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4q 4q 7 ` . 4q 4q Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993
Annual Report and Analysis of Competitive Market Conditions With Respect to Commercial Mobile Services)
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AUTOTEXTLIST \* MERGEFORMAT SEVENTH REPORT
Adopted: June 13, 2002 Released: July 3, 2002
By the Commission: Commissioner Copps issuing a statement.
Table of Contents
Page TOC \o "1-4"
I. INTRODUCTION PAGEREF _Toc12776032 \h 3
A. Overview PAGEREF _Toc12776033 \h 3
B. Status of Competition PAGEREF _Toc12776034 \h 4
C. Industry Development PAGEREF _Toc12776035 \h 5
II. THE CMRS INDUSTRY PAGEREF _Toc12776036 \h 9
A. Mobile Telephony PAGEREF _Toc12776037 \h 9
1. Mobile Telephone Overview and Analysis PAGEREF _Toc12776038 \h 9
a. Market Structure PAGEREF _Toc12776039 \h 9
b. Market Performance PAGEREF _Toc12776040 \h 19
c. Digital Deployment PAGEREF _Toc12776041 \h 25
d. Pricing Data and Trends PAGEREF _Toc12776042 \h 28
e. Wireless/Wireline Competition PAGEREF _Toc12776043 \h 32
f. Geographical Comparisons: Urban vs. Rural PAGEREF _Toc12776044 \h 36
2. Other Competitors: Resellers and Satellite Operators PAGEREF _Toc12776045 \h 41
a. Resellers PAGEREF _Toc12776046 \h 41
b. Satellite Operators PAGEREF _Toc12776047 \h 42
3. International Developments PAGEREF _Toc12776048 \h 44
a. International Investments PAGEREF _Toc12776049 \h 44
b. International Comparisons PAGEREF _Toc12776050 \h 48
B. Mobile Data PAGEREF _Toc12776051 \h 55
1. Introduction PAGEREF _Toc12776052 \h 55
a. Domestic Developments PAGEREF _Toc12776053 \h 55
b. International Developments PAGEREF _Toc12776054 \h 58
2. Industry Structure and Performance PAGEREF _Toc12776055 \h 59
a. Mobile Telephone Sector PAGEREF _Toc12776056 \h 59
b. Handheld Devices PAGEREF _Toc12776057 \h 61
c. Paging Sector PAGEREF _Toc12776058 \h 66
3. Mobile Data Services PAGEREF _Toc12776059 \h 68
a. Paging PAGEREF _Toc12776060 \h 68
b. SMS and Instant Messaging PAGEREF _Toc12776061 \h 68
c. Web Content PAGEREF _Toc12776062 \h 70
d. E-mail and Corporate Server Access PAGEREF _Toc12776063 \h 73
e. Location-Based Services PAGEREF _Toc12776064 \h 75
f. Short Range Data Transmissions PAGEREF _Toc12776065 \h 78
4. Telemetry and Telematics PAGEREF _Toc12776066 \h 81
III. CONCLUSION PAGEREF _Toc12776067 \h 83
IV. ADMINISTRATIVE MATTERS PAGEREF _Toc12776068 \h 85
APPENDIX A: Fixed Wireless Voice and Data Services
APPENDIX B: Spectrum Auctions Tables
APPENDIX C: Mobile Telephony Tables
APPENDIX D: Mobile Data Tables
APPENDIX E: Maps
INTRODUCTION
Overview
In 1993, Congress created the statutory classification of Commercial Mobile Services to promote the consistent regulation of mobile radio services that are similar in nature. At the same time, Congress established the promotion of competition as a fundamental goal for CMRS policy formation and regulation. To measure progress toward this goal, Congress required the Federal Communications Commission (FCC or Commission) to submit annual reports that analyze competitive conditions in the industry. This report is the seventh of the Commissions annual reports on the state of CMRS competition.
CMRS includes a large number of terrestrial services and some mobile satellite services. As in the past, this report bases its analysis on a consumer-oriented view of wireless services by focusing on specific product categories, regardless of their regulatory classification. In some cases, this includes an analysis of offerings outside the umbrella of services specifically designated by the Commission as CMRS. However, because licensees of these other spectrum-based services often compete with CMRS providers, as well as with other providers of telecommunications services, the Commission believes that it is important to consider them in the analysis.
Since the release of the Sixth Report, the Commission has expanded its efforts to improve the quality and granularity of the data used to examine competition in the CMRS marketplace. For example, this report utilizes data submitted directly to the FCC, in addition to non-governmental surveys, for information on mobile telephony subscribership. An analysis of this information allows the Commission to estimate wireless penetration rates on a regional basis in addition to a national basis.
As part of its ongoing effort to improve its annual CMRS report, the Commission also held a Public Forum in February 2002 to examine ways in which to better gather and analyze data for this report, in particular data regarding the development of rural and underserved wireless markets. Participants included representatives from telecommunications companies, industry associations, consumer groups, academics, consulting firms, and federal government agencies. In response, the Commission has integrated into this report the data submitted at the forum, and adopted a number of suggestions made by Forum participants on how to obtain and analyze data more effectively. In addition, the Commission will be issuing a Notice of Inquiry (NOI) to help gather more information for next years report.
This report focuses on two categories of wireless services: mobile telephony and mobile data. We emphasize that these two service categories are not as clearly delineated in the marketplace. For example, many mobile telephony operators also offer mobile data services using the same spectrum, network facilities, and customer equipment. Therefore, while these service categories are used to provide structure for this CMRS competition report, the Commissions view of the mobile services marketplace is not limited by the categories in which this report places them.
Status of Competition
In the year 2001, the CMRS industry continued to experience increased competition, innovation, lower prices for consumers, and increased diversity of service offerings. The year saw a number of operators continue to fill in gaps in their national coverage through mergers, acquisitions, license swaps, and joint ventures. In parallel with this process of footprint building, mobile telephone operators continue to deploy their networks in an increasing number of markets, expand their digital networks, and develop innovative pricing plans.
During the past year, the mobile data industry continued to grow and to evolve. Estimates of the number of mobile Internet users at the end of 2001 range from approximately 8 to 10 million, up from 2 to 2.5 million at the end of 2000. Since the writing of the Sixth Report, several mobile data operators have begun upgrading their networks to allow for faster data access speeds and more advanced services. As of March 2002, four nationwide mobile telephone operators were offering mobile Internet access at speeds generally ranging from 25-60 kilobits per second (kbps), with maximum bursting rates up to 144 kbps for at least one carrier, in some portion of U.S. counties covering approximately 181 million people. In addition, most handheld personal digital assistant (PDA) devices currently available offer users some method of connecting to the mobile Internet. Competition within the mobile data sector is developing successfully, as evidenced by the multitude of dynamic services, service packages, and pricing plans available to consumers from a variety of providers.
Industry Development
Mobile Telephony. The mobile telephony sector of CMRS has experienced continued strong growth and competitive development. In the 12 months ending December 2001, the mobile telephony sector generated over $65 billion in revenues, increased subscribership from 109.5 million to 128.5 million, and produced a nationwide penetration rate of roughly 45 percent. Broadband PCS carriers and digital SMR providers continue to deploy their networks. To date, 268 million people, or 94 percent of the total U.S. population, live in counties with access to three or more different operators (cellular, broadband PCS, and/or digital SMR providers) offering mobile telephone service. Over 229 million people, or 80 percent of the U.S. population, live in counties with five or more mobile telephone operators competing to offer service. And 151 million people, or 53 percent of the population, live in counties in which six different mobile telephone operators are providing service.
Digital technology is now dominant in the mobile telephone sector. At the end of 2001, digital customers made up almost 80 percent of the industry total, up from 72 percent at the end of 2000. Finally, in part because of competitive pressures in the marketplace, the average price of mobile telephone service has declined during the year since the Sixth Report, continuing the trend of the last several years. According to the U.S. Department of Labors Bureau of Labor Statistics, the price of residential mobile telephone service declined by 5.5 percent during 2001. Another survey indicates that the average revenue per minute of mobile telephone use fell 31 percent between 2000 and 2001.
Mobile Data. This report describes mobile data providers and their corresponding devices in three general categories: (1) mobile telephone operators offering services primarily on mobile telephone handsets, (2) providers of mobile data access to handheld PDA devices and laptop computers, and (3) paging carriers offering services on pagers and two-way messaging devices. The reports mobile data section first discusses the key developments and events related to these three categories of carriers and devices that occurred during 2001 and early 2002. During the past year, the types of mobile data services available on mobile data devices have become increasingly similar. Therefore, this years report provides details on the major mobile data services available to consumers including paging, Short Messaging Service (SMS), web access, e-mail and corporate server access, location-based services, and short range data transmissions in a separate section following the discussion of the three categories of mobile data providers and devices. During the past year, many mobile telephone carriers began deploying advanced wireless service network technologies such as cdma2000 1xRTT and General Packet Radio Service (GPRS). These deployments contributed to the further convergence of mobile voice and mobile data services, which was marked by the emergence of smartphone devices that combine the organization and data-centric features of PDAs with the voice capabilities of mobile telephones.
THE CMRS INDUSTRY
Mobile Telephony
This report defines the mobile telephone sector to include all operators that offer commercially available, interconnected mobile phone services. These operators provide access to the public switched telephone network (PSTN) via mobile communication devices employing radiowave technology to transmit calls. As discussed in previous reports, providers using cellular radiotelephone, broadband PCS, and SMR licenses dominate this sector. Resellers and operators using satellite systems also offer mobile telephone services. Because these providers offer mobile telephone services that are essentially interchangeable, or at least close substitutes, from the perspective of most consumers, they are discussed in this report as a cohesive industry sector.
The discussion below describes the mobile telephone market as a whole and includes sections on market structure, market performance, digital technologies, pricing, wireless-wireline competition, and urban-rural comparisons. This is followed by discussions of resellers and satellite providers as well as international developments.
Mobile Telephone Overview and Analysis
Market Structure
Spectrum Allocation
Currently, mobile telephony operators primarily use three types of spectrum licenses to provide service: cellular, broadband PCS, and SMR.
Cellular The Commission began licensing commercial cellular providers in 1982 and completed licensing the majority of operators by 1991. The Commission divided the United States and its possessions into 734 cellular market areas (CMAs), including 305 Metropolitan Statistical Areas (MSAs), 428 Rural Service Areas (RSAs), and a market for the Gulf of Mexico. Two cellular systems were licensed in each market area. The Commission allocated 50 megahertz of spectrum in the 800 MHz frequency band for the two competing cellular systems in each market (25 megahertz for each system). Initially, cellular systems offered service using analog technology, but today most of the service offered using cellular spectrum is digital.
Broadband PCS Broadband PCS is similar to cellular service, except that broadband PCS systems operate in different spectrum bands and have been designed from the beginning to use a digital format. Broadband PCS licenses have been assigned through auction, beginning in 1995. The most recent broadband PCS auction was completed in 2001. The Commission has set aside the spectrum between 1850 MHz and 1990 MHz for broadband PCS. This spectrum includes 120 megahertz for mobile telephony, divided originally into three blocks of 30 megahertz each (blocks A, B, and C) and three blocks of 10 megahertz each (blocks D, E, and F). Two of the 30 megahertz blocks (A and B blocks) are assigned on the basis of 51 Major Trading Areas (MTAs). One of the 30 megahertz blocks (C block) and all three of the 10 megahertz blocks are assigned on the basis of 493 BTAs.
SMR - The Commission first established SMR in 1979 to provide for land mobile communications on a commercial basis. The Commission initially licensed spectrum in the 800 and 900 MHz bands for this service, in non-contiguous bands, on a site-by-site basis. The Commission has since licensed additional SMR spectrum through auctions. In total, the Commission has licensed 19 megahertz of SMR spectrum, plus an additional 7.5 megahertz of spectrum that is available for SMR as well as other services. While Commission policy permits flexible use of this spectrum, including the provision of paging, dispatch, mobile voice, mobile data, facsimile, or combinations of these services, the primary use for SMR traditionally has been dispatch services. Dispatch differs from mobile voice communications offered by PCS and cellular carriers in that it allows both one-to-one and one-to-many communication (including real-time conferencing with groups), and it generally does not operate through interconnection with the public switched telephone network. SMR systems have also had the ability to offer interconnected service, but until the development of digital technologies, analog SMR systems had very limited capacity to provide mobile telephony. In recent years, however, the nature of SMR service has evolved significantly. SMR providers such as Nextel Communications, Inc. (Nextel) and Southern LINC, a unit of energy concern Southern Company, have used digital technologies to increase spectral efficiency and to become more significant competitors in mobile telephony, while also providing dispatch functionality as a part of their service offerings. At the same time, traditional dispatch services are being provided increasingly on non-SMR spectrum bands. Furthermore, in apparent response to the dispatch functionality of SMR services, cellular and PCS carriers have recently begun to offer dispatch-like options (e.g., group calling and conferencing) as part of their service offerings, particularly for businesses.
Spectrum Cap - In every geographical area of the country, the Commission initially authorized up to eight different mobile telephony licenses (two cellular and six broadband PCS), not including additional digital SMR licenses. Moreover, under Commission rules, broadband PCS, cellular, and auctioned SMR licensees may, with Commission approval, disaggregate (divide the spectrum into smaller amounts of bandwidth) or partition (divide the license into smaller geographical areas) their licenses, or both, to other entities. Many licensees hold more than one license in a particular market. Previously, under the Commissions CMRS spectrum cap (which applies to 180 MHz of spectrum), no entity could control more than 45 megahertz of cellular, broadband PCS, and SMR spectrum in an MSA, or more than 55 megahertz in a RSA. In November 2001, however, the Commission raised the spectrum cap to 55 megahertz in all markets, and decided to eliminate the restriction entirely effective January 1, 2003. In addition, the Commission forbids an entity from having cross-interests in cellular licenses on both blocks within an RSA.
Building Nationwide Networks
In the United States, there are six mobile telephony operators that analyst typically describe as nationwide: AT&T Wireless Services, Inc. (AT&T Wireless), Sprint PCS, Verizon Wireless, LLC (Verizon Wireless), VoiceStream Wireless Corp. (VoiceStream), Cingular Wireless, LLC (Cingular Wireless or Cingular), and Nextel. When an operator is described as being nationwide, it does not necessarily mean that the operators license areas, service areas, or pricing plans cover the entire land area of the United States. The six mobile telephony carriers that analyst reports typically describe as nationwide all offer service in at least some portion of the western, midwestern, and eastern United States. In addition to the nationwide operators, there are a number of large regional players, including ALLTEL Corp. (ALLTEL), Western Wireless Corp. (Western Wireless), United States Cellular Corp. (US Cellular), and Dobson Communications Corp. (Dobson).
The Commission has concluded previously that operators with larger footprints can achieve certain economies of scale and increased efficiencies compared to operators with smaller footprints. Such benefits, along with advances such as digital technology, have permitted companies to introduce and expand innovative pricing plans such as digital-one-rate (DOR) type plans, reducing prices to consumers.
Since the end of 1999, carriers have been building nationwide footprints through various forms of transactions. One of the driving forces behind many of these transactions has been the desire of large regional carriers to enhance their ability to compete with existing nationwide operators that offer attractive nationwide pricing plans. More recently, national operators have sought to fill in gaps in their coverage areas. Since the writing of the Sixth Report, a number of such transactions have been announced. The most significant are discussed below, along with a discussion of the spin-off of AT&T Wireless from its parent AT&T Corp. (AT&T).
Combinations
AT&T Wireless/TeleCorp AT&T Wireless announced in February 2002 that it had completed its acquisition of former network affiliate TeleCorp PCS, Inc. (TeleCorp). On October 8, 2001, AT&T Wireless announced plans to acquire TeleCorp in an all-stock transaction valued at $4.7 billion. AT&T Wireless acquired the 77 percent of TeleCorp it did not already own by issuing approximately 146 million additional AT&T Wireless Services common shares and assumed $2.1 billion in net debt and approximately $221 million in preferred securities. With this transaction, AT&T Wireless acquired markets covering 32 million potential customers, or POPs, in 14 states - primarily in the Southeast and Midwest, as well as the commonwealth of Puerto Rico. TeleCorp was AT&Ts largest affiliate with approximately 800,000 subscribers at the time of its acquisition.
Verizon Wireless/Price Wireless On November 15, 2000, Verizon Wireless announced it had signed an agreement to acquire Price Communications Wireless (Price Wireless) for approximately $2 billion. This agreement was conditioned on the completion of Verizon Wirelesss planned initial public offering (IPO) by September 30, 2001. With that deadline unmet, in December 2001, Verizon Wireless and Price Wireless agreed to alter their original agreement. Instead of an outright acquisition, the companies agreed to form a limited partnership consisting of Price Wirelesss wireless operations and certain Verizon Wireless assets. Verizon Wireless will control and manage the partnership. In exchange for its assets, Price Wireless will receive an interest in the partnership valued at $1.15 billion, and Verizon Wireless will assume $550 million of Price Wirelesss debt.
Sprint PCS Affiliates A number of Sprint PCS network affiliates have acquired, or announced plans to acquire, other affiliates. On August 13, 2001, UbiquiTel, Inc. (UbiquiTel), which serves markets in several states in the western and midwestern United States, acquired privately held VIA Wireless (VIA), an affiliate serving the central valley of California. The acquisition doubled UbiquiTels subscriber base to over 100,000 (at that time) and increased its service territory by 3.4 million POPs to 11.1 million. On November 30, AirGate PCS, Inc. (AirGate) completed its acquisition of iPCS Inc. (iPCS). The combined company, serving over 300,000 subscribers, has a service territory of more than 14.5 million POPs across seven states in the Southeast and Midwest. Finally, in the spring of 2002, US Unwired Inc. (US Unwired) announced that it had completed the acquisitions of two other affiliates, Georgia PCS Management, LLC (Georgia PCS) and Independent Wireless One holdings, Inc. (IWO). The two transactions, with a combined value of over $550 million, added roughly 160,000 subscribers to US Unwireds existing base of 236,000. The combined companies service territory covers more than 17.6 million POPs in the southeast and northeastern regions of the county.
ALLTEL/CenturyTel On March 19, 2002, ALLTEL announced an agreement to purchase all the wireless properties owned by CenturyTel Inc. (CenturyTel) for $1.65 billion in cash. Through the acquisition, ALLTEL will add more than 700,000 wireless customers and expand its footprint into new markets across Arkansas, Louisiana, Michigan, Mississippi, Texas, and Wisconsin. Combined with CenturyTels properties, ALLTEL will have 7.4 million wireless customers in 24 states. ALLTEL claims that the acquisition will allow the carrier to connect to areas where it has significant existing operations, and to increase the profitability of the CenturyTel properties through the introduction of regional and national rate plans as well as through cost reductions. The Commission granted consent to the license transfers on June 10, 2002.
US Cellular / PrimeCo Communications On May 10, 2002, US Cellular announced that it was acquiring PrimeCo Wireless Communications LLCs (PrimeCo) Chicago-area mobile wireless business for approximately $610 million. US Cellular, which has networks adjacent to the Chicago market, is acquiring PrimeCos CDMA network and subscriber base of 350,000. The transaction is subject to approval by the Commission and the Department of Justice.
Nextel/Pacific Wireless Technologies On July 27, 2001, Pacific Wireless Technologies, Inc. (Pacific) and Nextel filed an application with the Commission seeking consent to transfer Pacifics 800 MHz SMR licenses to Nextel. The deal was closed in December 2001. Pacific, one of only two other digital SMR providers besides Nextel, launched service in July 2000. Its digital SMR network in the central valley of California covered approximately 13.5 million POPs. Pacific offered consumers a package of digital wireless services, including digital dispatch and interconnected mobile voice services, using an iDEN technology similar to that deployed throughout Nextels markets. Pacific served approximately 7,500 subscribers.
Joint Ventures
Cingular Wireless/VoiceStream In October 2001, Cingular Wireless and VoiceStream announced an infrastructure sharing joint venture that the companies claim will allow them to share their GSM networks in California, Nevada, and New York.
Cingular Wireless/AT&T Wireless In January 2002, Cingular Wireless and AT&T Wireless announced the formation of an infrastructure joint venture to build out a GSM/GPRS network along 3,000 miles of interstate highways predominantly in western and midwestern states.
Spin-Off
On July 9, 2001, AT&T Wireless was spun-off from its parent AT&T and became a separate, independently-traded company. AT&T executed the spin-off in two steps. First, AT&T redeemed all of the outstanding shares of AT&T Wireless Group tracking stock in exchange for shares of the new AT&T Wireless common stock. Second, AT&T distributed the remaining shares of AT&T Wireless common stock to holders of AT&T common stock, less approximately $3 billion, or about 7.3 percent, that AT&T retained. By the end of 2001, AT&T had disposed of its remaining interest in AT&T Wireless.
Affiliations
Three national operators also have extended their coverage through contractual affiliations with smaller carriers. These affiliations create a family of operating companies with much closer relationships than those formed by traditional roaming agreements. The affiliations were established to accelerate the build-out of the larger companies networks by granting smaller affiliates the exclusive right to offer mobile telephony for those companies, in some cases under the larger companies brand names, in selected mid-sized and smaller markets.
AT&T Wireless The AT&T Wireless family consists of AT&T Wireless, as well as the affiliation it has with two companies: Triton PCS Holdings, Inc. (Triton PCS) and Edge Wireless, LLC (Edge). In the case of Triton PCS, AT&T Wireless sold portions of some of its broadband PCS licenses to the company in exchange for a minority ownership interest. While Triton PCS is marketed under the brand name SunCom and Edge is marketed under its own name, both companies provide service as a Member of the AT&T Wireless Network. These affiliates have been deploying TDMA technology throughout their networks.
Sprint PCS The Sprint PCS family consists of Sprint PCS and 12 affiliates. Each of the affiliates has an agreement with Sprint PCS to use the latters PCS licenses to deploy CDMA technology and Sprint PCS-branded service in specific areas of the country. In addition, Sprint PCS performs back-office tasks at cost for most of its affiliates, giving them the benefits of economies of scale for billing and customer service. In return, Sprint receives 8 percent of the affiliates local service revenue. Sprint PCS affiliates now provide service to more than 2 million subscribers.
Nextel The Nextel family consists of Nextel and Nextel Partners, Inc. (Nextel Partners). In an arrangement similar to that of AT&T with its affiliates, Nextel sold some of its SMR licenses to Nextel Partners in exchange for a minority ownership interest in the company. Nextel Partners is building out an iDEN network compatible with Nextels, and Nextel assists Nextel Partners in obtaining substantially the same terms Nextel receives from vendors for equipment and services. Both Nextel and Nextel Partners market their services under the Nextel brand name.
Market Performance
Some of the key metrics reported by mobile telephone operators, such as subscriber growth, average monthly usage per subscriber, and average revenue per subscriber, while not indicative of competition per se, demonstrate the increased demand for and reliance placed on mobile telephony services. In addition, continued downward price trends and continued expansion of mobile networks into new and existing markets are related in different ways to the level of competition for mobile telephony customers. These metrics generally demonstrate a high level of competition for most consumers.
In an effort to improve the accuracy of its estimate of U.S. mobile telephone subscribership, the Commission has begun analyzing information filed directly with the FCC. This information, the Numbering Report Utilization / Forecast data (NRUF), tracks phone number usage information for the United States. All mobile wireless carriers must report to the FCC which of their phone numbers have been assigned to end-users, thereby permitting the Commission to make more accurate estimates regarding subscribership. In previous years, for purposes of this report, the Commission had relied on national subscribership data from a highly-respected survey conducted by the Cellular Telecommunications and Internet Association (CTIA). CTIAs survey is voluntary; it does not receive information from all carriers and must therefore estimate the subscribership for carriers not reporting. In addition, NRUF data, in comparison to CTIAs survey, is collected on a small area basis and thus allows regional subscribership comparisons. For these reasons, for purposes of this report the Commission uses NRUF data as the basis for its estimate of mobile telephony subscribership, although we report the CTIA data as well.
Subscriber Growth
In 2001, the mobile telephone sector experienced another year of impressive subscriber growth. As of December 2001, the Commission estimates that the sector had 128.5 million subscribers, which translates into a nationwide penetration rate of roughly 45 percent. CTIAs estimate for year-end 2001 was 128.4 million subscribers, roughly the same as the FCC estimate, and a 17 percent increase over CTIAs estimate of 109.5 million subscribers for December 2000. CTIAs absolute increase of 18.9 million subscribers represents the second largest 12-month jump in subscribership in the history of the sector, but 4.5 million less than 2000s record increase of 23.5 million additional subscribers. We note that in 2001, for the first time since CTIA began tracking subscribership, the absolute number of new subscribers of mobile telephony service is lower than that of the previous year. Because this change has occurred for only one year, it is not clear whether this represents a more general leveling off of wireless growth. We also note that the growth rate for mobile phone subscribers have been declining for several years.
Regional Penetration Rates
As stated earlier, an additional advantage of NRUF data over the CTIA data is that it allows the Commission to compare the spread of mobile telephone subscribership across different areas within the United States. Economic Areas (EAs), which are defined by the Department of Commerces Bureau of Economic Analysis, are particularly well-suited for comparing regional mobile telephony penetration rates for two reasons. First, the defining aspect of mobile telephony is, of course, mobility. Each EA is made up of one or more economic nodes and the surrounding areas that are economically related to the node. The main factor used in determining the economic relationship between the two areas is commuting patterns, so that each EA includes, as far as possible, the place of work and the place of residence of its labor force. Thus, an EA would seem to capture the market where the average person would use his or her mobile phone most of the time around work, around home, and all of the places in between. Second, wireless carriers have considerable discretion in how they assign telephone numbers across the rate centers in their operating areas. In other words, a mobile telephone subscriber can be assigned a phone number associated with a rate center that is a significant distance away from the subscribers place of residence (but generally still in the same EA).
Regional penetration rates for the 172 EAs covering the 50 United States, sorted by EA population density, can be seen in Appendix C, Table 3. The rates range from a high of 57 percent in the Atlanta, GA-AL-NC EA (EA 40) to a low of 19 percent in the Paducah, KY-IL EA (EA 72). The Anchorage, AK EA (EA 171), with the lowest population density, had a penetration rate of 41 percent, while the Tampa-St. Petersburg-Clearwater, FL EA (EA 34), with the highest density, had a penetration rate of 38 percent. As previously stated based on an analysis of NRUF data, the national penetration rate is 45 percent.
Minutes-of-Use
Wireless subscribers continue to increase the amount of time they communicate using their wireless phones. Average minutes-of-use per subscriber per month (MOUs) continued a rapid rise in 2001. Increasing MOUs most likely are a result of the decreasing prices and the wider acceptance of and reliance upon wireless service.
According to the CTIA mobile telephone survey, MOUs were 385 between July and December 2001, an increase of 51 percent from 255 MOUs during the same period in 2000, in addition to a 38 percent increase from 1999. Other analysts also report higher MOUs in 2001. Paul Kagan and Associates estimated MOUs of 410 in mid-2001, an increase of 22 percent from 335 in mid-2000. J.D. Powers & Associates estimated 422 MOUs, an increase of 32 percent from 320 a year earlier.
Average Revenue Per Unit
A widely-used economic metric for the CMRS industry is average monthly revenue per subscriber (often referred to as average revenue per unit, or ARPU). For the mobile telephone sector, ARPU, until recently, decreased almost continuously since CTIA began tracking it in 1987, going from a peak of $98.02 in December 1988 to a low of $39.43 in December 1998. However, since 1999, ARPU has begun increasing, rising to $47.37 in December 2001, a 20 percent increase over the last three years. This is true even though per-minute prices have been declining throughout this period. The recent ARPU increases might be due to a variety of factors, including increased usage offsetting per-minute price declines, as well as the adoption by wireless consumers of higher-priced calling plans.
Churn
Churn refers to the number of customers an operator loses over a given period of time. Mobile telephone operators usually express churn in terms of an average percent churn per month. For example, an operator might report an average monthly churn of 2 percent in a given fiscal quarter. In other words, on average, the operator lost 2 percent of its customers in each of the quarters three months. At this rate, the operator would lose 24 percent of its customers in a single year. Most carriers report churn rates between 1.5 percent and 3 percent per month. At current rates, more than 30 percent of subscribers change service providers each year.
Consistent with findings in the Sixth Report, customers indicated network quality and cost as the main reasons for changing providers. In a survey taken in the second quarter of 2001, roughly equal percentages of subscribers who switched carriers did so in search of better network quality (18.4 percent) or better monthly service price plans (17.4 percent). Another 12 percent wanted to take advantage of a sale or promotion.
Market Entry
To track the level of competition in the mobile telephony market, the Commission compiles a list of counties with some level of coverage by mobile telephone providers. This data is based on publicly available sources of information released by the operators such as news releases, filings with the SEC, coverage maps available on operators Internet sites, and network buildout notifications filed with the Commission.
There are several important caveats to note when considering these data. First, to be considered as covering a county, an operator need only be offering any service in a portion of that county. Second, multiple operators shown as covering the same county are not necessarily providing service to the same portion of that county. Consequently, some of the counties included in this analysis may have only a small amount of coverage from a particular provider. Third, the figures for POPs and land area in this analysis include all of the POPs and every square mile in a county considered to have coverage. Therefore, this analysis overstates the total coverage in terms of both geographic areas and populations covered.
On the other hand, this county-by-county analysis reflects a significant improvement in accuracy. In past editions of this report, the Commission provided summaries of estimated coverage by BTAs. Starting with the Fifth Report, the Commission decided to re-estimate and enhance these coverage maps using county boundaries in an attempt to provide a more precise picture of network deployments. Moreover, while the newer broadband PCS and digital SMR entrants have less complete networks, the original cellular licenses have extensive networks that provide almost complete coverage of the entire land mass of the continental United States. Cellular licensees were originally awarded a geographical area (CMA) as a license area, but they only retained that portion of the CMA where they had built out and expanded their wireless networks.
To date, 268 million people, or 94 percent of the total U.S. population, have three or more different operators (cellular, PCS, and/or digital SMR) offering mobile telephone service in the counties in which they live. However, these counties make up only 50 percent of the total land area of the United States, reflecting the nations uneven population distribution. On the other hand, the land area of these counties, 1.7 million square miles, is roughly 40 percent larger than the combined land area of the 15 members of the European Union (1.2 million square miles). In addition, over 229 million people, or 80 percent of the U.S. population, live in counties with five or more mobile telephone operators competing to offer service.
While growth in the percentage of the population covered by three or more providers has been small in the past year, the percentage growth of the population covered by seven or more providers has been significant. Sixty million people, or about 21 percent of the population, can now choose from among seven or more different mobile telephone operators providing service somewhere in their counties, roughly double the percentage from 2000.
Digital Deployment
Cellular, PCS, and digital SMR networks use the same basic design. All use a series of low-power transmitters to serve relatively small areas (cells), and all employ frequency reuse to maximize spectrum efficiency. In the past, cellular and SMR networks used an analog technology, while PCS networks were designed from the start to use a digital format. Digital technology provides better sound quality and increases spectral efficiency in comparison to analog technology. Increased capacity on digital networks has in turn permitted companies to offer calling plans with large buckets of relatively inexpensive minutes, free enhanced services such as voicemail and caller ID, and wireless data and mobile Internet offerings. From a customers perspective, digital service in the cellular band or SMR bands is virtually identical to digital service in the PCS band.
Digital technology is now dominant in the mobile telephone sector. Digital subscribers now make up approximately 80 percent of all wireless subscribers, up from 72 percent last year. During 2001, the number of customers subscribing to digital services climbed 30 percent, from approximately 79 million to 103 million. Approximately 26 million mobile telephony subscribers are analog only.
Over 85 percent of the subscribers of the six largest carriers are using digital service. All of Sprint PCSs, VoiceStreams, and Nextels subscribers are on digital plans, while 96 percent of AT&T Wirelesss, 84 percent of Cingular Wirelesss, and almost 75 percent of Verizon Wirelesss customers subscribe to digital calling plans. Even among the smaller, regional carriers, digital subscribership is widespread. Leap Wireless International Inc. (Leap) and Qwest Corp. are 100 percent digital, while ALLTEL, Dobson, US Cellular, and Rural Cellular Corp. (Rural Cellular) range from 62 to 74 percent. Western Wireless and CenturyTel trail with an approximately 30 percent digital subscriber base each, although each has shown rapid conversion to digital over the past year.
Coverage by Technology Type
Operators also continued to expand the footprints of their chosen digital technology in 2001. This drive has stemmed from operators with analog networks needing to improve capacity, increase their advanced service offerings, and provide compatibility for digital-based roaming partners, as well as from newer, all-digital network operators who need to expand their footprints to increase their competitiveness.
The four main digital technologies used in the United States are: Code Division Multiple Access (CDMA), Global System Mobile Communications (GSM), integrated Digital Enhanced Network (iDEN), and Time Division Multiple Access (TDMA).
TDMA is being phased out as its main advocates, AT&T Wireless and Cingular Wireless, have announced plans to overlay their existing TDMA networks with GSM/GPRS technology. Furthermore, the trade group that had represented TDMA technology announced in December 2001 that it was dissolving, as it had successfully served its mission.
AT&T Wireless still expects to use TDMA for many years, but as reported in the Sixth Report, the company announced plans to overlay GSM/GPRS on its TDMA network in order to improve its wireless data capabilities and enhance its migration to 3G technology. By the end of 2001, AT&T Wireless had rolled out GSM/GPRS to 45 percent of the POPs covered by its network. AT&T Wireless has also announced that it plans to deploy GSM/GPRS in the network that it recently acquired through the purchase of TeleCorp.
Cingular Wireless, which currently has a mix of TDMA (covering 70 percent of its POPs) and GSM (covering 30 percent of its POPs) networks, announced in October 2001 that it would overbuild its entire TDMA and remaining analog networks with GSM/GPRS. Cingular Wireless expects to have 50 percent of its POPs covered with GSM by the end of 2002 and the remainder covered by the end of 2003. Cingular Wireless will continue to provide TDMA service to its current customers, but it expects that many will upgrade to its GSM technology over time. Cingular Wireless said the national network upgrade will cost approximately $3 billion. And, as noted above, Cingular Wireless and AT&T Wireless have announced plans to build a GSM/GPRS network along 3,000 miles of interstate highways in a number of western and midwestern states.
As a result of these industry developments, this report no longer distinguishes between TDMA and GSM networks in its analysis of digital coverage, but considers the two as one migration path towards more advanced digital capabilities. We recognize that TDMA as currently deployed will continue to be used by millions of subscribers for a number of years.
Of the other four nationwide mobile telephone operators, Sprint PCS and Verizon Wireless use CDMA as their digital technology, VoiceStream uses GSM, and Nextel uses iDEN.
To date, 276 million people, or 97 percent of the total U.S. population, live in counties where operators offer digital mobile telephone service, using CDMA, TDMA/GSM, or iDEN technologies, or some combination of the three. These counties make up 70 percent of the total land area of the United States. To estimate the current levels of deployment of the three main digital mobile telephone technologies individually, the Commission has prepared maps of each technology which combine the network coverage of all of the relevant operators.
CDMA has been launched in at least some portion of counties containing 256 million people, or roughly 90 percent of the U.S. population, while TDMA/GSM has been launched in at least some portion of counties containing 265 million people, or almost 93 percent of the U.S. population. To date, digital SMR operators have launched iDEN-based service in at least some portion of counties containing over 245 million people, or approximately 86 percent of the U.S. population.
Pricing Data and Trends
Equity analysts and other industry observers typically describe wireless price competition in the United States as competitive, intense, and aggressive. While it is difficult to identify sources of information that track mobile telephone prices in a comprehensive manner, these claims are supported by a number of reports and other available data indicating that the cost of mobile telephony service has fallen since the Sixth Report, continuing the trend of the last several years.
According to one economic research and consulting firm, mobile telephony prices in the 25 largest U.S. cities declined roughly 7.3 percent in 2001, following a 6.9 percent decline in 2000. The average cost of monthly service which was calculated across four typical usage plans (30, 150, 300 and 600 minutes) dropped from $42.53 in December 1999 to $39.60 in December 2000 to $36.70 in December 2001. Of the four typical usage levels, the greatest price decline was for 600 minutes of airtime, down 11.7 percent, while usage at 150 and 300 minutes saw more modest reductions. In contrast, the monthly cost of 30 minutes of airtime increased 5.9 percent.
Another source of price information is the cellular telephone services component of the Consumer Price Index (Cellular CPI) produced by the United States Department of Labors Bureau of Labor Statistics (BLS). Cellular CPI data is published on a national basis only. During 2001, the Cellular CPI decreased by 5.5 percent while the overall CPI increased by 1.6 percent. In comparison, during the same period, the local telephone services component increased by 4.5 percent and the long distance telephone services component decreased by 1.8 percent. The Cellular CPI has declined almost 33 percent since the end of 1997 when BLS began tracking it.
As a third pricing indicator, some analysts believe average revenue per minute is a good proxy for mobile pricing. CTIAs survey indicates that the average revenue per minute of mobile telephone use fell 31 percent between 2000 and 2001. This is calculated by dividing the estimate of ARPU by the estimate of MOUs, yielding the revenue per minute that the carrier is receiving. Since 1994, average revenue per minute has fallen from $0.47 in December 1994 to $0.12 in December 2001, a decline of 74 percent.
Developments in Pricing Plans
The continued rollout of differentiated pricing plans indicates a competitive marketplace. In the mobile telephone sector, a single operator often tries a new and innovative pricing plan, and is later imitated by competitors if the plan proves to be successful. For example, many in the industry questioned AT&T Wirelesss wisdom when it introduced the first Digital One Rate (DOR) plan in May 1998. Today all of the nationwide operators offer a similar type of DOR pricing plan that allows customers to purchase a bucket of MOUs on a nationwide or nearly nationwide network without incurring roaming or long distance charges.
A more recent example of this was the extension by carriers of unlimited or virtually unlimited night or weekend minutes to their DOR plans. In January 2001, Cingular Wireless started the trend when it promoted the feature as part of its campaign, launched during the Super Bowl, to promote its new brand (Cingular Wireless). Virtually every other national carrier (and several of the regional carriers) followed suit over the course of the year.
Roaming
All mobile calling plans specify a calling area such as a particular metropolitan area, the East Coast, the carriers entire network, or the entire United States within which the subscriber can make a call without additional charges. When a subscriber exits this area, or roams, he or she incurs additional charges for each minute of use. Sometimes these roaming charges go directly to the subscribers carrier, and sometimes the charges are used to pay a carrier other than the subscribers, on whose network the subscriber was roaming. This source of revenue is particularly important to some rural and smaller carriers.
CTIA reported a slight rise in roaming revenues for the mobile telephony industry in 2001, from $3.88 billion at the end of 2000 to $3.94 billion in 2001, reversing the slight decline reported from 1999 to 2000. Roaming revenues as a percentage of total service revenue have been declining for years, from 11 percent reported in December 1997 survey to 5.6 percent in the June 2001 survey. CTIA attributes this decline to the growth of DOR plans and the extended calling areas established by many of the larger carriers.
