Cell Phone Complexities Leave Some on Sidelines

Melissa Patton wants to buy her husband a cellular telephone for Christmas, and her timing would seem to be ideal. Instead of choosing between the two carriers that cozily divided the Southern California wireless market for 13 years, Patton now has her pick of five firms.

But the Arco Corp. paralegal is feeling a little overwhelmed, and it’s no wonder. New competition may be bringing lower prices and new services to the wireless communications market, but it has also produced a marketing blitz replete with so many claims and counterclaims about different technologies and pricing plans that even phone professionals have trouble deciphering it all.

“All those ads have such small print. I know I would have to do a lot of research to figure out what we want,” Patton said. Rather then do all that work or risk a bad deal, she says she may skip the cell phone altogether.

Cellular carriers are praying that not too many potential customers have that reaction. Pacific Bell Mobile and Sprint PCS, which entered the market in July and November, respectively, have spent about $400 million and $1 billion, respectively, to build their California digital networks. These networks use a piece of the radio spectrum that was auctioned off by the federal government in 1995.

Meanwhile, the incumbent carriers, AirTouch Communications and L.A. Cellular, have upgraded their networks with digital technology--both to increase capacity and better compete on features with the newcomers. Nextel, which built its walkie-talkie-like service out of radio-dispatch systems, is broadening its marketing and improving its technology.

All are hoping to persuade the vast majority of the local residents who don’t have a wireless phone that they need one. While Southern California is the nation’s largest cell phone market in terms of subscribers, the penetration rate of 12% is among the lowest in the country.

The new competition has driven overall prices down by about 30%, analysts say. And carriers are spending heavily on advertising to get the word out. Analysts estimate that cell phone advertising in Southern California has jumped 50% since the new entrants started coming on line.

Yet comparison shopping is remarkably difficult. Savvy consumers need to consider carefully exactly how they expect to use the phone and what features are truly important. And at least a basic understanding of the technology issues involved will help assure a good decision.

For starters, it’s important to remember the differences between the older analog technology and new digital services. The types of services available on your cellular phone will depend on this technology and the phone you buy.

Digital services transmit information in ones and zeros, rather than radio waves used by analog services. Consequently, they are more efficient and provide better voice quality. They are also tougher for hackers to intercept and encode, and can handle more advanced features like voicemail, caller-ID, paging, three-way calling, call forwarding and text messaging.

While some carriers advertise that these additional services are free when you sign up, there can be a service charge each time you use one of them. For example, Sprint charges 15 cents per call for call forwarding, plus long distance charges. And you incur per-minute charges when you call your voicemail.

Caller ID, voicemail and call forwarding and first incoming minute free are included in L.A. Cellular, AirTouch and Pacific Bell’s monthly fees.

In the digital world, there are several different types of systems: CDMA, or code division multiple access, used by AirTouch and Sprint PCS; TDMA, or time division multiple access, used by L.A. Cellular; and the global system for mobile, or GSM, used by Pacific Bell Mobile. Each of the systems has somewhat different sound characteristics.

These different standards mean that phones bought for one system often won’t work on another. Dual-mode phones that can switch back and forth between digital and analog networks give some additional flexibility by making it possible to use an analog service if you’re out of your digital calling area.

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Coverage is a key issue. Sprint PCS’ network has holes in beach areas like El Segundo, Palos Verdes and Long Beach. The carrier also does not have plans to have service available for Ventura, Riverside and San Bernardino counties until late 1998. Pacific Bell does not yet have coverage in Thousand Oaks.

Then there’s the question of roaming, or using the phone outside your home service area. L.A. Cellular and AirTouch customers can roam almost anywhere in the country and use their analog service and both have some digital roaming capability as well.

Sprint PCS customers can roam only where there are Sprint PCS networks--a fast-growing group of cities. Pacific Bell roamers can go almost anywhere in the largest U.S. cities. But roaming is never cheap: it ranges from 35 to 99 cents a minute, on top of air time and long-distance charges.

(Nextel, which runs most of its ads on cable TV and talk radio to reach its target audience of mobile business people, does not charge roaming fees.)

If you plan to use your phone primarily for business or you are a high volume user, you should consider service plans that require a flat fee up front in order to receive a deeply discounted per-minute rate, according to Telecommunications Research & Action Center, a Washington D.C.-based consumer group.

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Sprint, for example, offers three different minute-based plans in which the per-minute fees get lower as you pay a higher monthly service charge. These plans are: $20 a month with 20 “any time” minutes and a 40-cent-per-minute charge thereafter, $50 a month with 375 “any time” minutes and a 20-cent-per-minute charge thereafter, and $75 a month with 750 “any time” minutes and a 15-cent-per-minute charge thereafter. Keep in mind that unused minutes do not roll over into the next month.

Sprint PCS’ three pricing plans, which offered the lowest digital prices in Los Angeles in mid-December, are good through Jan. 1, 2000, if activated before Jan. 11. After Jan. 11 Sprint plans to raise its rates “to meet its competitors.”

Moderate users who make short, frequent calls should look for service plans that include the first 60 to 120 minutes per month for a fee of $20 to $40, TRAC says.

