Jill Stewart

Personal Communication Service (PCS) is digital wireless telephone service (Baldwin et al. 1996). Understanding advances such as PCS in the telecommunications industry is important for several reasons. First, PCS (also known as Personal Communication Network (PCN) is part of the current trend toward a future of digital communications technology that will include digital television, digital MMDS (or ‘wireless cable’), digital cameras and digital video from Direct Broadcast Satellites (DBS), (Kerver 1997). Secondly, in addition to the advent of digital technology, PCS is a new entrant in the wireless telecommunications industry that differs from current analog cellular telephone networks. Furthermore, besides cellular competitors, many analysts predict PCS will also compete in the local telephone market since a mobile PCS digital telephone provides the same voice quality as wireline telephone service (Baldwin et al. 1996). Therefore, PCS is likely to impact many people who have wireline local telephone service.

DIFFERENT STANDARDS OF TRANSMITTING PHONE CALLS

There are two different standards of transmission technology used in the United States. Some PCS providers use Global System for Mobile Communication (GSM) for their network systems, which has been used all over the world for many years and has established a track record of providing reliable performance. GSM technology is used to accomplish multiple access by assigning time slots to every user from which during that time the information must be transmitted (Dodd 1998). Other PCS providers use Code Division Multiple Access (CDMA) for their network systems, which is a new transmission standard that was invented in 1989 by Qualcomm, a company based in San Diego, California (Dodd 1998). CDMA technology is used to accomplish multiple access by assigning unique codes to differentiate users (Dodd 1998). Thus, by assigning special codes to every voice or data transmission, many more users can ‘share spectrum or air space’ (Dodd 1998:221).

The advantages of CDMA include better quality and more efficient use of battery power in the handset and more capacity because CDMA reuses all of the available bandwidth of frequency in adjacent cells (Dodd 1998). CDMA also provides better security for consumers because it converts voice or data into a special code that is transmitted to the person on the receiving end thereby reducing the problems of fraud and eavesdropping (Dodd 1998). Despite its advantages, the prospects of CDMA is questionable considering it is a new transmission technology that needs more time to develop a proven performance in the wireless telecommunications market.

FREQUENCY SPECTRUM BAND

One technological difference between PCS and cellular systems is that each uses a different frequency spectrum band. Cellular operates in a lower frequency band than PCS. PCS uses a 2GHz (gigahertz) frequency band to transmit and receive signals whereas cellular operates in a 800Mhz (megahertz) frequency band, (Baldwin et al. 1996).

DATA TYPE

Because of the different and more efficient use of frequency, PCS is more flexible with other types of data such as text and graphics than a cellular telephone. PCS also has more capacity to provide data services than a cellular telephone network (Dodd 1998).

CELL SIZE

Since the size of a PCS cell is smaller than that of a cellular telephone network and the power of the antenna is lower, the size of a PCS handset can be smaller (pocket-sized) than that of a cellular handset.

The types of equipment needed for PCS to function include a PCS handset, a base station in each cell site and a mobile telephone switching office (MTSO). Each base station is connected to a MTSO by a microwave link or a landline. The MTSO controls the switching between the public switched telephone network and the base station for calls between the wireline and PCS. The MTSO also processes data that is received from the base station controllers about the status of a mobile phone unit, switches calls to other cells and compiles billing data (Arnst et al. 1997). Thus, as a user drives across a service area, their call is transferred (or handed-off) from one cell to another in order to maintain a strong signal for quality reception. Unlike a cellular telephone network in which a few cell sites (or base stations) are constructed miles apart, PCS requires many more cell sites that are constructed close to one another (between 1,000 and 2,000 feet apart) (Baldwin et al. 1996).

CURRENT STATUS OF PCS: PCS PROVIDERS LAUNCH SERVICES IN 1996

The Sprint PCS alliance is the largest PCS provider in the U.S. covering 29 markets that can reach 145 million people nationwide. Sprint PCS is backed by Sprint Communications and two cable companies, Cox Communications Inc. and Comcast Corporation. AT&T Wireless is the second largest PCS provider in the U.S. covering 21 markets that can reach 107 million people nationwide. PCS PrimeCo, a joint venture between Bell Atlantic and AirTouch Communications, is the third largest PCS provider in the U.S. covering 11 markets that can reach 57 million people nationwide. (See Table 1 for a table listing the top 10 companies who bid the most money for PCS market licenses).

COST OF PCS: The terminal equipment costs (ie. PCS handset) between $150 to $500. The expensive PCS handsets are pocket-sized and offer the most features. The following is one example of the personal and business phone rates currently being offered by Sprint PCS (see Figure 1 for more current pricing plans from other PCS providers).

