Cingular Eyes Fees for Customers Who Won't Upgrade
MICHELE NORRIS, Host:
The nation's largest cell phone service provider wants its customers to upgrade their phones, and if they don't it's going to cost them an extra $5 a month. Cingular Wireless plans to impose the new fee on subscribers who don't upgrade to a phone that uses GSM technology as early as September. It's doing so in order to phase out TDMA in favor of GSM, which makes up a majority of its national network.
Kevin Fitchard is senior writer for Telephony Magazine. He joins us now from Chicago to explain all this. Kevin, first of all, tell us about the difference between GSM and TDMA.
KEVIN FITCHARD: Well, GSM is a, basically it's a network technology. It's basically the core technology that allows you to communicate over the wireless network. And TDMA is the same thing. It's just another version of the same technology. And the difference is, is that TDMA was only used by a couple of carriers in the U.S. and some in Latin America, while GSM was used throughout the world.
NORRIS: So they essentially do the same thing, but these different networks don't necessarily talk to each other.
FITCHARD: They don't talk to one another, correct.
NORRIS: And that's the problem for Cingular.
FITCHARD: And that was the problem. And that's why it decided to switch to GSM networks, so it could basically participate in that kind of global community.
NORRIS: Now, there are certainly people who are listening to this right now and wondering if they have a TDMA phone or a phone that uses GSM technology. How would you know that?
FITCHARD: The easiest way to tell, but this isn't a failsafe way, is to open up the back and take out the battery. If you have a SIM card inside it's going to be a GSM phone.
NORRIS: So, how do you know if you have a TDMA phone?
FITCHARD: Well, it will be very old. They haven't been making TDMA phones - at least newer versions of TDMA phones - for a while.
NORRIS: Old is relative when we're talking about new technology. So old is it?
FITCHARD: Probably about three years old at least.
NORRIS: Oh, that's really old. Three years.
FITCHARD: Yeah. For a wireless, that's pretty old, so.
NORRIS: So, for the customers who do have these TDMA phones and are facing this extra $5 a month surcharge, what's the company really trying to do here? Are they trying to get the customers to switch phones or are they saying go ahead and use those phones but you're just going to have to pay a fee because it's kind of a hassle to us?
FITCHARD: Well, Cingular only wants one of two things to happen. Either they want those customers to upgrade to its GSM network, because that is the network that it's going forward with. It's trying to migrate basically all of its customers there. Or they just want those customers, I mean, frankly to leave. That's probably why they're not offering any incentives or discounts or anything like that for them to upgrade to a GSM phone.
I mean, a couple of days ago, Ralph De La Vega - he's the chief operating officer of Cingular - he, in an earnings presentation, he pointed out that TDMA customers make up about 8 percent of Cingular's total customers, but they only use 2 percent of the total minutes on the network. So, they're just not very profitable customers. And every single one of the wireless carriers in the U.S. and around the world, really, they've been focusing more on getting high value customers as opposed to adding just bulk amounts of customers like they've focused on in the past.
NORRIS: I guess I'm surprised to hear you say this though. I always thought that the cellular industry was a cutthroat business. I'm surprised that anyone would want to just get rid of customers.
FITCHARD: Well, I mean, I guess from Cingular's perspective - I mean, from a consumer's perspective, you know, it seems very drastic, but I guess from Cingular's perspective it - the amount of money that it's spending, I mean, to get each individual customer on its network, can be a substantial amount of money every year. And if they're not drawing $40 to $50 a month, which is what they want them to do, then I guess in their mindset, they may not be the most valuable customer in the world.
NORRIS: T-Mobile, now as I understand, is the only other major U.S. service provider that also uses GSM, but it's used in much of the rest of the world's cell phone markets, as you've noted. Is this the way of the future? And if so, what does this mean for other providers?
FITCHARD: For the most part, I mean, GSM is the technology that most of the world has kind of gathered around. I mean, TDMA is still, I mean, has a huge presence throughout the world, but it definitely doesn't have the numbers that GSM has.
NORRIS: Well, Kevin Fitchard, thanks so much for talking to us.
FITCHARD: No problem.
NORRIS: Kevin Fitchard is senior writer for Telephony Magazine. He joined us from Chicago.