationwide for cell phones, the more business opportunities are available to us in the future. We are developing our products and services to capture this growth in the changing telecommunications market.”

At some point, wireless carriers will have to focus on making money, said Kasargod.

“Many investors are getting tired of telecommunications losing money,” he said. “Investors want to see the sector make money or the competition rationalized. Hopefully at some point the wireless companies will realize they need to make money and that they can’t keep giving it away for free.”

Contact MBJ contributing writer Lynne W. Jeter at (800) 993-3392 or lwjeter@yahoo.com</a.

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