Those who plan to use their phones only in an emergency should opt for plans with low monthly rates and higher per-minute charges. Consumers should be aware that promotional monthly fees--which are all the rage during the holidays when carriers usually rake in 40% of their annual sales--are typically good for only three months, after which a higher fee will kick in.

When signing on for any of these plans you should ask if there’s a fee to activate the service.

If you have a tight budget or a poor credit history or just don’t want to deal with a monthly bill, you can opt for a prepaid plan that allows you to purchase a block of minutes up front. The carrier will deduct minutes from this block each time you use the phone. Sprint, L.A. Cellular and AirTouch offer prepaid service plans.

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Carriers also try to attract entry-level users with promotions that feature free weekend minutes. L.A. Cellular is currently offering 240 free weekend minutes, while AirTouch is offering 500 free weekend minutes. Both offers are available on analog and digital services.

These promotions are available, however, only to users willing to sign a long-term contract. Consumers should also ask which weekend hours they’re allowed to use these minutes.

AirTouch offers an analog plan that doesn’t require a contract in a kit that includes a free phone called the “AirTouch Complete Cellular Package.” This kit ties into the company’s marketing strategy of convenience, and was featured recently in a newspaper ad that read “Really, Really, Really Easy Cellular Is Really Here.”

Typically, for analog service, you can get a free or sharply discounted phone if you agree to sign a long-term contract. But that’s not the case for digital service, and a phone can cost anywhere from $49 to $500.

Analog carriers see that difference as a big selling point.

“We have a lot of customers that are very price conscious and they’re looking for safety and security,” said Robert Curran, vice president of marketing and sales for AirTouch’s Southern California region. “It begs the question, ‘Why do I need a Rolls Royce when I could get a Chevy?’ ”

Rod Egdorf, Los Angeles area vice president for Sprint PCS Southern California/Nevada, responds that the “expenses of the service are in the blades, not the razor. It’s not the phone that will kill you, it’s the minutes.”

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Some of the new digital phones have features like smart ringing--in which a user can choose up to nine different tones to signal who is calling--and message panels for caller ID and text messages.

Wireless firms agree competition will help them become more efficient in constructing their pricing and marketing strategies. For example, recent L.A. Cellular ads show a person holding a phone that displays the firm’s pricing plan. The company can change these ads on the fly to meet a competitor’s newest promotion.

But analysts disagree with carriers’ assertions that “a rising tide lifts all boats,” saying the market cannot sustain five wireless companies.

“The wireless market isn’t big enough to profitably sustain all these carriers. Someone will go broke or get bought out,” said Michael French, a vice president of Insight Research, a Livingston, N.J.-based telecommunications market research firm. “There will be severe price wars.”

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Times staff writer Jennifer Oldham can be reached at jennifer.oldham@latimes.com

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Wireless Wars

Fueled by competition and the holiday retail season, advertising for wireless phone services has reached a fever pitch as firms scramble to alert consumers to lower rates on traditional analog services and tout the benefits of new digital services. Here’s the marketing battle at a glance.

* AirTouch: This 13-year-old firm is betting its “We’re easy to do business with” ad theme, together with its reputation for efficient customer service, will help it retain customers. It’s one of L.A.’s two incumbent carriers, and now offers both traditional analog and newer digital service.

* L.A. Cellular: Also 13 years old, this company touts convenience in its ads. In an effort to attract businesses and consumers, the firm plans to position itself as L.A.’s “home-grown” wireless company. It also has both analog and digital offerings.

* Nextel: This firm sells digital phones with walkie-talkie-like capabilities. Nextel highlights this feature in ads designed to reach its target market of businesses that employ mobile workers. It’s been here since January 1994.

* Pacific Bell Mobile: This firm introduced digital service in July, with ads based around the idea that digital is more advanced and affordable. It’s relying on its “Ask for the Smart Chip” slogan to set it apart.

* Sprint PCS: The newcomer, Sprint PCS entered the market on Nov. 28 with an advertising blitz featuring its slogan, “It doesn’t get any clearer.” The firm’s strategy is to “take the craziness from the business.”

Cost Comparison

A comparison of the average cost per minute of the four main L.A. wireless networks.

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Minutes LA Cellular Airtouch Pacific Bell Mobile Sprint PCS per month* 60 $0.70 $1.00 $0.48 $0.54 100 0.60 0.60 0.42 0.46 250 0.40 0.37 0.21 0.20 500 0.35 0.34 0.16 0.12 1,000 0.30 0.29 0.17 0.09

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* Fees for digital services only and are based on rates provided by carriers on Dec. 11 and 12 and derived by adding monthly access charges, free minutes and air time and dividing them by total number of minutes used.

Behind the Marketing Slogans

What they say: Low monthly access fees.

The fine print: These fees only extend for several months, at which time a larger fee will kick in.

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What they say: 500 free minutes or 240 free minutes.

The fine print: Minutes can be used on weekends only and only in local service area.

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What they say: Get 400 SmartDigital minutes for $59.99 per month, or, 750 any-time minutes for $75 a month.

The fine print: If you don’t use all your minutes, they don’t roll over into the next month.

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What they say: Get a free phone when you sign up for our service.

The fine print: Nothing is ever free; companies will look to recoup costs through higher monthly charges and mandatory long-term contracts.

Sources: Insight Research, Times research, Yankee Group

Researched by JENNIFER OLDHAM / Los Angeles Times