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Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993

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Released: June 18, 2009

Federal Communications Commission DA 09-54


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
WT Docket No. 08-27
)

(Terminated)
)
Annual Report and Analysis of Competitive
)
Market Conditions With Respect to Commercial
)
Mobile Services
)


THIRTEENTH REPORT


Adopted: January 15, 2009

Released: January 16, 2009



By the Acting Chief, Wireless Telecommunications Bureau:

TABLE OF CONTENTS

Heading
Paragraph #
I. EXECUTIVE SUMMARY .................................................................................................................... 1
II. INTRODUCTION.................................................................................................................................. 3
A. Background...................................................................................................................................... 3
B. Structure of the Report..................................................................................................................... 6
III. MOBILE TELECOMMUNICATIONS MARKET STRUCTURE..................................................... 12
A. Overview of Service Providers ...................................................................................................... 14
1. Facilities-Based Mobile Telephone Providers......................................................................... 14
2. Resale/MVNO Providers......................................................................................................... 17
3. Broadband Data Providers....................................................................................................... 20
4. Mobile Video Providers .......................................................................................................... 24
5. Narrowband Data Providers .................................................................................................... 27
6. Mobile Satellite Providers ....................................................................................................... 28
B. Horizontal Concentration............................................................................................................... 29
1. Market Definition.................................................................................................................... 30
a. Product Market ................................................................................................................. 30
b. Geographic Market ........................................................................................................... 35
2. Number of Mobile Telephone Competitors ............................................................................ 37
a. Census Block Analysis ..................................................................................................... 37
3. Concentration Measures for Mobile Telephone Services........................................................ 44
4. International Comparison of Mobile Market Concentration ................................................... 49
C. Consolidation and Exit................................................................................................................... 51
D. Entry Conditions and Potential Barriers to Entry .......................................................................... 63
1. Spectrum Access ..................................................................................................................... 64
a. Spectrum Policy and Entry Conditions............................................................................. 65



Federal Communications Commission DA 09-54

b. Recent Spectrum Auctions................................................................................................ 68
c. Spectrum Bands Potentially Available for Terrestrial CMRS .......................................... 69
(i) Cellular ....................................................................................................................... 70
(ii) Broadband PCS .......................................................................................................... 71
(iii) SMR ........................................................................................................................... 72
(a) 800 MHz Band Reconfiguration and 1.9 GHz Spectrum Exchange.................... 73
(iv) 700 MHz Band ........................................................................................................... 75
(v) Advanced Wireless Services ...................................................................................... 82
(vi) Broadband Radio Service........................................................................................... 88
(vii)
Wireless Communications Service (WCS).......................................................... 95
(viii) 1670-1675 MHz................................................................................................... 97
(ix) Narrowband Spectrum................................................................................................ 98
2. Non-Regulatory Barriers to Entry ......................................................................................... 100
E. Rural Markets .............................................................................................................................. 102
1. Geographical Comparisons: Urban vs. Rural........................................................................ 102
2. Rural Competition ................................................................................................................. 104
3. Conclusion............................................................................................................................. 109
IV. PROVIDER CONDUCT IN THE MOBILE TELECOMMUNICATIONS MARKET .................... 110
A. Price Rivalry ................................................................................................................................ 111
1. Developments in Mobile Telephone Pricing Plans ............................................................... 111
2. Prepaid Service...................................................................................................................... 116
3. Mobile Broadband and Other Data Service Pricing .............................................................. 119
B. Non-Price Rivalry ........................................................................................................................ 125
1. Technology Deployment and Upgrades ................................................................................ 126
a. Market-Based Versus Mandated Standards .................................................................... 126
b. Background on Network Design and Technology.......................................................... 129
c. Technology Choices and Upgrades of Mobile Telephone Providers.............................. 134
d. Coverage by Technology Type....................................................................................... 141
e. Broadband Data Networks and Technology Deployment .............................................. 148
f. Narrowband Data Networks and Technology Deployment............................................ 153
2. Capital Expenditures ............................................................................................................. 155
3. Roaming ................................................................................................................................ 156
4. Advertising and Marketing.................................................................................................... 157
5. Network Quality .................................................................................................................... 159
6. Mobile Data Services and Applications ................................................................................ 164
V. CONSUMER BEHAVIOR IN THE MOBILE TELECOMMUNICATIONS MARKET ................ 177
A. Access to Information on Mobile Telecommunications Services................................................ 178
B. Consumer Ability to Switch Service Providers ........................................................................... 180
1. Churn..................................................................................................................................... 180
2. Local Number Portability...................................................................................................... 182
3. Barriers to Switching............................................................................................................. 185
VI. MOBILE TELECOMMUNICATIONS MARKET PERFORMANCE............................................. 187
A. Pricing Levels and Trends ........................................................................................................... 188
1. Pricing Trends ....................................................................................................................... 188
a. Mobile Telephony........................................................................................................... 188
b. Mobile Data .................................................................................................................... 194
2. Average Revenue Per Unit .................................................................................................... 195
B. Quantity of Services Purchased ................................................................................................... 196
1. Subscriber Growth................................................................................................................. 196
a. Mobile Telephony........................................................................................................... 196
b. Mobile Broadband and Other Data ................................................................................. 201

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Federal Communications Commission DA 09-54

2. Minutes of Use ...................................................................................................................... 208
3. Mobile Broadband and Other Data Usage............................................................................. 209
4. Sub-National Penetration Rates............................................................................................. 212
C. Network Quality .......................................................................................................................... 214
D. International Comparisons ........................................................................................................... 217
1. Mobile Voice......................................................................................................................... 217
2. Mobile Data........................................................................................................................... 225
VII. INTERMODAL ISSUES............................................................................................................. 228
A. Wireless Wireline Competition................................................................................................. 228
1. Wireless Substitution............................................................................................................. 229
2. Wireless Alternatives ............................................................................................................ 231
B. Wireless Local Area Networks and Wireless-Wireline Convergence ......................................... 233
VIII. MOBILE SATELLITE SERVICES ............................................................................................ 240
A. Introduction.................................................................................................................................. 240
B. Spectrum Bands Potentially Available for MSS.......................................................................... 241
C. Product and Geographic Markets................................................................................................. 246
1. Product Market ...................................................................................................................... 246
2. Geographic Market................................................................................................................ 248
D. Market Structure .......................................................................................................................... 249
1. Number of Carriers................................................................................................................ 249
2. Privatization, Consolidation and Exit.................................................................................... 251
E. Provider Conduct ......................................................................................................................... 253
F. Pricing.......................................................................................................................................... 259
G. Technology Deployment and Upgrades....................................................................................... 263
1. Ancillary Terrestrial Component........................................................................................... 263
2. Satellite System Deployment Plans....................................................................................... 266
H. Market Performance..................................................................................................................... 273
IX. CONCLUSION............................................................................................................................ 274
X. PROCEDURAL MATTERS ....................................................................................................... 278
APPENDIX A Mobile Telephone Tables
APPENDIX B Maps
APPENDIX C List of Commenters


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Map 1: Mobile Telephone Competitors


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I.

EXECUTIVE SUMMARY

1.
This is the thirteenth annual report ("Thirteenth Report" or "Report") to Congress on the
state of competition in the Commercial Mobile Radio Services ("CMRS") marketplace. The Thirteenth
Report
finds that U.S. consumers continue to reap significant benefits including low prices, new
technologies, improved service quality, and choice among providers from competition in the CMRS
marketplace, both terrestrial and satellite CMRS.1 The metrics below indicate that there is effective
competition in the CMRS market and demonstrate the increasingly significant role that wireless services
play in the lives of American consumers. In particular, these metrics indicate that wireless technology is
increasingly being used to provide a range of mobile broadband services.
2.
The Thirteenth Report is based, in part, on data available through a contract with
American Roamer, which provide the detailed boundaries of the network coverage areas of every
operational mobile telephone carrier in the United States. Using these maps, we have been able to
estimate the percentage of the U.S. population covered by a certain number of providers and the
percentage of the population covered by different types of network technologies, including mobile
broadband technologies. We base these estimates on census blocks (of which there are over 8 million in
the United States), allowing for a significantly more accurate and granular assessment of competition in
the United States than previous analyses done on a county-by-county basis.

Number of Providers & Network Deployment

Approximately 99.6 percent of the total U.S. population, have one or more different operators
(cellular, PCS, and/or SMR) offering mobile telephone service in the census blocks in which
they live.
Approximately 98.5 percent of the U.S. population living in rural census blocks, or about 60
million people, have one or more different operators offering mobile telephone service in the
census blocks within the rural counties in which they live.
More than 95 percent of the U.S. population lives in census blocks with at least three mobile
telephone operators competing to offer service, and more than 60 percent of the population
lives in census blocks with at least five competing operators.

1 Unless specifically noted, discussions of mobile telephone, wireless, and CMRS services, providers, subscribers,
and other metrics in the Thirteenth Report refer to and include only terrestrial, rather than both terrestrial and
satellite, services.

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Federal Communications Commission DA 09-54

Estimated Mobile Telephone Rollouts by Census Block


Total Number of Number of POPs Contained % of Total Square Miles % of Total
Providers in a
Blocks
in Those Blocks U.S. POPs Contained in
U.S.
block
Those Blocks
Square
Miles
1 or More
8,052,071
284,153,539
99.6%
2,831,266
74.5%
2 or More
7,627,040
280,987,512
98.5%
2,244,435
59.1%
3 or More
6,773,535
272,475,210
95.5%
1,548,924
40.8%
4 or More
5,755,825
258,167,149
90.5%
985,650
25.9%
5 or More
3,938,715
185,164,711
64.9%
532,606
14.0%
6 or More
1,596,405
70,238,178
24.6%
198,965
5.2%
7 or More
302,022
12,576,363
4.4%
39,004
1.0%
*Based on Census 2000.
An analysis of service provision by census block, including and excluding federal land,
shows similar population coverage. By comparison, an examination of geographic coverage
shows a higher percentage of geographic coverage when excluding federal lands. For
example, approximately 75 percent of the total United States land area is covered by one or
more providers, compared to approximately 84 percent of the land area when excluding
federal land.
Average concentration in the U.S. mobile telephone market, as measured by the Herfindahl-
Hirschman Index ("HHI"), was unchanged at 2674 at the end of 2007. No single competitor
has a dominant share of the market.
In addition to facilities-based mobile telephone operators, the CMRS industry also includes
mobile telephone resellers and Mobile Virtual Network Operators ("MVNOs"), mobile
satellite service providers, and various broadband and narrowband data service providers.

Subscribers


Mobile Telephone Subscribers

300
263
242
250
213
185
200
161
n
s
)
illio
150
(
m
100
50
0
2003
2004
2005
2006
2007

At the end of 2007, there were 263 million mobile telephone subscribers in the United States,
up from 241.8 million at the end of 2006.
The additional 21.2 million subscribers represent an increase of almost nine percent in 2007.
The nationwide mobile penetration rate at year end 2007 rose to approximately 86 percent of

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Federal Communications Commission DA 09-54

the approximately 305.6 million people in the United States.

Usage


MOUs Per Subscriber

769
800
708
714
584
600
507
400
200
0
2003
2004
2005
2006
2007

1. Voice:
Average minutes-of-use per subscriber per month ("MOUs") rose to about 769
minutes in the second half of 2007, up from 714 minutes in the same period of
2006.
2. Text Messaging:

Monthly Text / SMS Traffic Volumes

60
s
48.10
ge 50
a
s
s 40

e
f
M 30

o
18.71
ns 20
io
9.76
ill 10
2.08
4.66

B

0
2003
2004
2005
2006
2007


The monthly volume of text messaging traffic grew to 48.1 billion messages
during December 2007, up from 18.7 billion messages during December 2006,
9.8 billion messages during December 2005 and 4.7 billion messages during
December 2004.
We estimate that the average number of text messages sent per subscriber was
182.9 per month using December, 2007 text messaging traffic data. For
December 2006, the average number of text messages sent per subscriber was
77.3 per month. The additional 105 text messages per subscriber in December

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Federal Communications Commission DA 09-54

2007 represents an increase of almost 120 percent compared to December 2006.2
3. Multimedia Messaging:
The volume of photo messaging and other types of multimedia messaging traffic
more than doubled in the past year, rising from 2.7 billion messages in 2006 to
6.1 billion messages in 2007.
4. Mobile Web Services:
An estimated 13 percent of U.S. mobile telephone subscribers accessed news and
information via a mobile Web browser in January 2008, and rates were much
higher among "smartphone" users (58 percent) and iPhone users (nearly 85
percent).
"Smartphone" users spend an average of more than four and one-half hours per
month browsing the mobile Web in the United States.

Prices

Average Revenue Per Minute

$0.12
$0.10
$0.10
$0.09
$0.08
$0.07
$0.07
$0.06
$0.06
$0.04
$0.02
$0.00
2003
2004
2005
2006
2007

On average U.S. mobile subscribers paid about $0.06 per minute for mobile voice calls in
December 2007 based on an estimate of average revenue per minute ("RPM").
RPM declined by one cent from $0.07 in 2006 to $0.06 in 2007, continuing the price trend
since 1994.
The Thirteenth Report includes an analysis "Voice RPM," which excludes the portion of
Average Revenue Per Unit ("ARPU") generated by data services. As the overall RPM
declined during 2007, voice RPM also dropped from $0.06 in 2006 to $0.05 in 2007.
The percentage of the major U.S. operators' customers who subscribe to prepaid plans rose
from 15 percent at the end of 2006 to roughly 17 percent at the end of 2007.


2 See infra note 587.

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New Technologies and Services

During 2006 and 2007, wireless providers have continued to deploy mobile broadband
networks, such as CDMA EV-DO and WCDMA/HSDPA, which allow typical downstream
data transfer speeds of 400-800 kbps.
o Approximately 92 percent of the U.S. population lives in census blocks with at least
one mobile broadband provider.
o The two nationwide CDMA operators and a large regional CDMA provider are
upgrading their EV-DO networks with EV-DO Revision A ("Rev. A"), which
increases average downstream speeds to 600 kbps-1.4 Mbps and significantly
improves average uplink speeds to 350-800 kbps.
o One nationwide GSM operator launched its WCDMA/HSDPA network in May 2008,
and the other nationwide GSM operator is upgrading its WCDMA/HSDPA network
with HSUPA, which enables average upload speeds of 500-800 kbps.
o EV-DO/EV-DO Rev. A networks cover 92.2 percent of the U.S. population, based on
census blocks, and WCDMA/HSDPA networks cover 53.8 percent.
o As of December 31, 2006, 21.9 million mobile wireless devices capable of accessing
the Internet at broadband speeds were in use in the United States, versus 3.1 million
at the end of 2005.
New and innovative mobile services and devices launched during the past year include:
o A mobile TV service launched by AT&T using Qualcomm's MediaFLO network
rivals a service already offered by Verizon Wireless using the same network.
o The Apple 3G iPhone, launched by AT&T in July 2008, runs on the provider's
WCDMA/HSDPA network, which allows it to navigate the Internet at much faster
speeds than the original iPhone launched in June 2007.
o The App Store, opened the same day as the launch of the 3G iPhone, is an online
software clearinghouse that sells third-party applications and content developed for
the iPhone using a software development kit released by Apple.
o Google and T-Mobile unveiled the T-Mobile G1 in September 2008 one month
after the Commission approved the first Android-based phone.

Auctions & New Entry

The FCC's 700 MHz band Auction (Auction 73) was the largest auction in FCC history and
closed on March 18, 2008, with approximately $19.0 billion in net winning bids, exceeding
Congressional estimates.
The 700 MHz band Auction provided small businesses, new entrants, rural providers, and
existing nationwide wireless providers with access to additional spectrum enabling them to
deploy the next generation of wireless networks.
The 700 MHz band Auction advances open platform policies by requiring that licensees of
one-third of the spectrum allow users to choose their own wireless devices and software.


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Federal Communications Commission DA 09-54

Churn

Most mobile telephone providers report churn rates between 1.5 percent and 3.0 percent per
month.
Approximately 13.3 million wireless subscribers ported their phone number to another
wireless carrier during 2007, about 30 percent higher than the 10.3 million subscribers who
ported their phone numbers during 2006.

Service Quality

The J.D. Power and Associates 2008 Wireless Call Quality Performance Study (Volume 2),
released in September 2008, found that the overall number of reported wireless call quality
problems is 15 problems per 100 calls, unchanged from the same reporting period in 2007;
these are the lowest levels in the history of the study.

International Comparisons

In 2007, the U.S. mobile penetration rate surpassed that in Japan for the first time.
U.S. mobile subscribers lead the world in average voice usage by a wide margin, with
Western European subscribers averaging 161 minutes and Japanese subscribers averaging
138 minutes, compared to an average of over 700 minutes in the U.S.
Mobile calls were significantly less expensive on a per minute basis in the United States than
in Western Europe (where RPM averaged $0.20 in the last quarter of 2007) and Japan
($0.26).
Mobile Internet penetration is higher in the United States (15.6 percent of wireless
subscribers) than in Western European countries such as the United Kingdom (13 percent),
Italy (12 percent), France (9.6 percent) and Germany (7.4 percent).

Wireless-Wireline Competition


During the second half of 2007, 14.5 percent of U.S. adults lived in households with only
wireless phones, up from 11.8 percent in the second half of 2006, 7.8 percent in the second
half of 2005, and more than quadruple the percentage (3.5 percent) in the second half of
2003.
In the same period, one in three adults aged 18-24 years (31 percent) lived in households with
only wireless telephones, and 34.5 percent of adults aged 25-29 years lived in wireless-only
households.

Wireless-Wireline Convergence


Both T-Mobile and Sprint Nextel now offer, on a nationwide basis, add-on services using Wi-
Fi and femtocell technology, respectively, for their mobile customers. These add-on services
improve indoor coverage and allow consumers to avoid using their monthly cellular airtime
minutes while at home or in their offices. For those T-Mobile customers who want to use
their wireline number at home, T-Mobile now offers a $10 monthly add-on plan for home
service.

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Federal Communications Commission DA 09-54


Mobile Satellite Services

At the end of 2007, there were over 1.1 million mobile satellite service ("MSS") subscribers
in the United States, a 23 percent increase over year-end 2006.
Currently, there are five MSS operators that provide voice and/or data service in the U.S.
The voice providers include Globalstar, Inmarsat, Iridium and MSV. In addition, Orbcomm
provides data-only services.
Two additional companies planning to use the 2 GHz spectrum, ICO Global Communications
("ICO") and TerreStar Networks, Inc. ("TerreStar"), are developing their systems. ICO
launched its G1 satellite from Cape Canaveral in April, 2008, and TerreStar expects that the
launch of its geostationary spacecraft will occur in the second quarter of 2009.
MSS providers are introducing innovative pricing plans such as Globalstar's "Unlimited
Royalty" rate plan with a $39.99 per month charge, which will be reduced at the completion
of each calendar year, falling to $19.99 in 2009. In 2007, Iridium also introduced a new
pricing plan, offering a prepaid airtime packages for six months of service for a low as 30 to
40 cents per minute.
In 2003, the Commission permitted MSS licensees to provide an Ancillary Terrestrial
Component ("ATC") to their satellite systems to assist their signals when not in line-of-sight.
The satellite industry is optimistic about the potential positive effects of the ATC order.
The satellite industry states that MSS/ATC providers will offer user equipment that resembles
traditional mobile consumer devices, and that they will be able to take better advantage of
economies of scale for equipment, thereby making it possible for them to offer high quality
voice, broadband, and other services to their subscribers at prices that more closely
approximate those of cellular and PCS operators.

II.

INTRODUCTION

A.

Background

3.
In 1993, Congress created the statutory classification of Commercial Mobile Radio
Services3 to promote the consistent regulation of mobile radio services that are similar in nature.4 At the

3 Commercial Mobile Services came to be known as the Commercial Mobile Radio Services, or "CMRS." CMRS
includes a large number of terrestrial services and some mobile satellite services. See 47 C.F.R. 20.9(10).
4 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). As in the past, this Report bases its analysis on a
consumer-oriented view of wireless services by focusing on specific product categories, regardless of their
regulatory classification. In some cases, this includes an analysis of offerings outside the umbrella of "services"
specifically designated by the Commission as CMRS. However, because providers of these other services can
compete with CMRS providers, the Commission has indicated that it is important to consider them in the analysis.
As the Commission said, paraphrasing the Department of Justice/Federal Trade Commission guidelines on merger
review, "When one product is a reasonable substitute for the other in the eyes of consumers, it is to be included in
the relevant product market even though the products themselves are not identical." Application of Echostar
Communications Corporation, General Motors Corporation, and Hughes Electronics Corporation (Transferors) and
Echostar Communications Corporation (Transferee), Hearing Designation Order, 17 FCC Rcd 20559, 20606, 106
(2002).

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Federal Communications Commission DA 09-54

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 Commission to
submit annual reports that analyze competitive conditions in the industry.5 This Report is the thirteenth of
the annual reports6 on the state of CMRS competition. The Report is retrospective, focusing on
conditions prevailing in the CMRS marketplace as of the end of the 2007 calendar year and major events
in the 2008 calendar year.
4.
This Report, like the previous reports, discusses CMRS as a whole because Congress
called on the Commission to report on "competitive market conditions with respect to commercial mobile
services."7 In particular, the statute requiring the annual report on CMRS competition states:
The Commission shall review competitive market conditions with respect to commercial
mobile services and shall include in its annual report an analysis of those conditions.
Such analysis shall include an identification of the number of competitors in various
commercial mobile services, an analysis of whether or not there is effective competition,
an analysis of whether any of such competitors have a dominant share of the market for
such services, and a statement of whether additional providers or classes of providers in

5 47 U.S.C. 332(c)(1)(C).
6 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, First Report, 10 FCC
Rcd 8844 (1995) ("First 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,
Second Report, 12 FCC Rcd 11266 (1997) ("Second 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, Third Report, 13 FCC Rcd 19746 (1998) ("Third 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, 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"); 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, 17 FCC Rcd 12985 (2002) ("Seventh
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, Eighth Report, 18
FCC Rcd 14783 (2003) ("Eighth 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, Ninth Report, 19 FCC Rcd 20597 (2004) ("Ninth 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, Tenth Report, 20 FCC Rcd 15908 (2005) ("Tenth
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, Eleventh Report, 21
FCC Rcd 10947 (2006) ("Eleventh 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, Twelfth Report, 23 FCC Rcd 2241 (2008) ("Twelfth Report"). The reports can also be
found on the FCC's web site, http://wireless.fcc.gov/index.htm?job=cmrs_reports (last visited Sept. 16, 2008).
7 47 U.S.C. 332(c)(1)(C). As noted in previous Reports, 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 markets than any used, suggested, or implied in this Report. See, e.g.,
Twelfth Report,
23 FCC Rcd at 2252, n. 5.

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those services would be likely to enhance competition.8

5.
In this Thirteenth Report, we comply with each of the four statutory requirements for
analyzing competitive market conditions with respect to commercial mobile services. As did previous
reports, we base our analysis of competitive market conditions on a range of standard indicators
commonly used for the assessment of effective competition. All Reports since the Ninth Report have
organized the presentation of the various indicators based on a framework that groups such indicators into
four distinct categories: (A) Market Structure, (B) Provider Conduct, (C) Consumer Behavior, and (D)
Market Performance ("Structure-Conduct-Performance framework").9 This framework provides a
systematic approach to addressing the four statutory requirements. For example, Section III on market
structure identifies the number of competitors in various commercial mobile services, and it also uses
subscriber market shares to measure concentration in the market for mobile telephone services. In
addition, Section III tracks the entry of additional providers or classes of providers in commercial mobile
services, and more generally provides an analysis of the conditions affecting the ability of additional
providers or classes of providers to enter the market for commercial mobile services. As stated in earlier
reports, the framework proceeds from the premise that indicators of market structure such as the number
of competitors and their market shares are not, by themselves, a sufficient basis for determining whether
there is effective competition, and whether any of the competitors have a dominant share of the market for
commercial mobile services. Rather, we make these determinations based on an analysis of both the
structural and the behavioral characteristics of the CMRS marketplace.

B.

Structure of the Report

6.
As noted above, the structure of the Thirteenth Report follows the Structure-Conduct-
Performance framework. The section on market performance evaluates the outcomes of competitive
conditions in the CMRS industry from the consumer's point of view, focusing on the benefits to
consumers of competition, such as lower prices, higher consumption and better quality. In contrast, the
sections on market structure, provider conduct, and consumer behavior examine the various structural and
behavioral determinants of such market outcomes.
7.
In using this framework to analyze competitive market conditions with respect to CMRS,
we have integrated the discussion and analysis of mobile voice, mobile broadband and other mobile data
services within each of the four categories of indicators. Many mobile voice operators also offer mobile
broadband services and other mobile data services using the same spectrum, network facilities, and
customer equipment. Furthermore, many U.S. mobile providers have integrated the marketing of mobile
voice, mobile broadband and other mobile data services. For these reasons, we find it reasonable to
analyze competitive conditions with respect to these services together.
8.
Previous reports also identified, and distinguished from such integrated mobile operators,
mobile data providers that offer only mobile data services, instead of both voice and data services,
including those providers that offer such data-only services on networks distinct from those traditionally
used to provide mobile voice. Such providers were termed "data-only providers." Consistent with the
Twelfth Report, in this Report we have divided the providers formerly included in this category into two
separate groups: broadband data providers and narrowband data providers. The first group comprises
providers other than mobile telephone operators that offer portable or mobile wireless broadband Internet
access and other broadband services. The second group encompasses providers that offer messaging and
other narrowband mobile data services to enterprise customers, such as paging and telemetry services. In
addition, we identify mobile video providers, which operate networks dedicated to delivering one-way,

8 47 U.S.C. 332 (c)(1)(C).
9 Ninth Report, 19 FCC Rcd at 20602-20603, 8 & 20607, 17.

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IP-based, broadcast or multicast video programming to mobile telephone customers.
9.
As in previous reports, the Thirteenth Report includes an analysis of wireless-to-wireline
competition. Since such "intermodal" competition is distinct from "intra-modal" competition among the
various wireless providers, we have placed our analysis of wireless-to-wireline competition in a separate
section on intermodal issues (Section VII), following the sections on market structure, provider conduct,
consumer behavior, and market performance within the CMRS industry. In addition to the analysis of
wireless-to-wireline competition, Section VII also provides a brief discussion of Wireless Local Area
Networks and Wireless-Wireline Convergence. Although both CMRS and WLAN services are wireless
services, WLAN services are based on a different wireless technology and spectrum model than CMRS.
Moreover, they have the potential to act as a substitute as well as a complement to data services offered
over mobile telephone networks.
10.
Prior to the Twelfth Report, the discussion and analysis of the terrestrial mobile services
sector and the mobile satellite services sector were integrated within each of the four categories of
indicators in previous reports. By contrast, for the Thirteenth Report, as in the Twelfth Report, we have
provided a more detailed discussion and analysis of the mobile satellite services sector and placed it in a
separate section (Section VIII) of this Report.
11.
The Twelfth Report further refined the analysis of competition in the mobile telephone
sector by compiling a list of census blocks with a certain level of coverage by mobile telephone
providers.10 It included in the Commission's analysis of service provision on a county-by-county basis to
allow comparisons with previous Annual Competition Reports.11 In this Report, however, we report only
on a census block basis. We no longer report service on a county-by-county basis because a census block
analysis provides a more accurate and granular assessment of wireless competition in the United States.12
This transition is similar to when the Reports moved to a county analysis from a BTA analysis.13

III.

MOBILE TELECOMMUNICATIONS MARKET STRUCTURE

12.
The analysis in this section covers two distinct aspects of mobile telecommunications
market structure. The first is the current level of horizontal concentration as measured by the number of
providers competing in the various mobile service markets and their respective market shares. The
second is the ease or difficulty of entry into the various mobile service markets, with particular emphasis
on the way spectrum allocation and availability affect entry conditions and barriers to entry.
13.
Section III.A provides an overview of the various types of CMRS providers. Section
III.B provides an analysis of the current level of horizontal concentration in the mobile telephone sector.
Section III.C examines recent or impending transactions that affect, or have the potential to affect, the
level of horizontal concentration. Section III.D examines entry conditions and provides an overview of
the different frequency bands that can be used to provide CMRS. The final Section, III.E, addresses the
structure of rural mobile telecommunications markets in the United States.

10 Twelfth Report, 23 FCC Rcd at 2261, 35. This analysis was performed through a contract with American
Roamer, an independent consulting firm that tracks service provision for mobile voice and mobile data services.
11 Id. at 2264, 42.
12 Id. at 2245, 2. Moreover, as stated in the Twelfth Report that "the percentage of the population covered by a
given number of competitors resulting from the use of a census block analysis is similar to the figure provided by a
county analysis, with the absolute difference being less than a few percentage points in all cases. However, we find
that there are large differences in the percentage of the geographic area covered." Id. at 2266, 48.
13 See Fifth Report, 15 FCC Rcd at 17676-77.

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Federal Communications Commission DA 09-54

A.

Overview of Service Providers

1.

Facilities-Based Mobile Telephone Providers

14.
As of year-end 2007, there were four mobile telephone operators in the United States that
analysts typically describe as "nationwide": AT&T Inc. ("AT&T") (formerly known as Cingular
Wireless),14 Sprint Nextel Corp. ("Sprint Nextel"),15 T-Mobile USA ("T-Mobile"),16 and Verizon
Wireless, LLC ("Verizon Wireless").17 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 four mobile telephone carriers that analyst reports typically describe as
nationwide all offer facilities-based service in at least some portion of the western, mid-western, and
eastern United States. A map of the combined coverage areas of these four operators can be found in
Appendix B. In addition, each of the four national operators has networks covering at least 235 million
people (out of 305.6 million).18 In addition to the nationwide operators, there are a number of large
regional players, including: Leap Wireless ("Leap"), which covered 85 million POPs; United States
Cellular Corp. ("US Cellular"), which covered 82.3 million POPs; Alltel Corp. ("Alltel"), which covered
79.8 million POPs; and Metro PCS ("MetroPCS"), which covered 66.8 million POPs.19 Moreover, many
regional and smaller providers are able to offer pricing plans with nationwide coverage through roaming
agreements with other providers.

14 Cingular Wireless had been a joint venture of AT&T and BellSouth Corporation ("BellSouth"). On December 29,
2006, AT&T merged with BellSouth. With the BellSouth acquisition, AT&T thereby acquired BellSouth's 40
percent economic interest in AT&T Mobility LLC ("AT&T Mobility"), formerly Cingular Wireless LLC, resulting
in 100 percent ownership of AT&T Mobility. In 2007, AT&T began rebranding its wireless operations from
Cingular to AT&T. AT&T, Inc., SEC Form 10-K, Feb. 26, 2007, at 1.
15 Sprint Nextel was created by the merger of Sprint Corp. ("Sprint") and Nextel Communications, Inc. ("Nextel").
See Tenth Report, 20 FCC Rcd at 15931, 60.
16 T-Mobile USA is a wholly-owned subsidiary of Deutsche Telekom AG ("Deutsche Telekom").
17 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, Feb. 28, 2008, at 7.
18 As a general matter, we use the most recent relevant data available. For purposes of calculating numbers on
broader geographic bases, such as nationally and for Economic Areas, we use U.S. Census Bureau estimates as of
July 1, 2007. See infra note 555. For purposes of calculating the extent of service provision using census blocks,
we use 2000 Census population figures because that is the Census Bureau's most recent data about population at the
census block level.
19 John C. Hodulik, et al., Wireless 411, UBS Warburg, Equity Research, Mar. 18, 2008, at 16 ("4Q07 Wireless
411
").

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Federal Communications Commission DA 09-54


Chart 1: YE2007 Mobile Telephone Subscribers by Company

(in thousands, not representative of market share in any particular market) 20

Others

39,827

AT&T

Alltel

70,052
13,400

T-Mobile

28,685

Sprint Nextel

Verizon

45,329

Wireless

65,707

15.
Because the four nationwide mobile telephone operators, as well as the large regional and
numerous other smaller operators, have different geographic footprints, they do not all compete head-to-
head in each and every region and locality of the country. As a result, we define the scope of geographic
markets on a regional or local basis. For example, Section III.B.2 below identifies the number of mobile
telephone competitors on a census block basis.
16.
Facilities-based mobile telephone providers currently offer circuit-switched commercial
mobile voice services that are interconnected with the PSTN. In addition, many of these providers offer a
range of mobile data services and applications, as described in Section IV.B.6, Mobile Data Services and
Applications, infra. Some of these services and applications connect to the PSTN, while many rely on IP-
based, packet-switched networks. Furthermore, the broadband data, narrowband data, and mobile video
providers described below offer additional mobile data services and applications, some of which compete
with and some of which complement those offered by mobile telephone operators.
2.

Resale/MVNO Providers

17.
Resellers purchase airtime from facilities-based providers and resell service to the public
for profit.21 Many resellers today are often referred to as Mobile Virtual Network Operators ("MVNOs").
One commenter argued:
More than 40 MVNOs compete to serve consumers, offering personalized and differentiated
products and services, including tailored handsets and applications. These MVNOs target
specific demographic and specialized interest groups by appealing to various lifestyles, including

20 This includes companies with publicly-available subscriber counts. See Appendix A, Table A-4: Top 20 Mobile
Telephone Operators by Subscribers. Total subscribers based on Table A-4.
21 Interconnection and Resale Obligations Pertaining to Commercial Mobile Radio Services, First Report and
Order
, 11 FCC Rcd 18455, 18457 (1996).

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Federal Communications Commission DA 09-54

the young, the elderly, differing ethnicities, the hip and trendy to user-friendly and affordable.22
MVNOs distinguish themselves via content, but like facilities-based providers, they experiment with a
number of business models, such as pre-paid and unlimited plans. According to information provided to
the Commission in its ongoing local competition and broadband data gathering program, the resale sector
accounted for 7 percent of all mobile telephone subscribers, or 18.4 million subscribers, at the end of
December 2007.23 Similarly, one analyst estimated that there were 18.2 million wireless subscribers
receiving service from a resale provider at the end of 2007, up from 15.1 million customers at the end of
2006.24
18.
One analyst estimated that there were about 55 MVNOs operating as of May 2008.25
TracFone Wireless Inc., which serves more than 10 million customers with prepaid offerings,26 is the
largest reseller of wireless service. Virgin Mobile USA ("Virgin Mobile"), a joint venture between Sprint
Nextel and Richard Branson's Virgin Group, LLC, which targets its prepaid offerings at the youth market,
now serves almost 4.99 million subscribers.27 As stated in the Twelfth Report, other MVNOs include:
Airlink Mobile, AirVoice Wireless, Azteca Mobile, Beyond Wireless/Cbeyond, ConsumerCellular,
DEXA Wireless, Excel Wireless, Firefly Mobile, GSR Mobile, kajeet, Jitterbug, LetsTalk.com Liberty
Wireless, Omni Prepaid, PowerNet Mobile, Primus Mobile, Qwest, STI Mobile, TuYo Mobile, Working
Assets Wireless, 7-Eleven Speak Out, and 9278 Mobile.28 As discussed in the Twelfth Report, many of
these companies are targeting specific demographic groups or "micro-niches" of users, such as Cancer
Survivors Mobile (support for those affected by the disease).29
19.
While a number of MVNOs are flourishing, the Twelfth Report also found that certain
MVNOs had been unsuccessful in competing in the CMRS industry.30 In particular, it noted that Mobile
ESPN, Amp'd Mobile, and Disney Mobile had each ceased offering MVNO service in 2007.31 In 2008,
Hispanic-focused Movida filed for Chapter 11 bankruptcy.32 It also has been reported that Sonopia,

22 CTIA-The Wireless Association Comments, at 15-16 (filed Mar. 26, 2008) ("CTIA 2008 Comments").
23 See Appendix A, Table A-2, infra. Number of resale subscribers calculated from information in table.
24 4Q07 Wireless 411, Table 2: End-of-Period Subscribers, at 5 (estimating the total wholesale number by the four
nationwide service operators).
25 See Paul Davidson, Many Wireless Resellers Going Under, USA TODAY, May 8, 2008 ("ManyWireless Resellers
Going Under
").
26 TracFone Nationwide Prepaid Wireless About Us, available at http://www.tracfone.com (hyperlink "About
Us") (last visited Dec. 15, 2008).
27 Virgin Mobile USA Reports Results For The Second Quarter And First Six Months Of 2008, News Release,
Virgin Mobile USA, at 3, Aug. 13, 2008. Sprint Nextel also targets the teenage market through a subsidiary with its
iDEN-based push-to-talk product, using an alternative prepaid brand, "Boost Mobile." See Ninth Report, 19 FCC
Rcd at 20615, 40 for more history on the venture. Boost Mobile had 4 million customers at the end of 2006.
Investor Quarterly Update: Fourth Quarter 2006 Results, News Release, Sprint Nextel, Feb. 28, 2007.
28 See Twelfth Report, 23 FCC Rcd at 2257, 22 (citing CTIA 2007 NOI Comments, at 13).
29 Id. at 2257, 22-23. As noted in the Twelfth Report, most of the niches-targeting MVNOs use the service as a
self-sustaining way to promote themselves or their causes and keep members or customers engaged.
30 Id. at 2258, 24.
31 Id.
32 See Many Wireless Resellers Going Under, note 25, supra.

