*Pages 1--145 from Microsoft Word - 28908* Federal Communications Commission FCC 02- 179 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 ) ) ) ) ) ) ) ) ) SEVENTH REPORT Adopted: June 13, 2002 Released: July 3, 2002 By the Commission: Commissioner Copps issuing a statement. Table of Contents Page I. INTRODUCTION ........................................................................................................................... 3 A. Overview............................................................................................................................. 3 B. Status of Competition ......................................................................................................... 4 C. Industry Development......................................................................................................... 5 II. THE CMRS INDUSTRY ................................................................................................................ 9 A. Mobile Telephony............................................................................................................... 9 1. Mobile Telephone Overview and Analysis............................................................ 9 a. Market Structure ....................................................................................... 9 b. Market Performance ............................................................................... 19 c. Digital Deployment ................................................................................ 25 d. Pricing Data and Trends ......................................................................... 28 e. Wireless/ Wireline Competition .............................................................. 32 f. Geographical Comparisons: Urban vs. Rural ......................................... 36 2. Other Competitors: Resellers and Satellite Operators ......................................... 41 a. Resellers.................................................................................................. 41 b. Satellite Operators................................................................................... 42 3. International Developments ................................................................................. 44 a. International Investments........................................................................ 44 b. International Comparisons...................................................................... 48 B. Mobile Data ...................................................................................................................... 55 1 Federal Communications Commission FCC 02- 179 1. Introduction.......................................................................................................... 55 a. Domestic Developments ......................................................................... 55 b. International Developments.................................................................... 58 2. Industry Structure and Performance .................................................................... 59 a. Mobile Telephone Sector........................................................................ 59 b. Handheld Devices................................................................................... 61 c. Paging Sector .......................................................................................... 66 3. Mobile Data Services........................................................................................... 68 a. Paging ..................................................................................................... 68 b. SMS and Instant Messaging ................................................................... 68 c. Web Content ........................................................................................... 70 d. E- mail and Corporate Server Access ...................................................... 73 e. Location- Based Services......................................................................... 75 f. Short Range Data Transmissions ............................................................ 78 4. Telemetry and Telematics.................................................................................... 81 III. CONCLUSION.............................................................................................................................. 83 IV. ADMINISTRATIVE MATTERS.................................................................................................. 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 2 Federal Communications Commission FCC 02- 179 I. INTRODUCTION A. Overview In 1993, Congress created the statutory classification of Commercial Mobile Services 1 to promote the consistent regulation of mobile radio services that are similar in nature. 2 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. 3 This report is the seventh of the Commission’s annual reports 4 on the state of CMRS competition. 5 CMRS includes a large number of terrestrial services and some mobile satellite services. 6 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. 7 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 1 Commercial Mobile Services came to be known by the Commission as the Commercial Mobile Radio Services, or “CMRS.” 2 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). 3 Id. codified at 47 U. S. C. § 332( c)( 1)( C). 4 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, 15 FCC 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, 16 FCC Rcd 13350 (2001) (“ Sixth Report”). 5 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. 6 47 C. F. R. § 20.9( 10). 7 See, e. g., Section II. A. 2. b, 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. 3 Federal Communications Commission FCC 02- 179 mobile telephony subscribership. 8 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. 9 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 year’s report. This report focuses on two categories of wireless services: mobile telephony 10 and mobile data. 11 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 Commission’s view of the mobile services marketplace is not limited by the categories in which this report places them. B. 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. 12 In parallel with this process of footprint building, 13 mobile telephone operators continue to deploy their networks in an increasing number of markets, expand their digital networks, and develop innovative pricing plans. 8 See Section II. A. 1. b, Market Performance, infra, for a detailed discussion. 9 See Wireless Telecommunications Bureau Announces Agenda and Speakers For Public Forum For The 7 th 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 Day’s Event (visited Mar. 14, 2002) (“ Transcript”). 10 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. 11 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. 12 See Section II. A. 1. a( ii), Building Nationwide Networks, infra. 13 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. 4 Federal Communications Commission FCC 02- 179 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, 14 up from 2 to 2.5 million at the end of 2000. 15 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. 16 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. 17 In addition, most handheld personal digital assistant (“ PDA”) devices 18 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. C. Industry Development Mobile Telephony. The mobile telephony sector of CMRS has experienced continued strong growth and competitive development. 19 In the 12 months ending December 2001, the mobile telephony sector generated over $65 billion in revenues, 20 increased subscribership from 109.5 million to 128.5 million, 21 and produced a nationwide penetration rate of roughly 45 percent. 22 Broadband PCS carriers and digital SMR providers continue to deploy their networks. 23 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. 24 Over 229 million people, or 80 percent of the U. S. population, live in counties with five or more mobile telephone operators competing to 14 See Section II. B. 1. a, Mobile Data Domestic Developments, and note 367, infra. 15 See Section II. B. 1. a, Mobile Data Domestic Developments, infra. 16 See Section II. B. 2. a, Mobile Data Mobile Telephone Sector, infra. 17 See Section II. B. 1. a, Mobile Data Domestic Developments, infra. 18 The terms “PDA,” “handheld,” “handheld PDA,” and “handheld device” are used interchangeably throughout this report. 19 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. 20 See Appendix C, Table 1, at C- 2. 21 See Section II. A. 1. b( i), Subscriber Growth, infra. 22 Id. 23 See Section II. A. 1. b( vi), Market Entry, infra, for a detailed discussion. 24 See Appendix C, Table 4, at C- 5. 5 Federal Communications Commission FCC 02- 179 offer service. 25 And 151 million people, or 53 percent of the population, live in counties in which six different mobile telephone operators are providing service. 26 Digital technology is now dominant in the mobile telephone sector. 27 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. 28 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. 29 According to the U. S. Department of Labor’s Bureau of Labor Statistics, the price of residential mobile telephone service declined by 5.5 percent during 2001. 30 Another survey indicates that the average revenue per minute of mobile telephone use fell 31 percent between 2000 and 2001. 31 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 report’s 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 year’s 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”). 32 These deployments contributed to the further convergence of mobile voice and mobile data 25 Id. 26 Id. 27 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”). 28 See Section II. A. 1. c, Digital Deployment, infra, for a detailed discussion. 29 See Section II. A. 1. d, Pricing Data and Trends, infra, for a detailed discussion of price competition. 30 Id. 31 Id. 32 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 399, 6 Federal Communications Commission FCC 02- 179 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. 33 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. 33 See Section II. B. 2. b.( i), Smartphones, infra. 7 Federal Communications Commission FCC 02- 179 8 Federal Communications Commission FCC 02- 179 II. THE CMRS INDUSTRY A. 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, 34 providers using cellular radiotelephone, broadband PCS, and SMR licenses dominate this sector. 35 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. 1. Mobile Telephone Overview and Analysis a. Market Structure (i) Spectrum Allocation Currently, mobile telephony operators primarily use three types of spectrum licenses to provide service: cellular, broadband PCS, and SMR. 36 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. 37 Two cellular 34 See Fourth Report, at 10151- 10152, and Fifth Report, at 17668. 35 See 47 C. F. R. §§ 22.900, 24.200, 90.601. 36 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. 37 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) . 9 Federal Communications Commission FCC 02- 179 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. 38 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. 39 The most recent broadband PCS auction was completed in 2001. 40 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). 41 Two of the 30 megahertz blocks (A and B blocks) are assigned on the basis of 51 Major Trading Areas (“ MTAs”). 42 One of the 30 megahertz blocks (C block) and all three of the 10 megahertz blocks are assigned on the basis of 493 BTAs. 43 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) . 38 See Section II. A. 1. c, Digital Deployment, infra. 39 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) . 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. 40 See Sixth Report, at 13368. 41 The Commission’s 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. 42 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 McNally’s MTA specification contains 47 geographic areas covering the 50 states and the District of Columbia. For its spectrum auctions, the Commission has added three MTA- like 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 MTA- like 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 McNally’s 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; Mayagüez/ Aguadilla- Ponce, Puerto Rico; and the U. S. Virgin Islands. 43 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 Commission’s Rules Regarding Installment Payment Financing for Personal Communications 10 Federal Communications Commission FCC 02- 179 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. 44 The Commission has since licensed additional SMR spectrum through auctions. 45 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. 46 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, 47 the primary use for SMR traditionally has been dispatch services. 48 Dispatch differs from mobile voice Services (PCS) Licensees, Second Report and Order and Further Notice of Proposed Rule Making, 12 FCC Rcd 16436 (1997); Amendment of the Commission’s 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 Commission’s 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). 44 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”). 45 The Commission has held multiple auctions for SMR licenses. FCC, FCC Auctions (visited Mar. 7, 2002) . 46 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. 47 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). 48 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 11 Federal Communications Commission FCC 02- 179 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. 49 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. 50 At the same time, traditional dispatch services are being provided increasingly on non- SMR spectrum bands. 51 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. 52 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. 53 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. 54 Many licensees hold more than one license in a particular market. Previously, under the Commission’s CMRS spectrum cap (which applies to 180 MHz of spectrum), no entity could control Licenses, Order, 16 FCC Rcd 8451 (2001) (“ Motorola Order”). Dispatch and SMR are often used interchangeably, although SMR refers to specific spectrum ranges. 49 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. 50 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. 51 “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. 52 Id., at 8462- 8463. 53 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. 54 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. 12 Federal Communications Commission FCC 02- 179 more than 45 megahertz of cellular, broadband PCS, and SMR 55 spectrum in an MSA, or more than 55 megahertz in a RSA. 56 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. 57 In addition, the Commission forbids an entity from having cross- interests in cellular licenses on both blocks within an RSA. 58 (ii) 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, 59 Verizon Wireless, LLC (“ Verizon Wireless”), 60 VoiceStream Wireless Corp. (“ VoiceStream”), 61 Cingular Wireless, LLC (“ Cingular Wireless” or “Cingular”), 62 and Nextel. When an operator is described as being “nationwide,” it does not necessarily mean that the operator’s 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. 63 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 55 No more than 10 megahertz of SMR spectrum is attributable to an entity under the cap. 47 C. F. R. § 20.6( b). 56 47 C. F. R. § 20.6( a). 57 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. 58 Spectrum Cap Order, at 22669- 22670. 59 Sprint PCS is a division of Sprint Corp. (“ Sprint”). See Sprint Corp., SEC Form 10- K, Mar. 4, 2002, at 3. 60 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. 61 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 Year’s End, WIRELESSNOW, Feb. 15, 2002 (citing a report in THE SEATTLE TIMES). 62 Cingular Wireless is a joint venture of SBC Communications, Inc. (“ SBC”) and BellSouth Corporation (“ BellSouth”). See Sixth Report, at 13363- 64. 63 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. 13 Federal Communications Commission FCC 02- 179 economies of scale and increased efficiencies compared to operators with smaller footprints. 64 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. 65 Since the end of 1999, carriers have been building nationwide footprints through various forms of transactions. 66 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. 67 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”). (a) 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”). 68 On October 8, 2001, AT& T Wireless announced plans to acquire TeleCorp in an all- stock transaction valued at $4.7 billion. 69 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. 70 With this transaction, AT& T Wireless acquired markets covering 32 million potential customers, or “POPs,” 71 in 14 states - primarily in the Southeast and Midwest, as well as the commonwealth of Puerto Rico. 72 TeleCorp was AT& T’s largest affiliate with approximately 800,000 subscribers at the time of its acquisition. 73 64 See Fifth Report, at 17669. 65 For a discussion of DOR plans, see Fifth Report, at 17675- 17676; Fourth Report, at 10155- 10156. See also Section II. A. 1. d( i), Developments in Pricing Plans, infra. 66 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. 67 For a more complete discussion of the motivations for this phenomenon, see Fourth Report, at 10159- 10160. 68 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). 69 AT& T Wireless To Acquire TeleCorp PCS, News Release, AT& T Wireless, Oct. 8, 2001. 70 Id. 71 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. 72 AT& T Wireless To Acquire TeleCorp PCS, News Release, AT& T Wireless, Oct. 8, 2001. 73 AT& T Wireless, SEC Form 10- k405, Mar. 28, 2002, at 2. 14 Federal Communications Commission FCC 02- 179 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. 74 This agreement was conditioned on the completion of Verizon Wireless’s 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. 75 Instead of an outright acquisition, the companies agreed to form a limited partnership consisting of Price Wireless’s 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 Wireless’s 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. 76 The acquisition doubled UbiquiTel’s subscriber base to over 100,000 (at that time) and increased its service territory by 3.4 million POPs to 11.1 million. 77 On November 30, AirGate PCS, Inc. (“ AirGate”) completed its acquisition of iPCS Inc. (“ iPCS”). 78 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. 79 Finally, in the spring of 2002, 74 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). 75 Verizon Wireless, Price Communications to Combine Certain Business Operation, News Release, Verizon Wireless, Dec. 19, 2001. 76 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). 77 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 UbiquiTel’s $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 VIA’s 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 I. A. 1. a( i)( d), Affiliations, infra. 78 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. 79 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 15 Federal Communications Commission FCC 02- 179 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”). 80 The two transactions, with a combined value of over $550 million, added roughly 160,000 subscribers to US Unwired’s existing base of 236,000. 81 The combined companies’ service territory covers more than 17.6 million POPs in the southeast and northeastern regions of the county. 82 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. 83 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. 84 Combined with CenturyTel’s 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. 85 US Cellular / PrimeCo Communications – On May 10, 2002, US Cellular announced that it was acquiring PrimeCo Wireless Communications LLC’s (“ PrimeCo”) Chicago- area mobile wireless business for approximately $610 million. 86 US Cellular, which has networks adjacent to the Chicago market, is acquiring PrimeCo’s CDMA network and subscriber base of 350,000. 87 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 Pacific’s 800 MHz SMR 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. 80 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. 81 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. 82 US Unwired to Acquire Georgia PCS, News Release, US Unwired, Feb. 11, 2002. 83 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. 84 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. 85 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). 86 U. S. Cellular Enters into Agreement to Purchase PrimeCo Wireless, News Release, U. S. Cellular, May 10, 2002. 87 Id. 16 Federal Communications Commission FCC 02- 179 licenses to Nextel. 88 The deal was closed in December 2001. 89 Pacific, one of only two other digital SMR providers besides Nextel, launched service in July 2000. 90 Its digital SMR network in the central valley of California covered approximately 13.5 million POPs. 91 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 Nextel’s markets. 92 Pacific served approximately 7,500 subscribers. 93 (b) 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. 94 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. 95 (c) Spin- Off On July 9, 2001, AT& T Wireless was spun- off from its parent AT& T and became a separate, independently- traded company. 96 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. 97 Second, AT& T distributed the remaining shares of AT& T Wireless common 88 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). 89 Application of Pacific Wireless, Inc. and Nextel of California, Inc. for Assignments of Authorization, Consummation Notice, ULS file no. 0000738671 (filed Jan 18. 2002). 90 PWT Application, Attachment 2, Public Interest Statement, at 4. 91 Id. 92 Id. 93 Id. 94 Cingular, VoiceStream to Share Wireless Networks in New York, California and Nevada, News Release, Cingular, Oct. 15, 2001. 95 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. 96 AT& T Wireless Is Separate, Independently- Traded Company, Following Split- off From AT& T, News Release, AT& T Wireless, July 9, 2001. 97 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. 17 Federal Communications Commission FCC 02- 179 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. 98 (d) 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. 99 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. 100 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”). 101 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. 102 While Triton PCS is marketed under the brand name SunCom 103 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. 98 AT& T Completes Disposition of Its Remaining Interest in AT& T Wireless, News Release, Dec. 24, 2001. 99 See Section II. A. 1. d( ii), Roaming, infra. 100 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.”). 101 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). 102 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). 103 Suncom, Suncom Fact Sheet (visited Mar. 8, 2002) . 18 Federal Communications Commission FCC 02- 179 Sprint PCS – The Sprint PCS family consists of Sprint PCS and 12 affiliates. 104 Each of the affiliates has an agreement with Sprint PCS to use the latter’s PCS licenses to deploy CDMA technology and Sprint PCS- branded service in specific areas of the country. 105 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. 106 In return, Sprint receives 8 percent of the affiliates’ local service revenue. 107 Sprint PCS affiliates now provide service to more than 2 million subscribers. 108 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. 109 Nextel Partners is building out an iDEN network compatible with Nextel’s, and Nextel assists Nextel Partners in obtaining substantially the same terms Nextel receives from vendors for equipment and services. 110 Both Nextel and Nextel Partners market their services under the Nextel brand name. b. 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 111 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”), 112 tracks phone number usage information for 104 As of the end of 2001. See Section I. A. 1. a( i)( a), 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. 105 See, e. g., US Unwired Inc., SEC Form 4249( B)( 1), May 17, 2000, at 7. 106 Ric Prentis, Sprint PCS, Equity Research, Raymond James, Feb. 19, 2002, at 4. 107 Id. 108 Sprint Wireless Affiliate Program Exceeds Two Million Subscribers, News Release, Sprint PCS, Jan. 7, 2002. 109 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. 110 Id., at 3. 