Cellular Promotions in New York Sign of All-Out Pricing War

Article excerpt

NEW YORK -- Talk is cheap, of course. But watching television or reading the paper in New York City these days, you might think it was free.

New York's two leading cellular telephone carriers, Bell Atlantic Nynex Mobile and AT&T Wireless, are running a barrage of radio, television and newspaper ads that promise anywhere from 200 to 1,000 free minutes of calling time in return for signing up for cellular service. A third wireless competitor, Omnipoint Communications, may soon jump into the fray with its own introductory offer of free minutes.

Some industry experts see the promotions as a sure sign that a long-predicted wireless telephone war is breaking out in the New York market. And with new competitors invading every major market nationwide, similar price wars are likely to be raging soon throughout the country. Although more than 44 million Americans now carry around a portable phone, wireless rates have remained high because the government originally licensed only two carriers in each market when cellular service was introduced in the early 1980s. Now, though, thanks to new technologies using other portions of the wireless airwaves, up to five carriers are vying for customers in major markets. Their prices and promotions could put mobile phones into the hands of millions of first-time users. "A year ago, it cost $1 a minute to make a cellular call here," said George F. Schmitt, the president of Omnipoint, which has signed up 16,000 customers since it began offering wireless service in the metropolitan area last November. "Now Bell Atlantic Nynex and AT&T are at 60 cents a minute, while we're at 50 cents a minute." How many companies in New York or elsewhere can survive a price war is an open question. But consumers seem certain to benefit -- provided they carefully read the fine print. Some of the come-ons are so hyperbolic that New York State Attorney General Dennis Vacco is reviewing the AT&T and Bell Atlantic Nynex ads to determine whether they are misleading. The promises of free chatter usually do come with strings attached: Customers must pay extra charges to have their calls connected to the regular wired phone network; they must sign a one- year service contract, and they can be charged stiff fees for switching carriers early. People familiar with Vacco's views said he was particularly worried that the AT&T and Bell Atlantic Nynex ads did not adequately inform customers that they would be charged $175 to $200 for switching or cutting off service before the end of their annual contracts. "I think our industry isn't being very careful in the New York market," said Schmitt, who acknowledged that his own company recently ran a questionable ad contending that Omnipoint's network never dropped calls when in fact calls were being cut off on the network. Executives at AT&T and Bell Atlantic Nynex Mobile insisted that the promotions were not deceptive because the caveats were all listed in the fine print at the bottom of the ads. Both carriers also make new subscribers sign contracts that clearly state all the conditions. "If you get a customer to come on to your system deceptively, you're not doing yourself a favor," said Rick Conrad, the regional president of Bell Atlantic Nynex Mobile for the New York area. Still, Conrad acknowledged that the entrenched cellular operators in New York were facing an onslaught that would require aggressive countermeasures. "The consumer is going to expect to get all the features the other guys offer and a very good price," he said. Bell Atlantic Nynex Mobile already reduced its lowest monthly fee for a full package of cellular service -- from $24.99 to $18.99 -- to pre-empt Omnipoint's offer of $19.99 a month. Now a new competitor, Sprint PCS, plans to enter New York within six weeks, promising a price 10 to 20 percent lower than that. In addition to flat monthly charges, cellular bills include per- minute charges. …


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