Wireless deal may be boon for long distance market

Today's $70 billion joint wireless phone venture between Bell Atlantic, Vodafone, and GTE will likely do much to blur the lines between long distance and wireless phone service.

John Borland Staff Writer, CNET News.com
John Borland
covers the intersection of digital entertainment and broadband.
John Borland
3 min read
Today's $70 billion joint wireless phone venture will likely do much to blur the lines between long distance and wireless phone service.

By merging the areas now served by Vodafone AirTouch, Bell Atlantic, and GTE, the new joint venture will have coast-to-coast coverage, with more wireless subscribers than any other company in the United States.

That alone will create a powerful new competitor, able to match prices and service packages now offered by the other leading national wireless phone players like AT&T and Sprint. In particular, the venture will be able to challenge the popular "one rate" plans that have cut long distance charges over wireless networks.

"They can definitely offer a plan similar to AT&T's One Rate plan," said Elliot Hamilton, director of U.S. telecommunications consulting at the Strategis Group. "They're even in a better position to offer that plan. They now have more territory on the wireless side, and more customers."

Bell Atlantic has less reason than AT&T to protect an existing long distance business, analysts added. That means it could price its new long distance and nationwide service offerings in a way that could undermine traditional long distance service. The deal also has the potential to lead users toward package deals that include traditional local phone and Internet service.

"This creates, with Bell Atlantic, GTE, and Vodafone, a presence in the wireless, data, and local phone markets," Bell Atlantic CEO Ivan Seidenberg told reporters today, sketching out his vision for one-stop-shopping service bundles. "We now have an opportunity to focus on those customers who really require multiple parts and parcels of the communications revolution."

The deal will help catapult Bell Atlantic even further up the ranks of national communications companies. After its merger with GTE, it will be the largest local phone operator and the second-largest communications company in the United States after AT&T. Today's agreement will also make it the largest wireless player.

Long distance wireless
On its face, the venture--to be named after the new company formed by the merger of Bell Atlantic and GTE--will enter the wireless market at the top slot. All three companies are regional powerhouses with the customer base and networks to compete well with other national players.

Reaching the masses

But with a presence in 49 of the 50 top U.S. markets, the venture will become an effective competitor to AT&T and Sprint, which to date have worked on attracting lucrative national companies and business travelers as customers, analysts say.

Just how much AT&T and Sprint need to worry will depend on how much the new company intends to market service as a replacement for traditional long distance.

Wireless phones are only just beginning to act as replacement for local phone calls, and to lesser extent long distance service, analysts say. But as prices fall with more competition, this trend will pick up steam

AT&T's national Digital One Rate plan, which eliminates long distance charges for calls made on its network, has proven to be very popular. The prices for long distance service do wind up being slightly more expensive than with traditional phones--about 11 cents or 12 cents, compared to the 5- to 10-cent plans now offered by most carriers--but prices are on their way down.

In contrast, Bell Atlantic does not yet have a core long distance business to protect, as do AT&T and Sprint, and may spend more effort persuading customers to use their wireless network for interstate calls.

Executives today said they hadn't yet decided on final plans for wireless long distance and roaming charges.

"In wireless, Bell Atlantic is already in long distance. This transaction broadens our coverage areas so we have a nationwide footprint," CEO Seidenberg said. "We now have the ability to eliminates roaming charges across the network, depending on how we work it."

Analysts said the joint venture's effect on prices would likely be strongest on nationwide calling plans, rather than on basic local wireless services.

AirTouch and Bell Atlantic are already strong regional players, but they now will have a chance to win over the top 20 percent of high-end customers who travel frequently or use their phones for long distance, Hamilton said.

"Having nationwide one-rate roaming is critical for that customer base," Hamilton noted.