If you crave stability, steer clear of the Balkans and the cellular industry. Last year, cellular wholesales plummeted by 30% to 40% because of historic levels of overproduction in an industry that in previous years barely kept up with demand. Chaos reigned as carriers transshipped products to other carriers or sold product at "opportunistic" prices to distributors that normally buy products from manufacturers. For some suppliers, full-year unit sales fell in 1995 while they waited for carriers, retailers and distributors to clear out inventories.
One byproduct of the chaos was a flare-up in manufacturer consolidation, and some manufacturers and analysts fear that additional suppliers could drop out of the market in 1996 because wholesale prices haven't gone back up and inventories, though called "manageable" by some suppliers, are still considered high. On top of that, some analysts are projecting a slowdown in unit-sales growth in 1996 as the market matures and as three nationwide PCS carriers -- Sprint, AT&T and PCS PrimeCo -- begin to roll out their networks in the second half. In pointing to a maturing market, EMCI analyst Tom Ross pointed out that 70% of households with incomes of $50,000 or more have already gone cellular.
BIS Strategic Decisions estimates 1995 unit-sales growth of 20% in 1995 to 13.6 million units but only 10% growth in 1996. That followed 1994's increases of 30% to 40%, said analyst Jon Hulak.
Some suppliers are also concerned. In fact, some suppliers are preparing for multiple scenarios that include, for the first time, slower growth. But which scenario will pan out is far from certain. "So much of what will happen will depend on how aggressive the carriers are in rolling out digital and whether PCS carriers will roll out aggressively," said one supplier. Moreover, the supplier said, "1996 is the last year for cellular carriers to take advantage of their duopoly. Will they maximize their profits in 1996 or get aggressive to take a lot of market share in a preemptive strike against PCS?" In this climate of uncertainty, said another supplier, "unless you're vertically integrated like Ericsson, Motorola or Nokia, it's a very difficult business to justify staying in."
Despite the uncertainty, many cellular suppliers at WCES are introducing new products, which include analog phones that implement the industry-standard authentication feature, originally designed for digital TDMA phones, to make phone-cloning fraud virtually impossible and make it unnecessary for subscribers to enter PIN codes to thwart cloners. Those phones are the AT&T 3740 and Audiovox MVX-430, joining a Nokia 100 shipped in the fourth quarter and all of Motorola's analog phones, available with the feature since August.
Authentication works somewhat like the anti-code-grabbing feature of car security systems, which use algorithms that enable a remote transmitter to generate a different digital code with each use. In authentication, AT&T said, the phone maker programs a different mathematical value into every phone and provides the value to a carrier, which programs the value into its network.
Once it detects the phone for the first time, the network looks for the phone to generate a particular algorithm whenever a call is placed. If the algorithm isn't detected, the call isn't allowed to go through. A thief who clones the phone's number and ESN won't be able to place fraudulent calls because the algorithm changes with each phone call according to a complex formula. When the network detects a call being placed from a cloned phone using a subscriber's number and ESN but the wrong algorithm, the call is blocked.
Nokia will also unveil its Premier dealer program, which will target select cellular agents -- and perhaps some retailers -- for direct shipment of product and for special marketing support. Nokia currently sells to distributors and carriers. At NEC's offsite venue, the new TalkTime 800 series will be introduced to replace the 100 series. The four new phones include the 8-ounce 800, which offers 135 minutes of talktime.
Showgoers will also get a glimpse of Ericsson's quartet of new dual-mode digital portables that, when available in the mid first quarter, could become the first commercially available TDMA digital phones to incorporate the industry's upgraded TDMA spec: IS136. If carriers implement the IS136 spec in their digital networks, they will be able to offer consumers who buy IS136-equipped phones such additional features as short messaging, over-the-air activation, multi-line capability, and a network-activated sleep mode that could quintuple standby time.