111 See Section II. A. 1. d, Pricing Data and Trends, infra. 112 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 Commission’s 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 19 Federal Communications Commission FCC 02- 179 the United States. 113 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. 114 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”). CTIA’s survey is voluntary; it does not receive information from all carriers and must therefore estimate the subscribership for carriers not reporting. 115 In addition, NRUF data, in comparison to CTIA’s survey, is collected on a small area basis and thus allows regional subscribership comparisons. 116 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. 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). 113 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. 114 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. 115 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. 116 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. 20 Federal Communications Commission FCC 02- 179 (i) Subscriber Growth In 2001, the mobile telephone sector experienced another year of impressive subscriber growth. 117 As of December 2001, the Commission estimates that the sector had 128.5 million subscribers, 118 which translates into a nationwide penetration rate of roughly 45 percent. 119 CTIA’s estimate for year- end 2001 was 128.4 million subscribers, roughly the same as the FCC estimate, and a 17 percent increase over CTIA’s estimate of 109.5 million subscribers for December 2000. 120 CTIA’s 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 2000’s record increase of 23.5 million additional subscribers. 121 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. (ii) 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 Commerce’s Bureau of Economic Analysis, are particularly well- suited for comparing regional mobile telephony penetration rates for two reasons. 122 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. 123 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 117 Subscribers refer to the number of separate wireless accounts. A particular individual may have more than one wireless account. 118 Federal Communications Commission, based on preliminary year- end 2001 filings for Numbering Resource Utilization in the United States. 119 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) . 120 See Appendix C, Table 1, at C- 2. 121 Id. 122 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) . 123 Kenneth P. Johnson, Redefinition of the BEA Economic Areas, SURVEY OF CURRENT BUSINESS, Feb. 1995, at 75. 21 Federal Communications Commission FCC 02- 179 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 subscriber’s 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. 124 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. (iii) 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. 125 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. 126 J. D. Powers & Associates estimated 422 MOUs, an increase of 32 percent from 320 a year earlier. 127 (iv) 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, 128 until 124 See, also, Appendix E, Map 4, at E- 5. 125 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. 126 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. 127 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. 128 There are different ways of calculating ARPU. The measure used here, CTIA’s “average local monthly bill,” does not include toll or roaming revenues. June 2001 CTIA Survey, at 158. CTIA defines an alternative 22 Federal Communications Commission FCC 02- 179 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. 129 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. 130 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. 131 (v) 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 quarter’s three months. At this rate, the operator would lose 24 percent of its customers in a single year. 132 Most carriers report churn rates between 1.5 percent and 3 percent per month. 133 At current rates, more than 30 percent of subscribers change service providers each year. 134 Consistent with findings in the Sixth Report, customers indicated network quality and cost as the main reasons for changing providers. 135 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). 136 Another 12 percent wanted to take advantage of a 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. 129 See Appendix C, Table 1, at C- 2. 130 See Section II. A. 1. d, Pricing Data and Trends, infra. 131 Regardless of whether customers use the large bundles of minutes included with such plans, the higher monthly access fees increase operators’ ARPUs. 132 This assumes that each churned customer is a unique individual and that the same customers do not churn multiple times. 133 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). 134 Michael I. Rollins et al., Wireless Services, Equity Research, Salomon Smith Barney, Jan. 11, 2002, at 9 (“ SSB Wireless Services”). 135 See Sixth Report, at 13372- 73. 136 Churn Analysis II: Main Reason For Switching Carriers, Telephia, Oct. 10, 2001 (published in WIRELESSWEEK, available at ). 23 Federal Communications Commission FCC 02- 179 sale or promotion. 137 (vi) 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. 138 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. 139 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. 140 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. 141 137 Id. 138 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 operator’s network must serve an area containing at least one- third of the license area’s 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 area’s 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. 139 All population figures are based on the Bureau of the Census’s 2000 county population. 140 See Appendix E, Maps 2- 3, at E- 3 - E- 4. 141 See Amendment of Part 22 of the Commission’s 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. 24 Federal Communications Commission FCC 02- 179 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. 142 However, these counties make up only 50 percent of the total land area of the United States, reflecting the nation’s uneven population distribution. 143 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. 144 While growth in the percentage of the population covered by three or more providers has been small in the past year, 145 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. 146 c. 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. 147 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. 148 From a customer’s 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 142 See Appendix C, Table 4, at C- 5. 143 Id. 144 Id. 145 Only 3 percent, due to its previous high level of 90.8 percent. See Sixth Report, at 13465. 146 Id. 147 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. 148 See Sixth Report, at 13361. 25 Federal Communications Commission FCC 02- 179 approximately 80 percent of all wireless subscribers, up from 72 percent last year. 149 During 2001, the number of customers subscribing to digital services climbed 30 percent, from approximately 79 million to 103 million. 150 Approximately 26 million mobile telephony subscribers are analog only. 151 Over 85 percent of the subscribers of the six largest carriers are using digital service. 152 All of Sprint PCS’s, VoiceStream’s, and Nextel’s subscribers are on digital plans, while 96 percent of AT& T Wireless’s, 84 percent of Cingular Wireless’s, 153 and almost 75 percent of Verizon Wireless’s customers subscribe to digital calling plans. 154 Even among the smaller, regional carriers, digital subscribership is widespread. 155 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. 156 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. 157 (i) 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. 158 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 149 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. 150 Based on NextGen VI digital penetration rates. 151 Subscribers that can access both the digital and analog networks of carriers are considered to be digital subscribers. 152 NextGen VI, at 69. 153 Ninety- six percent of Cingular’s 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. 154 NextGen VI, at 69. 155 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. 156 NextGen VI, at 69. 157 NextGen VI, at 69. CenturyTel went from 19 percent to 32 percent, while Western Wireless went from 3 percent to 30 percent. Id. 158 See Fourth Report, at 10170. 26 Federal Communications Commission FCC 02- 179 announced plans to overlay their existing TDMA networks with GSM/ GPRS technology. 159 Furthermore, the trade group that had represented TDMA technology announced in December 2001 that it was dissolving, as it had “successfully served its mission.” 160 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. 161 By the end of 2001, AT& T Wireless had rolled out GSM/ GPRS to 45 percent of the POPs covered by its network. 162 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. 163 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. 164 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. 165 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. 166 Cingular Wireless said the national network upgrade will cost approximately $3 billion. 167 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 159 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. 160 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. 161 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”). 162 Goldman Sachs AT& T Wireless Group, at 2. 163 AT& T Wireless indicated that it would begin to deploy GSM/ GPRS infrastructure in TeleCorp’s coverage area beginning in the second half of 2002. Id., at 10. 164 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). 165 Ric Prentiss, Cingular Announced GSM Overbuild Plans, Email Alert, Raymond James, Oct. 30, 2001. 166 Cingular Moves to the Edge, News Release, Cingular, Oct. 30, 2001 167 Ric Prentiss, Cingular Clues Us In on ’02 CapEx Plans, Equity Research, Raymond James, Nov. 6, 2001 27 Federal Communications Commission FCC 02- 179 in a number of western and midwestern states. 168 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. 169 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. 170 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. 171 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. 172 d. Pricing Data and Trends Equity analysts and other industry observers typically describe wireless price competition in the United States as “competitive,” “intense,” and “aggressive.” 173 While it is difficult to identify sources of 168 See Section I. A. 1. a( i)( b), 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. 169 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 II. A. 1. b( vi), Market Entry, supra, apply to this analysis as well. 170 See Appendix E, Maps 5- 8, at E- 6 – E- 9. 171 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. 172 See Appendix C, Table 7 at C- 10. 173 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”). 28 Federal Communications Commission FCC 02- 179 information that track mobile telephone prices in a comprehensive manner, 174 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. 175 The average cost of monthly service 176 – 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. 177 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. 178 In contrast, the monthly cost of 30 minutes of airtime increased 5.9 percent. 179 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 Labor’s Bureau of Labor Statistics (“ BLS”). 180 Cellular CPI data is published on a national basis only. 181 During 2001, the Cellular CPI 174 See Fourth Report, at 10164- 10165. 175 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. 176 This does not include any additional costs for roaming or long distance. 177 The analysis assumes a 70 percent peak /30 percent off- peak split in the kind of minutes used. Transcript, at 78. 178 Econ One Survey Shows Average Cost of Cell Phone Service Dropped 7.3 % in 2001, News Release, Econ One, Jan. 31, 2002. 179 Id. 180 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. 181 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) . 29 Federal Communications Commission FCC 02- 179 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. 182 CTIA’s 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. 183 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. 184 (i) 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 Wireless’s wisdom when it introduced the first Digital One Rate (“ DOR”) plan in May 1998. 185 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. 186 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”). 187 Virtually every other national carrier (and several of the regional carriers) followed suit over the course of the year. 188 (ii) Roaming All mobile calling plans specify a calling area – such as a particular metropolitan area, the East Coast, the carrier’s 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 subscriber’s carrier, and 182 Adam Quinton et al, Wireless Matrix – 3Q01, Global Equity Research, Merrill Lynch, Jan. 2002, at 4 (“ Wireless Matrix”). 183 Note that this version of ARPU is CTIA’s “average monthly local bill” and does not include toll or roaming revenues where they are not priced into a calling plan. See note 128, supra. 184 See Appendix C, Table 9, at C- 11. 185 See AT& T Launches First National One- Rate Wireless Service Plan, News Release, AT& T Corp., May 7, 1998. 186 See NextGen VI, at 57- 63. 187 Id., at 18. 188 Id. 30 Federal Communications Commission FCC 02- 179 sometimes the charges are used to pay a carrier other than the subscriber’s, on whose network the subscriber was roaming. 189 This source of revenue is particularly important to some rural and smaller carriers. 190 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. 191 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. 192 CTIA attributes this decline to the growth of DOR plans and the extended calling areas established by many of the larger carriers. 193 (iii) 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, 194 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. 195 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. 196 189 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. 190 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 Wireless’s roaming revenues were likely to decline as a result of the deal. Id. 191 See Appendix C, Table 1, at C- 2. 192 June 2001 CTIA Survey, at 65. 193 Id. 194 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. 195 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. 196 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. 31 Federal Communications Commission FCC 02- 179 At the end of the third quarter of 2001, Verizon Wireless’s subscriber base was approximately 6 percent prepaid, AT& T Wireless’s and Cingular Wireless’s somewhat less than 10 percent, and VoiceStream’s was much higher, at 27 percent. 197 In place of a traditional prepaid offering, Sprint PCS has its Automatic Spending Limit (“ ASL”) program (now called “Clear Pay”). 198 Sprint PCS introduced ASL in late 1999 in an attempt to target an under-penetrated segment of the population, the sub- prime credit category. 199 Depending on a potential customer’s credit profile, he or she is offered either an account with no spending limit and no deposit, or is designated an ASL customer. 200 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. 201 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. 202 Approximately 29 percent of Sprint PCS’s subscribers are now ASL, and about 50 percent of Sprint PCS’s gross subscriber additions 203 in the fourth quarter of 2001 were ASL. 204 e. Wireless/ Wireline Competition Once solely a business tool, wireless phones are now a mass- market consumer device. 205 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. 206 Another study found 197 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) . 198 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 PCS’s slogan for the program is “Clear Pay – The Clear Alternative to Prepaid.” SSB Wireless Services, at 14. 199 NextGen VI, at 19. Approximately one- third of the U. S. consumer market has sub- prime credit. SSB Wireless Services, at 28. 200 Paul Wuh et al., Analysis of Prepaid Business Model, Global Equity Research, Goldman Sachs, June 14, 2001, at 13. 201 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. 202 See, e. g., Goldman Sachs Sprint PCS Report, at 2. 203 Gross additions includes sales to both new and existing subscribers. 204 Paul Wuh et al., Week in Wireless, Global Equity Research, Goldman Sachs, Feb. 6, 2002, at 2. 205 See Sixth Report, at 13381. 206 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 32 Federal Communications Commission FCC 02- 179 that 58 percent of Americans 12 and older now own a mobile phone. 207 (i) 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. 208 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.” 209 According to a USA Today/ CNN/ Gallop poll, almost one in five mobile telephony users regard their wireless phone as their primary phone. 210 Several local carriers have attributed declining access line growth rates in part to substitution by wireless. 211 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. 212 A top executive at Verizon attributed the decline in the number of access lines served by his company, the first in the company’s history, in part to the shift to wireless phones. 213 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. 214 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. 207 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. 208 Carriers Said to Need New Tactics to Combat LD Substitution, COMMUNICATIONS DAILY, Mar. 15, 2002 (citing Yankee Group analyst Knox Bricken’s 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). 209 Carriers Said to Need New Tactics to Combat LD Substitution, COMMUNICATIONS DAILY, Mar. 15, 2002 (citing Yankee Group analyst Knox Bricken). 210 Michelle Kessler, 18% See Cellphones as Their Main Phone, USA TODAY, Feb. 1, 2002. 211 NextGen VI, at 33. 212 Id., at 34. 213 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, “That’s okay. We tend to own both.” Id. 214 It’s 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. 33 Federal Communications Commission FCC 02- 179 A number of payphone providers claim wireless use is significantly decreasing payphone profits. 215 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. 216 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. 217 Wireless plans are substituting for traditional wireline long distance as well. 218 Many of the calling plans offered by the nationwide wireless carriers include free nationwide long distance. 219 One analyst claims that 20 percent of AT& T’s customers, or 5 million people, have replaced some wireline long distance usage with wireless. 220 AT& T itself attributed the decline in its long distance calling volumes and revenues in part to wireless substitution. 221 Cingular Wireless advertises its nationwide calling plans with the slogan, “Never Pay Long Distance Again.” 222 (ii) 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. 223 At the end of 2001, Leap had more than 1.1 million customers, having added more than 900,000 during 2001. 224 Leap’s service allows subscribers to make unlimited local calls and receive calls from anywhere in the world for one flat rate of $30 per month. 225 Roaming outside the local area is not available, 226 and customers pay extra for 215 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. 216 Verizon Tests Lower Prices for Local Payphone Calls, News Release, Verizon, Jan. 29, 2002. 217 Sixth Report, at 13381. 218 NextGen VI, at 33. 219 Id., at 57- 63. 220 Carriers Said to Need New Tactics to Combat LD Substitution, COMMUNICATIONS DAILY, Mar. 15, 2002 (citing Yankee Group analyst Knox Bricken). 221 AT& T Announces 1Q 2002 Earnings, News Release, AT& T Corp., Apr. 24, 2002. 222 See Cingular, Cingular Wireless (visited Mar. 21, 2002) . 223 Leap, Welcome to Cricket Communications (visited Mar. 20, 2002) . 224 Leap Reports Results for Fourth Quarter and Fiscal Year 2001, News Release, Leap, Feb. 11, 2002. 225 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 34 Federal Communications Commission FCC 02- 179 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. 227 According to the company, about 32 percent of their customers use their Cricket phones as their only phone, 228 and more than 80 percent use their Cricket phones at home. 229 Other companies offering unlimited local calling plans include: US Cellular in Tennessee; 230 ALLTEL in Arizona, New Mexico, North Carolina, Nebraska, and Arkansas; 231 MetroPCS in California, Florida, and Georgia; 232 NorthCoast PCS in Ohio; 233 First Cellular of Southern Illinois (“ First Cellular”) in Illinois, 234 Rural Cellular in Vermont, New Hampshire, New York, Kansas, Minnesota, Maine, North Dakota, South Dakota, and Wisconsin; 235 Midwest Wireless in Minnesota; 236 and Ntelos Inc. (“ Ntelos”) in Virginia. 237 For around $50, many carriers offer regional or national calling plans with 500 or more “anytime” 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. 226 Todd J. Rethemeier et al., Leap Wireless International Inc., Equity Research, Bear Stearns, Feb 1, 2002, at 13. 227 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). 228 Frank Marsala and Dae B. Rao, Leap Wireless, Equity Research, Robertson Stephens, Mar. 25, 2002, at 2. 229 Todd J. Rethemeier et al., Leap Wireless International Inc., Equity Research, Bear Stearns, Feb 1, 2002, at 17 (citing Leap’s market research). 230 Dan Meyer, Carriers Eat Up All- You- Can- Talk Local Buffets, RCR WIRELESS NEWS, July 16, 2001 (available in 2001 WL 8870069). 231 Id.. 232 See MetroPCS, Welcome (visited Mar. 20, 2002) . 233 See NorthCoast PCS, Service Plans (visited Mar. 20, 2002) . 234 See Transcript, at 108; First Cellular, Southern Illinois Unlimited (visited Mar. 20, 2002) . 235 See Rural Cellular, Welcome To Rural Cellular Corporation (visited Mar. 20, 2002) . 236 Midwest Wireless, Realm - Basic Service Plan (visited Mar. 20, 2002) . 237 Ntelos, Products & Services (visited Mar. 20, 2002) . 35 Federal Communications Commission FCC 02- 179 minutes and over 3000 night and weekends minutes. 238 In November 2001, VoiceStream began offering for a limited time virtually unlimited regional calling plans, its “Neighborhood” rate plans. 239 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 VoiceStream’s network without extra fees. Long distance from VoiceStream’s network to anywhere within those states is included as well. Subscribers on VoiceStream’s Northeast Neighborhood plan, for example, can call anywhere on VoiceStream’s East Coast network from southern Maine to northern Virginia without incurring roaming charges. 240 f. 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. 241 Several participants offered their opinions on these questions, which are discussed in more detail below. (i) 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. 242 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. 243 (ii) Definition of Rural As the Department of Education stated in 1994, “few issues bedevil analysts and planners . . . more than 238 See NextGen VI, at 57- 63. 239 Id., at 19. 240 VoiceStream, Rate Plans: Northeast Neighborhood (Boston) (visited Mar. 20, 2002) . This plan costs $59.99. Id. 241 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). 242 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). 243 Economist Greg Rosston, after describing the benefits of collecting data, said, “There are costs to collecting data as well, and that’s 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 we’re 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). 36 Federal Communications Commission FCC 02- 179 the question of what actually constitutes ‘rural. ’” 244 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. 245 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 244 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) ]. 245 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) . 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). 37 Federal Communications Commission FCC 02- 179 are defined expressly to distinguish between rural and urban areas.” 246 Some participants in the forum questioned whether the urban / rural distinction is currently meaningful in the context of mobile telephony. 247 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, 248 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. 249 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 EA’s center( s) of economic activity. 250 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 246 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. 