Prepaid Service
In the United States, most mobile telephony subscribers pay their phone bills after they have incurred charges (known as postpaid service). Prepaid service, in contrast, requires customers to pay for a fixed amount of minutes prior to making calls. Although prepaid plans are considered a good way to increase penetration rates, certain carriers have reevaluated their business plans with respect to prepaid subscribers, given their typically lower ARPUs and higher churn rates in comparison to postpaid subscribers. Analysts estimate that approximately 8 to 10 percent of U.S. wireless phone users subscribed to prepaid plans in 2001, roughly unchanged from what we found in the Sixth Report.
At the end of the third quarter of 2001, Verizon Wirelesss subscriber base was approximately 6 percent prepaid, AT&T Wirelesss and Cingular Wirelesss somewhat less than 10 percent, and VoiceStreams was much higher, at 27 percent.
In place of a traditional prepaid offering, Sprint PCS has its Automatic Spending Limit (ASL) program (now called Clear Pay). Sprint PCS introduced ASL in late 1999 in an attempt to target an under-penetrated segment of the population, the sub-prime credit category. Depending on a potential customers credit profile, he or she is offered either an account with no spending limit and no deposit, or is designated an ASL customer. ASL customers have the same choice of phones, contracts, and promotions as non-ASL customers, but they are subject to spending limits or a deposit, or both. Analysts claim that ASL is more attractive than prepaid to the credit-challenged, since postpaid plan rates are lower, the phone selection is greater, and the promotions are better than those available to prepaid subscribers. Approximately 29 percent of Sprint PCSs subscribers are now ASL, and about 50 percent of Sprint PCSs gross subscriber additions in the fourth quarter of 2001 were ASL.
Wireless/Wireline Competition
Once solely a business tool, wireless phones are now a mass-market consumer device. The overall wireless penetration rate (defined as the number of wireless subscribers divided by the total U.S. population) in the United States is now at 45 percent. In addition, one study found that 64.3 million households, or 61 percent of all U.S. households, had at least one wireless phone. Another study found that 58 percent of Americans 12 and older now own a mobile phone.
Wireless Substitution
While firm data is difficult to come by, analysts estimate that 3 to 5 percent of wireless customers use their wireless phones as their only phone. Though these estimates indicate that relatively few wireless customers have cut the cord in the sense of canceling their subscription to wireline telephone service, there is growing evidence that consumers are substituting wireless service for traditional wireline communications. One analyst claimed that 20 percent of residential customers had replaced some wireline phone usage with wireless, and that 11 percent had replaced a significant percentage. According to a USA Today/CNN/Gallop poll, almost one in five mobile telephony users regard their wireless phone as their primary phone.
Several local carriers have attributed declining access line growth rates in part to substitution by wireless. The number of residential access lines served by BellSouth, SBC, and Verizon dropped by almost 3 percent during 2001, more than 2.5 million lines. A top executive at Verizon attributed the decline in the number of access lines served by his company, the first in the companys history, in part to the shift to wireless phones. One study estimated that, by the end of 2001, wireless had displaced 10 million access lines, primarily by consumers choosing wireless over installing additional access lines.
A number of payphone providers claim wireless use is significantly decreasing payphone profits. In January 2002, Verizon began a trial program, which is still running, in which payphone users would pay a cheaper, per-minute rate for local calls, instead of a higher rate for a call of unlimited length. Verizon introduced the program as a competitive market response to the wireless challenge. In February 2001, BellSouth announced that it was exiting the payphone business in part due to business lost to wireless phones.
Wireless plans are substituting for traditional wireline long distance as well. Many of the calling plans offered by the nationwide wireless carriers include free nationwide long distance. One analyst claims that 20 percent of AT&Ts customers, or 5 million people, have replaced some wireline long distance usage with wireless. AT&T itself attributed the decline in its long distance calling volumes and revenues in part to wireless substitution. Cingular Wireless advertises its nationwide calling plans with the slogan, Never Pay Long Distance Again.
Wireless Alternatives
An increasing number of mobile wireless carriers offer service plans designed to compete directly with wireline local telephone service. For example, Leap, through its Cricket subsidiary, now offers its Around Town Phone mobile telephone service in 40 markets in 20 states. At the end of 2001, Leap had more than 1.1 million customers, having added more than 900,000 during 2001. Leaps service allows subscribers to make unlimited local calls and receive calls from anywhere in the world for one flat rate of $30 per month. Roaming outside the local area is not available, and customers pay extra for long distance calls. Leap states that, on average, its customers use 1,150 minutes a month, a figure which the company claims is comparable to typical landline usage. According to the company, about 32 percent of their customers use their Cricket phones as their only phone, and more than 80 percent use their Cricket phones at home.
Other companies offering unlimited local calling plans include: US Cellular in Tennessee; ALLTEL in Arizona, New Mexico, North Carolina, Nebraska, and Arkansas; MetroPCS in California, Florida, and Georgia; NorthCoast PCS in Ohio; First Cellular of Southern Illinois (First Cellular) in Illinois, Rural Cellular in Vermont, New Hampshire, New York, Kansas, Minnesota, Maine, North Dakota, South Dakota, and Wisconsin; Midwest Wireless in Minnesota; and Ntelos Inc. (Ntelos) in Virginia.
For around $50, many carriers offer regional or national calling plans with 500 or more anytime minutes and over 3000 night and weekends minutes. In November 2001, VoiceStream began offering for a limited time virtually unlimited regional calling plans, its Neighborhood rate plans. For $50 to $60 per month, subscribers get a calling plan that includes 3,000 minutes (usable anytime) and the ability to roam across several states on VoiceStreams network without extra fees. Long distance from VoiceStreams network to anywhere within those states is included as well. Subscribers on VoiceStreams Northeast Neighborhood plan, for example, can call anywhere on VoiceStreams East Coast network from southern Maine to northern Virginia without incurring roaming charges.
Geographical Comparisons: Urban vs. Rural
Since the release of the Sixth Report, the Commission has attempted to obtain a better understanding of the state of competition below the national level, in particular in rural areas. The primary difficulty for the Commission in this task is the lack of data specific to rural markets. At its Public Forum held in February 2002, the Wireless Telecommunications Bureau asked participants, among other questions, to address this issue. Several participants offered their opinions on these questions, which are discussed in more detail below.
Rural-Specific Data
Many of the analysts at the forum agreed that there was a lack of rural-specific data, as well as data on sub-national trends generally, and some suggested that the Commission should consider collecting data on local markets. Other participants, while recognizing the value of such data, expressed concerns about the costs and burdens of imposing new reporting requirements on carriers to obtain such information.
Definition of Rural
As the Department of Education stated in 1994, few issues bedevil analysts and planners . . . more than the question of what actually constitutes rural. The difficulties that this question brings are evidenced by the fact that within the federal government, the term rural has been defined in many different ways. The variety of definitions reflects the numerous purposes for which the definitions are used throughout the federal government. The Commission has used RSAs as a proxy for rural areas for certain purposes, such as its CMRS spectrum cap proceeding, stating that other market designations used by the Commission for CMRS, such as [EAs], combine urbanized and rural areas, while MSAs and RSAs are defined expressly to distinguish between rural and urban areas. Some participants in the forum questioned whether the urban / rural distinction is currently meaningful in the context of mobile telephony.
While the Commission does not have a statutory definition of what constitutes a rural area, in an attempt to gain some insight into the competitive differences within the different geographic areas of the United States, this report analyzes market entry data using a variety of criteria, including EA nodal versus EA non-nodal counties, CMAs, and population density. This section of the report also discusses data presented at the forum on the cost of mobile telephony service in rural areas.
Rural Rollout
EA Nodal vs. Non-Nodal Counties
Each EA consists of one or more counties that are Economic Nodes and the surrounding counties that are economically related to it. An EA may have more than one economic node. The counties that are economic nodes are metropolitan areas or similar areas that serve as the EAs center(s) of economic activity. As a proxy for urban and rural geographic areas, we have looked at counties which make up economic nodes, i.e. nodal counties, versus those counties that do not make up economic nodes, i.e. non-nodal counties. In comparing those two sets of counties, we find the non-nodal counties have an average of 3.1 mobile competitors, while the nodal counties have an average of 5.5 competitors.
MSAs vs. RSAs
In considering what constitutes a rural area, Ken Johnson, the Director of Legislative and Regulatory at RTG, stated, with reservations, that RSAs are a good place to start. In comparing competitive entry in counties that make up RSAs compared to counties that make up MSAs, we find that RSA counties have an average of 3.3 mobile competitors, while MSAs have an average of 5.7 competitors.
Population Density
Two forum participants, Johnson of RTG and Rubin of Western Wireless, indicated that population density is a significant element of defining rural. Johnson suggested that 100 people per square mile might be a reasonable place to make an urban versus rural split. In comparing competitive entry in counties with population densities of 100 persons per square mile or less to those with densities greater than 100, we find that the less densely populated counties have an average of 3.2 mobile competitors, while the more densely populated counties have an average of 5.5 competitors.
Summary
These three exercises of defining urban versus rural (EA Nodal vs. Non-Nodal Counties/MSAs vs. RSAs/Population Density) provide remarkably similar estimates of the average number of competitors in urban versus rural markets. On average, rural markets have slightly more than three providers, while urban markets have between five and six providers.
Rural Pricing
Econ One conducted an analysis in October 2001 of mobile telephony pricing in rural versus urban markets. Econ One reviewed the pricing plans of 25 markets it considered to be rural. The average population of the rural markets was 95,000, compared to the average population of 4.4 million in the top 25 U.S. cities. Econ One found that there was virtually no difference in the average monthly charge for wireless service between the two groups. The charge for the top 25 markets was $37.39, while the charge for rural markets was slightly less at $36.34, a difference of 2.9 percent. Further, Mahla noted that Econ Ones study showed one difference between rural and urban markets in that there was a much wider spread in pricing among rural markets as compared to urban markets use. Specifically, the difference between the least and the most expensive pricing plans was 8.3 percent in the top 25 U.S. cities versus 59 percent in the cities in the randomly-sampled RSAs used in the Econ One analysis. Although these results are interesting, Mahla cautioned about drawing a tremendous number of conclusions about [the study] because weve only done one data point.
Addington of RCA also presented some pricing data specific to the rural wireless company he manages in Illinois. First Cellular offers a number of plans, including an unlimited local calling plan. Addington claims that the average price per minute of First Cellular has declined from $0.79 in 1995 to $0.10 in 2001, dropping 70 percent from 1999 to 2001 alone. First Cellulars most popular plan for 2002 will average $0.04 per minute.
There appear to be differences in the number of market participants between our proxies for rural and urban wireless markets. Specifically, the proxies showed that there are, on the average, at least two more competitors in urban markets than in rural markets. However, at the public forum, Dobsons and RCAs representatives contended that it is not clear those differences are meaningful in terms of competition. According to Stephens of Dobson, competition exists very heavily throughout small market America. Addington of RCA agreed: Competition is real and . . . its out there. Some of the participants claimed that that reason for this may be the competitive pressures created by the very existence of nationwide operators. As explained by Stephens of Dobson:
In most respects, small market carriers like Dobson are subject to the same competitive pressures as the large market carriers. Because of national advertising and the Internet, consumers all over the country are educated about nationwide rate plans and services enabled by digital technology and the prices of wireless handsets. No matter where they live, customers expect and demand the diversity of services at competitive rates.
Addington of RCA experienced similar challenges in his role as CEO of First Cellular: If you want to measure [competition], come with me on a sales call, sit with me at a customers location, I'll offer my unlimited [rate plan]. AT&T will come in and offer their one rate [plan]. Sprint will come in and offer something else -- free phones, free this -- let me tell you, thats competition. Econ Ones pricing study found evidence of this nationwide pricing effect, in that its study showed no differences in service costs between rural and urban markets.
Other Competitors: Resellers and Satellite Operatorstc \l 3 "seq level2 \r4 \*arabic4.seq level3 \h \r0 Other Competitors\: Nextel Communications, Other Specialized Mobile Radio Operators, Resellers, and Satellite Operators"
This section discusses two other types of operators that are competing in the mobile telephone segment: resellers and satellite operators.
Resellers
Resellers offer service to consumers by purchasing airtime at wholesale rates from facilities-based providers and reselling it at retail prices. According to information provided to the FCC in its ongoing local competition and broadband data gathering program, the resale sector accounts for approximately 5 percent of all mobile telephone subscribers. WorldCom claims to be the largest reseller of post-paid wireless services in the United States with nearly 2 million customers; however, in June 2002, the company announced that it had decided to exit the resale business.
Recently, a new version of reseller, referred to as a mobile virtual network operator, or MVNO, has begun to appear in this country after experiencing some success in Europe and Asia. While some contend that MVNO is just a new catch phrase for reseller, others argue that MVNO arrangements differ from traditional resale in significant ways. For example, advocates contend that MVNOs, by focusing on brand development, have greater control over subscribers and will be better able to penetrate certain niche markets than a national company concerned with large market segments.
Sprint PCSs arrangement with Richard Bransons Virgin Group, LLC (Virgin) is one example of this. In October 2001, Sprint PCS and Virgin announced the formation of a joint venture, Virgin Mobile USA (Virgin Mobile). The venture plans to offer a new prepaid service to be marketed under the Virgin Mobile brand name using Sprint PCSs network. To fund the venture, Sprint PCS will contribute up to $150 million, the majority of which will be in the form of services and the remainder in cash, while Virgin will contribute up to $150 million in cash. Virgin Mobile plans to target the 15 to 30 year-old market in the United States.
Satellite Operators
As of year-end 2001, two carriers were providing mobile satellite services (MSS) in the United States, Globalstar Telecommunications LTD. (Globalstar) and Iridium Satellite LLC. (Iridium Satellite). Another company, New ICO Global Communications Limited (New ICO), has announced plans to initiate service in 2003.
The following is a brief description of how satellite telephony works. An outbound communication from a MSS mobile phone is transmitted up to the satellite, using service link frequencies. The satellite then retransmits the signal back down to the earth, using feeder link frequencies, to a gateway ground station, where the call is interconnected with terrestrial networks, such as the PSTN. The return or inbound communication works the exact opposite way. The communication from the terrestrial network is transmitted from the gateway earth station up to the satellite, and then retransmitted by the satellite back down to the MSS mobile telephone. In systems with inter-satellite links, the inbound and outbound communications may be transmitted through multiple satellites in order to complete the connection between the originating mobile telephone and the receiving gateway ground station.
The following is a description of the products and services offered by Globalstar and Iridium Satellite as of year-end 2001.
Globalstar. In February 2000, Globalstar initiated commercial mobile voice service via satellite. As of year-end 2001, the company had about 66,000 subscribers and $6.4 million in revenue over the course of the year. Globalstar offers global voice and data services, including SMS. The companys mobile satellite phone, GSP-1600, is manufactured by QUALCOMM, Inc. and retails for approximately $1000. Prices per month for service plans range from $24.95 for five minutes to $399.95 for 500 minutes. Additional minutes cost between $0.89 and $1.49, depending on the service plan chosen. Globalstar has 15 distributors of its products and services in the United States.
As reported in the Sixth Report, Globalstar was experiencing financial difficulties in 2000, and these difficulties continued in 2002. In the companys third quarter 2001 report filed with the SEC, Globalstar notified investors that it planned to seek voluntary Chapter 11 bankruptcy protection in order to restructure financial commitments to its creditors. On February 15, 2002, Globalstar sought Chapter 11 bankruptcy protection, despite cutting costs and doubling its subscriber base during 2001. In its bankruptcy filing, the company claims assets of $570 million and $46 million in cash reserves. However, Globalstar has liabilities of more than $3.3 billion, and observers believe that the company will need additional cash to emerge from Chapter 11 bankruptcy protection.
Iridium Satellite. Iridium Satellite, the company that emerged from bankruptcy in December 2000, initiated commercial service at the end of March 2001. The original Iridium LLC company began commercial service on November 1, 1998. Iridium Satellite has a network of 66 low-earth orbit satellites operating in the Ka-band, and seven in-orbit backup satellites. In addition to satellites, the company uses terrestrial gateways to connect users to terrestrial wireless and wireline networks. In December 2000, Iridium Satellite signed a two-year contract with the Department of Defense for at least 20,000 users at a cost of $3 million per month.
Iridium Satellite offers voice and data services throughout the world, and, in the United States, voice service costs $1.00 to $1.50 per minute for airtime. There are two types of handsets available from Motorola that work on Iridium Satellites network. The Satellite Series 9500 phone sells for $950 and is capable of transmitting data at 2.4 kbps. The Satellite Series 9505 phone is a similar, yet smaller phone, and sells for $1,495. In addition, the company offers two data services: Dial-Up Data and Direct Internet Data. Dial-Up Data offers customers speeds up to 2.4 kbps, while Direct Internet Data is slightly faster at 10 kbps. Iridium Satellite also offers SMS, allowing customers to send and receive messages up to 120 characters long.
International Developments
International Investments
Foreign Investment in U.S. Mobile Operators. Strategic foreign investment in U.S. mobile telecommunications companies remained relatively stable during 2001. As noted in the Sixth Report, the merger of VoiceStream and Powertel with Germanys Deutsche Telekom closed in May 2001, and Japans NTT DoCoMo, Inc. (NTT DoCoMo) acquired an approximate 16 percent stake in AT&T Wireless in November 2000. In connection with AT&T Wirelesss acquisition of former network affiliate TeleCorp, NTT DoCoMo exercised its preemptive rights by purchasing additional shares of AT&T Wireless to maintain its approximate 16 percent equity interest in the company after the acquisition was completed.
U.S. Investment in Foreign Mobile Operators. Beginning in 2000, U.S. mobile telephone operators have been seeking to reduce their accumulated portfolio of investments in foreign mobile telephone companies, particularly in Europe. As noted in the Sixth Report, SBC sold off its ownership stakes in two European mobile operators in 2000. This divestiture trend continued into 2001 and 2002.
In the third quarter of 2001, BellSouth closed on the sale of its 24.5 percent interest in SkyCell, a mobile operator in India. New Delhi-based Bharti Enterprises bought out BellSouths stake in SkyCell for a reported $21.5 million.
In August 2001, BellSouth announced its intention to dispose of its mobile phone investments in Europe and Israel in order to focus primarily on its holdings in Latin America along with its domestic business. To this end, BellSouth announced on January 30, 2002 that it was exercising its option to exchange its entire 22.51 percent stake in German mobile operator E-Plus for a 9.42 percent stake in Dutch operator Royal KPN N.V. (KPN), which acquired the remaining 77.49 percent stake in E-Plus in December 1999. BellSouth and KPN closed on their agreement to swap BellSouths E-Plus shares for a stake in KPN on March 13, 2002. BellSouth then disposed of its 9.42 percent stake in KPN by selling its shares in the Dutch company on March 19, 2002, the first day BellSouth was free to sell the shares. BellSouth is reported to have raised 1.23 billion euros ($1.1 billion) from the sale of its shares in KPN, and announced it will record an after-tax gain of approximately $850 million as a result of the share swap and subsequent disposal.
BellSouth has also signaled its desire to sell its stake in Danish mobile operator Sonafon, which is majority owned by Norwegian carrier Telenor with BellSouth as its partner. While BellSouth has yet to find a buyer for Sonafon, its decision to dispose of its European wireless assets did affect bidder participation in Denmarks auction of 3G licenses in September 2001. In particular, Sonafon did not bid in the sealed-bid auction because Telenor and BellSouth were unable to reach an agreement to let their jointly owned subsidiary submit a bid. Telenor submitted a bid on its own, but as the lowest of five bids for four licenses the bid was unsuccessful.
In July 2001 the Atlantic West consortium of Verizon Communications and AT&T Wireless reached an agreement to sell the U.S. operators combined 49 percent stake in Czech mobile operator EuroTel for nearly $1.5 billion to Czech operator Cesky Telecom, which owns the remaining 51 percent stake in EuroTel. However, Cesky Telecom later reopened the negotiations, arguing that market conditions had deteriorated and cutting the offered price to $1.1 billion. The negotiations were abandoned in November 2001 after the parties failed to reach an agreement on the purchase price and Atlantic West rejected Cesky Telecoms latest offer.
In March 2002, SBC was reported to be seeking an exit from its investment in Belgian operator Belgacom, through which SBC has an interest in Belgian mobile operator Proximus. To this end, the report indicated, SBC had pressed for an IPO of the Belgian operator, a majority of whose shares are owned by the Belgian government. An IPO would enable SBC to cash in its stake in Belgacom by selling shares on the stock market. Moreover, because Belgacom is one of the few incumbent European operators with practically no debt, SBC reportedly believes that Belgacom could be valued attractively through an IPO.
Like BellSouth, SBC has regarded its European holdings as non-core for more than a year. In addition to its stake in Belgacom, SBC also has investments in Denmarks TDC (formerly Teledanmark) and Frances Segetel, both of which own mobile operators in their respective home countries. SBC is reportedly willing to sell its stakes in both companies if it can obtain what it views as a reasonable price.
While BellSouth has expressed its intention to maintain a strong presence in Latin America, other U.S. companies have taken steps to reduce their Latin American holdings. For example, Sprint and Leap Wireless have agreed to exit their investment in Mexican mobile operator Pegaso PCS (Pegaso). In March 2002, Spanish mobile operator Telefonica Moviles announced that it had signed a letter of intent to acquire 65 percent of Pegaso and had agreed to buy out the interests of U.S. investors Sprint and Leap Wireless for $70.5 million in cash. Pegaso is the only foreign mobile operator in which Sprint and Leap Wireless had held an ownership interest.
SBC has reorganized its Latin American interests. SBC entered 2002 with an 8 percent interest in America Movil, a wireless provider in Mexico and Latin America that was spun off from Mexican operator Telmex in 2001, and a 12.8 percent interest in Telecom Americas, a joint venture among America Movil, SBC, and Bell Canada with investments in several wireless operators in Brazil. In January 2002, as part of a deal in which SBC purchased America Movils 50 percent interest in Cellular Communications of Puerto Rico, America Movil acquired an option to purchase SBCs stake in Telecom Americas within three years. According to SBC, this represents a forward sale of its interest in Telecom Americas.
Furthermore, Verizon announced on March 28, 2002 that it had cut its ownership stake in Argentine wireless communications company CTI Holdings S.A. (CTI) in order reduce its financial exposure to Argentinas economy. In particular, Verizon reduced its ownership stake in CTI from 65 percent to 48 percent by transferring 5.5 million shares in CTI to a newly created trust for CTI employees. The trust will distribute the shares to a program to be developed by CTI to give employees an equity-based stake in the company. In addition to reducing its ownership stake, Verizon said it is reducing its representation on the CTI Board of Directors from a maximum of five directors on the nine-member body to a maximum of four. According to Verizon, CTI has been under significant financial pressure as the value of the Argentine peso has continued to drop and Argentinas economy has deteriorated. CTI recently announced its decision to suspend principal and interest payments on its debt, and retained a financial adviser to assist in restructuring its approximately $1 billion of U.S.-dollar denominated debt, about 90 percent of which is non-recourse to Verizon. As a result of Verizons actions, CTI will no longer be consolidated into Verizons financial statements.
In an exception to the foregoing divestiture trend, Western Wireless International Corporation (WWI), a subsidiary of Western Wireless Corporation, announced in July 2001 that it had completed the acquisition from Vodafone of tele.ring Telekom Service GmbH (tele.ring), a mobile and fixed-line operator in Austria. Under the terms of the transaction, a new subsidiary of WWI purchased all of the outstanding shares of tele.ring for a nominal consideration, and an affiliate of Vodafone Group Plc agreed to provide tele.ring with a 250 million euro term loan for operating capital.
WWI also has the option to acquire, also for a nominal consideration, the Vodafone entity that acquired one of the six Austrian 3G licenses awarded through an auction in November 2000. However, WWI decided not to submit a bid for one of Irelands four 3G licenses through Meteor, the Irish mobile operator that is majority owned by WWI. Just three operators applied for the four Irish 3G licenses, which are to be awarded through comparative selection (beauty contest) with a nominal license fee. In announcing the decision not to bid, WWI cited the investment requirements for license fees and rapid infrastructure rollout, and indicated Meteor would better serve its customers by continuing its focus and investment on the delivery of its GSM and 2.5G voice and data services.
In July 2001 AT&T Wireless agreed to buy out British Telecommunications Plcs entire interest in a partnership between the two companies that held a stake in Canadian mobile operator Rogers Wireless for $379 million. The all-cash transaction increased AT&T Wirelesss stake in the Canadian operator to 33.3 percent from 19 percent.
International Comparisons
Mobile Growth and Penetration. As anticipated in the Sixth Report, a significant trend in the mobile telephone markets of Western European countries in 2001 was the sharp slowdown in the growth of mobile subscribership. Mobile subscribers in Western Europe totaled 288.8 million on January 1, 2002, up 45.3 million, or approximately 15.5 percent, from the beginning of 2001. This rate of increase in subscribership, while healthy by the standards of most industry sectors, is significantly below the record annual growth of nearly 90 million new subscribers, or roughly 58 percent, set in 2000. Mobile penetration in Western Europe averaged 74.3 percent at the end of 2001, up from 62.5 percent at the end of 2000.
There remain significant differences in the penetration rates of individual Western European countries, but the range of penetration rates narrowed slightly as compared with the situation at the end of 2000. In addition, the rankings of certain countries shifted significantly in the course of 2001. Luxembourg finished 2001 with the highest penetration rate in Western Europe at more than 90 percent, moving up from the sixth highest penetration rate at the end of 2000. Italy and Portugal followed closely behind with penetration rates of 88 percent and 86 percent, respectively. Norway and Sweden, which had, respectively, the first and second highest penetration rates at the end of 2000, found themselves in the middle tier of Western European countries at the end of 2001. For the second year in a row, France had Western Europes lowest penetration rate with 62 percent of the population using a mobile phone at the end of 2001, up from 50 percent at the end of 2000.
Despite the sharp slowdown in Western Europes mobile subscriber growth, mobile subscribership grew at a roughly comparable pace in Western Europe and the United States in 2001. As a result, while Western Europes mobile markets continued to achieve higher penetration levels than the U.S. mobile market in 2001, the margin of difference between the U.S. penetration level and the West European average remained roughly the same as it was at the end of 2000. As noted previously, the U.S. mobile penetration rate was approximately 45 percent at the end of 2001, as compared with the West European average of 74.3 percent. The ratio of Western Europes average mobile penetration rate to the U.S. penetration rate was therefore 1.7 at the end of 2001, as compared with 1.6 at the end of 2000.
In common with Western Europe, the Asian-Pacific countries of Japan, Australia, and New Zealand also experienced a slowdown in mobile subscriber growth in 2001. As was the case at the end of 2000, these three countries are continuing to achieve mobile penetration levels that are higher than the U.S. penetration level, but lower than the Western European average. At the end of 2001, mobile penetration rates were 54 percent in Japan, 61.6 percent in Australia and 63.5 percent in New Zealand. In contrast, mobile penetration levels in several smaller Asian-Pacific countries, including Taiwan and Hong Kong, have exceeded the Western European average in the past two years. Taiwan claimed a mobile penetration rate of 96 percent at the end of 2001, followed by Hong Kong at 81 percent.
A word of caution is in order, however, in comparing mobile penetration levels in different countries. As explained in the Sixth Report, mobile penetration rates tend to become inflated in countries with a high share of prepaid service users in their mobile subscriber base. Prepaid users can easily switch service providers, and those who do switch are likely to be double counted for a period of time if the countrys wireless operators are not diligent about removing inactive prepaid users from their subscriber base. The Sixth Report discussed the impact of this problem in the context of assessing European mobile subscriber figures, but subsequent reports suggest that the problem may be even more severe in certain Asian countries such as Taiwan, Hong Kong, and Singapore.
According to the Wall Street Journal, many Taiwanese, especially the young, own several prepaid phones, and carriers count each phone sold as a subscriber. As a result, while Taiwan government figures put its countrys mobile penetration rate at more than 90 percent, analysts estimates range anywhere from 70 to 85 percent. In Singapore, the mobile penetration rate dropped from nearly 80 percent to just under 70 percent in the last quarter of 2001 after wireless operators made downward adjustments in their prepaid subscriber numbers in an aggressive effort to weed out inactive customers from their customer base.
As first noted in the Sixth Report, analysts believe that prepaid was the primary driver of the rapid penetration gains in Western Europe over the past couple of years. Although some European mobile operators such as Vodafone have revised their subscriber counts downward to adjust for inactive prepaid subscribers, some analysts believe that subscriber figures reported by European mobile operators continue to overstate the actual number of mobile subscribers and, accordingly, mobile penetration levels. For example, after adjusting the UKs and Germanys reported mobile penetration levels for estimates of inactivity levels in each of these countries, Merrill Lynch analysts found that mobile penetration in 2001 dropped from 79 percent to 72 percent in the UK and from 68 percent to 62 percent in Germany. Even with this adjustment, Merrill Lynch analysts believe that the remaining disparity between penetration in Western Europe and the United States may still be somewhat overstated because U.S. accounting practices may in some instances be more conservative than some of the methodologies used to calculate inactivity levels at some of the Western European carriers.
Mobile Usage. As in previous years, U.S. subscribers continued to use their mobile phones more intensively than European subscribers in 2001, with the difference between average monthly usage per subscriber in the United States and Western Europe widening still further. According to one estimate, MOUs in Western Europe averaged 130 minutes per subscriber per month in 2001, while in the U.S. per subscriber MOUs averaged 338. By comparison, the same source estimates that in 2000 MOUs in the U.S. were, at 248, only slightly more than double the West European average that year of 119. Average U.S. mobile usage is also higher than usage levels in the Asia Pacific. Hong Kong comes the closest to the U.S. level with estimated average MOUs of 300 minutes. At 177 minutes, Japans estimated average MOUs are lower than the U.S. level but higher than the Western European average.
Mobile Pricing and Competition. The Sixth Report observed that, while a higher percentage of the population in Western Europe currently subscribes to mobile telephone service, certain categories of users may be paying less for mobile telephone service in the United States. This conclusion continues to be supported by two different measures of the cost of mobile service. The first measure involves estimating the cost of a defined basket of mobile services, and the second measure focuses on the average revenue per minute of mobile voice service.
The Sixth Report cited international comparisons of the cost of a basket of mobile services based on a pair of basket definitions developed by Teligen in cooperation with the Organization for Economic Cooperation and Development (OECD). The Teligen/OECD basket definitions represent two usage profiles, one for high-volume users, which are designated business users, and the other for lower volume users, which are designated residential or personal users. In either case, only outgoing mobile calls are included in the basket. The prices of the services included in each basket are taken from a selected calling plan of a single operator, and the two baskets are updated on a quarterly basis with the latest available prices for the calling plan.
As related in the Sixth Report, the Teligen/OECD basket estimates for the quarter ending February 1, 2001 suggested that the cost of the business basket in the United States was well below the Western European average, whereas the cost of the personal basket was above the Western European average. Updated Teligen/OECD mobile basket estimates for February 2002 continue to tell the same story. In addition, a comparison of the Teligen/OECD mobile basket estimates for the United States with the average for selected Asian-Pacific countries specifically, Japan, South Korea, Australia, and New Zealand reveals the same pattern as the U.S.-Western Europe comparison. In particular, U.S. mobile subscribers appear to pay less for the business basket, but more for the residential basket, than their Asian-Pacific counterparts.
There are a number of drawbacks to the mobile basket approach to international mobile pricing comparisons in the Teligen/OECD study. We mention two here. First, the mobile baskets in the study include only outgoing mobile calls. The exclusion of incoming calls reflects the predominance of the calling party pays (CPP) principle in OECD member countries. Whereas mobile subscribers in the United States and Canada typically pay both to make and receive calls, in Western Europe and parts of the Asia Pacific the party who initiates the call to a mobile phone pays for it. Accordingly, the cost of calls made from fixed wireline networks to mobile subscribers is reflected in the Teligen/OECD PSTN baskets for wireline telephone service rather than the mobile baskets. As a consequence, however, the mobile baskets for the United States and Canada are not fully comparable with those for other OECD member countries. Second, average monthly usage per subscriber in the U.S. (385 minutes) is higher than the usage in the Teligen/OECD high-volume business basket, which is defined to include 315 minutes per month. Indeed, bucket plans with 250-400 peak minutes and very large quantities of night and weekend minutes appear to be increasingly popular with residential subscribers and are targeted in carrier promotions and advertising to that group.
As an alternative to the Teligen/OECD mobile baskets, in this report we also consider Merrill Lynchs estimates of revenue per minute (RPM) for selected mobile markets in Western Europe, the Asia Pacific, and the United States and Canada (see Appendix C, Table 10). Merrill Lynch calculates RPM by dividing ARPU by MOUs. Unlike the Teligen/OECD mobile baskets, RPM reflects the pricing and volume of calls both to and from mobile phones. More specifically, in the United States and Canada mobile service revenue includes the monthly service charges and other usage fees paid by mobile subscribers for incoming and outgoing calls. In the countries of Western Europe and the Asia Pacific, service revenue includes the service charges and fees paid by mobile subscribers for outgoing calls, while for incoming calls the principal revenue component of RPM is the wholesale interconnection rate the mobile operator charges the originating operator to terminate traffic on the mobile operators network. Merrill Lynch analysts believe RPM is a good proxy for mobile pricing.
At $0.16, the United States RPM is lower than the RPM of all other countries in the group except Canada ($0.13) and New Zealand ($0.15). The U.S. level compares with an average of $0.22 for the Western European countries and $0.21 for the Asian-Pacific countries. Japans RPM, at $0.31, is nearly double the U.S. level and the highest in the group.
The relatively low level of RPM in the U.S. mobile market may in part reflect differences in the competitive environment for outgoing mobile calls. In CPP and non-CPP countries alike, mobile competition exerts pressure on mobile operators to keep the price of outgoing calls paid for by the mobile subscriber at levels sufficiently low to attract and retain customers. Most Western European governments have licensed three to four GSM operators in an effort to stimulate competition in mobile service markets. Nevertheless, comments by some analysts suggest that competition in Western European mobile markets has tended to be less than robust. For example, one group of analysts asserts that outgoing tariffs remain high in Europe, and characterizes the competitive environment there as being more benign than anticipated.
Analysts also point to differences in the competitive environment of individual European mobile markets. For example, equity analysts typically describe pricing competition in the UKs mobile market as being relatively intense and aggressive compared to other Western European markets. However, in a September 2001 review of mobile competition in the United Kingdom, British telecommunications regulator Oftel concluded that the market for services purchased by mobile subscribers is prospectively competitive but not yet effectively competitive.
Some analysts have also explicitly compared the United States and Western Europe with regard to mobile competition. These analysts agree that the U.S. mobile market is more competitive than most mobile markets in Europe, and that this is one of the primary reasons for lower RPM in the United States.
Apart from a less intense competitive environment for outgoing calls, analysts explain that the higher levels of RPM observed in Western Europe reflect the CPP environment in which European wireless carriers operate and the impact of CPP in raising the cost of calls to mobile phones. In this regard, given that neither Canada nor the United States has made it mandatory for mobile operators to implement CPP, it may be significant that RPM is lower in both the United States and Canada than in all the countries in which CPP is mandatory except New Zealand.
For fixed-to-mobile calls in Western Europe, the originating wireline carrier pays an interconnection charge to terminate traffic on the mobile operators network, and separately bills the charges incurred by its own customers based on published per-minute rates for fixed-to-mobile calls. British telecommunications regulator Oftel argues in a September 2001 report that there is little incentive for mobile operators in a CPP environment to reduce the interconnection rates they charge for terminating calls to their networks. Oftel stresses that callers have no choice but to terminate their calls on the mobile network chosen by the mobile subscriber, while mobile subscribers generally choose their network operator based primarily on the cost of making calls, not on what it costs others to call them. Oftel concludes that competitive pressures do not currently exert sufficient constraints on termination charges nor are they likely to do so in the near future. Other foreign regulators in CPP jurisdictions share Oftels view that CPP may confer a form of market power on mobile carriers with regard to the setting of mobile termination charges, including the European Commission and the Australian Competition and Consumer Commission. In contrast, because U.S. and Canadian mobile subscribers pay both to make and receive calls, mobile competition in these two countries is equally effective in constraining the price of incoming and outgoing mobile services.
While the foregoing discussion has been limited to an explanation of pricing differences in the West European and North American mobile markets, a group of Merrill Lynch analysts argue that the same considerations may explain why Japans RPM is nearly double the U.S. level. In particular, Merrill Lynchs analysts state their belief that pricing differences with the U.S. largely stem from a relatively less intensive competitive environment for outgoing calls in Japan. They further argue that two additional differentiating factors may be that Japan has implemented calling party pays and that its fixed-to-mobile interconnection rates are the highest in the world at $0.27 per minute.
Mobile Data
Introduction
Domestic Developments
For purposes of this report, the Commission considers mobile data service to be the delivery of non-voice information to a mobile device. Two-way mobile data services include the ability not only to receive non-voice information on an end-user device but to send it from an end-user device to the PSTN as well using wireless technology. During the past year, the mobile data industry continued to grow and to evolve. Estimates of the number of mobile Internet users at the end of 2001 range from approximately 8 to 10 million, up from 2 to 2.5 million at the end of 2000. Since the publication of the Sixth Report, several mobile data operators have begun upgrading their networks with advanced wireless service technologies, cdma2000 1xRTT and GPRS, to allow for faster data access speeds and more advanced services. As of March 2002, four nationwide mobile telephone operators were offering mobile Internet access service for mobile telephone handsets, PDAs, and/or laptops at speeds generally ranging from 25-60 kbps, with maximum bursting rates of 144 kbps for at least one carrier, in at least some portion of U.S. counties covering approximately 181 million people. Hence, nearly 63 percent of the U.S. population could have access to the Internet while mobile at speeds close or comparable to those on a 56 kbps wireline dial-up modem. Most of the nationwide U.S. carriers have plans to make advanced wireless services available in some form throughout most of their networks by the end of this year. Furthermore, competition within the mobile data sector is developing successfully, as evidenced by the multitude of dynamic services, service packages, and pricing plans available to consumers from a variety of providers.
The three general categories of mobile data providers and their corresponding devices discussed in this report are: (1) mobile telephone operators offering services primarily on mobile telephone handsets, (2) providers of mobile data access to handheld PDA devices and laptop computers, and (3) paging carriers offering services on pagers and two-way messaging devices. The first mobile data section, Industry Structure and Performance, discusses the key developments and events related to these three categories of carriers and devices that occurred during 2001 and early 2002. During the past year, the types of mobile data services available on mobile data devices have become increasingly similar. With the exception of traditional one-way pagers, most mobile data devices offer some form of text messaging, web browsing, and e-mail access. Therefore, this years report provides details on the major mobile data services available to consumers in a separate section following the discussion of the three categories of mobile data providers and devices.
