Wireless firms aim to revamp billing plans

Beginning in Colorado next month, Vodafone AirTouch will aim to change the way Americans pay to use wireless phones.

The company is planning to introduce a new set of billing rules it hopes will help shift the cost of cellular phone calls to callers, instead of having an owner pay for every minute of phone use.

Dubbed "calling party pays," this billing system is one of the chief goals of wireless phone companies in the United States. Wireless carriers believe this system is in part responsible for much heavier mobile phone use in Europe, and want to jump-start the U.S. market the same way.

Some wireless carriers even believe that this new billing system could take business away from the traditional local phone companies, as people use their wireless phones for more of their every day communications needs.

"This means that even the person with no income and no credit--if they can scrape together the money for a handset--can get communications access," said Ray Jodoin, a wireless analyst with Cahners In-Stat Group. "They can have other people call them, and not pay anything. This would allow people to get real value for their phones."

But there's just one problem, critics say. U.S. consumers are accustomed to paying by the minute for mobile calls. And where money is concerned, it's not easy to teach old consumers new tricks--something AT&T found out in its own calling party pays trial in Minnesota, which it has since cancelled.

"There's a bit of a jarring social reality to this," said Jordan Roderick, an executive vice president with AT&T Wireless. "Some people told us that they didn't want to use calling party pays because they didn't want to look cheap."

Europe in the lead
The drive toward calling party pays in the United States comes as carriers look at the success of wireless phones in Europe, where the system is commonplace. Use of wireless phones is more widespread across the Atlantic, and some say it is a result of calling party pays billing.

In Europe, a person calling the owner of a wireless phone would pay for the call, just as a caller routinely pays for a phone call over traditional telephone wires.

But in the United States, cellular telephones were developed from the beginning under a system which owners paid per minute to use their phones, whether receiving or making calls. Mobile phone companies believe this has kept people from using their phones--or even keeping them on, in some cases--for fear of running up high bills.

Vodafone AirTouch, which has a substantial presence in Europe and the United States, says that 40 percent of European mobile phone use comes from inbound calls, as opposed to just 20 percent in the United States. This means that people are giving out their phone number and using the wireless phone as their primary telephone far more in Europe than in the United States, said Jonathan Marshall, a Vodafone AirTouch spokesman.

Proponents of the system see it as particularly useful to bring new low-use or fixed-income customers into the wireless world, as well as expanding the amount of airtime used by today's customers.

"We're very keen on seeing it implemented," said Tom Murphy, a spokesman for Sprint PCS. "This helps put wireless on a more even footing with [traditional telephones]."

Trials and tribulations

Several U.S. carriers have already tried to set up "calling party pays" plans, but with only limited success.

AT&T has tried twice--once in Boise, Idaho, and more recently in Minneapolis, Minnesota. Vodafone AirTouch has the system commercially available in nine states, although only about 5 percent of its customer base has signed on to use the service. Bell Atlantic says it plans to offer its own calling party pays plan by the end of the year.

Part of the problem is getting customers comfortable with the change in billing. Callers have to be told somehow that they will be paying extra to reach a cellular phone. In some trials, a caller hears a recording before the call goes through. In others, the mobile number simply appears on a bill as a long distance call.

BellSouth offered the service for three years in Honolulu but pulled the plug almost two years ago.

"There wasn't enough customer support to justify it," said Shawn Steward, a BellSouth Cellular spokesman. "If we can see a business case for providing it, we're not at all opposed to it. But we don't see a market for it in the U.S."

FCC to weigh in
But many carriers are waiting for the Federal Communications Commission to iron out the many issues that a calling party pays national system would bring up. For example, firms need guidance on how a caller should be notified about new billing, what kind of marketing needs to happen to get consumers excited about the plans, and even what type of billing relationships companies need to set up.

The FCC is now taking comments on the issue, and is expected to make a ruling in the first few months of 2000. It won't mandate one billing system over the other, but its action could make it easier for the new system to go into effect on a wide scale.

"It is not the social norm in this country," AT&T's Roderick said. "That's why we're supporting [the system] in front of the FCC. Otherwise, we can't get there from here in the U.S."