On the network side, IS136 is currently available only by AT&T Wireless as part of an in-house office-complex cellular system in Dallas, but the carrier plans to roll it out in most of its digital markets in 1996. More than 90% of AT&T's 105 cellular markets, which cover 40% of the U.S. population, are digital, a spokesman said. The other two major carriers that have adopted TDMA digital -- BellSouth and Southwestern Bell -- haven't announced IS136 plans. The digital CDMA format, which offers IS136-type features, goes commercial this year, too. US West expects to provide CDMA service in Seattle early in 1996, but AirTouch, which expected to turn it on in the second half of '95 in Los Angeles, is delaying commercial availability for an unspecified period. "We're not entirely happy with the sound quality," the carrier said.
Flex, Alpha, And RDS Technology On Display By Pager Suppliers
By Lee Buchanan
New alphanumeric and Flex-protocol pagers will get the most attention from pager suppliers at Winter CES, where Motorola is introducing four new Flex models and Panasonic is demonstrating pagers using Radio Data System (RDS) technology. Motorola, which introduced the first Flex pager in late 1994, is making its biggest push ever behind Flex, in part by expanding its Flex line to four models from three at CES. A second alpha Flex model is in the works for second-quarter delivery, but it won't be on display.
The company's in-store materials will also talk up the benefits of Flex, and the Flex message might be added as a secondary theme to Motorola advertising later in the year, said marketing brand manager Karen Holmes. For consumers, the benefits include improved messaging reliability and a five-fold increase in battery life -- up to five months of 24-hour service from one AAA battery in Motorola's new numeric models. For the industry, Flex means transmission speeds up to a maximum 6,400 baud from a maximum of 2,400 in non-Flex networks, enabling carriers to increase capacity to keep pace with growth and to promote capacity-hogging alphanumeric services more aggressively.
Motorola's newest Flex pagers, which will be displayed at WCES, are: the $165-suggested-retail Renegade FLX; the $190 Bravo FLX (replacing the Pro Encore, Motorola's first numeric Flex model); the $199 Ultra Express FLX (the company's first front-display Flex numeric model); and the alphanumeric $319 Advisor Gold FLX. The first two ship in February/March; the latter two began shipping in recent months.
For its part, Uniden plans to show two pagers using Flex. One of the two models, set to ship in the first quarter, is the $79.95-suggested-retail FX9400 top-display numeric pager. The other is the $99.95 FLX9050, which offers a side display. Uniden also plans to show its first single-line alphanumeric pager, priced to retail at $119.95 and slated for release in the first quarter, said sales VP Pete Cavanaugh. NEC will also show off its first Flex pagers at WCES along with a full line of numeric and higher-end alpha products. On the carrier side, MobileComm and MobileMedia will exhibit together under the MobileComm name following last fall's announcement of a merger plan.
2-Way, Voice Paging Make Their Mark
Flex isn't the only new paging technology on display at WCES. New N-PCS (Narrowband-Personal Communications Service) technology is also on exhibit. MobileComm is showing the Motorola two-way Tango pager that it plans to use in its two-way paging system, which will go online in late-second quarter/early-third quarter 1996 in a limited number of markets. A nationwide network will be operating before 1997 is out, a spokeswoman said. SkyTel is exhibiting in a joint booth with Sony, where the duo will demonstrate SkyTel's two-way paging service. They're at the Sands Convention Center, where other wireless products and services will also be found.
Voice Now Due
PageNet is demonstrating its VoiceNow voice paging service, which uses a Motorola voice pager and will cost $20 per month for local service, including pager rental. The service will be beta-tested in New York, San Francisco and Dallas in the first quarter with commercial rollout around mid-year, starting in those three cities. The company is also developing a two-way text service similar to SkyTel's. The service, which has not yet been named, will be beta-tested in Atlanta in mid-1996, with commercial rollout scheduled for the end of the year. "The entire rollout will take 12 months, and by mid-1997, we expect to have N-PCScoverage similar to our current one-way coverage, covering 90% of the U.S. population," said spokesman Scott Baradell.
One of Motorola's new Flex pagers: The Bravo FLXEricsson is introducing a quartet of dual-Mode TDMA-digital phones that incorporate the upgraded TDMA-IS136 standard.