Not only has the mobile data industry witnessed a further convergence of data services across devices during the past year, but a convergence of voice and data services as well. The defining feature that, in the past, divided mobile telephones from PDAs was whether the devices offered voice capabilities; mobile telephones did, while PDAs did not. Furthermore, mobile telephones offered voice capabilities as their primary feature and had limited data capabilities, while handheld devices offered more advanced mobile data features but little or no voice ability. During the past year, the distinction between mobile telephones and PDAs began to blur with the emergence of smartphones. As discussed below, several of the major mobile data providers have released smartphone devices that combine the organizational and data-centric features of PDAs with the voice capabilities of mobile telephones. One catalyst for the convergence of mobile voice and mobile data during the past year has been the deployment of GPRS and 1xRTT, which, by increasing data transfer speeds, allow and increase the demand for advanced mobile data services.
While U.S. mobile carriers have the flexibility to deploy advanced wireless, including 3G, technologies using their existing CMRS spectrum, the Commission has continued its efforts during the past year to allocate additional spectrum suitable for offering advanced wireless, including 3G, services. As part of these efforts, the Commission released in August 2001 a Further Notice of Proposed Rulemaking, which explores the possible use of additional spectrum bands for 3G services beyond the initial bands proposed in the Notice of Proposed Rulemaking released in January 2001 and discussed in the Sixth Report. Specifically, the 3G FNPRM proposed the use and reallocation of the following bands for advanced wireless services: 1910-1930 MHz, 1990-2025 MHz, 2150-2160 MHz, 2165-2200 MHz, and 2390-2400 MHz. These bands are currently used for the following services: Mobile Satellite Service, Unlicensed PCS, Amateur Radio Service, and Multipoint Distribution Service (MDS).
International Developments
Mobile telephone carriers in other countries have continued to deploy next generation mobile data services since the writing of the Sixth Report. One of the most notable international developments was the launch of 3G service using WCDMA technology by NTT DoCoMo in Japan in October 2001. As mentioned in the Sixth Report, NTT DoCoMo had once planned to offer 3G service by May 2001, but in April 2001, delayed the launch until October. NTT DoCoMos 3G service, which the company calls FOMA (Freedom of Multimedia Access), allows users to access the Internet at speeds of up to 384 kbps, transmit and download video clips, and send large data files quickly. However, FOMAs adoption rate has been lower than expected due to problems such as limited coverage, low battery life, and the high cost of handsets. As of the end of April 2002, NTT DoCoMo had approximately 105,000 FOMA customers, compared to 32.6 million subscribers to its popular 2G mobile data service, i-mode, which is used by nearly 80 percent of DoCoMos voice subscribers.
While other countries around the world have delayed their WCDMA launches until at least 2003, carriers in many countries are currently offering service using advanced wireless technologies such as GPRS and cdma2000 1X. GPRS service is available in most western European countries, while cdma2000 1X has been launched by SK Telecom Company (SK Telecom) in South Korea. In South Korea, cdma 1X services have proven to be fairly popular thus far. As of March 2002, SK Telecom had over 5 million 1xRTT subscribers, up from approximately 2 million in October 2001. Furthermore, SK Telecoms wireless Internet revenue rose 55 percent during the first quarter of 2002 and represented 6.6 percent of the companys total revenue, up from 4.1 percent during the previous quarter. On the other hand, the adoption rate of GPRS service has been lower than expected in many countries, and the popularity of GPRS service does not match the level of popularity that SMS has achieved around the world. One analyst estimates there were only one million GPRS customers in all of Europe at the end of 2001, due to problems with handset availability as well as relatively low speeds and limited content offered by carriers. SMS, on the other hand, continues to be a widely-used mobile data application abroad. Approximately 30 billion SMS messages were sent worldwide during December 2001, more than double the 14 billion sent during December 2000.
Industry Structure and Performance
Mobile Telephone Sector
The Fifth and Sixth Reports discussed in depth the various next-generation technology standards in development and which of these technologies mobile telephone carriers were planning to use to migrate from their existing 2G technologies in order to offer mobile data services at higher speeds.
Since the writing of the Sixth Report, several developments have occurred on the road to 3G. During 2001, five of the nationwide telephone operators in the United States initiated service on newly deployed advanced wireless networks. The two largest mobile telephone carriers that currently use CDMA as their 2G technology, Verizon Wireless and Sprint PCS, announced at the end of 2001 the availability of cdma2000 1X as the first phase of their 3G technology rollout. In January 2002, Verizon Wireless initiated service on its high-speed data network, and the service, called Express Network, was available in approximately 20 percent of Verizon Wirelesss network footprint in the Northeast, San Francisco Bay Area, and Salt Lake City as of March 2002. Verizon Wirelesss cdma2000 1XRTT network transmits data at speeds up to 144 kbps; however, the company states that the average customer download speed is 40-60 kbps. Sprint PCS is upgrading its network and expects to rollout cdma2000 1X wireless data services, which it expects will be capable of speeds up to 144 kbps, nationwide in mid-year 2002. Both carriers plan to deploy cdma2000 1xEV, Verizon Wireless in 2002 for data only and Sprint PCS in 2004 for data and voice. Cdma2000 1xEV is expected to boost network data speeds to at least 2.4 Mbps. In addition, Nextels iDEN network transmits data at speeds of 15 to 20 kbps for mobile handsets and 30 kbps for laptops and PDAs. Nextel has not yet made a commitment to a 3G technology.
The major TDMA/GSM carriers in the United States, AT&T Wireless, VoiceStream, and Cingular Wireless, are taking a different migration path to 3G technology. All three carriers began deploying GPRS technology during 2001 on their nationwide networks. Data speeds on the carriers GPRS networks range from 25 to 56 kbps. AT&T Wireless, which currently uses TDMA as its 2G technology, plans to deploy GPRS to all of its markets by the end of 2002. After rolling out GPRS, these three carriers have announced that they will migrate to and deploy EDGE as an intermediate technology between GPRS and WCDMA. EDGE and WCDMA are expected to raise network speeds to 384 kbps and 2 Mbps, respectively. Cingular Wireless is reportedly planning to build out EDGE to all of its markets during 2003 and 2004. AT&T Wireless has announced that it expects to migrate to EDGE during 2002 and to WCDMA beginning in 2003.
Handheld Devices
PDAs or handheld devices began as electronic organizers containing personal information management (PIM) functions, such as an address book, calendar, and to-do list, that could be synched with PIM software on a users desktop computer. Most handheld devices also include the ability to download additional software programs that do not come pre-loaded on the device. While PDAs still contain these core PIM and software features, handhelds are being repositioned as wireless communication devices instead of simple organizers. All of the PDA models introduced by the major manufacturers during 2001 and early 2002 including Palm, Inc. (Palm), Handspring, Inc. (Handspring), Sony, Compaq Computer Corporation (Compaq), Casio, Inc. (Casio), Hewlett-Packard (HP), and Research in Motion, Inc. (RIM) allowed users some method of connecting to the Internet wirelessly.
According to one analyst, 6.6 million PDAs were sold in the United States during 2001, a 20 percent increase from the 5.5 million sold during 2000. According to another analyst, U.S. sales of handheld devices totaled 2.5 million during the second and third quarters of 2001. Palm devices accounted for 39.1 percent of that total, Handspring PDAs accounted for 19.6 percent, while RIM devices accounted for 7.5 percent, and the three major Pocket PC manufacturers (Compaq, Casio, and HP) accounted for a combined 23.6 percent.
There are four different methods by which PDAs can connect to the Internet while mobile. First, some PDAs, including RIM devices and the Palm VII and i705, have built-in, or embedded, wireless modems. These devices therefore do not require an additional attachment in order to connect to the Internet wirelessly. The Palm VII and i705 connect to Cingular Wirelesss Mobitex dedicated data network, while some of RIMs devices use Cingular Wirelesss network and others use Motient Corporations (Motient) dedicated data network. These devices can access the Internet at speeds of between 8.6 and 14.4 kbps, which are comparable to the speeds offered by mobile telephone carriers for their 2G mobile data services, but lower than the speeds offered on these carriers GPRS and 1xRTT networks, which range from 25-60 kbps.
A second method by which many PDAs connect to the Internet while mobile is with the attachment of a wireless modem card. The major manufacturers of wireless modem cards include Novatel Wireless, Sierra Wireless, and Enfora, and each modem card is usually made to work with a specific PDA model. Most wireless modem cards connect to Cellular Digital Packet Data (CDPD) networks operated by mobile telephone carriers such as AT&T Wireless and Verizon Wireless and give users Internet access speeds of around 19.2 kbps. However, modem cards that connect to GPRS and 1xRTT networks and can provide users with higher mobile Internet access speeds started to become available in early 2002. In January 2002, Verizon Wireless and Sierra Wireless announced the commercial availability of the AirCard 555 wireless modem card, which connects laptops and PDAs to Verizon Wirelesss cdma2000 1xRTT network and gives users Internet access speeds of 40-60 kbps. VoiceStream sells a wireless modem card for laptops and PocketPC PDAs that connects to GSM/GPRS networks and allows users to receive Internet access speeds of up to 56 kbps in areas where GPRS service is available.
A third way in which PDAs can connect to the Internet is with the attachment of an Internet-enabled mobile phone. With this piggybacking method, many of the factors associated with the Internet connection, including speed, reliability, and service pricing, are dependent upon the mobile telephone carrier providing the Internet access. Handspring offers a modified version of piggybacking method of mobile Internet access. All of its Visor PDA models include a Springboard where users can attach various modules, including two devices, called the VisorPhone and Sprint PCS DigitalLink, that allow a Visor to function as an Internet-ready mobile telephone, giving users both a mobile voice and data connection.
Smartphones
During the past year, the wireless industry witnessed the further convergence of the mobile telephone and PDA sectors, marked by the emergence of smartphones, which provide a fourth method of PDA mobile Internet access. Smartphones combine the voice and data capabilities of mobile telephones with the PIM functions of PDAs. While smartphones constituted less than one percent of all mobile phone sales during 2001, one analyst has stated that the line between PDAs and cellphones ha[s] blurred. Compared to traditional mobile handsets, smartphones generally have larger screens, more advanced graphics and processing capabilities, more memory, a more user-friendly operating system, some form of keypad, and the ability to synch data with and download software from a desktop computer. Smartphones also integrate traditional mobile telephone phone number storage and access with a PDAs address book so users are not required to store numbers in two different places.
In the fall of 2001, Kyocera and Samsung released PalmOS-based smartphones that operate on the CDMA networks of Sprint PCS and Verizon Wireless. And in February 2002, Handspring released its smartphone model, the Treo, which operates on GSM networks. In mid-2002 Handspring is scheduled to release a software upgrade that will allow the Treo to work on GPRS networks, giving users faster Internet access speeds of up to 56 kbps. Handspring also announced in March 2002 that it is developing with Sprint PCS another version of the Treo that will work on Sprint PCSs CDMA network, including its 1xRTT network, expected to launch in mid-2002. RIM announced the availability of a new smartphone in February 2002, the BlackBerry 5810, that allows users to make voice calls over GSM networks as well as access RIMs BlackBerry e-mail service. In February 2002, Microsoft and HP unveiled the HP Jornada 928, which incorporates Microsofts newly-designed operating system for mobile telephones, Pocket PC 2002 Phone Edition. The Jornada 928, which will connect to GSM/GPRS networks, integrates voice capabilities with the data communication functions and Microsoft software found on other Pocket PC devices. And in the spring of 2002, Verizon Wireless released a smartphone manufactured by Audiovox, called Thera, which runs Pocket PC 2002 and connects to Verizon Wirelesss cdma2000 1xRTT network.
Operating Systems
While there are several PDA device manufacturers, most PDAs use one of two major operating systems: Palms PalmOS or Microsofts Pocket PC. In addition to producing approximately 50 percent of all PDAs sold, Palm also licenses its PalmOS operating system to other handheld device and mobile telephone handset manufacturers, including Handspring, Sony, Samsung, and Kyocera. Approximately 72 percent of all PDAs sold in the United States during 2001 run PalmOS. In the fall of 2001, Palm began creating a separate subsidiary, now called PalmSource, Inc, for its PalmOS product. One of the major sources of demand for PalmOS products has been the multitude of software and applications developed by third party companies that can be downloaded on to PalmOS devices at little or no additional expense. For example, one company, DataViz, has developed software called Documents To Go that allows PalmOS device users to open and edit documents created in Microsoft Word and Excel, and to view documents created in Microsoft PowerPoint. The second major PDA operating system, Pocket PC, is similar to Windows, and all Pocket PC devices include PDA versions of most of the Microsoft Office desktop software applications, including Outlook, Word, Excel, PowerPoint, and Internet Explorer. In October 2001, Microsoft released an updated version of its PDA operating system, Pocket PC 2002, and several Pocket PC device manufacturers, including Compaq, Casio, and HP, simultaneously released new PDA models that run the new operating system. The improvements in mobile access to e-mail and corporate servers allowed by Pocket PC 2002 are discussed further in Section II.B.3.d., E-mail and Corporate Server Access, infra. According to one analyst, worldwide shipments of Windows CE and Pocket PC PDAs increased 120 percent during 2001.
Paging Sector
The paging mobile data subsector, as described herein, includes carriers that use paging and narrowband PCS spectrum to offer traditional one-way paging services as well as two-way advanced messaging services, which are discussed in more detail below. Arch Wireless Communications, Inc. (Arch Wireless) and Metrocall, Inc. (Metrocall) are the largest paging carriers and had a combined total of 13.7 million units in service at the end of 2001. The Commission estimates there were 18 million paging units in service as of mid-2001. Other major paging carriers include SkyTel Communications, Inc. (SkyTel) and WebLink Wireless, Inc. (WebLink). In addition to these major carriers, there are hundreds of smaller paging operators who compete with these larger carriers.
During 2001, paging carriers endured financial difficulties as a result of the continuing decline in demand for traditional one-way paging services, which has long constituted the bulk of these carriers revenue, as well as intense competition from other mobile data providers in the market for more advanced mobile data services. As mentioned in the Sixth Report, TSR Wireless, Inc. filed for bankruptcy in December 2000, and WebLink filed for Chapter 11 bankruptcy in May 2001. In October 2001, WebLink filed a restructuring plan detailing how the company intended to emerge from bankruptcy. In December 2001, Arch Wireless and its subsidiaries filed for Chapter 11 bankruptcy protection, and in January 2002 filed a plan of reorganization with the bankruptcy court. Finally, Metrocall filed a Chapter 11 bankruptcy petition for reorganization in June 2002.
Paging carriers have continued to compete with each other and with other mobile data providers by offering advanced, two-way mobile data services and by upgrading their networks to allow for such services. During 2001, SkyTel upgraded its ReFLEX network to version 2.7, and Arch announced that it was planning to upgrade its network to version 2.7 during 2002. This upgrade reduces network latency, or the time it takes to transfer a message through the network, thereby allowing chat and instant messaging applications among subscribers. Paging carriers claim that the upgraded 2.7 networks are powerful enough to compete with the data networks operated by Cingular Wireless and Motient, through which many handheld devices connect to the wireless Internet.
On December 5, 2001, the Commission completed the auction of over 15,000 20- and 40-kilohertz paging licenses in the 35 MHz, 43 MHz, 152 MHz, 454 MHz, 929 MHz, and 931 MHz bands. Most licenses were auctioned on an EA geographic basis, while the 929 and 931 MHz band licenses were auctioned by MEAs. These licenses were encumbered by the operations of existing paging carriers using site licenses. In this auction, 182 bidders won 5,323 licenses, and net high bids totaled $12.9 million. The fact that many of the licenses remained unsold probably reflects the fact that the operations of existing licensees were in some cases so extensive that the white space available was not sufficient to attract bidders. Moreover, capital market constraints facing the paging industry also likely influenced the limited demand for certain licenses.
Mobile Data Services
Paging
Traditional paging service consists of one-way data communications sent to a mobile device that alerts the user when it arrives. The communication could consist of a phone number for the user to call, a short message, or an information update. Other mobile data providers in addition to paging carriers offer paging services. For instance, most digital mobile telephone handsets include a paging component or Caller ID feature that allows users to view the phone number of someone who has called them. While paging carriers have faced competition with these types of features offered by mobile telephone carriers, traditional paging devices are generally less expensive and, in some cases, receive better in-building coverage than mobile telephone handsets. The more advanced two-way mobile data services offered by paging carriers, such as two-way messaging and web and e-mail access, are discussed below in their respective subsections.
SMS and Instant Messaging
SMS provides the ability for users to send and receive text messages to and from mobile handsets with maximum message length ranging from 120 to 500 characters. SMS also can be used to deliver a wide range of information to mobile users, including stock prices, sport scores, news headlines, weather reports, and horoscopes. Worldwide, SMS has become increasingly popular, growing to 250 billion messages sent over wireless networks worldwide in 2001.
Two-way SMS was introduced in the United States in May 2000 when VoiceStream began to offer the service. As of year-end 2001, the six nationwide mobile telephone carriers, as well as handheld providers and some smaller mobile telephone carriers, were offering SMS. At the end of 2001, AT&T Wireless became the first carrier to offer cross-carrier network SMS capabilities. A short time later, most of the nationwide carriers announced similar plans. Mobile telephone carriers that offer cross-carrier SMS have reported increased traffic since implementing this capability on their networks. AT&T Wireless stated that it has experienced 29 percent SMS growth from November 2001 through the end of March 2002, while Verizon has reported SMS traffic up to 4 million messages per day.
Pricing plans for SMS offered by mobile telephone carriers vary; however, with most carriers, charges are usually incurred in addition to monthly voice and/or wireless web service plan fees. Providers typically charge a fixed monthly fee for a set number of messages, although subscribers can also pay per message. For example, Verizon Wireless offers customers a plan for $2.99 per month for 100 messages and a plan for $7.99 per month for 600 messages. With both plans, additional sent messages are $0.10 and received messages are $0.02. Both Cingular Wireless and Nextel offer SMS la carte or bundled with their wireless web plans. Nextel offers a plan for $5 that allows unlimited messages, or users can receive 300 messages as part of the companys wireless Internet package.
In addition to SMS, some mobile telephone carriers offer instant messaging (IM) services for mobile devices. Instant messaging services, such as AOL Instant Messenger (AIM) and MSN Messenger, enable users to send and receive messages within a community of users, creating a chat-style atmosphere, whereas SMS is communication between two individuals. AT&T Wireless, Sprint PCS, and VoiceStream offer AIM to their mobile customers, and Cingular Wireless offers MSN Messenger to its mobile customers. Users of the Palm i705 also receive always on access to AIM. From their mobile devices, AIM users are able to tell whether or not someone from their buddy list a list of other AIM users with whom the initial user communicates is online. In addition, AIM users can communicate with their buddies regardless of whether the buddies are on a PC or on a mobile phone. We note that many in the industry have raised concerns about competitiveness and access issues in instant messaging.
Web Content
Using their existing and next generation networks, at least seven major mobile telephone service providers currently offer text-based wireless web services via mobile telephone handsets at speeds ranging from approximately 14.4 kbps on 2G networks to 60 kbps on advanced wireless networks. During 2001, mobile telephone providers expanded their data service offerings as they began migrating their networks to higher speed technologies. In addition to offering wireless web service on mobile telephone handsets, several carriers offer wireless Internet connections via wireless modem cards for PDAs and laptop computers as well.
As explained in the Sixth Report, mobile telephone service providers offer wireless web services that enable customers to surf web sites for news, stock quotes, traffic reports, weather forecasts, movie listings, shopping, and other text-based information. To deliver wireless web content to wireless handset users, carriers continue to employ the walled garden approach, which means all carriers currently restrict the content users can access via wireless handsets on their networks. However, customers who connect to the Internet via a mobile telephone or wireless modem card attached to a laptop are able to access the full content of the web.
Many PDAs have the ability to access almost the entire content of the web. For example, Pocket PC PDAs, which include a PDA version of Microsofts Internet Explorer web browser, are able to access any web site designed in HTML or WAP formats. Handspring PDAs and Treo smartphones, as well as certain PalmOS-based devices, can access web content with Handsprings Blazer browser, which supports web pages written in HTML, cHTML, or WAP. While many PDAs have the potential to access web content with their browsing software, they still require a subscription to a wireless Internet Service Provider (WISP) in order to connect to the wireless Internet. WISPs such as EarthLink, Inc. (EarthLink) and GoAmerica offer monthly wireless Internet access subscriptions for numerous handhelds, including Pocket PC and PalmOS devices, RIM BlackBerry PDAs, and two-way pagers such as the Motorola Talkabout T900. While RIMs BlackBerry service focuses on the delivery of e-mail instead of web content, BlackBerry users can access web content while mobile through services offered by third party WISPs such as EarthLink, GoAmerica, Oracle Mobile, and WolfeTech.
Palm i705 and VII users must access the Internet with a monthly subscription to Palms Palm.Net wireless Internet access service. Palm.Net subscribers do not have access to the entire web, but browse the web with Palms web clipping applications, which allow users to view text-based information from over 600 web-clipped Internet sites that have been specially designed for Palm.Net.
For wireless web service on 2G networks, most mobile telephone carriers charge an additional monthly fee beyond voice service ranging from $6 to $14. In addition, Internet access minutes are deducted from the customers minutes included in their monthly service plans. If customers exceed their allotted monthly minutes, they must pay per-minute airtime charges for wireless web or voice service.
For wireless web service on advanced wireless networks, users typically receive a bucket of MB to download depending on their plan, and additional MB downloaded beyond the plan limit cost extra. Prices for this type of high-speed data plan vary by provider, since some providers bundle other services with their plans. For example, VoiceStream allows customers to add-on wireless web service to any voice plan for $2.99 for one MB of data and $10 per extra MB. Verizon Wireless also allows customers to add-on high-speed wireless web service with unlimited usage for $30. AT&T Wireless offers two types of rate plans. Customers can add data services to existing voice plans starting at $29.99 for 5 MB of downloaded data. The company also offers plans that bundle high-speed wireless web service with voice services. Bundled voice and data plans start at $39.99 for 250 voice minutes and one MB of downloaded data.
E-mail and Corporate Server Access
As workers become increasingly more mobile and remote, the ability for employees outside the office to access e-mail messages and files stored electronically on corporate servers is likely to become an increasingly more important mobile data application. Analysts claim that giving employees mobile access to e-mail as well as to data and applications stored on corporate servers are two of the most important uses of PDAs in the enterprise market. One recent survey of U.S. firms that plan to deploy mobile systems for employees found that 83 percent listed mobile access to e-mail as the top priority, and another recent survey of 400 large corporations found that 47 percent are deploying wireless e-mail access.
Different types of mobile e-mail access services are currently available on different devices from various providers. Some mobile carriers and devices allow users to access e-mail messages from a personalized account provided by the carrier, such as username@carrier.com. Some mobile e-mail services allow users to access existing web-based, or POP3, e-mail accounts provided by web portals such as Yahoo or MSN. The most advanced mobile e-mail services give users direct access to their existing corporate or office-based e-mail accounts. Some mobile e-mail services are pushed or always-on, meaning users will receive their messages whenever their device is turned on, while other e-mail services are pulled and require users to dial-up periodically in order to receive their messages.
The pioneer provider of mobile access to corporate e-mail accounts has been RIM with its BlackBerry service. BlackBerry allows users to receive pushed e-mail messages automatically from an existing corporate e-mail account on one of RIMs mobile devices. About 289,000 people in North America have subscribed to BlackBerry service since 1999, and more than 13,000 North American organizations have integrated BlackBerry into their office e-mail systems.
While the e-mail services available from mobile telephone carriers on mobile telephone handsets vary, most carriers offer the ability to send and receive messages from a personalized carrier account and from a POP3 account. For example, AT&T Wireless offers its voice subscribers e-mail access with its PocketNet Plus plan for an additional $6.99 per month beyond voice service. E-mail subscribers receive a personalized AT&T Wireless PocketNet account and can access existing Yahoo, AOL, or AT&T WorldNet e-mail accounts. They can send, receive, and forward messages and Microsoft Word or text document attachments. VoiceStreams newly-introduced iStream WirelessInbox service allows customers to access their corporate Microsoft Outlook or Lotus Notes-based e-mail accounts, as well as POP3 e-mail accounts. Users can send, receive, reply to, delete, and forward messages. The service can be accessed from a Motorola P280 GPRS handset, a Pocket PC PDA, or a laptop computer (using either the P280 handset or the G100 wireless modem card for a connection).
The Palm i705 allows users to receive pushed e-mail messages from up to eight different accounts, including a Microsoft Outlook-based corporate e-mail account, a Palm.net account, an EarthLink account, and POP3 accounts such as Yahoo. Unlimited Internet access, including access to e-mail, the web, and IM, costs $39.99 per month, or $34.99 per month with a one-year commitment. The device vibrates or flashes when new messages arrive.
In addition to offering the ability to access corporate e-mail accounts, some mobile data providers offer a related service, the ability to access electronic files stored on a corporate server from a mobile device. Microsoft became a leading facilitator of this service with the release of its Pocket PC 2002 operating system in October 2001 and its Pocket PC 2002 Phone Edition smartphone operating system in February 2002. Both operating system editions allow users of Pocket PC 2002 devices to establish a secure virtual private network (VPN) connection over the wireless Internet to retrieve e-mail messages and files that are stored on corporate servers.
Many mobile data companies offer customized mobile access products directly to business customers. For example, GoAmerica sells a service to enterprise customers called Mobile Office that allows their employees to access proprietary corporate data applications with wireless-enabled PDAs, including the Palm i705. In January 2002, Arch Wireless began offering its Enterprise Solution product to businesses. The product can reportedly give a businesss mobile workforce secure, real-time access to firewall-protected files, e-mail, calendar functions, and enterprise applications on a variety of wireless devices.
Location-Based Services
The Commissions Enhanced 911 rules (E911) provide that starting on October 1, 2001, wireless carriers were required to begin a phase-in of automatic location identification (ALI) for 911 calls upon request by public safety answering points (PSAPs). Carriers have announced plans for complying with these requirements, called E911 Phase II, but generally at later dates than set by the rules. The Commission has granted waivers allowing delays in initial deployment by the major national wireless carriers, while setting more specific, detailed deployment benchmarks than in the original rules and continuing to target complete deployment by the end of 2005. Similar waiver requests from smaller carriers are under consideration. In addition, several matters concerning compliance with the E911 Phase II requirements have been investigated by the Enforcement Bureau.
Wireless carriers may comply with the ALI requirement using any of several location technologies, or combinations of technologies. For example, carriers may employ network-based or handset-based technologies, or hybrid technologies that require upgrades to both handsets and carrier networks. Currently, wireless carriers plan to deploy three primary location technologies, depending upon the carriers air interface technology. Nationwide CDMA carriers Sprint PCS and Verizon Wireless and iDEN carrier Nextel plan to employ Assisted GPS (A-GPS), a hybrid technology that requires handsets upgraded to include Global Positioning System (GPS) location capability and assistance from network components. For their GSM networks, AT&T Wireless, Cingular Wireless, and VoiceStream are planning to deploy a hybrid technology called Enhanced Observed Time Difference of Arrival (E-OTD) that requires handsets with E-OTD software plus added network equipment and upgrades to network software. In addition, some carriers are deploying network-based technologies. These network-based ALI solutions do not require changes to handsets. For its TDMA networks, Cingular has indicated that it will deploy a network-based solution and has entered a consent decree with the Commission whereby it will deploy its E911 solution in accordance with specific benchmarks. AT&T Wireless is currently in consent decree negotiations with the Enforcement Bureau relating to a similar issue.
Phase II E911 deployment began in the fall of 2001 in the state of Rhode Island and in individual counties in Illinois and Indiana. Sprint PCS began distributing ALI-capable handsets in October 2001, and reports that, as of the end of 2001, it had sold over 120,000 handsets with A-GPS capability. Verizon Wireless began selling similar A-GPS handsets in December 2001. Sprint PCS has committed to selling 100 percent A-GPS handsets by the end of this year. Verizon Wireless has committed to selling 50 percent of its handsets with A-GPS capabilities beginning in the second quarter of 2003, ramping up to 100 percent by the end of that year. The three largest carriers using GSM have committed to begin selling EOTD handsets this fall and plan to have 100 percent of their new handsets be EOTD capable by the summer of 2003.
In addition to E911, ALI can be used for a variety of other location-based services such as driving directions, mobile yellow pages, and the location of retailers, restaurants, or movie theaters. Application service providers are currently developing software that will enable a range of location-based services and can be tailored to a customers needs based upon their location. For example, AirFlash, Inc. is an application service provider that develops software that plots the location of businesses, hotels and restaurants. The software also allows the user to share the information with others via e-mail.
Carriers abilities to obtain and transmit precise location information in fulfillment of the Commissions E911 rules trigger privacy considerations. In 1999, Congress adopted the Wireless Communications and Public Safety Act (911 Act) to encourage the use of wireless services and to promote public safety by providing protection to users location information and specifying the conditions for the release of such information. Specifically, Section 5 of the 911 Act amended Section 222 of the Communications Act that governs carriers use or disclosure of customer proprietary network information (CPNI). Under the 911 Act, the disclosure or use of wireless location information without the express prior authorization of the customer is restricted, except in specified emergency situations to respond to a wireless users emergency call or in the transmission of automatic crash data.
In September 2000, Ericsson, Motorola, and Nokia founded the Location Interoperability Forum, whose purpose is to define, develop, and promote a common and ubiquitous location services solution. The Forum announced a draft protocol in December 2001 to define a common interface for the exchange of location information between location-based applications and the wireless networks. This proposed standard is intended to promote rapid introduction of location-based services worldwide. Companies have also entered into a number of partnerships to develop location-based services. For example, MapInfo, Inc. and Siemens have partnered to enable wireless carriers to deliver personalized Internet services based on a customers current or intended location.
Short Range Data Transmissions
While these services are not CMRS and hence are beyond the scope of this report, we mention them here briefly because of their increasing presence in the wireless data market. Short-range data transmission is device-to-device communication over short distances, typically via unlicensed spectrum. The three main short-range data transmission technologies are infrared, Bluetooth, and Wireless Fidelity (WiFi). Infrared, a well-established technology, is currently used in some PDAs to allow users to transfer data between two devices. Infrared is also the technology commonly used in remote controls and requires line-of-sight transmission. Bluetooth enables multipoint, broadcasting applications, and WiFi enables devices to connect to wireless local area networks (WLAN).
Bluetooth. Bluetooth is a technology used to establish wireless connectivity between electronic devices that are up to 10 meters apart. Bluetooth allows users to send signals and transfer data among numerous electronic devices, thus creating a personal area network (PAN). Bluetooth uses unlicensed spectrum in the 2.4 GHz band and transmits data at speeds close to one Mbps. Bluetooth also uses frequency hopping spread spectrum techniques to provide enhanced communications performance and an initial level of transmission security.
As mentioned in the Fifth Report, Bluetooth is widely backed by major players in the wireless industry, including Ericsson, Intel Corp., International Business Machines Corp. (IBM), Nokia, Toshiba, 3Com Corp., Lucent, Microsoft, and Motorola. As a result of industry cooperation, analysts forecast a large market for Bluetooth products. For example, Frost & Sullivan estimates there will be more than one billion Bluetooth-enabled devices shipped by 2007, generating $318 billion. Cahners In-Stat Group predicts that 780 million chip-set units will be shipped in 2005.
WiFi. Another wireless networking technology sharing the 2.4 GHz frequency band with Bluetooth is the Institute of Electrical and Electronics Engineers (IEEE) 802.11b standard, also called WiFi. The 802.11b standard is used to connect devices to WLANs, and allows a maximum throughput of 11 Mbps. Analysts have made several predictions about the growth of the WLAN market and WiFi. Frost & Sullivan predicts that WLAN industry revenues will reach $884 million by 2002, compared to $415 million in revenues forecast in 1999. The DellOro Group expects the WiFi market to grow by 35 percent in 2002. Gartner Group estimates 95 percent of notebook computers will be 802.11b-enabled by 2005.
The technology is being used in a number of WLAN settings, such as college campuses, business parks, office buildings, and even private houses. It is also being implemented by a number of vendors in public places such as airports, hotels and Starbucks stores to give users of WiFi-enabled notebook computers, handheld devices, and smartphones wireless Internet access anywhere inside those locations. For example, Wayport, a broadband service provider, has installed WiFi networks in nine airports, 3,500 hotel conference rooms, and 800 other WiFi access points or hot spots. In September 2001, Wayport signed an agreement with IPass, a global provider of network access to ISPs, to provide IPass subscribers Internet access via Wayports WiFi networks in airports and hotels around the U.S.
Boingo Wireless (Boingo), a WiFi service provider, also offers wireless broadband Internet access in popular venues such as major hotels, airports, and coffee shops across the nation. Boingo integrates WiFi hot spots from various providers to deliver broadband Internet service to its customers. As of May 2002, Boingo had was offering WiFi broadband Internet access in nearly 600 hot spots across the United States. The company plans to be connected to over 2,000 hot spots by the end of 2002.
On May 11, 2001, the Commission amended Part 15 of its rules for spread spectrum devices and proposed the following changes to systems operating in the 2.4 GHz band: revise rules for frequency hopping spread spectrum systems; eliminate the processing gain requirement for direct sequence spread spectrum systems; and allow digital transmission technologies to operate pursuant to the same rules as spread spectrum systems.
Telemetry and Telematics
Telemetry and telematics both involve the use of wireless technology to transfer data between systems and devices. Wireless telemetry is the monitoring of mobile or fixed equipment in a remote location. The most common example of wireless telemetry is the remote monitoring of utility meters by utility and energy companies, called automatic meter reading (AMR). With telematics systems, a person in a remote location can access information using various wireless technologies. Telematics is most often used to describe vehicle navigation systems, such as OnStar, where drivers and passengers employ GPS technology to obtain directions, track their location, and obtain assistance when a vehicle is in an accident.
Location-based services first appeared in vehicles as navigational devices using GPS technology to determine the vehicles location. However, OnStar, a wholly owned subsidiary of General Motors, Inc. (GM) formed in 1996, employs both GPS technology and terrestrial wireless networks. The basic, original OnStar service connects drivers to a live OnStar operator who pinpoints the location of the vehicle and provides verbal driving directions. OnStar also offers a variety of other in-vehicle communication and location-based, telematics services, including remote access to a vehicles horn, door locks, and headlights; automatic alerting of public safety officials if an airbag is deployed; roadside assistance; mobile telephone service; and e-mail and Internet access. As of January 2002, OnStar was available in 36 vehicle models and had more than 2 million subscribers.
As mentioned above, wireless telemetry systems are used mainly for AMR, but can also be used to monitor a variety of other fixed and mobile machines, including health care equipment, HVAC systems, gas and oil pipelines, vending machines, alarm systems, parking meters, streetlights, smoke/fire detectors, factory process systems, and photocopiers. Businesses and consumers can also employ wireless telemetry systems to remotely monitor the location and status of vehicles. A few examples of this include LoJack, corporate fleet tracking, and remote engine diagnostic systems. LoJack is a system used to recover stolen vehicles. Consumers can purchase the LoJack VHF transponder unit for their vehicles, and the LoJack Corporation and law enforcement agencies maintain the system used to track the location of vehicles in the case that they are stolen. Over 40,000 stolen vehicles equipped with LoJack have been recovered by U.S. law enforcement agencies.
The two major AMR providers are Itron, Inc. (Itron) and Schlumberger Resource Management Services, Inc. (Schlumberger). Itron focuses exclusively on providing AMR telemetry equipment and is the largest provider in that market. As of the end of 2001, Itron had connected 17.6 million AMR units for 625 utility companies in North America. As of the end of 2000, Schlumberger had connected over 5 million consumers to its CellNet wireless telemetry network.
Many mobile data providers discussed above, including WebLink, SkyTel, Motient, and Cingular, offer a variety of telemetry services, either directly to end users or through other telemetry providers who create and maintain telemetry computer systems for end users but rely on the networks of mobile data providers. As mentioned in the Sixth Report, many analysts and industry players believe that the telemetry market could represent a significant business opportunity for paging/messaging carriers. In addition, Aeris.net (Aeris) and NumereX Corp. lease capacity on mobile telephone networks to offer telemetry products. Aeris sells the use of its network to other telemetry service providers.
CONCLUSION
The past year has continued the positive trends of increased competition in the CMRS industry described in previous reports. In 2001, the mobile telephone sector experienced another year of impressive subscriber growth, increased usage, and declining prices. As of December 2001, the Commission estimates that the sector had 128.5 million subscribers, which translates into a nationwide penetration rate of roughly 45 percent. Other key metrics also demonstrate the increased demand for and reliance placed on mobile services. During 2001, MOUs and ARPU increased, while, according to BLS, the price of mobile telephone service fell by 5.5 percent.
Digital technology is now dominant, with 97 percent of the total U.S. population living in counties where operators offer digital mobile telephone service, and 80 percent of all mobile telephone subscribers using digital phones at the end of 2001.
Mobile telephony providers continued to expand their nationwide footprints and buildout their networks. To date, 268 million people, or 94 percent of the total U.S. population, have three or more different operators offering mobile telephone service in the counties in which they live. Over 229 million people, or 80 percent of the U.S. population, live in counties with five or more mobile telephone operators competing to offer service. And 151 million people, or over 53 percent of the population, can choose from among six or more different mobile telephone operators.
In addition, while few wireless customers have cut the cord in the sense of canceling their subscription to wireline telephone service, there is growing evidence that consumers are substituting wireless service for traditional wireline communications. According to one poll, almost one in five mobile telephony subscribers regard their wireless phone as their primary phone.
Competition continues to be an integral force in shaping the mobile data sector. A multitude of dynamic mobile data services, service packages, and pricing plans are available to consumers from a variety of providers, including mobile telephone carriers, paging carriers, and handheld device providers. Analysts estimate there were approximately 8 to 10 million mobile Internet users at the end of 2001, up from 2 to 2.5 million at the end of 2000. Furthermore, as of March 2002, four nationwide mobile telephone operators were offering mobile Internet access services for mobile telephone handsets, PDAs, and/or laptops at speeds generally ranging from 25 to 60 kbps, with maximum bursting rates up to 144 kbps for at least one carrier. These advanced wireless services using GPRS and 1xRTT networks were available in at least some portion of U.S. counties covering approximately 181 million people. Paging carriers have continued to compete in the mobile data sector by upgrading their networks and offering a variety of advanced, two-way messaging services. Furthermore, nearly all of the estimated 6.6 million PDAs sold during 2001 offered users some method of connecting to the Internet while mobile. Mobile data providers offer their customers a variety of services, including messaging, Web content, and e-mail access, and these services have become increasingly similar across devices during the past year.
