Subject: [NEXTEL-1] TOWER DILEMMA

From: [email-masked]
Date: Fri, 26 Sep 2003 16:01:47 -0400

TOWER DILEMMA
Cellular companies battle towns to read underserved market
Sue Robinson

Three antennas on the side of a water tower in Shelburne, hidden down a gravel
path nestled in the shadow of Mount Philo, tell the story of Tom McLaughlin's life
in Vermont.

A vice president at Unicel (formerly Cellular One), McLaughlin spent four years
and $200,000 to have those antennas constructed.

At no point did he -- or his company -- contemplate giving up.

What happened in those four years shows everything that McLaughlin and other
cellular company executives think is wrong with the way Vermont -- and its
communities -- deal with cell phones.

Vermonters can find necessary reception to make cellular phone calls in only about
20 percent of their state. The reason is simple: Not enough cell phone antennas in
a state that has mountains and is 80 percent forested, yet there is no umbrella
state policy -- or process for coherent or consistent siting of towers. The
state's 246 communities do little to solve the issue: Each town does things
differently.

Underlying the issue is an age-old conflict in Vermont: "quality of life" versus
economic development. In a state that bans billboards and is glad of it, the
prospect of a bank of cell phone towers on a mountain ridge is a call to battle.
Even the prospect of smaller antennas on water towers or silos or church steeples
becomes a matter of public concern.

How many towers are enough? What if this technology goes the way of eight-track
tapes, leaving behind an unsightly, abandoned network?

"In Vermont, this is something we have come up against over and over again,"
McLaughlin said.

The Shelburne cell tower debate, however, showed the resolve of Unicel to not give
up, to pursue its goal of providing service and making money in a state most
companies have avoided -- until recently.

"Vermont is our largest growing market in both opportunity and sales," McLaughlin
said.

Other companies are recognizing this. The Shelburne water tower, for example, is
now home to Sprint and Nextel antennas.

Unicel is trying to stay one step ahead.

The next frontier

For years, most cellular companies kept away from Vermont. The state's mountainous
landscape disrupted cellular signals -- so the companies headed for the flat
lands.

The state is also small and rural -- so the companies headed for the urban
centers.

The state and its communities have inconsistent -- and often nonexistent --
policies on siting of cell phone antennas and towers -- so the companies headed
for places that embraced the technology.

Unicel has had a different idea: It has gone after a business niche of rural,
underserved cell phone markets.

Under that definition, Vermont is tops.

The Green Mountain State, McLaughlin said, enjoys the worst reputation in the
nation when it comes to cellular coverage. (McLaughlin's opinion is shared by
every cellular company executive interviewed for this series.) In the time it took
McLaughlin to site and build 21 sites (towers and/or antennas) in other states, he
has erected only four in Vermont.

"A lot of the bigger companies, given the opportunity to put a cell site in Boston
or Providence or New York City or Vermont, are not going to choose Vermont,"
McLaughlin said.

"A company like ours, where our most dense population center is Chittenden County,
we have been more persistent and more willing to invest in the state, but it is
difficult, no doubt about that."

Unicel, the brand name of the parent corporation -- Rural Cellular Corp., based in
Minnesota -- made $458 million in 2002 from its rural cellular network in places
that larger telecommunications players ignored. Unicel has invested $80 million in
equipment here in 13 years.

That's a lot of money for an industry that is still losing money.

In 2002, Unicel reported its third straight year in net income losses along with
$1.2 billion in long-term debt. Many of its competitors are in similar financial
straits.

Why?

Equipment costs money; siting costs money; and competition has drastically lowered
rates or, from the companies' perspective, revenue.

Things are not looking up: As the competition has increased across the nation,
service plan prices for basic cell phones continue to decline and have declined 80
percent during the past eight years, according to the Cellular Telecommunications
& Internet Association.

As the competition builds more towers, roaming charges -- which allow customers
from one cell phone company to access services in places where the provider has no
network -- have decreased, too. Roaming charges used to make up a significant
percentage of most companies' revenues.

Unicel and its competitors need to increase revenue in unlikely places, and they
are banking on a future technology that will make current cellular phones look
like party lines or the first electric light bulb.

Cellular companies believe their infrastructure -- a network of antennas and
towers -- is similar to the laying of electric lines at the turn of the century
and the fiber optic cables of more recent times. Modern fiber telephone lines
transformed phone companies into data companies, providing new means of making
money.

Cellular companies believe people will switch to wireless technology for their
computers, their datebooks, their e-mail accounts, their cameras, their phones --
virtually anything virtual -- and this will bring the payoff for all this
investment and losses the companies have incurred during the past decade.

This is what the companies have been telling Wall Street analysts and investors
who've been looking askance at their balance sheets, particularly with the recent
collapse of the dot.com companies.