247 Mark Rubin, Director of Federal Government Affairs for Western Wireless stated that “broad generalities, based upon [M] SA and RSA distinctions, don’t 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. 248 See discussion in Rural Rollout, infra. 249 See Section II. A. 1. b( ii), Regional Penetration Rates, supra. 250 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. 38 Federal Communications Commission FCC 02- 179 RTG, stated, with reservations, that “RSAs are a good place to start.” 251 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. 252 Johnson suggested that 100 people per square mile might be a reasonable place to make an urban versus rural split. 253 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. 254 Econ One reviewed the pricing plans of 25 markets it considered to be rural. 255 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. 256 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 One’s study showed one difference between rural and urban markets in that there was a much wider 251 Although he added, “but I’m not sure if that works.” Transcript, at 101. Johnson earlier noted that “there are rural portions of MSAs.” Id., at 101. 252 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. 253 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 you’re right there at the University of Virginia, it’s not rural. If you drive five minutes away, where Thomas Jefferson was born, it’s extra rural.” Id., at 102. 254 Econ One normally analyzes pricing plan data every month for the top 25 most populous U. S. markets. See Section II. A. 1. d, Pricing Data and Trends, supra. The rural market pricing plans were analyzed using the same methodology as Econ One’s large markets survey. 255 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. 256 The survey results are reproduced in Appendix C, Table 10, at C- 11. 39 Federal Communications Commission FCC 02- 179 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. 257 Although these results are interesting, Mahla cautioned about drawing “a tremendous number of conclusions about [the study] because we’ve only done one data point.” 258 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. 259 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. 260 First Cellular’s most popular plan for 2002 will average $0.04 per minute. 261 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, Dobson’s and RCA’s 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.” 262 Addington of RCA agreed: “Competition is real and . . . it’s out there.” 263 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. 264 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 customer’s 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 257 Transcript at 87. 258 Transcript at 86. 259 Transcript, at 108- 109. 260 See Appendix C, Table 11, at C- 12. 261 See Appendix C, Table 11, at C- 12. Addington said that his company’s “margins have gone down 8 percent since we’ve 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. 262 Transcript, at 115. 263 Id., at 110. 264 Id., at 115. 40 Federal Communications Commission FCC 02- 179 something else -- free phones, free this -- let me tell you, that’s competition.” 265 Econ One’s pricing study found evidence of this nationwide pricing effect, in that its study showed no differences in service costs between rural and urban markets. 266 2. Other Competitors: Resellers and Satellite Operators This section discusses two other types of operators that are competing in the mobile telephone segment: resellers and satellite operators. a. Resellers Resellers offer service to consumers by purchasing airtime at wholesale rates from facilities- based providers and reselling it at retail prices. 267 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. 268 WorldCom claims to be the largest reseller of post- paid wireless services in the United States with nearly 2 million customers; 269 however, in June 2002, the company announced that it had decided to exit the resale business. 270 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. 271 For example, advocates contend that MVNOs, by focusing on 265 Id., at 110- 111. 266 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/). 267 Interconnection and Resale Obligations Pertaining to Commercial Mobile Radio Services, First Report and Order, 11 FCC Rcd 18455, 18457 (1996). 268 See Appendix C, Table 2, at C- 3. 269 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 country’s largest reseller of “cellular service.” General Motors Corp. – GM’s 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 OnStar’s “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 II. B. 4, Telemetry and Telematics, infra. 270 WorldCom, Inc. Announces Intention to Exit Wireless Resale Business, News Release, WorldCom, Inc., June 5, 2002. 271 Deborah Mendez- Wilson, Changing Rules of the Game: MVNO Advocates Keep a Watchful Eye on Nextwave Case, WIRELESS WEEK, Sept. 17, 2001, at 20. 41 Federal Communications Commission FCC 02- 179 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. 272 Sprint PCS’s arrangement with Richard Branson’s 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”). 273 The venture plans to offer a new prepaid service to be marketed under the Virgin Mobile brand name using Sprint PCS’s network. 274 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. 275 Virgin Mobile plans to target the 15 to 30 year- old market in the United States. 276 b. Satellite Operators As of year- end 2001, two carriers 277 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. 272 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). 273 Sprint and Virgin announce Joint Venture, News Release, Sprint PCS, Oct. 5, 2001. 274 Id. 275 Sprint and Virgin Announce Funding of Joint Venture, News Release, Sprint PCS, May 17, 2002. 276 Sprint and Virgin Announce Joint Venture, News Release, Sprint PCS, Oct. 5, 2001. 277 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. 42 Federal Communications Commission FCC 02- 179 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. 278 Globalstar offers global voice and data services, including SMS. 279 The company’s mobile satellite phone, GSP- 1600, is manufactured by QUALCOMM, Inc. and retails for approximately $1000. 280 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. 281 Globalstar has 15 distributors of its products and services in the United States. 282 As reported in the Sixth Report, Globalstar was experiencing financial difficulties in 2000, and these difficulties continued in 2002. 283 In the company’s 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. 284 On February 15, 2002, Globalstar sought Chapter 11 bankruptcy protection, despite cutting costs and doubling its subscriber base during 2001. 285 In its bankruptcy filing, the company claims assets of $570 million and $46 million in cash reserves. 286 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. 287 Iridium Satellite. Iridium Satellite, the company that emerged from bankruptcy in December 2000, 288 278 GlobalStar Sees 2 nd Qtr Reorg Plan, TR DAILY, Apr. 16, 2002; Andy Pasztor, Globalstar’s 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. 279 Globalstar, Systems Facts (visited Feb. 19, 2002) . 280 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) . 281 Globalstar, Globalstar Pricing and Promotions (visited Jan. 29, 2002) . 282 Globalstar, Globalstar USA : Our Distributors (visited Jan. 29, 2002) . 283 See Sixth Report, at 13386. 284 Globalstar Reports Results for Third Quarter of 2001, News Release, Globalstar, Nov. 13, 2001. 285 Andy Pasztor, Globalstar’s 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. 286 Andy Pasztor, Globalstar’s 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. 287 Id. 288 For a description of Iridium’s emergence from bankruptcy, see Sixth Report, at 13384. 43 Federal Communications Commission FCC 02- 179 initiated commercial service at the end of March 2001. The original Iridium LLC company began commercial service on November 1, 1998. 289 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. 290 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. 291 There are two types of handsets available from Motorola that work on Iridium Satellite’s network. The Satellite Series 9500 phone sells for $950 and is capable of transmitting data at 2.4 kbps. 292 The Satellite Series 9505 phone is a similar, yet smaller phone, and sells for $1,495. 293 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. 294 Iridium Satellite also offers SMS, allowing customers to send and receive messages up to 120 characters long. 295 3. International Developments a. 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 Germany’s Deutsche Telekom closed in May 2001, and Japan’s NTT DoCoMo, Inc. (“ NTT DoCoMo”) acquired an approximate 16 percent stake in AT& T Wireless in November 2000. 296 In connection with AT& T Wireless’s 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 289 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. 290 Malcolm Spicer, Iridium Satellite Lands Defense Contract, CT WIRELESS, Dec. 7, 2000, available in 2000 WL 6392736. 291 Satellite Phones - Newsday; Arik Hesseldahl, The Return Of Iridium, FORBES. COM, Nov. 30, 2001. 292 World Communication Center, Iridium Phones (visited Feb. 11, 2002) . 293 Satellite Phones - Newsday; World Communication Center, Iridium Phones (visited Feb. 11, 2002) ; Global Satellite FWI, 9505 Order For (visited Feb. 11, 2002) . 294 Iridium Satellite, Iridium – Services (visited Feb. 11, 2002) . 295 Id. 296 See Sixth Report, at 13388. 44 Federal Communications Commission FCC 02- 179 acquisition was completed. 297 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. 298 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. 299 New Delhi- based Bharti Enterprises bought out BellSouth’s stake in SkyCell for a reported $21.5 million. 300 In August 2001, BellSouth announced its intention to dispose of its mobile phone investments in Europe and Israel in order to focus primarily on its holdings in Latin America along with its domestic business. 301 To this end, BellSouth announced on January 30, 2002 that it was exercising its option to exchange its entire 22.51 percent stake in German mobile operator E- Plus for a 9.42 percent stake in Dutch operator Royal KPN N. V. (“ KPN”), which acquired the remaining 77.49 percent stake in E- Plus in December 1999. 302 BellSouth and KPN closed on their agreement to swap BellSouth’s E- Plus shares for a stake in KPN on March 13, 2002. 303 BellSouth then disposed of its 9.42 percent stake in KPN by selling its shares in the Dutch company on March 19, 2002, the first day BellSouth was free to sell the shares. 304 BellSouth is reported to have raised 1.23 billion euros ($ 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. 305 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. 306 While BellSouth has yet to find a buyer for Sonafon, its decision to dispose of its European wireless assets did affect bidder participation in Denmark’s auction of 3G licenses in September 2001. In particular, Sonafon did not bid 297 NTT DoCoMo Plans to Exercise Right to Purchase Additional AT& T Wireless Stock, News Release, AT& T Wireless, Dec. 21, 2001. 298 See Sixth Report, at 13388- 13389. See Appendix C, Table 9, at C- 13 for a summary of U. S. operators’ foreign holdings. 299 BellSouth Reports Third Quarter Earnings, News Release, BellSouth, Oct. 18, 2001. 300 Santosh Menon, Bharti Increases SkyCell Stake, REUTERS, Sept. 18, 2001; Santosh Menon, India’s Bharti Eyes Foreign- owned Stakes in SkyCell, REUTERS, Aug. 3, 2001. 301 Tally Goldstein, BellSouth Set to Sell Stakes in Mobile Phones, FT. COM, Aug. 28, 2001. 302 BellSouth Restructures Agreement with KPN, News Release, BellSouth, Jan. 30, 2002. 303 BellSouth and KPN Close on Sale of E- Plus, News Release, BellSouth, Mar. 14, 2002. 304 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. 305 Id. 306 Richard Waters, BellSouth Disposes of Stake in KPN, FT. COM, Mar. 20, 2002. 45 Federal Communications Commission FCC 02- 179 in the sealed- bid auction because Telenor and BellSouth were unable to reach an agreement to let their jointly owned subsidiary submit a bid. 307 Telenor submitted a bid on its own, but as the lowest of five bids for four licenses the bid was unsuccessful. 308 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. 309 However, Cesky Telecom later reopened the negotiations, arguing that market conditions had deteriorated and cutting the offered price to $1.1 billion. 310 The negotiations were abandoned in November 2001 after the parties failed to reach an agreement on the purchase price and Atlantic West rejected Cesky Telecom’s latest offer. 311 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. 312 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. 313 In addition to its stake in Belgacom, SBC also has investments in Denmark’s TDC (formerly Teledanmark) and France’s 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. 314 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 $70.5 million in cash. 315 Pegaso is the only foreign mobile operator in which Sprint and Leap Wireless had held an ownership interest. 307 Oida Taaffe, Telia, Telenor Amongst Danish UMTS Bidders, TOTAL TELECOM, Sept. 5, 2001. 308 Anne Young, Denmark Awards Four 3G Licenses, TOTAL TELECOM, Sept. 20, 2001. 309 Reuters staff, Czech Telecom to Buy EuroTel for US$ 1.5 Billion, TOTAL TELECOM, July 30, 2001. 310 Reuters staff, Cesky Telecom’s EuroTel Buy Hits Price Snag, TOTAL TELECOM, Nov. 7, 2001. 311 Reuters staff, Cesky Telecom Abandons Talks on EuroTel Buy, TOTAL TELECOM, Nov. 28, 2001. 312 Juliana Ratner, SBC Presses for Belgacom IPO to Cash in Stake, FT. COM, Mar. 13, 2002. 313 Id. 314 Id. 315 Leslie Crawford, Telefonica to Take Over Mexican Mobile Operator, FT. COM, Mar. 8, 2002. 46 Federal Communications Commission FCC 02- 179 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. 316 In January 2002, as part of a deal in which SBC purchased America Movil’s 50 percent interest in Cellular Communications of Puerto Rico, America Movil acquired an option to purchase SBC’s stake in Telecom Americas within three years. 317 According to SBC, this represents a forward sale of its interest in Telecom Americas. 318 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 Argentina’s economy. 319 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 Argentina’s 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 Verizon’s actions, CTI will no longer be consolidated into Verizon’s 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. 320 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. 321 However, WWI decided not to submit a bid for one of Ireland’s four 3G licenses through Meteor, the Irish mobile 316 Annual Report 2001, SBC Communications Inc., at 38; Fiona Ortiz, Telecom Americas Owners Plan Overhaul, REUTERS, Dec. 4, 2001. 317 America Movil Reshuffles Latin American Interests, TOTAL TELECOM, Jan. 29, 2002. 318 Annual Report 2001, SBC Communications Inc., at 32. 319 Verizon Communications Establishes Trust for Employees; Reduces Ownership of Wireless Company in Argentina, News Release, Verizon Communications, Mar. 28, 2002. 320 Western Wireless International Announces Completed Acquisition of tele. ring, News Release, Western Wireless International, July 3, 2001. 321 Id. 47 Federal Communications Commission FCC 02- 179 operator that is majority owned by WWI. 322 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. 323 In July 2001 AT& T Wireless agreed to buy out British Telecommunications Plc’s entire interest in a partnership between the two companies that held a stake in Canadian mobile operator Rogers Wireless for $379 million. 324 The all- cash transaction increased AT& T Wireless’s stake in the Canadian operator to 33.3 percent from 19 percent. b. 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. 325 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. 326 Mobile penetration in Western Europe averaged 74.3 percent at the end of 2001, up from 62.5 percent at the end of 2000. 327 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. 328 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 Europe’s 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. 329 322 Anne Young, Three Operators Apply for Four Irish 3G Licenses, TOTAL TELECOM, Mar. 27, 2002. 323 Id. 324 Emily Bourne, AT& T Wireless Buys BT’s Stake in Robers Wireless, TOTAL TELECOM, July 4, 2001; AT& T Wireless Increases Stake in Rogers Wireless, REUTERS, July 3, 2001. 325 See Sixth Report, at 13392. 326 Robert Budden, Mobile Sales Across Europe Hit by Slowdown, FT. COM, Feb. 3, 2002. 327 Id. 328 Paul Wuh, et al., Wireless 2002 – Focusing on Profitability, Global Equity Research, Goldman Sachs, May 3, 2002, at 4 and 46 (“ Focusing on Profitability”). 329 Id. 48 Federal Communications Commission FCC 02- 179 Despite the sharp slowdown in Western Europe’s 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 Europe’s 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 Europe’s 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. 330 As was the case at the end of 2000, 331 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. 332 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. 333 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. 334 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 country’s 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, 335 but subsequent reports suggest that the problem may be even more severe in certain Asian countries such as Taiwan, Hong Kong, and Singapore. 336 According to the Wall Street Journal, many Taiwanese, especially the young, own several prepaid phones, and carriers count each phone sold as a subscriber. 337 As a result, while Taiwan government figures put its country’s mobile penetration rate at more than 90 percent, analysts’ estimates range anywhere from 70 to 85 percent. 338 In Singapore, the mobile penetration rate dropped from nearly 80 330 Wireless Matrix, at 17, 27 and 31. 331 See Sixth Report, at 13392. 332 Focusing on Profitability, at 4 and 37- 38. 333 Id, at 38. 334 See Sixth Report, at 13391. 335 Id. 336 Operators Clean Up Subs Numbers and Focus on Profitability, GLOBAL MOBILE, Feb. 27, 2002, at 14- 15. 337 Connie Ling, Prepaid Mobile- Phone Lines Tangle Calculation of Market Penetration, WSJ. COM, Jan. 24, 2002. 338 Id. 49 Federal Communications Commission FCC 02- 179 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. 339 As first noted in the Sixth Report, 340 analysts believe that prepaid was the primary driver of the rapid penetration gains in Western Europe over the past couple of years. 341 Although some European mobile operators such as Vodafone have revised their subscriber counts downward to adjust for inactive prepaid subscribers, 342 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 UK’s and Germany’s 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. 343 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. 344 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. 345 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. 346 Average U. S. mobile usage is also higher than usage levels in the Asia Pacific. 347 Hong Kong comes the closest to the U. S. level with estimated average MOUs of 300 minutes. 348 At 177 minutes, Japan’s estimated average MOUs are lower than the U. S. level but higher than the Western European average. 349 339 Id. 340 See Sixth Report, at 13390- 13391. 341 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. 342 See Sixth Report, 13391. 343 NextGen VI, at 14. 344 Id. 345 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. 346 Id. 347 Wireless Matrix, at 3. 348 Id. 349 Id. 50 Federal Communications Commission FCC 02- 179 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. 350 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”). 351 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. 352 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. 353 Updated Teligen/ OECD mobile basket estimates for February 2002 continue to tell the same story. 354 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, 350 See Sixth Report, at 13393. 351 Id. 352 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. 353 See Sixth Report, at 13394. 354 Teligen T- Basket – Mobile (GSM/ PCS) Basket, Teligen Limited, Feb. 2002. See Appendix C, Table 10, at C- 15. 51 Federal Communications Commission FCC 02- 179 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 Lynch’s 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 operator’s network. Merrill Lynch analysts believe RPM is a good proxy for mobile pricing. 355 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. Japan’s 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. 356 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.” 357 Analysts also point to differences in the competitive environment of individual European mobile markets. For example, equity analysts typically describe pricing competition in the UK’s mobile market as being relatively intense and aggressive compared to other Western European markets. 358 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.” 359 355 Wireless Matrix, at 4. 356 ERO Information Document on GSM Frequency Utilisation Within Europe, European Radiocommunications Office, Feb. 2001. 357 Fanos Hira, Jerry Dellis Paul Harper and Jeremy Hudson, The Cellular Review, European Equity Research, Bear Stearns, Jan. 2002, at 12. 358 Wireless Matrix, at 37; Fanos Hira, Jerry Dellis Paul Harper and Jeremy Hudson, mmO2, European Equity Research, Bear Stearns, Dec. 12, 2001, at 21. 359 Effective Competition Review: Mobile, Oftel, Sept. 26, 2001, at v. 52 Federal Communications Commission FCC 02- 179 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. 360 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. 361 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 operator’s 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. 362 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.” 363 Other foreign regulators in CPP jurisdictions share Oftel’s 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. 364 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 Japan’s RPM is nearly double the U. S. level. In particular, Merrill Lynch’s 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. 365 They further argue that “two additional differentiating factors may be that Japan has implemented calling party pays and that its fixed- 360 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. 361 See, for example, Focusing on Profitability, at 66. 362 Review of the Charge Control on Calls to Mobiles, Oftel, Sept. 26, 2001, at 1. 363 Id. 364 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. 365 Wireless Matrix, at 27. 53 Federal Communications Commission FCC 02- 179 to- mobile interconnection rates are the highest in the world at $0.27 per minute.” 366 366 Id. 54 Federal Communications Commission FCC 02- 179 B. Mobile Data 1. Introduction a. 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. 367 Since the publication of the Sixth Report, several mobile data operators have begun upgrading their networks with advanced wireless service technologies, 368 cdma2000 1xRTT and GPRS, to allow for faster data access speeds and more advanced services. 369 As of March 2002, four nationwide mobile telephone operators were offering mobile Internet 367 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. 368 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 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 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. 369 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 55 Federal Communications Commission FCC 02- 179 access service for mobile telephone handsets, PDAs, and/ or laptops at speeds generally ranging from 25- 60 kbps, 370 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. 371 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. 372 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. 373 Therefore, this year’s 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. 374 technology won’t 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 we’re 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, “We’re nowhere [with 3G rollout]. We’re 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 aren’t 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. 370 See Section II. B. 2. a, Mobile Data Mobile Telephone Sector, infra. 371 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. 372 See Section II. B. 2. a, Mobile Data Mobile Telephone Sector, infra. 373 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. 374 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 56 Federal Communications Commission FCC 02- 179 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. 375 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. 376 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, 377 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. 