As if the hit to your investment portfolio weren't enough, the telecom meltdown could also leave you with patchier cell-phone coverage.
As cell-phone usage has soared in recent years, carriers have built billions of dollars worth of cell towers to help accommodate the new calls. But with many of the companies in financial trouble, they can no longer afford to keep up the investment pace.
"Capital is harder to get," says Charles Levine, president of Sprint Corp.'s wireless division, speaking about the industry in general. "That may have an effect on some coverage."
The top six carriers are slashing capital expenses by more than $3 billion, or about 12 percent, this year, says John Bensche of Lehman Brothers. One result: Between 70 percent and 90 percent fewer towers are being built now compared with just a couple of years ago — even though demand for phone services continues to grow rapidly. That could spark a rise in two things customers loathe: dropped calls and "dead zones," areas where you can't get a signal at all.
Wireless companies have attracted customers over the years with the promise of reliability, pushing the notion that cell phones are so failsafe you don't even need a landline phone anymore. Even now, with the expense cuts in store, they still are touting the breadth of their coverage. Between Dallas and Oklahoma City on I-35, for example, Sprint PCS has billboards proclaiming "Sprint PCS is clear to Dallas," even though some of its customers say the highway has plenty of dead zones. A Sprint spokeswoman says she isn't aware of any coverage holes on that road.
Many customers have a low threshold for coverage problems. On average, about a third of cell-phone users switch carriers every year because they're unhappy with the service. About 4 percent of all cell-phone calls are cut off, often because cell towers get overloaded with calls, and in major cities it can be much worse.
Dead zones, another big complaint, typically occur either because there isn't a cell tower in close enough proximity to the caller, or because a tall building is blocking reception. Overburdened cell sites can also be a factor. Most cities are rife with dead zones, and every carrier has them. Sprint PCS customers in Los Angeles say they can't use their phones at Paramount Studios of all places, while Verizon users have trouble getting a dial tone at the Rose Bowl, according to deadzones.com, a site that tracks complaints. If you're in Dallas, your phone may cut out at such popular spots as the intersection of I-635 and President George Bush Tollway, and the tony Cedar Crest Golf Course. The Big Apple? If AT&T Wireless is your carrier, your phone is near-useless in Penn Station; Columbia University, meanwhile, can be unfriendly to Sprint PCS customers.
"Every time I'm on the phone, when I walk down these steps (into campus), I lose my call," says Chris Zalla, a graduate student in film at Columbia. "I end up having to run or turn around and go back."
Sometimes it's more than economics that gets in the way of putting up towers. Sprint PCS says efforts to build one at Columbia, for example, have been sidelined by zoning laws, which analysts say are an obstacle at other sites in the United States as well.
Without the frantic cell-tower building of the past few years, though, coverage would be even spottier. A survey by J.D. Power & Associates of customers from all the major providers found significant improvements in coverage in some areas between 1999 and 2001, when tower building was booming. Customer satisfaction was up 12 percent in New York, for example, and 6 percent in St. Louis.
Most telecom companies say the spending cuts won't affect coverage. "We feel we can manage the capital crunch in the marketplace without affecting customer service," says Mike Pietropola, a vice president at Cingular Wireless. Cingular has slashed spending on capital improvements by $1 billion this year, the largest reduction of any major carrier. In lieu of new cell towers, it and other companies are putting up smaller cell sites on traffic lights and buildings, and adding capacity to existing towers.
But others in the industry say coverage already is suffering. David Porte, chief technology officer of American Tower Corp., which builds and rents space on cell towers to wireless companies, says he has noticed a falloff in coverage with a couple of carriers, both major providers. He declined to name them, or give further details.
One promising sign: Carriers are switching to the next-generation network. Sprint PCS has rolled out a new network nationwide that handles nearly twice the call capacity and sends data at much higher speeds. Nextel and VoiceStream Wireless (which is changing its name to T-Mobile USA) also have next-generation networks up and running. Verizon, AT&T and Cingular are switching over, though more gradually.
Industry consolidation could have an impact, too. For example, Cingular, which has some coverage gaps in major markets, is in talks to merge with VoiceStream. If the deal is completed, analysts say it could help fill some of those holes.
In the meantime, it's up to consumers to do their homework. Many analysts say Verizon and AT&T have the strongest overall networks, though coverage can differ by region. Users should test wireless service before they're locked into a contract; most carriers offer a short window to do that.
As for dead zones, they change frequently. The wireless companies won't say exactly where theirs are, though they admit they exist. Deadzones.com provides a running list. Perturbed cell-phone users send in the coordinates of dead zones in 39 major cities. In Los Angeles alone, they've posted almost 1,400. Carriers can participate, too. When they eliminate dead zones they can notify the Webmaster, who then erases that address from the site.