Personal phone rates:

Basic (moderate user) plan: $20/month for 20 minutes of free airtime. Beyond 20 minutes of phone use, the charge is $0.40/min. during peak and off-peak hours.*

Heavy user plan: $75/month for 600 minutes of free airtime. Beyond 600 minutes of phone use, the charge is $0.20/min. during peak and off-peak hours.*

Business phone rates:

Resource plan (basic plan): $50/month for 300 minutes of free airtime. Beyond 300 minutes of phone use, the charge is $0.30/min. during peak and off-peak hours.*

Profit Plus (heavy user plan): $200/month for 2,000 minutes of free airtime. Beyond 2,000 minutes of phone use, the charge is $.15/min. during peak and off-peak hours.*

*Peak Period: 7 a.m. to 7 p.m., Monday through Friday.

*Off-Peak Period: 7 p.m. to 7 a.m., Monday through Friday and all day on Saturday and Sunday.

Both PCS and cellular have very high fixed investment costs, heavy marketing expenses and high operating costs. However, the network construction costs for PCS are 1/3 the cost of cellular networks (Greichen and Lipoff 1996). In fact, although more cell sites are required for PCS service than for a cellular telephone network, each PCS cell site costs between $200,000 and $300,000 compared to $1 to $4 million for each cellular base station due to the fact that cellular base stations are taller and require more power (Dodd 1998). However, unlike cellular providers, PCS providers have to pay an average of $15 per customer (or up to $32/customer) for a market license (Lucent Technologies PCS supplement). For example, Sprint PCS paid $13.2 per population for a license and PacTel PCS paid $25.8 per population for a license (Lucent Technologies PCS supplement).

Unlike cellular systems, which have been analog for a decade, PCS has always been digital. Before the launch of PCS in 1996, the only cellular wireless service available was a cellular telephone that used analog transmission in which each cell site could only serve a limited amount of users (Baldwin et al. 1996). However, the development of digital transmission increased the number of users to each base station and provided superior voice quality (Baldwin et al. 1996). In addition to the technical achievement of digital transmission, competitive pressures led to the research and discovery of digital transmission technology. In fact, some analysts accurately predicted, ‘...emerging PCS may stimulate the evolution of mobile telephone service into a competitor to today’s local exchange service by allowing new entrants into the market (such as cable companies)’ (Baldwin et al. 1996:58). As predicted, this has occurred considering Sprint PCS is a joint venture between a long-distance carrier, Sprint Communications and two cable companies, Cox Communications Inc. and Comcast Corporation. This scenario was only recently feasible due to the Telecommunications Reform Act of 1996, which permits cable, long-distance and wireless providers to enter the $105 billion local telephone market (Arnst et al. 1997). However, it is important to note that local exchange carriers (LEC) have gained similar privileges, (Lucent Technologies PCS supplement). Thus, many LECs now have the opportunity to enter the long-distance and wireless markets and are doing so, such as Pacific Bell and GTE (Lucent Technologies PCS supplement).

In regard to its services, PCS provides high quality voice transmission compared to analog cellular. Also, PCS offers consumers special features such as caller ID, call waiting, call forwarding, call blocking, three-way conference calling, paging and voice mail (Dodd 1998).

All of these features are basic, built-in services, whereas digital cellular providers currently charge extra for these services.

Other features of PCS include a soft-hands off while driving between cell sites resulting in fewer dropped calls and security techniques to combat cloning as well as protection from other people eavesdropping on (listening to) someone’s call without permission. Cloning is a technique in which thieves use equipment to copy identification and serial numbers of mobile telephones and then steal airtime by making unauthorized calls using someone’s account (Dodd 1998).

A disadvantage of PCS is its more limited ability to roam. However, some PCS providers are overcoming this problem by expanding their coverage nationwide. For example, no other company in the U.S. has more PCS licenses than Sprint PCS. As a result, the lack of roaming capabilities is becoming less problematic.

USERS OF PCS

Consumer reaction has influenced the development of PCS. Prior to PCS, most customers of wireless telephones were business professionals (Baldwin et al. 1996). However, today most PCS customers are classified according to one of the following three categories:

SECURITY PURPOSES: Consumers who intend to primarily use PCS in cases of emergencies, such as to call for help in times of car trouble or to call for directions when lost.

SOCIAL PURPOSES: Consumers who intend to use PCS for personal safety purposes as well as to make frequent calls to family and friends.

BUSINESS PURPOSES: Consumers who intend to primarily use PCS for all their business needs such as the mobile availability of paging, voice mail and call waiting, which enable a person to be accessible at any time.

Furthermore, ‘PCS was conceived as a way to provide a low-cost, feature-rich wireless telephone service. Pricing was to be low enough for the service to be affordable to a wide segment of the population. ...with the multi-functional handset replacing the combination of a mobile phone, pager and answering machine’ (Dodd 1998:219).

PCS MARKET IN THE U.S.