378 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. 379 These bands are currently used for the following services: Mobile Satellite Service, Unlicensed PCS, Amateur Radio Service, and Multipoint Distribution Service (“ MDS”). 380 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. 375 At the writing of the Sixth Report, the Handspring VisorPhone was the only voice capability offered for a PDA. See Sixth Report, at 13416. 376 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. ’”). 377 Amendment of Part 2 of the Commission’s 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”). 378 See Sixth Report, at 13400. 379 3G FNPRM, at 16044. See Appendix A, Fixed Wireless Voice and Data Services, infra, for a further discussion of MDS. 380 3G FNPRM, 16044. 57 Federal Communications Commission FCC 02- 179 b. 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 DoCoMo’s 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. 381 However, FOMA’s adoption rate has been lower than expected due to problems such as limited coverage, low battery life, and the high cost of handsets. 382 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 DoCoMo’s voice subscribers. 383 While other countries around the world have delayed their WCDMA launches until at least 2003, 384 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, 385 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. 386 Furthermore, SK Telecom’s wireless Internet revenue rose 55 percent during the first quarter of 2002 and represented 6.6 percent of the company’s total revenue, up from 4.1 percent during the previous quarter. 387 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 381 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. 382 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 Japan’s 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 Japan’s populated areas. DoCoMo Hopes for More Customers with Expanded 3G Service, AGENCE FRANCE PRESSE, Feb. 22, 2002. 383 NTT DoCoMo, Current Information – Subscriber Growth (visited June 3, 2002) . See Sixth Report, at 13396- 13397, for a further discussion of i- mode. 384 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. 385 Id. 386 SK Telecom, 1st Quarter Earnings for the Period Ending March 31, 2002, May 6, 2002, at 9. 387 Wireless Internet Shows Promise in South Korea, WALL STREET JOURNAL, May 13, 2002, at A6. 58 Federal Communications Commission FCC 02- 179 offered by carriers. 388 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. 389 2. Industry Structure and Performance a. 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. 390 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. 391 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. 392 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 Wireless’s network footprint in the Northeast, San Francisco Bay Area, and Salt Lake City as of March 2002. 393 Verizon Wireless’s 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. 394 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. 395 Both carriers plan to deploy cdma2000 1xEV, Verizon Wireless in 2002 for data only and Sprint PCS in 2004 388 Sarah Parker, Europe Sidelines UMTS in Favor of UMTS Focus, GLOBAL WIRELESS, Feb. 15, 2002, at 1 (citing UK consulting firm Analysys). 389 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. 390 See Fifth Report, at 17697- 17703. 391 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 Nation’s 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. 392 Sprint Leads Evolution to 3G with Nation’s 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. 393 Christopher Stern, High- Speed Wireless Network to Debut, WASHINGTON POST, Jan. 27, 2002. 394 Verizon Wireless Launches Nation’s First Major Advanced Wireless Network: The Verizon Wireless Express Network, News Release, Verizon Wireless, Jan. 28, 2002. 395 Sprint Showcases First Live Public Demonstration of its Wireless Third Generation Network, News Release, Sprint PCS, Jan. 8, 2002. 59 Federal Communications Commission FCC 02- 179 for data and voice. 396 Cdma2000 1xEV is expected to boost network data speeds to at least 2.4 Mbps. In addition, Nextel’s iDEN network transmits data at speeds of 15 to 20 kbps for mobile handsets and 30 kbps for laptops and PDAs. 397 Nextel has not yet made a commitment to a 3G technology. 398 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 399 technology during 2001 on their nationwide networks. 400 Data speeds on the carriers’ GPRS networks range from 25 to 56 kbps. 401 AT& T Wireless, which currently uses TDMA as its 2G 396 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. 397 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 Industry’s Largest, Nationwide 2.5G Network, News Release, Nextel, May 14, 2002. 398 Peggy Albright, Lessons Learned From Current Next- Gen Nets, WIRELESS WEEK, Dec. 17, 2001. A clear timeline for Nextel’s 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. 399 See note 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. 400 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. 401 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& T’s 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 60 Federal Communications Commission FCC 02- 179 technology, plans to deploy GPRS to all of its markets by the end of 2002. 402 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. 403 EDGE and WCDMA are expected to raise network speeds to 384 kbps and 2 Mbps, respectively. 404 Cingular Wireless is reportedly planning to build out EDGE to all of its markets during 2003 and 2004. 405 AT& T Wireless has announced that it expects to migrate to EDGE during 2002 and to WCDMA beginning in 2003. 406 b. 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 user’s desktop computer. Most handheld devices also include the ability to download additional software programs that do not come pre- loaded on the device. 407 While PDAs still contain these core PIM and software features, handhelds are being repositioned as wireless communication devices instead of simple organizers. 408 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. 11, 2001; Harry Newton, NEWTON’S TELECOM DICTIONARY: 16 TH EXPANDED & UPDATED EDITION, CMP Books, July 2000, at 397. 402 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. 403 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 Cingular’s 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. 404 Blesson Mathews, Generation Wireless, NETWORK COMPUTING, June 11, 2001; Margot Suydam, Might As Well Jump; 3G: The Cellular Industry’s Leap Of Faith, COMMVERGE, Nov. 1, 2001; Kent German, An Unproven Promise, UPSIDE, Mar. 2002. 405 Cingular Wireless LLC, SEC Form S- 4, Jan. 24, 2002; Frank Marsala, Implications of Cingular’s Technology Announcement, Robertson Stephens, Oct. 31, 2001. 406 See AT& T Wireless 3G News Release; Paul Wuh, AT& T Wireless Group: Analyst Meeting Companion, Goldman Sachs, Jan. 25, 2002. 407 See Section II. B. 2. c. ii, Operating Systems, infra. 408 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 it’s not wireless, it’s pretty much useless.”). Palm stated in January 2002, “Handheld usage is shifting. While the [electronic organizer] is significant, what’s 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, Palm’s 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. 61 Federal Communications Commission FCC 02- 179 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. 409 According to another analyst, U. S. sales of handheld devices totaled 2.5 million during the second and third quarters of 2001. 410 Palm devices accounted for 39.1 percent of that total, 411 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) 412 accounted for a combined 23.6 percent. 413 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, 414 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 Wireless’s Mobitex dedicated data network, 415 while some of RIM’s devices use Cingular Wireless’s network and others use Motient Corporation’s (“ Motient”) dedicated data network. 416 These devices can access the Internet at speeds of between 8.6 and 14.4 kbps, 417 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 409 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). 410 Gartner Dataquest Says Announced Release of Pocket PC 2002 May Have Slowed PDA Sales in 3Q01, BUSINESS WIRE, Nov. 5, 2001. 411 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, INVESTOR’S BUSINESS DAILY, Jan. 29, 2002, at 5 (citing Todd Kort, an analyst with Gartner Inc.). 412 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. 413 Gartner Dataquest Says Announced Release of Pocket PC 2002 May Have Slowed PDA Sales in 3Q01, BUSINESS WIRE, Nov. 5, 2001. 414 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, INVESTOR’S 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”). 415 Palm Eyes Security. Cingular Wireless’s 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. 416 Cingular Powers New Palm i705 Wireless Handheld, News Release, Cingular Wireless, Jan. 28, 2002. 417 Palm Eyes Security. 62 Federal Communications Commission FCC 02- 179 networks, which range from 25- 60 kbps. 418 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. 419 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 Wireless’s cdma2000 1xRTT network and gives users Internet access speeds of 40- 60 kbps. 420 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. 421 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. 422 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. 423 418 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. 419 These manufacturers also make wireless modem cards for laptops, allowing them to connect to the Internet wirelessly. 420 Sierra Wireless and Verizon Wireless Connect Mobile Users on the First 1xRTT “Express Network,” News Release, Sierra Wireless, Jan. 28, 2002. 421 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. 422 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. 423 The VisorPhone connects to GSM networks, while the DigitalLink works with Sprint PCS’s CDMA network. The DigitalLink module is also compatible with Sprint PCS’s 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) . 63 Federal Communications Commission FCC 02- 179 (i) 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, 424 one analyst has stated that “the line between PDAs and cellphones ha[ s] blurred.” 425 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 PDA’s 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 426 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. 427 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. 428 Handspring also announced in March 2002 that it is developing with Sprint PCS another version of the Treo that will work on Sprint PCS’s CDMA network, including its 1xRTT network, expected to launch in mid- 2002. 429 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 RIM’s BlackBerry e- mail service. 430 In February 2002, Microsoft and HP 424 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). 425 Id. 426 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. 427 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 Aren’t Good Enough, WASHINGTON POST, Jan. 27, 2002, at H7. Treo users can send and receive SMS messages, access POP3 e- mail accounts (see note 496, infra, for a discussion of POP3 e- mail accounts), and surf the web using Handspring’s browser, Blazer, which does display graphical web pages in a recognizable form. The Treo does not contain Handspring’s 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 Aren’t Good Enough, WASHINGTON POST, Jan. 27, 2002, at H7. 428 Rob Pegoraro, Even the Best of the Phone- PDA Combos Aren’t Good Enough, WASHINGTON POST, Jan. 27, 2002, at H7. 429 Handspring and Sprint Developing CDMA Version of Treo Communicator, News Release, Handspring, Mar. 19, 2002. 430 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 RIM’s BlackBerry e- mail service and voice access over Nextel’s iDEN network, including Nextel’s DirectConnect two- 64 Federal Communications Commission FCC 02- 179 unveiled the HP Jornada 928, which incorporates Microsoft’s 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. 431 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 Wireless’s cdma2000 1xRTT network. 432 (ii) Operating Systems While there are several PDA device manufacturers, most PDAs use one of two major operating systems: Palm’s PalmOS or Microsoft’s Pocket PC. 433 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. 434 In the fall of 2001, Palm began creating a separate subsidiary, now called PalmSource, Inc, for its PalmOS product. 435 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. 436 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, way digital radio service. Nextel, RIM and Motorola Agree to Purchase Voice- enabled Handheld, News Release, Nextel and RIM, Jan. 24, 2002. Nextel’s iDEN network technology is manufactured by Motorola. Id. 431 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 other’s components in smartphone platform design. Microsoft agreed to support Intel’s Personal Internet Client Architecture (Intel PCA) while Intel’s components will integrate Microsoft’s 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. 432 Verizon Wireless, Introducing Thera (visited May 22, 2002) . 433 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. 434 About 22 percent of the PDAs sold during 2001 run Microsoft’s 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). 435 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. 436 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. 65 Federal Communications Commission FCC 02- 179 and to view documents created in Microsoft PowerPoint. 437 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. 438 c. 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. 439 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. 440 The Commission estimates there were 18 million paging units in service as of mid- 2001. 441 Other major paging carriers include SkyTel Communications, Inc. (“ SkyTel”) 442 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, 443 which has long constituted the bulk of these carriers’ revenue, 444 as well as intense competition from other mobile data providers in the market for more 437 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. 438 Microsoft Rings in Pocket PC Phone Edition, M2 PRESSWIRE, Feb. 19, 2002 (citing IDC). 439 See Section II. B. 3, Mobile Data Services, infra. 440 Arch Wireless Communications Inc., SEC Form 10- K, Mar. 21, 2002, at 11; Metrocall, Inc., SEC Form 10- K, Apr. 12, 2002, at 16. 441 NRUF database. See note 114, supra, for a description of this source. 442 SkyTel Communications, Inc. is a wholly owned subsidiary of WorldCom that was acquired on October 1, 1999. See Fifth Report, at 17720- 17721. 443 The number of paging subscribers of the major carriers fell substantially during the past year. Arch Wireless’s 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. Metrocall’s 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. 444 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. 66 Federal Communications Commission FCC 02- 179 advanced mobile data services. 445 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. 446 In October 2001, WebLink filed a restructuring plan detailing how the company intended to emerge from bankruptcy. 447 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. 448 Finally, Metrocall filed a Chapter 11 bankruptcy petition for reorganization in June 2002. 449 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. 450 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, 451 through which many handheld devices connect to the wireless Internet. 452 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. 453 Most licenses were auctioned on an EA geographic basis, while the 929 and 931 MHz band licenses were auctioned by 445 See Last Call for Metrocall?, WASHINGTON BUSINESS JOURNAL, Nov. 23, 2001, at 23 (citing Roberta Wiggins, an analyst for the Yankee Group); John Sullivan, Motorola’s 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. 446 See Sixth Report, at 13405. 447 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, WebLink’s Bankruptcy Restructure Includes Talks with Strategic Partners, RCR WIRELESS NEWS, Nov. 5, 2001, at 2. 448 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. 449 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. 450 Mike Dano, Arch Upgrades to 2.7 ReFLEX Network, RCR WIRELESS NEWS, Nov. 5, 2001, at 4. 451 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. 452 See Section II. B. 2. b, Handheld Devices, supra, for a discussion of how handheld devices connect to the Internet wirelessly. 453 Lower and Upper Paging Bands Auction Closes, Public Notice, DA 01- 2858, Dec. 11, 2001. 67 Federal Communications Commission FCC 02- 179 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. 454 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. 3. Mobile Data Services a. 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. 455 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. b. 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. 456 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. 457 Two- way SMS was introduced in the United States in May 2000 when VoiceStream began to offer the service. 458 As of year- end 2001, the six nationwide mobile telephone carriers, as well as handheld 454 Id. See Appendix B, Table 3, at B- 6. 455 John Sullivan, Motorola’s Exit: Death Knell Or New Dawn For Paging Market?, WIRELESS DATA NEWS, Dec. 19, 2001. 456 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) . 457 Brad Smith, Signs Point To A Surge In SMS, WIRELESS WEEK, Mar. 4, 2002 (citing GSM Association). 458 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. 68 Federal Communications Commission FCC 02- 179 providers and some smaller mobile telephone carriers, were offering SMS. 459 At the end of 2001, AT& T Wireless became the first carrier to offer cross- carrier network SMS capabilities. 460 A short time later, most of the nationwide carriers announced similar plans. 461 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. 462 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. 463 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. 464 Both Cingular Wireless and Nextel offer SMS à la carte or bundled with their wireless web plans. Nextel offers a plan for $5 that allows unlimited messages, 465 or users can receive 300 messages as part of the company’s wireless Internet package. 466 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. 467 AT& T Wireless, Sprint PCS, and 459 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. 460 Dan Meyer, AT& T Wireless move gives SMS legs in U. S., RCR WIRELESS NEWS, Nov. 26, 2001. 461 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. 462 Frank Marsala, Mid- Quarter Look Reveals Some Positive Trends, ROBERTSON STEPHENS, May 22, 2002. 463 In addition to paying service plan fees, customers must also purchase handsets capable of text messaging. 464 Verizon Wireless, Welcome To Verizon Wireless, (visited Mar. 7, 2002) . 465 Nextel, Nextel – Two- Way Messaging (visited Jan. 29, 2002) . 466 Nextel, Nextel – Nextel Online, (visited Jan. 29, 2002) ; Nextel – Nextel Online Plus, Nextel, (visited Jan. 29, 2002). 467 Devine Kofiloto and Mike Woolfrey, ‘SMS – Unexploited Potential’ Messaging Conference Hears, EMC MARKET DATA, Jan. 31, 2001. 69 Federal Communications Commission FCC 02- 179 VoiceStream offer AIM to their mobile customers, 468 and Cingular Wireless offers MSN Messenger to its mobile customers. 469 Users of the Palm i705 also receive “always on” access to AIM. 470 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. 471 We note that many in the industry have raised concerns about competitiveness and access issues in instant messaging. 472 c. Web Content Using their existing and next generation networks, at least seven major mobile telephone service providers 473 currently offer text- based wireless web 474 services via mobile telephone handsets at speeds ranging from approximately 14.4 kbps on 2G networks to 60 kbps on advanced wireless networks. 475 468 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) . 469 Cingular Wireless, Wireless Window – Cingular Wireless, (visited Jan. 29, 2002) . 470 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, INVESTOR’S BUSINESS DAILY, Jan. 29, 2002, at 5. 471 eCare, E- mail correspondence, Sprint PCS, May 16, 2001. 472 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). 473 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. 474 The terms “wireless web” and “mobile web” are used throughout Section II. B., Mobile Data, to mean mobile Internet access via mobile telephone handsets. 475 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 70 Federal Communications Commission FCC 02- 179 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. 476 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. 477 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. 478 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 Microsoft’s Internet Explorer web browser, are able to access any web site designed in HTML or WAP formats. 479 Handspring PDAs and Treo smartphones, as well as certain PalmOS- based devices, 480 can access web content with Handspring’s Blazer browser, which supports web pages written in HTML, cHTML, or WAP. 481 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. 482 While RIM’s BlackBerry service focuses on the delivery of e- mail 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. 476 See Sixth Report, at 13408. 477 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. 478 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. 479 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. 480 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. 481 Handspring, Handspring Software: Blazer Details (visited Mar. 19, 2002) . 482 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, 71 Federal Communications Commission FCC 02- 179 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. 483 Palm i705 and VII users must access the Internet with a monthly subscription to Palm’s Palm. Net wireless Internet access service. Palm. Net subscribers do not have access to the entire web, but browse the web with Palm’s 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. 484 For wireless web service on 2G networks, most mobile telephone carriers charge an additional monthly fee beyond voice service ranging from $6 to $14. 485 In addition, Internet access minutes are deducted from the customer’s minutes included in their monthly service plans. 486 If customers exceed their allotted monthly minutes, they must pay per- minute airtime charges for wireless web or voice service. 487 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. 488 Verizon Wireless also allows customers to add- on high- speed wireless web service with unlimited usage for $30. 489 AT& T Wireless offers two types of rate plans. Customers can add data services to existing voice plans starting at $29.99 EarthLink announced its plans to acquire the assets of OmniSky Corporation as part of OmniSky’s Chapter 11 bankruptcy proceedings. As of that time, OmniSky had approximately 32,000 customers. EarthLink Announces Plans to Purchase OmniSky’s Subscriber Base and Key Operational Assets, News Release, EarthLink, Dec. 7, 2001. 483 BlackBerry, Third Party Solutions (visited Mar. 19, 2002) ; EarthLink, EarthLink Wireless Services (visited Mar. 19, 2002) . 484 See Sixth Report, at 13414; Palm, The Wireless- Ready Web with Web Clipping Applications (visited Mar. 19, 2002) . 485 See Appendix D, Table 2, at D- 5. 486 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) . 487 In addition to paying monthly service fees and airtime charges, all mobile telephone Internet customers must purchase Internet- ready handsets. 488 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) . 489 Verizon Wireless Launches Nation’s First Major Advanced Wireless Network: The Verizon Wireless Express Network, News Release, Verizon Wireless, Jan. 28, 2002. 72 Federal Communications Commission FCC 02- 179 for 5 MB of downloaded data. 490 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. 491 d. 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. 492 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. 493 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, 494 and another recent survey of 400 large corporations found that 47 percent are deploying wireless e- mail access. 495 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. 496 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. 490 AT& T Wireless offers four plans ranging from $29.99 to $99.99 for 5 to 40 MB of downloaded data. AT& T Wireless, AT& T Wireless GSM™ / GPRS Network – Service Plan (visited Jan. 29, 2002) . 