The GPRS and 1xRTT deployments by mobile telephone carriers have contributed to the further convergence of voice and data services. During the past year, the distinction between mobile telephones, which have traditionally been voice-centric devices, and PDAs, which were primarily data-centric devices, began to blur with the emergence of smartphones. As discussed above, several major mobile data providers have released smartphone devices that combine the organizational and data-centric features of PDAs with the voice capabilities of mobile telephones. The industry is likely to witness an even greater level of voice and data convergence as mobile data providers make their planned deployments of further network upgrades over the next few years.
As evidenced by this year's forum and report, the Commission is always interested in improving the quality and quantity of the data contained in this Report. To that end, for next year's report, for the first time, the Commission will issue a Notice of Inquiry to solicit additional data from the public. In doing so, our goal is to provide the most complete picture possible of the state of CMRS competition. In particular, we hope to build on the new data in this years report on the state of competition in rural areas to provide a fuller picture of the state of competition throughout the United States. We encourage the public to participate fully in this process to ensure the best information available for our Report to Congress.
ADMINISTRATIVE MATTERS
This Seventh Report is issued pursuant to authority contained in Section 332 (c)(1)(C) of the Communications Act of 1934, as amended, 47 U.S.C. 322 (c)(1)(C).
It is ORDERED that the Secretary shall send copies of this Report to the appropriate committees and subcommittees of the United States House of Representatives and the United States Senate.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
STATEMENT OF COMMISSIONER
MICHAEL J. COPPS
June 13, 2002
RE: Implementation of Section 6002(b) of the Omnibus budget Reconciliation Act of 1993; Annual Report and Analysis of Competitive Market Conditions With Respect to Commercial Mobile Services.
I support todays Report because we have made progress in improving the quality of the data we rely on; because we state that our data is still incomplete; and because the Commission has committed to a wide-ranging Notice of Inquiry to gather more adequate data before the next CMRS Competition Report.
CMRS is a real success story. This Report shows how, in many areas, there is real competition, declining prices, reduced roaming charges, and innovative service offerings. Consumers are benefiting from this competition everyday. As cable and fixed telephone rates increase, we can all see what happens for consumers when many strong competitors exist prices decline.
However, I want to point out two dark clouds on the horizon of this sunny sky. First, our Report shows that this competition is not uniform across the country. Rural consumers have far less choice than urban consumers. In 50% of the country, consumers have a choice of two or fewer wireless companies. The majorities or close to majorities of Alaska, Arizona, Colorado, Kentucky, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, South Dakota, Vermont, and West Virginia are served by two or fewer carriers. Such areas are, of course, far less populated than more urban states. But they are no less important for that.
So I am concerned that our Report continues to define an entire county as being served by a carrier if any part of the county is served. This means we count an entire county as served even though only a highway that runs through it is actually served. And we find competition in a county even where two apparent competitors do not venture into each others territory to actually compete. Finding more granular data is difficult. But, just as in the broadband context of Section 706, when we have insufficient data, we should not rush to judgment and assume competition without proof. Im glad that the Report notes that we lack data specific to rural markets. The Commission sought additional data in a forum on data collection earlier this year. Unfortunately, most of the data collected was anecdotal. This is not enough. While we can make a judgement on competition in urban areas, better data is needed to give us clear answers on competition throughout the country. The NOI has the potential to give us what we need.
The second dark cloud is that this Report does not mean, nor should it be read to imply, that the competition we celebrate is safe from threats. We should not be tempted to see this report as license to declare the wireless industry uniformly competitive or invulnerable to serious competitive problems. Mergers, some of them far-reaching, are altogether likely in the wireless industry. The competition we have seen develop could yet be lost if we are not vigilant.
I would also like to point out that nothing in this Report changes the Commissions previous finding that the CMRS market is already characterized by moderate to high concentration levels. Going further, Leap Wireless, in another proceeding, offering economic studies that state that the average Herfindahl-Hirshman Indices (HHIs) for even the top 25 wireless markets which are more competitive than smaller markets are well above the level considered to be highly concentrated by antitrust authorities. The Commission has previously stated that [w]e find that the limited amount of spectrum suitable for CMRS available today creates a significant barrier to entry, at least in MSAs. Is a highly concentrated market consistent with a high level of competition? What does the presence of a significant barrier to entry mean for the continuance of a high level of competition? If the industry consolidates significantly more, what happens to the current levels of competition we cite today? We need to explore this issue further.
I also must note that in discussing churn in this Report we are less than clear about the fact that our churn data is insufficient and our findings inconclusive. We have not found that current churn rates suggest either increasing or decreasing competition.
I want to conclude by commending the staff who put this Report together. Its a daunting task, and they did it well. We all have lots more work ahead of us, Im afraid, but Im confident that we can continue to improve our understanding of this market with such a high-quality team. And, I hope, with widespread input from all interested stakeholders and they should be many.
APPENDIX A:PRIVATE
FIXED WIRELESS VOICE AND DATA SERVICES
Introduction and Overview
In this section, the Commission reviews the current state of the fixed wireless industry, including the market for voice and data services to both residential and business customers. The first part of Appendix A provides an overview of fixed wireless systems. The second part discusses recent developments in the industry, including the recent financial difficulties faced by many operators, two notable service terminations, the current level of service deployment, and significant policy changes related to spectrum bands used for fixed wireless service.
The Sixth Report gave an overview of fixed wireless technology and many of its advantages over wireline systems. Fixed wireless operators use several spectrum bands, including Multipoint Distribution Service (MDS), Wireless Communications Service (WCS), unlicensed spectrum bands, 24 GHz, Local Multipoint Distribution Service (LMDS), and 39 GHz, to provide such service. In addition, some licensees of spectrum bands traditionally used for CMRS are using that spectrum to provide fixed wireless services. This report groups operators into two major categories: lowerband providers (800 MHz to 5.8 GHz) and upperband providers (24 GHz to 39 GHz) due to the similar technical characteristics of the bands within each category.
SHAPE \* MERGEFORMAT
Operators using lowerband spectrum are able to serve a wider geographic area with a single transmitter than operators using upperband spectrum (see Figure 1). Lowerband systems generally have a service radius of five to 35 miles from a central hub, depending on the particular spectrum band, the power of the transmitter, and the terrain. Upperband systems, on the other hand, face significant losses of signal strength due to atmospheric conditions, most notably precipitation (i.e., rain, snow, and fog). Therefore, the range of individual transmitters in the upperbands is approximately two to five miles.
Recent Developments
Bankruptcies
During 2001, several carriers exited the fixed wireless business, either through bankruptcy or service terminations. As discussed in the Sixth Report, three major upperband carriers Winstar Communications, Inc. (Winstar), Teligent, Inc. (Teligent) and Advanced Radio Telecom (ART) filed for bankruptcy during 2001. These bankruptcies have led to less competition in the fixed wireless market, and less intermodal competition for telecommunications services to business users.
Teligent, which filed for bankruptcy in May 2001, has since sold a large portion of its assets, including $1 million worth of transmission equipment, office space, and supplies to NextWave Telecom. In January 2002, a group of lenders announced that they plan to use the proceeds from the sale of Teligents assets, as well as additional financing, to fund a successor fixed wireless company. The new, yet unnamed company will reportedly hold the former Teligents wireless licenses and plans to abandon the retail business in favor of becoming a wholesale carrier of fixed wireless access for other carriers.
Winstar filed for Chapter 11 bankruptcy protection in April 2001. In January 2002, IDT Corp. (IDT) received approval from the bankruptcy court to purchase Winstars assets for $42.5 million. IDT is currently in the process removing the former Winstar from the wireline resale business, terminating its fixed wireless operations in certain smaller markets, and consolidating some of its facilities with IDTs business. IDT also plans to increase Winstars buildings on-net by 600 in 22 of the cities where Winstar had maintained its operations after it entered bankruptcy proceedings.
ART filed for bankruptcy in March 2001 and announced it would phase out service to its existing customers over the following month. Most of ARTs assets were purchased by First Avenue Networks Corp., which now sells fixed wireless access on a wholesale basis to other carriers.
XO Communications, Inc. (XO), a wireline CLEC that also holds LMDS and 39 GHz licenses covering 95 percent of the population of the 30 largest U.S. cities, has been offering fixed wireless broadband services to businesses in 27 markets. On June 17, 2002, XO filed for Chapter 11 bankruptcy protection and submitted a reorganization plan with two alternative scenarios for reorganizing and restructuring its balance sheet. The company stated that it would continue to fund its operations while its bankruptcy case is pending.
Service Terminations
Among the lowerband carriers, AT&T Wireless and Sprint both announced in the fall of 2001 that they were terminating their fixed wireless operations. At the writing of the Sixth Report, AT&T Wireless was offering its fixed wireless voice and data service, Digital Broadband, to residential customers in five cities. As of January 2001, the company had sold a total of 20,000 lines to 12,000 households. However, in October 2001, AT&T Wireless announced it was exiting the fixed wireless business and phasing out service to its 47,000 existing customers. And Sprint, which had launched its Broadband Direct MDS-based high-speed Internet access service in 16 cities across the United States, announced in October 2001 that it was discontinuing the deployment of Broadband Direct. The company stated at that time that it would continue to serve its 52,000 existing Broadband Direct subscribers.
Many analysts believe that fixed wireless carriers are awaiting the availability of next-generation technologies that will not require a direct line-of-sight between subscribers antennas and their receivers before making further deployments. These new technologies will reportedly lower carriers costs and increase their service options significantly. Orthogonal Frequency Division Multiplexing (OFDM) is a technology standard that has the potential to overcome the line-of-sight restriction and is expected to increase the speeds of wireless networks. OFDM-based equipment is currently being developed for use in multiple wireless products, including wireless LANs, mobile wireless systems, and broadband fixed wireless access.
Service Availability
In contrast to the service terminations and financial distress of its fellow fixed wireless carriers, WorldCom Inc. (WorldCom) has continued to roll out high-speed, fixed wireless Internet access service using its MDS and WCS spectrum during the past year. At the writing of the Sixth Report, WorldCom was offering commercial service in three markets and was running trials in two additional markets. As of February 2002, the company had expanded its offering of fixed wireless broadband services to business customers to a total of 13 U.S. markets.
Several smaller fixed wireless carriers, including hundreds of operators using unlicensed spectrum, continue to provide high-speed Internet access service, generally in less densely populated markets across the country and often in a only a few markets apiece. Most of the companies that use unlicensed spectrum to offer Internet access are local and regional Internet service providers, also referred to as wireless ISPs, that offer the service in an average of three markets apiece. Many of these carriers are targeting business customers, while others serve both businesses and residences. Many fixed wireless operators use lowerband spectrum to offer high-speed Internet access in rural and underserved areas. For example, Canyon Country Communications offers Internet access in Page, AZ; Planet Connect offers fixed wireless service in Bristol, Seymour, Newport, and Greeneville, TN; and DATACentric sells the service in Lufkin, Conroe, and Bryan-College Station, TX. In fact, at least one industry analyst claims that, while fixed wireless has the potential to compete with DSL and cable modem service, the technology is best-suited for rural and underserved markets where these services may not be available. Other analysts believe that the technology will be deployed mainly to residential, not business, customers.
Estimates of the number of fixed wireless customers vary. One analyst estimates that there were 100,000 fixed-wireless broadband subscribers in the United States as of May 2001, while another estimates there are were 300,000 fixed wireless subscribers, including businesses, in the United States as of October 2001.
As mentioned in the Sixth Report, the Commission has begun tracking the rollout of fixed wireless services by providers using lowerband spectrum on a county-by-county basis. Based on its analysis, the Commission estimates that there are at least 222 different lowerband operators providing fixed wireless services in 466 different counties. These counties contain 124 million people, or 43.5 percent of the U.S. population. This analysis is based on publicly-available information, such as news articles and operators press releases, SEC filings, and web sites. There are several caveats to note when considering this data. First, in order to be considered as covering a county, an operator need only be offering service in a portion of that county. Second, the POPs and square mile figures in this analysis include all of the POPs and all of the square miles in a county considered to have coverage. Third, all population figures are based on the 2000 Census. Fourth, because some lowerband carriers serve small and remote locations and because unlicensed operators provide service without a license from the Commission, it is difficult to assess precisely who is operating where. Therefore, the analysis may not include certain companies that do not make the information on their fixed wireless offerings easily obtainable or publicly available.
Spectrum Allocation Proceedings
As mentioned in the Sixth Report, the Commission was evaluating the possible use and reallocation of the 2500-2690 MHz band for advanced wireless, including 3G mobile, services. However, due to the extensive use of that band by incumbent MDS and ITFS operators for services including high-speed fixed wireless Internet access, the Commission decided in September 2001 not to reallocate that band specifically for 3G services, but instead to permit mobile use of the spectrum by MDS licensees. Analysts and industry players generally believe the decision has given fixed wireless carriers and equipment vendors additional flexibility, and may help to revive the industry. In addition, in August 2001, the Commission proposed the possible reallocation of the remaining MDS spectrum, the 2150-2160/62 MHz band, for advanced wireless services, including 3G systems. MDS licensees currently use this band primarily for the upstream links in two-way, fixed wireless broadband services.
APPENDIX B:PRIVATE
SPECTRUM AUCTIONS
Table of Contents
Table 1A: FCC Auctions Summary - Service Design B-2
Table 1B: FCC Auctions Summary - Auction Results B-4
Table 2: VHS Public Coast and LMS Auction #39 Results B-5
Table 3: Paging Auction #40 Results B-6
Table 4: Narrowband PCS Auction #41 Results B-9
Table 5: Multiple Address Systems Spectrum Auction #42 Results B-9
Table 6: Multi-Radio Service Auction #43 Results B-9
Table 7: New Analog Television Stations Auction #82 Results B-9
Table 1A: FCC Auctions Summary - Service Design
PRIVATE Auction Number and Name
Number of Licenses (1)Geographic License Scheme (2)Spectrum per licenseTotal Spectrum per MarketService Description1Nationwide Narrowband PCS11 (3)Nationwide11 blocks: 5 = 50/50 kHz, 3 = 50/12.5 kHz, 2 = 50 kHz0.7875 MHzAdvanced paging/data2Interactive Video and Data Service594MSA2 blocks of 500 kHz 1 MHzInteractive data3Regional Narrowband PCS30Regional6 blocks: 2 = 50/50 kHz, 4 = 50/12.5 kHz0.45 MHzAdvanced paging/data4A & B block Broadband PCS102 (4)MTA2 blocks of 30 MHz60 MHzMobile voice and data5/10/22C block Broadband PCS (5)493BTA1 block of 30 MHz or 2 blocks of 15 MHz30 MHzMobile voice and data6Multichannel Distribution Service493BTAMax of 13 channels of 6 MHz78 MHz (6)Wireless cable7900 MHz Specialized Mobile Radio1020MTA20 blocks of .25 MHz5 MHzMobile voice and data8Digital Broadcast Service (7)1Full US Coverage500 MHz 437.5 MHzMultichannel video9Digital Broadcast Service (7)1Partial US CoverageUses same spectrum as full coverage license375 MHzMultichannel video11/
22D, E, & F block Broadband PCS (8)1479BTA3 blocks of 10 MHz30 MHzMobile voice and data12Cellular Unserved14MSA/RSA2 blocks of 25 MHz50 MHzMobile voice and data13Interactive Video and Data Service981MSA/RSA2 blocks of 500 kHz1 MHzInteractive data14Wireless Communications Service128MEA/REAG4 blocks: 2 = 10 MHz, 2 = 5 MHz30 MHz(9)15Digital Audio Radio Service2Full US Coverage2 blocks of 12.5 MHz25 MHzMultichannel audio16Upper 800 MHz Specialized Mobile Radio525EA3 blocks: 1 MHz, 3 MHz , and 6 MHz10 MHzMobile voice and data17/
23Local Multipoint Distribution Service986 (10)BTA2 blocks: 1150 MHz and 150 MHz1300 MHzFixed voice, data and video18/
24/
43220 MHz908National, EAG, EA13 blocks: 3 = 100 kHz, 5 = 100 kHz, 5 = 150 kHz1.55 MHzVoice, data, paging, fixed20/
39VHF Public Coast42Pub. Coast Station Areas1 block between 350 and 500 kHz350 to 500 kHzFixed and mobile21/
39/
43Location and Monitoring Service528EA3 blocks: 2 = 6 MHz, 1 = 2.25 MHz14.25 MHzMobile telemetry25/
27/
28"Closed" Broadcast118n/a(11)(11)Broadcast TV and radio26/
40929 and 931 MHz Paging Service2,499MEA49 blocks of 20 kHz: 12 in 929 Band, 37 in 931 band.790 kHzPaging and messaging3039 GHz2,450EA14 Blocks of 100 MHz1400 MHzFixed (12)33/
38700MHz Guard Band104MEA2 Blocks: 1= 4 MHz, 1 = 2 MHz6 MHz(13)34/
43SMR 800 MHz General Category1,050EA6 Blocks of 1.25 MHz (14)7.5 MHzMobile voice and data35PCS C & F Block (5)422 (15)BTAUp to 4 blocks of 10 MHz; Up to 2 blocks of 15 MHz10 to 40 MHzMobile voice and data36SMR 800 MHz Lower 80 Channels2,800EA16 Blocks of .25 MHz4 MHzMobile voice and data40Paging14,000 (16)EA36 blocks of 20 kHz; 44 blocks of 40 kHz2.48 MHzPaging and messaging41Narrowband PCS365National, MTA3 x 50/50 kHz; 3 x 50/150 kHz; 4 x 50/100 kHz; 3 x 50 kHz; 1 x 12.5/100 kHz1.7625 MHzAdvanced paging/data42Multiple Address Systems Spectrum5,104EA28 blocks of 25 kHz; 1 block of 100 kHz800 kHzFixed and Mobile43Multi-Radio Service (17)69 --------80Blanco Texas Broadcast1n/a1 construction permit6 MHzBroadcast TV82New Analog Television Stations4n/a4 construction permits6 MHzBroadcast TV
Source: Federal Communications Commission
(1) This is the total number of licenses initially auctioned in each service. It does not take into account any partitioning and disaggregation activity. Some of these licenses may not have been granted.
(2) MTAs = Major Trading Areas, BTAs = Basic Trading Areas, MSAs = Metropolitan Statistical Areas, RSAs = Rural Service Areas, MEAs = Major Economic Areas, REAGs = Regional Economic Area Groups, EAs = Economic Areas.
(3) Includes one pioneer preference license.
(4) Includes three pioneer preference licenses.
(5) To date, four auctions have been completed that included C block PCS licenses (Auctions Nos. 5, 10, 22 amd 35).
(6) To be precise, Multipoint Distribution Service ( MDS ) total spectrum should be 76 MHz because Channel 2 was originally 6 MHz only in the top 50 markets. In the rest of the markets, it was Channel 2A with 4 MHz. As noted in the MDS Auction Procedures, Terms, and Conditions: "In 1992, the 2160-2162 MHz frequency was reallocated to emerging technologies, and thus, any subsequent MDS use of these 2 MHz will be secondary."
(7) There is a total of 500 MHz of DBS downlink spectrum available. The same spectrum can be reused at each of the eight U.S. DBS orbital slots. The figures in the table are (28/32) x500 and (24/32) x500, respectively, but they each refer to portions of the same 500 MHz of spectrum.
(8) To date, two auctions have been completed that included DEF block PCS licenses, the original and one reauction.
(9) WCS is permitted to implement a wide range of services, subject to FCC engineering requirements, including fixed, mobile, radio location, and broadcasting-satellite (sound) service.
(10) Cellularvision, Inc. has been granted a pioneer preference for a portion of the 1150 MHz New York BTA, of which 850 MHz was subsequently sold to Winstar Communications, Inc.
(11) The Closed Broadcast auctions included a number of different licenses used for broadcast television and radio. The types of licenses included: AM Broadcast (10 kHz per license), FM Broadcast (200 kHz per license), FM Translator (200 kHz), TV Broadcast (6 MHz per license), Low Power TV (6 MHz per license), and TV Translator (6 MHz per license).
(12) Mobile communications are subject to the development of inter-licensee and inter-service interference criteria.
(13) The Guard Band Manager is a new class of commercial licensee engaged solely in the business of leasing spectrum to third parties on a for-profit basis. The Guard Band Manager may subdivide its spectrum in any manner it chooses and make it available to system operators, or directly to end users for fixed or mobile communications. Entities that employ a cellular system architecture are prohibited from operating in this band.
(14) Additionally, the Commission offered 3 EA licenses in the 800 MHz Upper Band: one 1 MHz license in Honolulu, HI (EA 172); one 3 MHz license and one 6 MHz license in Guam and Northern Mariana Islands (EA 173).
(15) 170 licenses were available only to entrepreneurs in closed bidding. 252 licenses were available to all bidders in open bidding.
(16) An additional 1,514 upper bands paging licenses that were unsold in Auction No. 26 were also offered.
(17) The 220 MHz, 800 MHz SMR, and LMS spectrum licenses available in this auction were either unsold from a previous auction or were defaulted on by a winning bidder in a previous auction. The auction included 4 Phase II 220 MHz Service licenses; 23, 800 MHz SMR Service General Category licenses; and 42 LMS licenses.
Table 1B: FCC Auctions Summary
Auction Results
Auction Number(s) and NameTotal Winning Bids (1)Auction BeganAuction
Ended# RoundsNumber of Winning Bidders1Nationwide Narrowband PCS$650,306,6747/25/947/29/944762Interactive Video and Data Service$213,892,3757/28/947/29/94Oral
Outcry1783Regional Narrowband PCS$392,706,79710/26/9411/8/9410594A & B block Broadband PCS$7,721,184,17112/5/943/13/95112185/
10/
22C block Broadband PCS (2)$10,071,708,841.50
$904,607,466.75
$409,936,425.0012/18/95
7/3/96
3/23/995/6/96
7/16/96
4/15/99184
25
7889
7
576Multichannel Distribution Service$216,239,60311/13/953/28/96181677900 MHz Specialized Mobile Radio$204,267,14412/5/954/15/96168808Digital Broadcast Service$682,500,0001/24/961/25/961919Digital Broadcast Service$52,295,0001/25/961/26/9625111/
22D, E, & F block Broadband PCS (3)$2,517,439,565
$2,904,5208/26/96
3/23/991/14/97
4/15/99276
78125
612Cellular Unserved$1,842,5331/13/971/21/97361014Wireless Communications Service$13,638,9404/15/974/25/97291715Digital Audio Radio Service$173,234,8884/1/974/2/9725216Upper 800 MHz Specialized Mobile Radio$96,232,06010/28/9712/8/982351417/
23Local Multipoint Distribution Service$578,663,029
$45,064,4502/18/98
4/27/993/25/98
5/12/99127
43104
4018/
24220 MHz$21,650,301
$1,924,9509/15/98
6/8/9910/22/98
6/30/99173
7144
1620/
39VHF Public Coast$7,459,200
$225,20012/3/98
6/6/0112/14/98
6/13/0144
344
321/
39Location and Monitoring Service$3,438,294
$919,5552/23/99
6/6/013/5/99
6/13/0154
34
4
425/
27/
28Closed Broadcast Auction $57,820,350
$172,250
$1,210,0009/28/99
10/6/99
3/21/0010/8/99
10/8/99
3/24/0035
15
26
91
1
226929 and 931 MHz Paging Service$4,122,5002/24/003/2/0028783039 GHz$410,649,0854/12/005/8/00732933/
38700MHz Guard Band$519,892,575
$20,961,5009/6/00
2/13/019/21/00
2/21/0166
389
334SMR 800 MHz General Category$319,451,8108/16/009/1/00761435PCS C & F Block$16,857,046,15012/12/001/26/011013536SMR 800 MHz Lower 80 Channels$28,978,38511/1/0012/5/001512240Paging$12,897,12710/30/0112/5/0114018241Narrowband PCS$8,285,03610/3/0110/16/0148542Multiple Address Systems Spectrum$1,202,72511/14/0111/27/01361343Multi-Radio Service$1,548,2251/10/021/17/0231380Blanco Texas Broadcast$18,798,0007/12/007/14/0016182New Analog Television Stations$5,025,2502/5022/13/02133
Source: Federal Communications Commission
Notes:
(1) Total Winning Bids includes high bids from the auction (net of any bidding credits) plus the price paid for any pioneer preference licenses.
(2) C block broadband PCS was auctioned in three auctions. Please note that because licenses are in more than one auction, simply summing together the figures for Total Winning Bids, Bid Price, and Number of Winning Bidders will result in over counting.
(3) DEF block broadband PCS was auctioned in two auctions. Please note that because licenses are in more than one auction, simply summing together the figures for Total Winning Bids, Bid Price, and Number of Winning Bidders will result in over counting.
Table 2: VHS Public Coast and LMS Auction #39 Results
Bidder NameTotal High BidsNet High Bids (1)POPsPCS Partners, L.P.32$528,84036,413,087Telesaurus Holdings GB, LLC80$347,81544,713,791Maritel, Inc.7$100,4001,846,458Helen Wong-Armijo84$58,37026,701,121SMR Systems, Inc.3$48,750473,571Scott MacIntyre3$35,750503,691FCR, Inc.8$24,8305,712,959Source: Federal Communications Commission
Notes: (1) As of the close of the auction.
Table 3: Paging Auction #40 Results
Bidder NameTotal High Bids Net High Bids (1) POPsMarcus Spectrum Holdings, LLC44$2,517,515624,112,560Jeff S Cofsky84$1,216,618230,315,004Paging Systems, Inc.117$1,042,540692,956,816Scott MacIntyre149$497,939358,701,230Jamestown Manufacturing Corporation698$434,1001,549,982,780Schuylkill Mobile Fone, Inc.221$432,840876,490,423anderson communications inc35$416,060170,524,100MOBILE RELAY ASSOCIATES14$377,775168,910,244Atlantic Communications, LLC5$336,750119,595,040T&W Electronics Inc.76$331,188213,553,445COMMUNICATIONS EQUIPMENT INC231$272,246223,655,246Fisher Wireless Services, Inc.77$219,980100,153,042James T. Hopper13$176,15080,350,179X.W. LLC6$163,80056,768,874VICTOR COMMUNICATIONS INC.120$152,438304,220,305Thomas O'Brien Sr. L.L.C.1$148,20023,919,008Cellplus Networks, LLC139$145,145122,757,347Colorado CallComm, Inc.12$140,14036,373,680TeleBEEPER of New Mexico, Inc.261$140,056352,109,285Redi-Call Salisbury Communications Consortium111$136,487245,766,788Morris Communications, Inc.116$134,460154,501,398FCCA, LLC98$124,980126,828,992Futronics Paging, Inc.40$123,00667,081,857Central Communications Service Company25$117,48121,464,395Mountain Communications and Electronics, Inc.15$116,10045,467,100Communications Sales and Service, Inc.82$109,954122,245,257Contact Communications, Inc.30$109,33082,342,398Direct Connect USA, Inc.14$109,00596,822,040SILKE COMMUNICATIONS INC.85$108,615125,057,456Domer Communication, Inc.17$87,89377,599,322AAA Mid-Atlantic2$85,00047,838,016TELEPHONE & TWO-WAY INC.56$84,500159,273,287Indiana Paging Network, Inc.63$81,405145,745,954Avery Wisdom86$76,544163,667,757RCC, Inc. d/b/a Radio Comm Company35$76,40159,324,191Golden Arrow Paging, Inc.22$59,00048,738,861A. V. LAUTTAMUS COMMUNICATIONS, INC.37$54,11952,422,195Ameritech Mobile Services, Inc.58$52,840164,858,305Arthur Nathan Sherman43$52,41061,790,669Omnicall Corp.21$50,74044,112,873Cook Telecom, Inc.84$50,190187,170,529WILLIAM WAYNE DBA MR. RADIO9$48,0358,493,318Ray's Mobile Communications, Inc.5$46,1506,393,610AAT Paging Corporation II4$45,50033,129,176Western Paging, LLC44$43,725140,724,540Lemar D. Van Heuveln54$42,79620,575,220Jim Doering DBA J Doering Communicatins22$41,990138,165,858Minnesota Mobile Telehone Company34$41,60064,839,085Fresno Moible Radio, Inc.31$40,72570,558,890Saia Communications Inc.20$39,75430,235,255Azle Communications Solutions, LLC6$39,45537,084,698Alpha Wireless Communications Co.56$39,08058,705,114FastAds, Inc.49$37,08949,276,462JSM Net Link LLC38$35,88052,754,331Baycom Inc.36$32,86529,536,226Tri County Communications, Ltd.51$32,44530,769,213NextBus Informations Systems. Inc30$30,355264,085,097JPJ Electronic Communications Inc Rene Matthew Cor36$29,82053,783,143Mobile Radio Communications, Inc.22$29,46024,792,425Automobile Club of Southern California19$28,28018,575,633Columbia Communications, Inc.7$28,08037,938,997ComProducts, Inc. d/b/a B&C Communications8$25,28516,804,904Mobilfone Service Inc5$23,72011,210,869Joshua F.A. McCormick8$23,14042,807,970Superior Technologies, Inc.10$23,0803,824,992Edward V Krom8$22,54059,637,064CENTRAL VERMONT COMMUNICATIONS, INC.18$22,12648,086,643ROBERT J FETTERMAN17$21,82554,470,474Communication Specialists Company of Wilmington, L39$21,54138,843,438METROCALL USA INC31$20,26054,331,591BADGER SPECTRUM LTD38$19,955101,417,799California State Automobile Association4$19,60026,034,889Range Corporation39$19,40921,213,191Teton Communincations54$19,27911,944,602Midwest Management, Inc.59$19,17515,249,549Kathleen Janssen12$19,14015,465,793UHF-DE, LLC25$18,59012,180,300FM Communications, Inc.6$17,1999,034,632AQUIS WIRELESS COMMUNICATIONS, INC.6$17,00041,416,102Regional Transit Service, Inc.3$17,0004,373,538WARNER COMMUNICATIONS CORPORATION28$16,84895,278,904Arthur R. Patrick40$16,77038,129,074iDigi Networks, LLC12$16,59041,949,528Alpha Communications Sites, Inc.18$15,90029,447,964Joplin Beepers Inc14$15,61514,647,350Lancaster Radio Paging, Inc.2$15,1407,942,319Page Plus Incorporated30$15,00046,941,240Lubbock Radio Paging Service, Inc.21$14,5207,560,150Clifford E. Bade14$14,20963,905,324Teletouch Licenses, Inc.15$14,00012,530,895Two-Way Communications, Inc.5$13,8455,463,330T&K Communications Systems, Inc.16$13,81925,636,757MULTIPAGE, INC.25$13,30027,291,114Electronic Engineering Co.18$13,14035,411,031BAKER'S ELECTRONICS & COMMUNICATIONS, INC.37$12,67556,165,736Robert R Rule25$12,61022,209,278TEXAPAGE NE INC.4$12,02524,723,132Myrtle Beach Communications, Inc.22$11,57012,956,566ComServ Services, LLC20$11,11533,756,340State of South Dakota, Bureau of Information & Tel16$11,0204,009,212Davis Electronics Company Inc22$11,00031,927,080Mid-Rivers Telephone Cooperative, Inc.22$11,0006,273,061L & L Services, Inc. d/b/a Metro Communications21$11,00016,918,724Centre Communications28$10,32233,616,491Richard L Oberdorfer5$9,6205,013,956Select Path Holding, Inc.10$9,52514,759,354CAPITOL RADIOTELEPHONE COMPANY, INC.12$9,33416,214,547Mobile Communication Service, Inc.20$9,12011,556,675Buttner Holdings, LLC21$8,77535,812,643Ozark Paging LLC5$8,5806,895,436Michael A Phillips10$8,55412,596,360UNITED TELEPHONE MUTUAL AID CORPORATION16$8,0002,855,048West Wisconsin Telcom Cooperative Inc6$7,1705,701,861TeleMaxx Communications LLC3$6,63010,990,738Industrial Communications12$6,56519,631,976WCS Communications Inc dba Western Communications11$6,4359,844,513Mobile Phone of Texas, Inc.5$6,22514,339,151Daksoft, Inc dba Mayer Radio12$6,0003,491,262Communications Specialists, Inc.18$5,85015,219,742TRIANGLE COMMUNICATIONS INC.10$5,77516,153,991wharton telecom holdings, inc5$5,10026,228,739Mobile Telephone & Paging Inc.8$5,0608,865,832Bob Jacobson d/b/a Wavecomm6$5,00517,163,540Virginia Channels, JV10$5,00012,476,270RAM Technologies Inc4$5,0004,879,317M. E. Parkinson14$4,8364,999,288KARL A RINKER9$4,66713,367,176Moraine Radio6$4,49812,717,342John L Crump11$4,29031,793,449Business Service Center, Inc.4$4,2752,191,808Acadian Ambulance Service, Inc.8$4,0005,920,678FONES WEST DIGITAL SYSTEMS, INC.5$3,9659,088,441Afton Communications Corporation10$3,75010,383,010NEP, LLC7$3,70011,616,403Pro-Com Inc.6$3,65314,913,325Com-Nav, Inc. d/b/a Radiotelephone of Maine7$3,5103,731,945Western Communications, Inc.6$3,5101,525,570Chicago Communication Service, Inc.2$3,40024,991,020Space Data Spectrum Holdings, LLC3$3,30010,376,805Spectrum Communications, Inc.10$3,2505,457,470Gabriel Wireless LLC2$3,25010,051,212BEEPER NETWORK INC8$3,18513,899,057Metamora Telephone Company7$3,1504,055,807CITY PAGE & CELLULAR SERVICES, INC. DBA CITY BEEPE2$3,1209,564,000Hub Communications, Inc.9$2,9909,661,811SEMA-PHOON, INC. d/b/a R.A. Communications7$2,9644,154,428Bobier Electronics, Inc.9$2,92510,764,387Communications Systems, Inc.2$2,8602,956,766Joseph B McNeal6$2,4054,485,684PROGRESSIVE COMMUNICATIONS SERVICES, INC.7$2,2755,823,297Robert F. Ryder d/b/a Radio Paging Service7$2,2751,898,610Starpage Inc6$2,2757,474,231McLeodUSA Telecommunications Services, Inc.4$2,1007,605,185Paging Source of Florida, Inc.2$2,1007,374,875Page-All, LLC1$2,0003,945,443Answer Fort Smith, Inc.3$1,9505,264,463Great Eastern Communications Co. Inc.1$1,8857,454,633Christine M. Busby2$1,69018,635,894Pineland Telephone Cooperative, Inc.3$1,5001,773,768VENTURES IN PAGING, LLC3$1,5002,955,208Professional Answering Service, Inc.3$1,3005,861,648General Tel Courier3$1,1703,324,687MARK A. APSLEY2$1,1052,852,700Allcom Communications, Inc.2$1,000572,068AreaWide Communications Inc.2$1,0002,835,801Leonard R. Putnam d/b/a Cascade Telephone Communic2$1,0002,617,632South Shore Radio, Inc.3$9754,313,682P & R Comunnications Service, Inc.1$7504,325,459Atlas Mobilfone Inc2$715946,147Courtesy Communications, Inc.2$6501,383,612D & K Business Pagers1$6501,934,632DATAPAGE, INC.1$6508,672,944Westside Paging Inc1$6503,445,064Holsum Bakers, Inc. d/b/a Caprock Communications1$500382,517Cactus Communications Inc1$3901,741,991Pattersonville Telephone Company1$3751,147,154St. Louis Electronics Communications Corporation1$3753,402,818Communications Management Co. of Indiana1$325825,644Mobile Radio Communications Service, Inc.1$325150,155Mobilephone of Humboldt, Inc.1$325689,659SCP COMMUNICATIONS, LLC1$325864,201Western Communication Services, Inc.1$325144,847Source: Federal Communications Commission
Notes: (1) As of the close of the auction.
Table 4: Narrowband PCS Auction #41 Results
Bidder NameTotal High BidsNet High Bids (1)POPsSpace Data Spectrum Holdings, LLC204$6,343,5112,795,954,831.00Allegheny Communications, Inc.101$1,767,825755,996,003.00Scott C. MacIntyre6$75,30030,417,369.00AQUIS WIRELESS COMMUNICATIONS, INC.5$64,40056,415,142.00Paging Systems, Inc.1$34,00019,145,232.00Source: Federal Communications Commission
Notes: (1) As of the close of the auction.
Table 5: Multiple Address Systems Spectrum Auction #42 Results
Bidder NameTotal High BidsNet High Bids (1)POPsMilkyWay Communications, LLC476$757,5001,510,789,444Microwave Data Systems Inc.168$181,000182,265,599Paging Systems, Inc.38$113,100312,924,284TeleBEEPER of New Mexico, Inc.58$38,41595,673,811Wisconsin Electric Power Company33$33,00048,559,020TELEPHONE & TWO-WAY INC.40$26,260138,076,054Southern Communications Services Inc d/b/a Souther14$14,00050,185,120Phillips Communications, Inc.10$10,1004,230,958Kirkland Associates, Inc.15$9,75041,956,089IBG, Inc.8$6,50073,559,336Fiberlessnet, Inc.10$6,50027,601,346Chicago Communication Service, Inc.4$4,00037,271,788Petra Ramasastry4$2,60025,526,022Source: Federal Communications Commission
Notes: (1) As of the close of the auction.
Table 6: Multi-Radio Service Auction #43 Results
Bidder NameTotal High BidsNet High Bids (1)POPsNEXTEL SPECTRUM ACQUISITION CORP.18$1,282,00015,984,384AerWav, Inc.4$182,70099,250,444TeleBEEPER of NEW MEXICO, INC5$83,5253,334,545Source: Federal Communications Commission
Notes: (1) As of the close of the auction.
Table 7: New Analog Television Stations Auction #82 Results
Bidder NameTotal High BidsNet High Bids (1)POPsRoberts Broadcasting USA, LLC2$3,326,250N/aVenture Technologies Group, LLC1$1,323,000N/aEquity Broadcasting Corporation1$376,000N/aSource: Federal Communications Commission
Notes: (1) As of the close of the auction.