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Federal Communications Commission DA 09-54

which helps clubs and organizations set up their own mobile services, is shutting down.33 In addition, in
June 2008, Virgin Mobile acquired Helio. One report notes that that the failure of certain individual
resellers is due to (1) fresh competition from the major carriers,34 (2) lack of distinctive service,35 (3) low
volumes,36 and (4) operational blunders.37
3.

Broadband Data Providers

20.
In addition to the voice and data services offered by mobile telephone providers, other
providers offer mobile or portable wireless broadband services using Broadband Radio
Service/Educational Broadband Service ("BRS/EBS") in the 2.5 GHz band or Wireless Communications
Systems ("WCS") spectrum in the 2.3 GHz band.
21.
There are two significant licensees in the BRS/EBS band: Clearwire Corporation
("Clearwire") and Sprint Nextel. Clearwire offers portable wireless high-speed Internet access and
Voice-over-Internet Protocol ("VoIP") services to consumers using spectrum in the 2.5 GHz BRS/EBS
band.38 As of December 31, 2007, Clearwire's U.S. network covered 46 markets and approximately 13.6
million people,39 and it had approximately 350,000 wireless broadband Internet subscribers.40 Sprint
Nextel currently uses the 2.5 GHz band to offer residential and small business customers fixed wireless
Internet access services, using "first generation" line of sight technology.41 Sprint Nextel offers this
service in 14 markets and has approximately 16, 500 subscribers.42 As part of the merger commitments
made by Sprint and Nextel in 2005 to close their merger, Sprint Nextel must build a network using the 2.5
GHz band to reach 15 million people in the first four years, and it also must reach an additional 15 million
people within six years of the Commission's Order approving the merger.43
22.
Both Clearwire and Sprint Nextel are planning to deploy a next generation broadband
wireless network for the 2.5 GHz band using the Worldwide Inter-Operability for Microwave Access
("WiMAX") technology. On May 7, 2008, Clearwire and Sprint Nextel announced that they had entered
into an agreement to combine their 2.5 GHz wireless broadband businesses to form a new wireless

33 Id.
34 Id (citing Chris Collins of Entner and Yankee Group).
35 Id.
36 Id. (citing Ovum analyst Raymond Yu).
37 Id. (citing Paul Greene, CEO of APC Wireless).
38 For a description of the technology used by the broadband data providers discussed in this section, see Section
IV.B.1.e, Broadband Data Networks and Technology Deployment, infra.
39 Clearwire Corp., SEC Form 10-K, Mar. 13, 2008, at 3.
40 Id. at 7.
41 Sprint Nextel Corp., SEC Form 10-K, Mar. 1, 2008, at 11-12.
42 Id.
43 See Letter from Lawrence R. Krevor, Nextel Communications, Inc., and Vonya B. McCann, Sprint Corporation,
to Marlene H. Dortch, Secretary, FCC, WT Docket No. 05-63 (Aug. 2, 2005); see also Applications of Nextel
Communications, Inc. and Sprint Corporation For Consent to Transfer Control of Licenses and Authorizations,
Memorandum Opinion and Order, 20 FCC Rcd 13967, 13422, 151 & 1343, 192 (2005).

18




Federal Communications Commission DA 09-54

communications company, which also will be named Clearwire.44 The company "will be focused on
expediting the deployment of the first nationwide mobile WiMAX network to provide a true mobile
broadband experience for consumers, small businesses, medium and large enterprises, public safety
organizations and educational institutions."45 The company plans to cover up to 140 million people in the
United States in thirty-six months; permit consumers to use any lawful device that they want so long as it
is compatible with its WiMAX network; permit consumers to download and use any software
applications, content, or services they desire, subject only to reasonable management practices and law
enforcement and public safety considerations; and, offer non-exclusive wholesale access to its network.46
The Commission approved the Sprint Nextel/Clearwire transaction on November 4, 2008,47 and the
companies closed on November 28, 2008.48
23.
AT&T is a significant licensee in the WCS band, and it is using its WCS spectrum
licenses to offer fixed wireless broadband Internet access service in eight U.S. markets, including Juneau,
Alaska, where the company has deployed WiMAX technology.49 As part of the merger commitments
made by the company in conjunction with its acquisition of BellSouth, AT&T plans to offer mobile or
fixed wireless broadband service to 25 percent of the population covered by its WCS licenses (not
including Alaska) by July 21, 2010.50
4.

Mobile Video Providers

24.
Certain wireless licensees have been developing and launching networks dedicated to
delivering one-way, IP-based, broadcast or multicast video programming to mobile telephone customers.
Because these networks are unidirectional (downlink only), the video services are sold to end users
through mobile telephone operators and rely on the mobile telephone operators' networks for any uplink
communications. Additionally, as currently offered, subscribers must use a device that is compatible with
the mobile television network in order to receive programming.

44 Sprint And Clearwire To Combine WiMAX Businesses, Creating A New Mobile Broadband Company, News
Release, Sprint Nextel and Clearwire Corp. (May 7, 2008). See also Section III.D, Entry Conditions and Potential
Barriers to Entry, infra, for further discussion of the Sprint Nextel/Clearwire transaction.
45 Id. See Section IV.B.1.e, Broadband Data Networks and Technology Deployment, infra, for further discussion of
the WiMAX technology.
46 Sprint Nextel/Clearwire Description of the Transaction and Public Interest Statement, ULS File No. 0003462540,
WT Docket No. 08-94, at 1-2 & 20 (amended Jun. 24, 2008).
47 Sprint Nextel Corp. and Clearwire Corp., Applications for Consent to Transfer Control of Licenses, Leases, and
Authorizations, WT Docket No. 08-94, Memorandum Opinion and Order, FCC 08-259, at 128 (rel. Nov. 7, 2008)
("Sprint Nextel/Clearwire Order").
48 Clearwire Completes Landmark Transaction with Sprint Nextel to Combine 4G Mobile WiMAX Businesses;
Clearwire Receives $3.2 Billion Cash Investment from Comcast, Intel, Time Warner Cable, Google and Bright
House Networks
, News Release, Clearwire Corp. (Nov. 28, 2008).
49 AT&T Alascom Delivers New Broadband Internet Choice for Juneau, News Release, AT&T, Aug. 6, 2007; Kelly
Hill, Big Players Have Big Plans for WiMAX, RCR WIRELESS NEWS, Oct. 24, 2007 (citing AT&T spokeswoman
Jenny Parker). The company has conducted trials or limited deployments of WiMAX or other fixed wireless
broadband technologies in a total of 22 markets. Id.
50 Notice of Written Ex Parte Communication by Joan Marsh, AT&T, "Revised Merger Commitments," Review of
AT&T Inc. and BellSouth Corp. Application for Consent to Transfer of Control, WC Docket No. 06-74, Jan. 4,
2007, at 10. AT&T also agreed to divest its 2.5 GHz BRS/EBS spectrum, and in May 2007, Clearwire completed
the acquisition of this spectrum. Clearwire Completes Acquisition of AT&T Mobile WiMAX Spectrum, News
Release, Clearwire, May 31, 2007.

19




Federal Communications Commission DA 09-54

25.
Qualcomm Incorporated's MediaFLO service uses Lower 700 MHz spectrum and video
multicasting technology to provide linear video programming, in which the same program content being
aired on cable and broadcast television networks is aired on the mobile video network, as well as
programming from channels exclusive to MediaFLO.51 MediaFLO's mobile TV service is available to
AT&T customers as AT&T Mobile TV and to Verizon Wireless customers as V CAST Mobile TV.52
AT&T Mobile TV and VCAST Mobile TV feature an extensive lineup of primetime news, entertainment
and children's content from the leading entertainment brands.53 All programs are available to AT&T and
Verizon Wireless subscribers in 58 major metropolitan areas nationwide, including Atlanta, Chicago,
Dallas, Las Vegas, Los Angeles, New York, San Diego, Seattle, and Washington, D.C.54
26.
While MediaFLO is not releasing subscriber counts, competitor MobiTV claims to have
4 million subscribers through wireless carriers, including Sprint Nextel, AT&T and Alltel.55 Instead of
using its own dedicated spectrum, MobiTV transmits over carriers' networks to offer news and
entertainment, depending on the carrier and plan selected.56
5.

Narrowband Data Providers

27.
Several wireless data providers offer messaging and other narrowband mobile data
services to enterprise customers using paging and narrowband PCS networks and spectrum. For instance,
USA Mobility is the largest U.S. paging company and offers traditional paging and two-way messaging,
among other wireless services, to business customers.57 In addition, Space Data Corp. ("Space Data")
provides commercial telemetry services across the south-central United States to energy companies and
other industrial companies.58
6.

Mobile Satellite Providers

28.
As discussed in detail in Section VIII of this Report, the commercial MSS industry in the
United States is currently comprised of five service providers operating in MSS-designated frequency
bands, with satellite platforms of differing orbital configurations, and offering multiple products including
voice and data services in fixed and mobile environments to a variety of terminal types. The five MSS
providers are Globalstar, Inmarsat plc ("Inmarsat"), Iridium Satellite LLC ("Iridium"), MSV, and
Orbcomm Inc. ("Orbcomm").

51 Verizon Wireless Lifts Curtain on V CAST Mobile TV; True Broadcast Quality, the Best of TV, News Release,
Verizon Wireless, Jan. 7, 2007. The linear programming available on MediaFLO will have a slight delay and, in
some cases, different commercials from the programming being aired on the television networks.
52 MediaFLO USA Brings Expanded Live News Coverage to AT&T and Verizon Wireless Phones With Addition of
NBC Universal's CNBC, and MSNBC, Fox News Channels
, Company Press Release, Aug. 25, 2008.
53 Id.
54 Id.
55 Tim Doyle, MobiTV Asserts Lead Over MediaFLO, SNL Interactive, Aug. 16, 2008.
56 MobiTV, Leading The Industry In Hosted Content Delivery Solutions, available at
http://www.MobiTV.com/technology (last visited Dec. 16, 2008).
57 USA Mobility, Wireless Messaging Products and Services, available at
http://www.usamobility.com/products/messaging/ (last visited Dec. 16, 2008); Tenth Report, 20 FCC Rcd at 15923,
33.
58 Space Data Corp., Overview of SkySite Network, available at http://www.spacedata.net/technology.htm and
http://www.spacedata.net/company.html (last visited Dec. 15, 2008); Tenth Report, at 15923, 34.

20




Federal Communications Commission DA 09-54

B.

Horizontal Concentration

29.
The level of market concentration generally depends on both the number of competing
providers per market and the distribution of their respective market shares. Thus, market concentration
can result from both a relatively small number of providers competing in the relevant market and a
relatively high degree of inequality in the distribution of market shares among incumbent providers. In
conjunction with entry conditions and the way providers and consumers behave and interact, market
concentration affects the likelihood that a single provider unilaterally, or a small group of providers
through coordinated action, could successfully exercise market power.
1.

Market Definition

a.

Product Market

30.
The mobile telephone industry currently provides an array of mobile voice and data
services, ranging from conventional interconnected mobile voice service to text and photo messaging
services to high-speed mobile Internet access services provided over mobile wireless broadband
networks. As already noted above, many providers of mobile voice service also offer mobile broadband
services and other mobile data services using the same spectrum, network facilities, and customer
equipment, and many mobile telephone providers have integrated the marketing of mobile voice, mobile
broadband and other mobile data services. Although available mobile data service offerings include
standalone mobile Internet access services for customers who typically access the Internet through laptop
computers and who connect to wireless networks primarily or exclusively for data, rather than voice use,
cellphone customers who use their handsets for data services typically purchase mobile voice and mobile
data services bundled together in various ways. Initially, handset-based mobile data applications were
marketed primarily as an add-on to mobile voice service.59 Although the add-on approach to mobile data
services continues to predominate, in recent years mobile telephone providers have introduced a growing
number of pricing plans that directly bundle mobile voice service and mobile broadband and other data
services together in a single monthly service package.60 In addition to the ongoing shift from add-on
mobile data services to direct bundling of mobile voice and data services, the mobile telephone industry is
in the process of transitioning from the provision of interconnected mobile voice services and mobile data
services over legacy mobile wireless networks to the provision of mobile voice and data services over
mobile wireless broadband networks.
31.
As discussed below, these industry characteristics and developments have implications
for the definition of the product market. When these implications are taken into account, measuring
concentration based on separate, narrowly defined markets for mobile voice services and mobile data
services may give a misleading picture of the status of competition in the mobile telephone sector.
Therefore, this section analyzes and measures concentration in the markets for mobile voice services and
mobile data services, including mobile voice and data services provided over mobile wireless broadband
networks (mobile broadband services), under the combined product market for mobile telephony/
broadband services.
32.
The justification for using the combined product market for mobile telephony/broadband
services is not based strictly on the principle of demand substitutability. As noted in the Twelfth Report
and previous reports, the basic economic principle for defining the scope of the relevant product market is
to include two mobile services in the same product market if they are essentially interchangeable from the

59 See Twelfth Report, 23 FCC Rcd at 2311, 169.
60 See Section IV.A.1, Developments in Mobile Telephone Pricing Plans, and Section IV.A.3, Mobile Broadband
and Other Data Service Pricing, infra.

21




Federal Communications Commission DA 09-54

perspective of most consumers that is, if consumers view them as close substitutes.61 In measuring
concentration for mobile voice and data services in a combined product market for mobile telephony/
broadband services, this Report generally does not consider mobile voice service and most mobile data
services to be close substitutes. In addition, although it is reasonable to assume that mobile voice services
provided by different operators offer the same basic voice call functionality and are indistinguishable to
consumers regardless of the network technology these operators use,62 it is clear that there are perceptible
differences in the user experience when certain advanced mobile data services are provided over mobile
wireless broadband networks. For example, the higher data speeds on mobile wireless broadband
networks allow users to navigate the Internet and load Web pages much faster than on networks using
older mobile wireless technologies, and greatly enhance the viewing quality of video streamed onto
mobile devices by increasing the rate at which frames are shown.63
33.
As mentioned above, this section measures concentration in the markets for mobile voice
services and mobile data services under the combined product market for mobile telephony/broadband
services for several reasons. One reason involves the numbering data used in this Report to estimate the
subscriber market shares of mobile telephone operators.64 As documented in a subsequent section of this
Report, less than 60 percent of U.S. mobile telephone subscribers use some form of mobile data service
even on a sporadic basis, and a minority of subscribers use advanced data services such as mobile Internet
access and mobile broadband.65 However, the numbering data provide an estimate of mobile telephone
subscribers in general, without regard to whether subscribers use mobile broadband and other data
services as well as mobile voice services. As a result, the data do not provide a way of distinguishing
mobile telephone subscribers who still use their handsets primarily or exclusively for voice calls from
those who also subscribe to, and actively use, mobile data services, or the smaller subset of subscribers
who have already migrated to mobile broadband networks and devices.
34.
Beyond the issue of data limitations, certain economic considerations suggest that use of
the combined market for mobile telephony/broadband services can provide a reasonable approximation of
concentration in the markets for mobile voice and mobile data services. As noted above, mobile
telephone providers produce mobile voice and data services jointly, and cellphone users tend to purchase
them in bundles. Bundling may give rise to a complementary relationship between the demand for
mobile voice service and the demand for mobile broadband and other data services.66 The existence of
complementarities between mobile voice and data services may increase the cost to the consumer of

61 See Twelfth Report, 23 FCC Rcd at 2253 13. Under the standard test for defining the boundaries of a product
market, two services are considered to be close substitutes if consumers respond to an increase in the price for one
service by switching to the alternative service. Jordi Gual, Market Definition in the Telecoms Industry, Working
Paper No. 517, IESE Business School University of Navarra, Sept. 2003, at 2-3 ("Market Definition in the
Telecoms Industry
").
62But see Section VI.C, Network Quality, infra (discussing a J.D. Power and Associates wireless call quality
performance study finding that the rate of reported call quality problems is lower for customers using certain
network technologies than for customers using alternative technologies, and also for customers using certain next-
generation mobile devices than for customers using earlier-generation devices).
63 See Eleventh Report, 21 FCC Rcd at 2311, 170.
64 See Section III.B.3, Concentration Measures for Mobile Telephone Services, infra.
65 See Section VI.B.1.b, Mobile Broadband and Other Data, infra.
66 Jordi Gual, Market Definition in the Telecoms Industry, Working Paper No. 517, IESE Business School
University of Navarra, Sept. 2003, at 16-19 ("Market Definition in the Telecoms Industry").

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Federal Communications Commission DA 09-54

switching in response to an increase in the price for an individual mobile service.67 At the same time,
when complementary services are produced jointly, a high mark-up of price over cost for an individual
mobile service may be a misleading indicator of market power.68 Complementarities in demand arising
from the bundling of mobile voice and data services, in conjunction with the joint production of mobile
voice and data services on the supply side, may therefore justify the definition of the product market
broadly at the level of bundles of mobile services, rather than narrowly and separately at the level of
individual mobile services.69
b.

Geographic Market

35.
The basic economic principle for defining the scope of the relevant geographic market is
to include customers facing the choice of similar competitive alternatives in the same geographic market.
Because U.S. mobile telephone providers have different-sized geographic footprints, any individual
mobile provider does not compete with all other mobile providers in each and every part of the country.
This suggests that the relevant geographic market for mobile telephone services is narrower than the
entire nation. An attempt to measure concentration in mobile telephone services at the national level
would understate the actual level of market concentration because the underlying geographic market
definition would be too broad.
36.
At the same time, defining the appropriate regional or local geographic market for mobile
telephone services is a highly complex exercise due to various factors, including (1) the relatively large
number of licensed providers; (2) the variety of geographic schemes used to license different spectrum
bands; (3) the wide variation in providers' geographic footprints; and (4) the difficulty of collecting
accurate information on the geographic coverage each mobile operator provides in its license areas. To
simplify the measurement task, in this Report we base our analysis of market concentration on uniform
geographic areas that may be broader or narrower than the relevant geographic market. In particular, we
estimate the number of competitors per market based on census blocks, and we provide concentration
measures at the level of Economic Areas ("EAs"). We use EAs as the geographic unit for measuring the
level of concentration in mobile telephone markets because an EA captures the area in which the average
person shops for and purchases a mobile phone, most of the time.70
2.

Number of Mobile Telephone Competitors

a.

Census Block Analysis

37.
As previously discussed, in this Report we analyze competition in the mobile telephone
sector by compiling a list of census blocks with some level of coverage by mobile telephone providers.
This analysis is performed through a contract with American Roamer, an independent consulting firm that

67 Id. at 17 (arguing that the cost of switching increases because the existence of complementarities with other
mobile telecommunications services reduces the own-price elasticity for an individual mobile service, so that an
increase in the price for this individual service will not reduce demand significantly if the prices of complementary
services do not change).
68 Id. at 18 (arguing that firms producing a collection of goods in the presence of fixed costs will optimally charge
higher mark-ups for those services that face more inelastic demand, and therefore a high mark-up in an individual
service need not reflect an overall high level of market power).
69 Id. at 19.
70 See infra note 87 for a discussion of the reasons why we use EAs for measuring the level of concentration in
mobile telephone markets, including for example, protecting confidential information we maintain. See also Section
VI.B.4, Sub-National Penetration Rates, infra.

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Federal Communications Commission DA 09-54

tracks service provision for mobile voice and mobile data services.71 Under the American Roamer
contract, in this Report we are able to estimate the extent to which each facilities-based provider operates
in the more than 8 million census blocks, compared to just the roughly 3,200 counties in previous
reports.72 Moreover, a census block is the smallest geographic entity for which the Census Bureau
tabulates decennial census data.73
38.
By utilizing such a small area to analyze coverage, the census block method addresses the
issue of the over-counting of population and geographic area inherent in a county-by-county analysis.74
Many census blocks cover areas as small as an individual city block, and generally contain significantly
fewer than 3,000 people.75 The map below shows mobile telephone competition throughout the United
States. More detailed regional maps are available in Appendix B.

71 See American Roamer, available at http://www.americanroamer.com (last visited Dec. 16, 2008). American
Roamer began in 1985 as the original vendor of custom printed roaming guides for cellular carriers, but has since
evolved into a provider of data and mapping for the wireless industry in North America. American Roamer's
product is unique in that it includes detailed coverage polygons of every operational terrestrial mobile telephone
voice carrier in the United States, regardless of spectrum bands. In addition to public sources, American Roamer
works directly with many carriers to develop its coverage maps.
72 There are roughly 30,000 5-digit area ZIP code areas in the United States. U.S. ZIP Code Areas 2004,
Geographic Data Technology, Inc., ESRI.
73 U.S. Census Bureau, Glossary Of Basic Geographic And Related Terms - Census 2000, available at
http://www.census.gov/geo/www/tiger/glossary.html#glossary (last visited Dec. 15, 2008). Many blocks correspond
to individual city blocks bounded by streets, but blocks especially in rural areas may include many square miles
and may have some boundaries that are not streets. The Census Bureau established blocks covering the entire nation
for the first time in 1990. Previous censuses back to 1940 had blocks established only for part of the nation. Over 8
million blocks are identified for Census 2000. U.S. Census Bureau, Question & Answer Center, available at
http://www.census.gov (last visited Oct. 2, 2008). The mean size of a census block is .0460 square miles, and its
median size is 0.016 square miles with a range of 0.0000001 to 8,081 square miles; its mean population is 34.3
people, while its median population is 8.0 people, with a range of 0 to 23,373 people. FCC analysis based on
Census 2000 "Summary File 1 (SF 1)," U.S. Census Bureau, United States Census 2000, available at
http://www.census.gov/Press-Release/www/2001/sumfile1.html (last visited Dec. 15, 2008).
74 For example, county populations can reach up to one million people, as in the county of Los Angeles.
75 The next level above census blocks in the geographic hierarchy, census block groups - which are clusters of
census blocks generally contain between 600 and 3,000 people, with an optimum size of 1,500 people. U.S.
Census Bureau, Appendix A: Census 2000 Geographic Terms and Concepts, Reference Resources for
Understanding Census Bureau Geography, available at http://www.census.gov/geo/www/tiger/glossry2.pdf, at A8,
(last visited Dec. 15, 2008).

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Federal Communications Commission DA 09-54


Map 2: Mobile Telephone Competitors

76










39.
According to our analysis of American Roamer's July 2008 coverage data of mobile
telephone providers, approximately 284 million people, or 99.6 percent of the total U.S. population, have
one or more different operators (cellular, PCS, and/or digital SMR) offering mobile telephone service in
the census blocks in which they live. These blocks make up approximately 75 percent of the total land
area of the United States (including Alaska), reflecting the nation's uneven population distribution.77 As
one analyst noted, "U.S. carriers have a much more challenging environment in which to build networks.
Population density is a mere 50 POPs per square mile compared to an average of 290 per mile in Europe
and 370-400 per mile in major European markets like the U.K. and Germany." 78 Based on our definition
of rural, approximately 61 million people, or 21 percent of the U.S. population,79 live in rural counties.
These counties comprise 3.1 million square miles, or 86 percent of the geographic area of the U.S.80 In
sum, approximately 79 percent of the U.S. population lives on 14 percent of the land, while 21 percent
live on the remaining 86 percent of the land.

76 A larger version of this map may be found in Appendix B.
77 Id. Alaska is approximately 572,000 square miles (land area), while the entire United States is 3,537,000 square
miles (land area). U.S. Census Bureau, State & County QuickFacts, available at
http://quickfacts.census.gov/qfd/states/02000.html (last visited Dec. 15, 2008).
78 Timothy Horan, et al., U.S. Wireless On Track To Deliver Solid Financial Results, CIBC World Markets, Equity
Research, Sept. 21, 2006, at 21.
79 Including the populations of Puerto Rico and the Virgin Islands.
80 Including the populations of Puerto Rico and the Virgin Islands.

25




Federal Communications Commission DA 09-54

40.
The following table contains more detailed findings regarding population and geographic
coverage.

Table 1: Estimated Mobile Telephone Rollouts

by Census Block

Total Number of Number of POPs Contained % of Total Square Miles % of Total
Providers in a
Blocks
in Those Blocks U.S. POPs Contained in
U.S.
block
Those Blocks
Square
Miles
Total for U.S.
8,262,363
285,230,516
100%
3,799,408
100%

1 or More
8,052,071
284,153,539
99.6%
2,831,266
74.5%
2 or More
7,627,040
280,987,512
98.5%
2,244,435
59.1%
3 or More
6,773,535
272,475,210
95.5%
1,548,924
40.8%
4 or More
5,755,825
258,167,149
90.5%
985,650
25.9%
5 or More
3,938,715
185,164,711
64.9%
532,606
14.0%
6 or More
1,596,405
70,238,178
24.6%
198,965
5.2%
7 or More
302,022
12,576,363
4.4%
39,004
1.0%

Source: Federal Communications Commission estimates based on data supplied by American Roamer, July 2008.
Notes: POPs are from the 2000 Census, and square miles include the United States and Puerto Rico.
41.
As seen in Table 1 , approximately 272 million people, or 95.5 percent of the total U.S.
population, have three or more different operators offering mobile telephone service in the census blocks
in which they live, while approximately 258 million people, or 90.5 percent of the U.S. population, live in
census blocks with four or more mobile telephone operators competing to offer service.
42.
In order to give some additional perspective on geographic coverage, we also have
analyzed service provision by census block excluding lands owned or administered by the Federal
Government. As the Commission has recognized, "[i]n many locations, covering certain government land
may be impractical, because these lands are subject to restrictions that prevent a licensee from providing
service or make provision of service extremely difficult. We also note that government lands often
include only very small portions of the population in a license area."81 The land area of the United States
is approximately 3.6 million square miles, while the area of Federal lands is approximately 1.0 million
square miles, or 28 percent of the total land area of the United States.82 A map of showing Federal lands,
with American Indian Reservations and Alaska Native Village Statistical Areas, can be found in
Appendix B.

81 Service Rules for the 698-746, 747-762 and 777-792 MHz Bands; Revision of the Commission's Rules to Ensure
Compatibility with Enhanced 911 Emergency Calling Systems; Section 68.4(a) of the Commission's Rules
Governing Hearing Aid-Compatible Telephones; Biennial Regulatory Review -- Amendment of Parts 1, 22, 24, 27,
and 90 to Streamline and Harmonize Various Rules Affecting Wireless Radio Services; Former Nextel
Communications, Inc. Upper 700 MHz Guard Band Licenses and Revisions to Part 27 of the Commission's Rules;
Implementing a Nationwide, Broadband, Interoperable Public Safety Network in the 700 MHz Band; and
Development of Operational, Technical and Spectrum Requirements for Meeting Federal, State and Local Public
Safety Communications Requirements Through the Year 2010, Second Report and Order, 22 FCC Rcd 15289,
15350, 160 (2007) ("700 MHz Second Report and Order").
82 The land area of the State of Alaska is 663,267 square miles, while the area of Federal lands is 414,364 square
miles, or 62% of the total land area of the State of Alaska.


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Federal Communications Commission DA 09-54

Table 2: Estimated Mobile Telephone Rollouts Excluding Federal Land

83
by Census Block

Total Number of Number of
POPs
% of Total
Square Miles
% of Total
Providers in a
Blocks
Contained in
U.S. POPs
Contained in
U.S. Square
block
Those Blocks Excl. Those Those Blocks Miles Excl.
on Federal
Federal Land
Land
Total for U.S.
7,794,199 280,371,248
100%
2,652,534
100%



1 or More
7,658,969 279,481,965
99.7%
2,236,150
84.3%
2 or More
7,326,666 276,653,846
98.7%
1,893,767
71.4%
3 or More
6,574,580 268,713,465
95.8%
1,369,514
51.6%
4 or More
5,624,592 254,940,976
90.9%
898,938
33.9%
5 or More
3,870,194 183,055,407
65.3%
493,988
18.6%
6 or More
1,570,686
69,266,255
24.7%
185,648
7.0%
7 or More
298,943
12,433,378
4.4%
36,743
1.4%

Source: Federal Communications Commission estimates based on data supplied by American Roamer, July 2008.
Notes: POPs are from the 2000 Census, and square miles include the United States and Puerto Rico.
43.
An analysis of service provision by census block, including and excluding federal land,
shows similar population coverage. By comparison, an examination of geographic coverage shows a
higher percentage of geographic coverage when excluding federal lands. For example, approximately 41
percent of the total United States land area is covered by three or more providers, compared to
approximately 52 percent of the land area when excluding federal land. In addition, approximately 26
percent of the total United States land area has access to four or more providers compared to
approximately 34 percent, when excluding federal land.
3.

Concentration Measures for Mobile Telephone Services

44.
In this section we use the Herfindahl-Hirschman Index ("HHI") to measure the level of
market concentration with respect to the provision of mobile telephone services.84 The value of the HHI
reflects both the number of market competitors and the distribution of their market shares. In general, the
value of the HHI declines as the number of firms increases, and it increases with rising inequality among
any given number of firms.85

83 In this analysis, federal lands consist of lands owned or administered by the Federal Government, including the
Bureau of Land Management, the Bureau of Reclamation, the U.S. Department of Agriculture Forest Service, the
Department of Defense, the U.S. Fish and Wildlife Service, the National Park Service, the Tennessee Valley
Authority, and other agencies. Only areas of one square mile (640 acres) or more are included. See Federal Lands
of the United States, available at http://www.nationalatlas.gov/mld/fedlanp.html (last visited Dec. 16, 2008).
84 The HHI is calculated by summing the squares of the individual market shares of all firms competing in the
relevant market. When a single firm is the sole supplier in the relevant market (a pure monopoly), the HHI attains
its maximum value of 10,000 (100 x 100). If there are ten providers, each with ten percent of the market, the value
of HHI would be 1,000 [(10)2 x 10]. As the structure of a market becomes progressively more atomistic, the value
of HHI approaches 0.
85 For example, if four carriers are identified as participants in the relevant product and geographic market and each
carrier accounts for 25 percent of total sales, the value of HHI would be 2500 [(25)2 x 4]. If the number of carriers
increases to five, each with a 20 percent market share, the value of HHI would decline to 2000 [(20)2 x 5]. On the
(continued....)

27




Federal Communications Commission DA 09-54

45.
We calculate each mobile carrier's market share based on the number of subscribers
served by each carrier in an EA. The number of subscribers served by each carrier is determined based on
the Commission's Numbering Resource Utilization/Forecast ("NRUF") data, which track phone number
usage information for the United States.86 As noted previously, we use EAs as the geographic unit for
measuring the level of concentration in mobile telephone markets because an EA captures the area in
which the average person shops for and purchases a mobile phone, most of the time.87 We emphasize
that, in using the EA to calculate market shares for the purposes of this Report, we are not concluding that
the EA is the relevant geographic market for other purposes.88
46.
Based on NRUF data as of December 2007, the average value of the HHIs weighted by
EA population is 2674.89 In light of our estimate that the average value of the HHIs weighted by EA
population was also 2674 as of December 2006, we find there was virtually no change in average
concentration in 2007.90 As a benchmark for comparison, the value of HHI for a hypothetical market in
which there are four carriers with equal market shares is 2500. The value of HHI for individual EAs
ranges from a low of 1795 in EA 28 (covering parts of South Carolina and Georgia, including Savannah)
to a high of 6272 in EA 121 (covering parts of Nebraska and Colorado).
(Continued from previous page)
other hand, if there are still only four carriers but the top carrier has a 40 percent market share while each of the
remaining three carriers has 20 percent, the value of HHI would increase from 2500 to 2800 [(40)2 + (20)2 x 3].
86 The methodology used to compile NRUF data is described in Section VI.B.4, Sub-National Penetration Rates,
infra.
87 See VI.B.4, Sub-National Penetration Rates, infra. Although the Commission typically uses 734 CMAs to
calculate HHIs when it evaluates the competitive consequences of certain transactions, we use 176 EAs to calculate
HHIs in this Report. We use EAs in this Report in part to better compare market concentration in the U.S. with
market concentration in foreign markets. The average EA population is less than 2 million, although smaller when
compared to certain foreign markets, EAs provide a much more useful comparison than smaller geographic areas
like CMAs. Further, to use smaller geographic areas like CMAs may also compromise the confidential information
found in the NRUF data. However, the methodology used to calculate the HHIs for EAs also has its own
limitations. The methodology gives equal weight to a mobile carrier that reports assigned numbers in one county as
it does to a carrier that reports assigned numbers in all counties, or at least more than one county, within the EA. In
effect, the methodology is based on the implicit assumption that the EA is the relevant geographic market, so that
each carrier with assigned numbers in the EA is competing head to head with all other carriers operating in the EA.
However, to the extent that carriers have different coverage areas that do not overlap, not all carriers with assigned
numbers in an EA are in fact direct competitors. The implication is that the HHIs for EAs will tend to understate
systematically the actual level of market concentration because the underlying geographic market definition is
overly broad. On the other hand, there may be factors that would cause the relevant geographic market to be
broader.
88 For instance, in the Commission's review of the transfers and assignments of mobile wireless licenses, it has
typically used CMAs as the relevant geographic market for calculating HHIs.
89 See Appendix A, Table A-3, infra. The simple mean (not weighted by population) is 3073.
90 See Twelfth Report, 23 FCC Rcd at 2267, 52.

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Federal Communications Commission DA 09-54


Table 3: Trends in Mobile Telephone Market Concentration

Herfindahl-Hirschman
Index

Thirteenth Twelfth Eleventh
Report
Report
Report
Year 2007 2006
2005
Average
2674 2674 2706
High 6272 6551 9042
Low 1795 1609
1605

Source: Federal Communications Commission Estimates
47.
In interpreting these HHIs, it is important to note that the number of competitors a market
can support depends on two key factors: (1) the size of the market; and (2) the minimum efficient scale
(MES) of production, which is defined as the level of output at which economies of scale are fully
exploited. In industries where economies of scale are significant and the MES is large relative to the
demand for the relevant product or service, the market has room for only a small number of firms
operating at the lowest possible cost.
48.
In light of the impact of scale economies and demand in determining the level of market
concentration, it is noteworthy that the estimated values of HHIs for EAs tend to increase as the EA
population declines. In other words, consistent with the theoretical considerations noted above, market
concentration tends to be higher in EAs with a smaller potential subscriber base. For example, the EA
with the highest HHI value (EA 121) is also the least populated EA. However, apart from differences in
population size, EAs also vary significantly with regard to other important determinants of market
demand and cost, including factors such as per capita income, population density, urbanization, the age
distribution of the population, and the size and composition of the business sector.91 A regression
analysis of data at the EA level indicates that, consistent with economic theory, concentration in the
mobile telephone market (measured by HHI) declines with increases in market size, population density,
per capita income and percentage of the population living in urban areas.92
4.

International Comparison of Mobile Market Concentration

49.
A cross-country comparison of national-level HHIs from Merrill Lynch shows that the
United States has the least concentrated mobile telephone market among comparable countries in Western
Europe and the Asia Pacific region.93 However, the Merrill Lynch estimate of HHI for the United States
(2180) tends to understate concentration in the U.S. mobile market because it is calculated based on the
assumption that there is a single nationwide geographic market, and the market participants include the
four nationwide providers plus a fifth provider whose subscriber market share is a residual reflecting the
subscribers of all the remaining regional and local providers. On the other hand, estimates of HHI for the

91 The average cost of serving a given market tends to decline with higher population density and urbanization
because high concentrations of subscribers make it easier for operators to provide adequate coverage with less
infrastructure deployment. See Eugence C. Signorini, Wireless Coverage in the United States: Leaving a Lot to Be
Desired
, THE YANKEE GROUP REPORT, Vol. 1, No. 11, Aug. 2000, at 8.
92 Federal Communications Commission analysis, September 2008.
93 Merrill Lynch, Interactive Global Wireless Matrix 4Q07.

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Federal Communications Commission DA 09-54

United States at the EA level may tend to overstate concentration in the U.S. mobile market relative to
foreign mobile markets because the size of the market as measured by total population is, on average,
much lower in the EAs than in the foreign countries included in this Report's cross-country comparison.94
Nevertheless, even if we rely on the average value of the HHIs weighted by EA population reported
above (2674) for the purpose of conducting a cross-country comparison of mobile market concentration,
we find that, on average, concentration is lower in the U.S. mobile telephone market than in comparable
mobile markets in Western Europe and the Asia Pacific region with the exception of the mobile market in
the United Kingdom (2260).