491 The bundled voice and data plans offered by AT& T Wireless range from $39.99 to $159.99, and all plans include one MB of downloaded data. AT& T Wireless, AT& T Wireless GSM™ / GPRS Network – Service Plan (visited Jan. 29, 2002) . 492 One analyst expects the number of mobile and remote workers to increase by nearly 20 percent by 2004 to 55 million, up from 46 million currently. Palm i705 Handheld Debuts: Only Secure, Integrated Wireless, Email Solution with Web Access, News Release, Palm, Jan. 28, 2002 (citing IDC, “U. S. Mobile and Remote Worker Market Forecast and Analysis 1999- 2004,” doc. 23020). 493 Patrick Seitz, Palm Setting Its Sights on Corporate Spending with New i705 Device Lets Users Check Their E- Mail, INVESTOR’S BUSINESS DAILY, Jan. 29, 2002, at 5. 494 Palm i705 Handheld Debuts: Only Secure, Integrated Wireless, Email Solution with Web Access, News Release, Palm, Jan. 28, 2002 (citing Jupiter Media Metrix, “Jupiter Metrics: Wireless Infrastructure,” 2Q 2001 [September].). 495 Sue Marek, Java Will Drive Data Adoption, WIRELESS WEEK, Mar. 18, 2002, at 1, 8 (citing a survey by Evans Data Group). 496 POP3 (Post Office Protocol 3) e- mail servers attached to the Internet are independent of the transport mechanism used to access them. Therefore, POP3 e- mail account subscribers can access their e- mail messages from any Internet connection anywhere in the world. See Harry Newton, NEWTON’S TELECOM DICTIONARY: 16 TH EXPANDED & UPDATED EDITION, CMP Books, July 2000, at 692. 73 Federal Communications Commission FCC 02- 179 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 RIM’s mobile devices. About 289,000 people in North America have subscribed to BlackBerry service since 1999, 497 and more than 13,000 North American organizations have integrated BlackBerry into their office e- mail systems. 498 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. 499 E- mail subscribers receive a personalized AT& T Wireless PocketNet account and can access existing Yahoo, AOL, or AT& T WorldNet e- mail accounts. 500 They can send, receive, and forward messages and Microsoft Word or text document attachments. 501 VoiceStream’s 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. 502 Users can send, receive, reply to, delete, and forward messages. 503 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). 504 The Palm i705 allows users to receive pushed e- mail messages from up to eight different accounts, 497 Vanessa Hua, Palm Rides Wireless Wave, SAN FRANCISCO CHRONICLE, Jan. 28, 2001, at E1. Approximately 54 percent of RIM’s fiscal year 2001 (ended Feb. 28, 2002) revenue of $221 million was derived from its Blackberry service. Research in Motion, 2001 Annual Report, at 15. 498 Nextel, RIM and Motorola Agree to Purchase Voice- enabled Handheld, News Release, Nextel and RIM, Jan. 24, 2002. 499 AT& T Wireless, PocketNet Service (visited Mar. 4, 2002) . 500 Id. 501 Id. 502 VoiceStream, WirelessInbox – “Your” E- mail on Your Phone (visited Mar. 4, 2002) ; VoiceStream, Introducing the iStream Wireless Data Network (visited Mar. 4, 2002) . 503 VoiceStream, WirelessInbox – “Your” E- mail on Your Phone (visited Mar. 4, 2002) . 504 VoiceStream, iStream Service Plans (visited Mar. 4, 2002) . Telephone handset users of iStream can download one MB of data per month for $2.99 with additional MBs costing $10 per MB. VoiceStream, iStream Service Plans (visited Mar. 4, 2002) . iStream PDA customers can download 5 MB of data for $19.99 per month while laptop customers can download 10 MB of data for $39.99 per month. VoiceStream, iStream Service Plans (visited Mar. 4, 2002) . Additional MB cost $5 per MB for the PDA service and $4 per MB for the laptop service. Id. User’s downloaded data can consist of e- mail messages or web pages or a combination of the two. Id. 74 Federal Communications Commission FCC 02- 179 including a Microsoft Outlook- based corporate e- mail account, a Palm. net account, an EarthLink account, and POP3 accounts such as Yahoo. 505 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. 506 The device vibrates or flashes when new messages arrive. 507 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. 508 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. 509 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. 510 In January 2002, Arch Wireless began offering its Enterprise Solution product to businesses. The product can reportedly give a business’s mobile workforce secure, real- time access to firewall- protected files, e- mail, calendar functions, and enterprise applications on a variety of wireless devices. 511 e. Location- Based Services The Commission’s 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 505 Palm, Wireless Email with the Palm i705 Handheld (visited Feb. 20, 2002) . 506 Palm i705 Handheld Debuts: Only Secure, Integrated Wireless, Email Solution with Web Access, News Release, Palm, Jan. 28, 2002. 507 Patrick Seitz, Palm Setting Its Sights on Corporate Spending with New i705 Device Lets Users Check Their E- Mail, INVESTOR’S BUSINESS DAILY, Jan. 29, 2002, at 5. 508 Jon Fortt, Microsoft Takes Another Shot at Palm with New Handheld OS, SAN JOSE MERCURY NEWS, Oct. 3, 2001. 509 Tish Williams, Comparing the Pocket PC with the Palm, THESTREET. COM, Nov. 8, 2001; Pocket PC Launch Byting the Palm, LOS ANGELES TIMES, Oct. 18, 2001, at T2; Microsoft Rings in Pocket PC Phone Edition, News Release, Microsoft, Feb. 19, 2002. The security features of the VPN connection allowed with Pocket PC 2002 devices include password support with encryption, Windows 2000 password rules, and an “active period” after which a user’s authentication ends. Marge Brown and Bruce Brown, Microsoft Takes on Palm – Again, PC MAGAZINE, Nov. 6, 2001, at 41. 510 GoAmerica to Support Palm i705 Enterprise Solution, News Release, GoAmerica, Jan. 29, 2002. 511 Arch Wireless Launches Wireless Enterprise Solution Nationwide, News Release, Arch Wireless, Jan. 29, 2002. 75 Federal Communications Commission FCC 02- 179 request by public safety answering points (“ PSAPs”). 512 Carriers have announced plans for complying with these requirements, called E911 Phase II, but generally at later dates than set by the rules. 513 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. 514 Similar waiver requests from smaller carriers are under consideration. 515 In addition, several matters concerning compliance with the E911 Phase II requirements have been investigated by the Enforcement Bureau. 516 Wireless carriers may comply with the ALI requirement using any of several location technologies, or combinations of technologies. 517 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 carrier’s 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. 518 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-OT” D) that requires handsets with E- OTD software plus added network equipment and upgrades to 512 Under Phase II E911 rules, wireless carriers offering cellular- type voice service must provide a PSAP the telephone number of the wireless caller and a precise measurement of the location of the caller, by latitude and longitude. 47 C. F. R. § 20.18( e). 513 See FCC, Phase II Automated Location Identification Reports . 514 Revision of the Commission’s Rules to Ensure Compatibility with Enhanced 911 Emergency Calling Systems, Fourth Memorandum Opinion and Order, 15 FCC Rcd 17442 (2000). The Commission also granted individual waivers to five national wireless carriers in a series of orders released in October 2001. See, e. g., Revision of the Commission’s Rules To Ensure Compatibility with Enhanced 911 Emergency Calling Systems Request for Waiver by AT& T Wireless Services, Inc., Order, 16 FCC Rcd 18253 (2001). For more information regarding the Commission’s wireless 911 rules and orders, see . 515 Commission Establishes Schedule for E911 Phase II Requests by Small and Mid- Sized Wireless Carriers, Public Notice, FCC 01- 302 (rel. Oct. 12, 2001). 516 See, eg., Cingular Wireless, LLC, Order, FCC 02- 132 (rel. May 9, 2002); AT& T Wireless Services, Inc., Notice of Apparent Liability for Forfeiture, FCC 02- 142 (rel. May 20, 2002). 517 7 C. F. R. § 20.18( e), (f). See OET Bulletin No. 71, Guidelines for Testing and Verifying the Accuracy of Wireless E911 Location Systems, Apr. 12, 2000. 518 Sprint PCS First Quarterly E911 Implementation Report at 9- 12, filed Feb. 1, 2002; Verizon E911 Status Report at 1, filed Feb. 1, 2002; Nextel Communications, Inc. Phase II E911 Quarterly Report at 2- 5, filed Feb. 1, 2002. 76 Federal Communications Commission FCC 02- 179 network software. 519 In addition, some carriers are deploying network- based technologies. 520 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. 521 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. 522 Verizon Wireless began selling similar A- GPS handsets in December 2001. 523 Sprint PCS has committed to selling 100 percent A- GPS handsets by the end of this year. 524 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. 525 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. 526 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 customer’s 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. 527 Carriers’ abilities to obtain and transmit precise location information in fulfillment of the Commission’s E911 rules trigger privacy considerations. In 1999, Congress adopted the Wireless Communications and 519 VoiceStream Wireless Corporation April 2002 Semi- Annual Report on E911 Phase II Implementation Plan at 13- 15, filed Apr. 1, 2002; AT& T Wireless Services, Inc. Quarterly Report at 1- 3, filed Feb. 1, 2002; Cingular Wireless LLC First Quarterly E911 Implementation Report at 1- 2, filed Feb. 1, 2002. 520 See, e. g., Verizon Enhanced 911 Status Report at 3- 4, filed Feb. 1, 2002 (regarding completed network deployments in St. Clair County, IL and Lake County, IN, and planned deployments in Chicago and Cook County, IL; St. Louis County, MO; and Harris County, TX) 521 See Cingular Wireless, LLC, FCC 02- 132 (released May 9, 2002). 522 Sprint First Quarterly E911 Implementation Report at 12- 13, filed Feb. 1, 2002. 523 Verizon Enhanced 911 Status Report at 1, filed Feb. 1, 2002. 524 Sprint Second Quarterly E911 Implementation Report at 14, filed April 29, 2002. 525 Revision of the Commission’s Rules to Ensure Compatibility with Enhanced 911 Emergency Calling Systems Request for Waiver by Verizon, Order, 16 FCC Rcd 18364 (2001). 526 See, e. g., VoiceStream Wireless Corporation April 2002 Semi- Annual Report on E911 Phase II Implementation Plan at 25, filed Apr. 1, 2002. 527 See, e. g., Zagat Survey And Airflash Partner To Serve Up Localized Restaurant Finder And Reviews To Wireless Users On- The- Go, News Release, AirFlash, May 8, 2001. 77 Federal Communications Commission FCC 02- 179 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 user’s 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. 528 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. 529 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 customer’s current or intended location. 530 f. 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. 531 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. 532 Bluetooth allows users to send signals and transfer data among numerous electronic devices, thus creating a personal area network (“ PAN”). 533 Bluetooth uses 528 SignalSoft Becomes First Member of Location Interoperability Forum, News Release, SignalSoft Corp., Oct. 15, 2000. 529 Location Interoperability Forum Launches Draft Mobile Location Protocol Specifications for Public Comments, News Release, Location Interoperability Forum, Dec. 3, 2001. 530 MapInfo in Cooperation with Siemens IC Mobile Makes Mobile Location Services a Reality as Wireless Becomes a Way of Life, News Release, MapInfo, Mar. 15, 2002. 531 Unlicensed spectrum is also used to provide fixed wireless high- speed Internet access to home and businesses in neighborhoods and communities across the United States. See Appendix A, infra, for a discussion of fixed wireless services. 532 The name Bluetooth comes from the Danish King Harald Blatand II who peacefully unified Denmark and Norway. Doug Bedell, The Cutting Edge Cuts Loose, DALLAS MORNING NEWS, Jan. 10, 2002; Lynn Greiner, Products Looking For A Home, COMPUTER DEALER NEWS, Dec. 14, 2001. 533 PAN is a term used to describe the network that is created when wireless devices are connected in a small office or home environment. Motorola, Motorola Bluetooth, Personal Area Networks (visited Feb. 20, 2002) 78 Federal Communications Commission FCC 02- 179 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. 534 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. 535 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. 536 Cahners In- Stat Group predicts that 780 million chip- set units will be shipped in 2005. 537 WiFi. Another wireless networking technology sharing the 2.4 GHz frequency band with Bluetooth is the Institute of Electrical and Electronics Engineers (“ IEEE”) 538 802.11b standard, also called WiFi. The 802.11b standard is used to connect devices to WLANs, and allows a maximum throughput of 11 Mbps. 539 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. 540 The Dell’Oro Group expects the WiFi market to grow by 35 percent in 2002. 541 Gartner Group estimates 95 percent of notebook computers will be 802.11b- enabled ; all talking. com, What is a Personal Area Network (visited Feb. 20, 2002) ; Wikipedia, Personal area network: encyclopedia article from Wikipedia (visited Feb. 20, 2002) . 534 The Bluetooth standard calls for frequency hopping, spread- spectrum techniques that make 1,600 hops per second among different frequencies within the 2.4 GHz ISM band. Bluetooth, Bluetooth Wireless, FAQ, Technical Information (visited Feb. 20, 2002) . 535 See Fifth Report, at 17706. Bluetooth has been under development since 1994 when Ericsson began conducting a feasibility study. In 1998, the Bluetooth Special Interest Group (SIG) was formed. The group, which promotes the Bluetooth standard, has over 2,000 adopter companies. 536 Frost & Sullivan, Bluetooth Vision On The Verge Of Reality As First Products Hit Mass Market, M2 PRESSWIRE, Nov. 7, 2001; Lynn Greiner, Products Looking For A Home, COMPUTER DEALER NEWS, Dec. 14, 2001. 537 Cahners In- Stat Group Says Bluetooth Chips Kick Butt, BUSINESS WIRE, Dec. 5, 2001. 538 IEEE is a technical society that sponsors conferences, publishes technical papers, and provides a forum for the development of standards. IEEE standards include those for computers and telecommunications, specifically standards used for LANs such as 802.11b. Harry Newton, NEWTON’S TELECOM DICTIONARY: 16 TH EXPANDED & UPDATED EDITION, CMP Books, July 2000, at 439. 539 J. William Gurley, The next big thing? Try 802.11b, CNET. COM, Feb. 19, 2001; Curtis Franklin, Cut The Cord, INTERNETWEEK, Mar. 12, 2001, available in 2001 WL 8007251; Terry Sweeney, 802.11B: One Standard Worth Waiting For, TECHWEBUK. COM, Nov. 16, 2000. 540 Wireless Ethernet Compatibility Alliance, Wi- Fi Value and the Benefit of Standards (visited Feb. 21, 2002) . 541 Greg Tally, Back to Basics: Last Mile Broadband Trends for 2002 and how they affect your Business, BOARDWATCH MAGAZINE, Feb. 2002. 79 Federal Communications Commission FCC 02- 179 by 2005. 542 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. 543 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. 544 In September 2001, Wayport signed an agreement with IPass, a global provider of network access to ISPs, to provide IPass subscribers Internet access via Wayport’s WiFi networks in airports and hotels around the U. S. 545 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. 546 Boingo integrates WiFi hot spots from various providers to deliver broadband Internet service to its customers. 547 As of May 2002, Boingo had was offering WiFi broadband Internet access in nearly 600 hot spots across the United States. 548 The company plans to be connected to over 2,000 hot spots by the end of 2002. 549 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. 550 542 J. William Gurley, The Next Big Thing? Try 802.11b, CNET. COM, Feb. 19, 2001. 543 John C. Dvorak, Wireless Whale, FORBES, Mar. 5, 2001, available in 2001 WL 2184050; Michael Dell Puts Wireless in Focus; Sees Standards, Notebooks as Easy Way for Customers to be Connected, BUSINESS WIRE, Mar. 20, 2001. In January 2001, Starbucks announced it would begin installing MobileStar Network’s (now owned by VoiceStream) wireless broadband network in stores, allowing customers with 802.11b- enabled notebook computers, handheld devices, and smartphones to access broadband content and services in Starbucks stores. Starbucks and Microsoft Blend Coffee Retailer’s Expertise With Technology Leader’s Software and Services to Deliver Wireless Cof, News Release, Starbucks, Jan. 3, 2001. 544 Paul Wuh et al., Telecom Service: Wireless Communication; Why Wireless Carriers Should Care about Wi- Fi, Global Equity Research, Goldman Sachs, May 3, 2002, at 14. 545 Steve Gold, Wi- Fi Access Coming To More Than 400 Airports, Hotels, NEWSBYTES, Sept. 27, 2001. 546 Boingo Wireless, Boingo Wireless – Market Overview (visited May 22, 2002) . 547 Id. 548 Paul Wuh et al., Telecom Service: Wireless Communication; Why Wireless Carriers Should Care about Wi- Fi, Global Equity Research, Goldman Sachs, May 3, 2002, at 12. 549 Id. 550 Amendment of Part 15 of the Commission’s Rules Regarding Spread Spectrum Devices and Wi- LAN, Inc. Application for Certification of an Intentional Radiator Under Part 15 of The Commission’s Rules, Further Notice of Proposed Rulemaking And Order, 16 FCC Rcd 10036 (2001). 80 Federal Communications Commission FCC 02- 179 4. 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. 551 Location- based services first appeared in vehicles as navigational devices using GPS technology to determine the vehicle’s location. 552 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. 553 OnStar also offers a variety of other in- vehicle communication and location- based, telematics services, including remote access to a vehicle’s 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. 554 As of January 2002, OnStar was available in 36 vehicle models and had more than 2 million subscribers. 555 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, 551 See Section II. B. 3. e, Location- Based Services, supra. 552 Many of these devices use a small screen and an extensive database contained on DVD or CD- ROM to display maps and directions. The DVD- and CD- ROM- dependent devices are available for about $2,000, including installation. Bill Howard, The Right Direction; using GPS systems, PC MAGAZINE, Feb. 12, 2002; Jill Amadio, The Thinker: Watch Out! Your Car May Be Getting Smarter Than You; Wheels; Lexus Link Navigational System, ENTREPRENEUR, Feb. 1, 2002; Micheline Maynard, Personal Business; Navigation Aids: No Longer Just for Luxury Cars, NEW YORK TIMES, Jan. 27, 2002. 553 Steve Ditlea, Wheels Online, MC TECHNOLOGY MARKETING INTELLIGENCE, March 1, 2001, available in 2001 WL 15717085. 554 There are three OnStar service plans: Safe & Sound, Directions & Connections, and Luxury & Leisure. The Safe & Sound plan offers live connection to an OnStar operator, remote access to the vehicle’s horn, door locks and headlights, and contact with public safety officials if the airbag deploys. This plan costs $16.95 per month or $199 per year. In addition to the basic service, the Directions & Connections plan offers directions as well as information services such as finding hotels, ATMs, restaurants, and service stations. This plan costs $34.95 per month or $399 per year. The Luxury & Leisure plan adds one premium service to the Directions & Connections plan, Personal Concierge Service. Subscribers to this plan may obtain tickets, purchase gifts, and receive other assistance through a live OnStar concierge operator. This plan costs $69.95 per month or $799 per year. OnStar, What is OnStar: Frequently Asked Questions (visited Mar. 13, 2002) ; OnStar, What is OnStar: Services (visited Mar. 13, 2002) . 555 The number of subscribers includes the owners of GM models who receive the service free for one year whether they use it or not. 81 Federal Communications Commission FCC 02- 179 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. 556 Over 40,000 stolen vehicles equipped with LoJack have been recovered by U. S. law enforcement agencies. 557 The two major AMR providers are Itron, Inc. (“ Itron”) and Schlumberger Resource Management Services, Inc. (“ Schlumberger”). 558 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. 559 As of the end of 2000, Schlumberger had connected over 5 million consumers to its CellNet wireless telemetry network. 560 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. 561 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. 562 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. 563 556 LoJack Corporation, SEC Form 10- K/ A, Mar. 13, 2000. 557 LoJack Corporation, Company Overview (visited Apr. 29, 2002) . 558 See Appendix D, Table 4, at D- 9 for an overview of their services. 559 Itron, Inc., SEC Form 10- K/ A, Mar. 1, 2002, at 4. 560 See Sixth Report, at 13430. Schlumberger no longer reports results on its telemetry business unit. 561 See Appendix D, Table 4, at D- 9 for the details on the services offered by these carriers. 562 See Fifth Report, at 17727. 563 See Appendix D, Table 4, at D- 9. 82 Federal Communications Commission FCC 02- 179 III. 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. 564 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. 565 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. 566 Mobile telephony providers continued to expand their nationwide footprints and buildout their networks. 567 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. 568 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. 569 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, 570 with maximum bursting rates up to 144 kbps for at least one carrier. These advanced wireless services using GPRS and 1xRTT networks were 564 See Section II. A. 1. b( i), Subscriber Growth, supra. 565 See Section II. A. 1. b Market Performance, and Section II. A. 1. d, Pricing Data and Trends, supra. 566 See Section II. A. 1. c, Digital Deployment, supra. 567 See Section II. A. 1. b( vi), Market Entry , supra. 568 See Section II. A. 1. e, Wireless/ Wireline Competition, supra. 569 See note 367, supra. 570 See Section II. B. 2. a, Mobile Data Mobile Telephone Sector, supra. 83 Federal Communications Commission FCC 02- 179 available in at least some portion of U. S. counties covering approximately 181 million people. 571 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. 572 Furthermore, nearly all of the estimated 6.6 million PDAs sold during 2001 offered users some method of connecting to the Internet while mobile. 573 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. 574 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. 575 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. 576 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 year’s 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. 571 See Section II. B. 2. a, Mobile Data Mobile Telephone Sector, supra. 572 See Section II. B. 2. c, Paging Sector, supra. 573 See Section II. B. 2. b, Handheld Devices, supra. 574 See Section II. B. 3., Mobile Data Services, supra. 575 See Section II. B. 2. b.( i), Smartphones, supra. 576 See Section II. B. 2. a, Mobile Data Mobile Telephone Sector, supra. 84 Federal Communications Commission FCC 02- 179 IV. 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 85 Federal Communications Commission FCC 02- 179 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 today’s 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 other’s 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. I’m 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 Commission’s 86 Federal Communications Commission FCC 02- 179 previous finding that the CMRS market is already characterized by “moderate to high concentration levels.” 577 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.” 578 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.” 579 Is a highly concentrated market consistent with “a high level of competition?” 580 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. It’s a daunting task, and they did it well. We all have lots more work ahead of us, I’m afraid, but I’m 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. 577 Spectrum Cap Order at ¶ 33. It is important to note that these concentration levels are present with the spectrum aggregation limits intact. The majority does not explore the consequences for lifting the limits on HHI, as I believe it was required to do. Additionally, the decreases in HHI- measured concentration that the majority relies upon, id. at 32, occurred while the limits were in place. 578 Leap Reply Comments in Spectrum Cap Proceeding at p. 28. 