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Este informe no está disponible en español. CARIBBEAN BUSINESSWelcome To The Wireless RevolutionIn The Future, Cellular Phones Will Outnumber Regular Phones In Puerto Rico; Service Will Include Internet AccessRing Out The Old, Ring In The New: With Five Wireless Phone Companies In The Market And More To Come, Intense Competition Will Drive Down Prices, Create New Servicesby José MartínezMarch 23, 2000 When brothers Sosthenes and Hernand Bhen introduced the telephone to Puerto Rico in 1914 as the Porto Rico Telephone Company, few local residents could have imagined that two gadgets connected by a wire would replace the highly usedwireless telegraph as the principal means of distant communication. Today the explosion in wireless telecommunications technology is taking us back to bring us the future. In a few years there may be more cellular (wireless) phones in Puerto Rico than conventional (wireline) phones. Like in the old days of the radiotelegraph, wireless will again be king. But with a difference--technological innovation is making wireless telecommunications more affordable and useful by integrating voice, data, and the Internet at costs that are accessible to almost anyone. There are at least 800,000 cellular phone users in Puerto Rico today. That means one for every five people on the island--a number that is much higher than that of any country south of the continental U.S. At 20% wireless market penetration in Puerto Rico, we are still below the estimated 30% prevalent on the mainland. But we’re fast approaching it, having jumped 4% in the last year. More significantly, at 20%, wireless telecommunications penetration in Puerto Rico is fast approaching the 35% of conventional wireline telecommunication. In 1999, there were 35 phone lines for every 100 people. So it’s not far-fetched to think that eventually, there will be more cellular phones than regular wired phones on the island. That appears to be a worldwide trend. Finnish cellular handset manufacturer Nokia has estimated that, if current growth is sustained, cellular lines will surpass the number of fixed or land lines in the U.S. mainland by 2003. That forecast is already a fact of life in countries like Spain and Finland, where people prefer wireless to fixed-line as their telephone of choice. In 1999, only three carriers provided wireless telecommunication services in Puerto Rico. Since then, two more wireless telecommunications providers have entered the market. Most industry experts say growth will continue its current course as the price of wireless service goes down and the economy keeps booming. Centennial is the only local wireless carrier that also offers wireline services, which amount to $50 million a year in revenue, while their wireless business generates $150 million. "Wireless won’t displace wireline," said Kari Jordan, president of Centennial de Puerto Rico. "Wireline will continue to grow because of data and Internet needs. But the growth rate of wireless is much higher than wireline." "I think the local percentage of penetration in the wireless market will catch up with stateside numbers. After that, both markets will grow at the same rate," said Raul Burgos, general manager and vice president of TeleCorp/AT&T’s local affiliate doing business under the SunCom brand. "Future growth will come from intense competition between carriers lowering prices and deploying new services and technologies." According to market studies, there are roughly one million potential cellular customers in Puerto Rico. Cellular prices continue to go down, making them appealing to members of socio-economic ranks that had once considered them out of their reach. "The demographics of cellular users have changed in the last three years," said Centennial’s Jordan. "Cellular phones were expensive devices that only business people used. Today, people are well informed and know what they want. Cellular phones have become mass-market products which almost anyone can obtain." Puerto Rico’s very special market differs from that of the States because people here seem to have an insatiable hunger for communication capability. For example, local pager sales have continued to grow even after cellular phones integrated this service into their own. "In other parts of the world, pagers are fading out of the picture because of cellular-pager service. But Puerto Rico doesn’t follow this trend," said Martin Rosario, business manager personal communications-Caribbean for Motorola. "We sell more pagers in Puerto Rico than in Brazil, Argentina, and Chile combined." Another example of wireless carriers adjusting to the local market’s peculiarities is the strategy of not charging for incoming cellular calls implemented by MoviStar, Telefonica S.A.’s wireless division. "Customers shouldn’t be responsible for calls not made by them," said Claudio Hidalgo, business director for MoviStar. "With our method of not charging for incoming calls, calling party pays (CPP) is not necessary. We are a step ahead." Hidalgo added that in other parts of the world CPP, in which incoming cellular calls are charged to the originator, has always been the normal billing method. "This method, under study by the Federal Communications Commission (FCC), represent a cultural problem for U.S. market cellular users since they have always paid for everything, even incoming calls. So there are challenges that have to be gauged before implementing CPP," said Hidalgo. Hidalgo also specified that their system of not charging for incoming calls is a billing method, not a special offer. He also predicted the industry would follow their lead. MoviStar also offers free incoming calls in Guatemala. This is the only country in North, Central, and South America--besides Puerto Rico--in which the company has implemented this system. The Players A year ago CellularOne was the leading local wireless carrier with 46% of the local market, roughly 294,000 users. Celulares Telefonica followed them with a 35% market share and Centennial with a 19%. Since then, two more Cellular providers have entered the market and a