Battle rages for wireless customers While analog phones dominate, digital users are on the rise

Competition cutting costs

Exotic features used to lure buyers to expensive products

Cellular communication

January 04, 1998|By Mark Ribbing | Mark Ribbing,SUN STAFF

Phones used to be such simple things.

Years ago, the biggest dilemma consumers faced was whether to mount a phone on a wall or plop it on an end table. Then came cellular, and customers could choose between old-fashioned, plugged-in phones and wireless phones.

Now customers who want to go wireless must pick between analog and digital phones, and many of them are opting for digital. Peter Nighswander of the Strategis Group Inc., a Washington telecommunications research firm, said there are about 3 million digital wireless users nationwide, a 150 percent increase from 1996.

While the analog sector is still much bigger, with more than 50 million users, phone companies are doing all they can to capture the dynamic digital market.

The battle for digital customers is especially fierce in the Baltimore-Washington area, where, according to Nighswander, one of every four wireless customers uses a digital phone.

Chris Doherty, a spokesman for AT&T Wireless, said the region is "probably the most intense place for digital competition in the country."

In October, AT&T began offering digital phone service in the region, joining such industry heavyweights as Bell Atlantic Mobile, SBC Communications Inc.'s Cellular One, NexTel Communications and American Personal Communications, the Bethesda company that launched the nation's first all-digital network, Sprint Spectrum, in Baltimore and Washington in November 1995.

Digital phone companies are drawn to the Baltimore-Washington area by the large pool of wireless users. Doherty said 19 percent of the area's population uses a wireless phone, the highest rate in the country. By comparison, New York, Los Angeles and Chicago have rates of about 15 percent.

The competition has lowered the costs of both digital and analog wireless services. Nighswander said wireless fees have dropped percent since November 1995.

To attract customers, digital vendors offer all kinds of services. Because of their higher capacity and greater transmission speed, digital phones can do things that are available on analog phones only at a high price. For example, a digital phone can simultaneously print out a text message on its tiny screen and carry out a good old voice conversation.

Digital companies are rolling out exotic new goodies all the time. NexTel offers a phone that can operate like a walkie-talkie. Bell Atlantic Mobile has voice-activated dialing. Sprint Spectrum has a feature that allows a customer to get USA Today headlines on the message screen.

In addition to offering such gee-whiz features, digital companies also promise more prosaic advantages over analog, such as clearer calls and tighter security.

Some industry observers think these promises are oversold. Jane Zweig of Herschel Shosteck Associates Ltd., a market research firm in Wheaton, said, "There's a lot of marketing hype. The reality is that analog services can offer a lot of what digital can. Digital can offer security and maybe more clarity, but if the networks aren't built right, it's going to sound lousy."

She said customers should take a hard look at their own needs.

"If you just need a phone to let your kid say, 'Hey, pick me up at the soccer field,' you don't need a fancy phone. If you're in sales or something and you have to travel for your job, you may be able to use all of the features of digital, but that depends on the quality of the network."

Jim Carter, vice president of marketing for Cellular One, a wire-less company that offers digital phones but is still heavily involved in the analog market, said, "For most customers, there is no real great advantage to having digital services. Digital is for someone who's going to want to use a lot of advanced features."

For now, in fact, analog still has some important advantages over digital.

While customers still pay $50 or more for a digital handset, analog handsets are available for nominal fees or even given away.

In addition, analog phones have wider geographic coverage than digital systems, which are often limited to metropolitan areas. Some digital phones can now switch to analog signals when necessary, but others are useless in backwoods and rural areas.

However, such distinctions between analog and digital are being swamped by simple market reality: Because digital phones offer a broader array of marketable features, phone companies can make more money from them than they can from analog phones.

Although analog demand is still healthy, companies are pushing their digital products with low prices and aggressive marketing.

"More and more people are going with digital because of promotions," Nighswander said. "It's analog that's put on the back burner."

Pub Date: 1/04/98

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