Several years from now, a delivery truck pulls up to your house with a C.O.D. package. You don't have the $25 to pay the bill, but the delivery man is unperturbed. He simply pulls a small portable phone out of his breast pocket, calls his office's computer and punches in your credit number and the amount owed. In a minute's time, without any cash changing hands, the package is paid for and delivered.
Elsewhere, a securities analyst is taking a prospective client to lunch. The client wants to know the current stock price of a company. The analyst whips his battery-operated phone out of his briefcase, dials a computer, enters a code for the company and gets the price.
Or: a salesman, late for an appointment, runs into a major traffic jam. He picks up his car phone and, without having to wait several minutes for a free line, dials his customer to cancel the meeting. Then he spends the rest of his time in traffic calling other customers, making deals. Instead of aggravation, the salesman manages to make several hundred dollars in sales.
All these scenarios will be possible as a result of a new "cellular" mobile radio service about to be formally launched by the Federal Communications Commission. In two cities, including Washington, a limited version of this service is being tested, and experts predict that within two to five years the technology will become available to the public--but at a hefty price.
The nation's current mobile phone service is so overloaded that thousands of businessmen are on six-to-seven-year waiting lists for mobile phone systems that, in a large city, allow only 20 calls at one time. The new "cellular" system will greatly increase communication capacity by allowing thousands of calls to be made simultaneously through low-power transmitters and rapid call-switching equipment.
As a result, the new system promises to bring a wide variety of new services to consumers--as well as great opportunities for large profits for many businesses. Within two years of its start-up, the cellular system is expected to be a $3-billion business nationwide.
Scores of businesses, from the world's largest--American Telephone & Telegraph Co.--to small local firms that provide mobile phone and paging services, are filing applications with the FCC for permission to offer the new service, spending $250,000 to $400,000 an application for each city they want to serve.
With tomorrow the deadline for applying for service in the nation's 30 largest cities, thousands of pages of paperwork are stacking up at the FCC. AT&T, for example, has delivered 57,600 pages in applications to serve all but one of the 30 cities. Graphic Scanning, an aggressive telecommunications company, plans to submit 1.5 million pages tomorrow, seeking permission to operate in all 30 cities. In all, commission officials expect to receive at least another 200 applications, each ranging from 500 to 1,500 pages.
Instead of handling calls through one high-power transmitter for an entire metropolitan area, cellular radio uses several low-power transmitters scattered throughout the city.
Each city is divided into a honeycomb of hexagonal "cells," each cell having its own transmitter-receiver and a computer controller that will serve the mobile phones in that particular cell.
A city the size of Washington would have seven to 18 cells, depending on the number of users. Each cell's low-power transmitter is assigned a set of radio frequencies. Each adjacent cell would have different frequencies to avoid interference, but cells sufficiently far apart would be able to use the same frequencies. This allows several frequencies to be reused many times within the metropolitan area and is the key reason why the cellular system can handle many more calls than the current system.
Each cell's computer automatically assigns an incoming caller a radio channel, making sure that no two subscribers are assigned the same channel in that cell or an adjacent cell. If the caller wants to reach a conventional telephone, the call is automatically connected to the local telephone network. If one of the parties to a call is in a car traveling through the city--and crossing different cells--the computer will automatically transfer the call to the appropriate cell's transmitter--and if necessary, shift radio frequencies--without interrupting the call or quality of service.
Industry analysts predict that the chief users of this service, at least initially, will be businesses, primarily because of the cost: about $150 a month plus a one-time charge of $2,000 for a car phone. A portable phone would cost about $2,500.
"It's not going to be something you and I put in the car to call home and say we're on the way for dinner," comments James K. Smith, legal assistant to the head of the FCC's common carrier bureau. Still, Smith and others note that for many businessmen, such as traveling salesmen, building contractors and delivery men, the service would be well worth the high cost.
Financial analysts predict that as the systems becomes more popular, the price will plunge to about $80 a month for service and $500 for the phone itself--making cellular radio a widely used consumer service that will translate into a lucrative venture for companies that sell the equipment and handle the calls.
In fact, some analysts and telecommunications experts predict cellular radio may become so popular that it could provide real competition to the local phone company as more and more customers use portable phones instead of their home telephones.
Even so, local phone companies are bound to benefit, too. For one thing, most of the calls made from the portable phones will be tied into the local network, which will receive an as yet undetermined connection fee.
But even more significant, in approving the cellular radio system, the FCC guaranteed that the local telephone companies would get a big piece of the action. The FCC set aside radio frequencies to accommodate two different cellular systems in a city. Local telephone companies must be given priority to operate at least one of these systems, the FCC ruled, partly to acknowledge AT&T's lead in developing cellular radio. However, to ensure competition and guarantee that AT&T, with its money and expertise, would not win all cellular licenses if there were only one system per city, the FCC set the other half of the licenses aside for non-telephone companies. That split is being challenged in court, however.
Even with two systems per city, though, the competition is fierce. For the top 30 cities, 250 applications are expected to be filed for 60 slots. Hundreds more applications are expected this September when the FCC begins processing requests for the rest of the cities across the country.
In addition to AT&T, other local telephone companies wanting cellular licenses in areas where they operate include General Telephone & Electronics Corp., United Telephone System Inc., Continental Telephone Corp. (which serves part of the Washington suburban area) and Central Telephone & Utilities Corp.
In many areas, these and other telephone companies operate along with the Bell System. So unless these companies can negotiate joint agreements with AT&T, they will be locked into lengthy competitive hearings before the FCC, which will have to determine which company should provide the service.
Lengthy competitive hearings are almost assured for the nontelephone company systems as hundreds of companies large and small vie for only a few slots. These companies include Graphic Scanning, Metromedia Inc., which has bought out two large potential competitors for the New York City system, MCI Communications Corp., which is applying for slots in 12 cities, and Western Union Telegraph Co., which has formed two joint ventures and acquired minority interest in a cellular communications company to apply for service in about half of the nation's top 30 cities.
Industry analysts also predict the Washington Post Co. will apply for cellular service, especially in the cities where it has media property, including Washington, Detroit and Miami. The company would not comment on this speculation.
Also applying for a license here will be American Radio Telephone Service Inc. (ARTS), which has been offering cellular service on an experimental basis to Washington and Baltimore firms since last December. ARTS is currently serving 200 customers in seven cells over a 3,200-square-mile radius. The company expects to expand to 2,500 customers by the end of the year. The average monthly bill, which includes a rental fee for equipment, ranges from $160 to $200.
Given the intense competition for cellular licenses, it may take the FCC years to decide who should be awarded them.
Meanwhile, a pending court appeal is challenging the FCC's ruling that at least one system in each city be set aside for the telephone companies. Millicom, a company that wants to provide cellular service, and the Department of Justice argue that the ruling is anticompetitive because it guarantees that the local phone company will have a stake in the business while all other companies will have to fight it out to get a share of the lucrative market.
Last week the U.S. Court of Appeals refused to delay the FCC's deadline tomorrow for accepting applications. However, the court said its decision was without prejudice to the right of any party to file a new request for a stay for beginning service once a license is issued.
But given the vast number of applications expected to pile into the FCC--including three by Millicom--it's clear that the lawsuit is not interfering with competition for a piece of the cellular action.