APPENDIX C:
MOBILE TELEPHONY
Table of Contents
Table 1: CTIAs Semi-Annual Mobile Telephone Industry Survey C-2
Table 2: FCCs Semi-Annual Local Telephone Competition Survey C-3
Table 3: Economic Area Penetration Rates C-4
Table 4: Top 25 Mobile Telephone Operators by Subscribers C-8
Table 5: Estimated Mobile Telephone Rollouts by Number of Launches by County C-9
Table 6: County Quartiles with Estimated Rollout by at least 3 Mobile Telephone Providers C-9
Table 7: Mobile Telephone Digital Coverage C-10
Table 8: Change in CPI C-10
Table 9: Average Revenue Per Minute C-11
Table 10: Rural vs. Urban Pricing C-11
Table 11: First Cellular of Illinois Per Minute Pricing 1995-2001 C-12
Table 12: Foreign Holdings of U.S. Mobile Telephone Operators C-13
Table 13: International Comparisons of Mobile Pricing C-15
Table 1: CTIAs Semi-Annual Mobile Telephone Industry Survey
DateEstimated SubscribersYear End over Year End Subscriber IncreaseTotal Six-Month Service Revenues (000s)Roamer Services RevenuesCell SitesEmployeesCumulative Capital Investment (000s)Average Local Monthly BillJan 8591,600$178,085 3461,404$354,760 June 85203,600$176,231 5991,697$588,751 Dec 85340,213248,613$306,197 9132,727$911,167 June 86500,000$360,585 1,1943,556$1,140,163 Dec 86681,825341,612$462,467 1,5314,334$1,436,753 June 87883,778$479,514 1,7325,656$1,724,348 Dec 871,230,855549,030$672,005 2,3057,147$2,234,635 $96.83 June 881,608,697$886,075 2,7899,154$2,589,589 $95.00 Dec 882,069,441838,586$1,073,473 $89,3313,20911,400$3,274,105 $98.02 June 892,691,793$1,406,463 $121,3683,57713,719$3,675,473 $85.52 Dec 893,508,9441,439,503$1,934,132 $173,1994,16915,927$4,480,141 $83.94 June 904,368,686$2,126,362 $192,3504,76818,973$5,211,765 $83.94 Dec 905,283,0551,774,111$2,422,458 $263,6605,61621,382$6,281,596 $80.90 June 916,380,053$2,653,505 $302,3296,68525,545$7,429,739 $74.56 Dec 917,557,1482,274,093$3,055,017 $401,3257,84726,327$8,671,544 $72.74 June 928,892,535$3,633,285 $436,7258,90130,595$9,276,139 $68.51 Dec 9211,032,7533,475,605$4,189,441 $537,14610,30734,348$11,262,070 $68.68 June 9313,067,318$4,819,259 $587,34711,55136,501$12,775,967 $67.31 Dec 9316,009,4614,976,708$6,072,906 $774,26612,80539,775$13,946,406 $61.48 June 9419,283,306$6,519,030 $778,11614,74045,606$16,107,920 $58.65 Dec 9424,134,4218,124,960$7,710,890 $1,052,66617,92053,902$18,938,677 $56.21 June 9528,154,415$8,740,352 $1,120,33719,83360,624$21,709,286 $52.45 Dec 9533,785,6619,651,240$10,331,614 $1,422,23322,66368,165$24,080,466 $51.00 June 9638,195,466$11,194,247 $1,314,94324,80273,365$26,707,046 $48.84 Dec 9644,042,99210,257,331$12,440,724 $1,465,99230,04584,161$32,573,522 $47.70 June 9748,705,553$13,134,551 $1,392,44038,65097,039$37,454,294 $43.86 Dec 9755,312,29311,269,301$14,351,082 $1,581,76551,600109,387$46,057,911 $42.78 June 9860,831,431$15,286,660$1,584,89157,674113,111$50,178,812$39.88Dec 9869,209,32113,897,028$17,846,515$1,915,57865,887134,754$60,542,774$39.43 June 9976,284,753$19,368,304$1,922,41674,157141,929$66,782,827$40.24Dec 9986,047,00316,837,682$20,650,185$2,163,00181,698155,817$71,264,865$41.24 June 0097,035,925$24,645,365 $1,971,625 95,733159,645$76,652,358 $45.15 Dec 00109,478,031 23,431,028$27,820,655 $1,911,356 104,288184,449$89,624,387 $45.27 Jun 01118,397,734$30,905,721 $1,727,058 114,059186,317$99,728,965 $45.56 Dec 01128,374,51218,896,481$34,110,163$2,209,387127,540203,580$105,030,101$47.37
Source: Cellular Telecommunications and Internet Association, Semi-Annual Wireless Industry Survey .
Table 2: FCCs Semi-Annual Local Telephone Competition Survey
Mobile Wireless Telephone Subscribers (as of June 30, 2001) 1/StateJun 2001 Reporting Carriers 1/Jun 2001 Percent Resold 2/Subscribers Dec 1999Subscribers
Jun 2000Subscribers Dec 2000 3/Subscribers Jun 2001Percent Change Jun 00 - Jun 01Alabama12 1%1,080,410 1,253,084 1,386,294 1,930,631 54%Alaska5 10%165,221 169,892 *218,424 29%Arizona13 3%1,125,321 1,624,668 1,855,115 2,018,410 24%Arkansas6 2%719,919 715,467 743,928 891,275 25%California12 5%8,544,941 12,283,369 12,710,520 14,184,625 15%Colorado9 3%1,552,718 1,654,989 1,856,075 1,983,405 20%Connecticut6 9%1,077,089 1,136,618 1,277,123 1,418,367 25%Delaware5 6%270,848 275,219 371,014 389,284 41%District of Columbia6 9%910,116 4/928,962 987,323 N.M.Florida9 7%5,158,079 4,983,478 6,369,985 7,536,670 51%Georgia14 4%2,538,983 2,687,238 2,754,784 4,076,119 52%Guam ** * *0 * *Hawaii6 2%288,425 454,364 524,291 543,283 20%Idaho7 3%271,436 296,066 344,564 398,781 35%Illinois10 9%3,922,482 4,309,660 5,143,767 5,621,044 30%Indiana9 5%1,318,975 1,717,378 1,715,074 1,781,247 4%Iowa8 7%774,773 975,629 832,106 861,382 -12%Kansas10 3%669,472 724,024 801,293 901,225 24%Kentucky9 1%911,700 999,544 1,026,334 1,176,756 18%Louisiana12 3%1,227,106 1,294,693 1,306,457 1,677,292 30%Maine5 3%187,003 283,640 359,786 399,616 41%Maryland8 4%1,473,494 4/1,982,477 2,134,125 N.M.Massachusetts6 4%1,892,014 2,228,169 2,649,130 2,753,685 24%Michigan10 9%3,512,813 3,423,535 3,551,719 4,071,091 19%Minnesota12 7%1,550,411 1,595,560 1,851,430 2,014,317 26%Mississippi9 4%673,355 509,038 786,577 993,781 95%Missouri9 4%1,855,452 1,848,775 1,767,411 1,937,684 5%Montana ** * * * * *Nebraska5 2%576,296 600,885 659,380 712,685 19%Nevada6 3%750,335 825,163 684,752 766,581 -7%New Hampshire7 13%280,508 309,263 387,264 445,181 44%New Jersey6 1%2,289,181 2,750,024 3,575,130 3,896,778 42%New Mexico8 8%363,827 395,111 443,343 619,582 57%New York9 11%4,833,816 5,016,524 5,918,136 6,749,096 35%North Carolina11 4%2,536,068 2,730,178 3,105,811 3,377,331 24%North Dakota ** * * * * *Ohio12 6%3,237,786 3,278,960 4,150,498 4,255,934 30%Oklahoma12 3%826,637 979,513 1,124,214 1,200,234 23%Oregon8 3%914,848 1,082,425 1,201,207 1,268,909 17%Pennsylvania12 5%2,767,474 3,850,372 4,129,186 4,378,216 14%Puerto Rico5 21% *1,090,005 757,613 1,374,747 26%Rhode Island6 5%279,304 313,550 355,889 401,805 28%South Carolina8 9%1,137,232 1,236,338 1,392,586 1,502,345 22%South Dakota ** * * * * *Tennessee11 1%1,529,054 1,876,444 1,985,851 2,251,208 20%Texas16 5%5,792,453 6,705,423 7,548,537 8,294,338 24%Utah10 3%643,824 692,006 750,244 833,492 20%Vermont ** * * * * *Virgin Islands ** *0 0 * *Virginia11 4%1,860,262 4/2,450,289 2,767,247 N.M.Washington9 4%1,873,475 2,144,767 2,286,082 2,493,214 16%West Virginia9 6%241,265 347,916 392,384 452,036 30%Wisconsin10 7%1,525,818 1,342,908 1,698,520 2,008,679 50%Wyoming4 3%127,634 * *173,939 * Nationwide72 5%79,696,083 90,643,058 101,043,219 114,028,928 26%
N.M. - Not meaningful.
* Data withheld to maintain firm confidentiality.
1/ Carriers with under 10,000 subscribers in a state were not required to report for that state.
2/ Percentage of mobile wireless subscribers receiving their service from a mobile wireless reseller
3/ Data for December 2000 have been revised.
4/ At the end of June 2000, the District of Columbia, Maryland, and Virginia had a total of 4.8 million subscribers. The state-by-state totals for these individual states were inconsistently reported at the end of June 2000 compared to the other filing periods.
Source: Local Telephone Competition: Status as of June 30, 2001, Federal Communications Commission, Feb. 2002 (Table 10: Mobile Wireless Telephone Subscribers).
Table 3: Economic Area Penetration Rates
EAEA NameSubscribers2000 CensusEA penetration rateEA density34Tampa-St. Petersburg-Clearwater, FL920,1702,395,99738%938.010New York-No. New Jer.-Long Island, NY-NJ-CT-PA-MA-VT12,184,29325,712,57747%924.212Philadelphia-Wilmington-Atl. City, PA-NJ-DE-MD3,542,9477,309,79248%802.1161San Diego, CA1,396,3362,813,83350%669.264Chicago-Gary-Kenosha, IL-IN-WI5,051,67610,328,85449%561.231Miami-Fort Lauderdale, FL2,971,4445,602,22253%532.73Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH-RI-VT3,735,2917,954,55447%437.455Cleveland-Akron, OH-PA2,022,2554,692,46043%432.913Washington-Baltimore, DC-MD-VA-WV-PA4,441,0338,403,13053%413.863Milwaukee-Racine, WI951,7402,255,18342%377.757Detroit-Ann Arbor-Flint, MI3,559,0746,963,63751%368.950Dayton-Springfield, OH515,4031,133,00445%319.520Norfolk-Virginia Beach-Newport News, VA-NC805,0411,722,76447%312.349Cincinnati-Hamilton, OH-KY-IN968,4892,184,86044%297.711Harrisburg-Lebanon-Carlisle, PA436,0661,125,26539%295.630Orlando, FL1,653,7703,642,54045%295.033Sarasota-Bradenton, FL237,085763,79531%288.9160Los Angeles-Riverside-Orange County, CA-AZ8,196,65618,003,42046%288.853Pittsburgh, PA-WV1,228,9442,971,82941%286.9163San Francisco-Oakland-San Jose, CA4,505,2799,111,80649%275.040Atlanta, GA-AL-NC3,101,1965,471,41257%250.232Fort Myers-Cape Coral, FL265,565692,26538%244.723Charlotte-Gastonia-Rock Hill, NC-SC1,036,0912,031,51951%244.3133McAllen-Edinburg-Mission, TX285,964978,36929%227.883New Orleans, LA-MS815,1441,725,33847%215.48Buffalo-Niagara Falls, NY-PA481,0331,507,75932%214.462Grand Rapids-Muskegon-Holland, MI745,4521,881,99140%210.9170Seattle-Tacoma-Bremerton, WA2,076,7664,135,29150%196.3164Sacramento-Yolo, CA1,089,9502,311,56747%192.951Columbus, OH1,043,7282,349,06044%191.519Raleigh-Durham-Chapel Hill, NC921,2461,831,51050%191.318Greensboro-Winston-Salem-High Point, NC-VA846,3211,854,85346%190.865Elkhart-Goshen, IN-MI302,732936,24532%188.7172Honolulu, HI678,4411,211,53756%188.641Greenville-Spartanburg-Anderson, SC-NC547,3361,248,82444%188.570Louisville, KY-IN624,4181,416,91444%183.1131Houston-Galveston-Brazoria, TX2,821,1745,632,85350%175.067Indianapolis, IN-IL1,263,3583,066,46941%172.444Knoxville, TN433,719983,32944%172.07Rochester, NY-PA440,5451,493,51830%170.481Pensacola, FL236,009623,25238%169.722Fayetteville, NC218,585528,22441%165.756Toledo, OH528,7911,294,39541%165.626Charleston-North Charleston, SC283,141587,29748%161.066Fort Wayne, IN237,456725,84733%159.8130Austin-San Marcos, TX708,1851,349,26752%158.560Appleton-Oshkosh-Neenah, WI169,589433,25039%156.143Chattanooga, TN-GA301,360720,37542%148.984Baton Rouge, LA-MS337,171739,67346%146.682Biloxi-Gulfport-Pascagoula, MS180,317396,75445%146.545Johnson City-Kingsport-Bristol, TN-VA218,673576,08138%146.278Birmingham, AL774,2171,578,90349%139.35Albany-Schenectady-Troy, NY398,0111,171,66934%139.046Hickory-Morganton, NC-TN176,375519,20834%133.214Salisbury, MD-DE-VA116,455363,97032%131.124Columbia, SC424,353932,11546%130.942Asheville, NC192,505444,59443%129.696St. Louis, MO-IL1,602,3213,558,65145%129.015Richmond-Petersburg, VA690,0321,446,12348%127.152Wheeling, WV-OH99,604327,64530%125.874Huntsville, AL-TN443,660997,82444%123.5127Dallas-Fort Worth, TX-AR-OK3,492,8197,645,53046%121.654Erie, PA146,901519,34828%117.929Jacksonville, FL-GA948,0621,885,19050%117.4102Davenport-Moline-Rock Island, IA-IL222,511558,91340%110.325Wilmington, NC-SC387,544878,26744%109.86Syracuse, NY-PA559,3531,902,64029%107.985Lafayette, LA252,426601,65442%107.171Nashville, TN-KY1,073,9722,444,64344%106.773Memphis, TN-AR-MS-KY844,8601,882,33245%106.02Portland, ME263,474748,81735%104.8103Cedar Rapids, IA182,916384,57748%101.8162Fresno, CA466,2131,419,99833%99.217Roanoke, VA-NC-WV342,689826,28441%98.721Greenville, NC333,540823,51741%96.728Savannah, GA-SC309,941668,21446%95.8158Phoenix-Mesa, AZ-NM1,660,1513,407,19749%94.19State College, PA239,859809,97930%92.8101Peoria-Pekin, IL208,753528,67139%92.487Beaumont-Port Arthur, TX186,769456,63741%92.327Augusta-Aiken, GA-SC261,341604,79943%91.492Fayetteville-Springdale-Rogers, AR-MO-OK153,503405,16038%90.399Kansas City, MO-KS1,337,2132,469,34054%89.7107Minneapolis-St. Paul, MN-WI-IA2,029,3794,498,28645%87.448Charleston, WV-KY-OH381,2951,199,37332%86.039Columbus, GA-AL245,678496,53849%85.6134San Antonio, TX875,6622,141,06041%83.647Lexington, KY-TN-VA-WV564,2821,851,36730%80.9167Portland-Salem, OR-WA1,274,6582,883,73744%77.169Evansville-Henderson, IN-KY-IL329,160854,71439%76.480Mobile, AL256,953676,25838%76.393Joplin, MO-KS-OK92,188263,90435%75.1124Tulsa, OK-KS612,3511,384,42644%74.572Paducah, KY-IL42,471226,58619%74.168Champaign-Urbana, IL231,754630,89837%73.8104Madison, WI-IL-IA352,588933,82338%72.979Montgomery, AL249,504481,13752%67.735Tallahassee, FL-GA326,031720,43445%65.9125Oklahoma City, OK682,5221,698,19740%65.837Albany, GA174,001468,17837%63.838Macon, GA303,464768,70139%63.5118Omaha, NE-IA-MO460,2501,044,15644%62.74Burlington, VT-NY145,021605,39324%61.088Shreveport-Bossier City, LA-AR213,734573,61637%60.3159Tucson, AZ454,852999,88245%60.397Springfield, IL-MO215,021517,46242%58.898Columbia, MO146,327369,01440%58.789Monroe, LA131,988333,51940%57.3106Rochester, MN-IA-WI140,121318,37444%56.286Lake Charles, LA201,460536,75838%55.3105La Crosse, WI-MN61,293241,90325%54.636Dothan, AL-FL-GA121,219332,40936%54.661Traverse City, MI111,359286,74539%52.4141Denver-Boulder-Greeley, CO-KS-NE2,158,5483,984,10554%52.195Jonesboro, AR-MO97,821303,85232%51.816Staunton, VA-WV172,853334,08752%51.177Jackson, MS-AL-LA582,4341,432,51841%50.5119Lincoln, NE168,876379,32145%50.475Tupelo, MS-AL-TN212,847625,00234%50.494Springfield, MO331,637859,55939%48.7132Corpus Christi, TX215,353549,01239%47.791Fort Smith, AR-OK109,451329,13633%47.7100Des Moines, IA-IL-MO726,7051,683,25743%47.690Little Rock-North Little Rock, AR673,9411,614,85042%47.2166Eugene-Springfield, OR-CA314,490791,77640%43.476Greenville, MS54,753252,28022%42.3117Sioux City, IA-NE-SD78,391252,65631%39.6152Salt Lake City-Ogden, UT-ID934,8972,088,97445%37.1123Topeka, KS172,136454,53938%36.0108Wausau, WI153,868487,72332%35.259Green Bay, WI-MI255,114671,22538%35.0157El Paso, TX-NM314,942955,60233%33.158Northern Michigan, MI52,371269,98619%29.9169Richland-Kennewick-Pasco, WA241,690677,67436%28.1137Lubbock, TX152,257374,62641%27.2147Spokane, WA-ID314,010829,73538%23.9153Las Vegas, NV-AZ-UT764,9381,709,79745%23.91Bangor, ME*526,106*22.2156Albuquerque, NM-AZ401,336921,08644%20.9122Wichita, KS-OK436,6811,175,57737%20.6128Abilene, TX69,134222,14731%20.4109Duluth-Superior, MN-WI138,626350,05940%19.8113Fargo-Moorhead, ND-MN142,755371,69138%16.9155Farmington, NM-CO67,869193,87235%16.1116Sioux Falls, SD-IA-MN-NE216,957519,14342%15.4165Redding, CA-OR115,277336,82034%14.7149Twin Falls, ID60,399162,39737%14.1150Boise City, ID-OR239,554574,87642%13.8139Santa Fe, NM98,201258,79038%13.1126Western Oklahoma, OK53,392139,76138%12.1138Amarillo, TX-NM181,305481,63338%11.8120Grand Island, NE115,829288,04740%11.6136Hobbs, NM-TX56,693190,34030%11.2148Idaho Falls, ID-WY117,667306,12038%11.0146Missoula, MT125,030399,18331%10.9110Grand Forks, ND-MN79,630230,25335%10.5135Odessa-Midland, TX150,112388,00739%10.1129San Angelo, TX66,580202,67933%10.1140Pueblo, CO-NM86,666279,60031%8.7168Pendleton, OR-WA60,071200,68130%8.7154Flagstaff, AZ-UT111,854401,76628%8.3142Scottsbluff, NE-WY34,77592,36038%7.8151Reno, NV-CA272,535670,01341%7.6111Minot, ND*111,195*7.2112Bismarck, ND-MT-SD64,536175,42737%6.4114Aberdeen, SD*82,608*5.5143Casper, WY-ID-UT184,959408,70845%5.2115Rapid City, SD-MT-NE-ND66,457213,69631%5.1121North Platte, NE-CO*61,758*5.0144Billings, MT-WY139,481404,90234%4.9145Great Falls, MT48,795166,56429%4.3171Anchorage, AK257,411626,93241%1.1
* Data withheld to maintain firm confidentiality.
Source: Federal Communications Commission internal analysis based on preliminary year-end 2001 filings for Numbering Resource Utilization in the United States. Density is persons per square mile.
Table 4: Top 25 Mobile Telephone Operators by Subscribers
(in thousands)
Year-End 2000Year-End 2001OperatorTotalOperatorTotal1Verizon Wireless27,505 Verizon Wireless29,3982Cingular19,681 Cingular21,5963AT&T15,163 AT&T18,0474Sprint PCS9,543 Sprint PCS13,5555Nextel6,678 Nextel8,6676ALLTEL6,300 VoiceStream6,9937VoiceStream3,879 ALLTEL6,6838US Cellular3,061 US Cellular3,4619Western Wireless1,050 Western Wireless1,17710Powertel908 Leap Wireless1,11911Qwest805 Qwest1,11412CenturyTel751 Telecorp (1)1,01813TeleCorp666 Centennial82714Dobson Comm.654 CenturyTel79715Rural Cellular552 Dobson Comm.70016Price Comm528 Triton PCS68617Centennial665 American Cell.65718Triton PCS446 Rural Cellular64719Cincinnati Bell339 Price Wireless (2)57020PR Tel. Co.335Nextel Partners51621Nextel Partners227 Alamosa PCS50322Midwest Wireless208 Broadwing46223Cellcom190 Airgate45324Leap Wireless190 PrimeCo (3)38525Ntelos168 PR. Tel. Co.327
Sources: For 2000, see Sixth Report, at 13464. For 2001, publicly available company documents such as operators news releases and filings made with the Securities and Exchange Commission. PrimeCo estimate from Paul Wuh et al., United States Cellular Corp. to Acquire PrimeCo in Chicago, Becomes 7th Carrier in Market, Global Equity Research, Goldman Sachs, May 13, 2002, at 2.
Notes
(1) AT&T Wireless acquired TeleCorp in February 2002.
(2) Verizon Wireless has announced plans to acquire Price Wireless.
(3) U.S. Cellular has announced plans to acquire PrimeCo.
Table 5: Estimated Mobile Telephone Rollouts
by Number of Launches by County
Total Number of Providers in a CountyNumber of CountiesPOPs Contained in Those Counties (1)% of Total US POPsSquare Miles Contained in Those Counties% of Total US Square Miles3 or More2164268,270,58294.1%1,746,78649.6%4 or More1615252,857,50588.7%1,193,83333.9%5 or More1125229,432,57980.4%839,93923.9%6 or More670151,497,04253.1%504,77714.3%7 or More21760,507,95121.2%172,2864.9%
Table 6: County Quartiles with Estimated Rollout by at least 3 Mobile Telephone Providers
County Quartile Based on PopulationTotal Number of Counties (2)Number of Counties with at least 3 ProvidersPercent of Counties in Quartile with at least 3 ProvidersTotal POPs in Quartile Counties (1)POPs in Counties with at least 3 ProvidersPercent of Quartile POPs with at least 3 Providers1st Quartile80577596.3%234,640,253231,961,74998.9%2nd Quartile80563278.5%31,425,46625,249,59480.4%3rd Quartile80550963.2%14,146,6989,189,87965.0%4th Quartile80424830.9%5,018,0991,869,36037.3%
Source: Federal Communications Commission estimates based on publicly available information.
Notes:
POPs from the 2000 Census.
United States and Puerto Rico
Table 7: Mobile Telephone Digital Coverage
TechnologyPOPs in Those Areas (1)% of Total POPs (2)Square Miles Contained in Those Counties% of Total Square MilesCDMA 256,427,449 89.9% 1,761,669.9 50.0%TDMA / GSM 265,019,589 92.9% 1,857,545.3 52.8%iDEN 245,068,095 85.9% 1,217,212.7 34.6%Total Digital 276,799,296 97.0% 2,487,809.1 70.7%
Source: Federal Communications Commission estimates based on publicly available information.
Notes:
Broadband PCS and digital SMR licensees are analyzed by county; cellular licensees are analyzed by cellular market areas (CMAs).
POPs from the 2000 Census.
Table 8: Change in CPI
CPICellular CPIAll Telephone CPI Local Telephone CPILong Distance Telephone CPIIndex ValueAnnual ChangeIndex ValueAnnual ChangeIndex ValueAnnual ChangeIndex ValueAnnual ChangeIndex ValueAnnual ChangeDec-97100100100100100Dec-98101.61.6%91.7-8.3%100.30.3%101.31.3%99.9-0.1%Dec-99104.32.7%81.1-11.6%100.70.4%104.22.8%98.6-1.3%Dec-00107.93.4%71.1-12.3%98.4-2.3%110.05.5%89.5-9.2%Dec-01109.51.6%67.2-5.5%99.71.3%114.94.5%87.9-1.8%Dec-97 to Dec-011009.5%100-32.8%100-0.3%10014.9%100-12.1%
Source: Bureau of Labor Statistics.
Table 9: Average Revenue Per Minute
Average Local Monthly BillMinutes of Use Per MonthAverage Revenue Per MinuteAnnual Change1993$61.49 140$0.44 1994$56.21 119$0.47 8%1995$51.00 119$0.43 -9%1996$47.70 125$0.38 -11%1997$42.78 117$0.37 -4%1998$39.43 136$0.29 -21%1999$41.24 185$0.22 -23%2000$45.27 255$0.18 -20%2001$47.37385$0.12 -31%
Source: CTIA, Semi-Annual Mobile Telephone Industry Survey <.http://www.wow-com.com/wirelesssurvey/> (average local monthly bill); June 2001 CTIA Survey (results through 2000), at 168-169 (minutes of use); Todd Rethemeier et al, Talk is Cheaper, Demand is Steeper, Bear Sterns, Equity Research, May 21, 2002, at 1 (citing CTIA 2001 minutes of use).
Table 10: Rural vs. Urban Pricing
Average Monthly Charge for Wireless Service
Comparison Across Market Groups Surveyed
October 2001
October 2001 70 % PeakMinutes of Usage Per Month30150300600Average(Dollars Per Month)Top 25 Markets$23.46$34.69$39.79$51.61$37.39Rural Markets$23.52$31.09$36.34$54.39$36.34Large-Market Premium-$0.07$3.60$3.45-$2.78$1.05% Difference-0.3%11.6%9.5%-5.1%2.9%
Source: Charles R. Mahla, Public Forum For the 7th Annual CMRS Competition Report, Presentation, Econ One Research, Inc., Feb. 28, 2002, at slide 12 (available at http://wireless.fcc.gov/services/cmrs/presentations/).
Table 11: First Cellular Of Illinois Per Minute Pricing
1995-2001
Source: Terry Addington, CEO of First Cellular of Southern Illinois, handout presented at the CMRS Public Forum, Feb. 28, 2002.
Table 12: U.S. Mobile Telephone Operators
Holdings in Foreign Mobile Operators
OperatorCountrySubscribers
(Brand name)VentureOwnership (%)SBCFrance11.646 millionCegetel (owns 80% of cellular company Societe Francaise de Radiotelephone)15 (through JV with Vivendi)Denmark1.918 millionTele Danmark41.6Belgium4.098 million
(Proximus)Belgacom17.5 (controls 24.36% through investment in Tele Danmark, which owns 16.5% of Belgacom)South Africa5.919 million (Vodacom)Telkom SA(owns 50% of Vodacom)18Canada2.789 million
(Bell Mobility)Bell Canada20Mexico16.103 million
America Movil8BellSouthUruguay138,000
(Movicom)Abiatar46Guatemala75,000 BellSouth Guatemala60Nicaragua157,000Nicacell89Ecuador344,000Otecel89.4Panama293,000BellSouth Panama43.7Brazil (Sao Paulo)1.781 millionBCP45.4Brazil (northeast)942,000BCP47.1Venezuela3.106 millionTelcel78.2Argentina1.588 millionMovicom/
BellSouth65Chile860,000BellSouth Chile100Columbia1.126 millionCelumovil66Peru404,000Tele 200097.4Denmark810,251Sonafon46.5Israel1,856,488Cellcom34.7AT&TCanada3 million Rogers Wireless34.4India176,800Birla-AT&T-Tata33Taiwan3.211 millionFarEasTone22.7Czech Republic2.11 millionEuroTel Praha24.5Slovakia493,030EuroTel Bratislava24.5India606,200
(BPL Mobile)BPL Cellular49VerizonItaly>17 millionOmnitel Pronto Italia23.1Mexico1.9 millionIusacell39.4Czech Republic2.11 millionEuroTel Praha24.5Slovakia493,030EuroTel Bratislava24.5Greece1.645 millionSTET Hellas17.5Indonesia765,000Excelcomindo23.1Japan3.84 millionTu-Ka2.7-5New Zealand1.2 millionTelecom New Zealand21.5Philippines26,000
(Extelcom)BayanTel (owns 46.6% stake in wireless provider Extelcom)19.4Argentina1.1 million
(CTI Movil)CTI Holdings65.3Canada2.5 millionTELUS Corporation23.7Venezuela2.5 millionCANTV28.5Taiwan6.6 millionTaiwan Cellular Corporation13Dominican Republic550,000CODETEL100Western Wireless InternationalIreland
802,000 for all foreign venturesLaunched 2/01Meteor 78Iceland55,000TAL57.3Austria200,000tele.ring100SloveniaLicensed 11/00Western Wireless100Croatia470,000VIPnet19GeorgiaNAMagtiCom14.5GhanaNAWestern Telesystems56.7Cote dIvoireLaunched 9/00CORA de Comstar40BoliviaLaunched 11/00NuevaTel67HaitiNACOMCEL51Nextel InternationalCanada2.156 millionTELUS Corp.4.8Japan49,000NEXNET Co.32Argentina134,000Nextel Communications Argentina100Brazil322,000Nextel Telecomunicacoes100Mexico218,000Nextel De Mexico100Peru68,000Nextel del Peru100Philippines42,000Nextel Communications Philippines, Inc.51
Sources: Publicly available information such as operators news releases, web sites, filings with the Securities and Exchange Commission, and the web site of the European Radiocommunications Office.
Table 13: International Comparisons of Mobile Pricing
CountryBusiness
Mobile BasketResidential
Mobile BasketRevenue Per MinuteAustralia$759$172$0.18Japan$907$347$0.33New Zealand$1659$368$0.15South Korea$1039$357$0.19Asia-Pacific Average$1091$311$0.21Austria$736$387Belgium$860$266Denmark$945$183Finland$1074$152France-Orange, Forfait 2H$1063$406$0.20France-Orange, Forfait 5H$790$683Germany$1124$299$0.20Greece$1262$308$0.28Iceland$815$167Ireland$1157$257Italy$1556$345$0.21Luxembourg$690$184Netherlands$790$269Norway$717$214Portugal$1252$388$0.21Spain$1618$323$0.23Sweden$1257$206Switzerland$1046$284U.K.-BT$1006$339$0.21U.K.-Vodafone$1047$331West European Average$1040$299$0.22Canada$1026$422$0.13U.S.A.-Qwest$772$415$0.16U.S.A.-Sprint$692$479
Sources: The mobile baskets are from Teligen T-Basket Mobile (GSM/PCS) Basket, Teligen Limited, Feb. 2002; the Revenue Per Minute estimates are from Adam Quinton et al, Wireless Matrix 3Q01, Global Equity Research, Merrill Lynch, Jan. 2002, at 3.
APPENDIX D:PRIVATE
MOBILE DATA
Table of Contents
Table 1: 3G Spectrum Licensing Abroad D-2
Table 2: Mobile Internet Access Services D-5
Table 3: Bluetooth-Enabled Devices D-8
Table 4: Telemetry Services D-9
Table 1: 3G Licensing Abroad
Country
(status)Spectrum
(MHz)Number of LicensesAssignment
MethodAuction Revenue
Or License Fee
(US Dollars)Austria
(Awarded November 2000)1454-6
(6 awarded)Auction
$618m Australia
(Awarded March 2001)140 in capital cities4 or more
(6 awarded)Auction$580m110 in Canberra3 or more
(5 awarded)40 in regional areas2 or more
(3 awarded)Belgium
(Awarded March 2001)
140
(105 sold)4
(3 awarded)Auction$413mDenmark
(Awarded September 2001)
1404Auction$472mFinland
(Awarded March 1999)1404Beauty contestAnnual spectrum fee of $890 per 25 KHz (licenses awarded free of charge)France
(Awarded May 2001)1404
(2 bids received)Beauty contest$535m per license + 1% of annual revenueGermany
(Awarded August 2000)1454-6
(6 awarded)Auction$46.11bnGreece
(Awarded July 2001)1404
(3 awarded)Auction$414.1mHong Kong
(Awarded September
2001)1404Combination
(prequalifica tion followed by auction) 5% of 3G revenue over 15 years, with minimum of $6.4m per year in first 5 yearsItaly
(Awarded October 2000)145
5Combination (prequalification beauty contest followed by auction)$10.04bnIreland
(Expected June 2002)1404Beauty contest$43.6m (A license) or $98.3m (B licenses) + $1.91m annual feeJapan
(Awarded July 2000)1203Beauty contestNo feesNetherlands
(Awarded July 2000)145
5Auction$2.5bnNew Zealand
(Awarded January 2001)1054Auction$51.4mNorway
(Awarded November 2000)1404Beauty contest$92m + annual fee of $2.2m per licensePortugal
(Awarded November 2000)140 4Beauty contest$342.4m + annual feeSingapore
(Awarded April 2001)1404
(3 awarded)Auction
$173.4mSouth Korea
(Awarded December 2000 and August 2001)Not available3
Beauty contest$3.3bnSpain
(Awarded March 2000)1404Beauty contest
$446.5m + annual fee Sweden
(Awarded December 2000)1404Beauty contest$107,000 + 0.15% of annual revenuesSwitzerland
(Awarded December 2000)1404Auction$120mTaiwan
(Awarded Feb. 2002)1705Auction$1.4bnUK
(Awarded April 2000)1405
Auction$35.361bn
Sources: Publicly available information such as web sites of national regulatory authorities, the EU Commission, and the ITU.
Table 2: Mobile Internet Access Services
ProviderService NameDevice(s)Price
($ per month)Mess-
agingWebE-mailNotesALLTELWeb-UnwiredMobile handsets $5.95, free for the first monthUsers can customize their wireless web home pages to include pertinent information and tools, such as a list of bookmarks.AOL Mobile CommunicatorRIM 2-way messaging device$29.95Users can access AOL IM and e-mail messages from an AOL account.Arch WirelessWebster 100Motorola T900$9.95-$59.95 for 10,000 characters to unlimited messagingUsers can have messages from existing e-mail accounts forwarded to the device, exchange IMs, and receive information updates.AT&T Wireless2-Way Text Messaging/AIMMobile handsets10 per sent message or AIM command
25 per message when roamingReceive unlimited messages with both pricing plans. Send text messages to any digital network.$4.99 for 100 sent messages, 10 thereafter or per AIM commandPocketNetMobile handsets $0-$14.99Basic free service includes access to over 80 web sites.
Plus and Premium plans include access to all web sites, email, calendar, contact list, and other features.Mobile Internet (GSM/GPRS Network)Mobile handsets, wireless modem card $29.99 for up to 5MB + .7 per extra KBGSM/GPRS network with speeds bursting up to 144 kbps. $39.99 and up Bundled voice and data plans that include 1 MB + voice minutesCingular Wireless2-Way Text Messaging/MSN MessengerMobile handsets $2.99 for 100 messages
$5.99 for 250 messages
$9.99 for 500 messages
10 per additional messageSend and receive up to 150 characters on any carriers network.Wireless InternetMobile handsets $6.99-$13.99, includes 100 to 500 messagesProvides content such as movie listings, stock quotes, news, weather and yellow pages.Wireless Internet ExpressMobile handsets $14.99-$21.99 for 500 KB + 100 to 500 messagesProvides content via GPRS network.EarthLinkEarthLink Wireless Servicevarious PDAs, Motorola 2-way pager $39.99 (most PDAs)
RIM: $9.95 beyond BlackBerry
Compaq: $59.99 Motorola: $24.95Prices are slightly lower with an annual prepaid service contract.
GoAmerica Go.Webvarious PDAs, laptops $49.95 unlimited RIM: $24.95 beyond BlackBerryUsers can access existing POP3 e-mail accounts.MetrocallMy2WayMotorola T900, P935$19.95-$49.95 for 1000-3500 messagesMy eLinkRIM 850$49.95 unlimitedMotienteLinkRIM 850, RIM 857, Palm V with wireless modem $49.99 unlimited
$19.99 for 150,000 characters + $0.20 per addl KBForwards messages from an existing POP or IMAP e-mail account to the device; web browsing from Go.WebNextelNextel OnlineMobile handsets $5.00, free with national plans Access to wireless-enabled websites and Microsoft Hotmail account. Plan includes 300 text messages per month.Nextel Online PlusMobile handsets $10.00Access to wireless-enabled websites, email, calendar, and contact list. Plan includes 300 text messages per month.Two-way MessagingMobile handsets $5.00, unlimited usageSend and receive email, text, and numeric messages.PalmPalm.netPalm i705
Palm VII $9.99 50 KB
$24.99 150 KB
$44.99 unlimited Service on Palm i705 includes access to AIM.RIMBlackBerryRIM PDAs $39.99Allows integration with existing e-mail accounts. SkyTeleChatMotorola T900 $14.95 - $29.98 for 500 - 2000 messagesIndividual messages have a 500-character limit.Mobile MailRIM 850, RIM 857 $49.95 unlimitedE-mail messages can be up to 2,000 characters long.BlackBerry by SkyTelRIM 850, RIM 857 $49.99 unlimitedAllows integration with existing e-mail accounts. Two-way messaging with other SkyTel and RIM users included.Sprint PCSWireless Web OptionMobile handsets From $9.99 with Sprint PCS calling planCalling plan minutes can be used for either calls or Internet. Includes 50 wireless web updates.Wireless Web ConnectionLaptops and handhelds 39 per minuteUses Sprint PCS phone and connection kit to wirelessly connect laptops and handhelds to the Internet.Wireless Web Short MailWAP-enabled Mobile handsets From $5.00 with Sprint PCS calling plan or 39 per minuteCalling plan minutes can be used for either calls or Short Mail messages. Messages are sent via email.Verizon Wireless2-Way Text MessagingMobile handset 2 send/10 receive
$2.99 for 100 messages
$7.99 for 600 messages120 character text messaging on the Verizon Wireless network.Mobile WebMobile handset $6.95 to $12.95 for web access and 100 to 600 alerts.Allows users to customize content, either with a handset or through a wired PC at MyVZW.com, Verizons portal.Mobile Web PlusKyocera QCP-6035 smartphone $9.95Service for Smartphones. Allows access to up to 6 POP3 email accounts.Express Network1XRTT mobile handset, wireless modem card Plans start at $35 for 10 MB or $30 for unlimited downloads when purchased with a voice plan.Using the CDMA2000 1xRTT network, average data rates are 40-60 kbps. Verizon Wireless claims speeds up to 144 kbps.VoiceStreamiStream Smartphone, PDA, and laptop $2.99 for Smartphones
$19.99 for PDAs
$39.99 for laptopsPrices and conditions vary by device. Each plan includes an allotment of MB, and the option to use more MB for an additional fee. Each plan also includes 300 Ping Pong text messages.AOL Instant Messenger Mobile handset $2.99 for 500 messagesCustomers keep in touch with buddies using AIM. WebLink Wireless2-Way MessagingMotorola T900 $14.95-$29.95 for 500-3000 messagesRemote E-mail ManagerMotorola T900 $2 in addition to 2-way messaging plan, free for Deluxe 2-Way subscribersUsers can have e-mail messages from existing accounts forwarded to the T900.