579 Spectrum Cap Order at ¶ 40. 580 Report at p. 19 87 Federal Communications Commission FCC 02- 179 A- 1 APPENDIX A: FIXED WIRELESS VOICE AND DATA SERVICES I. Introduction and Overview In this section, the Commission reviews the current state of the fixed wireless 1 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 2 and many of its advantages over wireline systems. 3 Fixed wireless operators use several spectrum bands, including Multipoint Distribution Service (“ MDS”), 4 Wireless Communications Service (“ WCS”), 5 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. 6 This report groups operators into two major categories: 1 “Fixed wireless” services are also sometimes referred to as “wireless broadband” or “wireless DSL.” 2 See Sixth Report at 13433- 13437. In a fixed wireless access system, a provider attaches a radio transmitter to a customer’s premises that communicates with the provider’s central antenna site. This antenna site acts as the gateway to the PSTN or the Internet. This technology functions as a replacement for the “last mile” of copper wire that has traditionally provided individual customers with telecommunications services, and thus allows wireless providers to compete with a traditional wireline service providers. The “last mile” is also referred to as the “local loop”; thus, fixed wireless access is often referred to as “Wireless Local Loop,” or “WLL” for short. WLLs afford fixed wireless competitors direct access to an individual customer’s building, thereby lessening their reliance on the facilities of local exchange carriers (“ LECs”). 3 See Sixth Report, at 13433- 13434 and Fifth Report, at 17785. Fixed wireless technology generally has lower network deployment costs compared to wireline service and is better suited to serve rural and underserved markets. 4 What is commonly referred to as MDS or wireless cable spectrum includes 33 different 6 megahertz channels in the 2.1- 2.2 GHz and 2.5- 2.7 GHz spectrum bands. These channels include the Multipoint Distribution Service (“ MDS”), Multichannel Multipoint Distribution Service (“ MMDS”), and Instructional Television Fixed Service (“ ITFS”) channels. MDS operators generally use the MMDS and MDS channels and lease excess capacity from ITFS operators. 5 The WCS band at 2305- 2320 MHz and 2345- 2360 MHz surrounds the Digital Audio Radio Service (“ DARS”) spectrum at 2320- 2345 MHz and is used by licensees Sirius Satellite Radio and XM Radio to offer digital satellite radio service. In order to augment their satellite networks and achieve nationwide coverage, DARS licensees are seeking to deploy terrestrial repeater networks that have the potential to cause interference. Therefore, in November 2001, the Commission sought comment on specific proposals to resolve interference issues between DARS and WCS, ITFS, and MDS licensees related to these repeater networks. See Request for Further Comment on Selected Issues Regarding the Authorization of Satellite Digital Audio Radio Service Terrestrial Repeater Networks, Public Notice, DA 01- 2570 (rel. Nov. 1, 2001). 6 “Licensees of cellular systems may use alternative cellular technologies and/ or provide fixed services on a co- primary basis with their mobile offerings, including personal communications services . . . on the spectrum within their assigned channel block.” 47 CFR § 22.902( d). 88 Federal Communications Commission FCC 02- 179 A- 2 lowerband providers (800 MHz to 5.8 GHz) and upperband providers (24 GHz to 39 GHz) 7 due to the similar technical characteristics of the bands within each category. 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). 8 Therefore, the range of individual transmitters in the upperbands is approximately two to five miles. II. Recent Developments A. 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. 9 These bankruptcies have led to less competition in the fixed 7 The lowerbands consist of the cellular (800 MHz) and broadband PCS (1900 MHz) bands, the MDS (2.5- 2.7 GHz) band, the WCS (2.3 GHz) band, and the unlicensed bands. The upperbands consist of the 24 GHz (DEMS) band, the LMDS (28 GHz) band, and the 39 GHz band. 8 However, by adjusting factors such as cell size and transmission power, the networks can be engineered to the standard level of reliability in a telecommunications network, 99.999 percent. This level of reliability is also known as “five 9’s.” See Sixth Report, at 13435, note 602. 9 See Sixth Report, at 13446- 13447. Unlicensed Spectrum 5- 15 miles MDS Spectrum 25- 35 miles 24 GHz, LMDS, 39 GHz 2- 5 miles Figure 1. Fixed Wireless Coverage Radii 89 Federal Communications Commission FCC 02- 179 A- 3 wireless market, and less intermodal competition for telecommunications services to business users. 10 Teligent, which filed for bankruptcy in May 2001, 11 has since sold a large portion of its assets, including $1 million worth of transmission equipment, office space, and supplies to NextWave Telecom. 12 In January 2002, a group of lenders announced that they plan to use the proceeds from the sale of Teligent’s assets, as well as additional financing, to fund a successor fixed wireless company. 13 The new, yet unnamed company will reportedly hold the former Teligent’s wireless licenses and plans to abandon the retail business in favor of becoming a wholesale carrier of fixed wireless access for other carriers. 14 Winstar filed for Chapter 11 bankruptcy protection in April 2001. 15 In January 2002, IDT Corp. (“ IDT”) received approval from the bankruptcy court to purchase Winstar’s assets for $42.5 million. 16 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 IDT’s business. 17 IDT also plans to increase Winstar’s buildings on- net by 600 in 22 of 10 For a more comprehensive discussion of competition in the fixed wireless industry and broadband telecommunications services generally, see Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps To Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, Third Report, 17 FCC Rcd 2844 (2002). 11 See Sixth Report, at 13447. In November 2001, Teligent announced it would discontinue service to all but 4,000 of its remaining customers, and that it would only provide private line service (not Internet access or local phone service) to those 4,000. Tony Weber, As Latest Plan Falls Through, Teligent Short of Options, TELEPHONY, Nov. 26, 2001. At the end of 2000, Teligent served 35,500 customers, and, as of April 2001, it operated in 43 U. S. markets. See Sixth Report, at 13447- 13448. 12 Bankruptcy Court Approves Assets Transfer from Teligent to NextWave, GLOBAL WIRELESS, Mar. 1, 2002, at 2. In January 2002, Teligent hired Venture Assets Group to manage the sale of 21 of its central offices in 17 states. Venture Asset Group to Manage Sale of Teligent Central Offices, PR NEWSWIRE, Jan. 24, 2002. Teligent also sold its data and videoconference subsidiary, Executive Conference Inc., in January 2002 to Bahrain’s Investcorp for $60 million. Greg Johnson, Teligent Hires Venture Asset, DAILY DEAL, Jan. 25, 2002. 13 Teligent Announces Lender Support for Fixed Wireless Successor Company, News Release, Teligent, Jan. 23, 2002; Yuki Noguchi, Teligent Lenders Agree to Plan To Revive Firm, WASHINGTON POST, Jan. 24, 2002, at E- 1. Former Teligent COO, Jim Continenza, plans to become the CEO of the new company. The deal still requires the approval of the bankruptcy court and the Commission. Id. 14 Id.; Lenders Give Teligent New Life, RCR WIRELESS NEWS, Jan. 28, 2002, at 16. 15 See Sixth Report, at 13446. Prior to its bankruptcy, Winstar served approximately 30,000 customers, 1,040,000 access lines, and 4,400 buildings on- net in 60 markets. See Sixth Report, at 13448. 16 Hilary Smith, IDT Gets Busy with Winstar Makeover, RCR WIRELESS NEWS, Mar. 18, 2002, at 53; IDT Buys Winstar, WASHINGTON TECHNOLOGY, Jan. 7, 2002. 17 Hilary Smith, IDT Gets Busy with Winstar Makeover, RCR WIRELESS NEWS, Mar. 18, 2002, at 53; IDT Corporation Announces Strategic Plan for Its Winstar Communications Subsidiary, BUSINESS WIRE, Mar. 8, 2002. 90 Federal Communications Commission FCC 02- 179 A- 4 the cities where Winstar had maintained its operations after it entered bankruptcy proceedings. 18 ART filed for bankruptcy in March 2001 and announced it would phase out service to its existing customers over the following month. 19 Most of ART’s assets were purchased by First Avenue Networks Corp., which now sells fixed wireless access on a wholesale basis to other carriers. 20 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. 21 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. 22 The company stated that it would continue to fund its operations while its bankruptcy case is pending. 23 B. 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, 24 to residential customers in five cities. 25 As of January 2001, the company had sold a total of 20,000 lines to 12,000 households. 26 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. 27 And Sprint, which had launched 18 IDT Corporation Announces Strategic Plan for Its Winstar Communications Subsidiary, BUSINESS WIRE, Mar. 8, 2002. 19 See Sixth Report, at 13446. 20 Lenders Give Teligent New Life, RCR WIRELESS NEWS, Jan. 28, 2002, at 16. 21 See Sixth Report, at 13449. 22 XO Communications Files for Chapter 11 Bankruptcy Protection, DOW JONES BUSINESS NEWS, June 17, 2002. 23 Id. 24 For $34.95 per month, AT& T’s Digital Broadband service gave users up to four voice lines, unlimited local calling, long distance calling at five cents per minute for in- state calls and seven cents per minute for out-of- state calls, three advanced calling features, and unlimited, “always- on” Internet access for up to five computers with downstream speeds of up to 512 kbps and upstream speeds of 128 kbps. See Sixth Report, at 13440- 13441. 25 Dallas- Ft. Worth and Houston, TX; Los Angeles and San Diego, CA; and Anchorage, AK. See Sixth Report, at 13440. AT& T was using its broadband PCS spectrum for Digital Broadband in Dallas, Anchorage, and San Diego, and was using its WCS spectrum licenses to offer the service in Los Angeles and Houston. Id. 26 See Sixth Report, at 13440. 27 AT& T Wireless Exits Fixed Wireless, Takes $1. 3 Billion Charge, COMMUNICATIONS DAILY, Oct. 24, 2001. The company did state it would continue to hold its WCS licenses, and that it might use the tower capacity that it had deployed for the fixed wireless service to expand its mobile capacity instead. Id. (citing CFO Joseph McCabe). AT& T Wireless sold its fixed wireless assets, not including its licenses, to equipment 91 Federal Communications Commission FCC 02- 179 A- 5 its Broadband Direct MDS- based high- speed Internet access service in 16 cities across the United States, 28 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. 29 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. 30 These new technologies will reportedly lower carriers’ costs and increase their service options significantly. 31 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. 32 OFDM- based equipment is currently being developed for use in multiple wireless products, including wireless LANs, mobile manufacturer Netro Corp. in January 2002. Deborah Solomon, AT& T Wireless to Sell Fixed- Wireless Assets to Netro for $45 Million in Cash and Stock, WALL STREET JOURNAL, Jan. 15, 2002. 28 Phoenix and Tucson, AZ; San Francisco, Oakland, San Jose, and Fresno, CA; Denver, Boulder, and Colorado Springs, CO; Melbourne, FL; Wichita, KS; Detroit, MI; Oklahoma City, OK; Houston, TX; Salt Lake City, UT; and Chicago, IL. See Sprint Introduces New Broadband Fixed Wireless Service to Chicago’s Residential and Small Business Customers, News Release, Sprint, Mar. 26, 2001. 29 Sue Marek, Sprint Halts MMDS Rollout; Fixed Wireless Setbacks Are Sending U. S. Vendors Scurrying For Better Solutions And More Promising Markets. Analysts Say Consolidation Is Near, WIRELESS WEEK, Oct. 29, 2001, at 40. 30 Denise Pappalardo, Worldcom Adds Wireless MMDS Area, NETWORK WORLD, Aug. 20, 2001, at 23 (citing Lindsay Schroth, an analyst at the Yankee Group: “MMDS is not readily available because service providers are waiting for next- generation equipment to come to market.”); The Yankee Group Projects That Worldwide Market for High Frequency Fixed Wireless Solutions Will Grow to $1.9 Billion in 2006, BUSINESS WIRE, Nov. 8, 2001 (“[ D] espite the disillusionment caused by slow growth in 2001, there is a market for high-frequency (HF) point- to- multipoint products. However, the market for HF PMP solutions is still emerging, and there are issues yet to be resolved by both vendors and carriers that use this technology”). 31 Michael Grebb, Can Broadband Save MMDS?, CABLEVISION, May 28, 2001, at 32 (citing Andy Fuertes, senior vice president of communications technology at Allied Business Intelligence: “Combining cellularization with non- line- of- sight technologies could lower the cost of providing MMDS service significantly. … [With non- line- of- sight technology,] “there’s the potential for more self- install…. That takes the massive cost of the truck roll out of there.” Fuertes predicts that self- installs will be commonplace in MMDS operations within two years.); Wireless Expected To Challenge Cable, DSL For SOHO Customers, BUSINESS COMMUNICATIONS REVIEW, June 1, 2001, at 8 (citing Allied Business Intelligence: “Technology breakthroughs that allow for non- line- of sight applications are being introduced, boosting the prospects for multichannel multipoint distribution service (MMDS) and broadband wireless access (BWA) systems.”). However, analysts believe these non- line- of- sight technologies will not be ready for full- scale deployment until at least 2003. See Sinead Carew, Could Fixed Wireless Still Have Its Day?, COMPUTERWIRE, Oct. 30, 2001 (citing the Yankee Group); Denise Pappalardo, Fixed Wireless Takes Some Lumps, NETWORK WORLD, Nov. 5, 2001, at 33 (citing Maribel Dolinov, senior analyst at Forrester Research). 32 Michael Bartlett, Fixed Wireless System To Join Broadband Access Race – Study, NEWSBYTES, Aug. 29, 2001, at 9 (citing Lindsay Schroth, an analyst with the Yankee Group: “[ L] ine- of- sight restrictions are hampering deployment of MMDS fixed wireless systems. … [OFDM has] spectral efficiency [and] several vendors are working on next- generation technologies that address the limitations of MMDS fixed wireless systems.” See Sixth Report, at 13435 and Fifth Report, at 17793. 92 Federal Communications Commission FCC 02- 179 A- 6 wireless systems, and broadband fixed wireless access. 33 C. 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. 34 At the writing of the Sixth Report, WorldCom was offering commercial service in three markets and was running trials in two additional markets. 35 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. 36 Several smaller fixed wireless carriers, including hundreds of operators using unlicensed spectrum, 37 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. 38 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, 33 See Sixth Report, at 13435. 34 WorldCom holds MDS licenses covering approximately 45 million households in 78 markets. The company also holds WCS licenses, which it is reportedly using in conjunction with MDS spectrum to offer service in Memphis, TN; Jackson, MS; and Baton Rouge, LA. See Sixth Report, at 13442. 35 As of January 2001, the company had launched service in Memphis, TN; Baton Rouge, LA; and Jackson, MS, and was running service trials in Boston, MA and Dallas- Fort Worth, TX. See Sixth Report, at 13442. 36 Lafayette and Baton Rouge, LA; Bakersfield, CA; Montgomery, AL; Jackson, MS; Hartford, CT; Chattanooga and Memphis, TN; Tallahassee and Pensacola, FL; Minneapolis, MN; Springfield, MA; and Kansas City, KC. WorldCom Launches New High- Speed, Fixed Wireless Internet Service in Lafayette, News Release, WorldCom, Feb. 21, 2002. 37 Unlicensed spectrum consists of 26 megahertz in the 900 MHz band, 83.5 megahertz in the 2.4 GHz band, and 300 megahertz in the 5 GHz band. See, generally, 47 CFR Part 15. Unlicensed spectrum is used for many purposes, including short- range data transmission technologies such as Bluetooth and 802.11, cordless phones, microwave ovens, and amateur radio. The spectrum is also used for wireless LAN/ WAN connections within airports, hotels, and office buildings as well as across larger areas such as corporate and college campuses. See Section II. B. 3. f, Short- Range Data Transmission, supra. Companies using unlicensed spectrum to offer fixed wireless point- to- point broadband services primarily use the 2.4 GHz band, while some reportedly employ both the 2.4 GHz and 5 GHz bands for such services. Unlicensed fixed applications generally employ spread spectrum technology for long range transmissions in order to minimize the risk of interference with other operators. See Sixth Report, at 13439. 38 Many of these companies offer traditional wireline dial- up Internet access as well. See Sixth Report, at 13444. See also, Nancy Gohring, Wireless ISPs: Emerging from the Shadows, BROADBAND WIRELESS BUSINESS, March/ April 2002, at 1, 8. Many of the small wireless ISPs believe that by offering service and becoming profitable in only one or a few markets before expanding to other markets, they will remain financially viable. Id. 93 Federal Communications Commission FCC 02- 179 A- 7 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. 39 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. 40 Other analysts believe that the technology will be deployed mainly to residential, not business, customers. 41 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, 42 while another estimates there are were 300,000 fixed wireless subscribers, including businesses, in the United States as of October 2001. 43 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. 44 These counties contain 124 million people, or 43.5 percent of the U. S. population. 45 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. 39 See Sixth Report, at 13444. 40 Sinead Carew, Could Fixed Wireless Still Have Its Day?, COMPUTERWIRE, Oct. 30, 2001 (citing Lindsay Schroth, an analyst at the Yankee Group, who said, “Fixed wireless is not going to be the market that people thought, but there will still be a place for it…. Rather than pitching their wares against DSL or cable, operators should go after niche markets like rural areas outside of the reach of DSL.”). 41 Fixed Wireless No Wipeout, Despite Recent Troubles, NETWORK WORLD, June 4, 2001, at 38 (citing Peter Jarich of the Strategis Group: “We see the technology as being primarily residential…. We’re not seeing business as the right way to go. … Business users have a range of connectivity options to choose from, and they’re more concerned about quality of service and reliability than are residential users.”; and citing Chris Whitely of Insight Research: “When businesses decide to go with a fixed wireless link, it’s often as a back- up connection, or for less critical traffic only.”). 42 Alex Salkever, Broadband's Next Wave: Wireless?, BUSINESS WEEK ONLINE, May 17, 2001 (citing Peter Jarich of the Strategis Group). 43 Eve Tahmincioglu, For High- Speed Access to the Web, a Dish- to- Dish Route, NEW YORK TIMES, Oct. 11, 2001, at G9 (citing Cahners In- Stat Group). 44 See Appendix E, Map 10, p. E- 11. 45 Many of these lowerband providers serve only business customers. Residential fixed wireless Internet access is available in at least 298 different counties. These counties contain approximately 64 million people or 23 percent of the U. S. population. 94 Federal Communications Commission FCC 02- 179 A- 8 D. 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. 46 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. 47 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. 48 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. 49 MDS licensees currently use this band primarily for the upstream links in two- way, fixed wireless broadband services. 50 46 See Sixth Report, at 13400. 47 Amendment of Part 2 of the Commission’s 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, First Report and Order and Memorandum Opinion and Order, 16 FCC Rcd 17222 (2001). 48 Jim Barthold, Fixed Wireless Eyes Mobile Future, TELEPHONY, October 1, 2001 (John Schwartz, president of the Instructional Telecommunications Foundation, stated, “We do have an evolution to make now.”; Leo Cyr, president and chief operating officer of Clearwire Technologies, which serves ITFS licensees, said, “It gives you some new service possibilities, especially with portability.”; Charles Riggle, vice president of marketing and business development at NextNet Wireless: “This ruling really plays into our hands … We’re uniquely positioned to take advantage.”; Peter Jarich, director of Global Broadband Research for the Strategis Group: “It doesn’t look like [Sprint PCS and WorldCom] are committed to fixed. … In fact, everyone wonders if they’re [both] going to stick with their MMDS fixed wireless plans or move to deploy 3G.”). 49 Amendment of Part 2 of the Commission’s 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). In the 50 largest U. S. markets, the 2150- 2162 MHz band is allocated to MDS, while in the rest of the country only 10 megahertz at 2150- 2160 MHz is used for MDS. Id. 50 Under an informal agreement among MDS licensees, the principal use of this spectrum is for upstream communications to hub receiving facilities. Id. 95 Federal Communications Commission FCC 02- 179 B- 1 APPENDIX B: 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 96 Federal Communications Commission FCC 02- 179 B- 2 Table 1A: FCC Auctions Summary - Service Design Auction Number and Name Number of Licenses (1) Geographic License Scheme (2) Spectrum per license Total Spectrum per Market Service Description 1 Nationwide Narrowband PCS 11 (3) Nationwide 11 blocks: 5 = 50/ 50 kHz, 3 = 50/ 12.5 kHz, 2 = 50 kHz 0.7875 MHz Advanced paging/ data 2 Interactive Video and Data Service 594 MSA 2 blocks of 500 kHz 1 MHz Interactive data 3 Regional Narrowband PCS 30 Regional 6 blocks: 2 = 50/ 50 kHz, 4 = 50/ 12.5 kHz 0.45 MHz Advanced paging/ data 4 A & B block Broadband PCS 102 (4) MTA 2 blocks of 30 MHz 60 MHz Mobile voice and data 5/ 10 /22 C block Broadband PCS (5) 493 BTA 1 block of 30 MHz or 2 blocks of 15 MHz 30 MHz Mobile voice and data 6 Multichannel Distribution Service 493 BTA Max of 13 channels of 6 MHz 78 MHz (6) Wireless cable 7 900 MHz Specialized Mobile Radio 1020 MTA 20 blocks of .25 MHz 5 MHz Mobile voice and data 8 Digital Broadcast Service (7) 1 Full US Coverage 500 MHz 437.5 MHz Multichannel video 9 Digital Broadcast Service (7) 1 Partial US Coverage Uses same spectrum as full coverage license 375 MHz Multichannel video 11/ 22 D, E, & F block Broadband PCS (8) 1479 BTA 3 blocks of 10 MHz 30 MHz Mobile voice and data 12 Cellular Unserved 14 MSA/ RSA 2 blocks of 25 MHz 50 MHz Mobile voice and data 13 Interactive Video and Data Service 981 MSA/ RSA 2 blocks of 500 kHz 1 MHz Interactive data 14 Wireless Communications Service 128 MEA/ REAG 4 blocks: 2 = 10 MHz, 2 = 5 MHz 30 MHz (9) 15 Digital Audio Radio Service 2 Full US Coverage 2 blocks of 12.5 MHz 25 MHz Multichannel audio 16 Upper 800 MHz Specialized Mobile Radio 525 EA 3 blocks: 1 MHz, 3 MHz , and 6 MHz 10 MHz Mobile voice and data 17/ 23 Local Multipoint Distribution Service 986 (10) BTA 2 blocks: 1150 MHz and 150 MHz 1300 MHz Fixed voice, data and video 18/ 24/ 43 220 MHz 908 National, EAG, EA 13 blocks: 3 = 100 kHz, 5 = 100 kHz, 5 = 150 kHz 1.55 MHz Voice, data, paging, fixed 20/ 39 VHF Public Coast 42 Pub. Coast Station Areas 1 block between 350 and 500 kHz 350 to 500 kHz Fixed and mobile 21/ 39/ 43 Location and Monitoring Service 528 EA 3 blocks: 2 = 6 MHz, 1 = 2.25 MHz 14.25 MHz Mobile telemetry 25/ 27/ 28 "Closed" Broadcast 118 n/ a (11) (11) Broadcast TV and radio 26/ 40 929 and 931 MHz Paging Service 2,499 MEA 49 blocks of 20 kHz: 12 in 929 Band, 37 in 931 band. 790 kHz Paging and messaging 30 39 GHz 2,450 EA 14 Blocks of 100 MHz 1400 MHz Fixed (12) 33/ 38 700MHz Guard Band 104 MEA 2 Blocks: 1= 4 MHz, 1 = 2 MHz 6 MHz (13) 34/ 43 SMR 800 MHz General Category 1,050 EA 6 Blocks of 1.25 MHz (14) 7.5 MHz Mobile voice and data 35 PCS C & F Block (5) 422 (15) BTA Up to 4 blocks of 10 MHz; Up to 2 blocks of 15 MHz 10 to 40 MHz Mobile voice and data 36 SMR 800 MHz Lower 80 Channels 2,800 EA 16 Blocks of .25 MHz 4 MHz Mobile voice and data 40 Paging 14,000 (16) EA 36 blocks of 20 kHz; 44 blocks of 40 kHz 2.48 MHz Paging and messaging 41 Narrowband PCS 365 National, MTA 3 x 50/ 50 kHz; 3 x 50/ 150 kHz; 4 x 50/ 100 kHz; 3 x 50 kHz; 1 x 12.5/ 100 kHz 1.7625 MHz Advanced paging/ data 42 Multiple Address Systems Spectrum 5,104 EA 28 blocks of 25 kHz; 1 block of 100 kHz 800 kHz Fixed and Mobile 97 Federal Communications Commission FCC 02- 179 B- 3 43 Multi- Radio Service (17) 69 -- -- -- -- 80 Blanco Texas Broadcast 1 n/ a 1 construction permit 6 MHz Broadcast TV 82 New Analog Television Stations 4 n/ a 4 construction permits 6 MHz Broadcast 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. 