Bells Are Ringing on the Road

By John S. DeMott

New mobile telephones are popular and getting cheaper

One of the most durable symbols of corporate clout is that of the tycoon talking on the telephone as he reclines luxuriously in the back seat of a limousine speeding him to work or the next big deal. The carphone was long confined to the privileged few because only a handful of broadcast channels were available, the cost was prohibitive for most individuals and the waiting lists were so long that it often took several years to get a phone. Even then, callers sometimes had to wait for up to 30 minutes to get a dial tone, and reception often faded in the middle of a conversation. Now, however, the mobile phone is about to come into its own, spurred by new technology that makes it cheaper (though still expensive), better and more accessible.

In the New York City area, Potamkin Cadillac is installing mobile phones in anticipation of service that will start in May or June. Mobile phones have already been put in cars in Chicago, Washington, Indianapolis and Buffalo, and are expected to spread to 30 U.S. cities by year's end. OKI Advanced Communications of New Jersey, a major supplier of mobile-phone gear, anticipates sales of at least 100,000 this year, vs. 4,000 in 1983.

Behind the explosion is something called cellular radio-telephone technology, which dramatically improves mobile-phone service by using radio waves with frequencies high enough to pass through city buildings. The quality is almost equal to standard telephones, far surpassing the fadeout and noisy reception of earlier systems. Says Bonn Pearlman, a reporter for radio station WBBM in Chicago: "I love it. It's like calling next door."

The new cellular technology works by dividing metropolitan areas into transmission zones, or cells, each with its own antenna, transmitter and connections to a central phone office. Every cell contains a low-power FM system that sends out signals just far enough to cover its own area. As a car moves around a city, the radio-telephone signal is automatically handed from one cell to another, with no fading or break in conversation. This task is performed by computers so sensitive that they can react to slight changes in the speed of radio waves traveling toward or away from an antenna.

Engineers have known the principles behind cellular radio since the 1950s, and Bell Laboratories proposed a complete system in 1971. But many refinements in computer and radio technology were necessary before the system could be widely used. Transmitters, for example, had to be able to operate on closely spaced frequencies without interfering with one another. Finally, with many of these improvements in hand, the FCC in 1981 allocated to cellular mobile phones 666 radio channels previously reserved for UHF television.

Until then, there were typically just 44 channels for mobile phones in urban areas. These were served by a central transmitter and antenna capable of handling only two dozen calls simultaneously. In all of New York City, only nine radio-telephone conversations could take place at any one time, and the result was long delays in making calls. The cellular system improves that dramatically. Chicago's new system can handle 50,000 calls an hour, vs. 1,400 before.

Although an experimental cellular system has operated in the Chicago area since 1978, it is chiefly the breakup of the Bell System that is making cellular technology take off. Under the terms of the Jan. 1 divestiture, the seven new regional companies responsible for local phone service won the right to enter the mobile-telephone business. Each is pumping as much as $20 million into its cellular efforts.

The most likely customers are executives and salespeople who have been unable to get mobile phones because of the limited capacity of the old systems. Says Katie Harriss, an executive with Ameritech in Chicago, the first company to offer cellular service: "All the sales we've had so far are from the pent-up demand that already existed." Ameritech has been operating its network only since October and has 6,500 customers. It expects to have twice as many by December.

Although prices are inching down, they will still discourage casual lovers of electronic toys. The cost of phones ranges from about $2,000 to $4,400. The phones themselves, similar in size to a standard cordless handset, are just the beginning. There is usually also a onetime $50 charge to buy a number, a $35 monthly service fee and a charge of 400 per minute for prime business-hour calls. But users do not mind. Says Washington Real Estate Broker Dee Carl: "In my business, I can pay for a cellular phone in one deal."

Lower prices, though, may be just ahead. To encourage competition, the FCC has also authorized non-Bell companies to provide cellular transmission in 30 large market areas, and about 1,000 firms, including Metromedia and GTE, are competing for licenses in smaller cities. All are expected to fight for customers by lowering prices.

The rush has created a logjam at the FCC and griping among the non-Bell newcomers, who see the old Bell companies as getting a head start in mobile service. Says Albert Grimes, vice president of American TeleServices, a company in the Baltimore-Washington market: "The industry was moving at 100 m.p.h. and ran into an agency that was moving at 20."

Most industry watchers believe that the market for mobile phones will eventually be huge. Arthur Andersen, the accounting firm, estimates that 7 million cellular telephones could be operating by 1990. General Motors is helping, at least with top-of-the-line models. In March, Buick began offering a cellular phone as an option, at $2,900, on Rivieras sold in the Chicago area. Motorola, the company that first put two-way radios in police cars in 1938, is marketing a portable version that lets callers remove the devices from their cars. People can thus take the phone indoors and use it just like that one over there on the wall. --By John S. DeMott. Reported by Magda Krance/Chicago and Jerome Cramer/Washington

With reporting by Magda Krance, Jerome Cramer