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Cellular Phone Piece Gave Wrong Impression

July 15, 1990

The "Cellular Blues" article in the June 10 Viewpoints contains information that is likely to leave an erroneous impression with your readers. Here are some facts that give a more accurate picture of the cellular industry in general and L.A. Cellular in particular:

* The statement that cellular companies operate a "fixed-cost business" and do little more than pocket their profits once a system is built is completely untrue. When L.A. Cellular began operations in 1987, we had invested about $34 million in equipment and facilities before any income was received. Since then, L.A. Cellular has invested an additional $120 million to improve and expand service to its customers.

* While it is true that cellular demand in Los Angeles is very high, it is also true that L.A. Cellular's investment in its system has substantially exceeded its after-tax income. Since 1985, L.A. Cellular has had a $33-million net negative cash return, largely due to the increasing demand for cellular service, which requires that we continually reinvest earnings in new and more technologically advanced equipment.

* Between now and 1992, L.A. Cellular is committed to spending more than $200 million toward the conversion to digital technology to ensure quality service to our customers. For most cellular customers, the critical issues are geographic coverage and service quality. L.A. Cellular's first priority is to give our customers as much coverage as possible while reducing "dropped calls" and electronic interference.

* It is important to note that despite the fact that we have invested millions of dollars in new equipment and technology, inflation that has affected every aspect of our operations and the addition of new services at no additional charge to our customers, there have been no price increases at L.A. Cellular.

* An important part of the cost of cellular service is the cost of the cellular telephone. The price of cellular equipment has dropped by more than 50% in recent years, and prices should continue to fall as the cellular phone business matures.

The recent decision by the California Public Utilities Commission loosening restrictions on reducing cellular prices will enhance cellular carriers' ability to respond to consumer needs and thus will benefit customers. Increased regulation would have the opposite effect. The PUC has decided that it will not punish companies who reinvest their profits in cellular system improvements. This promises to bring the benefits of cellular communication to every corner of the state, a worthy goal that all Californians should support. We do.

MICHAEL D. HEIL

The writer is president of L.A. Cellular.

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