News Release

PCS Subscribers Are Full Of Surprises; Cheap Talk Converts The Old, Lures The New And Paves The Way For Landline Displacement

August 18, 1997

Catarina Wylie
PrimeCo Personal Communications
(817) 258-1531
cwylie@notes.primeco.com
Melanie Ofenloch
M/C/C
(972) 480-8383
melanie_ofenloch@mccom.com

trend has been building for the past decade, but the recent surge in demand is due in part to a new digital technology known as personal communication services.

PCS is making talk cheap and enticing hundreds of thousands of new subscribers to take a walk on the wireless side. Most entrants to the wireless world don't know analog from digital, but their attitudes and emerging patterns of use are redefining the business, says PrimeCo Personal Communications L.P.

"PCS subscribers are full of surprises," said Lowell McAdam, COO of PrimeCo, the first-to-market player that won nearly 200,000 subscribers within the first two quarters of this year. "The biggest surprise is usage. The average PrimeCo customer is already using their wireless phone almost three times more than the average cellular consumer." That deceptively simple statistic is hard evidence of just how fast PCS is changing the wireless landscape.

PCS represents a new frontier with lots of space. Increased network capacity, in itself, is proving a dynamic catalyst within the marketplace. For more than a decade, traditional wireless carriers operated under the 20/80 principle, meaning 20 percent of the subscribers gobbled 80 percent of network capacity. Leftover capacity was marketed to consumers as a "safety and security" blanket, which brought in new customers but discouraged use.

Enter PCS. In a matter of months, its "priced-to-use" strategy catapulted wireless phones out of the glove box and into the mainstream.

That mainstream, however, represents uncharted waters. Half of PrimeCo's subscribers are first-time wireless users who think of PCS phones as a logical extension of their home phones, according to McAdam, which helps explain increased talk time. In the past, wireless phones were viewed as one-way communicators, something subscribers primarily used to place a call.

The sound of phones ringing in the grocery store, the mall, and the gym are testament to the fact PCS users are now receiving nearly as many calls as they place. The increased usage also indicates subscribers are reaching for their PCS phone to make dozens of casual calls once reserved for landline connections.

"This shift in attitude literally speaks volumes," McAdam said. "To enter the mainstream, you have to offer a product that can appeal to millions. What this out-of-the-gate spike in usage proves is that when quality and cost are in line with consumer expectations, demand is there."

Not only have consumers embraced PCS phones for everyday use, some are selecting them as second phones for home or as an alternative to wireline service altogether. This early trend toward wireline displacement is bolstered by PCS marketing strategies that bundle popular features and services associated with home phones such as voice mail and caller ID.

Innovations like flat-rate pricing plans for regional local calling, which consumers often view as "free" long-distance service, narrow the gap further. McAdam characterizes PCS as the cross-over product between wired and wireless networks, and agrees with analysts who predict roughly 20 percent of all telecommunications traffic will migrate to wireless networks over the next five years.

To contend in this increasingly competitive arena, PrimeCo is reshaping its coverage footprint to reflect the usage patterns of its new subscribers.

Typically, traditional cellular subscribers used their phones most during weekday drive time within central business districts and along major traffic corridors. PCS subscribers are taking wireless off the beaten path and out to the suburbs, soccer fields, golf courses, ball parks, lakes and other getaways. As a result, PrimeCo's subscribers are using PCS service just about as much on the weekends as they do weekdays.

This phenomenon impacts all kinds of business decisions, chief of which is how to efficiently design a network to offer service not only where subscribers work, but also where they live, shop and play. PrimeCo is responding with an aggressive 1997-98 network build that rivals its historic 16-city launch. Some of the new sites are earmarked to enhance existing coverage, but about 75 percent of the new sites target new geographic areas.

In fact, when this agressive build is completed, PrimeCo will cover roughly two thirds of its 61 million potential customers. The availability of dual-band phones that work on both PCS and traditional cellular networks, coupled with roaming agreements slated to begin taking effect later this year, soon will enable the start-up company to offer subscribers virtual nationwide service.

Handling these logistical obstacles, according to McAdam, clears the way to tackle the biggest challenge facing wireless carriers wading into the mainstream - changing wireless communications' "private club" image to one that welcomes the mass consumer. That's a tall order involving everything from adopting simple-to-understand pricing plans, to eliminating long-term contracts, to creating payment options that make it easier for more people to take advantage of the convenience of wireless communications.

"As we learn, we adjust course a bit, but our basic strategy hasn't changed," McAdam said. "Because unlike Columbus or other explorers, we know what we've discovered. PCS is a whole new world of wireless users."

PrimeCo Personal Communications provides digital wireless service in 19 major cities: Norfolk and Richmond, Va.; Fort Lauderdale, Jacksonville, Miami, Orlando and Tampa, Fla.; Chicago; Madison and Milwaukee, Wis.; Mobile, Ala.; New Orleans; Austin, Dallas, Fort Worth, Houston and San Antonio, Texas; Honolulu and Maui, Hawaii.

The company, which was formed by an alliance of AirTouch Communications, Bell Atlantic, NYNEX and U S WEST Media Group, owns PCS licenses covering 19 states and 61 million potential customers in 11 MTAs and has more than 2,800 employees. PrimeCo sells its phones and service through its own direct sales force, the company's 44 stores, more than 2,000 indirect retail outlets and a toll-free telephone sales line. The address for PrimeCo's interactive Website is www.primeco.com.

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