Sources: The information provided above is illustrative of Internet access services provided by mobile telephone operators in 2000 and should not be considered an exhaustive list. Information is based on publicly available company documents such as news releases, company web sites, SEC filings, and newspaper and periodical articles.
Table 3: Bluetooth-Enabled Devices
CompanyProduct NameProduct TypeATO Technology Ltd.ATO Bluetooth HeadsetMobile phone accessoryCompaqiPAQ Pocket PCMobile computerEpsonPrint AdapterOffice equipmentEricssonMobile Telephone T68iMobile phoneBluetooth Headset HGH-20Mobile phone accessoryFujitsuModem Access PointComputer accessoryData Access PointOffice equipmentINVENTEL SYSTEMESBlueDSL and EtherBlueComputer accessoryMotorolaHandsfree Car KitMobile phone accessoryTimeport 270Mobile phonePhone Module and Phone Module IIMobile phone accessoryClip-on AccessoryMobile phone accessoryNokiaModels 6310 and 6310iMobile phoneConnectivity BatteryMobile phone accessorySamsungSamsung Bluetooth PCS PhoneMobile phoneSonyDigital Video Camera RecorderCameras and videoToshibaUbiquitous HeadsetAccessoryRefrigerator-freezerHome environment equipment
Sources: The information provided above is illustrative of the qualified Bluetooth-enabled devices available from equipment manufacturers and should not be considered an exhaustive list. Information is based on the Bluetooth Qualification web site: .
Table 4: Telemetry Services
CompanyStatusSchlumberger5 million wireless telemetry customers in North America connected as of February 2001.ItronOffers AMR exclusively; had connected 17.6 million AMR units at YE 2001 to over 625 utilities in North America.Aeriss MicroBurstLeases the control channel of cellular networks from cellular carriers covering all of North America. During 2001, Aeris signed the following agreements with telemetry providers: American Innovations Team to monitor 2 million miles of gas and oil pipelines; Notifact to allow Invensys Energy Systems to remotely control and monitor lighting systems at Albertsons 250 supermarket locations in California; Beacon Wireless Solutions to provide monitoring and security services for boats.NumereXs Cellemetry Data ServiceLeases capacity from cellular carriers covering 99 percent of U.S. cellular markets. Provides two-way, wireless data connectivity for a variety of machine-to-machine communications that remotely monitor, measure, or track fixed and mobile assets. Numerex has signed agreements with Vermeer Manufacturing allowing Vermeer to provide a fleet management system in order to track and monitor its equipment, and with InterTrak to provide security and tracking support in the deployment of InterTracks GPS Satellite Tracking System. WebLink WirelessIts telemetry business unit, Wireless Control Systems, sells the use of its narrowband PCS spectrum for remote monitoring services; has contracts to deploy security alarm monitoring and HVAC control systems. MotientOffers telemetry services such as AMR, asset tracking, and vending machine monitoring. Cingular WirelessResells Mobitex network to telemetry providers, such as alarm, billboard sign, and vending machine monitoring companies. SkyTel ReFLEX Telemetry ServicesOffers telemetry services for nearly any type of machine measurement system, including utility meters, vending machines, vehicles, and health care devices. Uses narrowband PCS spectrum, satellite backhaul, and CreataLink2 XT wireless data transceiver devices to monitor and transmit remote data for its customers.
Sources: Information is based on publicly available documents such as news releases, newspaper and periodical articles, company web pages, and SEC filings.
APPENDIX E:PRIVATE
MAPS
Table of Contents
Map 1: Mobile Telephone Operator Coverage Estimated by County E-2
Map 2: A-Side Cellular Coverage E-3
Map 3: B-Side Cellular Coverage E-4
Map 4: Mobile Telephony Penetration Estimated by Economic Area E-5
Map 5: Estimated Rollout with Any Digital Coverage E-6
Map 6: Estimated Rollout with CDMA-Based Coverage E-7
Map 7: Estimated Rollout with TDMA/GSM-Based Coverage E-8
Map 8: Estimated Rollout with iDEN-Based Coverage E-9
Map 9: Estimated Rollout of GPRS and cdma2000 1xRTT Networks E-10
Map 10: Lowerband Fixed Wireless Internet Access Rollout Estimated by County E-11
Table 1: Geographic Licensing Schemes E-12
Map 11: Basic Trading Areas. E-13
Map 12: Major Trading Areas. E-14
Map 13: Cellular Market Areas. E-15
Map 14: Economic Areas. E-16
Map 1
Map 2
Map 3
Map 4
Map 5
Map 6
Map 7
Map 8
Map 9
Map 10
SHAPE \* MERGEFORMAT
Table 1: Geographic Licensing Schemes
Geographic Licensing SchemesNumber of Market AreasNoteBasic Trading Areas (BTAs)493BTAs make up MTAsMajor Trading Areas (MTAs)51Cellular Market Areas (CMAs)734Also known as MSAs and RSAsEconomic Areas (EAs)175
Map11
Map 12
Map 13
Map 14
Commercial Mobile Services came to be known by the Commission as the Commercial Mobile Radio Services, or CMRS.
The Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66, Title VI, 6002(b), amending the Communications Act of 1934 and codified at 47 U.S.C. 332(c).
Id. codified at 47 U.S.C. 332(c)(1)(C).
See Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report and Analysis of Competitive Market Conditions with Respect to Commercial Mobile Services, Fourth Report, 14 FCC Rcd 10145 (1999) (Fourth Report); Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report and Analysis of Competitive Market Conditions with Respect to Commercial Mobile Services, Fifth Report, 15FCC Rcd 17660 (2000) (Fifth Report); Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report and Analysis of Competitive Market Conditions with Respect to Commercial Mobile Services, Sixth Report, 16FCC Rcd 13350 (2001) (Sixth Report).
This report, like the others before it, discusses CMRS as a whole because Congress called on the Commission to report on competitive market conditions with respect to commercial mobile services. 47 U.S.C. 332 (c)(1)(C). Any individual proceeding in which the Commission defines relevant product and geographic markets, such as an application for approval of a license transfer, may present facts pointing to narrower or broader product markets than any used, suggested, or implied in this report.
47 C.F.R. 20.9(10).
See, e.g., Section REF _Ref4833318 \w \h \* MERGEFORMAT II.A.2.b, REF _Ref4833350 \h Satellite Operators, infra, which includes a discussion of satellite services that are regulated as commercial mobile radio services as well as satellite services that may compete with CMRS, even though they are not subject to the CMRS rules.
See Section REF _Ref4833512 \w \h II.A.1.b, REF _Ref4833527 \h Market Performance, infra, for a detailed discussion.
See Wireless Telecommunications Bureau Announces Agenda and Speakers For Public Forum For The 7th Annual Commercial Mobile Radio Services Competition Report, Public Notice, DA 02-422 (rel. Feb. 25, 2002). See Commercial Mobile Radio Services (CMRS) Competition Report Public Forum for access to participants presentations and forum transcript. The transcript of the forum can be found at Public Hearing for 7th Annual CMRS Competition Report: Transcript of the Days Event (visited Mar. 14, 2002) (Transcript).
For purposes of this report, the Commission defines the mobile telephone segment to include the provision of mobile telephony services by cellular, broadband Personal Communications Services (broadband PCS or PCS), and digital Specialized Mobile Radio (SMR) operators. The Commission recognizes that other formulations have been used in specific adjudications and that the Commission may determine in the future that these definitions should be revised.
Mobile data service is the delivery of non-voice information to a mobile device and includes everything from paging messages to web access on a mobile phone to e-mail delivery.
See Section REF _Ref9927746 \r \h II.A.1.a(ii), REF _Ref9927761 \h Building Nationwide Networks, infra.
Generally, footprint is an industry term of art referring to the total geographic area in which a wireless provider offers service or is licensed to offer service.
See Section II.B.1.a, Mobile Data Domestic Developments, and note NOTEREF _Ref6799234 \h 367, infra.
See Section II.B.1.a, Mobile Data Domestic Developments, infra.
See Section II.B.2.a, Mobile Data Mobile Telephone Sector, infra.
See Section II.B.1.a, Mobile Data Domestic Developments, infra.
The terms PDA, handheld, handheld PDA, and handheld device are used interchangeably throughout this report.
Most of the data in this report, except where noted, are taken from publicly-available sources. These sources include: trade associations, securities analysts, company releases and web sites, filings with the Securities and Exchange Commission (SEC), newspaper and periodical articles, and certain materials made available to the Commission that were prepared by research companies and consultants that study various aspects of the wireless industry. The accuracy of the data from these materials, however, was not independently verified by the Commission. The inclusion of these data in this report does not constitute a representation or warranty by the Commission of their accuracy or completeness.
See Appendix C, Table 1, at C-2.
See Section REF _Ref4833717 \w \h II.A.1.b(i), REF _Ref4833735 \h Subscriber Growth, infra.
Id.
See Section REF _Ref483803446 \r \h II.A.1.b(vi), REF _Ref483803446 \h Market Entry, infra, for a detailed discussion.
See Appendix C, Table 4, at C-5.
Id.
Id.
The four main digital technologies used in the United States are: Code Division Multiple Access (CDMA), Global System Mobile Communications (GSM), integrated Digital Enhanced Network (iDEN), and Time Division Multiple Access (TDMA).
See Section REF _Ref510602760 \w \h II.A.1.c, REF _Ref4833831 \h Digital Deployment, infra, for a detailed discussion.
See Section REF _Ref510602025 \w \h II.A.1.d, REF _Ref510601972 \h Pricing Data and Trends, infra, for a detailed discussion of price competition.
Id.
Id.
For purposes of this report, advanced wireless services is used to describe the next-generation mobile network technologies of GPRS and cdma2000 1xRTT (also referred to as cdma2000 1X or 1xRTT). This term is used because there is debate in the industry as to which next-generation mobile network upgrades constitute 3G. As explained in the Sixth Report, Third Generation, or 3G, generally refers to high-speed advanced mobile data services and the next generation of technologies beyond the 2G technologies of CDMA, TDMA, GSM, and iDEN that will make such services possible. See Sixth Report, at 13356. 3G speeds are expected to reach 2 megabits per second (Mbps) from a fixed location, 384 kbps at pedestrian speeds, and 144 kbps at traveling speeds of 100 kilometers per hour. See Fifth Report, at 17695. In the United States, GSM/TDMA carriers are deploying GPRS as an interim technology, also often referred to as a 2.5G technology because most currently plan to use GPRS in migrating from 2G to 3G. GPRS is a packet-based data-only network upgrade that allows for faster data rates by aggregating up to eight 14.4 kbps channels. See Fifth Report, at 17700. See also, note NOTEREF _Ref514761638 \h 399, infra. Most U.S. GSM/TDMA carriers plan to deploy Enhanced Data Rates for GSM Evolution (EDGE) and eventually Wideband CDMA (WCDMA, also known as Universal Mobile Telecommunications System, or UMTS). CDMA carriers are upgrading to cdma2000 1xRTT, a network technology that doubles voice capacity and allows maximum data throughput rates of up to 144 kbps. Many in the industry describe 1xRTT as a 2.5G technology, while some CDMA carriers and equipment manufacturers characterize it as the first step in 3G deployment. Beyond 1xRTT, the major CDMA carriers have plans to build out cdma2000 EV-DO and/or cdma2000 1X-EV, which will reportedly increase maximum data transfer speeds to 2.4 Mbps. See Section II.B.2.a, Mobile Data Mobile Telephone Sector, infra, for a more detailed discussion.
See Section II.B.2.b.(i), Smartphones, infra.
See Fourth Report, at 10151-10152, and Fifth Report, at 17668.
See 47 C.F.R. 22.900, 24.200, 90.601.
See Appendix E, Table 1 and Maps 11-14, at E-12 E-16, for descriptions and maps of various geographical licensing schemes employed by the Commission.
Under the original cellular licensing rules, one of the two cellular channel blocks in each market (the B block) was awarded to a local wireline carrier, while the other block (the A block) was awarded competitively to a carrier other than a local wireline incumbent. After awarding the first 30 MSA licenses pursuant to comparative hearing rules, the Commission adopted rules in 1984 and 1986 to award the remaining cellular MSA and RSA licenses through lotteries. By 1991, lotteries had been held for every MSA and RSA, and licenses were awarded to the lottery winners in most instances. In some RSA markets, however, the initial lottery winner was disqualified from receiving the license because of a successful petition to deny or other Commission action. Implementation of Competitive Bidding Rules to License Certain Rural Service Areas, Report and Order, 17 FCC Rcd 1960, 1961-1962 (2002). In 1997, the Commission auctioned cellular spectrum in areas unbuilt by the original cellular licensees. See FCC, Auction 12: Cellular Unserved (visited Apr. 12, 2002) < HYPERLINK "http://wireless.fcc.gov/auctions/12/" http://wireless.fcc.gov/auctions/12/>. In 2002, the Commission auctioned three RSA licenses where the initial lottery winner had been disqualified. See FCC, Auction 45: Cellular RSA (visited June 7, 2002) < HYPERLINK "http://wireless.fcc.gov/auctions/12/" http://wireless.fcc.gov/auctions/45/>.
See Section REF _Ref4833831 \r \h II.A.1.c, REF _Ref4833831 \h Digital Deployment, infra.
The first auction was for two license blocks of 30 megahertz each. FCC Grants 99 Licenses For Broadband Personal Communications Services In Major Trading Areas, News Release, Federal Communications Commission, June 23, 1995. The Commission has had five additional broadband PCS auctions. See Federal Communications Commission, Completed Auctions (visited Apr. 13, 2001) < HYPERLINK "http://www.fcc.gov/wtb/auctions/serv8.html" http://www.fcc.gov/wtb/auctions/serv8.html>. Three licenses were also awarded as part of a pioneer preference program in 1994. Three Pioneer Preference PCS Applications Granted, News Release, FCC, Dec. 14, 1994.
See Sixth Report, at 13368.
The Commissions broadband PCS allocation includes 20 megahertz of spectrum at 1910 MHz - 1930 MHz for unlicensed broadband PCS. Unlicensed broadband PCS is used for short-range communications such as wireless private branch exchanges. Such systems operate with very low power and have a limit on the duration of transmissions.
Major Trading Areas are Material Copyright (c) 1992 Rand McNally & Company. Rights granted pursuant to a license from Rand McNally & Company through an arrangement with the Federal Communications Commission. Rand McNallys MTA specification contains 47 geographic areas covering the 50 states and the District of Columbia. For its spectrum auctions, the Commission has added three MTAlike areas: Guam and the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands, and American Samoa. In addition, Alaska was separated from the Seattle MTA into its own MTAlike area. MTAs are combinations of two or more Basic Trading Areas (BTAs). BTAs are Material Copyright (c) 1992 Rand McNally & Company. Rights granted pursuant to a license from Rand McNally & Company through an arrangement with the Federal Communications Commission. BTAs are geographic areas drawn based on the counties in which residents of a given BTA make the bulk of their shopping goods purchases. Rand McNallys BTA specification contains 487 geographic areas covering the 50 states and the District of Columbia. For its spectrum auctions, the Commission added additional BTA-like areas for: American Samoa; Guam; Northern Mariana Islands; San Juan, Puerto Rico; Mayagez/AguadillaPonce, Puerto Rico; and the U.S. Virgin Islands.
In June 1998, broadband PCS C block licensees were permitted to elect to disaggregate their licenses and return 15 megahertz of C block spectrum to the Commission. As a result, a number of licensees elected to disaggregate some or all of their licenses, creating some BTAs with seven broadband PCS spectrum licenses. See Amendment of the Commissions Rules Regarding Installment Payment Financing for Personal Communications Services (PCS) Licensees, Second Report and Order and Further Notice of Proposed Rule Making, 12 FCC Rcd 16436 (1997); Amendment of the Commissions Rules Regarding Installment Payment Financing for Personal Communications Services (PCS) Licensees, Order on Reconsideration of the Second Report and Order, 13 FCC Rcd 8345 (1998). In August 2000, the Commission decided to reconfigure each 30 megahertz C block license available for auction, beginning with Auction No. 35, into three 10 megahertz licenses. Amendment of the Commissions Rules Regarding Installment Payment Financing for Personal Communications Services (PCS) Licensees, Sixth Report and Order and Order on Reconsideration, 15 FCC Rcd 16266, 16267 (2000).
The 900 MHz SMR band refers to spectrum allocated in the 896-901 and 935-940 MHz bands; the 800 MHz band refers to spectrum allocated in the 806-824 and 851-869 MHz bands. See 47 C.F.R. 90.603; see also 47 C.F.R. 90.7 (defining specialized mobile radio system).
The Commission has held multiple auctions for SMR licenses. FCC, FCC Auctions (visited Mar. 7, 2002) .
There are five megahertz in the 900 MHz band (200 paired channels x 12.5 kHz/channel). See 47 C.F.R. 90.617, Table 4B. There are 21.5 megahertz in the 800 MHz band: 14 megahertz in the 800 SMR Service (280 paired channels x 25 kHz/channel) and 7.5 megahertz in the 800 MHz General Category (150 paired channels x 25 kHz/channel). See 47 C.F.R. 90.615, Table 1 (SMR General Category) and 47 C.F.R. 90.617, Table 4A (SMR Service). In 2000, the Commission amended its rules to allow Business and Industrial/Land Transportation licensees in the 800 MHz band to use their spectrum for CMRS operations under certain conditions. Implementation of Sections 309(j) and 337 of the Communications Act of 1934 as Amended Promotion of Spectrum Efficient Technologies on Certain Part 90 Frequencies; Establishment of Public Service Radio Pool in the Private Mobile Frequencies Below 800 MHz; Petition for Rule Making of The American Mobile Telecommunications Association, Report and Order and Further Notice of Proposed Rule Making, 15 FCC Rcd 22709, 22760-61 (2000). This could make up to five megahertz of additional spectrum available for digital SMR providers: 2.5 megahertz in the Industrial/Land Transportation Category (50 paired channels x 25 kHz/channel) and 2.5 megahertz in the Business Category (50 paired channels x 25 kHz/channel). See 47 C.F.R. 90.617, Tables 2A and 3A.
Principles for Reallocation of Spectrum to Encourage the Development of Telecommunications Technologies for the New Millennium, Policy Statement, 14 FCC Rcd 19868 (1999); see also Applications of Various Subsidiaries and Affiliates of Geotek Communications, Inc., Debtor-In-Possession, Assignors, and Wilmington Trust Company or Hughes Electric Corporation, Assignees, For Consent to Assignment of 900 MHz Specialized Mobile Radio Licenses, Memorandum Opinion and Order, 15 FCC Rcd 790, 802 (2000).
Dispatch services allow two-way, real-time, voice communications between fixed units and mobile units (e.g., between a taxicab dispatch office and a taxi) or between two or more mobile units (e.g., between a car and a truck). See Fifth Report, at 17727-17728, for a detailed discussion. A number of providers continue to provide both commercial and private dispatch services at 800 MHz, 900 MHz, 220 MHz, 217-219 MHz, and 450-470 MHz. See Applications of Motorola, Inc.; Motorola SMR, Inc.; and Motorola Communications and Electronics, Inc. Assignors; and FCI 900, Inc., Assignee, For Consent to Assignment of 900 MHz Specialized Mobile Radio Licenses, Order, 16FCC Rcd 8451 (2001) (Motorola Order). Dispatch and SMR are often used interchangeably, although SMR refers to specific spectrum ranges.
See The Strategis Group, The State of the SMR Industry: Nextel and Dispatch Communications (Sept. 2000), at 57; The Strategis Group, U.S. Dispatch Markets (Jan. 2000), at 1. See also Motorola Order, at 8457.
According to Nextel, [We are] referred to as an SMR provider . . ., although [our] services compete directly with and are regulated virtually identically to those of cellular and PCS providers. Nextel, Automatic and Manual Roaming Obligations Pertaining to Commercial Mobile Radio Services, Comments, WT Docket No. 00-193, at note 4 (filed Jan. 5, 2001). However, in comparison with cellular and broadband PCS providers, digital SMR providers are more focused on the business than the individual consumer market. See, e.g., Nextel Communications, Inc., SEC Form 10-Q, Nov. 14, 2000, at 16.
Trunked dispatch, which refers to dispatch offered on systems allowing automatic sharing of multiple radio channels, is available on spectrum allocated in the 217-219, 220-222, and 450-470 MHz frequency bands. See Motorola Order, at 8460-8462 for a detailed discussion.
Id., at 8462-8463.
Some markets may have fewer than eight active licenses because certain auction winners have defaulted on payments to the Commission, because some licensees did meet their buildout requirements, because some licensees returned their licenses, or because some licenses went unsold in auction.
47 C.F.R. 24.714 (PCS); 47 C.F.R. 22.948 (cellular); 47 C.F.R. 22.948, 90.813, and 90.911 (auctioned SMR). As a result of partioning and disaggregation, there often are more than eight cellular and broadband PCS licenses in a market.
No more than 10 megahertz of SMR spectrum is attributable to an entity under the cap. 47 C.F.R. 20.6(b).
47 C.F.R. 20.6(a).
2000 Biennial Regulatory Review Spectrum Aggregation Limits For Commercial Mobile Radio Services, Report and Order, 16 FCC Rcd 22668 (2001), petitions for reconsideration pending (Spectrum Cap Order). The increase to 55 megahertz took effect February 13, 2002. See 67 Fed. Reg. 1626 (Jan. 14, 2002). All license transfers are still subject to review by the Commission to determine whether they are in the public interest. Spectrum Cap Order, at 22670-22671.
Spectrum Cap Order, at 22669-22670.
Sprint PCS is a division of Sprint Corp. (Sprint). See Sprint Corp., SEC Form 10-K, Mar. 4, 2002, at 3.
Verizon Wireless is a joint venture of Verizon Communications, Inc. (Verizon) and Vodafone Group PLC (Vodafone). Verizon owns 55 percent of Verizon Wireless, and Vodafone owns 45 percent. See Verizon Communications, Inc., SEC Form 10-K, Mar. 20, 2002, at 10.
VoiceStream is a wholly-owned subsidiary of Deutsche Telekom AG (Deutsche Telekom). See Sixth Report, at 13364. Deutsche Telecom is in the process of phasing out its VoiceStream brand in favor of its worldwide T-Mobile name, to be completed by the end of 2002. T-Mobile replaces VoiceStream By Years End, WirelessNow, Feb. 15, 2002 (citing a report in The Seattle Times).
Cingular Wireless is a joint venture of SBC Communications, Inc. (SBC) and BellSouth Corporation (BellSouth). See Sixth Report, at 13363-64.
In addition, based on FCC internal analysis, the six national operators, including affiliates and partnerships, have licenses covering between 230 and 285 million people, while the next largest provider of mobile telephone service has licenses covering less than 60 million people.
See Fifth Report, at 17669.
For a discussion of DOR plans, see Fifth Report, at 17675-17676; Fourth Report, at 10155-10156. See also Section REF _Ref510603652 \w \h II.A.1.d(i), REF _Ref510848343 \h Developments in Pricing Plans, infra.
The Commission must consent to the transfer of control or assignment of all spectrum licenses used to provide wireless telecommunications services. 47 C.F.R. 1.948.
For a more complete discussion of the motivations for this phenomenon, see Fourth Report, at 10159-10160.
AT&T Wireless Completes TeleCorp PCS Acquisition, News Release, AT&T Wireless, Feb. 12, 2002. The Commission gave its consent to the transaction in February 2002. Wireless Telecommunications Bureau and International Bureau Grant Consent For Transfer Of Control Or Assignment Of Licenses From Telecorp PCS, Inc. to AT&T Wireless Services, Inc., Public Notice, DA 02-331 (rel. Feb. 12, 2002).
AT&T Wireless To Acquire TeleCorp PCS, News Release, AT&T Wireless, Oct. 8, 2001.
Id.
POPs is an industry term referring to population, usually the number of people covered by a given wireless license or footprint. One POP equals one person.
AT&T Wireless To Acquire TeleCorp PCS, News Release, AT&T Wireless, Oct. 8, 2001.
AT&T Wireless, SEC Form 10-k405, Mar. 28, 2002, at 2.
See Sixth Report, at 13364. The Commission granted consent for the transaction in March 2001. Wireless Telecommunications Bureau and International Bureau Grant Consent For Assignment or Transfer of Control of Wireless Licenses and Authorizations from Price Communications Corporation to Cellco Partnership d/b/a Verizon Wireless, Public Notice, DA 01-791 (rel. Mar. 30, 2001).
Verizon Wireless, Price Communications to Combine Certain Business Operation, News Release, Verizon Wireless, Dec. 19, 2001.
UbiquiTel Becomes Second Largest Sprint PCS Network Partner with Completion of Acquisition of VIA Wireless, News Release, UbiquiTel, Aug. 13, 2001. VIA also had spectrum licenses in Oklahoma and Pennsylvania. UbiquiTel to Sell Spectrum, News Release, UbiquiTel, Mar. 6, 2001. The Commission consented to this transaction in July 2001. Wireless Telecommunications Bureau Grants Consent to Transfer Control Of A, C, and F Block Broadband PCS Licenses and Common Carrier Fixed Point to Point Microwave Service, Public Notice, DA 01-1707 (rel. July 16, 2001).
UbiquiTel Becomes Second Largest Sprint PCS Network Partner with Completion of Acquisition of VIA Wireless, News Release, UbiquiTel, Aug. 13, 2001. The acquisition cost Ubiquitel about $150 million in stock and assumed debt. Id. Based on UbiquiTels $8 closing price on August 13, 2001, the deal valued VIA at $156.2 million. UbiquiTel Buys VIA Wireless, Dow Jones News Service, Aug. 13, 2001. In October 2001, UbiquiTel raised $50 million by the sale of VIAs California spectrum to VoiceStream. UbiquiTel to Sell Spectrum, News Release, UbiquiTel, Mar. 6, 2001; UbiquiTel Completes Sale of Spectrum to VoiceStream for $50 Million, News Release, UbiquiTel, Oct. 22, 2001. The Commission consented to the transaction in August 2001. Wireless Telecommunications Bureau Grants Consent to Assign A, C and F Block Broadband PCS Licenses, Public Notice, DA 01-2012 (rel. Aug. 24, 2001). UbiquiTel is able to continue operations in California through its affiliation with Sprint PCS. See Section REF _Ref4834331 \w \h I.A.1.a(i)(d), REF _Ref4834340 \h Affiliations, infra.
AirGate PCS, Inc. Completes Merger With iPCS, Inc., News Release, AirGate, Nov. 30, 2001; AirGate PCS to Combine With iPCS for $900 Million to Create The Premier Sprint PCS Network Partner, News Release, AirGate, Aug. 29, 2001.
AirGate PCS to Combine With iPCS for $900 Million to Create The Premier Sprint PCS Network Partner, News Release, AirGate, Aug. 29, 2001. The transaction, involving the swap of 13.5 million shares of AirGate stock for iPCS stock and the assumption of $97 million of iPCS debt, was valued at $900 million when the deal was announced in August 2001. Id.
US Unwired Completes Acquisition of Georgia PCS, News Release, US Unwired, Mar. 15, 2002; US Unwired Completes Acquisition of IWO Holdings, News Release, US Unwired, Apr. 2, 2002.
Subscriber numbers for IWO (125,000) and US Unwired (236,000) are as of September 30, 2001 and December 31, 2001 for Georgia PCS (36,600). See US Unwired to Acquire Georgia PCS, News Release, US Unwired, Feb. 11, 2002; US Unwired to Acquire IWO Holdings, News Release, US Unwired, Dec. 20, 2001.
US Unwired to Acquire Georgia PCS, News Release, US Unwired, Feb. 11, 2002.
ALLTEL to Purchase CenturyTel's Wireless Properties for $1.65 billion, News Release, ALLTEL, Mar. 19, 2002. In 2001, ALLTEL made an unsolicited $6.1 billion bid for all of CenturyTel, but the offer was rejected. Communications Daily, Mar. 20, 2002.
Also included in the transaction are minority partnership interests in cellular operations of 2 million POPs, and PCS licenses covering 1.3 million POPs in Wisconsin and Iowa.
Wireless Telecommunications Bureau Grants Consent for the Transfer of Control of Licenses from Centurytel, Inc. to ALLTEL Communications, Inc., Public Notice, DA 02-1366 (rel. June 12, 2002).
U.S. Cellular Enters into Agreement to Purchase PrimeCo Wireless, News Release, U.S. Cellular, May 10, 2002.
Id.
Application of Pacific Wireless, Inc. and Nextel of California, Inc. for Assignments of Authorization, Application, ULS file no. 0000523796 (filed July 27, 2001) (PWT Application). The Commission consented to the transaction in November 2001. Application of Pacific Wireless Technologies, Inc. and Nextel of California, Inc. for Consent to Assignment of Licenses, Memorandum Opinion and Order, 16 FCC Rcd 20341(2001).
Application of Pacific Wireless, Inc. and Nextel of California, Inc. for Assignments of Authorization, Consummation Notice, ULS file no. 0000738671 (filed Jan 18. 2002).
PWT Application, Attachment 2, Public Interest Statement, at 4.
Id.
Id.
Id.
Cingular, VoiceStream to Share Wireless Networks in New York, California and Nevada, News Release, Cingular, Oct. 15, 2001.
AT&T Wireless and Cingular Wireless Announce Major Expansion of GSM/GPRS Network Coverage Via New Joint Venture, News Release, AT&T Wireless, Jan. 28, 2002.
AT&T Wireless Is Separate, Independently-Traded Company, Following Split-off From AT&T, News Release, AT&T Wireless, July 9, 2001.
During late April 2000, AT&T raised $10.6 billion in its initial public offering of 360 million shares of AT&T Wireless Group tracking stock. AT&T Closes Wireless Offering, News Release, AT&T Wireless, May 2, 2000.
AT&T Completes Disposition of Its Remaining Interest in AT&T Wireless, News Release, Dec. 24, 2001.
See Section REF _Ref513363805 \r \h II.A.1.d(ii), REF _Ref513363811 \h Roaming, infra.
See, e.g., Nextel, Automatic and Manual Roaming Obligations Pertaining to Commercial Mobile Radio Services, Comments, WT Docket No. 00-193, at note 20 (filed Jan. 5, 2001) (To facilitate rapid deployment of its network throughout suburban, tertiary and rural areas of the country and move towards more ubiquitous nationwide service, Nextel entered into an agreement with Nextel Partners . . . to construct iDEN coverage using Commission licensed frequencies disaggregated by Nextel to [Nextel Partners], and offering its services to the public under the Nextel brand according to strict service quality standards.).
In addition, AT&T Wireless has close relationships with a number of other operators. AT&T Wireless and Dobson own equal interests in a joint venture, ACC Acquisitions, LLC (ACC), which provides service primarily in rural and suburban areas of the Midwestern and eastern United States. Dobson, SEC Form 10-K, Apr. 1, 2002, at 72. Dobson operates the ACC markets under the brand name Cellular One. Dobson, SEC Form 10-K, Apr. 1, 2002, at 3 and 8. AT&T Wireless owns approximately 12 percent of Dobson. AT&T Wireless, SEC Form 10-K405, Mar. 28, 2002, at 62. Cincinnati Bell Wireless, LLC (Cincinnati Bell Wireless) is a joint venture of Broadwing, Inc. (Broadwing) and AT&T Wireless, in which AT&T Wireless owns 19.9 percent and Broadwing owns the remaining 80.1 percent. Broadwing, Inc., SEC Form 10-K, Mar. 16, 2001, at 4. Cincinnati Bell Wireless services are sold under the Cincinnati Bell Wireless brand name. AT&T Wireless also has interests in a number of other broadband PCS licensee holders, including Cascade Wireless, LLC (85 percent) and Lewis & Clark Communications, LLC (49.9 percent). AT&T Wireless, FCC Form 602 (filed Mar. 6, 2002).
AT&T Wireless owns 15.7 percent of Triton PCS and 40 percent of Edge. AT&T Wireless, FCC Form 602 (filed Mar. 6, 2002).
Suncom, Suncom Fact Sheet (visited Mar. 8, 2002) .
As of the end of 2001. See Section REF _Ref9927845 \r \h I.A.1.a(i)(a), REF _Ref9927845 \h Combinations, supra. For a list of Sprint PCS affiliates and their service territories, see Dan Myer, US Unwired Adds Georgia PCS To Fold, RCR Wireless News, Feb. 18, 2002, at 14.
See, e.g., US Unwired Inc., SEC Form 4249(B)(1), May 17, 2000, at 7.
Ric Prentis, Sprint PCS, Equity Research, Raymond James, Feb. 19, 2002, at 4.
Id.
Sprint Wireless Affiliate Program Exceeds Two Million Subscribers, News Release, Sprint PCS, Jan. 7, 2002.
Nextel Partners, SEC Form 10-K, Mar. 22, 2002, at 3. As of the end of 2001, Nextel owned 32.3 percent of the common stock of Nextel Partners. Id., at 2.
Id., at 3.
See Section REF _Ref510601972 \r \h II.A.1.d, REF _Ref510601972 \h Pricing Data and Trends, infra.
Carriers began reporting NRUF data biannually beginning with the period ending June 2000. The Commission has another source of mobile wireless subscribership data in addition to the NRUF data. Since the Commissions local competition and broadband data gathering program was adopted in March 2000, mobile wireless carriers with over 10,000 facility-based subscribers in a state have been required to report the number of their subscribers in those states twice a year to the Commission. In their June 30, 2001 filings, operators reported that they served 114 million subscribers. See Appendix C, Table 2, at C-3. However, the Commission recognizes that its reporting rules result in some level of undercount of total industry subscribers since it does not count subscribers served by mobile telephony providers in states where the provider has fewer than 10,000 customers. See Local Competition and Broadband Reporting, Report and Order, 15 FCC Rcd 7717, 7743 (2000).
When the North American Numbering Plan (NANP) was established in 1947, only 86 area codes were assigned to carriers in the United States. Only 61 new codes were added during the next 50 years. But the rate of activation has increased dramatically since then. Between January 1, 1997 and December 31, 2000, 84 new codes were activated in the United States. Because the remaining supply of unassigned area codes is dwindling, and because a premature exhaust of area codes imposes significant costs on consumers, the Commission has taken a number of steps to ensure that the limited numbering resources are used efficiently. Among other things, the Commission requires carriers to submit data on numbering resource utilization and forecasts twice a year. Federal Communications Commission, Numbering Resource Utilization in the United States as of June 30, 2001 (Nov. 2001), at 1, 2. This information is submitted to the FCC on Form 502. Id.
Federal Communications Commission, Numbering Resource Utilization in the United States as of June 30, 2001 (Nov. 2001), at 1, 2. An assigned number is one that is in use by an end-user customer. Federal Communications Commission, Numbering Resource Utilization in the United States as of June 30, 2001 (Nov. 2001), at 3. Carriers also report other phone number categories, including: intermediate numbers given to other companies; aging - numbers held out of circulation; administrative numbers for internal uses; reserved - numbers reserved for later activation; and available numbers available to be assigned. Id. Assigned numbers are not necessarily from facilities-based carriers. A reseller can assign a number to an end user. This does not double-count in the assigned total, since the facilities-based carrier only counts that number as an intermediate number given to the reseller.
For example, in the survey for the period ending June 30, 2001, subscribers captured through survey response made up 109,674,358 out of a total subscriber estimate of 118,397,734, a difference of 8 percent (8,723,376). CTIA, Wireless Industry Indices: Semi-Annual Data Survey Results (results through June 2001) (June 2001 CTIA Survey), at 15.
NRUF data is collected by the area code and prefix (NXX) level for each carrier, which enables the Commission to approximate the number of subscribers that each carrier has in each of the approximately 30,000 rate centers in the country. Rate center boundaries generally do not coincide with county boundaries. However, for purposes of geographical analysis, the rate center data can be associated with a geographic point, and all of those points that fall within a county boundary can be aggregated together and associated with much larger geographic areas based on counties, for which population and other data exists. Aggregation to larger geographic areas reduces the level of inaccuracy inherent in combining unlike areas such as rate center areas and counties.
Subscribers refer to the number of separate wireless accounts. A particular individual may have more than one wireless account.
Federal Communications Commission, based on preliminary year-end 2001 filings for Numbering Resource Utilization in the United States.
The nationwide penetration rate is calculated by dividing total mobile telephone subscribers by the total U.S. population. According to the Bureau of the Census, the combined population of the 50 states, the District of Columbia, and Puerto Rico as of July 1, 2001 was estimated to be 288.6 million. See U.S. Census Bureau, Population Estimates (visited Mar. 8, 2002) .
See Appendix C, Table 1, at C-2.
Id.
There are 172 EAs, each of which is an aggregation of counties. See Kenneth P. Johnson, Redefinition of the BEA Economic Areas, Survey Of Current Business, Feb. 1995, at 75. For its spectrum auctions, the FCC has defined four additional EAs: Guam and the Northern Mariana Islands (173); Puerto Rico and the U.S. Virgin Islands (174); American Samoa (175); and Gulf of Mexico (176). See FCC, FCC Auctions: Maps (visited Mar. 25, 2002) .
Kenneth P. Johnson, Redefinition of the BEA Economic Areas, Survey Of Current Business, Feb. 1995, at 75.
See, also, Appendix E, Map 4, at E-5.
June 2001 CTIA Survey (minutes of use through 2000), at 169; Todd Rethemeier et al., Talk is Cheaper, Demand is Steeper, Bear Sterns, Equity Research, May 21, 2002, at 1 (citing CTIA 2001 MOU results). CTIA aggregated all of the carriers MOUs from July 1 through December 31, then divided by the average number of subscribers, and then divided by six.
Paul Kagan Associates, Inc., Wireless Customers Using 60% More Minutes than Two Years Ago Not Always On Plan, Wireless Market Stats, Sept. 11, 2001, at 4 (based on carriers reported MOUs); Paul Kagan Associates, Inc., Minutes Up By 28% in Quarter; Acquisition Costs Continue Decline, Wireless Market Stats, Aug. 14, 2000, at 6.
Wireless Phone Penetration Among U.S. Households Climbs Above 50 Percent As More First-Time Subscribers Enter the Marketplace, News Release, J.D. Power and Associates, Sept. 26, 2001 (based on survey responses from 14,492 households in 25 of the largest U.S. markets); Wireless Usage Continues to Climb as Flat-Rate Pricing And Free Minutes Become More Prevalent in the Marketplace, News Release, J.D. Power and Associates, Sept. 26, 2000.
There are different ways of calculating ARPU. The measure used here, CTIAs average local monthly bill, does not include toll or roaming revenues. June 2001 CTIA Survey, at 158. CTIA defines an alternative measure of ARPU, which includes roaming revenues but not toll revenue. For a comparison between these two measures, see June 2001 CTIA Survey, at 159.
See Appendix C, Table 1, at C-2.
See Section REF _Ref510601972 \r \h II.A.1.d, REF _Ref510601972 \h Pricing Data and Trends, infra.