sixth one is expected to join them soon. Between the five wireless service providers operating on the island--Celulares Telefonica, CellularOne, Centennial, MoviStar (Telefonica S.A.), and SunCom (TeleCorp/AT&T)–they all generate more than 3,000 direct jobs. A sixth carrier-- Sprint PCS–is the next one in line to enter the local market. Besides these carriers, there are also companies like Pegasus and Omnipoint, which have wireless licenses for Puerto Rico but haven’t yet decided to enter the local market. With so many companies already providing similar services, competition will definitely heat up. "With six companies on the local scene, it will be very difficult to compete in the next five years. Some companies will disappear," said Carla Ussery, general manager and vice president of Celulares Telefonica (CTI), the wireless division of the Puerto Rico Telephone. "Only those with the economic and technological means will be able to survive." "There are cities in the States with approximately the same population as Puerto Rico that have more than six carriers," said Centennial’s Jordan. "So in theory, the market could sustain the six of us, at least for the short term. But nothing is for sure." Bo Brockman, president and general manager for CellularOne Puerto Rico, agrees it’s going to be a tough market. "The industry is getting crowded and extremely competitive. Carriers not only have to deliver good value to customers but also to their investors. We’ll see what happens in the future." Others are more optimistic at how the market will react to increased competition. "The local market can sustain even more wireless operators, at least in the short term," said MoviStar’s Hidalgo. "Actually, we want more competition because this helps the market grow. In the end, it’s the consumers who win." "Increased competition will force carriers to be more effective reaching customers," said TeleCorp’s Burgos. "With so many carriers in a limited market, finding niches and focusing on these will be the key. Competition is great for consumers. The burden is on us." New Technology Wireless communications are bound to get an additional boost now that Internet access through cellular phones has been made possible. In a nutshell, we will be able to access special websites and read our e-mails from a cellular phone. In a manner similar to what happened in the wireline industry with the recent boom of the Internet, the use of airwaves will be used more for data than voice transmissions. "Everyone is looking for the new edge in wireless telecommunications and it will be wireless data," said CellularOne’s Brockman. "Almost every carrier is looking at this option seriously." Already three of the local service providers, Celulares Telefonica, SunCom, and MoviStar, have said that Internet access service through cellular phones will be available before the end of the year. The other two are expected to follow. In the States, Sprint PCS was the first to launch the service and is expected to also offer it in Puerto Rico. Last month, MoviStar launched its wireless Internet access service in Spain. "The launch of the service locally will follow soon," said Juan Oyarzabal, marketing manager for MoviStar. "Our network is based on the latest Lucent and Alcatel third-generation Personal Communications System (PCS) wireless equipment, which allows us to deploy new services faster, including Internet through cellular phones, e-mail, and new service payment options." Oyarzabal also mentioned that MoviStar is already considering various Internet content providers to supply data for the service. Content providers are needed to supply data in a new format that can be displayed in the limited space of cellular phones screens and can be downloaded fast. These content providers, like web portals, and e-commerce sites like Amazon, will become the default sites for users, since browsing is limited to them, which works to their advantage. But some carriers are very cautious about integrating data to cellular phones. "We are getting ready to offer the service but want to have a product that is easy to use and that depends on the availability of handsets with Internet capabilities," said CTI’s Ussery. Centennial’s Jordan warned against possible complications if the amount of data dumped into a user’s handset makes its operation cumbersome. "There is a need for on-the-spot information, which wireless can deliver. And we have a commitment to deliver the latest technology to our customers. So we will definitely see some kind of two-way data transmission in the near future. We just don’t want to make it harder on customers." Phone manufacturers are busy addressing handset functions as they deploy the next generation of phones. Recently, Motorola presented in Puerto Rico its new line of cellular handsets with Internet capabilities. The new phones feature integrated Internet access, besides regular cellular functions, in either one of the most popular wireless network protocols available in Puerto Rico: Time division multiple access (TDMA), as used by CellularOne, Celulares Telefonica, and SunCom, or code division multiple access (CDMA) as used by Centennial and MoviStar. "We are working with local wireless service providers to implement this feature in their networks in a not so distant future," said Victor Diaz, general manager personal communications-North Latin America for Motorola. "Wireless will provide new life to the Internet by increasing the number of people capable of accessing the Net." Besides Motorola, major cellular equipment manufacturers like Ericsson, Nokia, and Qualcomm have presented handsets with Internet capabilities. "New technologies are changing the way we do things," said Bengt Forssberg, president of Ericsson Latin America. "In a not so distant future, wireless and Internet traffic will surpass wireline. That’s something incredible, considering that the voice networks have taken 100 years to reach their current state." Forssberg also mentioned that once cellular phones have Internet capabilities, the number of Internet users would grow at a faster rate. "Personal computer penetration is