The cellular companies have statistical trends on their side.

In the year 2000, Americans sent 14 million text messages by cell phone, according
to the Cellular Telecommunications & Internet Association in Washington, D.C. By
December 2002, Americans were sending more than 1 billion of those data messages a
year from one phone to another.

Wireless data revenue is expected to surpass $1 billion by year's end, said Travis
Larson of the CTIA. This trend has reversed the companies' trend of losses -- the
companies are not losing money at the rate they were even a year ago.

Why Vermont?

Against this backdrop, more companies are beginning to see promise in Vermont.

There is another reason for their interest: The companies that have locked in
urban markets in New England are hearing from customers who travel to Vermont and
experience lousy service.

Vermont, it seems, is bad business for a cell company doing business in Boston or
Hartford or even New York.

In the past two years, twice the number of cellular phone companies have knocked
on Vermont's door with pleas for cellular towers and pledges of premium packages
at cheap rates.

The state has about 250 cellular sites, up from 50 or 60 in 1997, according to
estimates from the cell companies.

From a business perspective, the companies have one goal: to improve service.

"The sentiment for improved service (in Vermont) has gotten a lot stronger in the
last few years as people have come to expect full coverage," said Richard Enright,
director of engineering for Verizon Wireless in New England. "Certainly the
tourists expect it, and we sure hear about it when they don't have a signal."

Roadblocks in the wild

In McLaughlin's mind, there is no better example than Unicel's efforts to site
antennas in Shelburne. (See related story.)

Five years ago, Unicel went to Shelburne for permission to install antennas on a
water tower. The company's customers were losing service as soon as they drove
into town.

The zoning board denied the request -- in large part because the town had no
policy concerning cell phone towers. Logically enough, the town decided to develop
a policy. It took three years; then, a year after that, Unicel obtained the
permit.

From a business perspective, that's way too long and way too expensive, so
McLaughlin has developed a strategy.

In his Colchester office, McLaughlin often consults a color-coded map -- generated
by new computer software -- that shows concentrations of the company's customers
and provides a breakdown of their characteristics -- from how much they talk on
the cell phone (250 minutes a month and growing) to their age and income (between
24 and 54, $50,000).

The research also shows where Unicel can find new customers throughout the 14
states in which Unicel operates.

In Vermont, Unicel's customers just want quality voice service, and the potential
new customers are mostly in the rural areas surrounding populated towns such
Burlington and Rutland where there is little reception.

New technology demands a cellular antenna every six miles -- more in dense areas
and areas with lots of "clutter" or trees and buildings that could block signals.
Unicel maintains 68 towers or antennas across the state. McLaughlin was not sure
how many more the company needs.

"People have asked us how many is enough, and they really don't believe you when
you say, 'Well, we don't know,'" he said. "As more and more people use the
service, even though we might have good coverage in an area, we will need to
continue to add sites to accommodate the demand."

A cellular system divides a large geographic area into cells, assigning the same
channels to multiple, nonadjacent cells. Each cellular site can handle only so
many calls, then another antennas must be added or the site will start dropping
signals as it becomes saturated.

Unicel's strategy for obtaining approval for new antennas and towers is
multi-tiered, planned down to who from the company should show up at the local
public hearings and what they wear: "Some towns it's better if it's me at the
hearing rather than an attorney," he said, "especially an attorney in a suit."

The first tier involves appealing to individuals: The company waves cash in front
of individuals and organizations who are in a position (read: own an existing tall
structure) to help.

For example, Langdon Smith in New Haven is paid $1,000 a month for the four
antennas on his barn silo. A Middlebury church makes an extra $9,600 a year for
its steeple antennas.

On a second tier, the company makes sure it compromises with communities, which
can mean spending as much as 25 percent more hiding the cell antennas on silos or
steeples. Unicel created special territory managers for Vermont who push for the
tower proposal from a grassroots level within each community. It also works with
the competition to locate antennas on other companies' towers.

On the broadest level, McLaughlin pleads with the state. The company's counsel sat
down with then-candidates Gov. Jim Douglas and Lt. Gov. Brian Dubie, and Public
Service Commissioner David O'Brien. In March he presented Unicel's strategy to
Dubie again.

"We are very encouraged by what we see out of Montpelier today," McLaughlin says.
"People realize the infrastructure is important, that it goes hand-in-hand with
economic development, that cell phones are a part of life now. The view on these
12 years ago was that they were a luxury item, and now that has changed. These are
a necessity."

First he needs to convince many Vermonters they cannot do without cellular phones
and the towers needed to make them work.

Contact Sue Robinson by e-mail at [email-masked]

http://www.burlingtonfreepress.com/specialnews/cell/2.htm

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