Table 4: Mobile Market Structure in Selected Countries

Country HHI Number
of Top 2 Share
Competitors
(%)
USA 2180
4+
53.2
Australia 3230
4
74.8
Canada 3110
3
68.1
Finland 3580
3
79.0
France 3400
3
78.3
Germany 2990
4
71.9
Italy 3130
4
73.9
Japan 3630
3
78.4
Sweden 3420
4
76.4
UK 2260
5
49.7

Source: Interactive Global Wireless Matrix 4Q07.
50.
The relatively low level of concentration in the UK mobile market reflects the presence
of five national operators and the roughly equal market shares of the top four operators.95 The higher
levels of concentration in the other Western European countries and Japan reflect two factors. One is the
smaller number of competitors per market, with four national operators in Germany, Italy and Sweden
and three national operators in France, Finland and Japan. Second, each market tends to be dominated by
the top two competitors, which have a combined market share ranging from nearly 72 percent in Germany
to approximately 78-79 percent in France, Finland and Japan.96

C.

Consolidation and Exit

51.
Consolidation and exit of service providers, whether through secondary market
transactions or bankruptcy, may affect the structure of the mobile telecommunications market. A
reduction in the number of competing service providers due to consolidation or exit may increase the

94 Using Merrill Lynch estimates of population in the foreign countries included in the cross-country comparison,
we estimate that the average population in the foreign countries is about 51 million, while the average population in
the EAs is only about 1.75 million.
95 Merrill Lynch, Interactive Global Wireless Matrix 4Q07.
96 Id.

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Federal Communications Commission DA 09-54

market power of any given service provider, which in turn could lead to higher prices, fewer services,
and/or less innovation. However, consolidation does not always negatively impact consumers.
Consolidation in the mobile telecommunications market may enable providers to achieve economies of
scale and increased efficiencies compared to smaller operators.97 If the cost savings generated by
consolidation give the newly enlarged provider the ability and the incentive to compete more
aggressively, consolidation could result in lower prices and new and innovative services for consumers.98
Moreover, it is unlikely that competitive harm will result from consolidation among service providers
licensed to operate in separate geographic markets, as such consolidation does not result in the merger of
direct competitors.
52.
As previously noted, currently four nationwide facilities-based mobile telephone
providers operate in the United States.99 In many cases, these carriers built nationwide footprints100
through various forms of transactions.101 Many nationwide operators continue to seek to fill in gaps in
their coverage areas, as well as to increase the capacity of their existing networks.102 As the Commission
has previously concluded, operators with larger footprints can achieve economies of scale and increased
efficiencies compared to operators with smaller footprints.103 Since the writing of the Twelfth Report, a
number of transactions between market participants have been completed or announced. The largest of
these transactions are discussed below.
53.
AT&T/Dobson: Following the Commission's approval,104 in November 2007 AT&T
acquired Dobson Communications Corporation ("Dobson").105 In June 2007, AT&T announced that it
would acquire Dobson for approximately $2.8 billion in cash.106 Dobson, with 1.7 million subscribers,
marketed wireless service under the Cellular One brand name.107 Dobson's GSM network covers rural
and suburban areas in Alaska, Arizona, Illinois, Kansas, Kentucky, Maryland, Michigan, Minnesota,

97 See Section III.B.3, Concentration Measures for Mobile Telephone Services, supra, and Section III.D.2, Non-
Regulatory Barriers to Entry, infra, for a fuller discussion of how economies of scale may affect market structure.
98 See Jonathan B. Baker, Developments in Antitrust Economics, JOURNAL OF ECONOMIC PERSPECTIVES, Vol. 13,
No. 1, Winter 1999, at 182.
99 See Section III.A.1, Facilities-Based Mobile Telephone Providers, supra.
100 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.
101 The Commission must consent to the transfer of control or assignment of all non pro-forma spectrum licenses
used to provide wireless telecommunications services. 47 C.F.R. 1.948.
102 See, e.g., Section III.D.1.c(iv), 700 MHz Band, supra.
103 See Seventh Report, 17 FCC Rcd at 12997. One study found bigger companies get better equipment prices
because of their size. Shawn Young, As Wireless Firms Grow, So Can Costs, WALL STREET JOURNAL, Apr. 29,
2004, at B4. However, the study also found that the cost of signing up new customers increases as wireless
companies get bigger.
104 Applications of AT&T Inc. and Dobson Communications Corporation For Consent to Transfer Control of
Licenses and Authorizations, Memorandum Opinion and Order, 22 FCC Rcd 20295, 20296 2 (2007) ("AT&T-
Dobson Order
").
105 AT&T, AT&T Inc. 2007 Annual Report, at 30, available at
http://www.att.com/Investor/ATT_Annual/downloads/07_ATTar_FullFinalAR.pdf (last visited Dec. 15, 2008).
106 AT&T to Acquire Dobson Communications, Expand Wireless Coverage, News Release, Dobson, June 29, 2007.
107 Id.

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Federal Communications Commission DA 09-54

Missouri, New York, Ohio, Oklahoma, Pennsylvania, Texas, Virginia, West Virginia, and Wisconsin.108
Through the acquisition, AT&T expects to realize significant annual savings in reduced roaming
expenses, as well as cost savings for the combined companies in areas such as overhead and operations.109
54.
The Commission consented to the merger with conditions on November 15, 2007.110
Specifically, the Commission concluded that the companies had demonstrated that the merger was
generally in the public interest.111 But the Commission also found that the merger did have the potential
to cause competitive harm in four markets. Accordingly, divestiture of the licenses and related
operational and network assets was required in those markets.112
55.
AT&T/Aloha: Following the Commission's approval,113 AT&T announced on February
13, 2008, that it completed its acquisition of spectrum licenses in the 700 MHz band covering 196 million
people in 281 license areas from a subsidiary of Aloha Partners.114 Previously, AT&T announced that it
agreed to pay approximately $2.5 billion in cash for the licenses.115 According to AT&T, Aloha's
spectrum covers 72 of the top 100 major metropolitan areas and all of the top 10 markets in the U.S.116 In
addition, AT&T believes that the transaction will enhance AT&T's spectrum position by adding 12
megahertz of spectrum covering 196 million people in 281 markets.117 According to Forrest Miller, group
president-corporate strategy and development, "The addition of Aloha's spectrum will facilitate AT&T's
ability to continue to meet increasing customer demand for mobile services."
56.
T-Mobile/Suncom: Following the Commission's approval,118 T-Mobile announced on
February 22, 2008, that it completed its acquisition of SunCom Wireless Holdings, Inc. ("SunCom"),
adding 1.1 million customers in North Carolina, South Carolina, Tennessee, Georgia, Puerto Rico, and
the U.S. Virgin Islands.119 Previously, T-Mobile had announced that it agreed to pay approximately $2.4
billion in cash and assumed debt for SunCom.120 According to T-Mobile, the company expects to realize

108 Id.
109 Id.
110 AT&T-Dobson Order 3.
111 Id.
112 Id. 88.
113 Application of Aloha Spectrum Holdings Company LLC (Assignor) and AT&T Mobility II LLC (Assignee)
Seeking FCC Consent For Assignment of Licenses and Authorizations, Memorandum Opinion and Order, 23 FCC
Rcd 2234, 2337 13 (2008).
114 AT&T Completes Acquisition of Wireless Spectrum from Aloha Partners; Acquisition to Enhance AT&T's Ability
to Meet Customer Demand for Mobile Services
, News Release, AT&T, Feb. 13, 2008.
115 AT&T Acquires Wireless Spectrum from Aloha Partners, News Release, AT&T, Oct. 9, 2007.
116 AT&T Completes Acquisition of Wireless Spectrum from Aloha Partners; Acquisition to Enhance AT&T's Ability
to Meet Customer Demand for Mobile Services
, News Release, AT&T, Feb. 13, 2008.
117 Id.
118 Applications of T-Mobile USA, Inc. and SunCom Wireless Holdings, Inc. For Consent to Transfer Control of
Licenses and Authorizations and Petition for Declaratory Ruling that the Transaction is Consistent with Section
310(b)(4) of the Communications Act, Memorandum Opinion and Order, 23 FCC Rcd 2515, 2526 27 (2008).
119 T-Mobile USA Completes Acquisition of SunCom Wireless, News Release, T-Mobile, Feb. 22, 2008.
120 T-Mobile Agrees to Acquire SunCom Wireless to Expand Network and Industry-Leading Customer Service to the
Southeastern United States, Puerto Rico and U.S. Virgin Islands
, News Release, T-Mobile, Sept. 17, 2007.

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Federal Communications Commission DA 09-54

synergies with a net present value of approximately $1 billion through reduced roaming and operating
expenses.121 The company also expects further upside growth opportunities through the addition of new
markets.122
57.
Verizon Wireless/Rural Cellular: Following the Commission's approval,123 Verizon
Wireless announced on August 7, 2008, that it acquired Rural Cellular Corporation ("Rural Cellular") for
approximately $2.66 billion in cash and assumed debt.124 According to Verizon Wireless, the transaction
increases Verizon Wireless's licensed coverage area by 4.7 million people, and Verizon Wireless is
acquiring licenses that cover markets in Maine, New Hampshire, Massachusetts, Alabama, Mississippi,
Minnesota, North Dakota, South Dakota, Wisconsin, Idaho, Washington, and Oregon.125 Rural Cellular
had used both CDMA and GSM technology separately across its markets.126 Verizon Wireless notes that
it plans to deploy CDMA technology in Rural Cellular's existing GSM markets and convert the GSM
customers to CDMA service, while simultaneously maintaining Rural Cellular's existing GSM networks
to provide roaming services to other GSM customers.127 Verizon Wireless expects to realize more than
$1 billion in cost savings through reduced roaming and operations expenses.128
58.
The Commission consented to the merger with conditions on July 31, 2008.129
Specifically, the Commission concluded that the companies had demonstrated that the merger was
generally in the public interest.130 However, the Commission also found that the merger did have the
potential to cause competitive harm in six markets. Accordingly, it required divestiture of the licenses
and related operational and network assets in those markets.131
59.
Sprint Nextel/Clearwire: Sprint Nextel and Clearwire Corporation announced on May 7,
2008 that they agreed to combine their "next-generation wireless broadband businesses" to form a new
wireless communications company, which will use the name Clearwire.132 According to Sprint Nextel,
the new company will focus on expediting the deployment of the first nationwide mobile WiMAX

121 Id.
122 Id.
123 Applications of Cellco Partnership d/b/a Verizon Wireless and Rural Cellular Corporation, for Consent to
Transfer Control of Licenses, Authorizations, and Spectrum Manager Leases, and Petitions for Declaratory Ruling
that the Transaction is Consistent with Section 310(b)(4) of the Communications Act, WT Docket No. 07-208,
Memorandum Opinion and Order and Declaratory Ruling, FCC 08-181, 3 (2008) ("Verizon-RCC Order").
124 Verizon Wireless Completes Purchase Of Rural Cellular; Acquisition Will Expand Nation's Most Reliable
Wireless Network to Many Rural Markets
, News Release, Verizon Wireless, Aug. 7, 2008.
125 Id.
126 Verizon Wireless to Acquire Rural Cellular Corporation, Expand the Nation's Most Reliable Wireless Network,
News Release, Verizon Wireless, July 30, 2007.
127 Verizon Wireless Completes Purchase Of Rural Cellular; Acquisition Will Expand Nation's Most Reliable
Wireless Network to Many Rural Markets
, News Release, Verizon Wireless, Aug. 7, 2008.
128 Id.
129 Verizon-RCC Order 3.
130 Id.
131 Id.
132 Sprint and Clearwire to Combine WiMAX Businesses, Creating a New Mobile Broadband Company, News
Release, Sprint Nextel, May 7, 2008.

33




Federal Communications Commission DA 09-54

network, and the speed and manner in which customers access the Internet will be improved.133 Sprint
Nextel and Clearwire also announced that Intel Corporation, Google Inc., Comcast Corporation, Time
Warner Cable Inc., and Bright House Networks have collectively agreed to invest $3.2 billion into the
new company.134 This investment was based on a target price of $20.00 per share of Clearwire's common
stock, subject to a post-closing adjustment.135 In addition, Trilogy Equity Partners, led by John Stanton,
will invest directly in the new Clearwire's common stock.136 Sprint Nextel states that the new Clearwire
expects to offer mobile wireless Internet services on new devices that will use integrated WiMAX
chipsets and an open architecture.137 On June 24, 2008, the Commission placed their applications on
Public Notice for comment.138
60.
The Commission approved the Sprint Nextel/Clearwire transaction on November 4,
2008.139 The Commission conditioned its approval of the transaction on Sprint Nextel's compliance with
a voluntary commitment to phase out its requests for federal high-cost universal service support over a
five-year transition period and with a voluntary commitment to use counties for measuring compliance
with the Commission's wireless E911 location accuracy rules governing handset-based technologies.140
The companies closed their transaction on November 28, 2008.141
61.
Verizon Wireless/Alltel: Verizon Wireless announced on June 5, 2008, that it agreed to
acquire the equity of Alltel for approximately $5.9 billion, and that based on Alltel's projected net debt at
closing of $22.2 billion, the aggregate value of the transaction is $28.1 billion.142 Alltel serves more than
13 million customers in markets in 34 states, including 57 primarily rural markets that Verizon Wireless
does not serve.143 Verizon Wireless claims that it expects to realize synergies with a net present value,
after integration costs, of more than $9 billion driven by reduced capital and operating expense savings.144
Verizon Wireless believes that the synergies of the merger will generate incremental cost savings of $1
billion in the second year after closing.145 According to Lowell McAdam, Verizon Wireless president and
chief executive officer, the transaction "will create an enhanced platform of network coverage, spectrum
and customer care to better serve the growing needs of both Alltel and Verizon Wireless customers for

133 Id.
134 Id.
135 Id.
136 Id.
137 Id.
138 Sprint Nextel, Corporation and Clearwire Corporation Seek FCC Consent to Transfer Control of Licenses and
Authorizations, Public Notice, WT Docket No. 08-94, DA 08-1477, (rel. June 24, 2008).
139 See Sprint Nextel/Clearwire Order, FCC 08-259 at 128.
140 Id. at 108 & 112.
141 Clearwire Completes Landmark Transaction with Sprint Nextel to Combine 4G Mobile WiMAX Businesses;
Clearwire Receives $3.2 Billion Cash Investment from Comcast, Intel, Time Warner Cable, Google and Bright
House Networks
, News Release, Clearwire Corp. (Nov. 28, 2008).
142 Verizon Wireless To Acquire Alltel; Will Expand Nation's Most Reliable Wireless Network, News Release,
Verizon Wireless, June 5, 2008.
143 Id.
144 Id.
145 Id.

34




Federal Communications Commission DA 09-54

reliable basic and advanced broadband wireless services."146 Verizon Wireless and Alltel filed a series of
applications to seek Commission approval of their transaction. On June 25, 2008, the Commission placed
their applications on Public Notice for comment.147
62.
The Commission approved the Verizon Wireless/Alltel transaction on November 4,
2008.148 The Commission conditioned its approval of the transaction on the companies divesting the
licenses and related operational and network assets in five markets where the Commission found potential
for competitive harm.149 The Commission also conditioned the transaction on the companies' voluntary
commitment to divest the licenses and related operational and network assets in 100 markets and on
Verizon Wireless's voluntary commitments on roaming.150 Finally, the Commission conditioned its
approval of the transaction on Verizon Wireless's compliance with a voluntary commitment to phase out
its requests for federal high-cost universal service support over a five-year transition period and with a
voluntary commitment to use counties for measuring compliance with the Commission's wireless E911
location accuracy rules governing handset-based technologies.151 The companies closed their transaction
on January 9, 2009.152

D.

Entry Conditions and Potential Barriers to Entry

63.
Market concentration is necessary, but not sufficient, for unilateral or coordinated anti-
competitive behavior to occur. If entry into a market is easy, then entry or the threat of entry may prevent
incumbent operators from exercising market power, either collectively or unilaterally, even in highly
concentrated markets.153 The ease or difficulty of entry generally depends on the nature and significance
of entry barriers. Barriers to entry in the mobile telecommunications market may include government
regulation of access to spectrum and various non-regulatory entry barriers such as economies of scale. In
the following sections, we first address access to spectrum, and then we discuss potential non-regulatory
barriers to entry.
1.

Spectrum Access

64.
In this section, we first discuss the impact of the Commission's spectrum management
policies on entry conditions in the mobile telecommunications market. We then provide an analysis of
the outcomes of recent auctions. Finally, we identify and discuss the various spectrum bands that can be

146 Id.
147 Verizon Wireless and Atlantis Holdings LLC Seek FCC Consent to Transfer Licenses, Spectrum Manager and
De Facto Transfer Leasing Arrangements, and Authorizations, and Request a Declaratory Ruling on Foreign
Ownership, Public Notice, WT Docket No. 08-95, DA 08-1481, (rel. June 25, 2008).
148 Applications of Cellco Partnership d/b/a Verizon Wireless and Atlantis Holdings LLC For Consent to Transfer
Control of Licenses, Authorizations, and Spectrum Manager and De Facto Transfer Leasing Arrangements and
Petition for Declaratory Ruling that the Transaction is Consistent with Section 310(b)(4) of the Communications
Act, WT Docket No. 08-95, Memorandum Opinion and Order, FCC 08-258, 233 (rel. Nov. 10, 2008) ("Verizon
Wireless/Alltel Order
").
149 Id. at 100-106.
150 See id. at 157 & 233, 178-181.
151 Id. at 197 & 201.
152 Verizon Wireless Completes Purchase of Alltel; Creates Nation's Largest Wireless Carrier, News Release,
Verizon Wireless, Jan. 9, 2009.

153 See DOJ/FTC Guidelines at 3.0; see also Dennis W. Carlton and Jeffrey M. Perloff, Modern Industrial
Organization
(3rd ed.), Addison, Wesley, Longman, Inc., 1999, at 77.

35




Federal Communications Commission DA 09-54

used for the provision of CMRS.
a.

Spectrum Policy and Entry Conditions

65.
Government control of spectrum allocation and assignment has the potential to create a
barrier to entry into markets for mobile communications services by limiting the amount of spectrum
allocated to CMRS and by requiring providers to obtain a government-issued license in order to use such
spectrum for the provision of CMRS.154 However, the Commission has reduced any potential entry-
limiting effects of government-controlled spectrum allocation and assignment through various policies.
First, as discussed in greater detail below, the Commission has progressively increased the amount of
spectrum available for the provision of CMRS. For example, beginning in the mid-1990s, the allocation
of 120 megahertz of spectrum to broadband PCS and the assignment of broadband PCS spectrum licenses
through auction ended the cellular duopoly by facilitating the entry of new mobile telephone service
providers. More recently, the auction of licenses for spectrum allocated to AWS in 2006 raised the total
amount of spectrum made available for CMRS by an additional 90 megahertz, and the auction of 700
MHz band licenses in 2008 added another 62 megahertz to the amount of spectrum made available for
CMRS.155 Moreover, the current transition of the BRS/EBS spectrum band has further increased the
amount of spectrum available for CMRS. The impact of the recent 700 MHz band auction on spectrum-
related entry barriers is analyzed in the following section.
66.
Second, the Commission has progressively implemented a more flexible, market-oriented
model of spectrum allocation and assignment for spectrum used to provide commercial mobile services.
For example, initially spectrum policy restricted the use of cellular spectrum to analog service and created
an absolute barrier to entry by limiting the number of cellular entrants to two in each local market. In
contrast, current policy allows market forces to play a greater role in determining the number of entrants
in each local market for mobile telephone service, and affords licensees greater flexibility to decide which
services to offer and what technologies to deploy on spectrum used for the provision of CMRS. For
example, licensees have the flexibility to deploy next-generation wireless technologies that allow them to
offer high-speed mobile data services using their existing CMRS spectrum.156
67.
Finally, subject to the Commission's approval, CMRS licensees may buy and sell
licenses, in whole or in part, on the secondary market. As noted in the Ninth Report, beginning in 2003
the Commission implemented its secondary markets policies which permit CMRS licensees to lease all or
a portion of their spectrum usage rights for any length of time within the license term, and over any
geographic area encompassed by the license.157 The cumulative effect of these flexible, market-oriented
spectrum policies has been to help reduce any entry barriers that may arise from government regulation of
spectrum.
b.

Recent Spectrum Auctions

68.
The results of the recent auctions indicate that the Commission's spectrum allocation and
assignment policies have helped minimize spectrum-related entry barriers. The largest auction conducted

154 See, e.g., Thomas W. Hazlett, The Wireless Craze, The Unlimited Bandwidth Myth, The Spectrum Auction Faux
Pas, and the Punchline to Ronald Coase's "Big Joke"
, Working Paper 01-01, AEI-Brookings Joint Center for
Regulatory Studies, Jan. 2001; Spectrum Framework Review: Implementation Plan, Consultation Document, Office
of Communications, Jan. 13, 2005, at 77 and 81-82.
155 Portions of the lower 700 MHz band were auctioned previously in Auctions 44, 49, and 60. See Tenth Report, 20
FCC Rcd at 15940, 80.
156 47 C.F.R 24.3.
157 Ninth Report, 19 FCC Rcd at 20631, 84.

36




Federal Communications Commission DA 09-54

since the release of the Twelfth Report was the Commission's auction of 700 MHz band licenses (Auction
73) that closed on March 18, 2008.158 As a result of this auction, a diverse mix of new entrants and small
regional and rural providers as well as nationwide providers succeeded in acquiring access to spectrum
needed to deploy the next generation of wireless networks.159 New entrant Frontier Wireless LLC, which
is owned by Dish Network, won 168 licenses to establish a near nationwide footprint. More generally, 72
of the 101 winning bidders were new entrants who won a total of 675 licenses. In addition, small and
rural providers won spectrum that almost covers the entire United States. Nationwide providers AT&T
and Verizon Wireless also acquired spectrum licenses in this auction. Moreover, Verizon Wireless
submitted the winning bids for seven of the twelve licenses in a block of spectrum (the C Block) that is
subject to new open platform conditions which require that C Block licensees "allow customers, device
manufacturers, third-party application developers, and others to use or develop the devices and
applications of their choosing in C Block networks, so long as they meet all applicable regulatory
requirements and comply with reasonable conditions related to management of the wireless network (i.e.,
do not cause harm to the network)." 160 In addition, C Block licensees "may not block, degrade, or
interfere with the ability of end users to download and utilize applications of their choosing on the
licensee's C Block network, subject to reasonable network management."161 Nevertheless, 69 percent of
the licenses were won by bidders other than the nationwide wireless incumbents, and a bidder other than a
nationwide incumbent provider won a license in every market. In considering the results from Auction 66
described in the Twelfth Report162 and the results from Auction 73 described above, we find that the
results of both auctions support the notion that the Commission's spectrum allocation and assignment
policies do not create an effective barrier to entry into the U.S. mobile telecommunications market.

158 Auction of 700 MHz Band Licenses Closes; Winning Bidders Announced for Auction 73, Public Notice, Report
No. AUC-08-73-I (Auction 73), DA 08-595 (rel. Mar. 20, 2008) ("Auction 73 Closes Public Notice").
159 In total, 101 bidders won 1,090 licenses. While Auction 73 did not produce a successful bidder for the D Block
of spectrum that was part of the Public Safety/Private Partnership, the Commission has issued Further Notices of
Proposed Rulemaking
reflecting its commitment to finding a solution that will facilitate a nationwide interoperable
broadband network for public safety. The future auction of the D Block is discussed in Section III.D.1.c(iv), 700
MHz Band, infra.
160 See 700 MHz Second Report and Order, 22 FCC Rcd at 15360, 206.
161 Id.
162 See Twelfth Report, 23 FCC Rcd at 2274, 75.

37




Federal Communications Commission DA 09-54


Map 3: 700 MHz Band Licenses Won By Rural, Smaller and New Entrant Bidders


Licenses Won by Rural, Smaller, and New Entrant Bidders

(Excludes AT&T and Verizon Wireless)
Minneapolis
Detroit
Chicago
Cleveland
Denver
Philadelphia
Indianapolis
New York
Kansas City
Cincinnati
Washington
San Francisco
Oklahoma City
Los Angeles
Atlanta
Dallas
Houston
San Antonio
Orlando
Miami
License Areas
Won by Rural, Smaller and New Entrant Bidders
Won Solely by AT&T and/or Verizon
Top 20 Metropolitan Market
33
Note: Map includes A and B Block licenses in the 700 MHz Band in the 50 states. (FCC, April 2008)

Source: Federal Communications Commission

c.

Spectrum Bands Potentially Available for Terrestrial CMRS

69.
Currently, mobile telephone operators primarily use three types of spectrum licenses to
provide mobile voice and, in most cases, mobile data services: cellular, broadband PCS, and SMR.163
Initially, the Commission authorized up to eight different mobile telephone licenses (two cellular and six
broadband PCS) in every geographical area of the country.164 In addition, there are other bands
including, 700 MHz, 1710-1755/2110-2155 MHz (AWS-1), 2500-2690 MHz (BRS/EBS), 2.3 GHz
(WCS), 1670-1675 MHz, and 901-902 MHz (Narrowband PCS) that are licensed under the
Commission's flexible Part 27 or Part 24 rules and can be used to provide CMRS services.165 Under

163 See Appendix B, Table B-1, and Maps B-45 to B-49, infra, for descriptions and maps of various geographical
licensing schemes employed by the Commission.
164 As a result of partitioning and disaggregation, there often are more than eight cellular and broadband PCS
licenses in a market. However, in a few areas, there may be fewer than eight active licenses because certain auction
winners or licensees have defaulted on payments to the Commission, because some licensees did not meet their
buildout requirements, some licensees returned their licenses, or some licenses remained unsold in an auction.
165 The discussion in this Report is to be distinguished from the identification of the relevant spectrum input markets
in the context of Commission review of individual wireless license transfers and assignments. For example, in
wireless transactions, the Commission includes, in its evaluation of potential competitive harm, spectrum in
particular bands that is "suitable" for the provision of services in a relevant product market. See Applications of
AT&T Inc. and Dobson Communications Corporation, Memorandum Opinion and Sprint Nextel/Clearwire Order,
FCC 07-19608-259, at 17 26 (rel. Nov. 19, 2007) 53; Verizon Wireless/Alltel Order, FCC 08-258, at 53
(continued....)

38




Federal Communications Commission DA 09-54

Commission rules, many licensees may 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.166 Many licensees hold more than one license in a particular market.167 We discuss in more
detail below spectrum bands potentially available for terrestrial CMRS. Band plan diagrams for each
spectrum band depict where the frequencies are located. Spectrum described in this section may be used
for a variety of CMRS products including narrowband data services as well as mobile telephony,
broadband data and mobile video services. In addition to the 643 megahertz of terrestrial spectrum
described in this section, there is an additional 157.7 megahertz of mobile satellite spectrum available for
CMRS voice and data services.
(Continued from previous page)
("[S]uitability is determined by whether the spectrum is capable of supporting mobile service given its physical
properties and the state of equipment technology, whether the spectrum is licensed with a mobile allocation and
corresponding service rules, and whether the spectrum is committed to another use that effectively precludes its uses
for mobile telephony/broadband service.")
166 47 C.F.R. 27.15.
167 While no longer in operation, at one time the Commission's CMRS spectrum cap restricted the distribution of
certain spectrum licenses. Under the spectrum cap, no entity could control more than 45 megahertz of cellular,
broadband PCS, and SMR spectrum in an MSA, or more than 55 megahertz in an RSA. In November 2001,
however, the Commission decided to raise the spectrum cap to 55 megahertz in all markets effective February 13,
2002, and to eliminate the restriction entirely effective January 1, 2003. See 67 Fed. Reg. 1626 (Jan. 14, 2002).

39




Federal Communications Commission DA 09-54

Table 5: Spectrum Bands Potentially Available for Terrestrial CMRS

Spectrum Band
Megahertz
Cellular 50
SMR* 14
Broadband PCS
120
1910-15/1990-95
10
MHz**
700 MHz
84
AWS-1 90
AWS II & III***
40
BRS/EBS**** 194
WCS 30
1670-1675 MHz
5
Narrowband Spectrum
6
Total 643

* Post 800 MHz Band Reconfiguration ESMR spectrum at 817-824 MHz and 862-869 MHz.
** Held by Sprint Nextel as a result of the 800 MHz Band Reconfiguration.
*** These bands have been designated for AWS.
**** BRS/EBS spectrum is calculated based on the post-transition band plan described in 47 C.F.R.
27.5(i)(2). EBS licenses must be held by educational institutions; however, EBS licensees can lease a
significant portion of their spectrum to commercial operators.

(i)

Cellular

70.
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.168 Two cellular
systems were licensed in each market area. The Commission designated 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.169

168 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, 1961-62
(2002). In 1997, the Commission auctioned cellular spectrum in areas unbuilt by the original cellular licensees. See
FCC, Auction 12: Cellular Unserved, http://wireless.fcc.gov/auctions/12 (last visited Oct. 2, 2008). In 2002, the
Commission auctioned three RSA licenses where the initial lottery winner had been disqualified. See FCC, Auction
45: Cellular RSA
, http://wireless.fcc.gov/auctions/45 (last visited Oct. 2, 2008).
169 See Section VI.B.1, Subscriber Growth, infra.

40




Federal Communications Commission DA 09-54

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(ii)

Broadband PCS

71.
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 1995.170 The Commission has
set aside the spectrum between 1850 MHz and 1990 MHz for broadband PCS. This spectrum includes
120 megahertz used for mobile telephone services, 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).171 Two of the 30
megahertz blocks (A and B blocks) are assigned on the basis of 51 Major Trading Areas ("MTAs").172
One of the 30 megahertz blocks (C block)173 and all three of the 10 megahertz blocks are assigned on the
basis of 493 Basic Trading Areas ("BTAs").174

170 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, FCC, June 23, 1995. The Commission
has since had numerous additional broadband PCS auctions. See FCC, Auctions Home,
http://wireless.fcc.gov/auctions/ (last visited Oct. 2, 2008). 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.
171 Initially, the Commission's broadband PCS allocation included 20 megahertz of spectrum at 1910 MHz - 1930
MHz for unlicensed broadband PCS. Ten megahertz has since been allocated on a nationwide basis to Sprint
Nextel. See Improving Public Safety Communications in the 800 MHz Band, Report and Order, Fifth Report and
Order, Fourth Memorandum Opinion and Order
, 19 FCC Rcd. 14969, 15083 (2004).
172 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 FCC. 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.
173 The Commission also has reconfigured returned C block licenses. See Tenth Report, 20 FCC Rcd at 15935, 71,
n.150.
174 Basic Trading Areas ("BTAs") are Material Copyright (c) 1992 Rand McNally & Company. Rights granted
pursuant to a license from Rand McNally & Company through an agreement with the FCC. 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; Mayagez/Aguadilla-Ponce, Puerto Rico; and the U.S.
Virgin Islands.

41




Federal Communications Commission DA 09-54

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(iii)

SMR

72.
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.175 The Commission has
since licensed additional SMR spectrum through auctions.176 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.177 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,178
the primary use for SMR traditionally was dispatch services.179 With the development of digital
technologies that increased spectral efficiency, SMR providers such as Sprint Nextel (on its iDEN
network) and SouthernLINC Wireless, a unit of the energy firm Southern Company, became more
significant competitors in mobile telephony, while also maintaining dispatch functionality as a part of

175 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").
176 The Commission has held multiple auctions for SMR licenses.
177 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. As
discussed in Section III.D.1.c(iii)(a), 800 MHz Band Reconfiguration and 1.9 GHz Spectrum Exchange, infra, the
configuration of the 800 MHz band is changing as a result of a new band plan adopted by the Commission.
178 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).
179 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, 15 FCC Rcd at 17727-28, for a detailed discussion. Dispatch and SMR are often used
interchangeably, although SMR refers to specific spectrum ranges.

42




Federal Communications Commission DA 09-54

their service offerings. Furthermore, in apparent response to the dispatch functionality of SMR services,
many cellular and broadband PCS providers now offer push-to-talk ("PTT") functionality on their
networks, including Verizon Wireless, AT&T, and Alltel. SMR spectrum is also used for certain data-
only networks.180
698-
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(a)
800 MHz Band Reconfiguration and 1.9 GHz
Spectrum Exchange

73.
On July 8, 2004, the Commission adopted a new band plan for the 800 MHz band to
resolve the problem of interference to public safety radio systems operating in the band from CMRS
providers operating systems on channels in close proximity to those utilized by public safety entities.181
The new band plan addresses the root cause of the interference problem by separating generally
incompatible technologies, with the costs of relocating 800 MHz incumbents to be paid by Sprint Nextel.
To accomplish the reconfiguration, the Commission required Sprint Nextel to give up rights to certain of
its licenses in the 800 MHz band and all of its licenses in the 700 MHz band. In exchange, the
Commission modified Sprint Nextel's licenses to provide the right to operate on two five-megahertz
blocks in the 1.9 GHz band specifically 1910-1915 MHz and 1990-1995 MHz conditioned on Sprint
Nextel fulfilling certain obligations specified in the Commission's decision. As a new entrant in the 1.9
GHz band, Sprint Nextel is also obligated to fund the transition of incumbent users to comparable
facilities. The Commission determined that the overall value of the 1.9 GHz spectrum is $4.8 billion, less
the cost of relocating incumbent users. In addition, the Commission decided to credit to Sprint Nextel the
value of the spectrum rights that Sprint Nextel is relinquishing and the actual costs Sprint Nextel incurs to
relocate all incumbents in the 800 MHz and 1.9 GHz bands. To the extent that the total of these
combined credits is less than the assessed value of the 1.9 GHz spectrum rights, Sprint Nextel will make
an anti-windfall payment equal to the difference to the United States Department of the Treasury at the
conclusion of the relocation process.
74.
Significant progress has been made reconfiguring licensees to the new 800 MHz band
plan in non-border regions of the country. In addition, the Public Safety and Homeland Security Bureau
released an order, on May 9, 2008, establishing a reconfigured 800 MHz band plan for U.S. licensees
along the U.S. Canada border.182 Furthermore, the Commission, in conjunction with the State
Department, is continuing to discuss a modified 800 MHz band plan with Mexico for U.S. licensees
operating along the U.S.-Mexico border.

180 See Section IV.B.1.f, Narrowband Data Networks and Technology Deployment, infra.
181 FCC Adopts Solution to Interference Problem Faced by 800 MHz Public Safety Radio Systems, News Release,
FCC, July 8, 2004.
182 See generally Improving Public Safety Communications in the 800 MHz Band; New 800 MHz Band Plan for
U.S. Canada Border Regions, Second Report and Order, 23 FCC Rcd 7605 (2008).

43




Federal Communications Commission DA 09-54

(iv)
700 MHz Band
75.
The 698-806 MHz band (the "700 MHz band") is being reclaimed from use by broadcast
services in connection with the transition of the analog television service to digital television ("DTV").183
The Digital Television Transition and Public Safety Act of 2005 ("DTV Act")184 set a firm deadline of
February 17, 2009 for the 700 MHz band spectrum to be cleared of analog transmissions and made
available for public safety and commercial services as part of the DTV transition. This spectrum is being
made available for wireless services, including public safety and commercial services.185 Although the
DTV Act established a date certain for the DTV transition, portions of the 700 MHz band will remain
encumbered by television broadcasters until the end of the transition.186 Nevertheless, there are
substantial portions of the band that are not so encumbered and are available for immediate use by new
licensees.
76.
The DTV Act also established two specific statutory deadlines for the auction of licenses
for recovered spectrum in the 700 MHz band: (1) the auction was required to begin no later than January
28, 2008; and (2) the auction proceeds were required to be deposited in the Digital Television Transition
and Public Safety Fund by June 30, 2008.187 The Commission met both of these statutory deadlines.
69
6 8-94
-
0 MHz: 700
70 MHz Ba
MH
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700 M
70

Hz

H

z Ba

B nd

800 MHz

H SM

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8
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698
806
817
824
849
862
869
894 896 901
935
940

77.
Prior to holding the auction, the Commission revisited the rules governing the 700 MHz
band in light of the DTV Act, recent developments in the market for commercial wireless
communications, and the evolving needs of the public safety community for advanced broadband
communications.188 Specifically, in the 700 MHz Second Report and Order, the Commission adopted a
new band plan and revised certain of the service rules relating to both the commercial and public safety

183 See 700 MHz Second Report and Order, 22 FCC Rcd at 15291, 1.
184 Deficit Reduction Act of 2005, Pub. L. No. 109-171, 120 Stat. 4 (2006) ("DRA"). Title III of the DRA is the
DTV Act.
185 See 700 MHz Second Report and Order, 22 FCC Rcd at 15291, 1 & 15295-96, 14.
186 Reallocation and Service Rules for the 698-746 MHz Spectrum Band (Television Channels 52-59), Report and
Order
, 17 FCC Rcd 1022, 1028, 9 (2002) ("Lower 700 MHz Report and Order").
187 See DRA. Congress also extended the Commission's auction authority to September 30, 2011. DTV Act
3003(b).
188 See Service Rules for the 698-746, 747-762 and 777-792 MHz Bands; Revision of the Commission's Rules to
Ensure Compatibility with Enhanced 911 Emergency Calling Systems; and Section 68.4(a) of the Commission's
Rules Governing Hearing Aid-Compatible Telephones, Notice of Proposed Rule Making, Fourth Further Notice of
Proposed Rule Making, and Second Further Notice of Proposed Rule Making
, 21 FCC Rcd 9345 (2006) ("700 MHz
Commercial Services Notice"
).

