THE GO-ANYWHERE PHONE IS AT HAND No longer tied to the car, cellular phones are getting smaller. They may soon be economical enough for every pocket -- though service charges can be stunning.
By Andrew Kupfer REPORTER ASSOCIATE Patricia A. Langan

(FORTUNE Magazine) – ONCE YOU GET over the initial self-consciousness and the dirty looks from people nearby trying to read the paper, there is undeniably an illicit, nerdish thrill in making a call with a portable phone while you're riding on a bus. The rush of self-satisfaction -- which comes from doing something where it previously was impossible, something that inferior gadgetless beings can't do yet -- is very much akin to the way you may have felt the first time you extracted cash from a bank machine at midnight or watched a Hollywood movie on a Betamax. Cellular phones are leaving the auto and becoming truly portable. An estimated 40% or more of those being sold can be carried and used anywhere, and the proportion is growing. About 25% of new telephone numbers are going to cellular phones. System operators, newly licensed by the Federal Communications Commission for practically all areas still without service (see box), are filling in the holes on the map. The phones are getting smaller, lighter, and with remarkable rapidity, cheaper. Motorola's 10.7-ounce MicroTAC came out last year at $2,495; you can get it now in some markets for $800. You can buy a car phone for a quarter of that price. As a result, industry experts believe subscribers could grow from almost 4.4 million today to 25 million by the end of the decade. Yet the profusion has bred confusion, and not a little disillusion. Users are often dismayed by signal quality, especially in big cities and at the edges of service areas. Batteries on the smallest phones allow less than an hour and a half of talk time between charges, and in the case of the MicroTAC, only 30 minutes. Monthly bills can be stunning, averaging about $85 but far higher for subscribers who use their phones away from their home city -- system operators hit outside users with extra charges. And every month, it seems, companies announce plans for a new type of service that will be cheaper, or permit featherweight phones, or span the entire globe via satellite -- but that won't work with phones on the market today. One prominent operator, Craig McCaw, even suggests -- at least half-seriously -- that the government reserve radio spectrum for mental telepathy service. For prospective cellular junkies afflicted with consumer's paralysis, some reassurance: Chances are slim that the phone you buy today will become obsolete tomorrow. Precisely because of such fears, cellular operators and equipment makers have agreed that whatever new services come into play, the existing network will remain compatible with today's phones for as long as they are likely to last. The basic network will continue to grow, making it easier to place and receive calls. Anyone hankering after portability soon should not be overdazzled by things to come; most of the new technologies have yet to prove themselves and are at least several years away. A CELLULAR PHONE is really a radio. Service providers divide their areas into cells, each with equipment that transmits calls over a slice of the radio spectrum. As a user moves, the network hands a call in progress from cell to cell, each of which has a range of 25 miles on average (less in cities). The cells send calls by radio to a mobile telephone switch, which feeds into the land-line telephone network by wire or microwave. Subscribers to cellular phone service receive a seven-digit local telephone number. Electronics dealers like Radio Shack program the number into the phone at the store. With four types of phones to choose from (see table), buyers should consider what they will be doing when they want to make their calls. The best choice for heavy drivers is the mobile telephone, or car phone. It delivers the most powerful signal but it is tied to the vehicle with a separate transceiver, usually mounted under a seat. Some luxury cars offer hands-off operation and sound coming through the hi-fi speakers. Gee-whiz versions have limited powers of voice recognition (''Call Dave!'' or ''Hang up!'' you may command). For users who need to take their phone from car to car -- or from car to construction site or sailboat -- a good option is a transportable phone. Consisting of a handset and a somewhat bulky transceiver and battery, the transportable can draw power from either a car's cigarette lighter or batteries and puts out a signal as strong as a mobile phone's. It weighs at least 4 1/2 pounds, unwieldy for slinging into an overnight bag. Its batteries are good for three to five hours of active use. The so-called bag phone is a mobile unit packaged by retailers in a carrying case and sold as a transportable. It is cheaper and easier to carry, but manufacturers say in many cases the components are not shielded well enough to operate in close proximity to each other without causing interference. Peripatetic people prefer hand-held portables. These combine transceiver, antenna, and battery in a single unit resembling a walkie-talkie with push buttons. The phones weigh no more than 1 1/2 pounds or so; the lightest, just introduced by Mitsubishi, weighs only 10.4 ounces. Generally, the lighter the phone, the higher the price. Drawbacks, besides price, are lower power output and limited talk time -- rarely more than two hours per battery charge. Cellular service is proliferating. The FCC divided the country into areas based on population patterns and has licensed two competing operators in each area -- one a local telephone company, the second an independent operator, like McCaw Cellular Communications. Most metropolitan areas have systems up and running, and