GM, Bell Atlantic join in wireless revolution

Cadillics, Corvettes get OnStar phones

Telecommunications

March 12, 2000|By Mark Ribbing | Mark Ribbing,SUN STAFF

In one of the most striking examples of just how thoroughly the communications revolution is changing American business, General Motors Corp. has struck a deal with Bell Atlantic Mobile to put hands-free telephones in millions of GM cars, with onboard Internet access to follow.

That's right, General Motors -- the quintessential 20th century industrial behemoth -- is a paid-in-full member of the new, wired economy. The company that produced the Cadillac and the Corvette is set to become one of the nation's largest resellers of cellular telephone service, offering the technology beginning in the middle of the year.

The phone connections will be part of GM's OnStar plan, a 4-year-old package of futuristic services such as satellite signals that can unlock the doors of subscribers who accidentally leave their keys in the car.

OnStar comes as standard equipment on some of GM's Cadillacs and sport utility vehicles, and is optional on many others. GM hopes to make OnStar standard on all of its vehicles in five to 10 years.

Such offerings, along with the Bell Atlantic Mobile alliance, represent the auto industry's seriousness about shedding its image as an old-line smokestack business and reclaiming the attentions of technology-obsessed investors.

"The industry has been very frustrated to be associated with the old economy and having depressed stocks," said Richard A. Henderson, an automobile analyst at Pershing Division of Donaldson, Lufkin & Jenrette Securities Corp. in Jersey City, N.J. "They've really shored up their balance sheets in recent years."

And now GM is putting some its cash -- it refuses to say how much -- into turning its cars into mobile communications centers. There are 140,000 OnStar customers, a number GM hopes to increase to 1 million by year's end and 3 million within four years. GM's bet is that the bulk of those users will become monthly telephone and Internet subscribers.

Detroit's leading automaker is convinced that it has a great deal to gain from its foray into communications. For starters, ever-growing numbers of Americans are buying mobile-phone services; 11 million were wireless-phone users in 1992, 90 million seven years later. Offering onboard calling could allow GM to tap into this demand for portable phone systems.

In addition, rather than selling a vehicle and never hearing from a customer again, GM could pull in a continuous flow of monthly revenue from subscriptions, similar to a traditional telephone or Internet-service company.

As OnStar project spokesman Todd Carstensen put it: "This offers the driver the opportunity to have an ongoing relationship with GM."

And, of course, vice versa.

"Traditionally in the auto business, the profit margin is in the single digits," Carstensen said. "In telecommunications, it's in the double digits. If we can move to a subscriber relationship, there's the potential for huge revenue."

For Bell Atlantic Corp., the New York-based parent of Bell Atlantic Mobile, the envisioned payback is similarly outsized. Since being split off from AT&T Corp., the company has held a virtual monopoly on local telephone service in Maryland and 12 other Northeastern and mid-Atlantic states, along with the District of Columbia. Now that deregulation is allowing regional phone companies like Bell Atlantic to compete for local and long-distance customers nationwide, Bell Atlantic is eagerly seeking opportunities to expand its presence coast-to-coast.

The GTE factor

Toward this end, the company has agreed to buy GTE Corp., a national phone company that provided GM with some of the technology underlying the OnStar system. In January, Bell Atlantic and GM announced their deal, giving the telephone company a chance to reach millions of motorists crisscrossing the nation's highways. To ensure that callers will be able to make connections outside the service areas of Bell Atlantic and GTE, the companies are negotiating alliances with other carriers around the country.

"We are soon to be a national carrier, and we see this as an opportunity to serve a major player in the national automobile market," said Debra Carroll, a spokeswoman at Bell Atlantic Mobile headquarters in Bedminster, N.J.

Carroll added that Bell Atlantic views its relationship with General Motors as "another way to get wireless into customers' hands," encouraging the 70 percent of the population that does not use mobile phones to pick up the habit.

But the GM deal might bring Bell Atlantic a bigger prize. Larry Swasey, an analyst with Allied Business Intelligence Inc. in Oyster Bay, N.Y., said that within three years, OnStar might be able to signal drivers -- perhaps with a phone call -- when they pass near a certain store, restaurant or other business. Swasey said such an onboard hawking feature would be "a great advertising mechanism," one that could draw keen interest from fast-food outlets, gas stations, movie theaters, or anyone looking to persuade motorists to stop.

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