44




Federal Communications Commission DA 09-54

spectrum in the 700 MHz band.189 The new band plan provided a balanced mix of geographic service
area licenses and spectrum blocks sizes for the commercial spectrum to be auctioned.190 Among other
service rules, the Commission provided that licensees for one of the commercial blocks of spectrum in the
700 MHz band, the Upper 700 MHz C Block would be subject to an "Open Platform" condition.191
Accordingly, licensees must "allow customers, device manufacturers, third-party application developers,
and others to use or develop the devices and applications of their choosing in C Block networks, so long
as they meet all applicable regulatory requirements and comply with reasonable conditions related to
management of the wireless network (i.e., do not cause harm to the network)." 192 In addition, C Block
licensees "may not block, degrade, or interfere with the ability of end users to download and utilize
applications of their choosing on the licensee's C Block network, subject to reasonable network
management."193 The Commission also took two steps to promote the rapid construction and deployment
of a nationwide, interoperable broadband public safety network. First, in the public safety spectrum, the
band plan established a spectrum block designated for broadband communications, the public safety
broadband spectrum, and provided that the spectrum would be licensed on a nationwide basis to a non-
profit entity (the Public Safety Broadband Licensee) representative of the public safety community in
accordance with a specific selection process.194 Second, the Commission established a block in the
commercial spectrum, the Upper 700 MHz D Block ("D Block"), to be licensed on a nationwide basis to a
single entity, and required the winning bidder for the D Block to enter into a public/private partnership
with the Public Safety Broadband Licensee to enable the construction of a nationwide network operating
over the spectrum associated with both licenses and providing broadband services to both commercial and
public safety users.195
78.
The auction of the 700 MHz Band licenses, designated Auction 73, closed on March 18,
2008.196 The auction concluded with 1090 provisionally winning bids covering 1091 licenses and totaling
$19,592,420,000. While the bids for licenses associated with four of the five Upper 700 MHz Band
blocks (the A, B, C, and E Blocks) exceeded the applicable reserve prices, bids for the fifth block (the D
Block) license did not meet the reserve price and thus, there was no winning bid in Auction 73 for that
license.197

189 See 700 MHz Second Report and Order, 22 FCC Rcd at 15291-95, 1-13; Service Rules for the 698-746, 747-
762 and 777-792 MHz Bands, Report and Order and Further Notice of Proposed Rulemaking, 22 FCC Rcd 8064
(2007) ("700 MHz Report and Order").
190 The Commission changed the location of existing 700 MHz Guard Band licenses, provided for a 1-megahertz
shift of the other commercial blocks in the Upper 700 MHz band and in the spectrum allocated to public safety, and
reduced the size of the Guard Band B Block to make two additional megahertz of commercial spectrum available for
auction. 700 MHz Second Report and Order, 22 FCC Rcd at 15292-93, 3. In addition, the Commission afforded
all Guard Band A Block licensees the same technical rules that apply to the adjacent commercial spectrum and the
ability to deploy cellular architectures. Id. at 15294, 9.
191 See 700 MHz Second Report and Order, 22 FCC Rcd at 15361, 195.
192 See id. at 15360, 206.
193 Id.
194 See 700 MHz Second Further Notice, 23 FCC Rcd at 8052, 8.
195 See 700 MHz Second Report and Order, 22 FCC Rcd at 15295, 13.
196 FCC, Auction 73, http://wireless.fcc.gov/auctions/73 (last visited Sept. 18, 2008).
197 Accordingly, Auction 73 raised a total of $19,120,378,000 in winning bids and $18,957,582,150 in net winning
bids (reflecting bidders' claimed bidding credit eligibility). Auction of 700 MHz Band Licenses Closes, Public
Notice
, 23 FCC Rcd 4572, 4572-73 2 (2008).

45




Federal Communications Commission DA 09-54

79.
The total 84 megahertz of commercial spectrum in the 700 MHz band will generally be
available for a broad range of flexible uses.198 This spectrum has many permissible uses: new licensees
may use the spectrum for fixed, mobile (including mobile wireless commercial services), and broadcast
services.199 In addition, the Commission optimized the power rules in the remaining paired spectrum
specifically for mobile use.200 The Commission expects that many of the new technologies to be
developed and deployed in this band will support advanced wireless applications.201
80.
Because the auction of the D Block did not result in a winning bid, on May 14, 2008, the
Commission issued the Second Further Notice of Proposed Rulemaking ("700 MHz Second Further
Notice"
), revisiting the rules governing the D Block licensee, the mandatory public/private partnership,
and the Public Safety Broadband Licensee. 202 The Commission sought comment broadly on how it might
modify those rules to achieve the goal of a nationwide, interoperable public safety network, whether it
should continue to mandate a public/private partnership between the D Block licensee and Public Safety
Broadband Licensee, and if so, under what terms and conditions.203
81.
On September 25, 2008, the Commission adopted a Third Further Notice of Proposed
Rulemaking ("700 MHz Third Further Notice") that proposes licensing the D Block spectrum as part of a
revised 700 MHz Public/Private Partnership, with modifications to the rules governing both the D Block
and the Public Safety Broadband License, in order to maximize the public safety and commercial benefits
of a nationwide, interoperable broadband network in the 700 MHz band.204 Among other modifications,
the 700 MHz Third Further Notice proposes to use the competitive bidding process to determine whether
the D Block would be licensed to a single licensee on a nationwide basis or to regional licensees on the
basis of 58 public safety regions. To ensure a uniform broadband technology nationwide, the 700 MHz
Third Further Notice
proposes that in the event the D Block is licensed on a regional basis, the auction
results also would determine which air interface technology, Long Term Evolution (LTE) or Worldwide
Interoperability for Microwave Access (WiMAX), would be deployed across the nation by the D Block

198 See Lower 700 MHz Report and Order; Service Rules for the 746-764 and 776-794 MHz Bands, and Revisions
to Part 27 of the Commission's Rules, Third Report and Order, 16 FCC Rcd 2703 (2001); Service Rules for the
746-764 and 776-794 MHz Bands, and Revisions to Part 27 of the Commission's Rules, Second Memorandum
Opinion and Order
, 16 FCC Rcd 1239 (2001); Service Rules for the 746-764 and 776-794 MHz Bands, and
Revisions to Part 27 of the Commission's Rules, Memorandum Opinion and Order and Further Notice of Proposed
Rulemaking
, 15 FCC Rcd 20845 (2000); Service Rules for the 746-764 and 776-794 MHz Bands, and Revisions to
Part 27 of the Commission's Rules, Second Report and Order, 15 FCC Rcd 5299 (2000) ("Upper 700 MHz Second
Report and Order
"); 700 MHz Second Report and Order; 700 MHz Report and Order. The eighty-two megahertz of
spectrum does not include the reconfigured Guard Band B Block spectrum at 775-776/805-806 MHz. See 700 MHz
Second Report and Order
, 22 FCC Rcd at 15294, 9, 15388-89, 266-69.
199 See generally id.
200 See 700 MHz Report and Order, 22 FCC Rcd at 8067-68, 6.
201 See, e.g., Lower 700 MHz Report and Order, 17 FCC Rcd at 1032, 20.
202 See Service Rules for the 698-746, 747-762 and 777-792 Bands; Implementing a Nationwide, Broadband,
Interoperable Public Safety Network in the 700 MHz Band, Second Further Notice of Proposed Rulemaking, 23
FCC Rcd 8047 (2008) (Second Further Notice).
203 Id. The Commission also indicated that, prior to adopting final rules, it would present for public comment a
detailed proposal regarding specific proposed rules to address these issues. Id. at 8052, 7.
204 See generally Service Rules for the 698-746, 747-762 and 777-792 MHz Bands, WT Docket No. 06-150,
Implementing a Nationwide, Broadband, Interoperable Public Safety Network in the 700 MHz Band, PS Docket No.
06-229, Third Further Notice of Proposed Rulemaking, FCC 08-230 (rel. Sept. 25, 2008).

46




Federal Communications Commission DA 09-54

licensee(s). 205 To further its primary goal of promoting the widest possible population coverage by D
Block license(s) subject to the public-private partnership conditions, the Commission tentatively
concludes, as an initial matter, that it will not award any D Block licenses unless the total population
covered by licenses with high bids meets or exceeds fifty percent of the U.S. population.206
(v)

Advanced Wireless Services

82.
To further the goal of promoting the deployment of advanced services, the Commission
has made efforts to allocate and license additional spectrum suitable for offering AWS.207 As noted in the
Eleventh Report, in 2002 the Commission, together with the National Telecommunications and
Information Administration ("NTIA"), allocated 90 megahertz of spectrum in the 1710-1755 MHz and
2110-2155 MHz bands that can be used to offer advanced wireless services, including 3G services.208
17
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83.
Subsequently, the Commission completed the process of establishing service rules for the
1710-1755 MHz and 2110-2155 MHz bands. This included a determination that the spectrum could be
used for any wireless service that is consistent with the spectrum's fixed and mobile allocations and
would be licensed under the Commission's flexible, market-oriented Part 27 rules,209 and also a band plan
that provided for a significant amount of the spectrum to be licensed on a small geographic basis to
encourage the participation of small and rural providers in the AWS auction.210 In 2006, the Commission
established procedures for the auction of the 1710-1755 MHz and 2110-2155 MHz bands (Auction 66).211
84.
In 2006, the Commission also established procedures by which AWS licensees could
relocate existing incumbents in the 1710-1755 MHz and 2110-2155 MHz bands to other spectrum. The
1710-1755 MHz band includes incumbent federal government spectrum users, and NTIA is overseeing

205 Id. at 4.
206 Id. at 246.
207 47 C.F.R. 24.3. Advanced Wireless Services (AWS) is the collective term we use for new and innovative fixed
and mobile terrestrial wireless applications using bandwidth that is sufficient for the provision of a variety of
applications, including those using voice and data (such as Internet browsing, message services, and full-motion
video) content.
208 Eleventh Report, 21 FCC Rcd at 10977, 73. The Commercial Spectrum Enhancement Act, signed into law on
December 23, 2004, establishes a Spectrum Relocation Fund to reimburse federal agencies operating on certain
frequencies that have been reallocated to non-federal use, including the 1710-1755 MHz band, for the cost of
relocating their operations. See Commercial Spectrum Enhancement Act, Pub. L. No. 108-494, 118 Stat. 3986, Title
II (2004).
209 Eleventh Report, 21 FCC Rcd at 10977-10978, 74; 47 C.F.R. Part 27.
210 Eleventh Report, 21 FCC Rcd at 10978, 74.
211 See Auction of Advanced Wireless Services Licenses Scheduled For June 29, 2006, Public Notice, 21 FCC Rcd
4562 (2006); Auction of Advanced Wireless Services Licenses Rescheduled for August 9, 2006, Public Notice, 21
FCC Rcd 5598 (2006).

47




Federal Communications Commission DA 09-54

the coordination with and relocation of these users under the coordination procedures released by the FCC
and NTIA in April 2006.212 The 2110-2155 MHz band includes fixed microwave service licensees and
BRS licensees. For the band, the Commission established rules under which other new licensees
benefiting from the relocation of an incumbent would share in the costs of the relocation.213
85.
The Commission held Auction 66 in the third quarter of 2006.214 Of the 1,122 licenses
offered in Auction 66, 104 winning bidders won 1,087 licenses, with net bids of more than $13.7
billion.215 In April 2007, the Wireless Bureau announced that licensing had been completed for all of the
licenses, with the exception of one license subject to a later deadline for the applicant to file a certification
to qualify for a Tribal Land Bidding Credit.216 That license has now been granted.217 Accordingly, all of
the Auction 66 licenses have been awarded.
86.
The Commission also has taken significant steps toward licensing other bands of
spectrum for use by AWS. In 2004, the Commission allocated an additional twenty megahertz of
spectrum in the 1915-1920 MHz, 1995-2000 MHz, 2020-2025 MHz and 2175-2180 MHz bands ("AWS-
2").218 The Commission additionally released the AWS-2 Service Rules NPRM, which sought comment
on appropriate service rules for the1915-1920 MHz, 1995-2000 MHz, 2020-2025 MHz and 2175-2180
MHz bands, and also offered some tentative conclusions consistent with existing AWS service rules, such
as allowing flexible use of this spectrum and licensing this spectrum under Part 27 of the Commission's
rules.
87.
In 2005, the Commission designated yet another 20 MHz of spectrum for AWS,
specifically the 2155-2175 MHz band ("AWS-3"), thus establishing 70 MHz of contiguous AWS
spectrum in the 2.1 GHz band (from 2110 to 2180 MHz).219 An application for exclusive use of the

212 See FCC and NTIA Coordination Procedures in the 1710-1755 MHz Band, Public Notice, 21 FCC Rcd 4730
(2006).
213 See 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; and Services Rules for Advanced Wireless Services in the 1.7 GHz and 2.1 GHz Bands, Ninth Report and
Order and Order
, 21 FCC Rcd 4473 (2006).
214 The auction started on August 9, 2006 and closed on September 18, 2006. See Auction of Advanced Wireless
Services Closes: Winning Bidders Announced for Auction 66, Report AUC-06-66-F, Public Notice, 21 FCC Rcd
10521 (2006). In Auction 66, the Commission made available 1,122 AWS licenses in the 1710-1755 MHz and
2110-2155 MHz bands ("AWS-1").
215 Id.
216 See Wireless Telecommunications Bureau Completes Review of Applications for Licenses for Advanced
Wireless Services, News Release, FCC, Apr. 30, 2007.
217 See Wireless Telecommunications Bureau Market-Based Applications Action, Public Notice, Report No. 3672
(rel. Dec. 19, 2007).
218 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, Sixth Report and Order, Third Memorandum Opinion and Order and Fifth Memorandum Opinion and
Order
, 19 FCC Rcd 20720 (2004); Service Rules for Advanced Wireless Services in the 1915-1920 MHz, 1995-
2000 MHz, 2020-2025 MHz and 2175-2180 MHz Bands; Service Rules for Advanced Wireless Services in the 1.7
GHz and 2.1 GHz Bands, Notice of Proposed Rulemaking, 19 FCC Rcd 19263 (2004) ("AWS-2 Service Rules
NPRM"
).
219 See Amendment of Part 2 of the Commissions Rules to Allocate Spectrum Below 3 GHz for Mobile and Fixed
Services to Support the Introduction of New Advanced Wireless Services, Including Third Generation Wireless
Systems, Eighth Report and Order, Fifth Notice of Proposed Rule Making and Order, 20 FCC Rcd 15866 (2005).

48




Federal Communications Commission DA 09-54

spectrum in the 2155-2175 MHz band was filed in 2006, and was accepted for filing in January 2007.220
Subsequently, six other applicants filed similar applications for use of this AWS-3 spectrum.221 On
August 31, 2007, the Commission released an Order dismissing these seven applications without
prejudice and denying two Forbearance Petitions associated with two of the applications. In this Order,
the Commission stated that the public interest is best served by first seeking public comment on how the
band should be used and licensed.222 On September 19, 2007, the Commission released a Notice of
Proposed Rulemaking (NPRM), seeking comment on service rules for the AWS-3 spectrum.223 On June
20, 2008, the Commission released a Further Notice of Proposed Rulemaking (FNPRM), seeking
comment on the Commission's proposed AWS-3 rules, which include adding 5 megahertz of spectrum
(2175-80 MHz) to the proposed AWS-3 band (2155-75 MHz). The FNPRM proposes to require licensees
of that spectrum to provide using up to 25 percent of its wireless network capacity free, two-way
broadband Internet service at engineered data rates of at least 768 kbps downstream.224
(vi)

Broadband Radio Service

88.
In July 2004, the Commission transformed the rules and policies governing the
Multipoint Distribution Service (MDS) and the Instructional Television Fixed Service (ITFS) in the 2500-
2690 MHz band by providing licensees with greater flexibility and establishing a more functional band
plan.225 As one part of this action, the Commission renamed the MDS service the "Broadband Radio
Service" (BRS) and renamed the ITFS service the Educational Broadband Service (EBS).
2300-2
2300- 700 M
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BRS/EBS

ISM

IS B

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23
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23
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220 See Application of M2Z Networks, Inc. for License and Authority to Provide a National Broadband Radio
Service in the 2155-2175 MHz Band, WT Docket No. 07-16 (filed May 5, 2006) (M2Z Application); Wireless
Telecommunications Bureau Announces that M2Z Networks, Inc.'s Application for License and Authority to
Provide a National Broadband Radio Service in the 2155-2175 MHz Band is Accepted for Filing, Public Notice, 22
FCC Rcd 1955 (WTB 2007). See also Wireless Telecommunications Bureau Sets Pleading Cycle for Application
by M2Z Networks, Inc. to be Licensed in the 2155-2175 MHz Band, Public Notice, 22 FCC Rcd 4442 (WTB 2007).
221 Specifically, there were applications filed by Commnet Wireless, LLC; McElroy Electronics Corp.; NetfreeUS,
LLC; NextWave Broadband, Inc.; and Open Range Communications, Inc.; each on Mar. 2, 2007; and by
TowerStream Corporation on Mar. 15, 2007. See WT Docket No. 07-16.
222 Applications for License and Authority to Operate in the 2155-2175 MHz Band; and Petitions for Forbearance
Under 47 U.S.C. 160, Order, 22 FCC Rcd 16563 (2007), recons pending.
223 Service Rules for Advanced Wireless Services in the 2155-2175 MHz Band, Notice of Proposed Rulemaking, 22
FCC Rcd 17035 (2007).
224 Service Rules for Advanced Wireless Services in the 2155-2175 MHz Band; and Service Rules for Advanced
Wireless Services in the 1915-1920 MHz, 1995-2000 MHz, 2020-2025 MHz and 2175-2180 MHz Bands, Further
Notice of Proposed Rulemaking, 23 FCC Rcd 9859 (2008).
225 Amendment of Parts 1, 21, 73, 74, and 101 of the Commission's Rules to Facilitate the Provision of Fixed and
Mobile Broadband Access, Educational, and Other Advanced Services in the 2150-2162 and 2500-2690 MHz
Bands, Report and Order and Further Notice of Proposed Rulemaking, 19 FCC Rcd 14165 (2004). The rules for
this band were initially established in 1963 but have evolved significantly since that time.

49




Federal Communications Commission DA 09-54

89.
The Commission took several steps to restructure the BRS/EBS band and facilitate more
efficient use of the spectrum. First, the Commission expanded the 2500-2690 MHz band by five
megahertz, from 2495-2500 MHz, to accommodate the relocation of BRS Channels 1 and 2, which are
presently located in the 2.1 GHz band. Specifically, the Commission created a one-megahertz guard
band, 2495-2496 MHz, to separate incumbent operations below 2495 MHz and new BRS Channel 1
licensees that would operate at 2496-2502 MHz. Second, the Commission created a new BRS/EBS band
plan for the 2496-2690 MHz band that eliminated the use of interleaved channels and created distinct
band segments for high power operations, such as one-way video transmission, and low power operations,
such as two-way fixed and mobile broadband applications. By grouping high and low power users into
separate portions of the band, the new band plan reduces the likelihood of interference caused by
incompatible uses. The new band plan also creates incentives for the development of low-power,
cellularized broadband operations, which were inhibited by the prior band plan.
90.
In addition, the Commission provided licensees with the flexibility to employ the
technologies of their choice in the band and to lease spectrum under the Commission's secondary market
spectrum leasing policies and procedures. The Commission also implemented geographic area licensing
for all licensees in the band, which will allow increased flexibility while reducing administrative burdens
on both licensees and the Commission.
91.
In April 2006, the Commission continued its transformation of the rules governing BRS
and EBS by revising the mechanism for transition from the existing band configuration to the new band
plan.226 BRS and EBS providers will have thirty months from the effective date of the new rules during
which they may propose transition plans for relocating existing facilities of all other licensees within the
same BTA to new spectrum assignments in the revised band plan. Plan proponents must notify all
licensees in the BTA and file their plans with the Commission. As of September 2008, proponents had
filed transition plans for 403 of the 493 BTAs, and they had completed the transition in 310 BTAs.227
92.
The Commission also allowed licensees to transition themselves if no proponent came
forward in a BTA by the deadline for filing transition plans. It also made other changes to the transition
rules to facilitate transitions to the new band plan. With respect to lease agreements, the Commission
held that EBS licensees are permitted to enter into excess capacity leases for a maximum of 30 years, but
leases with terms of 15 years or longer must include a right to review the educational use requirements of
the leases every five years starting at year 15.
93.
In March 2008, the Commission set forth auction rules for unassigned BRS spectrum,
and it sought further comment on how to license the available and unassigned "white spaces" in the EBS
spectrum band.228 The item also clarified that EBS leases executed before January 10, 2005 cannot run
into perpetuity and are limited to 15 years. The Commission also reinstated a Gulf of Mexico service area
for the BRS band in light of recent events, including Hurricanes Katrina and Rita, as well as recent oil

226 Amendment of Parts 1, 21, 73, 74, and 101 of the Commission's Rules to Facilitate the Provision of Fixed and
Mobile Broadband Access, Educational, and Other Advanced Services in the 2150-2162 and 2500-2690 MHz
Bands, Order on Reconsideration and Fifth Memorandum Opinion and Order and Third Memorandum Opinion and
Order and Second Report and Order
, 21 FCC Rcd 5606 (2006).
227 See Initiation Plans and Post-Transition Notifications filed in WT Docket No. 06-136. See also Wireless
Telecommunications Bureau Establishes Docket for the Filing of Initiation Plans, Post-Transition Notifications, and
Self Transition Notices in the Transition of the 2500-2690 MHz Band, Public Notice, 21 FCC Rcd 7909 (2006).
228 Amendment of Parts 1, 21, 73, 74 and 101 of the Commission's Rules to Facilitate the Provision of Fixed and
Mobile Broadband Access, Educational and Other Advanced Services in the 2150-2162 and 2500-2690 MHz Bands,
Third Order on Reconsideration and Sixth Memorandum Opinion and Order and Fourth Memorandum Opinion and
Order and Second Further Notice of Proposed Rulemaking and Declaratory Ruling
, 23 FCC Rcd 5992 (2008).

50




Federal Communications Commission DA 09-54

discoveries in the Gulf of Mexico. Finally, the Commission issued a Declaratory Ruling clarifying the
"splitting-the-football" methodology that licensees should use to divide overlapping geographic service
areas for licenses that expired and are later reinstated. This Ruling responded to filings by several parties
seeking clarification of the "splitting-the-football" process and policies.
94.
The changes made to the 2496-2690 MHz band, together with technological and business
developments, is facilitating the development of a nationwide WiMAX network by Sprint Nextel and
Clearwire that has the potential to compete with cable and DSL broadband providers. The 2496-2690
MHz band can speed the arrival of a wireless broadband pipe that will increase competition and consumer
choice, make possible new services, and promote the availability of broadband for all Americans. This
band also can play an important role in extending broadband service to rural and underserved areas.
Moreover, the changes to this band have enabled BRS/EBS providers to use this spectrum in a more
technologically and economically efficient manner.
(vii)

Wireless Communications Service (WCS)

95.
The Commission has licensed 30 megahertz of spectrum in the 2.3 GHz band, at 2305-
2320 MHz and 2345-2360 MHz, for the Wireless Communications Service ("WCS"). The service rules
governing WCS are flexible, and WCS licensees can use this spectrum to provide a variety of fixed or
mobile wireless services. The WCS spectrum was auctioned in 1997 and licensed on a Major Economic
Area ("MEA") and Regional Economic Area Grouping ("REAG") basis. In May 2006, the Wireless
Telecommunications Bureau granted a request for an extension of time for certain WCS licensees to build
out their licensed areas.229 The Order permits these licensees an additional three years, until July 21,
2010, to demonstrate that they have satisfied the build out requirement (which is substantial service) in
their licensed areas.230 As described in Section III.A.3, at least one wireless provider has begun using
WCS spectrum to deploy wireless broadband services.
2300-2
- 700
70 MHz: WCS Spe
WCS
ctrum

Licens

Lice

e
ns -
e

WCS

WC

WCS

C

Exem

Exe pt

Big

BRS/EB

E S

B

ISM B

IS

a

M B nd

LEO

(e
( .g. W
e
i-
i F
- i)
23
23
23
23
236
24
24
24
26
27
0
0
2
4
0
8
9
9
0
0
2
9
0
0
5
0
5
0
0
3
6
0
0


96.
The WCS spectrum is adjacent to and separated by the spectrum band for the Satellite
Digital Audio Radio Service ("SDARS"), which is used by Sirius XM Radio Inc. to provide satellite radio
service. On December 18, 2007, the Commission released a Notice of Proposed Rulemaking and Second
Further Notice of Proposed Rulemaking seeking comment on appropriate rules and policies for licensing
SDARS digital repeaters and considering changes to the rules governing WCS licenses.231 In particular,

229 Consolidated Request of the WCS Coalition For Limited Waiver of Construction Deadline for 132 WCS
Licenses; Request of WCS Wireless, LLC for Limited Waiver of Construction Deadline for 16 WCS Licenses; and
Request of Cellutec, Inc. for Limited Waiver Of Construction Deadlines for Stations KNLB242 and KNLB216 in
Guam/Northern Mariana and American Samoa, Order, 21 FCC Rcd 14134, 14139-41, 9-13 (WTB 2006).
230 Id.
231 See generally Amendment of Part 27 of the Commission's Rules to Govern the Operation of Wireless
Communications Services in the 2.3 GHz Band; Establishment of Rules and Policies for the Digital Audio Radio
Satellite Service in the 2310-2360 MHz Frequency Band, NPRM and Second Further NPRM, FCC 07-215 (rel. Dec.
18, 2007).

51




Federal Communications Commission DA 09-54

the Commission sought to consider what changes may be necessary to facilitate the coexistence of
SDARS and WCS licensees.
(viii) 1670-1675 MHz
97.
In April 2003, the FCC auctioned five megahertz of unpaired spectrum in the 1670-1675
MHz band as a single, nationwide license. As with the other spectrum bands licensed under Part 27 of the
Commission's rules, such as AWS and WCS, the service rules for the 1670-1675 MHz band are flexible,
and licensees can use the spectrum to deploy a variety of fixed or mobile wireless services. The license
was won at auction by Crown Castle. In July 2007, Crown Castle entered into a long-term agreement to
lease the spectrum to a wholly-owned subsidiary of TVCC Holding Company, LLC ("TVCC
Holding").232 In late 2008, control of TVCC Holding was transferred, so that 13.13 percent was held by a
company wholly owned by Rajendra Singh and the Singh family; 11.86 percent by Columbia Capital IV,
LLC, subsidiaries; and 75 percent by Harbinger-related entities.233
1500-
00 1
- 700 MHz

:

MHz 167


0-1
167
675 MHz
675
S
MHz pec
e tru
c
m

L-ba

L-

nd

Big

band

Bi

L-band

LEO

15
15
155
161
162
16
16 16
17
0
2
6
7 7
0
0
5
9
0
6
0
0 5
0

(ix)

Narrowband Spectrum

98.
In addition to the spectrum that mobile telephone providers use to offer both voice and
data CMRS services, two additional spectrum bands paging and narrowband PCS are used by
licensees to offer CMRS services that consist only of data communications. Spectrum designated for
commercial messaging/paging is spread across several non-contiguous bands: 35-36 MHz, 43-44 MHz,
152-159 MHz, 454-460 MHz, and 929-932 MHz.234 Each license consists of between 20 and 50
kilohertz.235 The Commission first allocated spectrum for paging in 1949 and licensed the spectrum on a
site-by-site basis through the mid-1990s.236 In 2000, the Commission began auctioning additional paging
licenses on a geographic area basis using EAs and MEAs.237 The Commission completed its third paging
auction on May 28, 2003.238

232 Long-Term De Facto Transfer Lease Application, File No. 0003108073 (filed July 17, 2008). Crown Castle
Announces Long-Term Modeo Spectrum Lease
, News Release, Crown Castle, July 23, 2007; ULS Lease ID
L000002305.
233 Transfer of Control of a Lessee Application, File No. 0003573463 (filed Sept. 10, 2008); TVCC Holding
Company, LLC, Form 602, File No. 0003635816 (filed Nov. 3, 2008).
234 FCC, Paging (Lower) Bandplan, available at http://wireless.fcc.gov/auctions/data/bandplans/pagingLwrband.pdf
(last visited Dec. 15, 2008); FCC, 929 and 931 MHz Paging Bandplan, available at
http://wireless.fcc.gov/auctions/data/bandplans/auc26bnd.pdf (last visited Dec. 15, 2008).
235 Id.
236 Revision of Part 22 and Part 90 of the Commission's Rules to Facilitate Future Development of Paging Systems,
Implementation of Section 309(j) of the Communications Act Competitive Bidding, Notice of Proposed
Rulemaking
, 11 FCC Rcd 3108, 3109-10, 4 (1996).
237 See 929 and 931 MHz Paging Auction Closes, Public Notice, 15 FCC Rcd 4858 (2000); Seventh Report, 17 FCC
Rcd at 13050-51.
238 Lower and Upper Paging Bands Auction Closes, Public Notice, 18 FCC Rcd 11154 (2003).

52




Federal Communications Commission DA 09-54

99.
Narrowband PCS spectrum is located in the 901-902 MHz, 930-931 MHz, and 940-941
MHz bands and allows licensees to offer an array of two-way data services such as text messaging.239
The Commission first auctioned narrowband PCS spectrum in 1994.240 Licenses consist of between 50
and 200 kilohertz each and were auctioned on a nationwide, regional, and MTA basis.241 The
Commission completed its most recent auction of narrowband PCS licenses on September 25, 2003.242
698-
6
9
98- 4
9 1 MH

M z

H : N

z
a
: N rro
rr w
o ba
b nd PC
nd

S Sp

PC
ec

S Sp

tr
t um
u
700 MHz

H Ban

z
d
800 MHz

H SM

z

R*

900 MHz

H SM

z

R

700
700
800
800
M
M
M
M

H

H

H

H

z
z Pub
z
z

Narrow-

P
P
z
P

Ce

C llula

e
r
P
llular
llula

Ce

C llu

e
la
llu r
u
u
u
la

Ban

Ba d

u
b
b
b
l
l
l
ic
ic
ic
l
ic
ic

PCS

ic
Saf
Saf
Saf
Saf
e
e
e
t
t
t
e
y
y
y
t

t
*
y

y
*
*
69
80
817
824
84
86
869
894 896 901
93 935 94
8
6
9
2
0
1

2.

Non-Regulatory Barriers to Entry

100.
There are three basic types of potential non-regulatory entry barriers, each of which
captures separate dimensions of the difficulty of entering an industry.243 The first type consists of the
impediment to entry erected by advertising expenditures. Unlike tangible capital, advertising can neither
be resold nor otherwise transferred to prospective buyers; such expenditures are irrecoverable or sunk.
While the incumbent has already incurred the sunk costs, the entrant has not. Therefore, the entrant has
higher incremental cost and incremental risk associated with its decision to enter. The second type of
entry barrier arises from economies of scale, which allow firms to lower the cost per unit of producing
and distributing a product as the volume of output expands. The more extensive economies of scale are,
the larger the minimum efficient scale is relative to the size of the market. Consequently, a nascent firm
risks depressing market price by producing at optimal scale. The alternative is to produce at less than
minimum cost. Either way, expected profitability is lowered, and entry is dissuaded. The third type of
entry barrier, and closely related to the second, is the inability of new firms to borrow sums sufficient to
finance efficient start-ups. The inability to borrow sufficiently increases with the larger absolute capital
requirement needed to realize minimum cost.
101.
All three types of entry barriers have the potential to afford incumbent carriers first-
mover advantages over latecomers. Therefore, it is possible that the three types of entry barriers are

239 Implementation of Section 309(j) of the Communications Act Competitive Bidding Narrowband PCS, Third
Memorandum Opinion and Order and Further Notice of Proposed Rulemaking
, 10 FCC Rcd 175 (1994).
240 Announcing the High Bidders in the Auction of Ten Nationwide Narrowband PCS Licenses; Winning Bids Total
$617,006,674, Public Notice, PNWL 94-4 (rel. Aug. 2, 1994).
241 Id.; Announcing the High Bidders in the Auction of 30 Regional Narrowband PCS Licenses; Winning Bids Total
$490,901,787, Public Notice, PNWL 94-27 (rel. Nov. 9, 1994).
242 Regional Narrowband PCS Spectrum Auction Closes, Public Notice, 18 FCC Rcd 19689 (2003); Narrowband
PCS Spectrum Auction Closes, Public Notice, 18 FCC Rcd 19751 (2003). See also Ninth Report, 19 FCC Rcd at
20636-37, 26.
243 See William J. Baumol and Robert D. Willig, Fixed Cost, Sunk Cost, Entry Barriers and Sustainability of
Monopoly
, QUARTERLY JOURNAL OF ECONOMICS, Vol. 96, Aug. 1981, at 406-431; Joe S. Bain, BARRIERS TO NEW
COMPETITION, 1956, at 55; William S. Comanor and Thomas A. Wilson, Advertising Market Structure and
Performance
, THE REVIEW OF ECONOMICS AND STATISTICS, Vol. 49, Nov. 1967, at 425.

53




Federal Communications Commission DA 09-54

significant in mobile telephone service. Telecommunications has historically been an industry
characterized by large investments in network infrastructure and vast scale economies, suggesting the
scale economy and capital requirement barriers are both high. Increasing advertising expenditures by
mobile telephone providers as they seek to brand their products suggests that the product differentiation
barrier in mobile telephone service is similarly high. Data provided in Section IV of this Report shows
that advertising spending for wireless telephone services totaled $4.1 billion in 2007, a 12 percent
increase over 2006, and that the top five operators alone increased advertising spending in 2007 by an
even higher 16 percent.244

E.

Rural Markets

1.

Geographical Comparisons: Urban vs. Rural

102.
Since the release of the Sixth Report,245 the Commission has attempted to obtain a better
understanding of the state of competition below the national level, and particularly in rural areas. The
Communications Act does not include a statutory definition of what constitutes a rural area.246 The
Commission used RSAs as a proxy for rural areas for certain purposes, such as the former cellular cross-
interest rule and the former CMRS spectrum cap, stating that "other market designations used by the
Commission for CMRS, such as [EAs], combine urbanized and rural areas, while MSAs and RSAs are
defined expressly to distinguish between rural and urban areas."247 Since its 2004 Report and Order
concerning deployment of wireless services in rural areas, however, the Commission has adopted a
"baseline" definition of rural as a county with a population density of 100 persons or fewer per square
mile.248 For this reason, we adopt this same definition to analyze service availability in rural areas in this
Report.
103.
By this definition, roughly 61 million people, or 21 percent of the U.S. population,249 live
in rural counties. These counties comprise 3.1 million square miles, or 86 percent of the geographic area
of the United States.250 The distribution of rural counties across the United States can be seen in the map
below.

244 Twelfth Report, 23 FCC Rcd at 2308, 160. See Section IV.B.4, Advertising and Marketing, infra.
245 Sixth Report, 16 FCC Rcd at 13350.
246 The federal government has multiple ways of defining rural, reflecting the multiple purposes for which the
definitions are used. Eighth Report, 18 FCC Rcd at 14834; Facilitating the Provision of Spectrum-Based Service to
Rural Areas and Promoting Opportunities for Rural Telephone Companies to Provide Spectrum-Based Services,
Notice of Proposed Rulemaking, 18 FCC Rcd 20802 (2003) ("Rural NPRM"), at 20808-11.
247 1998 Biennial Regulatory Review, Spectrum Aggregation Limits for Wireless Telecommunications Carriers,
Report and Order, 15 FCC Rcd 9219, 9256, 84, n.203 (1999).
248 Facilitating the Provision of Spectrum-Based Services to Rural Areas and Promoting Opportunities for Rural
Telephone Companies To Provide Spectrum-Based Services, Report and Order, 19 FCC Rcd. 19078, at 19087-88
(2004) ("We recognize, however, that the application of a single, comprehensive definition for `rural area' may not
be appropriate for all purposes. . . . Rather than establish the 100 persons per square mile or less designation as a
uniform definition to be applied in all cases, we instead believe that it is more appropriate to treat this definition as a
presumption that will apply for current or future Commission wireless radio service rules, policies and analyses for
which the term `rural area' has not been expressly defined. By doing so, we maintain continuity with respect to
existing definitions of `rural' that have been tailored to apply to specific policies, while also providing a practical
guideline.").
249 Including the populations of Puerto Rico and the Virgin Islands.
250 Including the populations of Puerto Rico and the Virgin Islands.

54





Federal Communications Commission DA 09-54

Map 4: U.S. County Density

251

2.