networks are spreading in rural areas. The extent of service in some parts of the country will surprise the frustrated user of a couple of years ago. On the West Coast, with the exception of a few gaps, service is available continuously from Vancouver to Tijuana. ONE HOT ISSUE is how to make life easier for roamers, industry parlance for customers who call outside their own service areas. Most cellular companies . have reciprocal arrangements that let roamers make calls just by dialing. Where roaming agreements are not in force, an operator may break in and ask for a credit card number for billing, but that sort of inconvenience is becoming the exception. Operators sock roamers with costly charges -- $3 a day for access and extra per minute rates. In the New York metropolitan area, for example, Nynex charges 75 cents a minute for local calls and Lin Broadcasting 85 cents, vs. the 50 cents and 45 cents on average that regular subscribers pay. Long- distance tolls are added, too, for calls out of the area. Receiving calls has been a bigger headache for roamers, but a breakthrough promises relief in several years. Today a roamer's home network may not be able to forward calls to another system; cellular switches made by different manufacturers can't always talk with one another. Callers must then know where the roamer is and dial a cumbersome code to gain access to the host company's network. This impediment should disappear by mid-decade. The industry has agreed on software standards that will allow heretofore incompatible switches to communicate. Until then, some operators offer a voice mail service that will store messages for customers who are out of reach. A new generation of equipment will help operators add the capacity frustrated urban subscribers desperately need. At peak times in New York (midday is the worst), some 20% of calls don't get through on the first try because the system is filled to capacity. In Seattle, by contrast, only about 2% of peak calls are delayed. A cellular company usually increases capacity by dividing its area into a greater number of smaller cells. When transmitters are packed too tightly together, as in big cities, calls in adjacent cells begin to interfere with one another. Calls are also more likely to be lost as cars move from cell to cell. Says Bob Keller, chief operating officer of Nynex Mobile Communications: ''None of us is providing the service we want in metropolitan areas.'' Today's systems are based on analog technology that essentially sends electronic versions of voice patterns over the air. Next year the industry will begin to phase in digital equipment that translates sound patterns into computer codes. Digital radio channels can handle at least three times as many calls as analog channels. Companies then will be able to add capacity while giving urban cells the elbowroom they need. The drawback for consumers: / Initially, the requisite phones will be bigger and heavier and cost 10% to 15% more than present-day analog phones. Price subsidies from operators are a likely inducement. The industry promises to protect owners of old phones by keeping analog channels during an unspecified transition period. A little further in the future of the strained urban networks are plans by operators -- some of whom already run cellular systems -- to build low-priced ''pedestrian networks'' for use by people carrying cheap, ultralight phones. Under such rubrics as Personal Communication Networks or Personal Telephone Services, the systems will have closely spaced cells and use low- powered transmitters. The digital systems will tag the signal between cell and handset with a unique code; each phone will be able to ''hear'' only the signal that bears its code. Nynex plans to start building a system in Manhattan next year. A joint venture of Washington Post Co. and American Personal Communications plans an experimental system this year in Washington. On the far horizon of space and time -- and perhaps just inside the realm of credibility -- is Motorola's grand Iridium scheme to bring wireless phone service to every point on the surface of the earth. Users anywhere with a small handset would be able to beam calls skyward to an array of 77 low-orbit satellites. Skeptics wonder if the consortium of companies Motorola is forming to run the project will receive the necessary permission from foreign governments. Costs may also be stratospheric, with $2.3 billion needed for deployment (scheduled to begin in 1994). But Motorola says the service can make money with only 700,000 subscribers worldwide. THE IDEAL RESOLUTION of these different systems varies with the perspective of the beholder. Pushers of the new schemes see nothing wrong with a multiplicity of incompatible services, each appropriate for a different set of consumer needs. Operators with big commitments to the present network advocate compatibility, especially Craig McCaw, whose company has borrowed billions to move toward a unified national network. Says he: ''Whatever we do ultimately has got to protect the customer from having a boxload of phones.'' It is McCaw who floats the idea of a telepathic implant device. ''It's only a matter of time,'' he says. ''Categorically, there will be a form of telepathic communication possible with electronic impulses out of the brain. Five years from now we may know how to do it. Maybe it will be ten or 20 more years before it could be implemented.'' In the meantime, perhaps by the end of the decade, the national cellular network may be able to link up with the pedestrian systems now being field-tested. Most people still won't have a cellular phone by then. But most people don't have a Walkman today, and yet we would consider them ubiquitous.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: BUYER'S GUIDE TO CELLULAR PHONES