The FCC divided the United States into fifty major trading areas (MTAs) comprised of states or many cities. Two broadband PCS licenses for 30 MHz of spectrum were allocated for each of the 50 MTAs and distributed through an auction in 1995 (Dodd 1998). For example, PacTel Mobile Service paid $695 million for two licenses. (See Table 1 for a table listing the top 10 companies who bid the most money for PCS market licenses). Furthermore, ‘The idea behind the federal government’s promotion of new use of the airways is to encourage competition and raise money for the U.S. Treasury. By dividing up the country...each area could have six personal communications service competitors plus the two existing cellular providers. It is hoped that competition from PCS services will drive prices lower for all cellular service and encourage growth in new wireless services’ (Dodd 1998:219).

OPPORTUNITIES: RAPID INDUSTRY GROWTH

The wireless communication market is a rapidly growing market. Currently, one out of every eight people is a wireless telephone subscriber (Lucent Technologies PCS supplement). Other studies indicate that ‘one in every three new phone numbers is for wireless service’ (Wickham 1997:37). By the year 2005, the number of subscribers for wireless services is expected to reach 130 million in the U.S. However, while the growth rate of cellular will decrease, PCS is expected to eventually exceed the growth rate of cellular. In fact, PCS is expected to have 60 million subscribers by 2005 (see Figure 3).

PROBLEMS: RETALIATION FROM CELLULAR PROVIDERS

PCS providers will face intense competition from cellular providers who are upgrading their networks from analog to digital and lowering their prices to match those of PCS (Lucent Technologies PCS supplement). Thus, there might be little difference between PCS and digital cellular telephone services in the near future.

PROSPECTS: WIRELESS VERSUS WIRELINE PHONE NETWORK

The success of mobile telephones may diminish the demand for wireline telephone service, (Baldwin et al. 1996). However, other analysts point out that ‘wired networks are still ahead in voice quality and data speeds’ (Arnst et al. 1997:88).

*The consortium of Sprint, Cox and Comcast

**The alliance of Bell Atlantic, NYNEX, US West and AirTouch

Source: Telecommunications (July 1995)

Source: The Wall Street Journal (November 11, 1996)

PCS PRIMECO: This company offers the following three plans for business and non-business users.

Digital Choice 30 plan: $19.99/month for 30 minutes of free airtime. Beyond 30 minutes of phone use, the charge is $0.35/min. during peak and off-peak hours.*

Digital Choice 100 plan: $29.99/month for 100 minutes of free airtime. Beyond 100 minutes of phone use, the charge is $0.30/min. during peak and off-peak hours.*

Digital Choice 300 plan: $49.99/month for 300 minutes of free airtime. Beyond 300 minutes of phone use, the charge is $0.25/min. during peak and off-peak hours.*

PACIFIC BELL: This company offers the following three plans for business and non-business users.

Digital Value 30 plan: $19.95/month for 30 minutes of free airtime. Beyond 30 minutes of phone use, the charge is $0.40/min. during peak and off-peak hours.*

Digital Value 100 plan: $34.95/month for 100 minutes of free airtime. Beyond 100 minutes of phone use, the charge is $0.30/min. during peak and off-peak hours.*

Digital Value 250 plan: $49.95/month for 250 minutes of free airtime. Beyond 250 minutes of phone use, the charge is $0.25/min. during peak and off-peak hours.*

*Peak Period: 7 a.m. to 7 p.m., Monday through Friday.

*Off-Peak Period: 7 p.m. to 7 a.m., Monday through Friday and all day on Saturday and Sunday.

Arnst, C., Barrett, A. and Elstrom, P. (1997) "Vaulting the Walls with Wireless," Business Week, 20 January: 85-88.

Baldwin, T.F., McVoy, D.S., and Steinfield, C. (1996), Convergence: Integrating Media, Information & Communication, Thousand Oaks and London: Sage Publications.

Colman, P. (1996) "Cable TV in 1997: Nowhere to Go But Up," Broadcasting & Cable,

9 December: 64-78.

Dodd, A. (1998), The Essential Guide to Telecommunications, New Jersey: Prentice Hall PTR.

Greichen, J. and Lipoff, S. (1996) "PCS Strategies: How to Design the Perfect System," Telecommunications, July: 33-35.

Kerver, T. (1997) "Cox’s Western Push," Cablevision, 6 January: 18-24.

Lucent Technologies PCS Supplement, Meeting the Promise of PCS.

Online. Available: http://www.sprintpcs.com (February 1998).

Online. Available: http://www.pacbell.com-pcs (February 1998).

Online. Available: http://www.primeco.intelligentinfo.com (February 1998).

Online. Available: http://www.airtouch.com (February 1998).

Wickham, R. (1997) "1997 News & Goods," Cellular Business, January: 36-45.

Personal Communication Service (PCS) is digital wireless telephone service, (Baldwin et al. 1996: 19). PCS is also known as Personal Communication Network (PCN).

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