Rural Competition

104.
Using data provided by American Roamer, we find that 98.5 percent of the U.S.
population living in rural counties have one or more different operators offering mobile telephone service
in the census blocks in which they live, 94.2 percent live in census blocks with two or more mobile
telephone operators competing to offer service, 82.1 percent live in census blocks with at least three
competing mobile telephone operators, and 65.2 percent live in census blocks with at least four competing
mobile telephone operators.252 Based on the international comparison of mobile market concentration
presented above, the competitive choices facing residents of rural counties in the United States compare
favorably with those facing urban as well as rural residents of comparable foreign countries.253 In
particular, about 82 percent of U.S. consumers living in rural counties have at least as many mobile
telephone competitors from which to choose as consumers living in countries with three competing
mobile operators, including Japan, Finland, France and Canada, while about 65 percent of U.S. consumers
living in rural counties have a choice of at least one more mobile competitor than consumers in these
countries.
105.
Providers based in rural areas seem to be providing many of the services that nationwide
providers do. In the fall of 2007, the National Telecommunications Cooperative Association ("NTCA")
surveyed its members regarding their provision of wireless services.254 According to the 2007 NTCA

251 A larger version of this map may be found in Appendix B.
252 FCC analysis, using American Roamer, July 2007, and Census 2000 population figures.
253 See Table 4: Mobile Market Structure in Selected Countries, supra.
254 See NTCA 2007 Wireless Survey Report, at 3 (Jan. 2008), attached to the Comments of the National
Telecommunications Cooperative Association, WT Docket No. 08-27 (Mar., 26, 2008), also available at
(continued....)

55




Federal Communications Commission DA 09-54

Wireless Survey, 77 percent of survey respondents are offering wireless service to customers.255
Population density in most NTCA member service areas is extremely rural, between one and five persons
per square mile.256 Nevertheless, the survey indicates that competition is strong in rural areas, with
member providers "facing competition from other carriers--the average respondent indicated that their
company competes with between two and five other carriers."257 Survey respondents indicated that they
have invested considerable resources for the provision of wireless service.258 Of those members
providing wireless service, 93 percent offer voicemail and caller ID, 97 percent family plans, 72 percent
free long distance, 90 percent three-way calling, and 72 percent bonus night and weekend minutes, 66
percent unlimited local calling, and 41 percent voice activated dialing.259 CTIA makes a similar finding,
stating that "[c]arriers across the country, including those in rural markets continually deploy mobile
data and broadband to bring new technologies at faster speeds to consumers."260
106.
In terms of the availability of licensed spectrum to entities other than the four nationwide
service providers, we find first that, in 80 percent of rural counties (which include over 70 percent of rural
population), more than 100 megahertz of spectrum (cellular / PCS / AWS / 700 MHz) is licensed to
entities other than the four nationwide carriers and their affiliates.261 By comparison, in urban counties,
only 46 percent of counties, including just 21 percent of the population in urban counties, have more than
100 megahertz not licensed to the nationwide carriers and their affiliates.262

Table 6: Spectrum Not Licensed to the Nationwide Carriers & Their Affiliates

(Cellular / PCS / AWS / Lower 700 MHz)

Total

101-150
151-200
>200
<50 MHz Percent 50-100 MHz Percent

Percent

Percent

Percent


Counties

MHz

MHz

MHz

Rural

2356 0
0% 471
20%
1355
58%
474
20%
56
2%

Urban

878 4
0% 473
54%
282
32%
112
13%
7
1%

Total

3234


101-150
151-200
>200

Total Pops <50 MHz Percent 50-100 MHz Percent

Percent

Percent

Percent

MHz

MHz

MHz

Rural

60,836,650 0
0%
17,208,140
28%
34,494,276
57%
8,179,911
13%
954,323
2%

Urban

224,783,795
2,568,158 1%
173,485,258
77%
41,066,130
18%
6,967,151 3%
697,098
0%

Total

285,620,445


Map 5: Spectrum Not Licensed to the Nationwide Carriers & Their Affiliates

(Continued from previous page)
http://www.ntca.org/images/stories/Documents/Advocacy/SurveyReports/2007ntcawirelesssurveyreport.pdf (last
visited Dec. 15, 2008) ("2007 NTCA Wireless Survey").
255 Id. at 3.
256 Id. at 4.
257 Id. at 9.
258 Id. at 7.
259 Id. at 10.
260 CTIA 2008 Comments, at 11.
261 FCC internal analysis.
262 See Map B-34 in Appendix for a graphical representation of these data.

56




Federal Communications Commission DA 09-54

(Cellular / PCS / AWS / 700 MHz)263

107.
We find as well that significant spectrum is potentially available, particularly in rural
areas, through the secondary market. For this purpose, we regard licensed spectrum to be potentially
available where a licensee has no mobile telephone subscribers based on the NRUF data within the EAs
where the spectrum is located.264 Based on this information, we find that 34 percent of rural counties
(which include 26 percent of the rural population) have more than 100 megahertz of spectrum (cellular /
PCS / AWS / 700 MHz) that is potentially available. We find as well that 96 percent of rural counties,
including 91 percent of the rural population, have at least 50 megahertz that is not being utilized to
provide mobile telephone service to customers in those areas.265 By comparison, in urban counties, only
10 percent of counties, including just 3 percent of the population in urban counties, have more than 100
megahertz of potentially available spectrum, and 85 percent of urban counties, including 68 percent of
urban population, have at least 50 megahertz.266

263 A larger version of this map may be found in Appendix B.
264 FCC internal analysis based on NRUF data. See Appendix B, Map B-35.
265 FCC internal analysis based on NRUF data. See Appendix B, Map B-35.
266 See Map B-35 in Appendix for a graphical representation of these data.

57





Federal Communications Commission DA 09-54


Table 7: Available Licensed Spectrum

(Cellular / PCS / AWS / Lower 700 MHz)

Total

101-150
151-200
>200
<50 MHz Percent 50-100 MHz Percent

Percent

Percent

Percent


Counties

MHz

MHz

MHz

Rural

2356 97
4% 1452
62%
566
24%
167
7%
74
3%

Urban

878 132
15% 685
78%
57
6%
4 0% 0
0%

Total

3234



101-150
151-200
>200

Total Pops

<50 MHz Percent 50-100 MHz Percent

Percent

Percent

Percent

MHz

MHz

MHz

Rural

60,836,650 5,382,255
9% 39,983,738
66% 12,582,590
21%
2,160,946
4% 727,121
1%

Urban

224,783,795 72,816,451
32% 144,673,325
64%
6,641,564
3%
652,455
0%
0
0%

Total

285,620,445



Map 6: Available Licensed Spectrum (Cellular / PCS / AWS / 700 MHz)

267

108.
Thus, it appears that significant spectrum is available in rural areas for the provision of
new mobile wireless services to consumers.
3.

Conclusion

109.
Based on our analysis, and the information provided in the record, we conclude that
CMRS providers are competing effectively in rural areas. We note that market structure is only a starting

267 A larger version of this map may be found in Appendix B.

58




Federal Communications Commission DA 09-54

point for a broader analysis of the status of competition based on the totality of circumstances, including
the pattern of provider conduct, consumer behavior, and market performance, as discussed more fully
below. There is no evidence in the record to indicate that wireless providers in rural areas have the ability
to raise prices above competitive levels or to alter other terms and conditions of service to the detriment
of rural consumers.

IV.

PROVIDER CONDUCT IN THE MOBILE TELECOMMUNICATIONS MARKET

110.
A concentrated market, in conjunction with significant entry barriers, may lessen
competition in the market for commercial mobile services in two distinct ways. First, it may increase the
likelihood that a group of competing providers will successfully engage in coordinated interaction aimed
at raising prices and lowering output. Second, it may enable an individual provider to profitably raise
price and lower output unilaterally. However, neither coordinated interaction nor unilateral action to
lessen competition is a necessary consequence of market concentration and entry barriers. For example,
unilateral or coordinated action to lessen competition may be thwarted or undermined by the presence of
one or more maverick providers who have the ability and incentive to expand sales by undercutting the
prices of rivals, offering innovative service packages and engaging in aggressive advertising and
promotional campaigns. The analysis of provider conduct thus focuses on whether incumbent carriers,
given the prevailing market structure, engage in intense price and non-price rivalry or instead compete in
a less aggressive manner.

A.

Price Rivalry

1.

Developments in Mobile Telephone Pricing Plans

111.
The continued rollout of differentiated pricing plans also indicates a competitive
marketplace.268 In the mobile telephone sector, we observe independent pricing behavior, in the form of
continued experimentation with varying pricing levels and structures, for varying service packages, with
various handsets and policies on handset pricing. Today, all of the nationwide operators, and many
smaller operators, offer some version of a national rate pricing plan in which customers can purchase a
bucket of minutes to use on a nationwide or nearly nationwide network without incurring roaming or
long-distance charges. As noted in the Tenth Report, all the nationwide operators also offer some version
of a family plan.269 The Twelfth Report highlighted the experimentation by a number of operators with
various types of "unlimited" calling options.270 For example, some providers, including Alltel ("My
Circle") and T-Mobile ("myFaves"), allow subscribers unlimited free calling to and from a small number
of designated numbers, regardless of wireline or wireless carrier,271 while other providers offer plans that
provide for free calls only to customers who use the same wireless provider ("on-net" mobile-to-mobile
options).272 In addition, in 2007 Sprint Nextel became the first nationwide carrier to begin offering
unlimited calling plans, for a limited time, in select markets.273 Finally, a number of smaller and regional

268 See Section IV.B.6, Mobile Data Services and Applications, infra.
269 See Tenth Report, 20 FCC Rcd at 15946, 98.
270 See Twelfth Report, 23 FCC Rcd at 2292, 113.
271 Eleventh Report, 21 FCC Rcd at 10984, 91. See also Allie Winter, Verizon Wireless Apes Alltel's My Circle
With New Small Businesses Calling Plan
, RCR WIRELESS NEWS, June 11, 2008 (reporting that, in June 2008,
Verizon Wireless also introduced a new plan for businesses, allowing unlimited calling between a Verizon Wireless
number and up to five wireline numbers for $5 per line).
272 Id.

273 See Twelfth Report, 23 FCC Rcd at 2292, 113. Sprint Nextel's service consisted of unlimited wireless voice,
text and data service to consumers in the Twin Cities, Philadelphia, San Francisco and Tampa, Florida for $120 per
month. For $150 per month, consumers could add unlimited broadband access (via network cards). Id.

59




Federal Communications Commission DA 09-54

carriers, like Leap and MetroPCS, have been offering unlimited local calling plans for years.274
112.
The major development since the release of the Twelfth Report is the introduction of
unlimited national flat-rate calling plans across the four nationwide operators in the first quarter of
2008.275 Verizon Wireless made the first move by offering an unlimited nationwide flat-rate calling plan
in February 2008.276 AT&T quickly responded with a similar offer, and T-Mobile followed soon after
with a nationwide flat-rate calling plan that it differentiated by including unlimited voice bundled together
with unlimited text messaging.277 Similarly, the version of a nationwide flat-rate offering subsequently
unveiled by Sprint Nextel includes unlimited voice, text messages, and various premium data services
such as e-mail and Web surfing.278 In addition, beginning in the second quarter of 2008, T-Mobile cut the
price of additional lines on the shareable "family plan" version of its unlimited national calling plan by 50
percent.279 As discussed below, at least two resale/MVNO providers also responded to the introduction of
national flat-rate calling plans across the nationwide providers by offering prepaid versions of such
plans.280
113.
In addition to the developments discussed above, providers have initiated a series of
changes in contractual arrangements for mobile telephone pricing plans over the past few years. Until
recently, providers have generally required customers to sign a one- or two-year agreement in order to
take advantage of the various types of calling plans discussed above. As a rule, providers have also
required customers to pay early termination fees ("ETFs") when they cancel their wireless service before
the expiration of these agreements. Fixed-term service contracts and ETFs are part of a traditional
industry business model in which providers use handset subsidies to offer consumers a discount on the
upfront price of handsets and thereby promote the sale of mobile telephone services.281 The recent
changes to these arrangements involve the pro-rating of ETFs and the introduction of a month-to-month
service option.
114.
As noted in the Twelfth Report, Verizon Wireless became the first carrier to pro-rate

274 See Section VII.A.2, Wireless Alternatives, infra, and Tenth Report, at 15981, 199.
275 David W. Barden, et al., Wireless Services and Handset Pricing Analysis, Bank of America, Equity Research,
June 19, 2008, at 3-4, 7 ("Wireless Services and Handset Pricing Analysis").
276 Id. at 7; Amol Sharma and Dionne Searcy, For Big Talkers, Wireless Firms Offer Flat Rates: Plans from
Verizon, Rivals Will Allow Unlimited Calling; Switching Without Penalties
, WALL STREET JOURNAL, Feb. 20, 2008,
at D1; Matt Kapko, It's An Unlimited Industry Now . . . But What About Sprint Nextel, RCR WIRELESS NEWS, Feb.
20, 2008; Roger Cheng, Virgin Mobile to Join Flat Rate Phones Frenzy, WALL STREET JOURNAL, June 24, 2008
("Flat Rate Phones Frenzy").
277 T-Mobile Offers Consumers Unlimited Calling and Messaging Plan, News Release, T-Mobile, Feb. 19, 2008;
Flat Rate Phones Frenzy; Wireless Services and Handset Pricing Analysis.
278 Matt Kapko, Sprint Nextel Goes All In, Announces `Simply Everything' Unlimited Play, RCR WIRELESS NEWS,
Feb. 28, 2008; Flat Rate Phones Frenzy; Wireless Services and Handset Pricing Analysis.
279 Wireless Services and Handset Pricing Analysis, at 11 (noting that T-Mobile lowered the price of its Family
Time Unlimited plan from $199.99 to $149.99 for two parties sharing the plan, and additional lines can be added for
$49.99 each); COMMUNICATIONS DAILY, June 5, 2008, at 7. The plan includes unlimited text and instant messaging
as well as unlimited voice.
280 See Section IV.A.2, Prepaid Service, infra.
281 See, e.g., Wireless Services and Handset Pricing Analysis, at 1, 13-19.

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Federal Communications Commission DA 09-54

ETFs for new contract customers in November 2006,282 and cited a report suggesting that Verizon
Wireless's new ETF policy may put competitive pressure on other providers to follow suit.283 AT&T
implemented a new policy to pro-rate ETFs in late May 2008.284 In November 2007, both Sprint Nextel
and T-Mobile announced plans to implement pro-rated ETFs in 2008.285 As of June 2008, T-Mobile pro-
rates its ETFs for customers with 180 days or less remaining on their service contracts,286 and as of
November 2, 2008, Sprint Nextel altered its policy on ETFs beginning in month six of a customer's
contract.287 As of June 2008, AT&T, Verizon Wireless, Sprint Nextel, T-Mobile, and Alltel have each
implemented various policies that allow customers the option of changing elements of their contracts
without requiring a contract extension, and they each permit customers various periods of time to try their
services so that if they are not fully satisfied they can change plans without penalties.288
115.
In addition, since the release of the Twelfth Report one of the nationwide providers
initiated a significant departure from the traditional business model. In September 2008, Verizon
Wireless introduced a month-to-month option that allows customers to purchase the company's
nationwide pricing plans without signing a one- to two-year contract.289 Under this new month-to-month
agreement, customers can either purchase new devices at the full retail price, or use their own devices
provided they are compatible with Verizon Wireless's wireless network technology. In addition,
customers can terminate their agreement at the end of any month without paying an ETF. Verizon
Wireless's month-to-month agreement is available on all of the company's nationwide voice and data
plans for both new and current contract customers, though current contract customers must fulfill the
terms of their current contract before moving to a month-to-month agreement.
2.

Prepaid Service

116.
In the United States, most mobile telephone subscribers pay their phone bills after they
have incurred charges, an approach 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, they typically produce lower ARPUs and higher
churn rates in comparison to postpaid service.290 For these reasons, the industry generally has not heavily

282 Twelfth Report, 23 FCC Rcd at 2293, 115;Verizon Wireless Expands the `Worry-Free Wireless Guarantee' It
Pioneered
, News Release, Verizon Wireless, Nov. 16, 2006. Verizon Wireless reduces its $175 ETF by $5 per
month for each full month the customer retained Verizon Wireless's service.
283 Citing Negative Impact on Industry, Verizon Wireless to Pro-Rate ETFs, TRDAILY, June 29, 2006.
284 AT&T Announces New Approach To Early Termination Fees: More Flexibility For Wireless Customers, News
Release, AT&T, Mar. 31, 2008. AT&T followed Verizon Wireless's lead and also reduces its $175 ETF by $5 per
month for each full month the customer retained AT&T's service.
285 T-Mobile to Introduce More-Flexible Contract Terms for Customers, News Release, T-Mobile, Nov. 7, 2007;
Sprint Announces New Programs to Deliver Better Customer Experience, News Release, Sprint Nextel, Nov. 7,
2007.
286 See T-Mobile Offers Customers Additional Service Plan Flexibility, News Release, T-Mobile (June 23, 2008),
available at http://www.fiercewireless.com/node/25144 (last visited Dec. 15, 2008).
287 Sprint Launches One of the Industry's Most Customer-Friendly Policies on Pro-Rated Early Termination Fees,
News Release, Sprint Nextel (Oct. 31, 2008).
288 CTIA, Written Ex Parte Communication, WT Docket Nos. 05-194 & 08-27, June 11, 2008, at 2-4.
289 No Contract Required New Month-To-Month Agreement Gives Verizon Wireless Customers Even More
Freedom
, Press Release, Verizon Wireless, Sept. 22, 2008.
290 Twelfth Report, 23 FCC Rcd at 2293-94, 116.

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promoted prepaid offerings in the past.291 However, the pool of unsubscribed customers qualified for
postpaid plans has declined to the point where prepaid offerings, which do not require credit checks, seem
more attractive to carriers.292 In response, some carriers have introduced new prepaid plans, or entire
brands.293 In some cases, they are tailoring their offerings to suit segments of the market that do not want
or cannot get a traditional cellular plan, particularly the youth market. In addition, many MVNOs offer
prepaid plans rather than standard monthly billing.
117.
The result of these efforts has been a significant rise in the percentage of wireless users
who subscribe to prepaid plans.294 According to one analyst, prepaid wireless subscribers accounted for
roughly 17 percent of major U.S operators' subscribers at the end of 2007, 295 versus 15 percent at the end
of 2006.296 Prepaid subscriber growth slowed last year; however, its growth is still three times higher
than postpaid subscriber growth.297
118.
Although prepaid service is generally targeted at different market segments than postpaid
service, there is evidence of competitive interaction between the pricing of prepaid and postpaid service
offerings. A recent example is the spread of unlimited national calling options from postpaid to prepaid
service. In July 2008, MVNO Virgin Mobile responded to the introduction of unlimited national flat-rate
calling plans across the nationwide facilities-based providers by unveiling a prepaid version of an
unlimited national flat-rate calling plan, along with a variant that includes unlimited text messaging and
emails for an additional flat monthly charge.298 Whereas the nationwide facilities-based providers charge
higher monthly fees for unlimited calling plans and require their customers to sign fixed-term contracts,
customers who take advantage of Virgin's unlimited offering do not have to sign contracts and are free to
leave at any time.299 In August 2008, Net10, a prepaid service provider and subsidiary of Tracfone,
followed by offering unlimited calling and text messaging for a flat monthly charge.300
3.

Mobile Broadband and Other Data Service Pricing

119.
During the past year providers continued to use a wide variety of options for pricing
mobile data services provided over wireless broadband networks and slower legacy wireless networks.
These options include subscription to a monthly data package, flat rate pricing for each use or download
of an application, and pricing based on kilobytes consumed. The availability of the different pricing
options varies by type of application as well as by provider, with providers frequently offering customers

291 Id.
292 Id.
293 Id.
294 The percentage of total mobile telephone subscribers who use prepaid plans remains significantly lower in the
United States than in most of Western Europe. See Table 16: Mobile Market Performance in Selected Countries,
infra.
295 See John C. Hodulik et al., US Wireless 411, UBS Investment Research, UBS, Mar. 18, 2008, at 3 ("US Wireless
411
").
296 See Twelfth Report, 23 FCC Rcd at 2294, 117.
297 US Wireless 411 at 3.
298 Virgin Mobile USA To Introduce Lowest-Priced Unlimited Nationwide Calling With No Roaming Or Long
Distance Charges, No Activation Fees or Annual Contracts
, News Release, Virgin Mobile, June 24, 2008; Flat Rate
Phones Frenzy
, supra note 276.
299 Id.
300 Allie Winter, Unlimited Calling Dribbles Into No-Contract Crowd, RCR WIRELESS NEWS, Aug. 4, 2008.

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Federal Communications Commission DA 09-54

a choice of pricing options for a particular application. In addition to allowing customers to purchase
particular applications on a stand-alone or a la carte basis, carriers also offer certain applications bundled
with monthly data packages for mobile phones. As in the past, mobile data pricing continues to be
characterized by considerable complexity due to the diversity of pricing options.301
120.
Providers offer a wide variety of data packages for a flat monthly charge. The specific
content of such mobile data packages varies by provider, and individual providers typically offer multiple
tiers of monthly data packages.302 As noted in the Twelfth Report, providers price monthly data packages
in two principal ways: based on a limited amount of usage per month or unlimited monthly data use.303
For example, providers continue to offer messaging packages that include a set number of messages per
month, as well as unlimited monthly messaging packages.304 Data packages for mobile content such as
Web browsing, e-mail, video and television typically allow unlimited access to all or some of the content
included in the package.305 In this regard, a notable development in the past year is the introduction of
unlimited bundled service plans that combine unlimited nationwide calling with unlimited text messaging
and unlimited use of certain other data services such as picture or video messaging, Web browsing,
emailing, GPS navigation and mobile television.306 These unlimited voice and messaging bundles were
introduced as a competitive response to the prior launch of unlimited voice-only plans.307
121.
Providers also allow mobile subscribers to use mobile data applications on a "pay-per-
use" or "pay-as-you-go" basis, without subscribing to a monthly data package. The two most common
pay-per-use pricing options currently in use are: (1) a flat fee for each use or download of an
application;308 and (2) a per-kilobyte fee. 309 Differentiated rates for pay-per-use and monthly data

301 Twelfth Report, 23 FCC Rcd at 2294-97, 118-123.
302 See, e.g., AT&T Wireless, Messaging and MEdia (TM) Bundles, available at http://www.wireless.att.com
(search "Messaging and Media (TM) Bundles") (last visited Dec. 16, 2008); Sprint, Data Service Packs, available at
http://www.sprint.com (search "Data Service Packs") (last visited Dec. 16, 2008); Verizon Wireless, Data Plans,
available at http://www.verizonwireless.com (hyperlink "Plans;" hyperlink "Voice and Email Plans" or "Internet
Plans") (last visited Dec. 15, 2008).
303 Twelfth Report, 23 FCC Rcd at 2295, 120.
304 See, e.g., See, e.g., AT&T Wireless, Messaging and MEdia (TM) Bundles, available at
http://www.wireless.att.com (search "Messaging and Media (TM) Bundles") (last visited Dec. 16, 2008); Sprint,
Data Service Packs, available at http://www.sprint.com (search "Data Service Packs") (last visited Dec. 16, 2008);
305 See, e.g., AT&T Wireless, Messaging and MEdia (TM) Bundles, available at http://www.wireless.att.com
(search "Messaging and Media (TM) Bundles") (last visited Dec. 16, 2008); Sprint, Data Service Packs, available at
http://www.sprint.com (search "Data Service Packs") (last visited Dec. 16, 2008); Verizon Wireless, Data Plans,
available at http://www.verizonwireless.com (hyperlink "Plans;" hyperlink "Voice and Email Plans" or "Internet
Plans") (last visited Dec. 15, 2008).
306 See Section IV.A.1, Developments in Mobile Telephone Pricing Plans, supra.
307 David W. Barden, et al., Wireless Services and Handset Pricing Analysis, supra note 275, at 7, 10-12.
308 See, e.g., T-Mobile, Services, available at http://www.t-mobile.com/shop/addons/ (last visited Dec. 16, 2008)
(explaining that subscribers can download various types of games and ringtones for a range of flat fees apiece);
AT&T Wireless, Messaging FAQs, available at http://www.wireless.att.com/learn/messaging-
internet/messaging/faq.jsp (last visited Dec. 16, 2008) (noting that AT&T customers with text-messaging capable
phones are pre-activated to send and receive messages for $0.20 per message); Sprint, Music, available at
http://www.nextel.com/en/services/power_vision/music.shtml (last visited Dec. 16, 2008) (noting that the price for
downloading music from the Sprint Music Store is $0.99 per song with the purchase of various monthly data plans
or packages).

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Federal Communications Commission DA 09-54

packages allow high-volume users to save on data services by subscribing to monthly data packages. For
example, volume discounts applied to monthly messaging packages result in a lower unit price per
message than the flat pay-as-you-go rate for messaging services.310
122.
Nielsen Mobile reports that a growing number of consumers are turning to unlimited
("all-you-can-eat") data plans that allow them to access the mobile Internet as frequently as they'd like for
a fixed cost.311 In particular, Nielsen Mobile estimates that 14 percent of U.S. wireless subscribers had a
wireless plan that provided unlimited access to the mobile Internet as of the first quarter of 2008, up from
10 percent in the first quarter of 2007.312 In addition, Nielsen Mobile finds that fixed-fee, unlimited data
use is the preferred subscription model for mobile data users, with 50 percent of such users saying they
would prefer such a model in the fourth quarter of 2007, much higher than the percentages of those users
who favored alternative pricing models such as fixed-fee limited use (2 percent) or pay-per-use (1
percent).313 As noted in previous reports, monthly data packages are particularly popular among
subscribers who access the Web via their mobile phones because consumers perceive mobile web
browsing to be too expensive without using monthly data packages, and want to avoid being surprised by
additional charges billed to their monthly mobile phone invoices.314
123.
As discussed in the Twelfth Report, advertising on mobile phones has the potential to
become a significant alternative revenue source, and U.S. wireless providers have begun to sell
advertising on mobile phones, or made plans to do so, with a view towards using advertising revenues to
subsidize mobile data services and thereby stimulate greater consumer uptake and usage of mobile video,
Internet access and other content.315 Nielsen Mobile reports that, by the end of 2007, 29 percent of U.S.
mobile data users recalled seeing some form of advertising on their phone, including not only mobile
Internet advertising, but also shortcode advertising via text messaging, mobile video advertising, mobile
game advertising and other forms of mobile marketing.316 The Twelfth Report identified consumers'
lukewarm response to mobile advertising in surveys as a potential stumbling block to the advertising
(Continued from previous page)
309 See, e.g., AT&T Wireless, MEdiaTM Net, available at http://www.wireless.att.com (last visited Oct. 7, 2008)
(noting that the pricing options available for MEdia Net wireless data services include pay-as-you-go for $0.01 per
kilobyte); Sprint, Data Packs, available at http://www.sprint.com (last visited Oct. 7, 2008) (noting that customers
will be charged $0.03 per kilobyte for usage of Sprint Vision data services unless they purchase a monthly data
package for Sprint Vision); Verizon Wireless, Data Services: V CAST Music, available at
http://www.verizonwireless.com (last visited Oct. 7, 2008) (noting that purchasing and downloading music from the
V CAST Music store may be billed at 1.5 cents per kilobyte if the customer does not subscribe to a data plan or
feature).
310 See, e.g., T-Mobile, Messaging, available at http://www.t-mobile.com (last visited Oct. 7, 2008) (offering
subscribers the option of purchasing volume-discount priced monthly messaging bundles as an alternative to sending
and receiving messages on a pay-as-you-go basis for $0.15 each); AT&T Wireless, Messaging FAQs, available at
http://www.wireless.att.com (last visited Oct. 7, 2008) (stating that a messaging package is an allotment of messages
that are priced lower than the per message charge). See also Twelfth Report, 23 FCC Rcd at 2295-96, 120.
311 Critical Mass The Worldwide State of the Mobile Web, Nielsen Mobile, July 2008, at 4.
312 Id.
313 Id.
314 See, e.g., Twelfth Report, 23 FCC Rcd at 2296, 120.
315 Id. at 2296-2297, 122. See also Sharon Armbrust, Wireless Investor: U.S. Mobile Wireless Projections: Data
Dollars Outgrow Voice 8-to-1
, WIRELESS INVESTOR, SNL Kagan, July 15, 2008, at 4.
316 Critical Mass The Worldwide State of the Mobile Web, Nielsen Mobile, July 2008, at 8.

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model.317 More recent survey evidence from Nielsen Mobile indicates that consumers may be becoming
somewhat more receptive to marketing on mobile phones in exchange for receiving free applications.
Specifically, while just 14 percent of U.S. mobile data users say they do not mind relevant mobile
advertising, 23 percent of such users expect to see more of it, and 32 percent are open to mobile
advertising if it helps to lower their wireless bill.318 Nielsen Mobile also finds that mobile Internet users
and mobile video users tend to be more open to mobile advertising then users of some other forms of
mobile content, and in particular estimates that mobile Internet users are 60 percent more likely than the
average data user to find mobile advertising acceptable.319 Based on such findings, Nielsen Mobile
believes that "mobile advertising is most acceptable to consumers via media types with which they are
accustomed to receiving advertising messages in the non-mobile world."320
124.
The mobile search advertising market is one promising source of ad revenue. Although
this market is currently still small, with only an estimated $244 million in spending expected in 2008,
wireless providers and Internet companies expect the market to grow rapidly in the future.321 Wireless
service providers will split revenue with other parties from ads that come up in response to the keywords
subscribers use to conduct searches.322 For example, it is reported that Sprint Nextel recently entered into
a deal with Google under which Sprint Nextel added Google as the default Web search bar on browsers in
more than 40 of its handsets, and as part of that deal Sprint Nextel shares revenue from ads Google
displays in response to searches.323

B.

Non-Price Rivalry

125.
Service providers in the mobile telecommunications market also compete on many more
dimensions other than price, including non-price characteristics such as coverage, call quality, data
speeds, and mobile data content. Indicators of non-price rivalry include advertising and marketing,
capital expenditures, technology deployment and upgrades, and the provision of mobile data services.
1.

Technology Deployment and Upgrades

a.

Market-Based Versus Mandated Standards

126.
The subject of technology deployment and upgrades by U.S. mobile telecommunications
providers is properly analyzed under the heading of provider conduct because of the Commission's
market-oriented approach to managing spectrum for commercial mobile voice and data services. The
Commission has adopted flexible licensing policies instead of mandating any particular technology or
network standard. Mobile telephone service providers have the flexibility to deploy the network
technologies and services they choose as long as they abide by certain technical parameters designed to
avoid radiofrequency interference with adjacent licensees. In contrast, the European Community
mandated a single harmonized standard for second-generation mobile telecommunications services

317 Twelfth Report, 23 FCC Rcd at 2296-97, 122. (citing a survey conducted in August 2006 that asked participants
"How willing would you be [on a scale of 1 to 7] to watch advertising on your cell phone if in return you were to
receive free applications for your cell phone?," in which 51 percent responded that they were not willing at all
[rating 1], 12 percent were neutral [4], and only 10 percent responded that they were very willing [7].)
318 Critical Mass The Worldwide State of the Mobile Web, Nielsen Mobile, July 2008, at 8.
319 Id.
320 Id.
321 Amol Sharma, Verizon, Google Close to Mobile Search Deal, WALL STREET JOURNAL, Aug. 22, 2008, at A1.
322 Id.
323 Id.

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(GSM324), and also has adopted a single standard for third-generation services (WCDMA325).326 As a
result of the flexibility afforded by the Commission's market-based approach, different U.S. providers
have chosen to deploy a variety of different technologies with divergent technology migration paths.
Competition among multiple incompatible standards has emerged as an important dimension of non-price
rivalry in the U.S. mobile telecommunications market and a distinctive feature of the U.S. mobile industry
model.
127.
The main advantage of compatibility between competing wireless networks is that greater
economies of scale in the production of both terminals and network infrastructure equipment tend to
lower the unit cost of handsets, chipsets, and other network equipment.327 Lower equipment costs, in
turn, may promote more rapid adoption of mobile telephone services.328 In addition, standardization tends
to produce greater variety of handsets.329 However, it has been argued that the Commission's market-
based approach to wireless network standards helped encourage the emergence of a promising new
wireless network technology (CDMA330) that ultimately proved to be superior to the European second-
generation wireless standard for high-speed mobile data services.331 In addition, competition between
mobile telephone providers using incompatible wireless network technologies has other advantages that
can benefit consumers, including greater product variety and differentiation of services,332 more
technological competition,333 and greater price competition.334

324 See Section IV.B.1.b, Background on Network Design and Technology, infra.
325 Id.
326 Neil Gandal, David Salant, and Leonard Waverman, Standards in Wireless Telephone Networks,
TELECOMMUNICATIONS POLICY, Vol. 27, No. 5-6, June-July 2003, at 325 ("Standards in Wireless Telephone
Networks
"). The authors note that, although the European Community backed away from mandating a single
standard for third-generation services, the absence of a mandate has had little practical effect as all European mobile
operators have opted for the same standard and migration path. Id. at 330.
327 Id. at 329.
328 See Carl Shapiro and Hal R. Varian, INFORMATION RULES, Harvard Business School Press, 1999, at 264 (noting
that "the Europeans managed to adopt new digital wireless telephone technology more rapidly than in the United
States") ("INFORMATION RULES"); Stephen C. Littlechild, Mobile Termination Charges: Calling Party Pays Versus
Receiving Party Pays
, TELECOMMUNICATIONS POLICY, Vol. 30, No. 5-6, June-July 2006, at 242-77 (finding that
"technical concentration," measured as the percent of subscribers on GSM networks, increases mobile penetration).
329 Standards in Wireless Telephone Networks, at 329.
330 See Section IV.B.1.b, Background on Network Design and Technology, infra.
331 Standards in Wireless Telephone Networks, at 328-30; INFORMATION RULES, at 264; Section IV.B.1.b,
Background on Network Design and Technology, infra.
332 Standards in Wireless Telephone Networks, at 329-330 (noting, for example, that CDMA networks "have offered
more and better data services than were available on GSM networks").
333 Id. at 330. See also Eleventh Report, 21 FCC Rcd at 10993, 113 (noting that the former Cingular was pressured
to upgrade its network to WCDMA/HSDPA, rather than the slower, interim WCDMA technology, in an effort to
compete with Verizon Wireless's EV-DO network, which offers speeds similar to WCDMA/HSDPA and faster than
WCDMA) and at 11025-26 (arguing that this technological competition helped give the United States an edge over
Europe with regard to the deployment of high-speed wireless data networks).
334 Standards in Wireless Telephone Networks, at 330. Technological competition may pressure providers to cut
rates and provide larger handset subsidies to attract a sufficiently large customer base to ensure their chosen
technology survives as a standard. See Simon Flannery et al., 3G Economics a Cause for Concern, Morgan Stanley,
Equity Research, Feb. 1, 2005, at 11 ("3G Economics a Cause for Concern"). In addition, use of multiple
(continued....)

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Federal Communications Commission DA 09-54

128.
The following analysis of technology deployment and upgrades is divided into four parts.
As background to examining the particular technological choices made by different providers, Section
IV.B.1.b provides an introduction to cellular network design and technology and identifies and describes
the major digital technologies and associated migration paths. Section IV.B.1.c examines the specific
technological choices made by mobile providers that use the same spectrum bands, network design and
technologies to offer both voice and data services. Section IV.B.1.d examines the impact of these choices
on coverage by technology type. Finally, Sections IV.B.1.e and IV.B.1.f examine the technology
deployment decisions of broadband and narrowband data network operators, respectively.
b.

