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Bankruptcy filing shows impact of cell phones on dwindling marketOAK RIDGE—A paging company has filed for Chapter 11 bankruptcy protection after suffering a double whammy: a shrinking market because of the advent of cell phones and a financial dispute with a major service provider that threatened to seize the company’s customer list. The firm’s woes illustrate what can happen to a small business that’s threatened by a new way of doing things.

Some experts say the fact that the company, Paging Management I LLC, has managed to hang on this long is unusual, given the challenge presented by cell phones.

“Cell phones helped to kill the paging industry,” says Brad Dye, a wireless consultant based in Springfield, Ill. “In 1990, there were an estimated 45 million paging devices in the country, but today there are less than 6 million.”

Dye says hospitals and construction sites still use pagers, primarily because both have sensitive instruments that generally are not affected by one-way pager-service signals, but may be affected by the two-way signals of cell phones and other devices.

As wireless gadgets continue to feature functions once offered only by pagers, including text and data transmission, “we’ve seen the number of paging companies in our organization dwindle,” says Jackie McCarthy, director of government affairs for the Personal Communications Industry Association (PCIA), a trade organization in Alexandria, Va. “Most of the paging companies that used to be members of the PCIA are no longer in existence.”

Oak Ridge-based Paging Management has five employees and rings up about $330,000 a year in revenue, according to Hoover’s Inc., an industry and market information provider. Paging Management sells and activates pagers and manages paging services. The company has no more than $10,000 in cash and other assets, according to court filings.

“Some industry segments, like hospitals, still use pagers, but overall the customer base of Paging Management has dwindled during the past few years,” says Chad Friedman, a partner with the Roseland law firm Ravin Greenberg LLC, who represents the company and its owner, Jeff Koonjy. “The smaller market also means there are fewer [pager] providers to choose from, so Paging Management may have been forced to depend on a small number of key providers.”

Friedman says the bankruptcy filing was triggered by a dispute over $150,000 that Paging Management was said to owe one of those providers. Right now, Paging Management is still servicing its customers and hopes to work out a deal with the creditor, says Friedman.

The creditor claimed the right to take over servicing Paging Management’s customers if the company didn’t pay the money owed, says Friedman. But a Chapter 11 filing places a temporary hold on a creditor’s ability to collect a debt while the parties try to work out their issues.

While Friedman wouldn”t name the creditor, Paging Management owes $150,000 to PCS Partners, a Buford, Ga., company that engages in wireless communication-related retail distribution and customer service activity, according to documents filed two weeks ago with the U.S. Bankruptcy Court in Newark on behalf of Paging Management.

The court filings also cite a $144,000 debt owed to USA Mobility, a Columbia, Md., company that provides paging and cell phone products and services. The documents say that Paging Management disputes both debts, but do not provide any details about the disagreement.

Experts says Paging Management’s troubles are industry-wide and provide an example of how abrupt changes in technology can affect a business.

“Before cell phones, even the smaller pager companies were able to ride a successful wave of business,” says James Barrood, executive director of the Rothman Institute of Entrepreneurial Studies, part of the Silberman College of Business at Fairleigh Dickinson in Madison. “Many smaller shops did not recognize cell devices as a disruptive technology, and instead hung on to their ‘cash cow.’ But some collaborated with the new technology, even changing their business model and becoming cell phone providers. In general, it may be better to diversify and find a higher- margin business if the core business is under attack by new technology.”

Koonjy has launched a second Oak Ridge company, called Paging Management Inc., that provides Web hosting and other Internet-related services. That company has annual revenue of about $1.5 million, according to information provided by Hoover’s.

“I believe that as the revenue from paging went down, Koonjy may have seen the establishment of an Internet services company as a way to complement the activities of Paging Management I LLC,” says Friedman. “Either way, he believes his businesses will succeed.”

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