Payphone Phoenix

Payphone Phoenix

Tim Kridel

Is the payphone dead? Readers of The Net Economy recently debated that question, and 66 percent said that payphones would be around for a while, because plenty of people still don’t have wireless phones.

Even those who have wireless phones still want to keep payphones around. “As long as AT&T refuses to add capacity to their cell antennas in places like the Atlanta airport, there will always be a need for payphones,” wrote one reader.

The debate was prompted by BellSouth’s Feb. 2 announcement that it will be out of the payphone business by December 2002.

Here’s the BellSouth announcement:

“BellSouth has carefully evaluated the market trends in the payphone business, which indicate that our customers are opting for the new technology options we provide, including wireless telephones and interactive pagers,” says Charlie Coe, president of BellSouth Network Services.

The payphone business apparently is even tougher in Europe, where wireless penetration is higher than in North America. Even there, most payphones aren’t covered in cobwebs. A November 2000 report by the Office of Telecommunications, the U.K. equivalent of the FCC, found that 12 percent of British adults use payphones at least once a month. Perhaps the biggest surprise is that the heaviest users were younger, lower-income groups — exactly the sort of people prepaid wireless was supposed to attract.

Here’s the OFTEL report:

The point is that a significant number of people still use payphones, although that number has decreased to the point that British Telecom recently doubled the basic charge and is looking at ways to remake the booths into something sexier and more lucrative, like Internet kiosks.

One of the more interesting proposals involves wireless, the popularity of which got payphones into this mess in the first place. Earlier this year, British Telecom began trials of cell-site equipment compact enough to fit atop a payphone booth. The trial apparently went well, because last week, BT announced that it’s effectively turning 5,000 of its 141,000 payphone booths into cell sites. For a fee, a wireless carrier can put a microcell on top of BT booth.

This strategy seems wise. Even without 3G, carriers are always looking for additional sites to improve coverage and capacity. Urban areas are particularly tough, because most municipalities balk when a carrier asks to put an antenna, however small and camouflaged, on the side of a building. The delays and red tape can be horrendous. So if a carrier can use and even lease out real estate that it already owns in those prime areas, all the better. If the booths don’t already have the power and backhaul that a microcell requires, chances are they can brought in cheaper than if the site were on, say, the side of an office building.

BT says the lease fees will subsidize its payphone business, which it apparently isn’t ready to exit. If this business model has legs, then regulators and consumer watchdogs should look favorably on BT for its willingness to find a way to continue providing a valuable service.

Wireless carriers will always need towers and rooftops, but if the technology allows you to use less-expensive real estate, why not? Cingular Wireless would be wise to look at BT’s decision before its parent, BellSouth, unloads its roughly 143,000 payphones. The same applies to Verizon Wireless, which could piggyback on Verizon’s umpteen payphone booths — and provide an incentive to repair the ones that don’t work.

“In NYC, there usually are payphones available, although half of them don’t work,” wrote one of our readers. “It’s a good thing that there are four on every corner in Manhattan. That way I can be sure of finding at least one that works!”

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in The Net Economy.