Regardless of whether customers use the large bundles of minutes included with such plans, the higher monthly access fees increase operators ARPUs.
This assumes that each churned customer is a unique individual and that the same customers do not churn multiple times.
See Linda J. Mutschler et al., The Next Generation VI: Wireless in the US, United States Telecom Services-Wireless/Cellular, Merrill Lynch, Mar. 8, 2002 (NextGen VI), at 85 (Table 24: US Wireless Operating Matrix Monthly Churn). Churn also varies by locality. According to one survey, in the second quarter of 2001, Chicago had churn of 4.5 percent; Los Angeles, 3.5 percent; New York, 3.1 percent; San Francisco, 2.8 percent; and Washington, 2.7 percent. Tim Race, Drilling Down / Cell Phones, New York Times, Sept. 3, 2001 (citing a survey by Telephia).
Michael I. Rollins et al., Wireless Services, Equity Research, Salomon Smith Barney, Jan. 11, 2002, at 9 (SSB Wireless Services).
See Sixth Report, at 13372-73.
Churn Analysis II: Main Reason For Switching Carriers, Telephia, Oct. 10, 2001 (published in WirelessWeek, available at ).
Id.
The Commission has buildout rules for geographic area licenses, although they do not require operators to deploy networks such that the entire geographic area of a specific license receives coverage. For example, the construction requirements for 30 megahertz broadband PCS licenses state that an operators network must serve an area containing at least one-third of the license areas population within five years of the license being granted and two-thirds of the population within 10 years. See 47 C.F.R. 24.203(a). Similarly, the construction requirements for 10 and 15 megahertz broadband PCS licenses state that an operator must cover one-quarter of a license areas population, or provide substantial service, within five years of being licensed. See 47 C.F.R. 24.203(b). The details concerning exactly which geographic areas or portions of the population should be covered to meet these requirements are left to the operators. In addition, decisions about whether to increase coverage above these requirements are left to the operators. For information on the buildout requirements for cellular licenses, see 47 C.F.R. 22.946, 22.947, 22.949,22.951. For information on the buildout requirements for non-site based SMR licenses, see 47 C.F.R. 90.665 and 90.685.
All population figures are based on the Bureau of the Censuss 2000 county population.
See Appendix E, Maps 2-3, at E-3 - E-4.
See Amendment of Part 22 of the Commissions Rules to Provide for the Filing and Processing of Applications for Unserved Areas in the Cellular Service and to Modify other Cellular Rules, First Report and Order and Memorandum Opinion and Order on Reconsideration, 6 FCC Rcd 6185, 6196-6200 (1991). Initial cellular systems operators were given a five-year period during which to expand their systems within CMA in which they were licensees. Id.
See Appendix C, Table 4, at C-5.
Id.
Id.
Only 3 percent, due to its previous high level of 90.8 percent. See Sixth Report, at 13465.
Id.
PCS, digital SMR, and cellular networks are all cellular systems, since all divide service regions into many small areas called cells. Cells can be as small as an individual building or as big as 20 miles across, or any size in between. Each cell is equipped with its own radio transmitter/receiver antenna. Service regions are divided into cells so that individual radio frequencies may be used over and over again in different cells (frequency reuse), allowing for more calls in the system. When a person makes a call on a wireless phone, the message is transmitted to the nearest antenna, which connects with the local phone network. When a person is using a wireless phone and approaches the boundary of one cell, the wireless network senses that the signal is becoming weak and automatically hands off the call to the antenna in the next cell. See Sixth Report, at 13361, note 55.
See Sixth Report, at 13361.
NextGen VI, at 69. In the Sixth Report, the Commission estimated year-end 2000 digital penetration to be 62 percent. See Sixth Report, at 13374.
Based on NextGen VI digital penetration rates.
Subscribers that can access both the digital and analog networks of carriers are considered to be digital subscribers.
NextGen VI, at 69.
Ninety-six percent of Cingulars minutes of use were digital at the end of 2001. Frank G. Louthan IV, SBC Communications, Equity Research, Raymond James, Feb. 11, 2002, at 19.
NextGen VI, at 69.
Operators serving rural areas are converting their networks to digital technology as well. Ken Johnson of Rural Telecommunications Group (RTG) said, For their part, rural carriers are shifting to digital roll out. Transcript, at 100.
NextGen VI, at 69.
NextGen VI, at 69. CenturyTel went from 19 percent to 32 percent, while Western Wireless went from 3 percent to 30 percent. Id.
See Fourth Report, at 10170.
Cingular announced in January 2002 that it had begun field testing a new technology, known as GAIT (GSM/ANSI-136 Interoperability Team), that allows users to move with one handset between TDMA and GSM technologies on both broadband PCS and cellular spectrum bands. Network Enhancements to Enable Cingular Customers to Access Both GSM and TDMA, News Release, Cingular, Jan. 16, 2002.
Universal Wireless Communications Consortium Completes Organizational Objectives, News Release, Universal Wireless Communications Consortium, Dec. 26, 2001. In March 2002, a number of wireless carriers and equipment manufactures, including AT&T Wireless and Cingular, formed a new trade association, called 3G Americas, to promote the GSM and TDMA family of technologies. 3G Americas to Represent Global Technologies in the Americas, News Release, 3G Americas, Mar. 13, 2002.
See Sixth Report, at 13398-99. AT&T Wireless has indicated that it does not plan to aggressively migrate users to its GSM network. Paul Wuh et al., AT&T Wireless Group, Global Equity Research, Goldman Sachs, Feb. 8, 2002, at 4 (Goldman Sachs AT&T Wireless Group).
Goldman Sachs AT&T Wireless Group, at 2.
AT&T Wireless indicated that it would begin to deploy GSM/GPRS infrastructure in TeleCorps coverage area beginning in the second half of 2002. Id., at 10.
Cingular Moves to the Edge, News Release, Cingular, Oct. 30, 2001; Cingular Announces Technology Path, speech by Stephen Carter at the Righa Royal Hotel, New York, NY, Oct. 30, 2001 (available in http://www.cingularwireless.com/about/speech_01_10_30).
Ric Prentiss, Cingular Announced GSM Overbuild Plans, Email Alert, Raymond James, Oct. 30, 2001.
Cingular Moves to the Edge, News Release, Cingular, Oct. 30, 2001
Ric Prentiss, Cingular Clues Us In on 02 CapEx Plans, Equity Research, Raymond James, Nov. 6, 2001
See Section REF _Ref9927927 \r \h I.A.1.a(i)(b), REF _Ref9927927 \h Joint Ventures, supra. Dobson, whose two largest roaming partners are AT&T Wireless and Cingular, announced in January 2002 that it too planned to upgrade its TDMA network to GSM/GPRS. Dobson To Upgrade Network to Wireless Standard, Reuters, Jan. 29, 2002.
The broadband PCS-based and digital SMR-based coverage is estimated using counties, and the cellular-based coverage is estimated using CMAs. The same caveats mentioned in Section REF _Ref483803446 \w \h II.A.1.b(vi), REF _Ref483803446 \h Market Entry, supra, apply to this analysis as well.
See Appendix E, Maps 5-8, at E-6 E-9.
See Appendix C, Table 7 at C-10. Upgrades by carriers to GPRS and 1xRTT technologies are discussed in Section II.B.2.a, Mobile Data Mobile Telephone Sector, infra.
See Appendix C, Table 7 at C-10.
NextGen VI, at 2 (There is no question that wireless pricing remains incredibly competitive); NextGen VI, at 3 (in recent quarters, we estimate that the level of pricing competition has accelerated, and we currently see no end in sight); Olga Kharif, Why Sprint PCS Could Pick Up Speed, BusinessWeek Online, Mar. 13, 2002 (Price competition has grown intense); Tish Williams, Wireless Now Has Price War to Worry About, TheStreet.com, Mar. 3, 2002; Paul Wuh et al., Week In Wireless, Global Equity Research, Goldman Sachs, Feb. 8, 2002, at 1 (we believe that the national carriers are continuing to become more aggressive about pricing).
See Fourth Report, at 10164-10165.
Econ One Survey Shows Average Cost of Cell Phone Service Dropped 7.3 % in 2001, News Release, Econ One, Jan. 31, 2002. The survey is based on an analysis of pricing plan data collected from carriers websites. Transcript, at 78.
This does not include any additional costs for roaming or long distance.
The analysis assumes a 70 percent peak /30 percent off-peak split in the kind of minutes used. Transcript, at 78.
Econ One Survey Shows Average Cost of Cell Phone Service Dropped 7.3 % in 2001, News Release, Econ One, Jan. 31, 2002.
Id.
See Appendix C, Table 8, at C-10. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a fixed market basket of consumer goods and services. The basket of goods includes over 200 categories including items such as food and beverages, housing, apparel, transportation, medical care, recreation, education, and communications. The CPI provides a way for consumers to compare what the market basket of goods and services costs this month with what the same market basket cost a month or a year ago. Starting in December of 1998, this basket of goods included a category for cellular telephone services. All CPI figures discussed in this paragraph were taken from BLS databases found on the BLS Internet site at . The index used in this analysis, the CPI for All Urban Consumers (CPI-U), represents about 87 percent of the total U.S. population. Bureau of Labor Statistics, Consumer Price Index: Frequently Asked Questions (visited Mar. 18, 2002). . While the CPI-U is urban-oriented, it does include expenditure patterns of some of the rural population. Transcript, at 59. Information submitted by companies for the CPI is provided on a voluntary basis. Transcript, at 53.
Transcript, at 50. The Cellular CPI includes charges from all telephone companies that supply cellular telephone services, which are defined as domestic personal consumer phone services where the telephone instrument is portable and it sends/receives signals for calls by wireless transmission. This measure does not include business calls, telephone equipment rentals, portable radios, and pagers. Bureau of Labor Statistics, How BLS Measures Price Change for Cellular Telephone Service in the Consumer Price Index (visited Mar. 18, 2002) .
Adam Quinton et al, Wireless Matrix 3Q01, Global Equity Research, Merrill Lynch, Jan. 2002, at 4 (Wireless Matrix).
Note that this version of ARPU is CTIAs average monthly local bill and does not include toll or roaming revenues where they are not priced into a calling plan. See note NOTEREF _Ref4836561 \h \* MERGEFORMAT 128, supra.
See Appendix C, Table 9, at C-11.
See AT&T Launches First National One-Rate Wireless Service Plan, News Release, AT&T Corp., May 7, 1998.
See NextGen VI, at 57-63.
Id., at 18.
Id.
The fees that a carrier collects from non-subscribers using its network are called outcollect fees, and the fees that a carrier pays for its subscribers to roam on other networks are called incollect fees. Margo McCall, Roaming Feeds Regional Carriers, Wireless Week, Mar. 26, 2001, at 23.
In the fourth quarter of 2001, roaming revenues accounted for 25 percent of total revenue for Rural Cellular Corp. and 20 percent for Western Wireless. Dan Meyer, Rural Carriers Overlay to Keep Roaming $$, RCR Wireless News, Mar. 4, 2002, at 1. In fact, the price of Western Wireless stock fell 30 percent when AT&T Wireless and Cingular announced their infrastructure sharing agreement (see above). Western Wireless Stock Off More Than 30 Percent, Reuters, Jan. 28, 2002. Investors feared that Western Wirelesss roaming revenues were likely to decline as a result of the deal. Id.
See Appendix C, Table 1, at C-2.
June 2001 CTIA Survey, at 65.
Id.
See, e.g., Yukari Iwatani, AT&T Wireless Sees Potential in Prepayments, Reuters, July 26, 2001. Prepaid programs are considered to have been the primary driver of the rapid penetration gains in Europe over the past couple of years. NextGen VI, at 16.
See SSB Wireless Services, at 5; NextGen VI, at 16. In its July analyst conference, for example, AT&T Wireless took great pains to emphasize that prepaid programs will not be a dominant part of its subscriber base, so that subscriber quality will remain high. Frank Marsala and Dae B. Rao, AT&T Wireless, Equity Research, Robertson Stephens, Sept. 7, 2001, at 1.
Paul Wuh et al., Telecom Services: Wireless Communications, Global Equity Research, Goldman Sachs, Dec. 12, 2001, at 1 (8 percent); New Telephia/Harris Interactive Analysis Gives Wireless Carriers National Perspective on Customer Acquisition and Retention, News Release, Telephia, Aug. 27. 2001 (10 percent). The Telephia survey also found that 16 percent of new subscribers were prepaid. Id. For 2000 percentage, see Sixth Report, at 13380.
Ric Prentiss and Tanya Nelson, Wireless Holiday Songs, Industry Report, Raymond James & Associates, Dec. 20, 2001, at 5. Nextel does not offer prepaid plans. Nextel, Compare Rate Plans (visited Mar. 20, 2002) .
Paul Wuh and Seung Hoon Han, Sprint PCS Group, Global Equity Research, Goldman Sachs, Nov. 7, 2001, at 2 (Goldman Sachs Sprint PCS Report). Sprint PCSs slogan for the program is Clear Pay The Clear Alternative to Prepaid. SSB Wireless Services, at 14.
NextGen VI, at 19. Approximately one-third of the U.S. consumer market has sub-prime credit. SSB Wireless Services, at 28.
Paul Wuh et al., Analysis of Prepaid Business Model, Global Equity Research, Goldman Sachs, June 14, 2001, at 13.
Goldman Sachs Sprint PCS Report, at 2. Sprint PCS eliminated the deposit requirement in June 2001, but reinstated it in February 2002 due to high churn and default rates associated with ASL customers. Paul Kagan Associates, Inc., No-Deposit Plans Still Driving Up Sprint Churn, Wireless Market Stats, Mar. 26, at 6.
See, e.g., Goldman Sachs Sprint PCS Report, at 2.
Gross additions includes sales to both new and existing subscribers.
Paul Wuh et al., Week in Wireless, Global Equity Research, Goldman Sachs, Feb. 6, 2002, at 2.
See Sixth Report, at 13381.
Margaret Schoener, U.S. Residential Wireless Voice Access Lines Head South, Revenue Heads North, Gartner, Inc., Aug. 31, 2001, at 1. Another study found that 52 percent of households in the 25 largest U.S. markets use wireless phone service. Wireless Phone Penetration Among U.S. Household Climbs above 50 Percent As More First-Time Subscribers Enter the Marketplace, News Release, J.D. Power and Associates, Sept. 26, 2001.
GenWireless.Com, Mobile Penetration by Age (visited Jun 12, 2002 ) (describing a November 2001 survey commissioned by Upoc, a a mobile marketing and community developer). The breakdown by age: 12-17, 51 percent; 18-24, 61 percent; 25-29, 60 percent; 30-34, 69 percent; 35-54, 62 percent; 55 and older, 50 percent. Id.
Carriers Said to Need New Tactics to Combat LD Substitution, Communications Daily, Mar. 15, 2002 (citing Yankee Group analyst Knox Brickens estimate of 3 percent). According to CTIA, about 2.2 percent of people in the United States have abandoned their wireline phones in favor of wireless phones or other wireless devices, which translates into roughly 5 percent of all wireless subscribers. Yuki Noguchi, More Cell-Phone Users Cut Ties to Traditional Service, Washtech.com, Dec. 27, 2001 (citing CTIA).
Carriers Said to Need New Tactics to Combat LD Substitution, Communications Daily, Mar. 15, 2002 (citing Yankee Group analyst Knox Bricken).
Michelle Kessler, 18% See Cellphones as Their Main Phone, USA Today, Feb. 1, 2002.
NextGen VI, at 33.
Id., at 34.
Yuki Noguchi, Verizon Connections Decline, Washington Post, Sept. 11, 2001 (available in 2001 WL 22754735) (citing Verizon President and Co-Chief Executive Officer Ivan Seidenberg). In the same vein, Duane Ackerman, Chairman and Chief Executive Officer of BellSouth said: Wireless substitution is now a fact. Shawn Young, More Callers Cut Off Second Phone Lines for Cellphones, Cable Modems, Wall Street Journal, Nov. 15, 2001, at B1. He added, Thats okay. We tend to own both. Id.
Its a Wireless Boom as More People Cut the Cord, News Release, International Data Corp. (IDC), Jan. 8, 2002. Another study estimates that 2 million households replaced an access line with a wireless phone in the first six months of 2001. Margaret Schoener, U.S. Residential Wireless Voice Access Lines Head South, Revenue Heads North, Gartner, Inc., Aug. 31, 2001, at 1.
SBC Adjusts Prices to Maintain Payphone Base, News Release, SBC, July 6, 2001; Verizon Raises Price of Local Payphone Call; Announces Return of the 10-Cent Call in Some Markets, News Release, Verizon, Sept. 7, 2001.
Verizon Tests Lower Prices for Local Payphone Calls, News Release, Verizon, Jan. 29, 2002.
Sixth Report, at 13381.
NextGen VI, at 33.
Id., at 57-63.
Carriers Said to Need New Tactics to Combat LD Substitution, Communications Daily, Mar. 15, 2002 (citing Yankee Group analyst Knox Bricken).
AT&T Announces 1Q 2002 Earnings, News Release, AT&T Corp., Apr. 24, 2002.
See Cingular, Cingular Wireless (visited Mar. 21, 2002) .
Leap, Welcome to Cricket Communications (visited Mar. 20, 2002) <HYPERLINK "http://www.cricketcommunications.com/"http://www.cricketcommunications.com/>.
Leap Reports Results for Fourth Quarter and Fiscal Year 2001, News Release, Leap, Feb. 11, 2002.
The monthly fee, paid in advance, varies slightly by service area. The service is offered without a term contract and requires no credit check. Leap Wireless International Inc., SEC Form 10-Q, Nov. 13, 2001, at 21. Leap emphasizes that its Cricket service is not a prepaid program, but rather, pay-in-advance, like cable TV. The pay-in-advance model has the recurring revenue of customers paying every month, as opposed to the random refill patterns of someone using prepaid service. Pay-in-advance is considered more desirable than prepaid, since customers who receive a monthly bill are more likely to pay it, resulting in less churn and higher ARPUs, and thus greater profitability per customer. Frank Marsala and Dave B. Rao, Leap Wireless, Telecom Services Research, Robertson Stephens, Oct. 25, 2001, at 3.
Todd J. Rethemeier et al., Leap Wireless International Inc., Equity Research, Bear Stearns, Feb 1, 2002, at 13.
Leap Wireless International, Inc. Request for Waiver and Extension of the Broadband PCS Construction Requirements of Commission Rule 24.203(a) and (b), FCC File No. 0000436815 (filed Apr. 26, 2001), at 2; Leap Reports Results for Fourth Quarter and Fiscal Year 2001, News Release, Leap, Feb. 11, 2002 (average usage in its one-year or older markets).
Frank Marsala and Dae B. Rao, Leap Wireless, Equity Research, Robertson Stephens, Mar. 25, 2002, at 2.
Todd J. Rethemeier et al., Leap Wireless International Inc., Equity Research, Bear Stearns, Feb 1, 2002, at 17 (citing Leaps market research).
Dan Meyer, Carriers Eat Up All-You-Can-Talk Local Buffets, RCR Wireless News, July 16, 2001 (available in 2001 WL 8870069).
Id..
See MetroPCS, Welcome (visited Mar. 20, 2002) .
See NorthCoast PCS, Service Plans (visited Mar. 20, 2002) .
See Transcript, at 108; First Cellular, Southern Illinois Unlimited (visited Mar. 20, 2002) .
See Rural Cellular, Welcome To Rural Cellular Corporation (visited Mar. 20, 2002) .
Midwest Wireless, Realm - Basic Service Plan (visited Mar. 20, 2002) .
Ntelos, Products & Services (visited Mar. 20, 2002) .
See NextGen VI, at 57-63.
Id., at 19.
VoiceStream, Rate Plans: Northeast Neighborhood (Boston) (visited Mar. 20, 2002) . This plan costs $59.99. Id.
See Commercial Mobile Radio Services (CMRS) Competition Report Public Forum for access to participants presentations and forum transcript. The transcript of the forum can be found at Public Hearing for 7th Annual CMRS Competition Report: Transcript of the Day's Event (visited Mar. 14, 2002) (Transcript).
See, e.g., Transcript, at 83 (Economist Charles Mahla: We would love to have more data. Some of this data is difficult to get.). Chris Murray of the Consumers Union argued that [the Commission] should gather data independently as much as possible. Id., at 29. See, also, Id., at 32 (comments of Economist Greg Rosston).
Economist Greg Rosston, after describing the benefits of collecting data, said, There are costs to collecting data as well, and thats an important thing for the FCC to consider. Id., at 37. Terry Addington, President of the Rural Cellular Association (RCA) and CEO of First Cellular, concurred: Mandates are very, very difficult for a small carrier to manage because were resource challenged. Id., at 106. Rosston also raised concerns about confidentiality and whether or not collected data would be or could be used anti-competitively. Transcript, at 37. See, also, Id., at 105 (comments by Addington).
Joyce D. Stern, The Condition of Education in Rural Schools, U.S. Department of Education (Jun 1994) [cited in National Center for Education Statistics, Urban\Rural Classification Systems (visited Apr. 4, 2002) ].
For Census 2000, the Census Bureau classifies urban as all territory, population, and housing units located within an urbanized area (UA) or an urban cluster (UC). It delineates UA and UC boundaries to encompass densely settled territory, which consists of: 1) core census block groups or blocks that have a population density of at least 1,000 people per square mile, and 2) surrounding census blocks that have an overall density of at least 500 people per square mile. In addition, under certain conditions, less densely settled territory may be part of each UA or UC. Rural consists of all territory, population, and housing units located outside of UAs and UCs. U.S. Census Bureau, Urban and Rural Classification: Urban and Rural Criteria (visited Apr. 15, 2002) < HYPERLINK "http://www.census.gov/geo/www/ua/ua_2k.html" http://www.census.gov/geo/www/ua/ua_2k.html>. The Office of Management and Budget (OMB) defines Metropolitan Areas (MA) for purposes of collecting, tabulating, and publishing federal data. OMB defines MAs as those areas within the United States that include: 1) one city with 50,000 or more inhabitants, or 2) a Census-Bureau defined urbanized area of at least 50,000 inhabitants and a total metropolitan population of at least 100,000 inhabitants (75,000 in New England). Currently defined MAs are based on application of 1990 standards (which appeared in the Federal Register on March 30, 1990) to 1990 decennial census data and to subsequent Census Bureau population estimates and special census data. Current MA definitions were announced by OMB effective June 30, 1999. U.S. Census Bureau, About Metropolitan Areas (visited Apr. 15, 2002) . For the administration of several types of business loans, the Small Business Administration (SBA) has defined rural area as a political subdivision or unincorporated area in a non-metropolitan county (as defined by the Department of Agriculture), or, if in a metropolitan county, any such subdivision or area with a resident population under 20,000 which is designated by SBA as rural. 13 C.F.R. 120.10. The Rural Housing and Economic Development (RHED) program, administered by the U.S. Department of the Housing and Urban Development, supports housing and economic development activities in rural areas, which are defined by any one of five criteria: 1) A place having fewer than 2,500 inhabitants (within or outside a metropolitan area); 2) a county with no urban population of 20,000 inhabitants or more; 3) Territory, persons, and housing units in rural portions of extended cities (using data from the U.S. Census Bureau); 4) Open country which is not part of or associated with an urban area (as defined by the Department of Agriculture); 5) Any place with a population not in excess of 20,000 and not located in a Metropolitan Statistical Area. 66 Fed. Reg. 12190 (2001). In the early 1970s, the Economic Research Service (ERS) of the U.S. Department of Agriculture, found a need for a classification of counties into various degrees of urbanization. The resultant system, officially known as the ERS Rural-Urban Continuum Codes, is most often referred to as the Beale codes, after its creator, Dr. Calvin Beale. The Beale codes form a classification scheme that distinguishes metropolitan counties by size, and nonmetropolitan counties by degree of urbanization and proximity to metro areas. Counties are subdivided into 4 metro and 6 nonmetro categories, resulting in a 10-part county codification scheme. A number of agencies, including the Department of Education, have used the Beale codes. National Center for Education Statistics, Urban\Rural Classification Systems (visited Apr. 25, 2002) ). The Employment and Training Administration (ETA) in the Department of Labor administered the Welfare-to-Work grant program. In the third round of that grant program, a rural area was defined as: 1) any county that does not contain an urban center of more than 50,000 people, and where at least 50 percent of the geographical area of the county has a population density of less than 100 persons per square mile; or 2) in counties where there is an urban center, a rural area within the county that constitutes, or is part of, a distinct rural labor market. 64 Fed. Reg. 4018 (1999).
See Biennial Regulatory Review, Spectrum Aggregation Limits for Wireless Telecommunications Carriers, Report and Order, 15 FCC Rcd 9219, 9256 at note 203 (1999). Consistent with this approach, the Commission recently applied this distinction between rural and urban markets in its review of the cellular cross-interest rule, deciding to maintain this rule in RSAs while eliminating it in MSAs. See Spectrum Cap Order, at 22708. Based on data in its records, the Commission found that RSAs typically have fewer competitors offering two-way mobile service, and fewer nationwide service providers, than do MSAs. Id., at 22705.
Mark Rubin, Director of Federal Government Affairs for Western Wireless stated that broad generalities, based upon [M]SA and RSA distinctions, dont necessarily reflect the marketplace realities. Transcript, at 122. Doug Stephens, interim Chief Operating Officer and Vice President for the central region of Dobson, said, It is no longer useful for the Commission to engage in urban/rural distinction[s]. Transcript, at 114. Rubin of Western Wireless agreed: Any differences that do exist [in competition between rural and urban areas] may not [be] attributable to any rural or urban distinction. For example, there are some rural areas that have better service and more competition than urban areas. Transcript, at 122.
See discussion in Rural Rollout, infra.
See Section REF _Ref5433688 \r \h II.A.1.b(ii), REF _Ref5433688 \h Regional Penetration Rates, supra.
Of the 3,141 counties in the nation in 1995, 836 were counties that made up the 310 metropolitan areas as defined by the Office of Management and Budget in June 1993. The 310 metropolitan areas consisted of 240 metropolitan statistical areas, 59 primary metropolitan statistical areas (PMSAs), and 11 New England county metropolitan areas (NECMAs). In parts of the United States remote from metropolitan areas, 38 non-metropolitan counties were each identified as a node. Kenneth P. Johnson, Redefinition of the BEA Economic Areas, Survey Of Current Business, Feb. 1995, at 75.
Although he added, but Im not sure if that works. Transcript, at 101. Johnson earlier noted that there are rural portions of MSAs. Id., at 101.
Johnson said [population density is] one of the many factors that would determine rural. Id., at 101. Rubin said, as a rural cellular service provider, Western defines itself, in part, based upon the low population density of its service area. Id., at 122-123.
Id., at 102. Johnson cautions: So does that make Albemarle County, Virginia [rural?]. Albemarle County [includes] the University of Virginia. They have 94.0 people per square mile. Does that make [the county] rural . . . ? I mean, if youre right there at the University of Virginia, its not rural. If you drive five minutes away, where Thomas Jefferson was born, its extra rural. Id., at 102.
Econ One normally analyzes pricing plan data every month for the top 25 most populous U.S. markets. See Section REF _Ref510601972 \w \h II.A.1.d, REF _Ref510601972 \h Pricing Data and Trends, supra. The rural market pricing plans were analyzed using the same methodology as Econ Ones large markets survey.
Economist Charles Mahla of Econ One described the selection process: We randomly selected from RSAs and then simply chose cities within an RSA. The one, perhaps, selection bias is that we chose cities that were not adjacent to or very close to larger urban areas. So we randomly selected the RSAs we used and then, selected cities within those RSAs to conduct those studies. He added, I don't believe the definition of rural markets would comport with some of the government agencies definition of rural markets. Transcript, at 84-85.
The survey results are reproduced in Appendix C, Table 10, at C-11.
Transcript at 87.
Transcript at 86.
Transcript, at 108-109.
See Appendix C, Table 11, at C-12.
See Appendix C, Table 11, at C-12. Addington said that his companys margins have gone down 8 percent since weve gone from two competitors to five competitors, which has only been about a year, year and a half. My margins have gone done 8 percent. My [churn] has gone up 38 percent. Transcript, at 110.
Transcript, at 115.
Id., at 110.
Id., at 115.
Id., at 110-111.
See Charles R. Matha, Public Forum For the 7th Annual CMRS Competition Report, Presentation, Econ One Research, Inc., Feb. 28, 2002, at slide 10 (available at http://wireless.fcc.gov/services/cmrs/presentations/).
Interconnection and Resale Obligations Pertaining to Commercial Mobile Radio Services, First Report and Order, 11 FCC Rcd 18455, 18457 (1996).
See Appendix C, Table 2, at C-3.
WorldCom, Inc., Petition Pursuant to 47 U.S.C. Sec.160 For Forbearance From the Commercial Mobile Radio Service Number Portability Obligation, WT Docket No. 01-184, Comments, at 1 (filed Sept. 21, 2001). General Motor Corp. claims that its telematics system OnStar is the countrys largest reseller of cellular service. General Motors Corp. GMs OnStar Has Close to Two Million Subscribers, Canada Stockwatch, Nov 12, 2001 (2001 WL 31657384). OnStar services include automatic notification of air bag deployment, stolen vehicle tracking, remote door unlock, emergency services dispatch, roadside assistance, remote diagnostics, route support, convenience services and OnStar Concierge. At extra cost, subscribers can also use OnStars Personal Calling service, which allows OnStar system customers to make and receive calls in their vehicles in cooperation with Verizon Wireless. Cadillac and OnStar Offer Six-Months Directions & Connections Service at No Charge on Certified Pre-Owned Cadillacs, News Release, OnStar, May 13, 2002. OnStar customers must pre-purchase minutes to use the service. OnStar, What is OnStar: Services: Personal Calling (visited Mar. 11, 2002) . For a more complete discussion of OnStar, see Section REF _Ref9753535 \r \h II.B.4, REF _Ref9753549 \h Telemetry and Telematics, infra.
WorldCom, Inc. Announces Intention to Exit Wireless Resale Business, News Release, WorldCom, Inc., June 5, 2002.
Deborah Mendez-Wilson, Changing Rules of the Game: MVNO Advocates Keep a Watchful Eye on Nextwave Case, Wireless Week, Sept. 17, 2001, at 20.
Deborah Mendez-Wilson, Changing Rules of the Game: MVNO Advocates Keep a Watchful Eye on Nextwave Case, Wireless Week, Sept. 17, 2001, at 20. See, also, Dominic Endicott, MNVOs in the U.S.: Who Will Win and How . . . and Will It Be Worth It?, RCR Wireless New, Sept. 20, 2001, at 42, and Lynette Luna, Carriers Look Beyond Brand, Telephony, Feb. 18, 2002 (2002 WL 7733793).
Sprint and Virgin announce Joint Venture, News Release, Sprint PCS, Oct. 5, 2001.
Id.
Sprint and Virgin Announce Funding of Joint Venture, News Release, Sprint PCS, May 17, 2002.
Sprint and Virgin Announce Joint Venture, News Release, Sprint PCS, Oct. 5, 2001.
Inmarsat Ltd. (Inmarsat) and Mobile Satellite Ventures (MSV), a joint venture of Motient Corporation and TMI Communications and Company, LP, were also providing voice and data communications via satellite at year-end 2001. The companies offer voice and data services in fixed and mobile environments. The mobile environment consists of a laptop-sized or larger terminal that can be transported from one location to another. These voice and data services offered by Inmarsat and MSV are not discussed in this report as they do not compete directly with mobile telephony services.
GlobalStar Sees 2nd Qtr Reorg Plan, TR Daily, Apr. 16, 2002; Andy Pasztor, Globalstars Filing Reflects a Lack Of Restructuring Plan, Customers, Wall Street Journal, Feb. 19, 2002; Pradnya Joshi, Satellite Phones Find Their Calling, New York Times, Jan. 8, 2002.
Globalstar, Systems Facts (visited Feb. 19, 2002) .
Pradnya Joshi, Satellite Phones Find Their Calling, Newsday, Jan. 8, 2002 (Satellite Phones - Newsday); Satellite-Phones.org, Satellite Phones and Cell Phone Accessories from Global Star, Iridium, and Inmarsat (visited Feb. 19, 2002) .
Globalstar, Globalstar Pricing and Promotions (visited Jan. 29, 2002) .
Globalstar, Globalstar USA : Our Distributors (visited Jan. 29, 2002) .
See Sixth Report, at 13386.
Globalstar Reports Results for Third Quarter of 2001, News Release, Globalstar, Nov. 13, 2001.
Andy Pasztor, Globalstars Filing Reflects a Lack Of Restructuring Plan, Customers, Wall Street Journal, Feb. 19, 2002; Ben Berkowitz, Globalstar Files for Chapter 11 Bankruptcy, Reuters, Feb. 15, 2002; Globalstar, Creditors Finalize Agreement On Debt Restructuring and New Business Model, News Release, Globalstar, Feb. 15, 2002.
Andy Pasztor, Globalstars Filing Reflects a Lack Of Restructuring Plan, Customers, Wall Street Journal, Feb. 19, 2002; Ben Berkowitz, Globalstar Files for Chapter 11 Bankruptcy, Reuters, Feb. 15, 2002.
Id.
For a description of Iridiums emergence from bankruptcy, see Sixth Report, at 13384.
Iridium Satellite LLC Launches Global Communications Services, News Release, Iridium Satellite, Mar. 28, 2001; Iridium Satellite, Iridium Our Story (visited Jan. 25, 2002) ; Quentin Hardy, Corporate Focus: Global Minded Iridium has Down-to-Earth Need: Profit, Wall Street Journal, Jan. 26, 1999 at B4, available in 1999 WL-WSJ 5438178.
Malcolm Spicer, Iridium Satellite Lands Defense Contract, CT Wireless, Dec. 7, 2000, available in 2000 WL 6392736.
Satellite Phones - Newsday; Arik Hesseldahl, The Return Of Iridium, Forbes.com, Nov. 30, 2001.
World Communication Center, Iridium Phones (visited Feb. 11, 2002) .
Satellite Phones - Newsday; World Communication Center, Iridium Phones (visited Feb. 11, 2002) ; Global Satellite FWI, 9505 Order For (visited Feb. 11, 2002) .
Iridium Satellite, Iridium Services (visited Feb. 11, 2002) .
Id.
See Sixth Report, at 13388.
NTT DoCoMo Plans to Exercise Right to Purchase Additional AT&T Wireless Stock, News Release, AT&T Wireless, Dec. 21, 2001.
See Sixth Report, at 13388-13389. See Appendix C, Table 9, at C-13 for a summary of U.S. operators foreign holdings.
BellSouth Reports Third Quarter Earnings, News Release, BellSouth, Oct. 18, 2001.
Santosh Menon, Bharti Increases SkyCell Stake, Reuters, Sept. 18, 2001; Santosh Menon, Indias Bharti Eyes Foreign-owned Stakes in SkyCell, Reuters, Aug. 3, 2001.
Tally Goldstein, BellSouth Set to Sell Stakes in Mobile Phones, FT.com, Aug. 28, 2001.
BellSouth Restructures Agreement with KPN, News Release, BellSouth, Jan. 30, 2002.
BellSouth and KPN Close on Sale of E-Plus, News Release, BellSouth, Mar. 14, 2002.
BellSouth Records $850 million on Sale of KPN Shares, News Release, BellSouth, Mar. 19, 2002; Richard Waters, BellSouth Disposes of Stake in KPN, FT.com, Mar. 20, 2002.
Id.
Richard Waters, BellSouth Disposes of Stake in KPN, FT.com, Mar. 20, 2002.
Oida Taaffe, Telia, Telenor Amongst Danish UMTS Bidders, Total Telecom, Sept. 5, 2001.
Anne Young, Denmark Awards Four 3G Licenses, Total Telecom, Sept. 20, 2001.
Reuters staff, Czech Telecom to Buy EuroTel for US$1.5 Billion, Total Telecom, July 30, 2001.
Reuters staff, Cesky Telecoms EuroTel Buy Hits Price Snag, Total Telecom, Nov. 7, 2001.
Reuters staff, Cesky Telecom Abandons Talks on EuroTel Buy, Total Telecom, Nov. 28, 2001.
Juliana Ratner, SBC Presses for Belgacom IPO to Cash in Stake, FT.com, Mar. 13, 2002.
Id.
Id.
Leslie Crawford, Telefonica to Take Over Mexican Mobile Operator, FT.com, Mar. 8, 2002.
Annual Report 2001, SBC Communications Inc., at 38; Fiona Ortiz, Telecom Americas Owners Plan Overhaul, Reuters, Dec. 4, 2001.
America Movil Reshuffles Latin American Interests, Total Telecom, Jan. 29, 2002.
Annual Report 2001, SBC Communications Inc., at 32.
Verizon Communications Establishes Trust for Employees; Reduces Ownership of Wireless Company in Argentina, News Release, Verizon Communications, Mar. 28, 2002.
Western Wireless International Announces Completed Acquisition of tele.ring, News Release, Western Wireless International, July 3, 2001.
Id.
Anne Young, Three Operators Apply for Four Irish 3G Licenses, Total Telecom, Mar. 27, 2002.
Id.
Emily Bourne, AT&T Wireless Buys BTs Stake in Robers Wireless, Total Telecom, July 4, 2001; AT&T Wireless Increases Stake in Rogers Wireless, Reuters, July 3, 2001.
See Sixth Report, at 13392.
Robert Budden, Mobile Sales Across Europe Hit by Slowdown, FT.com, Feb. 3, 2002.
Id.
Paul Wuh, et al., Wireless 2002 Focusing on Profitability, Global Equity Research, Goldman Sachs, May 3, 2002, at 4 and 46 (Focusing on Profitability).
Id.
Wireless Matrix, at 17, 27 and 31.
See Sixth Report, at 13392.
Focusing on Profitability, at 4 and 37-38.
Id, at 38.
See Sixth Report, at 13391.
Id.
Operators Clean Up Subs Numbers and Focus on Profitability, Global Mobile, Feb. 27, 2002, at 14-15.
Connie Ling, Prepaid Mobile-Phone Lines Tangle Calculation of Market Penetration, WSJ.com, Jan. 24, 2002.
Id.
Id.
See Sixth Report, at 13390-13391.
NextGen VI, at 16; Paul Wuh et al., Prepaid in Europe, Lessons for the United States, Global Equity Research, Goldman Sachs, Dec. 22, 2001, at 1, 3.
See Sixth Report, 13391.
NextGen VI, at 14.
Id.
J. McIntyre, TMT Edge, Global Equity Research, Bear Stearns, Jan. 24, 2002, at 4. For the purpose of this comparison, we are using a source that provides an estimate of U.S. MOUs that is comparable to its estimate of the Western European average, but somewhat lower than the estimates of U.S. MOUs from other sources cited earlier.
Id.
Wireless Matrix, at 3.
Id.
Id.
See Sixth Report, at 13393.
Id.