Background on Network Design and Technology

129.
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 reuse spectrum to maximize
efficiency.335 In the past, cellular and SMR networks used an analog technology, while PCS and AWS
networks were designed from the start to use a digital format. Digital technology provides better sound
quality and increased spectral efficiency than analog technology. From a customer's perspective, digital
service in the cellular band or SMR bands is virtually identical to digital service in the PCS and AWS
bands. Digital technology is now dominant in the mobile telephone sector, with almost all wireless
subscribers using digital service.336
130.
The two main digital technologies used in the United States are Code Division Multiple
Access ("CDMA") and Global System for Mobile Communications ("GSM"). In addition, there are two
other, less-widely used (by subscribers), technologies: integrated Digital Enhanced Network ("iDEN")
and the once-common Time Division Multiple Access ("TDMA"). These four technologies are
commonly referred to as Second Generation, or "2G," because they succeeded the first generation of
analog cellular technology, Advanced Mobile Phone Systems ("AMPS").337 As discussed in previous
reports, in light of 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. U.S. carriers have been phasing out TDMA.338 Maps showing mobile
(Continued from previous page)
incompatible wireless network standards may act as a constraint on providers' ability to engage in explicit or tacit
coordination that would impair price competition. See Horizontal Merger Guidelines, U.S. Department of Justice
and Federal Trade Commission, Apr. 2, 1992, revised Apr. 8, 1997, 2.11 (noting that standardization of pricing
and product variables on which firms could compete may facilitate reaching terms of coordination that would harm
consumers).
335 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 large as 20 miles across. Each cell
serves as a base station for mobile users to obtain connection to the fixed network and is equipped with its own radio
transmitters/receivers and associated antennas. Service regions are divided into cells so that individual radio
frequencies may be reused in different cells ("frequency reuse"), in order to enhance frequency efficiency. When a
person makes a call on a wireless phone, the connection is made to the nearest base station, which connects with the
local wireline phone network or another wireless operator. 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 base station in the next cell. See Sixth Report, 16 FCC Rcd at 13361, n.55.
336 See Section VI.B.1, Subscriber Growth, infra.
337 See infra note 354 for a discussion of the cellular analog requirement and its sunset.
338 AT&T, for example, discontinued TDMA service on February 18, 2008, and on Mar. 1, 2008 TDMA service was
discontinued on the former Dobson TDMA network. AT&T, Answer Center, http://wireless.att.com/answer-center
(last visited Sept. 19, 2008). Cincinnati Bell Wireless discontinued its TDMA service in June 2006. Cincinnati
Bell, Inc., SEC Form 10-K, filed Mar. 1, 2007, at 5.

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Federal Communications Commission DA 09-54

telephone digital coverage can be found in Appendix B.
131.
Beyond the 2G digital technologies, mobile telephone providers have been deploying
next-generation or third generation ("3G") network technologies339 that allow them to offer mobile data
services at higher data transfer speeds and, in some cases, to increase voice capacity.340 For GSM/TDMA
providers, the first step in the migration to next-generation network technologies is General Packet Radio
Service ("GPRS" or "GSM/GPRS"), a packet-based data-only network upgrade that allows for faster data
rates by aggregating up to eight 14.4 kbps channels.341 Beyond GPRS, many U.S. GSM/TDMA providers
have deployed Enhanced Data Rates for GSM Evolution ("EDGE") technology, which offers average
data speeds of 100-130 kbps. Wideband CDMA ("WCDMA," also known as Universal Mobile
Telecommunications System, or "UMTS") is the next migration step for GSM providers beyond EDGE
and allows maximum data transfer speeds of up to 2 Mbps and average user speeds of 220-320 kbps.342
Finally, deployment of WCDMA with HSDPA (High Speed Data Packet Access) technology allows
average download speeds of 400-700 kbps with burst rates of up to several Mbps,343 while the addition of
HSUPA (High Speed Uplink Packet Access) technology allows average upload speeds of 500-800
kbps.344 Although WCDMA and WCDMA/HSDPA are not backwards compatible with GPRS/EDGE,
wireless modem cards that are compatible with both WCDMA/HSDPA and GPRS/EDGE, and enable
handoff between the two types of networks, are available for use with laptop computers.345
132.
Many CDMA providers have upgraded their networks to CDMA2000 1xRTT (also
referred to as "CDMA2000 1X" or "1xRTT"), CDMA2000 EV-DO (evolution-data optimized, "EV-
DO") Revision 0, and EV-DO Revision A ("Rev. A") technologies. 1xRTT doubles voice capacity and
delivers peak data rates of 307 kbps in mobile environments and typical speeds of 40-70 kbps.346 EV-DO
allows maximum data throughput speeds of 2.4 Mbps, while EV-DO Rev. A increases maximum data
throughput speeds to 3.1 Mbps.347 Whereas WCDMA and WCDMA/HSDPA are incompatible with
earlier technologies on the GSM migration path, the more advanced technologies on the CDMA
migration path are backwards compatible.348 Deployment of these various technologies is discussed

339 For purposes of this Report, all of the network technologies beyond 2G that carriers have deployed, as well as
those that they plan to deploy in the future, are generally referred to as "next-generation network technologies." The
International Telecommunication Union ("ITU") has defined 3G network technologies as those that can offer
maximum data transfer speeds of 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, 15 FCC Rcd at 17695. There
is ambiguity among other industry players, however, as to which network technologies constitute 3G and which
constitute interim technologies, often labeled "2.5G." See Seventh Report, 17 FCC Rcd at 12990 and 13038.
Therefore, this Report uses a more general label to describe all of the technologies beyond 2G.
340 See Section IV.B.1.c, Technology Choices and Upgrades of Mobile Telephone Providers, infra.
341 See Seventh Report, 17 FCC Rcd at 12990. This upgrade is also labeled GSM/GPRS because many
GSM/TDMA carriers are upgrading their TDMA markets with GSM and GPRS simultaneously.
342 Tenth Report, 20 FCC Rcd at 15951, 111.
343 Id.
344 AT&T Nears Completion of 3G Wireless Technology Deployment that Delivers Broadband Wireless Speeds
For Downloads and Uploads
, Press Release, AT&T, May 21, 2008.
345 See, e.g., Novatel Wireless, Products: Merlin U730 Wireless PC Modem Card, available at
www.novatelwireless.com (last visited Oct. 8, 2008).
346 See Seventh Report, at 12990; Ninth Report, 19 FCC Rcd at 20650, 129.
347 Id.
348 Standards in Wireless Telephone Networks, at 328.

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Federal Communications Commission DA 09-54

below. Maps showing CDMA and GSM network coverages, as well as Mobile Broadband coverage, can
be found in Appendix B.
133.
Beyond WCDMA/HSDPA/HSUPA and EV-DO, there are two main competing
technologies for next-generation wireless broadband networks: Long Term Evolution ("LTE") and
WiMAX. Both of these technologies, which are often referred to as fourth-generation ("4G")
technologies, are generally based on the Orthogonal Frequency Division Multiple Access ("OFDMA")
modulation technology.349 LTE can support up to 58 Mbps for upper link transmission and 173 Mbps for
downlink transmission with 20 MHz spectrum and a 2x2 Multiple Input Multiple Output ("MIMO")
antenna structure.350 The Mobile WiMAX technology can support peak downlink data rates up to 63
Mbps and peak upper link data rates up to 28 Mbps in a 10 MHz channel.351 The major GSM operators in
the United States have chosen LTE as their next-generation technology beyond HSDPA/HSUPA-
enhanced WCDMA.352 By contrast, one of the two nationwide CDMA operators in the United States is
planning to deploy WiMAX as its 4G wireless broadband network, while the other has announced that it
has chosen LTE as its 4G network technology.353 As a result, although GSM and CDMA operators have
been following divergent technological migration paths until now and it is evident that technological
competition will remain a characteristic feature of the U.S. wireless market, the future evolution of
wireless broadband technologies may ultimately lead to greater technological convergence.
c.

Technology Choices and Upgrades of Mobile Telephone Providers

134.
Of the four nationwide mobile telephone operators, AT&T and T-Mobile use
GSM/TDMA as their 2G digital technology, Verizon Wireless and Sprint Nextel use CDMA, and Sprint
Nextel also uses iDEN on the former Nextel network.354 The four nationwide mobile operators, together
with other U.S. mobile providers, have continued to deploy next-generation network technologies over
the past year.
135.
The two nationwide CDMA operators, Verizon Wireless and Sprint Nextel, have
deployed EV-DO and EV-DO Rev. A network technologies across significant portions of their

349 See EDGE, HSPA and LTE--The Mobile Broadband Advantage, Rysavy Research and 3G Americas, September
2007, at 16, available at http://www.3gamericas.com/pdfs/2007_Rysavy_091007.pdf (last visited Dec. 15, 2008).
350 Id. at 81.
351 See Mobile WiMAX Part I: A Technical Overview and Performance Evaluation, Mobile WiMAX Forum,
August 2006, at 10, available at
http://www.wimaxforum.org/documents/downloads/Mobile_WiMAX_Part1_Overview_and_Performance.pdf (last
visited Dec. 15, 2008).
352 EDGE, HSPA and LTE Broadband Innovation, Rysavy Research and 3G Americas, September 2008. See also,
AT&T Plans Major Expansion of 3G Wireless Broadband Service in 2008, Press Release, AT&T, Feb. 6, 2008
(asserting that the company's deployment of HSUPA marks the next step in direction toward LTE).
353 See Section IV.B.1.c, Technology Choices and Upgrades of Mobile Telephone Providers, and Section IV.B.1.e,
Broadband Data Networks and Technology Deployment, infra.
354 In addition, through February 18, 2008, all operators using cellular spectrum must deploy AMPS, an analog
technology, throughout the part of their networks using cellular spectrum. 47 C.F.R. 22.901(b). In 2002, the
Commission decided to eliminate the requirement after a five-year transition period, which ended February 18,
2008. Year 2000 Biennial Regulatory Review Amendment of Part 22 of The Commission's Rules to Modify or
Eliminate Outdated Rules Affecting The Cellular Radiotelephone Service and Other Commercial Mobile Radio
Services, Report and Order, 17 FCC Rcd 18401, 18414, 22 (2002).

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Federal Communications Commission DA 09-54

networks.355 Typical, user-experienced download speeds with EV-DO range from 400 to 700 kbps, while
upload speeds average 50-70 kbps.356 The EV-DO Rev. A network upgrade increases average download
speeds to 600 kbps to 1.4 Mbps and significantly improves average upload speeds to 350-800 kbps.357
136.
In the past year, Verizon Wireless has further expanded its EV-DO Rev. A network
footprint. As noted in the Twelfth Report, by mid-2007 Verizon Wireless had launched EV-DO
technology in areas of the country covering approximately 210 million people and had upgraded this
entire EV-DO network footprint with EV-DO Rev. A technology.358 Since then, Verizon Wireless has
continued to extend the reach of its EV-DO Rev. A network, making it available in areas of the country
covering approximately 240 million people by the end of 2007.359 With the EV-DO service, subscribers
can access the Internet while mobile via a wireless modem card connected to a laptop computer or PDA,
or they can download a range of multimedia content and advanced applications on certain mobile handset
models. More than half of the company's retail customers had broadband-capable devices by the end of
2007.360 As also noted in the Twelfth Report, Verizon Wireless also has announced that it plans to deploy
LTE as its Fourth Generation, or "4G," network technology.361 LTE will allow faster data rates, lower
latency, and global roaming in countries where Vodafone operates.362
137.
Sprint Nextel has also expanded its EV-DO Rev. A network footprint in the past year.
The Twelfth Report recorded that Sprint Nextel's EV-DO network covered 209 million people in 219
communities with populations over 100,000 at the end of 2006, and that as of June 2007 this EV-DO
network has been upgraded with EV-DO Rev. A in markets covering 203 million people.363 By the end
of 2007, Sprint Nextel's EV-DO network covered nearly 234 million people,364 and Sprint Nextel had

355 The Commission noted in the Ninth Report that Sprint Nextel altered its technology upgrade strategy in response
to competitive pressures from Verizon Wireless by deploying EV-DO rather than waiting for a successor technology
to become commercially available. See Ninth Report, 19 FCC Rcd at 20653, 134.
356 Sprint Powers Up Faster Mobile Broadband Network in 10 More Markets, Upgraded Coverage Reaches 60
Million People
, News Release, Sprint Nextel, Dec. 12, 2006; 3G Americas, 3G Technologies, available at
http://www.3gamericas.com/English/PDFs/3G_technology_comparison.pdf (last visited Dec. 15, 2008), ("3G
Technology Comparison
"). The maximum peak download speed for EV-DO is 2.4 Mbps. Id.
357 America's Largest and Fastest Mobile Broadband Network Just Got Even Larger Sprint Customers Can Do
More, In More Places, And At Fast Speeds
, News Release, Sprint Nextel, June 19, 2007; Verizon Wireless: 100
Percent of Wireless Broadband Network Now Enhanced with Faster Speeds
, News Release, Verizon Wireless, June
29, 2007. The maximum peak download speed for EV-DO Rev A is 3.1 Mbps. 3G Technology Comparison.
358 Twelfth Report, 23 FCC Rcd at 2301, 134. Verizon Wireless also has deployed 1xRTT technology throughout
"virtually all" of its network. Verizon Wireless, SEC Form 10-K, filed Mar. 1, 2007, at 5; Eleventh Report, at
10992. When EV-DO subscribers travel to other parts of the country where EV-DO networks have not been
deployed, they can seamlessly roam on and access Verizon Wireless's 1xRTT network because the more advanced
technologies on the CDMA migration path are backwards compatible. See Ninth Report, 19 FCC Rcd at 20652.
359 Verizon Caps Successful Year with Strong 4Q Results, Press Release, Verizon Wireless, Jan. 28, 2008.
360 Id.
361 Twelfth Report, 23 FCC Rcd at 2301-02, 134.
362 Id.
363 Id. at 2302, 135. As noted in the Ninth Report, Sprint altered its technology strategy by deploying EV-DO,
rather than waiting for a successor technology to become commercially available, in response to competitive
pressure from Verizon Wireless's deployment of EV-DO. Ninth Report, 19 FCC Rcd at 20652-53.
364 Sprint Nextel, SEC Form 10-K, filed Feb. 29, 2008, at 6.

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Federal Communications Commission DA 09-54

upgraded this EV-DO network with EV-DO Rev. A technology in areas of the country where 222 million
people live and work.365 Moreover, the company had upgraded over 82 percent of its CDMA network to
EV-DO Rev. A technology and planned to incorporate EV-DO Rev. A into all new cell sites added to its
CDMA network in 2008.366 In addition to offering Sprint Nextel-branded wireless services over its
CDMA network, Sprint Nextel continues to provide Nextel-branded and Boost Mobile prepaid wireless
services over the former Nextel iDEN network, which operates in 355 metropolitan markets covering
about 266 million people.367 In order to offer customers the benefits of both of its networks, and to
relieve capacity constraints on its iDEN network, Sprint Nextel continues to offer a line of dual-mode
handsets, marketed as PowerSource, that operate on both the CDMA and iDEN platforms.368 In 2008,
Sprint Nextel plans to launch Qualcomm's QChatTM technology, which is designed to provide high
performance walkie-talkie services on its CDMA network, and is designing interfaces to provide for
interoperability of walkie-talkie services on its CDMA and iDEN networks.369 The company expects that,
upon successful launch of QChat devices, these devices will succeed the PowerSource dual-mode
handsets.370
138.
Apart from the two near-nationwide CDMA mobile providers, some of the regional
CDMA operators also have begun to deploy EV-DO, including Alltel, Alaska Communications Systems,
and Cellular South.371 In June 2008, Alltel announced that it would launch EV-DO Rev. A technology
with an initial rollout in eighteen market areas and dozens of cities, including Charlotte, New Orleans,
Phoenix and Tampa.372 As of June 2008, Alltel's existing EV-DO network covered 76 percent of its
POPs, up from 56 percent of its POPs at the end of 2006.373 Alltel expects its EV-DO network to cover
about 82 percent of its POPs by the end of 2008.374
139.
AT&T expanded and upgraded its mobile broadband network in the past year. At the
time of the Twelfth Report, AT&T had expanded its WCDMA/HSDPA network to more than 160
markets, including most of the top 100 cities in the United States, and planned to continue deploying
WCDMA/HSDPA technology throughout a majority of the U.S. markets covered by its legacy network
footprint.375 Since then, AT&T has further expanded its WCDMA/HSDPA network to more than 275

365 Sprint Nextel Reports Fourth Quarter and Full-Year 2007 Results, Press Release, Sprint Nextel, Feb. 28, 2008.
366 Sprint Nextel, SEC Form 10-K, filed Feb. 29, 2008, at 6, 36.
367 Id. at 6.
368 Id. at 3; Twelfth Report, 23 FCC Rcd at 2302.
369 Sprint Nextel, SEC Form 10-K, filed Feb. 29, 2008, at 3.
370 Id.
371 See Twelfth Report, 23 FCC Rcd at 2302, 136.
372 Alltel Wireless Rolls Out Faster Broadband Network, Press Release, Alltel Wireless, June 23, 2008.
373 Id.; Twelfth Report, 23 FCC Rcd at 2302, 136.
374 Alltel Wireless Rolls Out Faster Broadband Network, Press Release, Alltel Wireless, June 23, 2008.
375 Twelfth Report, 23 FCC Rcd at 2302, 137. As noted in the Tenth Report, prior to its merger with AT&T
Wireless, Cingular had deployed GSM/GPRS technology across its entire network footprint and had upgraded its
data network to EDGE with respect to two-thirds of its covered network POPs. See Tenth Report, 20 FCC Rcd at
15953, 116 n.274. In addition, it has been reported that Cingular decided to upgrade its network to
WCDMA/HSDPA, rather than the slower, interim WCDMA technology, in an effort to compete with Verizon
Wireless's EV-DO network, which offers speeds similar to WCDMA/HSDPA and faster than WCDMA. Id. at
15953.

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Federal Communications Commission DA 09-54

markets, started the first U.S. deployment of HSUPA technology and upgraded its entire
WCDMA/HSDPA network footprint with HSUPA technology.376 WCDMA/HSDPA enables mobile
broadband access at average user download speeds of 400-700 kbps. The addition of HSUPA enables
average upload speeds of 500-800 kbps.377 AT&T's WCDMA/HSDPA customers can access the Internet
while mobile via a laptop computer or PDA with a wireless modem card, or they can download a range of
multimedia content and advanced applications on certain mobile handset models.378 HSUPA technology
initially provides enhanced upload speeds for laptop users.379 AT&T's new mobile broadband
deployments going forward will include both HSDPA and HSUPA technologies, and AT&T plans to
extend its mobile broadband network to nearly 350 markets by the end of 2008.380
140.
Since the Twelfth Report, T-Mobile has followed through on its plans to launch a mobile
broadband network. In the period covered by the Twelfth Report, T-Mobile had a nationwide EDGE
network and had announced plans to deploy a 3G next-generation network using the spectrum licenses it
acquired in the FCC's 2006 AWS-1 auction (Auction 66).381 In May 2008, T-Mobile announced that it
had taken the first commercial step in the rollout of its 3G wireless network by launching its
WCDMA/HSDPA network in New York City.382 In September 2008, T-Mobile confirmed that the
WCDMA/HSDPA network was deployed across 13 major metropolitan markets, such as New York,
Boston, Miami, Las Vegas, and Houston, and T-Mobile announced that by the end of 2008 it expected to
expand the network to 27 major markets, making T-Mobile 3G services available to more than two-thirds
of the company's current data customers.383
d.

Coverage by Technology Type

141.
As we did with the number of mobile telephone operators, in this Report, we further
refine our examination of competition in the mobile telephone sector by compiling a list of census blocks
where operators offer digital and next generation technologies. This analysis is performed through a
contract with American Roamer, an independent consulting firm that tracks service provision for mobile
voice and mobile data services.384 Under the American Roamer contract, in this Report we are able to

376 AT&T Nears Completion of 3G Wireless Technology Deployment that Delivers Broadband Wireless Speeds
For Downloads and Uploads
, Press Release, AT&T, May 21, 2008 ("AT&T Nears Completion of 3G Wireless
Technology Deployment
"); AT&T Delivers 3G Wireless Broadband Speed Boost with New-Generation Network
Technologies and LaptopConnect Card
, Press Release, AT&T, Oct. 18, 2007 ("AT&T Delivers 3G Wireless
Broadband Speed
").
377 AT&T Nears Completion of 3G Wireless Technology Deployment; AT&T Delivers 3G Wireless Broadband
Speed
.
378 Twelfth Report, 23 FCC Rcd at 2302-2303, 137. In markets where WCDMA/HSDPA is not available, laptop
modem cards that are compatible with both WCDMA/HSDPA and GPRS/EDGE will seamlessly fall back to
AT&T's EDGE and GPRS networks, albeit at lower speeds. Id. at 2303, n. 334.
379 AT&T Delivers 3G Wireless Broadband Speed Boost with New-Generation Network Technologies and
LaptopConnect Card
, Press Release, AT&T, Oct. 18, 2007.
380 AT&T Nears Completion of 3G Wireless Technology Deployment; AT&T Delivers 3G Wireless Broadband
Speed
.
381 Twelfth Report, 23 FCC Rcd at 2303, 138.
382 T-Mobile USA Begins Commercial 3G Network Rollout, Press Release, T-Mobile, May 5, 2008.
383 T-Mobile USA Announces Commercial 3G Network Availability In 21 Markets By Mid-October, Press Release,
T-Mobile, Sept. 18, 2008.
384 See American Roamer, available at http://www.americanroamer.com (last visited Dec. 16, 2008).

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Federal Communications Commission DA 09-54

estimate in which of the roughly 8 million census blocks each provider offers services using digital and
next generation technologies, compared to just the roughly 3,200 counties in previous reports. As
discussed earlier, by utilizing such a relatively small area to analyze technological availability, census
blocks eliminate, to a large degree, the concerns regarding overcounting populations and geographic
areas.
142.
As of July 2008, virtually the entire population of the United States live in census blocks
where operators offer digital mobile telephone service, using CDMA, GSM/TDMA, or iDEN (including
their respective next generation technologies), or some combination of the three.

Table 8: Mobile Telephone Digital Coverage by Census Block


Technology POPs
in
% of
Square Miles % of Total
Covered
Total
Contained in
Square
Blocks
POPs Those Blocks
Miles
CDMA
282,693,989
99.1%
2,546,595
67.0%
GSM/TDMA
279,933,740
98.1%
2,320,964
61.1%
IDen
251,596,508
88.2%
927,423
24.4%
Total Digital
284,153,539
99.6%
2,831,266
74.5%

Source: Federal Communications Commission estimates based on data supplied by American Roamer, July 2008.
Notes: POPs are from the 2000 Census, and the square miles include the United States and Puerto Rico.
143.
Both CDMA and GSM/TDMA have been launched in census blocks containing 280
million people, or roughly 98 percent of the U.S. population, while iDEN-based service is available in
census blocks containing roughly 164 million people, or approximately 57 percent of the U.S. population.
144.
Using data supplied by American Roamer from May 2008, we also have calculated the
extent of next generation deployment.

Table 9: Mobile Telephone NextGen Coverage

by Census Block

Technology POPs
in
% of Total
Square Miles % of Total
Covered
POPs
Contained in
Square
Blocks
Those Blocks
Miles
CDMA Path (1xRTT/EV-DO/EV-DO Rev. A)
281,709,287
98.8%
2,341,275
61.6%
GSM Path (GPRS/EDGE/WCDMA/HSDPA)
277,739,378
97.4%
2,151,354
56.6%

Total NextGen

283,672,514
99.5%
2,635,061
69.4%
WCDMA/HSDPA
153,492,549
53.8%
116,043
3.1%
EV-DO/EV-DO Rev. A
262,904,792
92.2%
1,499,848
39.5%

Total Broadband (EV-DO/WCDMA)

263,138,848 _______92.3%
1,504,174
39.6%

Source: Federal Communications Commission estimates based on data supplied by American Roamer, May 2008.
Notes: POPs are from the 2000 Census, and the square miles include the United States and Puerto Rico.
145.
CDMA 1xRTT and/or EV-DO, has been launched in census blocks containing
approximately 281 million people, or 98.8 percent of the U.S. population. Similarly, GPRS, EDGE,
and/or WCDMA/HSDPA has been launched in census blocks containing approximately 277 million
people, or about 98 percent of the U.S. population. EV-DO is now available in census blocks containing
92 percent of the U.S. population, covering about 40 percent of the total square miles of the United States,
while WCDMA/HSDPA is available in census blocks containing approximately 54 percent of the U.S.
population, but representing only 3.1 percent of its land area.

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Federal Communications Commission DA 09-54

146.
We also calculated the number of mobile broadband providers competing to offer service
by census block.

Table 10: Estimated Mobile Broadband Providers

by Census Block

Total Number of Number of POPs Contained % of Total Square Miles % of Total
Providers in a
Blocks
in Those Blocks U.S. POPs Contained in
U.S.
block
Those Blocks
Square
Miles
1 or More
6,300,761
263,138,848
92.3%
1,504,174 39.6%
2 or More
3,570,372
206,851,304
72.5%
349,751 9.2%
3 or More
2,004,199
144,723,270
50.7%
88,960 2.3%

Source: Federal Communications Commission estimates based on data supplied by American Roamer, May 2008.
(EV-DO/HSDPA Coverage). Notes: POPs are from the 2000 Census, and the square miles include the United States
and Puerto Rico.
147.
Approximately 206 million people, or 72.5 percent of the U.S. population, live in census
blocks with two or more mobile telephone operators offering EV-DO or WCDMA/HSDPA technologies,
while approximately 144 million people, or 50.7 percent of the U.S. population, live in census blocks
where three or more operators offer such technologies.
e.

Broadband Data Networks and Technology Deployment

148.
In addition to the EV-DO and WCDMA/HSDPA mobile broadband network
deployments discussed above, wireless operators in the 2.5 GHz BRS/EBS have begun rolling out, or
have announced plans to deploy, wireless broadband services using Orthogonal Frequency Division
Multiplexing ("OFDM") technologies, including WiMAX and similar technologies. Because OFDM
allows signals to pass through buildings and trees, providers can use the technology to offer wireless
broadband services without a direct line-of-sight between the transmitter and the end user's receiver.385
Many of the services offered using OFDM technology allow customers to access the Internet with
portable, "plug-and-play" modem devices connected to a personal or laptop computer, rather than a fixed
antenna mounted on a rooftop. Customers can transport these devices to other locations within the
provider's coverage area where a network signal is available and in some cases use them while traveling
at high speeds.386
149.
Clearwire offers wireless high-speed Internet access and VoIP services using OFDM and
Time Division Duplex ("TDD") technology, and spectrum in the 2.5 GHz BRS/EBS band. As of March
2008, the company had launched broadband service in 46 markets, mainly smaller towns and cities,
covering approximately 13.7 million people in portions of 16 states.387 Clearwire also offers VoIP
telephone service for an additional monthly fee.388 As of March 31, 2008, the company had 392,000
broadband subscribers. This is a 69 percent increase since March 31, 2007, when there were 232,000
subscribers.389 Clearwire's customers can access the Internet at downstream speeds around two Mbps and

385 Eleventh Report, 21 FCC Rcd at 10995, 119.
386 Id.
387 Clearwire, SEC Form 10-Q, filed May 12, 2008, at 6, 24; Clearwire, Interactive Coverage Map, available at
http://www.clearwire.com/store/service_areas.php (last visited Dec. 16, 2008).
388 Clearwire, SEC Form 10-Q, filed May 12, 2008, at 24.
389 Id. at 25.

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Federal Communications Commission DA 09-54

upstream speeds around 256 kbps, using a portable wireless modem device or PC card connected to a
desktop or laptop computer.390 Sprint Nextel, another WiMAX service provider in the 2.5 GHz BRS/EBS
band, plans to cover 15 million subscribers with its XOHM network by the end of 2008.391
150.
As we discussed earlier, in May 2008, Clearwire and Sprint Nextel announced an
agreement to combine their wireless broadband assets and businesses to form a new company focused on
deploying a nationwide mobile WiMAX IEEE 802.16e-2005 network. The companies completed their
transaction on November 28, 2008, after receiving Commission approval. The new company is named
Clearwire, and includes ownership interests by Sprint Nextel, Clearwire, Intel Corporation, Google Inc.,
Comcast Corporation, Time Warner Cable Inc., and Bright House Networks. With broadband speeds of
up to six Mbps across the country, Clearwire's wireless broadband network will: cover almost one half of
the U.S. population in roughly thirty-six months and offer wholesale service to unaffiliated firms to resell
directly to consumers.392
151.
Moreover, AT&T is using its 2.3 GHz WCS spectrum licenses to offer fixed wireless
broadband Internet access service, and it has deployed WiMAX technology.393 Downstream speeds range
from 384 kbps to 1.5 Mbps.394 AT&T also is interested in using WiMAX to extend broadband coverage
in rural markets where it would be more expensive to deploy wireline broadband.395
152.
Some smaller operators have launched WiMAX based networks and services in 2007.
DigitalBridge Communications launched the first commercial WiMAX system in the United States in
Rexburg, Idaho in June 2007.396 Towerstream launched its fixed WiMAX service in the Dallas-Forth
Worth, Texas metropolitan area on April 1, 2008.397
f.

Narrowband Data Networks and Technology Deployment

153.
Among the providers of narrowband mobile data services to business customers, several
providers use paging spectrum to operate networks that offer traditional one-way paging services. Some
paging providers also operate data networks using narrowband PCS spectrum, which allow them to offer
two-way messaging services. Narrowband PCS providers use the ReFLEX technology protocol, which

390 Clearwire, Plans High Speed Internet, available at http://www.clearwire.com/products/gallery.php (last visited
Dec. 16, 2008).
391 Dan Jones, Sprint Reaffirms WiMax Targets, available at
http://www.unstrung.com/blog.asp?blog_sectionid=244&doc_id=162776 (last visited Dec. 16, 2008).
392 Sprint Nextel/Clearwire Description of the Transaction and Public Interest Statement, ULS File No. 0003462540,
WT Docket No. 08-94, at 20 (amended Jun. 24, 2008).
393 AT&T Alascom Delivers New Broadband Internet Choice for Juneau, News Release, AT&T, Aug. 6, 2007; Kelly
Hill, Big Players Have Big Plans for WiMAX, RCR WIRELESS NEWS, Oct. 24, 2007 (citing AT&T spokeswoman
Jenny Parker). The company has conducted trials or limited deployments of WiMAX or other fixed wireless
broadband technologies in a total of 22 markets. Id.
394 Eleventh Report, 21 FCC Rcd at 10996, 121.
395 Leslie Cauley, AT&T's Goal is to Stay Ahead of Tech Curve, USA TODAY, July 31, 2008, available at
http://www.usatoday.com/tech/products/2008-07-31-att-tries-to-stay-ahead-of-tech_N.htm (last visited on Dec. 16,
2008)
396 DigitalBridge Communications, available at
http://www.digitalbridgecommunications.com/AboutDBC/tabid/84/Default.aspx (last visited Dec. 16, 2008).
397 Towerstream Launches Fixed WiMAX Network In Dallas-Fort Worth, Texas: Dallas-Fort Worth Becomes Ninth
Market In National Major Market Rollout
, News Release, April 1, 2008.

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Federal Communications Commission DA 09-54

can transmit data at speeds ranging from 3.2 to 25 kbps.398 USA Mobility's narrowband PCS network
uses ReFLEX technology developed by Motorola, Inc. ("Motorola"); it covers 90 percent of the U.S.
population.399
154.
In addition, Velocita Wireless operates a two-way data network using 900 MHz SMR
spectrum. The network, known as Mobitex, uses packet-switched radio technology to provide always-on,
two-way messaging and data delivery, and covers 93 percent of the U.S. business population.400 Space
Data is using narrowband PCS spectrum in the 900 MHz band and balloon-borne platforms, called
SkySitesTM, to offer wireless telemetry services to energy companies and other industrial companies in
Texas, Louisiana, Oklahoma, New Mexico, and the Gulf of Mexico.401
2.

Capital Expenditures

155.
Capital expenditures, also referred to as "capital spending" and abbreviated as "capex,"
are funds spent during a particular period to acquire or improve long-term assets such as property, plant,
or equipment.402 In the mobile telephone industry, capex primarily consists of spending to expand and
improve the geographic coverage of networks, increase the capacity of existing networks so they can
serve more customers, and improve the capabilities of networks (by allowing higher data transmission
speeds, for example).403 One analyst estimated that wireless operators spent approximately $19.9 billion
on capex during 2007,404 which is less than the approximately $24.7 billion spent in each of 2006 and
2005, and less than the approximately $21.4 billion spent in 2004.405 CTIA reports that the wireless
industry spent $9.71 billion in capital expenditures in the first six months of 2007.406
3.

Roaming

156.
All mobile calling plans specify a calling area such as a particular metropolitan area, a
state, a region, the provider's entire network, or the entire United States within which the subscriber can
make a call without incurring additional charges. When a subscriber exits this area, or "roams," he or she
may incur additional charges for each minute of use.407 CTIA reported that "outcollect" roaming

398 See Tenth Report, 20 FCC Rcd at 15955, 124.
399 Id.; USA Mobility, Reliability of ReFLEX, available at http://www.usamobility.com/pdf/ReFLEXreliability.pdf
(last visited Dec. 16, 2007).
400 United Wireless Acquires Velocita Wireless, L.P., News Release, Velocita Wireless, July 2, 2007.
401 Space Data Corp., Overview of SkySite Network, available at http://www.spacedata.net/technology.htm (last
visited Dec. 16, 2008); Tenth Report, 20 FCC Rcd at 15923, 34.
402 CNNMoney, Money 101 Glossary, available at http://money.cnn.com/services/glossary/c.html (last visited Dec.
16, 2008). There are differing opinions on what constitutes capital spending versus non-capital spending.
403 Eighth Report, 18 FCC Rcd at 14818, 70.
404 US Wireless 411, supra note 295, at 53.
405 Twelfth Report, 23 FCC Rcd at 2307, 154.
406 CTIA 2008 Comments, App. B, at 2. CTIA also states that wireless carriers "reported 12,784 more cell sites as of
June 2007 compared to June 2006." Id.
407 The fees that a carrier collects from non-subscribers using its network, including the carriers of such non-
subscribers, 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.

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revenues408 for the entire mobile telephone industry increased to $3.74 billion in 2007 from $3.5 billion in
2006, but fell below the amount collected in 2005 of $3.8 billion.409 The contribution of roaming
revenues to total service revenues continued its decline: from 4.1 percent in 2004, to 3.3 percent in 2005,
to 2.8 percent in 2006, to 2.7 percent in 2007, down from over ten percent seven years ago.410 As
discussed in the Twelfth Report, roaming revenues typically account for a higher percentage of total
service revenues for rural and smaller regional providers than for nationwide carriers.411 The Twelfth
Report
also acknowledged the Commission's Report and Order from August 2007, which clarified that
automatic roaming is a common carrier obligation for CMRS providers. In the Report and Order, the
Commission held that CMRS carriers must provide automatic roaming services to other technologically
compatible carriers outside their home areas upon reasonable request and on a just, reasonable, and
nondiscriminatory basis pursuant to Sections 201 and 202 of the Communications Act.412
4.

Advertising and Marketing

157.
Firms may engage in advertising and marketing either to inform consumers of available
products or services or to increase sales by changing consumer preferences. Mobile telecommunications
service is an "experience good,"413 and in general, advertising for an experience good tends to be
persuasive rather than informational in nature.
158.
In 2007, advertising spending for wireless telephone services was $4.1 billion, an
increase of 12 percent over the previous year, according to Nielsen Monitor-Plus.414 "The top five
operators, Verizon Wireless, AT&T, Sprint Nextel, T-Mobile, and Alltel totaled $3.89 billion a rise of
16% over 2006, and a higher rise than the overall industry figure of 12%."415 By comparison, U.S.
advertising spending in general only rose 0.6% in 2007. For the top ten companies, advertising spending

408 CTIA's measure is one of "outcollect" roamer traffic revenues; in other words, the revenues generated by
roamers in the providers' markets. CTIA's Wireless Industry Indices, Semi-Annual Data Survey Results: A
Comprehensive Report From CTIA Analyzing the U.S. Wireless Industry, Year-End 2007 Results, rel. May 2008, at
88 ("Dec. 2007 CTIA Survey").
409 See Appendix A, Table A-1, infra.
410 Id. This is for the entire 12 month period.
411 See Twelfth Report, 23 FCC Rcd at 2307, 156.
412 Roaming Obligations of Commercial Mobile Radio Service Providers, Report and Order and Further Notice of
Proposed Rulemaking
, 22 FCC Rcd 15817, 15818-19 2 (2007), petitions for recon. pending. The common carrier
obligation to provide roaming extends to real-time, two-way switched voice or data services that are interconnected
with the public switched telephone network and utilize an in-network switching facility that enables the provider to
reuse frequencies and accomplish seamless hand-offs of subscriber calls. The Commission also extended the
automatic roaming requirement to PTT and text messaging services, and in its Further Notice of Proposed
Rulemaking sought comment on whether the roaming obligation should be extended to services that are classified as
information services and services that are not CMRS. The Further Notice of Proposed Rulemaking remains
pending. Nonetheless, as noted in the Eleventh Report, some providers already have reached data roaming
agreements. Eleventh Report, 21 FCC Rcd at 10998, 127.
413 An experience good is a product or service that the customer must consume before determining its quality. See
Dennis W. Carlton and Jeffrey M. Perloff, MODERN INDUSTRIAL ORGANIZATION (3rd ed.), Addison, Wellsley,
Longman, Inc., 1999, at 484.
414 U.S. Operators Ad Spend Passes $4 Billion in 2007, Cellular-News, May 26, 2008.
415 Id.