98 Federal Communications Commission FCC 02- 179 B- 4 Table 1B: FCC Auctions Summary Auction Results Auction Number( s) and Name Total Winning Bids (1) Auction Began Auction Ended # Rounds Number of Winning Bidders 1 Nationwide Narrowband PCS $650,306,674 7/ 25/ 94 7/ 29/ 94 47 6 2 Interactive Video and Data Service $213,892,375 7/ 28/ 94 7/ 29/ 94 Oral Outcry 178 3 Regional Narrowband PCS $392,706,797 10/ 26/ 9 4 11/ 8/ 94 105 9 4 A & B block Broadband PCS $7,721,184,171 12/ 5/ 94 3/ 13/ 95 112 18 5/ 10/ 22 C block Broadband PCS (2) $10,071,708,841.50 $904,607,466.75 $409,936,425.00 12/ 18/ 9 5 7/ 3/ 96 3/ 23/ 99 5/ 6/ 96 7/ 16/ 96 4/ 15/ 99 184 25 78 89 7 57 6 Multichannel Distribution Service $216,239,603 11/ 13/ 9 5 3/ 28/ 96 181 67 7 900 MHz Specialized Mobile Radio $204,267,144 12/ 5/ 95 4/ 15/ 96 168 80 8 Digital Broadcast Service $682,500,000 1/ 24/ 96 1/ 25/ 96 19 1 9 Digital Broadcast Service $52,295,000 1/ 25/ 96 1/ 26/ 96 25 1 11/ 22 D, E, & F block Broadband PCS (3) $2,517,439,565 $2,904,520 8/ 26/ 96 3/ 23/ 99 1/ 14/ 97 4/ 15/ 99 276 78 125 6 12 Cellular Unserved $1,842,533 1/ 13/ 97 1/ 21/ 97 36 10 14 Wireless Communications Service $13,638,940 4/ 15/ 97 4/ 25/ 97 29 17 15 Digital Audio Radio Service $173,234,888 4/ 1/ 97 4/ 2/ 97 25 2 16 Upper 800 MHz Specialized Mobile Radio $96,232,060 10/ 28/ 9 7 12/ 8/ 98 235 14 17/ 23 Local Multipoint Distribution Service $578,663,029 $45,064,450 2/ 18/ 98 4/ 27/ 99 3/ 25/ 98 5/ 12/ 99 127 43 104 40 18/ 24 220 MHz $21,650,301 $1,924,950 9/ 15/ 98 6/ 8/ 99 10/ 22/ 9 8 173 71 44 16 20/ 39 VHF Public Coast $7,459,200 $225,200 12/ 3/ 98 6/ 6/ 01 12/ 14/ 9 8 44 34 4 3 21/ 39 Location and Monitoring Service $3,438,294 $919,555 2/ 23/ 99 6/ 6/ 01 3/ 5/ 99 6/ 13/ 01 54 34 4 4 25/ 27/ 28 “Closed” Broadcast Auction $57,820,350 $172,250 $1, 210, 000 9/ 28/ 99 10/ 6/ 99 3/ 21/ 00 10/ 8/ 99 10/ 8/ 99 3/ 24/ 00 35 15 26 91 1 2 26 929 and 931 MHz Paging Service $4,122,500 2/ 24/ 00 3/ 2/ 00 28 78 30 39 GHz $410,649,085 4/ 12/ 00 5/ 8/ 00 73 29 33/ 38 700MHz Guard Band $519,892,575 $20,961,500 9/ 6/ 00 2/ 13/ 01 9/ 21/ 00 2/ 21/ 01 66 38 9 3 34 SMR 800 MHz General Category $319,451,810 8/ 16/ 00 9/ 1/ 00 76 14 35 PCS C & F Block $16,857,046,150 12/ 12/ 0 0 1/ 26/ 01 101 35 36 SMR 800 MHz Lower 80 Channels $28,978,385 11/ 1/ 00 12/ 5/ 00 151 22 99 Federal Communications Commission FCC 02- 179 B- 5 Auction Number( s) and Name Total Winning Bids (1) Auction Began Auction Ended # Rounds Number of Winning Bidders 40 Paging $12,897,127 10/ 30/ 0 1 12/ 5/ 01 140 182 41 Narrowband PCS $8,285,036 10/ 3/ 01 10/ 16/ 0 1 48 5 42 Multiple Address Systems Spectrum $1,202,725 11/ 14/ 0 1 11/ 27/ 0 1 36 13 43 Multi- Radio Service $1,548,225 1/ 10/ 02 1/ 17/ 02 31 3 80 Blanco Texas Broadcast $18,798,000 7/ 12/ 00 7/ 14/ 00 16 1 82 New Analog Television Stations $5,025,250 2/ 502 2/ 13/ 02 13 3 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 Name Total High Bids Net High Bids (1) POPs PCS Partners, L. P. 32 $528,840 36,413,087 Telesaurus Holdings GB, LLC 80 $347,815 44,713,791 Maritel, Inc. 7 $100,400 1,846,458 Helen Wong- Armijo 84 $58,370 26,701,121 SMR Systems, Inc. 3 $48,750 473,571 Scott MacIntyre 3 $35,750 503,691 FCR, Inc. 8 $24,830 5,712,959 Source: Federal Communications Commission Notes: (1) As of the close of the auction. 100 Federal Communications Commission FCC 02- 179 B- 6 Table 3: Paging Auction #40 Results Bidder Name Total High Bids Net High Bids (1) POPs Marcus Spectrum Holdings, LLC 44 $2,517,515 624,112,560 Jeff S Cofsky 84 $1,216,618 230,315,004 Paging Systems, Inc. 117 $1,042,540 692,956,816 Scott MacIntyre 149 $497,939 358,701,230 Jamestown Manufacturing Corporation 698 $434,100 1,549,982,780 Schuylkill Mobile Fone, Inc. 221 $432,840 876,490,423 anderson communications inc 35 $416,060 170,524,100 MOBILE RELAY ASSOCIATES 14 $377,775 168,910,244 Atlantic Communications, LLC 5 $336,750 119,595,040 T& W Electronics Inc. 76 $331,188 213,553,445 COMMUNICATIONS EQUIPMENT INC 231 $272,246 223,655,246 Fisher Wireless Services, Inc. 77 $219,980 100,153,042 James T. Hopper 13 $176,150 80,350,179 X. W. LLC 6 $163,800 56,768,874 VICTOR COMMUNICATIONS INC. 120 $152,438 304,220,305 Thomas O'Brien Sr. L. L. C. 1 $148,200 23,919,008 Cellplus Networks, LLC 139 $145,145 122,757,347 Colorado CallComm, Inc. 12 $140,140 36,373,680 TeleBEEPER of New Mexico, Inc. 261 $140,056 352,109,285 Redi- Call Salisbury Communications Consortium 111 $136,487 245,766,788 Morris Communications, Inc. 116 $134,460 154,501,398 FCCA, LLC 98 $124,980 126,828,992 Futronics Paging, Inc. 40 $123,006 67,081,857 Central Communications Service Company 25 $117,481 21,464,395 Mountain Communications and Electronics, Inc. 15 $116,100 45,467,100 Communications Sales and Service, Inc. 82 $109,954 122,245,257 Contact Communications, Inc. 30 $109,330 82,342,398 Direct Connect USA, Inc. 14 $109,005 96,822,040 SILKE COMMUNICATIONS INC. 85 $108,615 125,057,456 Domer Communication, Inc. 17 $87,893 77,599,322 AAA Mid- Atlantic 2 $85,000 47,838,016 TELEPHONE & TWO- WAY INC. 56 $84,500 159,273,287 Indiana Paging Network, Inc. 63 $81,405 145,745,954 Avery Wisdom 86 $76,544 163,667,757 RCC, Inc. d/ b/ a Radio Comm Company 35 $76,401 59,324,191 Golden Arrow Paging, Inc. 22 $59,000 48,738,861 A. V. LAUTTAMUS COMMUNICATIONS, INC. 37 $54,119 52,422,195 Ameritech Mobile Services, Inc. 58 $52,840 164,858,305 Arthur Nathan Sherman 43 $52,410 61,790,669 Omnicall Corp. 21 $50,740 44,112,873 Cook Telecom, Inc. 84 $50,190 187,170,529 WILLIAM WAYNE DBA MR. RADIO 9 $48,035 8,493,318 Ray's Mobile Communications, Inc. 5 $46,150 6,393,610 AAT Paging Corporation II 4 $45,500 33,129,176 Western Paging, LLC 44 $43,725 140,724,540 Lemar D. Van Heuveln 54 $42,796 20,575,220 Jim Doering DBA J Doering Communicatins 22 $41,990 138,165,858 Minnesota Mobile Telehone Company 34 $41,600 64,839,085 Fresno Moible Radio, Inc. 31 $40,725 70,558,890 Saia Communications Inc. 20 $39,754 30,235,255 Azle Communications Solutions, LLC 6 $39,455 37,084,698 Alpha Wireless Communications Co. 56 $39,080 58,705,114 FastAds, Inc. 49 $37,089 49,276,462 JSM Net Link LLC 38 $35,880 52,754,331 Baycom Inc. 36 $32,865 29,536,226 Tri County Communications, Ltd. 51 $32,445 30,769,213 NextBus Informations Systems. Inc 30 $30,355 264,085,097 JPJ Electronic Communications Inc Rene Matthew Cor 36 $29,820 53,783,143 Mobile Radio Communications, Inc. 22 $29,460 24,792,425 Automobile Club of Southern California 19 $28,280 18,575,633 Columbia Communications, Inc. 7 $28,080 37,938,997 ComProducts, Inc. d/ b/ a B& C Communications 8 $25,285 16,804,904 Mobilfone Service Inc 5 $23,720 11,210,869 101 Federal Communications Commission FCC 02- 179 B- 7 Joshua F. A. McCormick 8 $23,140 42,807,970 Superior Technologies, Inc. 10 $23,080 3,824,992 Edward V Krom 8 $22,540 59,637,064 CENTRAL VERMONT COMMUNICATIONS, INC. 18 $22,126 48,086,643 ROBERT J FETTERMAN 17 $21,825 54,470,474 Communication Specialists Company of Wilmington, L 39 $21,541 38,843,438 METROCALL USA INC 31 $20,260 54,331,591 BADGER SPECTRUM LTD 38 $19,955 101,417,799 California State Automobile Association 4 $19,600 26,034,889 Range Corporation 39 $19,409 21,213,191 Teton Communincations 54 $19,279 11,944,602 Midwest Management, Inc. 59 $19,175 15,249,549 Kathleen Janssen 12 $19,140 15,465,793 UHF- DE, LLC 25 $18,590 12,180,300 FM Communications, Inc. 6 $17,199 9,034,632 AQUIS WIRELESS COMMUNICATIONS, INC. 6 $17,000 41,416,102 Regional Transit Service, Inc. 3 $17,000 4,373,538 WARNER COMMUNICATIONS CORPORATION 28 $16,848 95,278,904 Arthur R. Patrick 40 $16,770 38,129,074 iDigi Networks, LLC 12 $16,590 41,949,528 Alpha Communications Sites, Inc. 18 $15,900 29,447,964 Joplin Beepers Inc 14 $15,615 14,647,350 Lancaster Radio Paging, Inc. 2 $15,140 7,942,319 Page Plus Incorporated 30 $15,000 46,941,240 Lubbock Radio Paging Service, Inc. 21 $14,520 7,560,150 Clifford E. Bade 14 $14,209 63,905,324 Teletouch Licenses, Inc. 15 $14,000 12,530,895 Two- Way Communications, Inc. 5 $13,845 5,463,330 T& K Communications Systems, Inc. 16 $13,819 25,636,757 MULTIPAGE, INC. 25 $13,300 27,291,114 Electronic Engineering Co. 18 $13,140 35,411,031 BAKER'S ELECTRONICS & COMMUNICATIONS, INC. 37 $12,675 56,165,736 Robert R Rule 25 $12,610 22,209,278 TEXAPAGE NE INC. 4 $12,025 24,723,132 Myrtle Beach Communications, Inc. 22 $11,570 12,956,566 ComServ Services, LLC 20 $11,115 33,756,340 State of South Dakota, Bureau of Information & Tel 16 $11,020 4,009,212 Davis Electronics Company Inc 22 $11,000 31,927,080 Mid- Rivers Telephone Cooperative, Inc. 22 $11,000 6,273,061 L & L Services, Inc. d/ b/ a Metro Communications 21 $11,000 16,918,724 Centre Communications 28 $10,322 33,616,491 Richard L Oberdorfer 5 $9,620 5,013,956 Select Path Holding, Inc. 10 $9,525 14,759,354 CAPITOL RADIOTELEPHONE COMPANY, INC. 12 $9,334 16,214,547 Mobile Communication Service, Inc. 20 $9,120 11,556,675 Buttner Holdings, LLC 21 $8,775 35,812,643 Ozark Paging LLC 5 $8,580 6,895,436 Michael A Phillips 10 $8,554 12,596,360 UNITED TELEPHONE MUTUAL AID CORPORATION 16 $8,000 2,855,048 West Wisconsin Telcom Cooperative Inc 6 $7,170 5,701,861 TeleMaxx Communications LLC 3 $6,630 10,990,738 Industrial Communications 12 $6,565 19,631,976 WCS Communications Inc dba Western Communications 11 $6,435 9,844,513 Mobile Phone of Texas, Inc. 5 $6,225 14,339,151 Daksoft, Inc dba Mayer Radio 12 $6,000 3,491,262 Communications Specialists, Inc. 18 $5,850 15,219,742 TRIANGLE COMMUNICATIONS INC. 10 $5,775 16,153,991 wharton telecom holdings, inc 5 $5,100 26,228,739 Mobile Telephone & Paging Inc. 8 $5,060 8,865,832 Bob Jacobson d/ b/ a Wavecomm 6 $5,005 17,163,540 Virginia Channels, JV 10 $5,000 12,476,270 RAM Technologies Inc 4 $5,000 4,879,317 M. E. Parkinson 14 $4,836 4,999,288 KARL A RINKER 9 $4,667 13,367,176 Moraine Radio 6 $4,498 12,717,342 John L Crump 11 $4,290 31,793,449 Business Service Center, Inc. 4 $4,275 2,191,808 Acadian Ambulance Service, Inc. 8 $4,000 5,920,678 FONES WEST DIGITAL SYSTEMS, INC. 5 $3,965 9,088,441 102 Federal Communications Commission FCC 02- 179 B- 8 Afton Communications Corporation 10 $3,750 10,383,010 NEP, LLC 7 $3,700 11,616,403 Pro- Com Inc. 6 $3,653 14,913,325 Com- Nav, Inc. d/ b/ a Radiotelephone of Maine 7 $3,510 3,731,945 Western Communications, Inc. 6 $3,510 1,525,570 Chicago Communication Service, Inc. 2 $3,400 24,991,020 Space Data Spectrum Holdings, LLC 3 $3,300 10,376,805 Spectrum Communications, Inc. 10 $3,250 5,457,470 Gabriel Wireless LLC 2 $3,250 10,051,212 BEEPER NETWORK INC 8 $3,185 13,899,057 Metamora Telephone Company 7 $3,150 4,055,807 CITY PAGE & CELLULAR SERVICES, INC. DBA CITY BEEPE 2 $3,120 9,564,000 Hub Communications, Inc. 9 $2,990 9,661,811 SEMA- PHOON, INC. d/ b/ a R. A. Communications 7 $2,964 4,154,428 Bobier Electronics, Inc. 9 $2,925 10,764,387 Communications Systems, Inc. 2 $2,860 2,956,766 Joseph B McNeal 6 $2,405 4,485,684 PROGRESSIVE COMMUNICATIONS SERVICES, INC. 7 $2,275 5,823,297 Robert F. Ryder d/ b/ a Radio Paging Service 7 $2,275 1,898,610 Starpage Inc 6 $2,275 7,474,231 McLeodUSA Telecommunications Services, Inc. 4 $2,100 7,605,185 Paging Source of Florida, Inc. 2 $2,100 7,374,875 Page- All, LLC 1 $2,000 3,945,443 Answer Fort Smith, Inc. 3 $1,950 5,264,463 Great Eastern Communications Co. Inc. 1 $1,885 7,454,633 Christine M. Busby 2 $1,690 18,635,894 Pineland Telephone Cooperative, Inc. 3 $1,500 1,773,768 VENTURES IN PAGING, LLC 3 $1,500 2,955,208 Professional Answering Service, Inc. 3 $1,300 5,861,648 General Tel Courier 3 $1,170 3,324,687 MARK A. APSLEY 2 $1,105 2,852,700 Allcom Communications, Inc. 2 $1,000 572,068 AreaWide Communications Inc. 2 $1,000 2,835,801 Leonard R. Putnam d/ b/ a Cascade Telephone Communic 2 $1,000 2,617,632 South Shore Radio, Inc. 3 $975 4,313,682 P & R Comunnications Service, Inc. 1 $750 4,325,459 Atlas Mobilfone Inc 2 $715 946,147 Courtesy Communications, Inc. 2 $650 1,383,612 D & K Business Pagers 1 $650 1,934,632 DATAPAGE, INC. 1 $650 8,672,944 Westside Paging Inc 1 $650 3,445,064 Holsum Bakers, Inc. d/ b/ a Caprock Communications 1 $500 382,517 Cactus Communications Inc 1 $390 1,741,991 Pattersonville Telephone Company 1 $375 1,147,154 St. Louis Electronics Communications Corporation 1 $375 3,402,818 Communications Management Co. of Indiana 1 $325 825,644 Mobile Radio Communications Service, Inc. 1 $325 150,155 Mobilephone of Humboldt, Inc. 1 $325 689,659 SCP COMMUNICATIONS, LLC 1 $325 864,201 Western Communication Services, Inc. 1 $325 144,847 Source: Federal Communications Commission Notes: (1) As of the close of the auction. 103 Federal Communications Commission FCC 02- 179 B- 9 Table 4: Narrowband PCS Auction #41 Results Bidder Name Total High Bids Net High Bids (1) POPs Space Data Spectrum Holdings, LLC 204 $6,343,511 2,795,954,831.00 Allegheny Communications, Inc. 101 $1,767,825 755,996,003.00 Scott C. MacIntyre 6 $75,300 30,417,369.00 AQUIS WIRELESS COMMUNICATIONS, INC. 5 $64,400 56,415,142.00 Paging Systems, Inc. 1 $34,000 19,145,232.00 Source: Federal Communications Commission Notes: (1) As of the close of the auction. Table 5: Multiple Address Systems Spectrum Auction #42 Results Bidder Name Total High Bids Net High Bids (1) POPs MilkyWay Communications, LLC 476 $757,500 1,510,789,444 Microwave Data Systems Inc. 168 $181,000 182,265,599 Paging Systems, Inc. 38 $113,100 312,924,284 TeleBEEPER of New Mexico, Inc. 58 $38,415 95,673,811 Wisconsin Electric Power Company 33 $33,000 48,559,020 TELEPHONE & TWO- WAY INC. 40 $26,260 138,076,054 Southern Communications Services Inc d/ b/ a Souther 14 $14,000 50,185,120 Phillips Communications, Inc. 10 $10,100 4,230,958 Kirkland Associates, Inc. 15 $9,750 41,956,089 IBG, Inc. 8 $6,500 73,559,336 Fiberlessnet, Inc. 10 $6,500 27,601,346 Chicago Communication Service, Inc. 4 $4,000 37,271,788 Petra Ramasastry 4 $2,600 25,526,022 Source: Federal Communications Commission Notes: (1) As of the close of the auction. Table 6: Multi- Radio Service Auction #43 Results Bidder Name Total High Bids Net High Bids (1) POPs NEXTEL SPECTRUM ACQUISITION CORP. 18 $1,282,000 15,984,384 AerWav, Inc. 4 $182,700 99,250,444 TeleBEEPER of NEW MEXICO, INC 5 $83,525 3,334,545 Source: Federal Communications Commission Notes: (1) As of the close of the auction. Table 7: New Analog Television Stations Auction #82 Results Bidder Name Total High Bids Net High Bids (1) POPs Roberts Broadcasting USA, LLC 2 $3,326,250 N/ a Venture Technologies Group, LLC 1 $1,323,000 N/ a Equity Broadcasting Corporation 1 $376,000 N/ a Source: Federal Communications Commission Notes: (1) As of the close of the auction. 104 Federal Communications Commission FCC 02- 179 C- 1 APPENDIX C: MOBILE TELEPHONY Table of Contents Table 1: CTIA’s Semi- Annual Mobile Telephone Industry Survey ....................................................... C- 2 Table 2: FCC’s 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- 15 105 Federal Communications Commission FCC 02- 179 C- 2 Table 1: CTIA’s Semi- Annual Mobile Telephone Industry Survey Date Estimated Subscribers Year End over Year End Subscriber Increase Total Six- Month Service Revenues (000s) Roamer Services Revenues Cell Sites Employees Cumulative Capital Investment (000s) Average Local Monthly Bill Jan 85 91,600 $178,085 346 1,404 $354,760 June 85 203,600 $176,231 599 1,697 $588,751 Dec 85 340,213 248,613 $306,197 913 2,727 $911,167 June 86 500,000 $360,585 1,194 3,556 $1,140,163 Dec 86 681,825 341,612 $462,467 1,531 4,334 $1,436,753 June 87 883,778 $479,514 1,732 5,656 $1,724,348 Dec 87 1,230,855 549,030 $672,005 2,305 7,147 $2,234,635 $96.83 June 88 1,608,697 $886,075 2,789 9,154 $2,589,589 $95.00 Dec 88 2,069,441 838,586 $1,073,473 $89,331 3,209 11,400 $3,274,105 $98.02 June 89 2,691,793 $1,406,463 $121,368 3,577 13,719 $3,675,473 $85.52 Dec 89 3,508,944 1,439,503 $1,934,132 $173,199 4,169 15,927 $4,480,141 $83.94 June 90 4,368,686 $2,126,362 $192,350 4,768 18,973 $5,211,765 $83.94 Dec 90 5,283,055 1,774,111 $2,422,458 $263,660 5,616 21,382 $6,281,596 $80.90 June 91 6,380,053 $2,653,505 $302,329 6,685 25,545 $7,429,739 $74.56 Dec 91 7,557,148 2,274,093 $3,055,017 $401,325 7,847 26,327 $8,671,544 $72.74 June 92 8,892,535 $3,633,285 $436,725 8,901 30,595 $9,276,139 $68.51 Dec 92 11,032,753 3,475,605 $4,189,441 $537,146 10,307 34,348 $11,262,070 $68.68 June 93 13,067,318 $4,819,259 $587,347 11,551 36,501 $12,775,967 $67.31 Dec 93 16,009,461 4,976,708 $6,072,906 $774,266 12,805 39,775 $13,946,406 $61.48 June 94 19,283,306 $6,519,030 $778,116 14,740 45,606 $16,107,920 $58.65 Dec 94 24,134,421 8,124,960 $7,710,890 $1,052,666 17,920 53,902 $18,938,677 $56.21 June 95 28,154,415 $8,740,352 $1,120,337 19,833 60,624 $21,709,286 $52.45 Dec 95 33,785,661 9,651,240 $10,331,614 $1,422,233 22,663 68,165 $24,080,466 $51.00 June 96 38,195,466 $11,194,247 $1,314,943 24,802 73,365 $26,707,046 $48.84 Dec 96 44,042,992 10,257,331 $12,440,724 $1,465,992 30,045 84,161 $32,573,522 $47.70 June 97 48,705,553 $13,134,551 $1,392,440 38,650 97,039 $37,454,294 $43.86 Dec 97 55,312,293 11,269,301 $14,351,082 $1,581,765 51,600 109,387 $46,057,911 $42.78 June 98 60,831,431 $15,286,660 $1,584,891 57,674 113,111 $50,178,812 $39.88 Dec 98 69,209,321 13,897,028 $17,846,515 $1,915,578 65,887 134,754 $60,542,774 $39.43 June 99 76,284,753 $19,368,304 $1,922,416 74,157 141,929 $66,782,827 $40.24 Dec 99 86,047,003 16,837,682 $20,650,185 $2,163,001 81,698 155,817 $71,264,865 $41.24 June 00 97,035,925 $24,645,365 $1,971,625 95,733 159,645 $76,652,358 $45.15 Dec 00 109,478,031 23,431,028 $27,820,655 $1,911,356 104,288 184,449 $89,624,387 $45.27 Jun 01 118,397,734 $30,905,721 $1,727,058 114,059 186,317 $99,728,965 $45.56 Dec 01 128,374,512 18,896,481 $34,110,163 $2,209,387 127,540 203,580 $105,030,101 $47.37 Source: Cellular Telecommunications and Internet Association, Semi- Annual Wireless Industry Survey . 106 Federal Communications Commission FCC 02- 179 C- 3 Table 2: FCC’s Semi- Annual Local Telephone Competition Survey Mobile Wireless Telephone Subscribers (as of June 30, 2001) 1/ State Jun 2001 Reporting Carriers 1/ Jun 2001 Percent Resold 2/ Subscribers Dec 1999 Subscribers Jun 2000 Subscribers Dec 2000 3/ Subscribers Jun 2001 Percent Change Jun 00 - Jun 01 Alabama 12 1% 1,080,410 1,253,084 1,386,294 1,930,631 54% Alaska 5 10% 165,221 169,892 * 218,424 29% Arizona 13 3% 1,125,321 1,624,668 1,855,115 2,018,410 24% Arkansas 6 2% 719,919 715,467 743,928 891,275 25% California 12 5% 8,544,941 12,283,369 12,710,520 14,184,625 15% Colorado 9 3% 1,552,718 1,654,989 1,856,075 1,983,405 20% Connecticut 6 9% 1,077,089 1,136,618 1,277,123 1,418,367 25% Delaware 5 6% 270,848 275,219 371,014 389,284 41% District of Columbia 6 9% 910,116 4/ 928,962 987,323 N. M. Florida 9 7% 5,158,079 4,983,478 6,369,985 7,536,670 51% Georgia 14 4% 2,538,983 2,687,238 2,754,784 4,076,119 52% Guam * * * * 0 * * Hawaii 6 2% 288,425 454,364 524,291 543,283 20% Idaho 7 3% 271,436 296,066 344,564 398,781 35% Illinois 10 9% 3,922,482 4,309,660 5,143,767 5,621,044 30% Indiana 9 5% 1,318,975 1,717,378 1,715,074 1,781,247 4% Iowa 8 7% 774,773 975,629 832,106 861,382 -12% Kansas 10 3% 669,472 724,024 801,293 901,225 24% Kentucky 9 1% 911,700 999,544 1,026,334 1,176,756 18% Louisiana 12 3% 1,227,106 1,294,693 1,306,457 1,677,292 30% Maine 5 3% 187,003 283,640 359,786 399,616 41% Maryland 8 4% 1,473,494 4/ 1,982,477 2,134,125 N. M. Massachusetts 6 4% 1,892,014 2,228,169 2,649,130 2,753,685 24% Michigan 10 9% 3,512,813 3,423,535 3,551,719 4,071,091 19% Minnesota 12 7% 1,550,411 1,595,560 1,851,430 2,014,317 26% Mississippi 9 4% 673,355 509,038 786,577 993,781 95% Missouri 9 4% 1,855,452 1,848,775 1,767,411 1,937,684 5% Montana * * * * * * * Nebraska 5 2% 576,296 600,885 659,380 712,685 19% Nevada 6 3% 750,335 825,163 684,752 766,581 -7% New Hampshire 7 13% 280,508 309,263 387,264 445,181 44% New Jersey 6 1% 2,289,181 2,750,024 3,575,130 3,896,778 42% New Mexico 8 8% 363,827 395,111 443,343 619,582 57% New York 9 11% 4,833,816 5,016,524 5,918,136 6,749,096 35% North Carolina 11 4% 2,536,068 2,730,178 3,105,811 3,377,331 24% North Dakota * * * * * * * Ohio 12 6% 3,237,786 3,278,960 4,150,498 4,255,934 30% Oklahoma 12 3% 826,637 979,513 1,124,214 1,200,234 23% Oregon 8 3% 914,848 1,082,425 1,201,207 1,268,909 17% Pennsylvania 12 5% 2,767,474 3,850,372 4,129,186 4,378,216 14% Puerto Rico 5 21% * 1,090,005 757,613 1,374,747 26% Rhode Island 6 5% 279,304 313,550 355,889 401,805 28% South Carolina 8 9% 1,137,232 1,236,338 1,392,586 1,502,345 22% South Dakota * * * * * * * Tennessee 11 1% 1,529,054 1,876,444 1,985,851 2,251,208 20% Texas 16 5% 5,792,453 6,705,423 7,548,537 8,294,338 24% Utah 10 3% 643,824 692,006 750,244 833,492 20% Vermont * * * * * * * Virgin Islands * * * 0 0 * * Virginia 11 4% 1,860,262 4/ 2,450,289 2,767,247 N. M. Washington 9 4% 1,873,475 2,144,767 2,286,082 2,493,214 16% West Virginia 9 6% 241,265 347,916 392,384 452,036 30% Wisconsin 10 7% 1,525,818 1,342,908 1,698,520 2,008,679 50% Wyoming 4 3% 127,634 * * 173,939 * Nationwide 72 5% 79,696,083 90,643,058 101,043,219 114,028,928 26% N. M. - Not meaningful. 107 Federal Communications Commission FCC 02- 179 C- 4 * 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). 108 Federal Communications Commission FCC 02- 179 C- 5 Table 3: Economic Area Penetration Rates EA EA Name Subscribers 2000 Census EA penetration rate EA density 34 Tampa- St. Petersburg- Clearwater, FL 920,170 2,395,997 38% 938.0 10 New York- No. New Jer.