In the case of the United States, Teligen calculates two business and two residential baskets using selected calling plans of two mobile operators, namely, Sprint PCS and Qwest.
See Sixth Report, at 13394.
Teligen T-Basket Mobile (GSM/PCS) Basket, Teligen Limited, Feb. 2002. See Appendix C, Table 10, at C-15.
Wireless Matrix, at 4.
ERO Information Document on GSM Frequency Utilisation Within Europe, European Radiocommunications Office, Feb. 2001.
Fanos Hira, Jerry Dellis Paul Harper and Jeremy Hudson, The Cellular Review, European Equity Research, Bear Stearns, Jan. 2002, at 12.
Wireless Matrix, at 37; Fanos Hira, Jerry Dellis Paul Harper and Jeremy Hudson, mmO2, European Equity Research, Bear Stearns, Dec. 12, 2001, at 21.
Effective Competition Review: Mobile, Oftel, Sept. 26, 2001, at v.
NextGen VI, at 24; Paul Wuh et al., Prepaid in Europe, Lessons for the United States, Global Equity Research, Goldman Sachs, Dec. 22, 2001, at 9.
See, for example, Focusing on Profitability, at 66.
Review of the Charge Control on Calls to Mobiles, Oftel, Sept. 26, 2001, at 1.
Id.
See Draft Guidelines on Market Analysis and the Calculation of Significant Market Power, Commission of the European Communities, Mar. 28, 2001, at 17; Pricing Methodology for the GSM Termination Service Final Report, Australian Competition and Consumer Commission, July 2001, at 12.
Wireless Matrix, at 27.
Id.
Kagan estimates that there were 7.8 million wireless Internet subscribers in the United States at the end of 2001. U.S. Wireless Industry Data Sub and Revenue Projections, Interactive Mobile Investor, Kagan World Media, Mar. 31, 2002, at 3. The Yankee Group states that wireless Internet adoption is rapidly approaching 10 million users. This includes wireless Internet users on all devices. See Yankee Group, The Yankee Group: Highlights of New Surveys and Publications (visited Mar. 6, 2002) . The Sixth Report stated that there were approximately 2.5 million wireless web users at the end of 2000. See Sixth Report, at 13396, note 323. However, that figure was a sum of the number of wireless web users reported by individual mobile telephone carriers, and most carriers have since stopped reporting their total number of wireless web users. See Section II.B.2.a, Mobile Data Mobile Telephone Sector, infra. The Yankee Group estimated there were more than 2 million wireless data users at the end of 2000. See Sixth Report, at 13396, note 323. Kagan also estimates that mobile telephone carriers wireless Internet revenue totaled $649 million at the end of 2001, or 0.8% of total 2001 revenue. U.S. Wireless Industry Data Sub and Revenue Projections, Interactive Mobile Investor, Kagan World Media, Mar. 31, 2002, at 3.
As mentioned above, the term advanced wireless services is used to describe the interim technologies that carriers are using or plan to use in migrating from 2G to 3G technologies. See note NOTEREF _Ref7510685 \h 32, supra. In the United States, the two major advanced wireless service technologies currently being deployed are: 1) General Packet Radio Service (GPRS), which is being rolled out by carriers using GSM/TDMA, and 2) cdma2000 1xRTT (also referred to as cdma2000 1X or 1xRTT), which the current CDMA carriers are upgrading their networks to. Some in the industry describe 1xRTT, which will double voice capacity and allow maximum data transfer speeds of up to 144 kbps, as a 2.5G technology, while CDMA carriers and equipment manufacturers generally characterize it as the first stage of 3G deployment. GPRS is a packet-based data-only network upgrade that allows for faster data rates by aggregating up to eight 14.4 kbps channels and is characterized as a 2.5G service. See Fifth Report, at 17700. See also, note NOTEREF _Ref514761638 \h 399, infra. Most U.S. GSM/TDMA carriers plan to deploy Enhanced Data Rates for GSM Evolution (EDGE) and eventually Wideband CDMA (WCDMA, also known as Universal Mobile Telecommunications System, or UMTS). The major CDMA carriers have plans to build out cdma 1XEV or cdma EV-DO. See Section II.B.2.a, Mobile Data Mobile Telephone Sector, infra, for a more detailed discussion.
The deployment of GPRS and cdma2000 1xRTT by mobile telephone carriers is discussed in more detail in Section II.B.2.a, Mobile Data Mobile Telephone Sector, infra. Many analysts and industry players believe that the widespread deployment of 3G networks is still several years away, given certain technological and economic obstacles yet to be overcome. Danni Gladden Green, Americas Strategic Marketing Manager for Texas Instruments Inc.s semiconductor group, stated in January 2002, I think the bulk of the revenue in 2003 will still come from 2G and, to a smaller percentage, 2.5G services. See Alex Romanelli, 2G is Still King; 3G important, but older technology wont go away, Electronic News, Jan. 1, 2002. Given the economy is slowing down and no one knows what the killer applications are going to be, I think were going to see a more incremental approach than what has been suggested, said Joe Laszlo, broadband and wireless analyst for Jupiter Media Matrix. See Amy Shafer, Sprint considers 3G rollout a relaunch of the company, Associated Press, Feb. 15, 2002. Samuel May, U.S. Bancorp Piper Jaffray senior research analyst, said, Were nowhere [with 3G rollout]. Were at a starting gate with no starting gun. See Kent German, An unproven promise, Upside, Mar. 2002. Another difficulty for 3G has been the development of applications. According to Knox Bricken, a wireless telecommunications analyst with Yankee Group, The applications arent there yet. See Katie Hafner, The Future of Cellphones Is Here. Sort Of, New York Times, Feb. 14, 2002. See also Brad Smith, Filming the Wireless Data Sequel, Wireless Week, Jan. 7, 2002; Ric Prentiss,S-Curve Ahead Wireless Voice Plateaus in 2004 When Data Kicks-In, Raymond James, Sept. 5, 2001; Craig Mathias, A good year for wireless?, Electronic Engineering Times, Jan. 28, 2002.
See Section II.B.2.a, Mobile Data Mobile Telephone Sector, infra.
This analysis is based on publicly-available information, such as news articles and operators press releases, web sites, and filings with the Commission. There are several caveats to note when considering this data. First, in order to be considered as covering a county, an operator need only be offering GPRS or 1xRTT service in a portion of that county. Second, the population figure in this analysis includes the total population of the counties counted as having any GPRS or 1xRTT rollout. Third, all population figures are based on 2000 Census estimates.
See Section II.B.2.a, Mobile Data Mobile Telephone Sector, infra.
Other types of mobile data services such as location-based services and short-range data transmissions are discussed as well. See Sections II.B.3.e., Location-Based Services and II.B.3.f., Short-Range Data Transmissions, infra.
The various types of mobile data services available to consumers are generally distinct from each other and from voice service. For example, sending e-mail is distinguishable from browsing web pages. However, not all mobile data services fit in particular categories, and providers frequently bundle several mobile data services together in their pricing arrangements. This report therefore describes the various mobile data services currently available without concluding that they are necessarily separate and distinct markets. See Appendix D, Table 2, at D-5 for an overview of mobile Internet access services.
At the writing of the Sixth Report, the Handspring VisorPhone was the only voice capability offered for a PDA. See Sixth Report, at 13416.
However, some smartphones remain largely focused on data applications, while others are more voice application-centric. See Mark Heinzl and Pui-Wing Tam, Research in Motion, Palm Unveil New Handhelds, Raising Rivalry, Wall Street Journal, Mar. 4, 2002 (IBS Warburg analyst Michael Urlocker said, the new BlackBerry will appeal to those who want lots of data with some phone, while the new Handspring Treo appeals to those who want lots of phone with some data.).
Amendment of Part 2 of the Commissions Rules to Allocate Spectrum Below 3 GHz for Mobile and Fixed Services to Support the Introduction of New Advanced Wireless Services, including Third Generation Wireless Systems, Memorandum Opinion and Order and Further Notice of Proposed Rulemaking, 16 FCC Rcd 16043 (2001) (3G FNPRM).
See Sixth Report, at 13400.
3G FNPRM, at 16044. See Appendix A, Fixed Wireless Voice and Data Services, infra, for a further discussion of MDS.
3G FNPRM, 16044.
NTT DoCoMo, Revolutionary 3G Service (visited Mar. 20, 2002) ; Ken Wieland, Lessons from Japan: NTT DoCoMo Has Wisely Adopted a Step-by-Step Approach to Service Provisioning, Telecommunications (International Edition), Feb. 1, 2002, at 16.
NTT DoCoMo Sees 6 mln 3G Subscribers by 2004 Despite Initial Low Take-Up, AFX-Asia, Mar. 1, 2002. According to NTT DoCoMo, the 3G network will not be available to 97 percent of Japans populated areas until 2004. Id. However, DoCoMo announced in February 2002 that it would expand 3G service in April 2002 to areas outside of Tokyo, increasing the coverage to 60 percent of Japans populated areas. DoCoMo Hopes for More Customers with Expanded 3G Service, Agence France Presse, Feb. 22, 2002.
NTT DoCoMo, Current Information Subscriber Growth (visited June 3, 2002) . See Sixth Report, at 13396-13397, for a further discussion of i-mode.
Sarah Parker, Europe Sidelines UMTS in Favor of UMTS Focus, Global Wireless, Feb. 15, 2002, at 1. Reasons for the delays in 3G launches include the high cost of infrastructure deployment (added to the large amounts paid for 3G licenses in some countries), technical problems with both network infrastructure and handsets, and uncertainty over consumer demand. Id.
Id.
SK Telecom, 1st Quarter Earnings for the Period Ending March 31, 2002, May 6, 2002, at 9.
Wireless Internet Shows Promise in South Korea, Wall Street Journal, May 13, 2002, at A6.
Sarah Parker, Europe Sidelines UMTS in Favor of UMTS Focus, Global Wireless, Feb. 15, 2002, at 1 (citing UK consulting firm Analysys).
GSM Association, SMS Messages Sent Per Month (visited Mar. 20, 2002) . See Section II.B.3.b., SMS and Instant Messaging, infra, for a further discussion of SMS service in the United States.
See Fifth Report, at 17697-17703.
AT&T Wireless On Target To Deliver 3G Services, News Release, AT&T Wireless, July 17, 2001 (AT&T Wireless 3G News Release); Cingular Wireless First to Deliver 2.5G Services to Consumers, News Release, Cingular Wireless, Aug. 27, 2001; Verizon Wireless Launches Nations First Major Advanced Wireless Network: The Verizon Wireless Express Network, News Release, Verizon Wireless, Jan. 28, 2002; VoiceStream Extends GET MORE Value proposition to offer High-Speed Wireless Data Service to Customers Nationwide, News Release, VoiceStream, Nov. 14, 2001.
Sprint Leads Evolution to 3G with Nations Clearest, Fastest, Most Economical Migration Strategy, News Release, Sprint PCS, Mar. 20, 2001; Verizon Wireless and Lucent Technologies Plan to Speed Introduction of Third-Generation (3G) Technologies to U.S., News Release, Verizon Wireless, Mar. 19, 2001.
Christopher Stern, High-Speed Wireless Network to Debut, Washington Post, Jan. 27, 2002.
Verizon Wireless Launches Nations First Major Advanced Wireless Network: The Verizon Wireless Express Network, News Release, Verizon Wireless, Jan. 28, 2002.
Sprint Showcases First Live Public Demonstration of its Wireless Third Generation Network, News Release, Sprint PCS, Jan. 8, 2002.
Sprint PCS, Media Center: Sprint PCS Third Generation Network Questions and Answers (visited Jan. 30, 2002) ; Verizon Wireless and Lucent Technologies Plan to Speed Introduction of Third-Generation (3G) Technologies to U.S., News Release, Verizon Wireless, Mar. 19, 2001. Sprint PCS claims that its cdma2000 1xEV data and voice network will be capable of transmitting data at speeds of 3.5 to 5 Mbps. Id.
Frank Marsala, Nextel Communications; Strategy Holds Together, Execution Looks Good, Robertson Stephens, Mar. 11, 2002, at 2; Christopher Lindquist, Wireless Data Will Get A Boost In 2002-But How Much Of One Depends On Whom You Ask, CIO, Mar. 15, 2002; Nextel Launches Faster Wireless Access to Web Content and New Wireless Modem Device; Data Compression Solution Accelerates Industrys Largest, Nationwide 2.5G Network, News Release, Nextel, May 14, 2002.
Peggy Albright, Lessons Learned From Current Next-Gen Nets, Wireless Week, Dec. 17, 2001. A clear timeline for Nextels 3G network overlay has not yet been disclosed; however, one analyst believes the company will use cdma2000 and begin building the network in 2003 or beyond. Frank Marsala, Nextel Retains Exclusive Rights To Direct Connect on CDMA Network, Robertson Stephens, Jan. 10, 2002.
See note NOTEREF _Ref7502464 \h 16, supra, for an additional description of GRPS and other 2.5G and 3G wireless technologies. The channel aggregation technology used in GRPS reportedly caused unacceptable heating and battery drain problems in the initial GPRS handset models. Accordingly, handset manufacturers have been forced to limit the amount of channel aggregation, which has therefore affected GPRS data transfer speeds. See Dan Meyer, Rolling Out GPRS Only Half The Battle; Carriers Address Delicate Marketing, Handset Issues, RCR Wireless News, Jan. 28, 2002; Peggy Albright, Will GPRS Comply with SAR Standards?, Wireless Week, Apr. 30, 2001. GPRS data speeds also have been affected by network configurations that dedicate the majority of channels to voice rather than data traffic. Brad Smith, Next-Gen Networks Battle For Fastest Data Rates, Wireless Week, Dec. 17, 2001; Peggy Albright, Lessons Learned From Current Next-Gen Nets, Wireless Week, Dec. 17, 2001.
AT&T Wireless 3G News Release. As of year-end 2001, AT&T Wireless offered GPRS in 16 cities. Paul Wuh et al., AT&T Wireless Group, US Wireless Services, Goldman Sachs, Jan. 25, 2002, at 1. Cingular Wireless First to Deliver 2.5G Services to Consumers, News Release, Cingular Wireless, Aug. 27, 2001. As of June 2002, Cingular Wireless had deployed GPRS in 38 markets. Cingular, Wireless Internet Availability (visited June 18, 2002) . VoiceStream Extends GET MORE Value proposition to offer High-Speed Wireless Data Service to Customers Nationwide, News Release, VoiceStream, Nov. 14, 2001. VoiceStream has deployed GPRS across its entire network.
Dan Meyer, Rolling Out GPRS Only Half the Battle; Carriers Address Delicate Marketing, Handset Issues, RCR Wireless News, Jan. 28, 2002. Early results in AT&Ts launched markets yielded speeds of 20-40 kbps. AT&T Wireless estimates data rates on its GPRS network are 25 kbps on average. On the other hand, VoiceStream claims that its network yields speeds up to 56 kbps and 40 kbps on average. See Dan Meyer, GSM gains ground in United States; AT&T, VoiceStream detail launch, migration plans, RCR Wireless News, Nov. 19, 2001; Brad Smith, Next-Gen Networks Battle For Fastest Data Rates, Wireless Week, Dec. 17, 2001. Several sources estimate maximum GPRS speeds will be 115 kbps. See Jonathan Roubini, GPRS Phone Service Delivers on Speed Promises; Evaluation, PC Magazine, Feb. 26, 2002; Brad Smith, Next-Gen Networks Battle for Fastest Data Rates, Wireless Week, Dec. 17, 2001; Blesson Mathews, Generation Wireless, Network Computing, June 11, 2001; Harry Newton, Newtons Telecom Dictionary: 16th Expanded & Updated Edition, CMP Books, July 2000, at 397.
AT&T Wireless 3G News Release. By year-end 2001, AT&T Wireless had built-out GPRS to 45 percent of its covered POPs. Goldman Sachs AT&T Wireless Group, at 4.
Cingular Wireless has not established a timeline for installing WCDMA. In fact, the company has stated that it will need more spectrum to deploy WCDMA. See Kelly Carroll, Cingular Backs Away From Wideband CDMA, Telephony, Nov. 5, 2001; Frank Marsala, Implications of Cingulars Technology Announcement, Robertson Stephens, Oct. 31, 2001; Kelly Carroll, Cingular Attaches Billions To Its EDGE Commitment, Telephony, Dec. 10, 2001; Kelly Carroll, An Alternate Reality For 3G Wireless, Telephony, Oct. 15, 2001.
Blesson Mathews, Generation Wireless, Network Computing, June 11, 2001; Margot Suydam, Might As Well Jump; 3G: The Cellular Industrys Leap Of Faith, CommVerge, Nov. 1, 2001; Kent German, An Unproven Promise, Upside, Mar. 2002.
Cingular Wireless LLC, SEC Form S-4, Jan. 24, 2002; Frank Marsala, Implications of Cingulars Technology Announcement, Robertson Stephens, Oct. 31, 2001.
See AT&T Wireless 3G News Release; Paul Wuh, AT&T Wireless Group: Analyst Meeting Companion, Goldman Sachs, Jan. 25, 2002.
See Section II.B.2.c.ii, Operating Systems, infra.
One analyst stated in January 2002, [W]ireless is ultimately the most important aspect of any kind of handheld device. See Jon Fortt, Device Arrives at a Critical Time for Firm, Palm Unveils Its Wireless Handheld i705, San Jose Mercury News, Jan. 28, 2002 (quoting Thomas Sepenzis, an analyst at CIBC World Markets, who also stated, Twelve months from now, if its not wireless, its pretty much useless.). Palm stated in January 2002, Handheld usage is shifting. While the [electronic organizer] is significant, whats going to be driving the industry is communications functionality. See Vanessa Hua, Palm Rides Wireless Wave, San Francisco Chronicle, Jan. 28, 2001, at E1 (quoting John Cook, Palms senior director of product management). In January 2002, Handspring announced that it would eventually stop producing traditional handheld organizers and would offer wireless communicators instead. Ian Fried, Handspring to Developers: Remain Calm, CNET News.com, Jan. 23, 2001.
eTForecasts: Pocket PC PDAs to Surpass PalmOS PDAs in 2005, Business Wire, Dec. 12, 2001 (citing Worldwide PDA Markets, a market research report by eTForecasts).
Gartner Dataquest Says Announced Release of Pocket PC 2002 May Have Slowed PDA Sales in 3Q01, Business Wire, Nov. 5, 2001.
Palm is the largest PDA producer. According to one analyst, since its inception, the company has sold a total of 20 million devices, about 13 to 14 million of which are currently in use. Patrick Seitz, Palm Setting Its Sights on Corporate Spending with New i705 Device Lets Users Check Their E-Mail, Investors Business Daily, Jan. 29, 2002, at 5 (citing Todd Kort, an analyst with Gartner Inc.).
Compaq and HP are in the process of merging. In March, the Federal Trade Commission closed its review of the pending merger. Federal Trade Commission Clears HP-Compaq Merger, News Release, HP, Mar. 6, 2002.
Gartner Dataquest Says Announced Release of Pocket PC 2002 May Have Slowed PDA Sales in 3Q01, Business Wire, Nov. 5, 2001.
The Palm i705 was released in January 2002 and is an updated version of the Palm VII series, which was originally released in the second half of 1999 and is discussed in greater detail in the Sixth Report, at 13413-13414, and Fifth Report, at 17722-17723. The Palm i705 costs $450. Users can also purchase a thumb keypad to slip on to the bottom of the device. Patrick Seitz, Palm Setting Its Sights on Corporate Spending with New i705 Device Lets Users Check Their E-Mail, Investors Business Daily, Jan. 29, 2002, at 5. The device includes a 33 MHz Dragonball processor, 8 megabytes (MB) of RAM, and 4 MB of storage, and provides always-on access to e-mail and messaging. Kristen Kenedy, Palm Eyes Security Data Protection Key as Enterprise Arena Considers Handhelds, Computer Reseller News, Jan. 28, 2002, at 96 (Palm Eyes Security).
Palm Eyes Security. Cingular Wirelesss Mobitex network allows users to roam in 260 U.S. metropolitan areas without incurring additional charges. Palm i705 Handheld Debuts: Only Secure, Integrated Wireless, Email Solution with Web Access, News Release, Palm, Jan. 28, 2002.
Cingular Powers New Palm i705 Wireless Handheld, News Release, Cingular Wireless, Jan. 28, 2002.
Palm Eyes Security.
See Section II.B.2.a, Mobile Data Mobile Telephone Sector, supra, for a further discussion of advanced wireless network deployments by mobile telephone carriers.
These manufacturers also make wireless modem cards for laptops, allowing them to connect to the Internet wirelessly.
Sierra Wireless and Verizon Wireless Connect Mobile Users on the First 1xRTT Express Network, News Release, Sierra Wireless, Jan. 28, 2002.
The wireless modem card is the Merlin G100, made by Novatel Wireless. VoiceStream, G100 iStream PC Card (visited Mar. 4, 2002) . See Section II.B.2.a, Mobile Data Mobile Telephone Sector, supra, for a discussion of advanced wireless service rollouts and network deployments by mobile telephone carriers.
However, even when using a mobile telephone for a connection, PDA users can typically access additional or more advanced Internet services and applications not available on mobile telephone handsets. See Sections II.B.2.a, Mobile Data Mobile Telephone Sector, supra, and II.B.3, Mobile Data Services, infra.
The VisorPhone connects to GSM networks, while the DigitalLink works with Sprint PCSs CDMA network. The DigitalLink module is also compatible with Sprint PCSs 1xRTT network, which is being deployed nationwide during 2002 and is expected to increase data speeds to up to 144 kbps. Handspring, VisorPhone (visited February 13, 2002) ; Handspring, Sprint PCS Wireless Web DigitalLink (visited February 13, 2001) .
Andrea Ahles, Cellphones That Are Also PCs, PDAs, Pagers the Device of the Year, Fort Worth Star-Telegram, Jan. 9, 2002 (quoting Todd Kort, Gartner Group).
Id.
Jon Fortt, Device Arrives at a Critical Time for Firm, Palm Unveils Its Wireless Handheld i705, San Jose Mercury News, Jan. 28, 2002. See Section II.B.3.b(ii), Operating Systems, infra, for a discussion of PDA operating systems.
The Treo currently transmits data at around 9.6 kbps. Jon Fortt, Device Arrives at a Critical Time for Firm, Palm Unveils Its Wireless Handheld i705, San Jose Mercury News, Jan. 28, 2002; Rob Pegoraro, Even the Best of the Phone-PDA Combos Arent Good Enough, Washington Post, Jan. 27, 2002, at H7. Treo users can send and receive SMS messages, access POP3 e-mail accounts (see note NOTEREF _Ref12346180 \h 496, infra, for a discussion of POP3 e-mail accounts), and surf the web using Handsprings browser, Blazer, which does display graphical web pages in a recognizable form. The Treo does not contain Handsprings signature Springboard expansion slot, but it does have an integrated thumb keypad. See Bruce Brown, Handspring Gets the Phone/PDA Combo Right, PC Magazine, Feb. 12, 2002, at 34; Rob Pegoraro, Even the Best of the Phone-PDA Combos Arent Good Enough, Washington Post, Jan. 27, 2002, at H7.
Rob Pegoraro, Even the Best of the Phone-PDA Combos Arent Good Enough, Washington Post, Jan. 27, 2002, at H7.
Handspring and Sprint Developing CDMA Version of Treo Communicator, News Release, Handspring, Mar. 19, 2002.
RIM Adds Phone to BlackBerry, Takes on Cell Giants, Reuters, Mar. 4, 2002. See Section II.B.3.d, E-mail and Corporate Server Access, infra, for a discussion of e-mail service on mobile devices. RIM also announced an agreement with Nextel and Motorola in January 2002 to develop a RIM device that will include RIMs BlackBerry e-mail service and voice access over Nextels iDEN network, including Nextels DirectConnect two-way digital radio service. Nextel, RIM and Motorola Agree to Purchase Voice-enabled Handheld, News Release, Nextel and RIM, Jan. 24, 2002. Nextels iDEN network technology is manufactured by Motorola. Id.
Microsoft Rings in Pocket PC Phone Edition, News Release, Microsoft, Feb. 19, 2002. The mobile data services offered with devices running the Pocket PC 2002 and Pocket PC 2002 Phone Edition operating systems are discussed in more detail in Section II.B.3.d., E-mail and Corporate Server Access, infra. At the same time Microsoft unveiled the Jornada 928, the company announced an agreement with Intel in which the two companies will support each others components in smartphone platform design. Microsoft agreed to support Intels Personal Internet Client Architecture (Intel PCA) while Intels components will integrate Microsofts operating system with the goal of creating a standard platform for smartphone/PDA software development. Microsoft and Intel Announce Wireless Development Initiative, News Release, Microsoft, Feb. 19, 2002.
Verizon Wireless, Introducing Thera (visited May 22, 2002) .
The major exceptions are devices made by RIM. The BlackBerry 5810 uses a Java operating system developed by Sun Microsystems that can reportedly be read and understood by all other operating systems. RIM Adds Phone to BlackBerry, Takes on Cell Giants, Reuters, Mar. 4, 2002.
About 22 percent of the PDAs sold during 2001 run Microsofts Pocket PC or Windows CE, and the remaining 6 percent run other operating systems. eTForecasts: Pocket PC PDAs to Surpass PalmOS PDAs in 2005, Business Wire, Dec. 12, 2001 (citing Worldwide PDA Markets, a market research report by eTForecasts).
Palm, Inc. Second Quarter, Fiscal 2002 Analyst Teleconference Remarks - Eric Benhamou, Chairman and Chief Executive Officer, News Release, Palm, Dec. 19, 2001; Palm, Inc. Third Quarter Fiscal 2002 Analyst Teleconference Remarks Judy Bruner, Senior Vice President and Chief Financial Officer, News Release, Palm, Mar. 21, 2002.
As of December 2001, there were approximately 175,000 registered PalmOS third party application and software developers. Palm Reports Second Quarter Revenue Up 36 Percent Over First Quarter, Sequential Improvement in Operating Results, News Release, Palm, Dec. 19, 2001.
Palm i705 Handheld Debuts: Only Secure, Integrated Wireless, Email Solution With Web Access, News Release, Palm, Jan. 28, 2002. Documents To Go is pre-loaded on all Palm i705 devices. Id.
Microsoft Rings in Pocket PC Phone Edition, M2 Presswire, Feb. 19, 2002 (citing IDC).
See Section II.B.3, Mobile Data Services, infra.
Arch Wireless Communications Inc., SEC Form 10-K, Mar. 21, 2002, at 11; Metrocall, Inc., SEC Form 10-K, Apr. 12, 2002, at 16.
NRUF database. See note NOTEREF _Ref12343162 \h 114, supra, for a description of this source.
SkyTel Communications, Inc. is a wholly owned subsidiary of WorldCom that was acquired on October 1, 1999. See Fifth Report, at 17720-17721.
The number of paging subscribers of the major carriers fell substantially during the past year. Arch Wirelesss units in service declined 29 percent from 11.6 million at the end of 2000 to 8.2 million at the end of 2001. Arch Wireless Communications Inc., SEC Form 10-K, Mar. 21, 2002, at 11. Metrocalls units in service declined 13 percent from 6.3 million at the end of 2000 to 5.5 million at the end of 2001. Metrocall, Inc., SEC Form 10-K, Apr. 12, 2002, at 16.
Both Arch and Metrocall generates about 90 percent of their revenue from traditional one-way paging services. Arch Wireless Communications Inc., SEC Form 10-K, Mar. 21, 2002, at 4; Last Call for Metrocall?, Washington Business Journal, Nov. 23, 2001, at 23.
See Last Call for Metrocall?, Washington Business Journal, Nov. 23, 2001, at 23 (citing Roberta Wiggins, an analyst for the Yankee Group); John Sullivan, Motorolas Exit: Death Knell Or New Dawn For Paging Market?, Wireless Data News, Dec. 19, 2001 (citing analyst Herschel Shosteck of the Shosteck Group); Deborah Mendez-Wilson, An International Mobile Network; WebLink Wireless Crosses Borders With Two-Way Messaging, Wireless Week, Sept. 17, 2001, at 22; Arch Wireless Communications Inc., SEC Form 10-K, Mar. 21, 2002, at 7. See Sections II.B.2.a, Mobile Data Mobile Telephone Sector and II.B.2.b, Handheld Devices, supra; and Section II.B.3, Mobile Data Services, infra, for a further discussion of competing providers of advanced mobile data services.
See Sixth Report, at 13405.
WebLink Wireless Prepares to File Plan to Emerge from Chapter 11, PR Newswire, Oct. 31, 2001. In its reorganization filing, WebLink announced it planned to emerge from bankruptcy as a stand-alone company but was also soliciting proposals from outside investors. Mike Dano, WebLinks Bankruptcy Restructure Includes Talks with Strategic Partners, RCR Wireless News, Nov. 5, 2001, at 2.
Arch Agrees to Debt Restructuring Plan With Majority of Its Secured Creditors, News Release, Arch Wireless, Dec. 6, 2001; Arch Wireless Files Plan of Reorganization, News Release, Arch Wireless, Jan. 15, 2002.
Metrocall Files Voluntary Chapter 11 Petition, News Release, Metrocall, June 3, 2002. Metrocall expects to continue to provide service without interruption during its reorganization process. Id.
Mike Dano, Arch Upgrades to 2.7 ReFLEX Network, RCR Wireless News, Nov. 5, 2001, at 4.
Motient filed for Chapter 11 bankruptcy during 2001 but emerged from bankruptcy with significantly less debt on April 25, 2002. Yuki Noguchi, Motient Corp. Leaves Bankruptcy, Cuts Debt, Washington Post, Apr. 26, 2002, at E5.
See Section II.B.2.b, Handheld Devices, supra, for a discussion of how handheld devices connect to the Internet wirelessly.
Lower and Upper Paging Bands Auction Closes, Public Notice, DA 01-2858, Dec. 11, 2001.
Id. See Appendix B, Table 3, at B-6.
John Sullivan, Motorolas Exit: Death Knell Or New Dawn For Paging Market?, Wireless Data News, Dec. 19, 2001.
U.S. carriers have set varying character limits. For example, Verizon Wireless limits users to 120 characters, whereas Nextel allows users to send and receive messages up to 500 characters long. See Verizon Wireless, Welcome to Verizon Wireless, (visited Mar. 7, 2002) ; Nextel, Nextel Two-Way Messaging (visited Jan. 29, 2002) .
Brad Smith, Signs Point To A Surge In SMS, Wireless Week, Mar. 4, 2002 (citing GSM Association).
VoiceStream Wireless Launches Wireless Internet Services, News Release, VoiceStream, May 10, 2000. Verizon Wireless and AT&T Wireless initiated SMS services during the fourth quarter of 2000. AT&T Wireless Brings the International Text Messaging Craze to the U.S., News Release, AT&T Wireless, Oct. 17, 2000; Verizon Wireless Customers Can Now Let Their Fingers Do The Talking, News Release, Verizon Wireless, Nov. 30, 2000.
According to company websites, carriers offering SMS include the following: AT&T Wireless, CenturyTel, Cingular, Einstein PCS, MetroPCS, Nextel, Ntelos, Sprint PCS, US Cellular, Verizon Wireless, VoiceStream, and Western Wireless.
Dan Meyer, AT&T Wireless move gives SMS legs in U.S., RCR Wireless News, Nov. 26, 2001.
Cingular to Offer Text Messaging Without Boundaries, News Release, Cingular Wireless, Feb. 27, 2002; Sprint to Expand Sprint PCS Short Mail to Include Intercarrier Messaging, News Release, Sprint PCS, Mar. 13, 2002; Verizon Wireless Deploys InphoMatch Platform To Manage Inter-Carrier Text Messaging Traffic, News Release, Verizon Wireless, Apr. 9, 2002; VoiceStream Expands Two-Way Text Messaging Service, News Release, VoiceStream, Mar. 1, 2002.
Frank Marsala, Mid-Quarter Look Reveals Some Positive Trends, Robertson Stephens, May 22, 2002.
In addition to paying service plan fees, customers must also purchase handsets capable of text messaging.
Verizon Wireless, Welcome To Verizon Wireless, (visited Mar. 7, 2002) .
Nextel, Nextel Two-Way Messaging (visited Jan. 29, 2002) .
Nextel, Nextel Nextel Online, (visited Jan. 29, 2002) ; Nextel Nextel Online Plus, Nextel, (visited Jan. 29, 2002).
Devine Kofiloto and Mike Woolfrey, SMS Unexploited Potential Messaging Conference Hears, EMC Market Data, Jan. 31, 2001.
AT&T Wireless, AT&T Wireless 2-Way Text Messaging Service (visited Mar. 7, 2002) ; Sprint and America OnLine Launch the AOL Instant Messenger Service on the Sprint PCS Wireless Web, News Release, Sprint PCS, Oct. 19, 2000; VoiceStream, VoiceStream products & services (visited Jan. 29, 2002) .
Cingular Wireless, Wireless Window Cingular Wireless, (visited Jan. 29, 2002) .
Palm Delivers Wireless Always-on, AOL Instant Messenger(AIM) Service on New Palm i705 Handheld, News Release, Palm, Jan. 28, 2002; Patrick Seitz, Palm Setting Its Sights on Corporate Spending with New i705 Device Lets Users Check Their E-Mail, Investors Business Daily, Jan. 29, 2002, at 5.
eCare, E-mail correspondence, Sprint PCS, May 16, 2001.
See Consumer Federation of America, Media Access Project, and Center for Media Education, Applications for Consent to the Transfer of Control of Licenses and Section 214 Authorizations by Time Warner Inc. and America Online, Inc., Transferors, to AOL Time Warner Inc., Transferee, CS Docket No. 00-30, Petition to Deny, at 32-33 (filed Apr. 26, 2000); Testimony of Esther Dyson, Chairman, EDventure Holdings, FCC En Banc Hearing, CS Docket No. 00-30 (July 27, 2000); Testimony of Mark Cooper, Director of Research, Consumer Federation of America, FCC En Banc Hearing, CS Docket No. 00-30 (July 27, 2000); Testimony of William F. Reddersen, Executive Vice President, BellSouth Corporation, FCC En Banc Hearing, CS Docket No. 00-30 (July 27, 2000); Testimony of Ross Bagully, CEO, Tribal Voice Inc., FCC En Banc Hearing, CS Docket No. 00-30 (July 27, 2000); Prepared Testimony of Preston R. Padden, Executive Vice President of Government Relations, The Walt Disney Co., at 3, FCC En Banc Hearing, CS Docket No. 00-30 (July 27, 2000).
The wireless carriers offering wireless web service include ALLTEL, AT&T Wireless, Cingular Wireless, Nextel, Sprint PCS, Verizon Wireless, and VoiceStream. As mentioned in the Sixth Report, wireless telephone carriers began offering wireless web access in 1999. Sixth Report, at 13410.
The terms wireless web and mobile web are used throughout Section II.B., Mobile Data, to mean mobile Internet access via mobile telephone handsets.
As mentioned in the Sixth Report, the technologies and speeds used for wireless web services vary by mobile telephone carrier. As of March 2002, several carriers now offer data services at higher rates on their advanced wireless service networks than the speeds offered on their 2G networks. Verizon Wireless offers an average speed of 40 to 60 kbps on its cdma2000 1xRTT network, while AT&T Wireless, Cingular Wireless, and VoiceStream offer rates of 25 to 56 kbps on GPRS networks installed during 2001 and 2002. For more on network deployment, see Section II.B.2.a, Mobile Data Mobile Telephone Sector, supra. Christopher Stern, High-Speed Wireless Network to Debut, Washington Post, Jan. 27, 2002; VoiceStream Extends GET MORE Value proposition to offer High-Speed Wireless Data Service to Customers Nationwide, News Release, VoiceStream, Nov. 14, 2001; Katie Hafner, The Future of Cellphones Is Here. Sort Of., New York Times, Feb. 14, 2002.
See Sixth Report, at 13408.
See Sixth Report, at 13409; U.S. Wireless Phone Penetration Climbs, Wireless Insider, Oct. 1, 2001; Sean Buckley, Mobile IP: Breaking the on-size-fits-all mentality, Telecommunications, Sept. 2001.
A wireless modem card allows full access to the Internet just like a traditional modem. The difference is that a laptop with a wireless modem card will access the Internet via a wireless network, whereas a traditional modem accesses the Internet via a wireline network.
Microsoft, Pocket Internet Explorer (visited Mar. 19, 2002) . Pocket PC PDAs require the attachment of a wireless modem card in order to access the Internet, and users can choose to access web content in a text-only format. Id.
Blazer can be downloaded on PalmOS devices with at least 8 MB of memory running PalmOS version 3.5 or higher. Blazer is not available for Palm i705 and VII devices, which must use the Palm.Net web clipping applications. As mentioned above, Handspring PDAs require the attachment of a mobile phone, a VisorPhone, or a wireless modem card in order to access the wireless Internet. See Section II.B.2.b, Handheld Devices, supra.
Handspring, Handspring Software: Blazer Details (visited Mar. 19, 2002) .
GoAmerica, Go.Web Service (visited Mar. 19, 2002) < http://www.goamerica.com/goweb/>; EarthLink, EarthLink Wireless Services (visited Mar. 19, 2002) . On December 7, 2001, EarthLink announced its plans to acquire the assets of OmniSky Corporation as part of OmniSkys Chapter 11 bankruptcy proceedings. As of that time, OmniSky had approximately 32,000 customers. EarthLink Announces Plans to Purchase OmniSkys Subscriber Base and Key Operational Assets, News Release, EarthLink, Dec. 7, 2001.
BlackBerry, Third Party Solutions (visited Mar. 19, 2002) ; EarthLink, EarthLink Wireless Services (visited Mar. 19, 2002) .
See Sixth Report, at 13414; Palm, The Wireless-Ready Web with Web Clipping Applications (visited Mar. 19, 2002) .
See Appendix D, Table 2, at D-5.
Verizon Wireless, Welcome To Verizon Wireless (visited Jan. 29, 2002) ; Cingular, My Wireless Window (visited Jan. 1, 2002) ; Sprint PCS, Sprint PCS Wireless Sites (visited Jan. 29, 2002) .
In addition to paying monthly service fees and airtime charges, all mobile telephone Internet customers must purchase Internet-ready handsets.
VoiceStream offers wireless web service only via its GPRS data network. VoiceStream Extends GET MORE Value proposition to offer High-Speed Wireless Data Service to Customers Nationwide, News Release, VoiceStream, Nov. 14, 2001; VoiceStream, VoiceStream products & services (visited Jan. 29, 2002) .
Verizon Wireless Launches Nations First Major Advanced Wireless Network: The Verizon Wireless Express Network, News Release, Verizon Wireless, Jan. 28, 2002.
AT&T Wireless offers four plans ranging from $29.99 to $99.99 f o r 5 t o 4 0 M B o f d o w n l o a d e d d a t a . A T &