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was down an average of four percent from 2006.416 Bernstein Research reports that:
Verizon Wireless has been the most aggressive of the carriers, steadily increasing its ad
spending over the past two years. AT&T Mobility, too, has grown ad spending, albeit
more modestly of late. By contrast, T-Mobile has held ad spending almost perfectly flat
over the past two years. Only Sprint among the Big Four has sharply curtailed ad
spending.417

Bernstein Research reports that, together, the carriers spent approximately $5.1 billion in advertising in
2007 for major ad media, including network television, cable television, spot broadcast, newspapers,
magazines, radio, outdoor, and Internet, as reported by the media outlets.418
5.

Network Quality

159.
Network investment remains a centerpiece of providers' efforts to improve their
customers' wireless service experience. Section IV.B.1, supra, of this Report, as well as similar sections
in previous reports, detail the digital and next-generation upgrades that providers have been making to
improve the coverage, capacity, and capabilities of their networks, while Section IV.B.2 provides an
estimate of total spending by wireless providers on network expansion and improvements. By increasing
network coverage and call handling capacity and improving network performance and capabilities,
providers' investments in network deployment and upgrades have the potential to result in service quality
improvements that are perceptible to consumers, such as better voice quality, higher call-completion rates,
fewer dropped calls and deadzones, additional calling features and faster data transfer speeds. As noted in
the Ninth Report, one of the principal ways providers have improved network coverage and quality is by
increasing the number of cell sites.419 The Tenth Report added that carriers have been deploying micro-
cell sites, or antennas that provide coverage in highly localized areas, to improve coverage in locations
such as tunnels, airports, and certain neighborhoods, while some carriers also have used devices that
amplify cellular signals, called repeaters, to improve indoor coverage in office buildings, shopping malls,
and convention centers.420 The Twelfth Report highlighted the in-building systems wireless providers are
installing to improve the coverage of their networks inside office buildings, as well as the services and
devices they are offering to improve indoor coverage within the subscriber's home.421
160.
Recent analyst reports highlight the importance of next-generation network upgrades in
improving network quality and driving the growth of mobile data services. Nielsen Mobile stresses that
3G networks "bring tremendous improvements to the consumer experience of mobile Internet." 422 Based
on a drive-testing service used throughout the United States to track network quality for both voice and
data services, Nielsen Mobile reports that 3G networks "can improve data transfer throughputs by about

416 US Advertising Spending Up 0.6% in 2007, Internet Ad Spend Up 18.9%, Marketing Vox, April 2, 2008,
available at http://www.marketingvox.com/us-advertising-spending-up-06-in-07-internet-ad-spend-up-189-037756/
(last visited Dec. 3, 2008).
417 Craig Moffett, et al., U.S. Wireless: A Deep Dive Look At Carrier Ad Spending . . . Another Reason the Rich Are
Getting Richer
, Bernstein Research, Sept. 19, 2008, at 3.
418 Id. at 1 & 3.
419 Ninth Report, 19 FCC Rcd at 20657-58, 148.
420 Tenth Report, 20 FCC Rcd at 15958, 132.
421 Twelfth Report, 23 FCC Rcd at 2309, 163.
422 Critical Mass The Worldwide State of the Mobile Web, Nielsen Mobile, July 2008, at 7.

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six times over 2G and 2.5G networks, on average."423 As Nielsen Mobile indicates, this is important
because "network satisfaction is the largest driver of overall satisfaction with the mobile Internet."424 It
further states:
As of Q4 2007, Nielsen Mobile estimates that network quality is the most important driver,
accounting for 79 percent of mobile Internet users' overall satisfaction with the experience as of
the fourth quarter of 2007, followed by content at 18 percent. After cost, network quality is the
top reason former data users cancel their data services. 425
161.
In addition to investing in their networks, carriers can increase capacity and improve
service quality by acquiring additional spectrum. As detailed in Sections III.C and III.D above, carriers
have added to their spectrum holdings through the Commission's spectrum auctions, the purchase of
licenses in the secondary market, and mergers and acquisitions. The acquisition of AT&T Wireless by
the former Cingular (now AT&T) in October 2004 illustrates the impact transactions can have in
improving network quality. After the acquisition, the former Cingular integrated the cell cites in areas
where the two GSM networks of Cingular and AT&T Wireless had overlapping coverage, and ultimately
credited this network integration with providing "dramatically improved call quality for Cingular
customers throughout the nation."426 More recently, T-Mobile's acquisition of AWS spectrum in the
Commission's first AWS auction (Auction 66) enabled it to launch a commercial 3G wireless network
using WCDMA/HSDPA technology in New York City in May 2008.427 According to T-Mobile, "the
launch of the 3G network also enables T-Mobile to accommodate and serve more customers more
efficiently through the use of its AWS spectrum, effectively doubling T-Mobile USA's spectrum
position."428
162.
In addition to investing in network infrastructure and acquiring spectrum, providers
continue to pursue marketing strategies designed to differentiate their brand from rival offerings based on
dimensions of service quality such as superior network coverage, reliability, and voice quality. Verizon
Wireless pioneered this brand differentiation strategy with its "Can You Hear Me Now?" advertising
campaign.429 Verizon Wireless continues to use an advertising slogan describing its network as
"America's most reliable wireless network." Since March 2007, Verizon Wireless has maintained a 30-
day network test-drive pledge that absorbs the cost of calls if a customer is not satisfied and switches to
another wireless carrier.430 AT&T responded to Verizon Wireless with an advertising campaign claiming
that it has the fewest dropped calls of any wireless carrier.431
163.
T-Mobile was the first nationwide provider to differentiate its service through the
addition of an interactive "Personal Coverage Check" feature to its web site that enables customers to

423 Id.
424 Id.
425 Id.
426 Twelfth Report, 23 FCC Rcd at 2310, 160.
427 T-Mobile USA Begins Commercial 3G Network Rollout, Press Release, T-Mobile, May 5, 2008.
428 Id.
429 Bruce Mohl, The Fewest Dropped Calls, BOSTON GLOBE, Apr. 23, 2006 ("The Fewest Dropped Calls").
430 Verizon Wireless, About Us, available at http://aboutus.vzw.com/aboutusoverview.html (last visited Dec. 15,
2008). See also Twelfth Report, 23 FCC Rcd at 2310, 166.
431 See Twelfth Report, 23 FCC Rcd at 2310, 166.

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check the quality of network coverage where they live and work before they purchase service.432 T-
Mobile's computerized mapping tool allows users to search on any street address or intersection in the
United States and get a rating of the signal strength at that location and in the surrounding area. For each
search, T-Mobile provides a color-coded map with six shades of coverage ranging from no coverage to
the best coverage. According to T-Mobile, the top rating means that calls are rarely dropped.433 T-
Mobile also has made its new interactive maps available on computers in its stores. AT&T Wireless's
web site also features a very similar mapping tool for checking the quality of its network coverage at
particular locations.434 Like T-Mobile's personal coverage check feature, AT&T Wireless's mapping tool
allows users to search on any street address or intersection to get a rating of coverage at that location and
the surrounding area, and it provides a color-coded map with five shades of coverage ranging from "no
service available" to "best" coverage. Verizon Wireless also has added a network coverage check
mapping tool to its web site, but unlike the mapping tools provided by its rivals, Verizon Wireless's
mapping tool indicates only whether a location has digital or analog network coverage, rather than the
quality of coverage.435
6.

Mobile Data Services and Applications

164.
Providers exhibit competitive rivalry with respect to mobile data services by introducing
new mobile data offerings, responding to such innovations with rival offerings and differentiating their
mobile data offerings from those of rivals. Among the innovations highlighted in the Twelfth Report were
Verizon Wireless's March 2007 launch of V CAST Mobile TV, the first mobile TV service using
Qualcomm's dedicated MediaFLO USA network, and AT&T's June 2007 launch of Apple's iPhone.436
In the past year, providers have responded to both of these developments by introducing rival offerings.
In May 2008, for example, AT&T launched a rival mobile TV service in 58 markets.437 Like Verizon
Wireless's V CAST Mobile TV service, AT&T's Mobile TV uses Qualcomm's MediaFLO USA service,
but the service is offered under the AT&T brand and is further differentiated with handsets and channels
that are exclusive to AT&T. Similarly, analysts note that mobile telephone providers have pressed their
equipment suppliers to respond to the iPhone with new devices that try to look like the iPhone by copying
features such as its touch-screen system.438
165.
In July 2008, AT&T launched a new 3G version of Apple's iPhone.439 One of the biggest

432 See Tenth Report, 20 FCC Rcd at 15959, 135, citing David Kesmodel, T-Mobile Offers More Details On
Coverage to Ease Concerns
, WALL STREET JOURNAL, Apr. 27, 2005; T-Mobile, Personal Coverage Check,
available at http://www.t-mobile.com/coverage (hyperlink "check your coverage now") (last visited Dec. 15, 2008).
433 Tenth Report, 20 FCC Rcd at 15959, 135. More specifically, the top rating means that customers have a 95
percent chance of making a call without it being dropped.
434 AT&T Wireless, AT&T Coverage Viewer, available at http://www.wireless.att.com/cell-phone-
service/welcome/index.jsp (hyperlink "Coverage Viewer") (last visited Dec. 15, 2008).
435 Verizon Wireless, Coverage Locator, available at http://www.verizonwireless.com (hyperlink "see 3G coverage
in your area") (last visited Dec. 15, 2008).
436 Twelfth Report, 23 FCC Rcd at 2312-15, 171-177.
437 AT&T to Deliver MediaFLO USA's FLO TV Services in 58 Markets on New AT&T-Exclusive Handsets Designed
for Mobile TV Viewing; AT&T Introduces CNN Mobile Live, PIX and CNCRT, a Special Concert Channel,
Press
Release, AT&T, May 1, 2008.
438 See, e.g., Walter S. Mossberg, Samsung's Instinct Doesn't Ring True as an iPhone Clone, WALL STREET
JOURNAL, June 12, 2008, at D1.
439 AT&T Announces iPhone 3G Pricing and Tips to be iReady, Press Release, AT&T, July 1, 2008.

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complaints about the original iPhone was its relatively slow Internet access speeds.440 Whereas the
original version of the iPhone ran on AT&T's slower EDGE network, the 3G iPhone runs on the carrier's
mobile broadband network which uses WCDMA/HSDPA technology and allows it to navigate the
Internet and load Web pages much faster than its predecessor.441 The 3G iPhone also features Global
Positioning System ("GPS") technology for location-based service applications.442 At the same time,
competition for customers pushed Apple to revamp its business model for marketing the iPhone. When
Apple first launched the iPhone in June 2007, it eschewed the standard handset subsidy model in favor of
an innovative business model featuring a high upfront price and a relationship with AT&T and foreign
operators under which it received an undisclosed portion of the operator's monthly subscriber fees.443
However, based on evidence from surveys of people who had not purchased iPhones, Apple subsequently
determined that the biggest barrier to people buying the initial version of the iPhone was its high upfront
price.444 Resistance to the revenue-sharing arrangements from operators in overseas markets where Apple
is putting increased emphasis was another factor in Apple's decision to change its business model.445 To
boost sales and create a mass market for the iPhone, Apple aggressively lowered the price of the new 3G
models and discontinued its revenue-sharing arrangements with wireless service providers for the new
models.446 In conjunction with these changes, AT&T has gone back to the traditional handset subsidy
model that it uses to attract customers for all its other handsets.447
166.
On the same day that Apple launched the new 3G version of the iPhone, the company
also opened an online software clearinghouse, called App Store, to market applications from software
developers for the new 3G iPhone.448 The App Store is an icon on the home screen of every iPhone.449
As noted in the Twelfth Report, in October 2007 Apple announced that in 2008 the company would
release a software development kit that will allow programmers to develop third-party applications for the
iPhone.450 The software development kit is now available free of charge from Apple's web site, and
software developers can also pay for a version which includes technical support from Apple.451

440 Nick Wingfield, Will Masses Embrace Apple's $199 Handset?, WALL STREET JOURNAL, June 10, 2008, at B1
("Will Masses Embrace Apple's $199 Handset?").
441 Id.; Amol Sharma, AT&T's Bet on the iPhone, WALL STREET JOURNAL, June 10, 2008 ("AT&T's Bet on the
iPhone
"); John Markoff, Apple Aims for the Masses With a Cheaper iPhone, NEW YORK TIMES, June 10, 2008
("Apple Aims for the Masses").
442 Will Masses Embrace Apple's $199 Handset?; AT&T's Bet on the iPhone.
443 Will Masses Embrace Apple's $199 Handset?; Apple Aims for the Masses .
444 Will Masses Embrace Apple's $199 Handset? (noting that, according to Apple Chief Executive Steve Jobs, more
than half of the people surveyed said their decision not to buy the iPhone was based on the price of the device);
Apple Aims for the Masses
.
445 Id.
446 Id.
447 Id.; AT&T's Bet on the iPhone; Wireless Services and Handset Pricing Analysis, supra note 275, at 1, 13-19.
448 Nick Wingfield, IPhone Calls on Software Developers, WALL STREET JOURNAL, July 10, 2008, at B1 ("IPhone
Calls on Software Developers
"); Nick Wingfield, IPhone Software Sales Take Off: Apple's Jobs, WALL STREET
JOURNAL, Aug. 11, 2008, at B1 ("IPhone Software Sales Take Off"); Raymund Flandez, Programmers Jockey for
iPhone Users at Apple Site
, WALL STREET JOURNAL, Aug. 5, 2008 ("Programmers Jockey for iPhone Users").
449 IPhone Calls on Software Developers.
450 Twelfth Report, 23 FCC Rcd at 2315-16, 177.
451 Programmers Jockey for iPhone Users.

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According to Apple, there were about 900 applications available on the App Store as of August 2008, and
20 percent of these could be downloaded free of charge.452 Apple keeps 30 percent of the proceeds from
sales of iPhone applications for which customers pay to download, while developers receive the
remaining 70 percent.453 In the first month that the App Store was open, users downloaded more than 60
million programs for the iPhone.454 Apple Chief Executive Steve Jobs predicts that the mobile phone of
the future "will be differentiated by software."455
167.
Apple's release of the software development kit for the iPhone and the opening of the
App Store put Apple's iPhone at the forefront of the mobile service industry's movement to an open
platform model that was highlighted in the Twelfth Report.456 Other ongoing developments provide
further evidence that the industry has made significant progress toward the open platform model in the
period since the release of the Twelfth Report. As documented below, individual wireless providers have
taken additional steps to open their networks, leading to jockeying among wireless service providers to
demonstrate they offer consumers the most choices with regard to handsets and applications.457 In
addition, three of the four nationwide providers have expressed interest in offering mobile handsets that
use an operating system called Android, which is being designed to facilitate access to third-party content
providers.
168.
In 2008, Verizon Wireless has taken steps to follow through on a commitment it made in
2007 to open up its network to a wider array of wireless devices and applications. As noted in the Twelfth
Report
, in November 2007 Verizon Wireless announced that, by the end of 2008, it would no longer
restrict its network only to handsets sold through its retail stores and instead allow any wireless device,
software, or application that meets certain technical standards to access its wireless network.458 In March
2008, Verizon Wireless revealed certain details of its new open-access policy at an "Open Development
Conference."459 Verizon Wireless reiterated that, under the new policy, any company that wants to make
a mobile device for use by Verizon Wireless's customers will be able to do so provided the device meets
the carrier's minimum technical requirements. The company further indicated that device makers will be
responsible for marketing and distributing the new devices on their own, and they will have a choice of
options for dealing with customers: they can either allow customers to have a direct relationship with
Verizon Wireless, or buy voice minutes and data capacity on a wholesale basis from Verizon Wireless
and resell them to customers under their own brands. Verizon Wireless also disclosed that users of
devices that the carrier does not offer through its own retail network will not be required to sign service
contracts with Verizon Wireless, and will deal with Verizon Wireless online. In particular, users will
activate their Verizon Wireless accounts online, get billed online, and have online customer support.
Verizon Wireless representatives also stated that users will be able to download any application on the
new devices. As noted previously, in September 2008 Verizon Wireless introduced a month-to-month
agreement that is available on all its nationwide voice and data plans, and this month-to-month option
allows customers to use their own CDMA devices without the commitment of a one- to two-year service

452 Id.
453 IPhone Calls on Software Developers; IPhone Software Sales Take Off; Programmers Jockey for iPhone Users.
454 IPhone Software Sales Take Off.
455 Id.
456 Twelfth Report, 23 FCC Rcd at 2316-17, 177-179.
457 Amol Sharma, Verizon Wireless Details Open-Access Policy, WALL STREET JOURNAL, Mar. 19, 2008 ("Verizon
Wireless Details Open-Access Policy
").
458 Twelfth Report, 23 FCC Rcd at 2316, 179.
459 Verizon Wireless Details Open-Access Policy.

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contract.460
169.
In addition, Verizon Wireless also submitted the winning bids for seven of the 12 licenses
offered for the 700 MHz C Block in Auction 73.461 As mentioned above, to further the open platform
model, the Commission required the C Block licensees to allow customers, device manufacturers, third-
party application developers, and others to use or develop the devices and applications of their choosing
in C Block networks.462 Verizon Wireless has stated that it intends to use this spectrum in connection
with its Open Development Initiative.463
170.
In response to Verizon Wireless's shift in policy, AT&T emphasizes that it already
allows customers to use any GSM handset on its network and therefore does not need to pursue an open-
access model similar to Verizon Wireless's.464 In March 2008, the company announced a new web site,
www.att.com/choice, which provides instructions to consumers on how to bring any GSM handset
purchased outside of AT&T's retail stores on to its network.465 Finally, as discussed below, AT&T is one
of the U.S. wireless service providers that has shown interest in offering handsets that use the Android
operating system.
171.
The Twelfth Report noted that the development of Android was announced in November
2007 by the Open Handset Alliance an alliance of 34 handset makers, wireless providers and other
technology companies led by Google Inc. ("Google"), T-Mobile, High Tech Computer Corporation
("HTC"), Qualcomm, and Motorola which was formed to accelerate innovation and "openness" in the
provision of mobile wireless services.466 The Twelfth Report further noted that Android was intended to
be the "first open, complete, and free platform created specifically for mobile devices," and that it was set
to be commercially deployed in the second half of 2008.467
172.
As revealed in subsequent reports about its development, the Android system is a set of
operating software developed by Google that is designed to support several different objectives. First,
Android supports and brings together in one package a number of applications Google has developed for
mobile handsets, including a search service, Google maps and a new advanced mobile Web browser that
is intended to rival the browser on the Apple iPhone.468 Second, Android provides a platform to support a
marketplace for applications made by other companies.469 Like Apple's software development kit and
App Store, Android is designed to make it easier for third-party software developers to make their
applications available on mobile handsets and to integrate these applications with handset features such as

460 See Section IV.A.1, Developments in Mobile Telephone Pricing Plans, supra.
461 See Section III.D.1.b, Recent Spectrum Auctions, supra.
462 See 700 MHz Second Report and Order, 22 FCC Rcd at 15365, 206.
463 Verizon Wireless Says Spectrum Additions From FCC's Auction 73 Will Further Company's Broadband
Strategy,
Press Release, Verizon Wireless, Apr. 4, 2008.
464 Amol Sharma, Verizon Wireless Details Open-Access Policy, WALL STREET JOURNAL, Mar. 19, 2008.
465 Id.; AT&T, your device, your way, available at http://www.choice.att.com/flash/customersdevices.aspx (last
visited April 22, 2008).
466 Twelfth Report, 23 FCC Rcd at 2316.
467 Id.
468 Amol Sharma, AT&T Says it Favors Google Android System, WALL STREET JOURNAL, Apr. 3, 2008 ("AT&T
Says it Favors Google Android
"); Amol Sharma, New Smart Phone Will Showcase Google Brand, WALL STREET
JOURNAL, Sept. 18, 2008 ("New Smart Phone Will Showcase Google Brand").
469 New Smart Phone Will Showcase Google Brand.

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location-sensing technology.470 Third, despite its use of Google's search service and other Google
applications, the Android system allows wireless service providers to customize the Android software to
promote their own data services and content.471 Google is making the Android operating software
available free of charge to handset manufactures and wireless service providers in order to encourage the
development and deployment of handsets based on Android.472
173.
Although Google originally planned to launch the new Android handsets in the second
half of 2008, subsequently the company indicated that the handsets would not be commercially available
until the fourth quarter of 2008.473 Several factors contributed to the delays, including: (1) the inherent
difficulty of managing a project in which Google had to collaborate with and coordinate the work of
many different providers to support its Android technology platform, including handset manufacturers,
wireless service providers, software developers and chip set makers;474 (2) challenges wireless service
providers have encountered in their efforts to customize the Android software and brand their own
devices;475 and (3) various challenges that confronted software developers in working with Google's
programming tools and creating programs for Android.476
174.
Google and T-Mobile unveiled the first Android device, the G1, in September 2008,477
and the following month T-Mobile became the first U.S. provider to launch a handset that uses the
Android operating system.478 The G1 runs on both T-Mobile's mobile broadband WCDMA/HSDPA
network, which T-Mobile is still in the early stages of rolling out, and also on slower networks using
older GSM-family technologies.479 In addition to Google's advanced new mobile Web browser, search
interface and other Google applications such as maps, Gmail and YouTube, the G1 also features a touch-

470 AT&T Says it Favors Google Android.
471 Jessica E. Vascellaro and Amol Sharma, Google's Mobile-Handset Plans are Slowed, WALL STREET JOURNAL,
June 23, 2008, at B8 ("Google's Mobile-Handset Plans are Slowed").
472 Miguel Helft, Google Introduces a Phone With PC Features, NEW YORK TIMES, Sept. 24, 2008 ("Google
Introduces a Phone With PC Features
").
473 Google's Mobile-Handset Plans are Slowed.
474 Google's Mobile-Handset Plans are Slowed (noting the contrast to Apple, which controls most aspects of
hardware and software development for the iPhone).
475 Id. (noting that some handset makers were taking longer than the service providers anticipated to integrate
Android, test it and build custom user interfaces to meet service providers' specifications).
476 Id. (noting that some software developers said that it is more difficult to work with Google's programming tools
than Apple's because no Android devices are available on the market to use in testing software, Apple's guidelines
are easier to follow, and developers are already familiar with Apple's Macintosh operating system; other developers
emphasized the difficulty of creating programs while Android is still in the process of being completed, while still
others were waiting for Google to clarify critical issues such as how applications will be distributed and how
developers will earn revenue from their applications).
477 Roger Cheng, Google, T-Mobile Unveil New Phone, WALL STREET JOURNAL, Sept. 23, 2008 ("Google, T-Mobile
Unveil New Phone
"); Google Introduces a Phone With PC Features; Miguel Helft and Saul Hansell, Google
Introduces an iPhone Rival Open to Whims
, NEW YORK TIMES, Sept. 24, 2008 ("Google Introduces an iPhone
Rival
"); Walter S. Mossberg, Google's G1: First Impressions, WALL STREET JOURNAL, Sept. 23, 2008 ("Google's
G1: First Impressions
"); Walter S. Mossberg, Google Answers the iPhone, WALL STREET JOURNAL, Oct. 16, 2008
("Google Answers the iPhone").
478 T-Mobile Launches the Highly Anticipated T-Mobile G1, Press Release, T-Mobile, Oct. 22, 2008.
479 Google Introduces a Phone With PC Features; Google, T-Mobile Unveil New Phone.

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screen that slides open to reveal a real physical keypad underneath, a trackball that supplements the
touch-screen navigation, GPS navigation, Wi-Fi access and Bluetooth connections, among other gadgets
and functions.480 Although the Google applications come installed on the G1, the G1 has an applications
store, called the Android Market, where G1 users will be able to download programs created by third-
party developers.481 However, while Google maintains that the G1 leaves it up to consumers to decide
what they want to run on their cellphones,482 one reviewer points out that the G1 is "tightly tied to
Google's Web-based email, contacts and calendar programs."483 Nevertheless, while noting many
differences between the G1 and Apple's iPhone, the same reviewer concludes that, like Apple's product,
Google's G1 is "a serious handheld computer with a powerful new operating system."484
175.
Like T-Mobile, Sprint Nextel has endorsed Android and had also hoped to launch an
Android device in 2008, but will not be able to do so due to the aforementioned delays485 and other
internal factors.486 In April 2008, the chief of AT&T's wireless unit also expressed interest in offering
handsets that use Google Inc.'s Android operating system, but stopped short of committing AT&T to
offering Android devices.487 AT&T's wireless chief emphasized that one of the key attractions of the
Android system is that AT&T would be able to customize the software's open-source coding to promote
the carrier's own data and content services, rather than having to settle for a product that only promoted
Google's search service and other Google applications such as Google Maps.488
176.
Beyond differences in handset design and functions, Google's business model differs
fundamentally from that of rivals such as Apple and other industry players. Analysts stress that Google
will lose money on Android as an operating system, since as noted above Google is giving the Android

480 Id.; Google Introduces an iPhone Rival; Google's G1: First Impressions; Google Answers the iPhone.
481 Google Introduces an iPhone Rival; Google's G1: First Impressions; Google Answers the iPhone.
482 Google Introduces an iPhone Rival.
483 Google's G1: First Impressions (noting further that users must have a Google account to use the G1, and can
only synchronize the G1's calendar and address book with Google online services; also noting that, unlike the
iPhone, the G1 does not work with Microsoft Exchange, and it can't physically be synchronized with a PC-based
calendar or contacts program like Microsoft Outlook). See also, Google Answers the iPhone; Bonnie Cha and
Nicole Lee, HTC Dream T-Mobile G1(black) CNET Editors' Review, CNET, Oct. 22, 2008, available at
http://reviews.cnet.com/htc-dream-t-mobile-g1/?tag=mncol;txt (last visited Dec. 15, 2008). However, see also,
David Pogue, A First Look at Google's New Phone, NEW YORK TIMES, Sept. 23, 2008 (arguing that the G1, the
Android operating system and the Android applications store are far more open than Apple's iPhone, operating
system and App Store).
484 Google's G1: First Impressions. See also, Google Answers the iPhone.
485 Google's Mobile-Handset Plans are Slowed (noting that T-Mobile's launch of an Android device is taking up so
much of Google's attention and resources that Sprint Nextel will not be able to launch an Android device in 2008 as
it had originally hoped to do; in addition, Sprint would like to develop its own branded services based on Android,
rather than just carrying a device with the built-in features Google plans to offer); AT&T Says it Favors Google
Android.

486 Google's Mobile-Handset Plans are Slowed (noting that a management shake-up at Sprint may have contributed
to the delay, and that Sprint is considering scrapping plans for an Android device for its existing mobile broadband
network in favor of developing an Android device that will work on the faster WiMAX network Sprint Nextel is
planning to deploy in partnership with Google and other companies).
487 AT&T Says it Favors Google Android.
488 Id.

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Federal Communications Commission DA 09-54

software away free to wireless service providers and handset makers.489 However, Google hopes to earn
revenue from advertising, just as it now does on the PC-based Internet.490 As noted previously in this
report, the mobile search advertising market is a promising source of ad revenue.491 Even before
launching the new Android handsets, Google had succeeded in taking an early lead in mobile Web
searching. According to M:Metrics, of the 16.7 million users who say they conduct searches on their
mobile phones, about 63 percent say they use Google, 34 percent say they use Yahoo, and only 25 percent
say they use their wireless providers' search services.492 Most of these users access the Google search
engine by simply typing Google's URL into the browsers on their mobile phone.493 However, iPhone
users can access the Google search engine directly because Apple made Google the default search bar on
the iPhone.494

V.

CONSUMER BEHAVIOR IN THE MOBILE TELECOMMUNICATIONS MARKET

177.
A mobile provider can exercise market power only to the extent that mobile subscribers
do not respond to price increases or adverse changes in other terms of service. If, to the contrary, enough
consumers are sufficiently well-informed to take prices and other non-price factors into account when
choosing their service provider, and likewise, if enough consumers have the ability and propensity to
switch service providers in response to an increase in price or other harmful conduct, then the provider
will have an incentive to compete on price and non-price factors. Consumer behavior will be more
effective in constraining market power when the transaction costs subscribers incur in choosing and
switching providers are low. Transaction costs depend on, among other factors, subscribers' access to
and ability to use information, and costs and barriers to switching providers.

A.

Access to Information on Mobile Telecommunications Services

178.
Wireless consumers continue to demand information on the availability and quality of
mobile telecommunications services. Numerous third parties have been responding to this demand by
compiling and reporting such information. The sources of information available to consumers include
publications such as Consumer Reports, trade associations, marketing and consulting firms, and several
web sites dedicated to giving consumers an overview and comparison of the mobile telephone services
available in their area.495 For example, J.D. Power and Associates' web site posts the results of its annual
wireless user surveys, which rate wireless service providers by region based on overall customer
satisfaction, call quality and customer service.496
179.
In addition, the wireless industry itself has responded to this demand by launching
various initiatives designed to educate consumers and help them make informed choices when purchasing
wireless services. As noted above, for example, in March 2007 Verizon Wireless launched its "30-Day
Test Drive" promotion. This promotion allowed customers, who signed up for a Verizon Wireless calling
plan, "test drive" the network for 30 days. Verizon Wireless offered to absorb the cost of their calls if
customers were not satisfied with their experience and carry their number to another wireless carrier at

489 Google Introduces an iPhone Rival.
490 Id.
491 See Section IV.A.4, Mobile Data Pricing, supra.
492 Verizon, Google Close to Mobile Search Deal.
493 Id.
494 Id.
495 See Eleventh Report, 21 FCC Rcd at 11004, 142.
496 J.D. Power and Associates, Wireless, available at www.jdpower.com (last visited Sept. 5, 2008).

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Federal Communications Commission DA 09-54

any time during the 30-day period.497

B.

Consumer Ability to Switch Service Providers

1.

Churn

180.
Churn refers to the percentage of current customers an operator loses over a given period
of time, i.e., a company's gross loss of customers during that time period.498 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 two percent in a given fiscal quarter. In other words, on average, the
operator lost two percent of its customers in each of the quarter's three months, or approximately six
percent for the quarter.
181.
Most providers report churn rates between 1.5 percent and 3.0 percent per month.499
Churn rates have been trending lower for a number of years, with the nationwide carriers averaging a
monthly churn rate of 1.9 percent in the first quarter of 2008, trending consistently down from 2.8 percent
seven years earlier.500 However, churn is still a significant challenge for the industry.501 One analyst
described churn as "the biggest issue for all the wireless carriers,"502 while another wrote that "[i]t's no
secret that customer turnover is a major impediment for providers."503 Lowering churn improves
profitability. As one report explained: "Cutting churn by one-fifth can increase operating income by 5%
to 15%. In addition to boosting profits, improving customer loyalty allows wireless companies to
increase the lifetime value of their voice customers. . . . Improving customer loyalty typically can increase
revenues at twice the rate of competitors." 504
2.

Local Number Portability

182.
Local number portability ("LNP") refers to the ability of users of telecommunications
services to retain, at the same location, existing telecommunications numbers when switching from one
telecommunications carrier to another.505 Thus, subscribers can port numbers between two CMRS
carriers (intramodal porting) or between a CMRS and wireline carrier (intermodal porting). Under the
Commission's rules and orders, covered CMRS carriers operating in the 100 largest MSAs were required

497 See Section IV.B.5, Network Quality, supra.
498 CTIA defines it as "a measure of the number of subscribers disconnecting from service during the period." Dec.
2007 CTIA Survey
, supra note 408, at 66.
499 US Wireless 411 1Q08, Table 20: Monthly Churn, at 25.
500 Id. at 6. See also Eleventh Report, 21 FCC Rcd at 11005, 145 for reasons for this decline.
501Even if the churn rate stabilizes, it continues to grow as a problem from year to year: "Keep in mind that in a flat
churn environment, an increasing number of gross adds is required each year just to keep net adds flat. This is
because disconnects continue to climb as the flat churn rate is applied to a larger and larger base." Simon Flannery
et al., Deteriorating Wireless Trends, Revisited, Morgan Stanley, Equity Research, Jan. 18, 2007 at 7.
502 Kenneth Hein, Carriers Locked in Content Land Grab, BRANDWEEK.COM, Mar. 12, 2007 (citing John Hadl, CEO
of Brand in Hand, a mobile marketing consultancy based in Los Angeles) ("Carriers Locked in Content Land
Grab
").
503 Rasmus Wegener and Pratap Mukharji, The Unassured Future of Wireless Data, BUSINESSWEEK, Apr. 17, 2007.
504 Id. See also 4Q06 Wireless 411, at 34 ("in general, operators with lower churn rates post the [highest lifetime
revenue per subscriber]" and 53 ("We believe that Verizon Wireless' industry leading low monthly churn rate is the
primary driver behind its low cost structure and high margins.").
505 47 C.F.R. 52.21(l).

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Federal Communications Commission DA 09-54

to begin providing number portability by November 24, 2003.506 CMRS carriers outside of the top 100
MSAs were required to be LNP-capable by May 24, 2004.507
183.
Wireless number porting activity since the advent of porting has been significant.
Overall, approximately 43.93 million wireless subscribers ported their numbers to another wireless carrier
from December 2003 through December 2007.508 About 30 percent of this intramodal porting activity, or
approximately 13.3 million wireless-to-wireless ports, took place in 2007.509 Monthly rates of intramodal
porting activity averaged about 1.12 million ports during 2007, up from a monthly average of about
856,000 ports in 2006 and the highest monthly average for intramodal porting activity since the advent of
porting.510
184.
Another 2.98 million subscribers ported their numbers from a wireline carrier to a
wireless carrier from December 2003 through December 2007, with about 896,000 of these intermodal
ports taking place during 2007.511 Monthly rates of intermodal porting from wireline carriers to wireless
carriers averaged more than 74,600 ports during 2007, up from monthly averages of nearly 37,000 ports
in 2006 and about 48,300 ports in 2005 but well short of the highest monthly average of 87,500 ports in
2004.512 Intermodal porting from wireless to wireline carriers remained relatively low at roughly 2,000-
3,000 ports per month during 2007,513 up from levels in prior years but still a small fraction of wireline-
to-wireless porting rates.
3.

Barriers to Switching

185.
The practice of assessing ETFs against postpaid subscribers when they cancel their
wireless service agreement or plan before the expiration of its term represents a barrier to consumers'
ability to switch service providers. As noted by one Wall Street analyst, however, providers use long-
term contracts and ETFs to subsidize handset costs; absent contracts and ETFs, consumers might have to
pay higher prices for handsets upfront.514 Other provider practices also affect consumers' ability to switch
service providers. Mobile telephone service providers generally allow new customers to cancel their
service for any reason without incurring the early termination fee within a grace period typically thirty
days of signing the agreement.515 Consumers also have a choice between postpaid and prepaid service

506 47 C.F.R 52.31(a); Verizon Wireless's Petition for Partial Forbearance From Commercial Mobile Radio
Services Number Portability Obligation and Telephone Number Portability, Memorandum Opinion and Order, 17
FCC Rcd 14972, 14986, 31 (2002) ("Verizon Wireless LNP Order"). In an October 2007 ruling, the Commission
also expanded local number portability to VoIP, among other things. Telephone Number Requirements for IP-
Enabled Services Providers, Report and Order, Declaratory Ruling, Order on Remand, and Notice of Proposed
Rulemaking
, 22 FCC Rcd 19531 (2007).
507 Verizon Wireless LNP Order, 17 FCC Rcd at 14986, 31.
508 Craig Stroup and John Vu, Numbering Resource Utilization in the United States, FCC, Mar. 2008, at 35 ("March
2008 NRUF Report
"). This figure excludes significant porting activity between Cingular and AT&T Wireless
following the closing of their merger in October 2004.
509 Id.
510 Id.
511 Id.
512 Id.
513 Id.
514 Carriers Relaxing Early Termination Fees to Compete, COMMUNICATIONS DAILY, Nov. 14, 2007, at 11.
515 See Twelfth Report, 23 FCC Rcd at 2320, 192.

