This article first appeared in the April 1998 issue of Monitoring Times.

MARKETING STRATEGIES

How much does a cellular telephone cost? Advertisements entice new wireless consumers with promises of a telephone for one cent, or even free. Obviously the phone costs more than a penny to manufacture, so how can a cellular carrier afford to give away a phone?

The original marketing plan for analog cellular telephones required the customer to sign a service contract at the time of sale, obligating him or her to a lengthy term of service, typically one year. The cost of the telephone was built into the minimum monthly fee and airtime rates and was paid for over the course of the contract. If the customer chose to end the contract early, he or she would be charged a termination fee of $300 or more. This practice of combining the phone and service is called "bundling" and was prohibited in many areas of the United States. These days if you read the fine print closely, most analog cellular phones are available without activation for essentially the hefty contract termination fee.

From the beginning PCS carriers have chosen to market their services and phones differently. As covered in the October 1996 PCS Front Line column, the nation's first PCS provider, Sprint Spectrum, does not require the subscriber to sign a service agreement or obligate them to any length of service. Handsets are sold as a consumer item at retail outlets for prices ranging from $100 to $200, and activation is done via a toll-free 800 number. Although substantially more than a penny, these prices are on average about half the actual cost of the phones. The other half is subsidized by the network operator, and with one notable exception PCS service providers using the PCS-1900 GSM format are using another method to "lock in" their customers and recover that subsidy.

SIM CARDS

As in Europe where GSM began, PCS-1900 phones in the United States contain a removable Subscriber Identity Module, referred to as a SIM card. There are two kinds of SIMs, a credit-card-sized "Plug-in SIM" and thumbnail-sized "ID-1 SIM," and every GSM handset is designed to accept one kind or the other. Regardless of size, a SIM card communicates with the handset through a series of electrical contact pads which follow an international standard.

The main purpose of a SIM card is to authenticate the user to the GSM network, and to do so each SIM is actually a type of smart card, containing a tiny microprocessor and up to eight kilobytes of modifiable, non-volatile memory storage. The SIM card performs a number of cryptographic security functions and holds a variety of information relating to the subscriber, including short messages, speed dial numbers, and other personalized features. It also contains an International Mobile Subscriber Identity (IMSI), the first five digits of which identifies the "home" network on which the user has subscribed. Every GSM service provider issues a SIM card for each of their subscribers, and when the user plugs in the SIM the subscriber-specific information is made available to the handset. This allows the network to verify the status of the subscriber and authorize various levels of access.

Mobile Country Code (MCC)

Mobile Network Code (MNC)

Mobile Subscriber Identification Code (MSIC)

3 digits

2 digits

up to 10 digits

Table 1: International Mobile Subscriber Identity (IMSI)

Aerial 310-31
BellSouth 310-15

Omnipoint

310-16

Powertel

310-27

Sprint Spectrum

310-02

Western Wireless

310-26

Wireless 2000

310-11

Table 2: GSM network codes of selected PCS-1900 providers.

The SIM card was originally designed so that a handset could work with different SIM cards to access different GSM networks. A GSM subscriber in Europe, for instance, could take his or her SIM card to the United States, plug it into a rented or borrowed PCS-1900 phone, and place and receive calls just as if he or she were still in Europe.

SIM LOCKING

However, all but one of the US GSM providers has implemented a feature known as "SIM Lock" where a handset is electronically locked to operate only with SIM cards from their own network. Inserting a SIM card from another network into a SIM-locked handset results in a error message on the display and a phone that will not operate. If a customer had a SIM from Network A and wanted to use the services of Network B, he or she could not simply buy or borrow a Network B phone and insert the Network A SIM. The customer would either have to use a Network A handset and pay roaming charges, or purchase a new handset and SIM from Network B.

Network providers give two main reasons for SIM-locking. First, they claim it helps prevent the use of stolen phones since an out-of-network SIM will not allow the handset to operate. This seems a bit far-fetched due to another GSM identifier associated with each phone. Separate from the SIM, each GSM handset has an International Mobile Equipment Identity (IMEI) preset at the factory. This unique 15 digit code is transmitted when the handset is turned on, and the original GSM plan was for network operators to "blacklist" stolen and missing handsets in their Equipment Identification Register (EIR) database and deny service to any suspect IMEI. For those of you wishing to look, entering *#06# on the keypad of most GSM handsets will display the IMEI.

Type Approval Code (FAC)

Final Assembly Code (FAC)

Serial Number (SNR)

Spare (SP)

3 digits

2 digits

6 digits

1 digit

Table 3: International Mobile Equipment Identity (IMEI)

The other, more likely reason is that network operators want to protect the handset subsidy that they pay to dealers for selling the handsets to customers at low prices. Since PCS operators avoid long-term contracts, SIM-locking a phone provides another means of retaining customers and effectively prevents the phone from being used outside of the network service area.

Soon after SIM-locked phones appeared in Europe the European Commission ruled that such handsets would be harmful to competition and would prevent the establishment of a common market for goods. The EC warned all European handset manufacturers and network operators not to produce or sell SIM-locked handsets and requested that the GSM standards committee remove a proposed SIM-lock modification from the standards.

