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August 6, 1987

RACAL BIDS CELLULAR THIRD FORCE TO RIVAL TELECOM, MERCURY

By CBR Staff Writer

If prices fall to the point where everyone can have a mobile phone, who needs an old-fashioned point in the wall in order to be on the phone? That is the thinking behind a radical proposal submitted by Racal Vodafone to the Department of Trade and Industry to make cellular communications in the UK a force to bid for the domestic subscriber against the fixed telephone networks. Clearly businesses will continue to need their multitude of fixed telephone lines, but cheap cellular phones – and service – would make it much less imperative for households to have fixed phones installed. Racal has therefore asked the Department to release additional frequencies so that it can increase its potential subscriber base to 2m by the mid 1990s and to around 5m by the late 1990s, compared with around 100,000 now. This would give the company a compound growth rate of 53.4% over the next seven years. Racal believes that the economies of scale that the increased volumes would create could dramatically cut the cost of using cellular phones to make them competitive with fixed telephone charges. The company has its corporate eye fixed on forthcoming amendments to current deregulation rules, which centre on whether the current duopoly for public telecommunications, held by Mercury Communications and British Telecom in the UK, (plus the Hull Telephone Company on Humberside), should be broken to allow in further competitors, and whether organisations should be able to lease telephone lines from the public operators and re-sell capacity on them for voice traffic. Racal’s argument is that while there should certainly be more competition, expanding the capacity of the cellular network would make much more sense than licensing further companies to dig up the roads and rail wayleaves to add yet more to the clutter of cables. At present, Vodafone users pay a connection fee of UKP50 to use the network, plus a monthly access charge of UKP25, with call charges ranging from 33 pence for the first minute at peak times within the M25 belt around London and 16.5 pence for every 30 seconds thereafter during peak times to 10 pence for the firct minute outside the M25 belt and 5 pence for every 30 seconds thereafter at off-peak times. With much-expanded capacity and a subscriber base in millions, the charges would tumble.

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