- Long Island, NY- NJ- CT- PA- MA- VT 12,184,293 25,712,577 47% 924.2 12 Philadelphia- Wilmington- Atl. City, PA- NJ- DE- MD 3,542,947 7,309,792 48% 802.1 161 San Diego, CA 1,396,336 2,813,833 50% 669.2 64 Chicago- Gary- Kenosha, IL- IN- WI 5,051,676 10,328,854 49% 561.2 31 Miami- Fort Lauderdale, FL 2,971,444 5,602,222 53% 532.7 3 Boston- Worcester- Lawrence- Lowell- Brockton, MA- NH- RI- VT 3,735,291 7,954,554 47% 437.4 55 Cleveland- Akron, OH- PA 2,022,255 4,692,460 43% 432.9 13 Washington- Baltimore, DC- MD- VA- WV- PA 4,441,033 8,403,130 53% 413.8 63 Milwaukee- Racine, WI 951,740 2,255,183 42% 377.7 57 Detroit- Ann Arbor- Flint, MI 3,559,074 6,963,637 51% 368.9 50 Dayton- Springfield, OH 515,403 1,133,004 45% 319.5 20 Norfolk- Virginia Beach- Newport News, VA- NC 805,041 1,722,764 47% 312.3 49 Cincinnati- Hamilton, OH- KY- IN 968,489 2,184,860 44% 297.7 11 Harrisburg- Lebanon- Carlisle, PA 436,066 1,125,265 39% 295.6 30 Orlando, FL 1,653,770 3,642,540 45% 295.0 33 Sarasota- Bradenton, FL 237,085 763,795 31% 288.9 160 Los Angeles- Riverside- Orange County, CA- AZ 8,196,656 18,003,420 46% 288.8 53 Pittsburgh, PA- WV 1,228,944 2,971,829 41% 286.9 163 San Francisco- Oakland- San Jose, CA 4,505,279 9,111,806 49% 275.0 40 Atlanta, GA- AL- NC 3,101,196 5,471,412 57% 250.2 32 Fort Myers- Cape Coral, FL 265,565 692,265 38% 244.7 23 Charlotte- Gastonia- Rock Hill, NC- SC 1,036,091 2,031,519 51% 244.3 133 McAllen- Edinburg- Mission, TX 285,964 978,369 29% 227.8 83 New Orleans, LA- MS 815,144 1,725,338 47% 215.4 8 Buffalo- Niagara Falls, NY- PA 481,033 1,507,759 32% 214.4 62 Grand Rapids- Muskegon- Holland, MI 745,452 1,881,991 40% 210.9 170 Seattle- Tacoma- Bremerton, WA 2,076,766 4,135,291 50% 196.3 164 Sacramento- Yolo, CA 1,089,950 2,311,567 47% 192.9 51 Columbus, OH 1,043,728 2,349,060 44% 191.5 19 Raleigh- Durham- Chapel Hill, NC 921,246 1,831,510 50% 191.3 18 Greensboro- Winston- Salem- High Point, NC- VA 846,321 1,854,853 46% 190.8 65 Elkhart- Goshen, IN- MI 302,732 936,245 32% 188.7 172 Honolulu, HI 678,441 1,211,537 56% 188.6 41 Greenville- Spartanburg- Anderson, SC- NC 547,336 1,248,824 44% 188.5 70 Louisville, KY- IN 624,418 1,416,914 44% 183.1 131 Houston- Galveston- Brazoria, TX 2,821,174 5,632,853 50% 175.0 67 Indianapolis, IN- IL 1,263,358 3,066,469 41% 172.4 44 Knoxville, TN 433,719 983,329 44% 172.0 7 Rochester, NY- PA 440,545 1,493,518 30% 170.4 81 Pensacola, FL 236,009 623,252 38% 169.7 22 Fayetteville, NC 218,585 528,224 41% 165.7 56 Toledo, OH 528,791 1,294,395 41% 165.6 26 Charleston- North Charleston, SC 283,141 587,297 48% 161.0 66 Fort Wayne, IN 237,456 725,847 33% 159.8 109 Federal Communications Commission FCC 02- 179 C- 6 130 Austin- San Marcos, TX 708,185 1,349,267 52% 158.5 60 Appleton- Oshkosh- Neenah, WI 169,589 433,250 39% 156.1 43 Chattanooga, TN- GA 301,360 720,375 42% 148.9 84 Baton Rouge, LA- MS 337,171 739,673 46% 146.6 82 Biloxi- Gulfport- Pascagoula, MS 180,317 396,754 45% 146.5 45 Johnson City- Kingsport- Bristol, TN- VA 218,673 576,081 38% 146.2 78 Birmingham, AL 774,217 1,578,903 49% 139.3 5 Albany- Schenectady- Troy, NY 398,011 1,171,669 34% 139.0 46 Hickory- Morganton, NC- TN 176,375 519,208 34% 133.2 14 Salisbury, MD- DE- VA 116,455 363,970 32% 131.1 24 Columbia, SC 424,353 932,115 46% 130.9 42 Asheville, NC 192,505 444,594 43% 129.6 96 St. Louis, MO- IL 1,602,321 3,558,651 45% 129.0 15 Richmond- Petersburg, VA 690,032 1,446,123 48% 127.1 52 Wheeling, WV- OH 99,604 327,645 30% 125.8 74 Huntsville, AL- TN 443,660 997,824 44% 123.5 127 Dallas- Fort Worth, TX- AR- OK 3,492,819 7,645,530 46% 121.6 54 Erie, PA 146,901 519,348 28% 117.9 29 Jacksonville, FL- GA 948,062 1,885,190 50% 117.4 102 Davenport- Moline- Rock Island, IA- IL 222,511 558,913 40% 110.3 25 Wilmington, NC- SC 387,544 878,267 44% 109.8 6 Syracuse, NY- PA 559,353 1,902,640 29% 107.9 85 Lafayette, LA 252,426 601,654 42% 107.1 71 Nashville, TN- KY 1,073,972 2,444,643 44% 106.7 73 Memphis, TN- AR- MS- KY 844,860 1,882,332 45% 106.0 2 Portland, ME 263,474 748,817 35% 104.8 103 Cedar Rapids, IA 182,916 384,577 48% 101.8 162 Fresno, CA 466,213 1,419,998 33% 99.2 17 Roanoke, VA- NC- WV 342,689 826,284 41% 98.7 21 Greenville, NC 333,540 823,517 41% 96.7 28 Savannah, GA- SC 309,941 668,214 46% 95.8 158 Phoenix- Mesa, AZ- NM 1,660,151 3,407,197 49% 94.1 9 State College, PA 239,859 809,979 30% 92.8 101 Peoria- Pekin, IL 208,753 528,671 39% 92.4 87 Beaumont- Port Arthur, TX 186,769 456,637 41% 92.3 27 Augusta- Aiken, GA- SC 261,341 604,799 43% 91.4 92 Fayetteville- Springdale- Rogers, AR- MO- OK 153,503 405,160 38% 90.3 99 Kansas City, MO- KS 1,337,213 2,469,340 54% 89.7 107 Minneapolis- St. Paul, MN- WI- IA 2,029,379 4,498,286 45% 87.4 48 Charleston, WV- KY- OH 381,295 1,199,373 32% 86.0 39 Columbus, GA- AL 245,678 496,538 49% 85.6 134 San Antonio, TX 875,662 2,141,060 41% 83.6 47 Lexington, KY- TN- VA- WV 564,282 1,851,367 30% 80.9 167 Portland- Salem, OR- WA 1,274,658 2,883,737 44% 77.1 69 Evansville- Henderson, IN- KY- IL 329,160 854,714 39% 76.4 80 Mobile, AL 256,953 676,258 38% 76.3 93 Joplin, MO- KS- OK 92,188 263,904 35% 75.1 124 Tulsa, OK- KS 612,351 1,384,426 44% 74.5 72 Paducah, KY- IL 42,471 226,586 19% 74.1 68 Champaign- Urbana, IL 231,754 630,898 37% 73.8 110 Federal Communications Commission FCC 02- 179 C- 7 104 Madison, WI- IL- IA 352,588 933,823 38% 72.9 79 Montgomery, AL 249,504 481,137 52% 67.7 35 Tallahassee, FL- GA 326,031 720,434 45% 65.9 125 Oklahoma City, OK 682,522 1,698,197 40% 65.8 37 Albany, GA 174,001 468,178 37% 63.8 38 Macon, GA 303,464 768,701 39% 63.5 118 Omaha, NE- IA- MO 460,250 1,044,156 44% 62.7 4 Burlington, VT- NY 145,021 605,393 24% 61.0 88 Shreveport- Bossier City, LA- AR 213,734 573,616 37% 60.3 159 Tucson, AZ 454,852 999,882 45% 60.3 97 Springfield, IL- MO 215,021 517,462 42% 58.8 98 Columbia, MO 146,327 369,014 40% 58.7 89 Monroe, LA 131,988 333,519 40% 57.3 106 Rochester, MN- IA- WI 140,121 318,374 44% 56.2 86 Lake Charles, LA 201,460 536,758 38% 55.3 105 La Crosse, WI- MN 61,293 241,903 25% 54.6 36 Dothan, AL- FL- GA 121,219 332,409 36% 54.6 61 Traverse City, MI 111,359 286,745 39% 52.4 141 Denver- Boulder- Greeley, CO- KS- NE 2,158,548 3,984,105 54% 52.1 95 Jonesboro, AR- MO 97,821 303,852 32% 51.8 16 Staunton, VA- WV 172,853 334,087 52% 51.1 77 Jackson, MS- AL- LA 582,434 1,432,518 41% 50.5 119 Lincoln, NE 168,876 379,321 45% 50.4 75 Tupelo, MS- AL- TN 212,847 625,002 34% 50.4 94 Springfield, MO 331,637 859,559 39% 48.7 132 Corpus Christi, TX 215,353 549,012 39% 47.7 91 Fort Smith, AR- OK 109,451 329,136 33% 47.7 100 Des Moines, IA- IL- MO 726,705 1,683,257 43% 47.6 90 Little Rock- North Little Rock, AR 673,941 1,614,850 42% 47.2 166 Eugene- Springfield, OR- CA 314,490 791,776 40% 43.4 76 Greenville, MS 54,753 252,280 22% 42.3 117 Sioux City, IA- NE- SD 78,391 252,656 31% 39.6 152 Salt Lake City- Ogden, UT- ID 934,897 2,088,974 45% 37.1 123 Topeka, KS 172,136 454,539 38% 36.0 108 Wausau, WI 153,868 487,723 32% 35.2 59 Green Bay, WI- MI 255,114 671,225 38% 35.0 157 El Paso, TX- NM 314,942 955,602 33% 33.1 58 Northern Michigan, MI 52,371 269,986 19% 29.9 169 Richland- Kennewick- Pasco, WA 241,690 677,674 36% 28.1 137 Lubbock, TX 152,257 374,626 41% 27.2 147 Spokane, WA- ID 314,010 829,735 38% 23.9 153 Las Vegas, NV- AZ- UT 764,938 1,709,797 45% 23.9 1 Bangor, ME * 526,106 * 22.2 156 Albuquerque, NM- AZ 401,336 921,086 44% 20.9 122 Wichita, KS- OK 436,681 1,175,577 37% 20.6 128 Abilene, TX 69,134 222,147 31% 20.4 109 Duluth- Superior, MN- WI 138,626 350,059 40% 19.8 113 Fargo- Moorhead, ND- MN 142,755 371,691 38% 16.9 155 Farmington, NM- CO 67,869 193,872 35% 16.1 116 Sioux Falls, SD- IA- MN- NE 216,957 519,143 42% 15.4 111 Federal Communications Commission FCC 02- 179 C- 8 165 Redding, CA- OR 115,277 336,820 34% 14.7 149 Twin Falls, ID 60,399 162,397 37% 14.1 150 Boise City, ID- OR 239,554 574,876 42% 13.8 139 Santa Fe, NM 98,201 258,790 38% 13.1 126 Western Oklahoma, OK 53,392 139,761 38% 12.1 138 Amarillo, TX- NM 181,305 481,633 38% 11.8 120 Grand Island, NE 115,829 288,047 40% 11.6 136 Hobbs, NM- TX 56,693 190,340 30% 11.2 148 Idaho Falls, ID- WY 117,667 306,120 38% 11.0 146 Missoula, MT 125,030 399,183 31% 10.9 110 Grand Forks, ND- MN 79,630 230,253 35% 10.5 135 Odessa- Midland, TX 150,112 388,007 39% 10.1 129 San Angelo, TX 66,580 202,679 33% 10.1 140 Pueblo, CO- NM 86,666 279,600 31% 8.7 168 Pendleton, OR- WA 60,071 200,681 30% 8.7 154 Flagstaff, AZ- UT 111,854 401,766 28% 8.3 142 Scottsbluff, NE- WY 34,775 92,360 38% 7.8 151 Reno, NV- CA 272,535 670,013 41% 7.6 111 Minot, ND * 111,195 * 7.2 112 Bismarck, ND- MT- SD 64,536 175,427 37% 6.4 114 Aberdeen, SD * 82,608 * 5.5 143 Casper, WY- ID- UT 184,959 408,708 45% 5.2 115 Rapid City, SD- MT- NE- ND 66,457 213,696 31% 5.1 121 North Platte, NE- CO * 61,758 * 5.0 144 Billings, MT- WY 139,481 404,902 34% 4.9 145 Great Falls, MT 48,795 166,564 29% 4.3 171 Anchorage, AK 257,411 626,932 41% 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. 112 Federal Communications Commission FCC 02- 179 C- 9 Table 4: Top 25 Mobile Telephone Operators by Subscribers (in thousands) Year- End 2000 Year- End 2001 Operator Total Operator Total 1 Verizon Wireless 27,505 Verizon Wireless 29,398 2 Cingular 19,681 Cingular 21,596 3 AT& T 15,163 AT& T 18,047 4 Sprint PCS 9,543 Sprint PCS 13,555 5 Nextel 6,678 Nextel 8,667 6 ALLTEL 6,300 VoiceStream 6,993 7 VoiceStream 3,879 ALLTEL 6,683 8 US Cellular 3,061 US Cellular 3,461 9 Western Wireless 1,050 Western Wireless 1,177 10 Powertel 908 Leap Wireless 1,119 11 Qwest 805 Qwest 1,114 12 CenturyTel 751 Telecorp (1) 1,018 13 TeleCorp 666 Centennial 827 14 Dobson Comm. 654 CenturyTel 797 15 Rural Cellular 552 Dobson Comm. 700 16 Price Comm 528 Triton PCS 686 17 Centennial 665 American Cell. 657 18 Triton PCS 446 Rural Cellular 647 19 Cincinnati Bell 339 Price Wireless (2) 570 20 PR Tel. Co. 335 Nextel Partners 516 21 Nextel Partners 227 Alamosa PCS 503 22 Midwest Wireless 208 Broadwing 462 23 Cellcom 190 Airgate 453 24 Leap Wireless 190 PrimeCo (3) 385 25 Ntelos 168 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 7 th 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. 113 Federal Communications Commission FCC 02- 179 C- 10 Table 5: Estimated Mobile Telephone Rollouts by Number of Launches by County Total Number of Providers in a County Number of Counties POPs Contained in Those Counties (1) % of Total US POPs Square Miles Contained in Those Counties % of Total US Square Miles 3 or More 2164 268,270,582 94.1% 1,746,786 49.6% 4 or More 1615 252,857,505 88.7% 1,193,833 33.9% 5 or More 1125 229,432,579 80.4% 839,939 23.9% 6 or More 670 151,497,042 53.1% 504,777 14.3% 7 or More 217 60,507,951 21.2% 172,286 4.9% Table 6: County Quartiles with Estimated Rollout by at least 3 Mobile Telephone Providers County Quartile Based on Population Total Number of Counties (2) Number of Counties with at least 3 Providers Percent of Counties in Quartile with at least 3 Providers Total POPs in Quartile Counties (1) POPs in Counties with at least 3 Providers Percent of Quartile POPs with at least 3 Providers 1st Quartile 805 775 96.3% 234,640,253 231,961,749 98.9% 2nd Quartile 805 632 78.5% 31,425,466 25,249,594 80.4% 3rd Quartile 805 509 63.2% 14,146,698 9,189,879 65.0% 4th Quartile 804 248 30.9% 5,018,099 1,869,360 37.3% Source: Federal Communications Commission estimates based on publicly available information. Notes: (1) POPs from the 2000 Census. (2) United States and Puerto Rico 114 Federal Communications Commission FCC 02- 179 C- 11 Table 7: Mobile Telephone Digital Coverage Technology POPs in Those Areas (1) % of Total POPs (2) Square Miles Contained in Those Counties % of Total Square Miles CDMA 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: (1) Broadband PCS and digital SMR licensees are analyzed by county; cellular licensees are analyzed by cellular market areas (“ CMAs”). (2) POPs from the 2000 Census. Table 8: Change in CPI CPI Cellular CPI All Telephone CPI Local Telephone CPI Long Distance Telephone CPI Index Value Annual Change Index Value Annual Change Index Value Annual Change Index Value Annual Change Index Value Annual Change Dec- 97 100 100 100 100 100 Dec- 98 101.6 1.6% 91.7 -8.3% 100.3 0. 3% 101.3 1. 3% 99.9 -0.1% Dec- 99 104.3 2.7% 81.1 -11.6% 100.7 0. 4% 104.2 2. 8% 98.6 -1.3% Dec- 00 107.9 3.4% 71.1 -12.3% 98.4 -2.3% 110.0 5. 5% 89.5 -9.2% Dec- 01 109.5 1.6% 67.2 -5.5% 99.7 1. 3% 114.9 4. 5% 87.9 -1.8% Dec- 97 to Dec-01 100 9.5% 100 -32.8% 100 -0.3% 100 14.9% 100 -12.1% Source: Bureau of Labor Statistics. 115 Federal Communications Commission FCC 02- 179 C- 12 Table 9: Average Revenue Per Minute Average Local Monthly Bill Minutes of Use Per Month Average Revenue Per Minute Annual Change 1993 $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 $47.37 385 $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 % Peak Minutes of Usage Per Month 30 150 300 600 Average (Dollars Per Month) Top 25 Markets $23.46 $34.6 9 $39.7 9 $51.6 1 $37.39 “Rural” Markets $23.52 $31.0 9 $36.3 4 $54.3 9 $36.34 Large- Market Premium -$ 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/). 116 Federal Communications Commission FCC 02- 179 C- 13 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. Average Price Per Minute including Monthly Access $0. 79 $0. 66 $0. 51 $0. 40 $0. 28 $0. 10 $0.34 $0. 00 $0. 10 $0. 20 $0. 30 $0. 40 $0. 50 $0. 60 $0. 70 $0. 80 $0. 90 1995 1996 1997 1998 1999 2000 2001 Average Price Per Minute 70%decline from 1999 to 2001 Primary Plan for 2002 is $. 4/ min 117 Federal Communications Commission FCC 02- 179 C- 14 Table 12: U. S. Mobile Telephone Operators’ Holdings in Foreign Mobile Operators Operator Country Subscribers (Brand name) Venture Ownership (%) France 11.646 million Cegetel (owns 80% of cellular company Societe Francaise de Radiotelephone) 15 (through JV with Vivendi) Denmark 1.918 million Tele Danmark 41.6 Belgium 4.098 million (Proximus) Belgacom 17.5 (controls 24.36% through investment in Tele Danmark, which owns 16.5% of Belgacom) South Africa 5.919 million (Vodacom) Telkom SA( owns 50% of Vodacom) 18 Canada 2.789 million (Bell Mobility) Bell Canada 20 SBC Mexico 16.103 million America Movil 8 Uruguay 138,000 (Movicom) Abiatar 46 Guatemala 75,000 BellSouth Guatemala 60 Nicaragua 157,000 Nicacell 89 Ecuador 344,000 Otecel 89.4 Panama 293,000 BellSouth Panama 43.7 Brazil (Sao Paulo) 1.781 million BCP 45.4 Brazil (northeast) 942,000 BCP 47.1 Venezuela 3.106 million Telcel 78.2 Argentina 1.588 million Movicom/ BellSouth 65 Chile 860,000 BellSouth Chile 100 Columbia 1.126 million Celumovil 66 Peru 404,000 Tele 2000 97.4 Denmark 810,251 Sonafon 46.5 BellSouth Israel 1,856,488 Cellcom 34.7 Canada 3 million Rogers Wireless 34.4 India 176,800 Birla- AT& T- Tata 33 Taiwan 3.211 million FarEasTone 22.7 Czech Republic 2.11 million EuroTel Praha 24.5 Slovakia 493,030 EuroTel Bratislava 24.5 AT& T India 606,200 (BPL Mobile) BPL Cellular 49 Italy >17 million Omnitel Pronto Italia 23.1 Mexico 1.9 million Iusacell 39.4 Czech Republic 2.11 million EuroTel Praha 24.5 Slovakia 493,030 EuroTel Bratislava 24.5 Greece 1.645 million STET Hellas 17.5 Indonesia 765,000 Excelcomindo 23.1 Japan 3.84 million Tu- Ka 2.7- 5 New Zealand 1.2 million Telecom New Zealand 21.5 Philippines 26,000 (Extelcom) BayanTel (owns 46.6% stake in wireless provider Extelcom) 19.4 Argentina 1.1 million (CTI Movil) CTI Holdings 65.3 Canada 2.5 million TELUS Corporation 23.7 Verizon Venezuela 2.5 million CANTV 28.5 118 Federal Communications Commission FCC 02- 179 C- 15 Taiwan 6.6 million Taiwan Cellular Corporation 13 Dominican Republic 550,000 CODETEL 100 Ireland Launched 2/ 01 Meteor 78 Iceland 55,000 TAL 57.3 Austria 200,000 tele. ring 100 Slovenia Licensed 11/ 00 Western Wireless 100 Croatia 470,000 VIPnet 19 Georgia NA MagtiCom 14.5 Ghana NA Western Telesystems 56.7 Cote d’Ivoire Launched 9/ 00 CORA de Comstar 40 Bolivia Launched 11/ 00 NuevaTel 67 Western Wireless International Haiti 802,000 for all foreign ventures NA COMCEL 51 Canada 2.156 million TELUS Corp. 4.8 Japan 49,000 NEXNET Co. 32 Argentina 134,000 Nextel Communications Argentina 100 Brazil 322,000 Nextel Telecomunicacoes 100 Mexico 218,000 Nextel De Mexico 100 Peru 68,000 Nextel del Peru 100 Nextel International Philippines 42,000 Nextel 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. 119 Federal Communications Commission FCC 02- 179 C- 16 Table 13: International Comparisons of Mobile Pricing Country Business Mobile Basket Residential Mobile Basket Revenue Per Minute Australia $759 $172 $0.18 Japan $907 $347 $0.33 New Zealand $1659 $368 $0.15 South Korea $1039 $357 $0.19 Asia- Pacific Average $1091 $311 $0.21 Austria $736 $387 Belgium $860 $266 Denmark $945 $183 Finland $1074 $152 France- Orange, Forfait 2H $1063 $406 France- Orange, Forfait 5H $790 $683 $0.20 Germany $1124 $299 $0.20 Greece $1262 $308 $0.28 Iceland $815 $167 Ireland $1157 $257 Italy $1556 $345 $0.21 Luxembourg $690 $184 Netherlands $790 $269 Norway $717 $214 Portugal $1252 $388 $0.21 Spain $1618 $323 $0.23 Sweden $1257 $206 Switzerland $1046 $284 U. K.- BT $1006 $339 U. K.- Vodafone $1047 $331 $0.21 West European Average $1040 $299 $0.22 Canada $1026 $422 $0.13 U. S. A.- Qwest $772 $415 U. S. A.- Sprint $692 $479 $0.16 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. 120 Federal Communications Commission FCC 02- 179 D- 1 APPENDIX D: 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- 9 121 Federal Communications Commission FCC 02- 179 D- 2 Table 1: 3G Licensing Abroad Country (status) Spectrum (MHz) Number of Licenses Assignment Method Auction Revenue Or License Fee (US Dollars) Austria (Awarded November 2000) 145 4- 6 (6 awarded) Auction $618m 140 in capital cities 4 or more (6 awarded) 110 in Canberra 3 or more (5 awarded) Australia (Awarded March 2001) 40 in regional areas 2 or more (3 awarded) Auction $580m Belgium (Awarded March 2001) 140 (105 sold) 4 (3 awarded) Auction $413m Denmark (Awarded September 2001) 140 4 Auction $472m Finland (Awarded March 1999) 140 4 Beauty contest Annual spectrum fee of $890 per 25 KHz (licenses awarded free of charge) France (Awarded May 2001) 140 4 (2 bids received) Beauty contest $535m per license + 1% of annual revenue Germany (Awarded August 2000) 145 4- 6 (6 awarded) Auction $46.11bn Greece (Awarded July 2001) 140 4 (3 awarded) Auction $414.1m Hong Kong (Awarded September 2001) 140 4 Combination (prequalifica tion followed by auction 1 ) 5% of 3G revenue over 15 years, with minimum of $6.4m per year in first 5 years 122 Federal Communications Commission FCC 02- 179 D- 2 Italy (Awarded October 2000) 145 2 5 Combination (prequalificati on beauty contest followed by auction) $10.04bn Ireland (Expected June 2002) 140 4 Beauty contest $43.6m (A license) or $98.3m (B licenses) + $1.91m annual fee Japan (Awarded July 2000) 120 3 Beauty contest No fees Netherlands (Awarded July 2000) 145 5 Auction $2.5bn New Zealand (Awarded January 2001) 105 4 Auction $51.4m Norway (Awarded November 2000) 140 4 3 Beauty contest $92m + annual fee of $2.2m per license Portugal (Awarded November 2000) 140 4 Beauty contest $342.4m + annual fee Singapore (Awarded April 2001) 140 4 (3 awarded) Auction 4 $173.4m South Korea (Awarded December 2000 and August 2001) Not available 3 Beauty contest $3.3bn Spain (Awarded March 2000) 140 4 Beauty contest $446.5m + annual fee Sweden (Awarded December 2000) 140 4 Beauty contest $107,000 + 0.15% of annual revenues 123 Federal Communications Commission FCC 02- 179 D- 3 Switzerland (Awarded December 2000) 140 4 Auction $120m Taiwan (Awarded Feb. 2002) 170 5 Auction $1.4bn UK (Awarded April 2000) 140 5 Auction $35.361bn Sources: Publicly available information such as web sites of national regulatory authorities, the EU Commission, and the ITU. 124 Federal Communications Commission FCC 02- 179 D- 4 Table 2: Mobile Internet Access Services Provider Service Name Device( s) Price ($ per month) Mess- aging Web E- mail Notes ALLTEL Web- Unwired Mobile handsets $5.95, free for the first month • • Users can customize their wireless web home pages to include pertinent information and tools, such as a list of bookmarks. AOL Mobile Communicator RIM 2- way messaging device $29.95 • • Users can access AOL IM and e-mail messages from an AOL account. Arch Wireless Webster 100 Motorola T900 $9.95-$ 59.95 for 10,000 characters to unlimited messaging • • Users can have messages from existing e- mail accounts forwarded to the device, exchange IMs, and receive information updates. AT& T Wireless 2- Way Text Messaging/ AIM Mobile handsets 10¢ per sent message or AIM command 25¢ per message when roaming • Receive unlimited messages with both pricing plans. Send text messages to any digital network. $4.99 for 100 sent messages, 10¢ thereafter or per AIM command • PocketNet Mobile handsets $0-$ 14.99 • • Basic 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. $29.99 for up to 5MB + .7¢ per extra KB • • Mobile Internet (GSM/ GPRS Network) Mobile handsets, wireless modem card $39.99 and up – Bundled voice and data plans that include 1 MB + voice minutes • • GSM/ GPRS network with speeds bursting up to 144 kbps. 2- Way Text Messaging/ MSN Messenger Mobile handsets $2.99 for 100 messages $5.99 for 250 messages $9.99 for 500 messages 10¢ per additional message • Send and receive up to 150 characters on any carrier’s network. Wireless Internet Mobile handsets $6.99-$ 13.99, includes 100 to 500 messages • • • Provides content such as movie listings, stock quotes, news, weather and yellow pages. Cingular Wireless Wireless Internet Express Mobile handsets $14.99-$ 21.99 for 500 KB + 100 to 500 messages • • • Provides content via GPRS network. EarthLink EarthLink Wireless Service various PDAs, Motorola 2- way pager $39.99 (most PDAs) RIM: $9.95 beyond BlackBerry Compaq: $59.99 Motorola: $24.95 • • Prices are slightly lower with an annual prepaid service contract. GoAmerica Go. Web various PDAs, laptops $49.95 unlimited RIM: $24.95 beyond BlackBerry • • Users can access existing POP3 e- mail accounts. Metrocall My2Way Motorola T900, P935 $19.95-$ 49.95 for 1000- 3500 messages • • 125 Federal Communications Commission FCC 02- 179 D- 5 My eLink RIM 850 $49.95 unlimited • • Motient eLink RIM 850, RIM 857, Palm V with wireless modem $49.99 unlimited $19.99 for 150,000 characters + $0.20 per addl KB • • Forwards messages from an existing POP or IMAP e- mail account to the device; web browsing from Go. Web Nextel Online Mobile 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 Plus Mobile handsets $10.00 • • Access to wireless- enabled websites, email, calendar, and contact list. Plan includes 300 text messages per month. Nextel Two- way Messaging Mobile handsets $5.00, unlimited usage • Send and receive email, text, and numeric messages. Palm Palm. net Palm i705 Palm VII $9.99 50 KB $24.99 150 KB $44.99 unlimited • • • Service on Palm i705 includes access to AIM. RIM BlackBerry RIM PDAs $39.99 • Allows integration with existing e-mail accounts. SkyTel eChat Motorola T900 $14.95 - $29.98 for 500 - 2000 messages • • Individual messages have a 500- character limit. Mobile Mail RIM 850, RIM 857 $49.95 unlimited • E- mail messages can be up to 2,000 characters long. BlackBerry by SkyTel RIM 850, RIM 857 $49.99 unlimited • • Allows integration with existing e-mail accounts. Two- way messaging with other SkyTel and RIM users included. Wireless Web Option Mobile handsets From $9.99 with Sprint PCS calling plan • • Calling plan minutes can be used for either calls or Internet. Includes 50 wireless web updates. Wireless Web Connection Laptops and handhelds 39¢ per minute • • Uses Sprint PCS phone and connection kit to wirelessly connect laptops and handhelds to the Internet. Sprint PCS Wireless Web Short Mail WAP- enabled Mobile handsets From $5.00 with Sprint PCS calling plan or 39¢ per minute • Calling plan minutes can be used for either calls or Short Mail messages. Messages are sent via email. 2- Way Text Messaging Mobile handset 2¢ send/ 10¢ receive $2.99 for 100 messages $7.99 for 600 messages • 120 character text messaging on the Verizon Wireless network. Mobile Web Mobile 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, Verizon’s portal. Mobile Web Plus Kyocera QCP- 6035 smartphone $9.95 • • Service for Smartphones. Allows access to up to 6 POP3 email accounts. Verizon Wireless Express Network 1XRTT 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. 126 Federal Communications Commission FCC 02- 179 D- 6 iStream Smartphone, PDA, and laptop $2.99 for Smartphones $19.99 for PDAs $39.99 for laptops • • • Prices 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. VoiceStream AOL Instant Messenger Mobile handset $2.99 for 500 messages • Customers keep in touch with “buddies” using AIM. 2- Way Messaging Motorola T900 $14.95-$ 29.95 for 500- 3000 messages • WebLink Wireless Remote E- mail Manager Motorola T900 $2 in addition to 2- way messaging plan, free for “Deluxe” 2- Way subscribers • Users 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. 127 Federal Communications Commission FCC 02- 179 D- 7 Table 3: Bluetooth- Enabled Devices Company Product Name Product Type ATO Technology Ltd. ATO Bluetooth Headset Mobile phone accessory Compaq iPAQ Pocket PC Mobile computer Epson Print Adapter Office equipment Mobile Telephone T68i Mobile phone Ericsson Bluetooth Headset HGH- 20 Mobile phone accessory Modem Access Point Computer accessory Fujitsu Data Access Point Office equipment INVENTEL SYSTEMES BlueDSL and EtherBlue Computer accessory Handsfree Car Kit Mobile phone accessory Timeport 270 Mobile phone Phone Module and Phone Module II Mobile phone accessory Motorola Clip- on Accessory Mobile phone accessory Models 6310 and 6310i Mobile phone Nokia Connectivity Battery Mobile phone accessory Samsung Samsung Bluetooth PCS Phone Mobile phone Sony Digital Video Camera Recorder Cameras and video Ubiquitous Headset Accessory Toshiba Refrigerator- freezer Home 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: . 128 Federal Communications Commission FCC 02- 179 D- 8 Table 4: Telemetry Services Company Status Schlumberger 5 million wireless telemetry customers in North America connected as of February 2001. Itron Offers AMR exclusively; had connected 17.6 million AMR units at YE 2001 to over 625 utilities in North America. Aeris’s MicroBurst Leases 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 Albertson’s 250 supermarket locations in California; Beacon Wireless Solutions to provide monitoring and security services for boats. NumereX’s Cellemetry Data Service Leases 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 InterTrack’s GPS Satellite Tracking System. WebLink Wireless Its 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. Motient Offers telemetry services such as AMR, asset tracking, and vending machine monitoring. Cingular Wireless Resells Mobitex network to telemetry providers, such as alarm, billboard sign, and vending machine monitoring companies. SkyTel ReFLEX Telemetry Services Offers 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. 129 Federal Communications Commission FCC 02- 179 E- 1 APPENDIX E: 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- 16 130 Federal Communications Commission FCC 02- 179 E- 2 Map 1 131 Federal Communications Commission FCC 02- 179 E- 3 Map 2 132 Federal Communications Commission FCC 02- 179 E- 4 Map 3 133 Federal Communications Commission FCC 02- 179 E- 5 Map 4 134 Federal Communications Commission FCC 02- 179 E- 6 Map 5 135 Federal Communications Commission FCC 02- 179 E- 7 Map 6 136 Federal Communications Commission FCC 02- 179 E- 8 Map 7 137 Federal Communications Commission FCC 02- 179 E- 9 Map 8 138 Federal Communications Commission FCC 02- 179 E- 10 Map 9 139 Federal Communications Commission FCC 02- 179 E- 11 Map 10 140 Federal Communications Commission FCC 02- 179 E- 12 Table 1: Geographic Licensing Schemes Geographic Licensing Schemes Number of Market Areas Note Basic Trading Areas (BTAs) 493 BTAs make up MTAs Major Trading Areas (MTAs) 51 Cellular Market Areas (CMAs) 734 Also known as MSAs and RSAs Economic Areas (EAs) 175 141 Federal Communications Commission FCC 02- 179 E- 13 Map11 142 Federal Communications Commission FCC 02- 179 E- 14 Map 12 143 Federal Communications Commission FCC 02- 179 E- 15 Map 13 144 Federal Communications Commission FCC 02- 179 E- 16 Map 14 145