limited outside of the U.S. and parts of Europe because of its cost. But cellular phones have a much higher penetration rate and will provide basic Internet access to a much larger base of users than computers can," said Forssberg. Environmentally Friendly The growth achieved by wireless communications in the last five years hasn’t always been smooth. It has required the construction of special telecommunications infrastructure, like towers. A few years ago, cellular towers were hardly seen. But today, they are evident everywhere. There are even places where two or more towers occupy the same space, as carriers compete to have coverage in the same areas. In October, the Puerto Rico Planning Board issued new rules for the construction of wireless telecommunications towers and facilities. The new rules challenged existing and planned infrastructure as the market continues to expand. "New rules were created to ensure the presence of a safety margin around facilities," said Patricia Eaves, vice president and general manager for Sprint's local operations. "Some local facilities don’t meet the new requirements and will have to be changed or relocated." "The Planning Board was way off-base with these new rules," said Centennial’s Jordan, president of Centennial de Puerto Rico. "New hearings are scheduled to find a solution that is fair to both sides." The rules emphasized the danger that towers may present to adjacent properties in the event of a collapse due to a natural disaster, like a hurricane. To counter these dangers, new minimum distances between the towers and properties were issued. Also, restrictions over ecologically sensitive and flood-prone areas were also added to the construction requirements. "Our network takes into consideration the environment, and most of our antennas are installed on building rooftops," said MoviStar’s Hidalgo. "Only as a last resort, would we build a tower. And that has kept the number of our towers not meeting Planning Board guidelines very low." But some carriers have already taken initiatives to slow tower deployment considerably by sharing existing towers. "Sharing towers is something that is going to happen more often in the near future," said CellularOne’s Brockman. Centennial’s Jordan also mentioned that in the past, incumbent carriers wouldn’t allow competitors in their towers. "This caused a proliferation of towers since it wouldn’t stop a carrier from offering service. They’d simply set up their own towers. Today, we have been able to trade positions on towers with other companies. It’s a win-win situation because everyone saves money." With carriers entering agreements to share facilities, the future looks promising not only for the environment but also to customers in areas that would have been very difficult and expensive to reach. Glossary: Bandwidth: The amount of data that can be transmitted in a fixed amount of time. For digital devices, the bandwidth is usually expressed in bits per second (bps) or bytes per second. For analog devices, the bandwidth is expressed in cycles per second, or Hertz (Hz). Calling Party Pays (CPP): Calling Party Pays means that inbound cellular calls are not charged to the person receiving the call but are instead charged to the person originating the call, either from a regular phone or another cellular phone. The FCC and some cellular carriers are endorsing the new method of charging inbound calls. Cellular: Refers to communications systems, especially the Advanced Mobile Phone Service (AMPS), which divides a geographic region into sections, called cells. The purpose of this division is to make the most use out of a limited number of transmission frequencies. CDMA: Short for Code-Division Multiple Access, a digital cellular technology first used during World War II by the English allies that uses spread-spectrum techniques. Unlike competing systems, CDMA does not assign a specific frequency to each user. Instead, every channel uses the full available spectrum. Individual conversations are encoded with a pseudo-random digital sequence. GSM: Short for Global System for Mobile Communications, one of the leading digital cellular systems. GSM uses narrowband TDMA, which allows eight simultaneous calls on the same radio frequency. GSM was first introduced in 1991. As of the end of 1999, GSM service was available in more than 100 countries and has become the de facto standard in Europe and Asia. PCS: Short for Personal Communications Service, the U.S. Federal Communications Commission (FCC) term used to describe a set of digital cellular technologies being deployed in the U.S. PCS includes CDMA (also called IS-95), GSM, and North American TDMA (also called IS-136). Two of the most important distinguishing features of PCS systems are that they are completely digital, and they operate at the 1900 MHz frequency range. Roaming: The ability to use a cellular phone outside its base or home system when traveling. Short Message Service (SMS): Short Message Service is the transmission of short text messages to and from a mobile phone. Messages must be no longer than 160 alphanumeric characters and contain no images or graphics. This service is the first step for enabling Internet access in cellular phones. TDMA: Short for Time-Division Multiple Access, a technology for delivering digital wireless service using time-division multiplexing (TDM). TDMA works by dividing a radio frequency into time slots and then allocating slots to multiple calls. In this way, a single frequency can support multiple, simultaneous data channels. TDMA is used by the GSM digital cellular system that is very popular in Europe. WAP: Short for Wireless Application Protocol, a secure specification that allows users to access information instantly via cellular phones. WAP supports most wireless networks, including CDMA, GSM and TDMA. WAP-enabled phones use displays and access the Internet using microbrowsers, browsers with small file sizes that can accommodate the low memory constraints of handheld devices and the low-bandwidth constraints of a wireless-handheld network.
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