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A Wired Nation Where Wireless Doesn't Rule

The U.S.--often eager to adopt new technology--lags behind other industrialized countries in cell phone use. A key reason: There isn't one communication standard.


As a businessman frequently on the road, Marco Navarro swears by his wireless phone. But that doesn't mean he hasn't spent plenty of time swearing at it, too.

"My main line is my cell phone," says the Orange County computer consultant and entrepreneur. "It's wonderful that we're in an age when the phone rings wherever you are. But my calls get dropped one time out of three, and in the last month we've been having terrible echo problems on our service."

Navarro's irritations with his cell phone illustrate why the wireless phone business has grown more slowly in the U.S. than in any industrialized country.

Sprint PCS is the third wireless carrier Navarro has tried in the last few years--and he's considering shifting to a fourth in his eternal quest for better service.

Such a move, however, would mean throwing away his current handset, because in the new age of digital cellular devices each company's phones are usually incompatible with competitors' networks. (It would also condemn Navarro to the chore of notifying all his contacts of his new cell phone number.)

To be sure, all of this is an improvement over the not-too-distant days of analog cellular service, when carriers were awarded only local franchises and using your phone on the road meant incurring unpredictable "roaming" charges based on the contracts each carrier had reached with others across the country.

"When I'd be in New York with my L.A. Cellular phone, it would cost $2 just to initiate a call and 80-90 cents a minute in roaming [charges]," Navarro recalls. On one working drive from L.A. to San Francisco, he passed through so many zones that the roaming charges alone came to $150 that day.

Navarro's checkered experience with the technological marvel known as wireless telecommunications is undoubtedly old news to many of the more than 100 million wireless subscribers in the United States. It's also an indication of why that figure isn't higher.

About 36% of America's residents subscribe to wireless phone service--a "penetration" rate less than half that of some European countries, and 15 to 20 percentage points lower than other tech-savvy nations such as Japan and Israel.

Forecasters say the gap won't be closed any time soon: At current growth rates, according to the marketing firm IDC, wireless penetration at the end of 2003 will be 54% in Europe and 45.9% in the U.S.

Why does the U.S., which leads the world in its acceptance of such technological advances as the personal computer and the Internet, lag so badly in wireless communications? There are numerous reasons for the discrepancy, professionals say, including government policies, cultural habits and business rivalries.

Among the most important problems is the competition among transmission protocol standards, which prevents phones tuned to Sprint's network, say, from working on AT&T's.

American carriers are split among three broadly defined digital technologies, which differ according to how they allow individual calls to coexist within their limited transmission capacity. Sprint, for example, uses a technology known as code division multiple access, or CDMA, while AT&T is committed to time division multiple access, or TDMA. One smaller company, VoiceStream, utilizes a technology called global system for mobile communications, or GSM.

The latter is the standard used almost universally across Europe, which accounts for the wide compatibility of phones all over that continent.

Professionals believe that the three rival technologies will eventually converge or that new generations of phones will be increasingly capable of accessing more than one.

But one important reason why the U.S. lags the rest of the industrialized world in wireless usage is that its conventional phone service beats the rest of the world on price.

The average monthly charge here for unlimited local calling, according to Strategis Group, a Washington consulting firm, is about $18. In Europe and Asia, local calls are still metered at the equivalent of 2 to 8 cents a minute. At those rates, the American caller's $18 charge would cover only 3 hours and 45 minutes to 15 hours a month.

That means that wireless calling is not much more expensive overseas than picking up a home phone.

"Overseas, if you're paying for a local call anyway, wireless rates are comparable," says Elliott Hamilton, senior vice president at Strategis. "That's why you see [wireless] penetration of more than 60% for some Scandinavian countries."

Some social and cultural factors may also make the mobile phone more attractive abroad.

One is the relative dearth of American-style single-family housing. Americans used to the privacy of a call at home don't always relish sharing their cell phone conversations with strangers on the street; in lands where several generations of one family may live together, people sometimes find the anonymity of public places preferable to holding a conversation amid gangs of snoopy relatives.

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