In the United States, it appears that every PCS-1900 GSM network operator except Western Wireless sells SIM-locked phones. Voicestream-brand customers are almost guaranteed to be using an unlocked handset, but subscribers of every other PCS-1900 GSM service have handsets that are locked into their provider's network. Most operators are extremely reluctant, if not openly hostile, to reveal the code that will unlock a particular handset.

If you're in the market for a used PCS phone, be sure that the phone you're considering purchasing is either from the network in which you wish to use it, or is not SIM-locked. Otherwise you find yourself unable to use the phone with your own SIM.

ROAMING

Issues of handset operation and compatibility are increasingly important as PCS networks continue to grow. No PCS provider covers all of the United States, and no single wireless digital standard is available everywhere.

800 MHz

1900 MHz

AMPS (analog)

GSM

TDMA

TDMA

CDMA

CDMA

Table 4: Cellular technologies available in the United States.

PCS providers are working to plug gaps in their coverage areas by signing roaming agreements with existing analog cellular providers to allow their customers continuous service while moving between different kinds of networks. Subscribers will have the newest digital features while in the PCS service areas and still place and receive calls while in the extensive analog networks that are already in place. Such seamless roaming requires handsets capable of operating in two different frequency bands and utilizing more than one transmission technology. Dual-band phones can transmit and receive in both the original 800 MHz cellular channels and in the 1900 MHz PCS frequencies. Dual-mode phones can operate in two different types of networks, switching between one of the three digital standards (TDMA, CDMA, or GSM) and AMPS analog.

SPRINT PCS

One such provider is Sprint PCS, which announced the availability of dual-band, dual-mode AMPS/CDMA phones near the end of 1997. Dual-mode AMPS/TDMA phones operating on 800 MHz frequencies have been available for years, and GSM carriers have announced dual-band AMPS/PCS-1900 handsets. Sprint PCS and PrimeCo both report that customer demand for dual-mode handsets have been strong since the first of the year.

Sprint PCS also introduced a flat-rate roaming charge when customers are outside the Sprint PCS coverage area. As long as a subscriber is using a provider with whom Sprint has a roaming agreement, incoming and outgoing calls are charged at 69 cents a minute, plus any long distance charges, anywhere in the country.

Sprint PCS announced a number of industry milestones in the first quarter of 1998. They reported a combined total of more than one million customers for their primary and affiliate operations, with an average revenue per subscriber in 1997 of $64. Sprint PCS provided one billion minutes of PCS calling in 1997 and attributes their success in attracting customers to emphasizing the benefits of PCS over analog cellular: voicemail, caller ID, digital security, first incoming minute free, and no contracts.

Aerial

125,000

Omnipoint

136,000

PacBell

340,000

PowerTel

119,000

PrimeCo

387,000

Sprint PCS

1,000,000

Western Wireless

466,000

Table 5: Representative PCS subscriber counts

Several hundred thousand of those one million customers subscribe to Sprint Spectrum, the PCS service started in the Washington, D.C./Baltimore area in late 1995. Cellular providers should take note that the JD Power and Associates 1997 Wireless Customer Satisfaction Report ranked Sprint Spectrum above the two analog cellular providers in the area, despite being in operation less than two years, suffering billing problems, and having spotty coverage in many locations.

Sprint PCS has also build nearly 6000 cell sites since 1995. Even though PCS cell sites are generally smaller and easier to install, it took the analog cellular industry six years to establish that many sites.

CELLULAR AND 911

Emergency calls made from cellular telephones should go through regardless of whether or not the phone is currently under a service agreement. The Federal Communications Commission (FCC) ruled last December that 911 calls placed from any cell phone with a valid mobile identification number (MIN) should be completed, even if service has lapsed. Cellular carriers had resisted the implementation of such rules, upset over people being able to use their networks without paying a monthly service charge or other type of fee.

The California Highway Patrol (CHP) is testing a communications center in Sacramento with new wireless 911 capabilities, including a caller ID display that will show the cellular telephone number to the emergency operator in case the call is disconnected and the operator must call back.

Cellular companies are also under an October, 2001, deadline to provide the location of cellular callers to emergency operators. Under the FCC's Phase II requirements service providers must track callers to within 125 meters two-thirds of the time and report that information to emergency operators. Recent tests in Oakland using "location fingerprinting" technology tracked callers to within 50 meters of their actual position. Tests last year in New Jersey using a technique called Time Difference of Arrival (TDOA) also met the Phase II requirements. Although the FCC requirements are for 911 calls, keep in mind that whenever your cell phone is on, the cellular provider knows where you are.

NEW WEBSITE

That's all for this month, but for those of you wanting more information from the PCS Front Line website, we've moved! You can now follow the links to it at http://www.decode.com. Id like to thankgrove.net for hosting it for many months, and look forward to hearing from you at dan@decode.com. Until next time, happy monitoring!


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Updated May 1, 2003