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offerings, and they can avoid ETFs altogether by opting to purchase mobile telephone service on a
prepaid basis instead of signing up for a long-term service contract.516 As noted previously in this Report,
three of the four nationwide providers have already implemented various new policies to pro-rate ETFs
and the remaining nationwide provider has confirmed that it plans to implement a new pro-rated ETF
policy before the end of 2008.517 The introduction and spread of pro-rated ETFs will lower the barrier to
consumer switching ability compared to a flat rate by progressively reducing the fee customers pay for
canceling their service early. Similarly, Verizon Wireless's recent introduction of a month-to-month
agreement for all nationwide pricing plans that allows customers to terminate their agreement at the end
of any month without paying an ETF will also lower the barrier to consumer switching.518 However,
customers who choose Verizon Wireless's new month-to-month option must either purchase new devices
at the full retail price, or use their own CDMA devices.519 Finally, as previously noted in this Report, the
five largest mobile telephone operators have all implemented various policies that allow customers the
option of changing elements of their contracts without requiring a contract extension.520
186.
Apart from the introduction of pro-rated ETFs and a month-to-month service option, the
spontaneous emergence of a nascent secondary market for mobile phone service contracts may also help
promote competition by facilitating consumers' ability to switch service providers. Although customers
who cancel their service before the term of their mobile phone contract expires typically incur ETFs, in
most cases providers allow customers to get out of the contract without paying a penalty by transferring
the remaining time to someone else who meets the provider's approval through a credit check.521 A
number of new web sites use this contractual loophole to facilitate transfers of mobile phone contracts.522
In particular, the web sites help mobile phone customers avoid paying penalties for early termination by
putting them in touch with people seeking a mobile phone contract. The sites charge existing mobile
phone customers a range of fees to transfer or cancel a mobile phone contract, but in general the fees for
transferring a contract through these web sites are much lower than the usual fees customers would have
to pay for early termination.523 There is typically no fee for contract buyers to take over a mobile phone
contract, and many customers using the web sites offer to transfer their mobile phones free of charge as
an incentive to entice buyers to take over their contracts.524 Apart from a possible free phone and
accessories, other potential advantages to contract buyers include avoiding a registration fee and getting a
shorter contract than if they had signed with a mobile phone company directly. However, the number of
people using these sites is reported to be relatively low, and not all mobile phone customers who visit the
sites succeed in finding a buyer willing to take over their contract.525

516 See Section IV.A.2, Prepaid Service, supra.
517 See Section IV.A.1, Developments in Mobile Telephone Pricing Plans, supra.
518 Id.
519 Id.
520 Id.
521 Lauren Tara Lacapra, Breaking Free of a Cellular Contract, WALL STREET JOURNAL, Nov. 30, 2006, at D1
(noting that this "loophole" in mobile phone contracts is available "to nearly all customers with long-term
plans")("Breaking Free of a Cellular Contract").
522 Id. One example of a web-based service that is currently operating is cellswapper, available at
www.cellswapper.com/Buzz.aspx (last visited Dec. 15, 2008).
523 Breaking Free of a Cellular Contract.
524 Id.
525 Id. See also Suzanne Barlyn, How to Dump a Cellphone Contract, WALL STREET JOURNAL, Sept. 6, 2007, at D2.

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Federal Communications Commission DA 09-54

VI.

MOBILE TELECOMMUNICATIONS MARKET PERFORMANCE

187.
The structural and behavioral characteristics of a competitive market are desirable not as
ends in themselves, but rather as a means of bringing tangible benefits to consumers such as lower prices,
higher quality and greater choice of services. Such consumer outcomes are the ultimate test of effective
competition. To determine if these goals are met and whether there is still effective competition in the
market, in this section we analyze various metrics including pricing levels and trends, subscriber growth
and penetration, MOUs, innovation and diffusion of services, and quality of service.

A.

Pricing Levels and Trends

1.

Pricing Trends

a.

Mobile Telephony

188.
Wide variations in the non-price terms and features of wireless service plans make it
difficult to characterize the price of mobile telephone service; consequently, it is difficult to identify
sources of information that track mobile telephone prices in a comprehensive manner.526 As documented
in previous reports, there is ample evidence of a sharp decline in mobile telephone prices in the period
since the launch of PCS service. After a relatively stable year in 2006,527 pricing decreased slightly in
2007, which likely reflects continued price competition in the market.
189.
Of the three indicators of mobile telephone pricing examined here, all of the indicators
show that the cost of mobile telephone service fell in 2007.528
190.
According to one economic research and consulting firm, Econ One, mobile telephone
prices in the 25 largest U.S. cities decreased 1.4 percent in 2007,529 a reversal of the 5.6 percent increase
in 2006.530 The average cost of monthly service531 which was calculated across four typical usage plans
(200, 500, 800 and 1100 minutes) decreased from $47.42 in December 2006 to $46.74 in December
2007.532
191.
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").533 Cellular CPI data is published on a national basis only.534 From 2006 to

526 See Fourth Report, 14 FCC Rcd at 10164-10165.
527 See Twelfth Report, 23 FCC Rcd at 2321-2322, 195.
528 Fees for actual service are only one element of cost that consumers face. Handset prices, for example, are
another. One analyst calculated that the average handset was discounted 60 percent compared to its original price
(i.e., the advertised price). The analyst also claimed that, "handsets, and not the [monthly recurring charge], are
emerging as the competitive intersection in the wireless industry." David W. Barden, et al., Wireless Services &
Handset Pricing Analysis
, Bank of America, Equity Research, Dec. 19, 2006, at 8-9.
529 Econ One Wireless Survey: Wireless Costs Down, News Release, Econ One, May 22, 2007; Econ One Wireless
Survey: Econ One Wireless Survey: Wireless Service Cost Down
, News Release, Econ One, June 5, 2008. The
survey is based on an analysis of pricing plan data collected from carriers' web sites.
530 See Twelfth Report, 23 FCC Rcd at 2322, 197.
531 This does not include any additional charges for roaming or long-distance service.
532 The analysis assumes a 70 percent peak/30 percent off-peak split in the kind of minutes used.
533 See Table 11: Change in CPI, infra. 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
(continued....)

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2007, the annual Cellular CPI decreased by approximately 0.3 percent while the overall CPI increased by
2.8 percent. The Cellular CPI has declined 35.6 percent since December 1997, when BLS began tracking
it.535

Table 11: Change in CPI



CPI
Cellular CPI
All Telephone CPI Local Telephone CPI
Long Distance
Telephone CPI
Index
Annual
Index
Annual
Index
Annual
Index
Annual
Index
Annual
Value Change
Value
Change
Value
Change
Value
Change
Value
Change
Dec 1997
100
100
100
100
100
1998 101.6
95.1
100.7
101.6
100.5
1999 103.8 2.2%
84.9
-10.7%
100.1
-0.6%
103.4
1.8% 98.2
-2.3%
2000 107.3 3.4%
76.0
-10.5%
98.5
-1.6%
107.7
4.1% 91.8
-6.5%
2001 110.3 2.8%
68.1
-10.4%
99.3
0.8%
113.3
5.2% 88.8
-3.3%
2002 112.1 1.6%
67.4
-1.0%
99.7
0.4%
118.5
4.5% 84.9
-4.4%
2003 114.6 2.3%
66.8
-0.9%
98.3
-1.4%
123.3
4.1% 77.8
-8.4%
2004 117.7 2.7%
66.2
-0.9%
95.8
-2.5%
125.1
1.5% 70.9
-8.9%
2005 121.7 3.4%
65.0
-1.8%
94.9
-0.9%
128.5
2.7% 67.5
-4.8%
2006 125.6 3.2%
64.6
-0.6%
95.8
0.9%
131.1
2.1% 68.3
1.2%
2007 129.2 2.8%
64.4
-0.3%
98.247
2.6%
136.2
3.8% 71.453
4.6%




Dec 1997
to 2007
29.2%
-35.6%
-1.8%
36.2%
-28.5%

Source: Bureau of Labor Statistics.

192.
As a third pricing indicator, some analysts believe average revenue per minute ("RPM")
is a good proxy for mobile pricing.536 This is calculated by dividing a provider's estimate of average
monthly revenue per subscriber (often referred to as average revenue per unit, or "ARPU") by its estimate
(Continued from previous page)
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 1997, this basket of goods included a category for cellular/wireless telephone services.
All CPI figures discussed in this paragraph were taken from BLS databases found on the BLS Internet site available
at http://www.bls.gov. 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
, available at http://www.bls.gov/cpi/cpifaq.htm (last visited Aug. 26, 2008). 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.
534 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
, available at
http://www.bls.gov/cpi/cpifactc.html (last visited Sept. 26, 2008).
535 From December 1997 compared to the annual index.
536 See US Wireless Matrix 1Q07, at 52.

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of MOUs, yielding the RPM that the provider is receiving.537 Using estimates of industry-wide ARPU
and MOUs from CTIA's survey, we estimate that RPM was $.06 in December of 2007, which is a
decrease of one percent from December of 2006. In the thirteen years since 1994, RPM has fallen from
$0.47 in December of 1994 to $0.06 in December of 2007, which represents a decline of 87 percent.538
193.
Until the last three years, revenues from wireless data services were a relatively
insignificant portion of the average wireless subscriber's bill. However, in the last three years, data has
become an ever increasing portion of that bill.539 RPM becomes an increasingly inaccurate measure of
the pricing of mobile voice service as the contribution of data services to total revenues increases. This
Thirteenth Report, as did the Twelfth Report, includes a revised version of RPM, "Voice RPM," which
excludes that portion of ARPU generated by data services.540 While RPM and Voice RPM have been
mostly identical over time, in absolute value and trend, in the last four years, they have diverged
somewhat, with the decline in Voice RPM steeper, and its absolute value slightly lower, than RPM.

537 Note that this version of ARPU is CTIA's "Average Local Monthly Bill" ("ALMB") and does not include toll or
roaming revenues where they are not priced into a calling plan. See infra note 544.
538 See Table 12: Average Revenue Per Minute, infra.
539 Wireless Data: Just Getting Started, at 10.
540 To generate Voice RPM, we subtracted wireless data revenues, derived from CTIA's survey, from ALMB (we
assumed this was the same percentage of wireless data revenues in CTIA's measure of total service revenues), then
we divided that number by CTIA's average MOUs per month. See also Twelfth Report, 23 FCC Rcd at 2323-24,
200.

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Table 12: Average Revenue Per Minute


Average
Minutes of Average
Annual
Wireless Data Average Local
Average
Annual
Local
Use Per Revenue Per Change in
Revenue as
Monthly Bill Revenue Per Change in
Monthly
Month
Minute
Overall
Percent of Total (excl. Data Voice Minute
Voice
Bill
RPM
Service
Revenues)
RPM
Revenues
1993 $61.49 140 $0.44
n/a
$61.49 $0.44
1994 $56.21 119 $0.47
8%
n/a
$56.21 $0.47 8%
1995 $51.00 119 $0.43 -9%
n/a
$51.00 $0.43 -9%
1996 $47.70 125 $0.38 -11%
n/a
$47.70 $0.38 -11%
1997 $42.78 117 $0.37 -4%
n/a
$42.78 $0.37 -4%
1998 $39.43 136 $0.29 -21%
n/a
$39.43 $0.29 -21%
1999 $41.24 185 $0.22 -23%
0.2%
$41.16 $0.22 -23%
2000 $45.27 255 $0.18 -20%
0.4%
$45.09 $0.18 -21%
2001 $47.37 380 $0.12 -30%
0.9% $46.94 $0.12 -30%
2002 $48.40 427 $0.11
-9%
1.2%
$47.82 $0.11 -9%
2003 $49.91 507 $0.10
-13%
2.5%
$48.66 $0.10 -14%
2004 $50.64 584 $0.09
-12%
4.8%
$48.21 $0.08 -14%
2005 $49.98 708 $0.07
-19%
8.3%
$45.83 $0.06 -22%
2006 $50.56 714 $0.07
0%
13.5%
$43.73 $0.06 -5%
2007 $49.79 769 $0.06 -9%
17.9%
$40.88 $0.05 -13%

Note: Data covers the last six months of each year. For purposes of this presentation in this table, RPM is rounded
to two decimal places, but RPM change is based on absolute RPM.
Source: See Appendix A, Table 1 (ARPU); Dec 2007 CTIA Survey, at 110 (Wireless Data as a Percentage of
Monthly Subscriber ARPU), and at 198-99 (Table 86: Approximate Billable MOUs per Subscriber).

b.

Mobile Data

194.
The average price of text messaging continued to decline in the past year. As noted in the
Twelfth Report, Morgan Stanley estimated based on CTIA data that the price per text message declined
for the first time in 2006 to $0.036 after rising continuously from $0.015 in 2002 to $0.037 in 2005.541
Based on CTIA estimates of text messaging revenues and the volume of text messaging traffic in 2007,
we estimate that the price per text message dropped again in 2007 to $0.025, about one cent lower than
the price per text message in 2006.542 This decline is attributable to the increased use of volume-
discounted monthly text messaging packages and unlimited text messaging plans.543

541 Id. at 2324-25, 202.
542 Dec. 2007 CTIA Survey, supra note 408, at 110, 207.
543 Twelfth Report, 23 FCC Rcd at 2324-2325. See also Section IV.A.1, Developments in Mobile Telephone Pricing
Plans, supra.

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Federal Communications Commission DA 09-54


Table 13: Average Revenue Per Text Message

Year Text Traffic Volume Text Messaging Revenues Average Revenue
Per Text Message
2005 81,208,225,767
$2,991,666,181
$0.037
2006 158,648,546,798
$5,672,984,205
$0.036
2007 362,549,531,172
$8,976,574,961
$0.025
Source: CTIA, CTIA's Wireless Industry Indices Year-End 2007 Results.
2.

Average Revenue Per Unit

195.
ARPU is a widely used financial metric in analyzing the mobile telephone sector. Since
1999, following a decade of declines, CTIA's estimate of ARPU began increasing, rising to $50.64 in
December 2004, a 28 percent increase from the low of eight years ago.544 However, for the past four
years, ARPU has remained roughly the same, at around $50. As seen in the table, declining voice ARPU
(due to various factors, including further declines in the per-minute price of mobile calls545 and an
increase in the share of subscribers who typically spend less per month on mobile calls, such as prepaid
and family plan customers)546 continues to be offset by growth in data ARPU.547 According to CTIA, in
the last half of 2007, data revenues made up 17.9 percent of total wireless service revenues, compared to
13.5 percent a year earlier, an increase of 33 percent. For the nationwide operators, in the fourth quarter
of 2006, data accounted for 16 percent of service revenues, versus about 10 percent a year earlier.548

B.

Quantity of Services Purchased

1.

Subscriber Growth

a.

Mobile Telephony

196.
In an effort to improve the accuracy of its estimate of U.S. mobile telephone
subscribership, all Reports since the Seventh Report have included an analysis of information filed
directly with the FCC. This information, the NRUF data,549 tracks phone number usage information for

544 See Table 12: Average Revenue Per Minute, supra. There are different ways of calculating ARPU. The measure
used here, CTIA's "average local monthly bill," does not include toll or roaming revenues (CTIA calls it "the
equivalent of `local ARPU'"). Dec. 2007 CTIA Survey, supra note 408, at 183. CTIA defines an alternative
measure of ARPU, which includes roaming revenues but not toll revenue. For a comparison between these two
measures, see Dec. 2007 CTIA Survey, at 185.
545 See Section VI.A.1, Pricing Trends, supra. See also, Simon Flannery et al., 3Q06 Trend Tracker, Morgan
Stanley, Equity Research, Dec. 4, 2006, at 36 ("The challenging ARPUs, despite data, are the result of price cutting
in the form of family plans, free in-network calling, free nights and weekends, rollover, free incoming calls, free
cell-to-home and the like, as well as the growing mix of prepaid subscribers.).
546 See, e.g., Simon Flannery et al., Deteriorating Wireless Trends, Revisited, Morgan Stanley, Equity Research, Jan.
18, 2007, at 3 ("a growing portion of these net adds are coming from lower-ARPU family plans, prepaid customers,
and others receiving larger buckets of minutes at lower per-minute prices.")
547 See also 4Q06 Wireless 411, at 15; and Eleventh Report, 21 FCC Rcd at 11008-09, 155-156.
548 4Q07 Wireless 411, at 31.
549 Carriers began reporting NRUF data biannually beginning with the period ending June 2000. In addition, the
Commission's local competition and broadband data gathering program, adopted in March 2000, provides more data
on mobile subscribership. The FCC used to require only mobile wireless carriers with over 10,000 facility-based
(continued....)

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Federal Communications Commission DA 09-54

the United States.550 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 of
subscribership.551 In previous years, for the purposes of this Report, the Commission had relied on
national subscribership data from a highly-respected survey conducted by CTIA.552 While we use NRUF
data as the basis for our estimate of mobile telephone subscribership for the purposes of this Report, we
report the CTIA data as a benchmark for comparison.553
197.
As of December 2007, we estimate that there were 263 million mobile telephone
subscribers,554 up from 241.3 million at the end of 2006, which translates into a nationwide penetration
(Continued from previous page)
subscribers in a state to report the number of their subscribers in those states twice a year to the Commission. See
Local Competition and Broadband Reporting, Report and Order, 15 FCC Rcd 7717, 7743, 47 (2000). In 2004,
however, the Commission changed the requirement so that all carriers must report the number of their subscribers,
regardless of how many they serve, beginning in June 30, 2005. This information is submitted to the FCC on Form
477. See Local Telephone Competition and Broadband Reporting, Report and Order, 19 FCC Rcd 22340, 22345,
8 (2004). In their December 2007 filings, operators reported that they served 249.2 million subscribers. See
Appendix A, Table A-2, infra.
550 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 exhaustion of area codes would impose 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. See FCC,
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.
551 See FCC, 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. Id. 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. Id.
552 See Dec. 2007 CTIA Survey, supra note 408. The CTIA effort is a voluntary survey of both its member and non-
member facilities-based providers of wireless service. CTIA asks majority owners of corporations to report
information for the entire corporation, which helps eliminate double counting. To encourage honest reporting, the
surveys are tabulated by an independent accounting firm under terms of confidentiality and are later destroyed.
CTIA receives only the aggregate, national totals. Not all wireless carriers submit surveys, however. In order to
develop an estimate of total U.S. wireless subscribership, CTIA identifies the markets which are not represented in
the survey responses. Then, CTIA uses third-party estimates or extrapolates from surrogate and/or historical data to
create an estimate of subscribership for those markets. See Eighth Report, 18 FCC Rcd at 14813, n.211.
553 The advantages of NRUF data over CTIA's survey are discussed in the Seventh Report, 17 FCC Rcd at 13004.
554 FCC estimate, based on preliminary year-end 2007 filings for Numbering Resource Utilization in the United
States, adjusted for porting. In NRUF, carriers do not report numbers that have been ported to them. See Section
V.B.2, Local Number Portability, supra. Therefore, in order to develop an estimate of wireless subscribership, it is
necessary to adjust the raw NRUF data to account for wireless subscribers who have transferred their wireline
numbers to wireless accounts. Porting adjustments are developed from the telephone number porting database
managed by the Local Number Portability Administrator, which is currently NeuStar, Inc. The database contains all
ported numbers currently in service. It also contains information about when the number was most recently ported
(to a carrier other than the carrier to which the number originally was assigned) or, in some cases, when the database
was updated to reflect a new area code. Trends in Telephone Service, FCC, Apr. 2005, at 8-2 8-3.

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Federal Communications Commission DA 09-54

rate of 86 percent.555 This addition of 21.2 million subscribers represented an 8.8 percent subscriber
growth during 2007. Together with the largest absolute yearly increase of 28.8 million subscribers in
2006, the total mobile telephone subscriber base has increased 23 percent in the last two years.

Table 14: NRUF-Estimated Mobile Telephone Subscribers


Subscribers
Increase from Penetration
(millions)
previous year
Rate
(millions)
2001 128.5
n/a
45
%
2002 141.8
13.3
49
%
2003 160.6
18.8
54
%
2004 184.7
24.1
62
%
2005 213.0
28.3
71
%
2006 241.8
28.8
80
%
2007 263.0
21.2
86
%

Source: Federal Communications Commission estimates.

198.
CTIA's estimate for year-end 2007 was 255.4 million subscribers, a ten percent increase
over its estimate of 233.0 million subscribers as of year-end 2006.556 CTIA's estimate shows a similar
trend in subscriber growth, with the increase of 22.3 million subscribers shown by its 2007 survey, about
ten percent less than the 25.1 added in 2006.557
199.
Some analysts attribute this high subscriber growth to the attractiveness of innovative
service models, particularly prepaid options. As one analyst wrote, "Our survey suggests that prepaid is
playing a major role in growing US wireless penetration."558
200.
In its Year 2000 Biennial Regulatory Review, the Commission established a five-year
sunset period (until February 18, 2008) after which cellular service licensees will no longer be required to
provide analog service.559 The Twelfth Report estimated that almost all wireless subscribers were digital
subscribers at the end of 2006, with approximately one percent or less being analog-only mobile
telephone subscribers.560 In filings made with the Commission in conjunction with the analog sunset,
both Verizon Wireless and AT&T reported that 0.5 percent of their respective customer bases were

555 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, 2007 was estimated to be 305.6 million. See U.S. Census Bureau, National
and State Population Estimates:
Annual Population Estimates 2000 to 2007, available at
http://www.census.gov/popest/states/tables/NST-EST2007-01.xls (last visited Sept. 2, 2008). The number of
subscribers refers to the number of phone numbers that have been assigned to mobile wireless devices. A particular
individual may have more than one wireless device.
556 See Appendix A, Table A-1, infra.
557 Id.
558 Simon Flannery et al., Robust Wireless Quarter as Prepaid Surges, Morgan Stanley, Equity Research, Jan. 17,
2007, at 13.
559 47 C.F.R. 22.901(b).
560 Twelfth Report, 23 FCC Rcd at 2327, 209.

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Federal Communications Commission DA 09-54

analog-only at the end of 2006, while Alltel reported that .96 percent of its customers were analog as of
January 31, 2007.561 Since the sunset period has ended on February 28, 2008 and the analog cellular
service is phasing out from the market place, the Thirteenth Report no longer provides estimates for
analog-only subscribers.
b.

Mobile Broadband and Other Data

201.
The percentage of U.S. mobile telephone subscribers that uses their mobile phone for
data services continued to rise in the past year. For example, Nielsen Mobile estimates that 37 percent of
U.S. mobile subscribers paid for access to the mobile Internet in the first quarter of 2008, either as part of
a subscription or as a result of transactions, and that the number of U.S. subscribers who paid for mobile
Internet access increased 28 percent between the first quarter of 2007 and the first quarter of 2008.562 In
addition, Nielsen Mobile estimates that 15.6 percent of subscribers were active users of mobile Internet
services in May 2008, defined as those who use such services at least once on a monthly basis, and that
the number of such active users of the mobile Internet increased 73 percent from May 2006 to May
2008.563 Overall, taking into account subscribers who used their phone for any data use, including SMS
text messaging and accessing the mobile Internet, Nielsen Mobile estimates that 57 percent of U.S.
mobile subscribers were data users in the first quarter of 2008.564 Similarly, SNL Kagan estimates that
about 58 percent of U.S. subscribers use some form of data, but adds that usage is sporadic for most users
and limited primarily to texting, including SMS and e-mail.565
202.
The adoption of mobile data services by U.S. mobile telephone subscribers continues to
vary by type of application. Based on a survey566 of U.S. mobile subscribers for the three-month period
ending on March 31, 2008, research firm M:Metrics estimates that 23 percent of U.S. mobile subscribers
sent or received photos or videos during this period, 13.7 percent accessed news and information via a
browser, 12.6 percent used e-mail, 9.2 percent purchased ringtones, 9 percent played a downloaded
mobile game, 7.4 percent listened to music, 6 percent watched video, and 4.8 percent accessed social
networking sites.567
203.
Mobile data penetration is significantly higher among iPhone users than other mobile
subscribers. For example, Nielsen Mobile estimates that 82 percent of iPhone users access the mobile

561 Verizon Wireless Analog Sunset Report, Mar. 2, 2007, at 3; AT&T Mobility LLC F/K/A Cingular Wireless LLC
Second Analog Sunset Report, Feb. 26, 2007, at 11; Alltel Cellular AMPS Report, Mar. 19, 2007, at 1. All of the
analog sunset reports are available of the FCC's web site at
http://wireless.fcc.gov/services/index.htm?job=cellular_reports&id=cellular.
562 Critical Mass The Worldwide State of the Mobile Web, Nielsen Mobile, July 2008, at 3.
563 Id. at 3-4.
564 Id. at 3.
565 Sharon Armbrust, Wireless Investor: U.S. Mobile Wireless Projections: Data Dollars Outgrow Voice 8-to-1,
WIRELESS INVESTOR, SNL Kagan, July 15, 2008, at 4.
566 Since most mobile data services continue to be sold as add-ons to mobile voice services rather than as separate
data-only service offerings, measures of the adoption of mobile data services by U.S. mobile telephone subscribers
are generally based on indirect methods of gathering evidence such as surveys of mobile subscribers or analysis of
their billing records. See Twelfth Report, 23 FCC Rcd at 2328, 211.
567 M:Metrics: Americans Spend More than 4.5 Hours Per Month Browsing on Smartphones, Nearly Double the
Rate of the British
, Press Release, M:Metrics, May 21, 2008, at 3. The estimates are based on a three-month moving
average for the period ending March 31, 2008.

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Federal Communications Commission DA 09-54

Internet, making them five times more likely to do so as the average mobile consumer.568 Similarly, data
from M:Metrics for the month of January 2008 shows that U.S. consumers who have purchased the
iPhone access mobile content at much higher rates than those who own "smartphones" and U.S. mobile
phone subscribers in general (see Table 15 below).569 For example, M:Metrics found that nearly 85
percent of iPhone users accessed news and information via a browser in the month of January, as
compared with about 58 percent of "smartphone" users and a market average of about 13 percent.570
M:Metrics also found that nearly 31 percent of iPhone users watched mobile TV or video, versus a market
average of 4.6 percent and more than double the rate for all "smartphone" users (14.2 percent). 571 In
addition, nearly 50 percent of iPhone users accessed a social networking site or blog, versus 19.4 percent
of "smartphone" users and a 4.2 percent market average.572 The data also reveal that two of the iPhone's
featured "widgets," YouTube and Google Maps, are very popular among iPhone users, as is Facebook,
one of the first Web properties to customize its content for the iPhone.573 M:Metrics argues that the
dramatic increase in mobile content consumption among iPhone users is due not only to the attributes of
the device itself, but also the fact that all iPhones on the AT&T network are attached to an unlimited data
plan, which eliminates "the fear of surprise data charges."574

Table 15: Mobile Content Consumption: iPhone, Smartphone and Total Market (January 2008)

Activity iPhone Smartphone

Market

Any news or info via browser
84.8%
58.2%
13.1%
Accessed web search
58.6%
37.0%
6.1%
Watched mobile TV and/or video
30.9%
14.2%
4.6%
Watched on-demand video or TV programming
20.9% 7.0% 1.4%
Accessed social networking site or blog
49.7%
19.4%
4.2%
Accessed Facebook
20.0%
NA
1.5%
Accessed YouTube
30.4%
NA
1.0%
Used Google Maps
36.0%
NA
2.6%
Listened to music on mobile device
74.1%
27.9%
6.7%

Source: M:Metrics
204.
With the launch of wireless broadband services based on EV-DO or WCDMA/HSDPA
technologies by all four nationwide providers and some smaller regional providers, the number of
subscribers capable of accessing mobile data services at broadband-like speeds also has been growing.

568 Critical Mass The Worldwide State of the Mobile Web, Nielsen Mobile, July 2008, at 5.
569 M:Metrics: IPhone Hype Holds Up, Press Release, M:Metrics, Mar. 18, 2008. M:Metrics defines smartphones to
include devices running Windows, Symbian, RIM or Apple operating systems.
570 Id.
571 Id.
572 Id.
573 Id.
574 Id.

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Federal Communications Commission DA 09-54

The Commission estimates that high-speed Internet-access connections using mobile wireless technology
increased by more than 18 million in 2006, from 3.128 million connections to 21.910 million
connections.575 Mobile wireless connections represented approximately 26 percent of the more than
82.547 million high-speed lines in the United States at the end of 2006.576
205.
A study of U.S. Internet usage via mobile broadband conducted by comScore, Inc.
("comScore") found that the number of computers and other mobile devices using mobile broadband
technology to access the Internet grew by 154 percent in 2007, from 854,000 in the fourth quarter of 2006
to 2.168 million in the fourth quarter of 2007.577 The same study also found that work computers
accounted for the majority (59 percent) of these mobile broadband connections, with home or personal
computers accounting for the remaining 41 percent.578 ComScore estimates that mobile broadband access
is currently being used by about 1 percent of the total U.S. Internet population.579
206.
In another more recent study, comScore estimated that the number of U.S. mobile
subscribers with 3G enabled devices grew to 64.2 million in mid-2008, up by 80 percent from 35.65
million in mid-2007.580 Using these estimates, comScore also found that the penetration rate for 3G
devices rose from 16.7 percent of U.S. mobile subscribers in mid-2007 to 28.4 percent of subscribers in
mid-2008.
207.
In contrast with text messaging and other handset-based mobile data applications,
subscriber numbers for paging continue to drop. Using NRUF data, the Commission estimates there were
5.85 million paging units in service as of the end of 2007, down from 6.1 million paging units at the end
of 2006, 8.3 million units at the end of 2005, 8.5 million units at the end of 2004, 11.2 million units at the
end of 2003, and 14.1 million units at the end of 2002.581
2.

Minutes of Use

208.
Wireless subscribers continue to increase the amount of time they communicate using
their wireless phones, although at a slower rate than in the years prior to 2006. According to CTIA,
average minutes-of-use per subscriber per month ("MOUs") reached 769 between June and December
2007, an eight percent increase from the average of 714 MOUs reported during the same period in

575 High-Speed Services for Internet Access: Status as of December 31, 2006, FCC, Oct. 2007, Table 1. High-speed
lines or wireless channels connect homes and businesses to the Internet at speeds that exceed 200 kbps in at least
one direction. Id. at 2.
576 Id. at 5.
577 Number of U.S. Computers Accessing the Internet Via Mobile Broadband Soars 154 Percent in 2007, Press
Release, comScore, Mar. 4, 2008. The study examined the usage and characteristics of mobile broadband users
through data collected from computers where Internet access via mobile broadband Internet service providers
occurred. The study defines mobile broadband as a service that "employs cellular networks, where users pay
subscriptions for access" and "the connection is made with a PC card, built-in adapter, or connections can be
tethered via a cellphone or PDA," as distinct from Wi-Fi access via "hot spots." According to comScore, Verizon
and Sprint accounted for the majority of the mobile broadband market in 2007. Id.
578 Id.
579 Id.
580 Comscore Reports that the U.S. Catches Up With Western Europe in Adoption of 3G Mobile Devices, Press
Release, comScore, Sept. 4, 2008 ("U.S. Catches Up With Western Europe in Adoption of 3G Mobile Devices").
These estimates are based on a three-month average for the period ending June 2008 and June 2007.
581 Craig Stroup and John Vu, Numbering Resource Utilization in the United States, FCC, Aug. 2008, at 14; Twelfth
Report
, 23 FCC Rcd at 2330, 216.

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Federal Communications Commission DA 09-54

2006.582 Although the average monthly MOUs per subscriber for the four nationwide operators climbed
up only slightly from 892 minutes in the first quarter of 2007 to 898 minutes in the first quarter of
2008,583 some regional operators showed significant monthly MOU increases over the same period.
Alltel and US Cellular saw their monthly MOUs increase by 18% and 21%, respectively.584 MetroPCS
and Leap Wireless, both offering unlimited local callings in smaller cities, averaged over 1,450 MOUs per
month per subscriber for the entire year.585
3.

Mobile Broadband and Other Data Usage

209.
Data on the use of mobile data applications are fragmentary and their availability varies
with the particular type of application. By a number of indicators, however, mobile data applications
have continued to gain popularity among U.S. mobile subscribers. For example, the volume of SMS
traffic continued to increase at a rapid pace in the past year. According to CTIA, more than 48.1 billion
text messages were reported for the month of December 2007, up 66.7 percent from 28.88 billion text
messages for the month of June 2007, and up 157 percent from the more than 18.7 billion messages
reported for the month of December 2006.586 Based on CTIA's data, we estimate that the average number
of text messages sent per subscriber was 182.9 per month in December 2007 and 77.3 per month in
December 2006. The additional 105 text messages per subscriber in December 2007 represents an
increase of almost 120 percent as compared to December 2006.587
210.
In addition, the reported text/SMS traffic volume grew to 146.99 billion in the first six
months of 2007 and again to 215.56 billion in the second half of 2007, up from 93.8 billion messages in
the second half of 2006.588 For 2007 as a whole, total reported text/SMS traffic volume rose to more than
362 billion messages, more than double the total of more than 158 billion messages reported in 2006 (see
Table 13: Average Revenue Per Text Message).589 While text messaging remains the most widely used
type of messaging service, the volume of photo messaging and other multimedia messaging services also
has continued to grow. In particular, the volume of MMS messages reported to CTIA more than doubled
in the past year, rising from 2.7 billion messages in 2006 to 6.1 billion messages in 2007.590
211.
M:Metrics estimates that "smartphone" users spend an average of four hours and 38
minutes per month browsing the mobile Web in the United States.591 M:Metrics also estimates that
mobile browsing has increased 89 percent year over year among "smartphone" users in the United States,

582See Table 12: Average Revenue Per Minute, supra. 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.
583 Morgan Stanley Telecom Services 1Q08 Trend Tracker, at 45.
584 Id.
585 Id.
586 Dec. 2007 CTIA Survey, supra note 408, at 205-206.
587 Our calculations do not take into account that not all mobile telephone subscribers may use or have access to text
messaging.
588 Id. at 207.
589 Id.
590 Id. at 207-208
591 M:Metrics: Americans Spend More than 4.5 Hours Per Month Browsing on Smartphones, Nearly Double the
Rate of the British
, Press Release, M:Metrics, May 21, 2008, at 1. The estimate is based on on-device metering of
actual user behavior of those with Windows, Symbian and Palm handsets in March 2008.

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Federal Communications Commission DA 09-54

and that pageviews have increased 27 percent.592 M:Metrics concludes that social networking and
Internet commerce are drawing consumers into the mobile Web, finding that, on the days they visited
each site, U.S. consumers spent an average of 22 minutes on Craigslist, 29 minutes on eBay, 16 minutes
on MySpace, 14 Minutes on Facebook and 18 minutes on Go.com.593 M:Metrics also emphasizes that
one of the primary factors explaining the duration of time spent browsing on the mobile Web is the
relative popularity of flat-rate unlimited data plans in the United States, where an estimated 10.9 percent
of users have an unlimited data plan.594
4.

Sub-National Penetration Rates

212.
NRUF data is collected on a small area basis and thus allows the Commission to compare
the spread of mobile telephone subscribership across different areas within the United States.595 EAs,
which are defined by the Department of Commerce's Bureau of Economic Analysis, are reasonably suited
for comparing regional mobile telephone penetration rates.596 First, the defining aspect of mobile
telephone 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.597 Thus, an EA would seem to
include in virtually all instances the market where the average person would shop for and purchase his or
her mobile phone most of the time near home, near the workplace, and all of the places in between.598
Second, wireless carriers have considerable discretion in how they assign telephone numbers across the
rate centers in their operating areas.599 In other words, a mobile telephone subscriber can be assigned a

592 Id.
593 Id. at 1-2.
594 Id. at 2.
595 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 18,000 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.
596 There are 172 EAs, each of which is an aggregation of counties. See Kenneth P. Johnson, Redefinition of the EA
Economic Areas
, SURVEY OF CURRENT BUSINESS, Feb. 1995, at 75 ("Redefinition of the EA"). 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,
available at
http://wireless.fcc.gov/auctions/data/maps.html (last visited Dec. 15, 2008). In November 2004, the
Bureau of Economic Analysis released updated definitions of EAs; however, for consistency, we use the previous
release of definitions. See New BEA Economic Areas For 2004, Bureau of Economic Analysis, Nov. 17, 2004.
597 Redefinition of the EA, at 75.
598 See supra note 87 for a discussion of the reasons why we use EAs to measure market concentration in this
Report, including for example, to maintain confidential information we maintain. We note, however, that the
Commission typically has used CMAs as the geographic market for analyzing mobile wireless transactions. See,
e.g., Sprint Nextel/Clearwire Order
, FCC 08-259, at 51-52; Verizon Wireless/Alltel Order, FCC 08-258, 52.
599 According to one analyst's report in 2003, wireless carriers assign numbers so as to minimize the access charges
paid to local wireline companies. See Linda Mutschler et al., Wireless Number Portability, Merrill Lynch, Equity
Research, Jan 9, 2003, at 8 ("For wireless operators, the standard practice is to aggregate phone numbers within the
same area code onto the same or several rate centers, whose physical locations would result in the least amount of
(continued....)

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Federal Communications Commission DA 09-54

phone number associated with a rate center that is a significant distance away from the subscriber's place
of residence or usage (but generally still in the same EA).600
213.
Regional penetration rates for the 172 EAs covering the 50 United States, sorted by EA
penetration rate, can be seen in Appendix A, Table A-3.601 In addition, a map showing regional
penetration rate by EAs can be found in Appendix B. The rates range from a high of 99 percent602 in the
Biloxi-Gulfport-Pascagoula, Mississippi EA (EA 82) to a low of 61 percent in the Aberdeen, South
Dakota EA (EA 114).603 There are 160 EAs, with a combined population of 298.5 million, in which
penetration rates exceed 70 percent, and 24 EAs, with a combined population of 105 million, in which
penetration rates exceed 90 percent. Not only do no EAs have penetration rates under 60 percent, only 12
EAs, with a combined population of just 3 million, have penetration rates under 70 percent. The
Anchorage, AK EA (EA 171), with the lowest population density, had a penetration rate of 70 percent,
while the Tampa-St. Petersburg-Clearwater, FL EA (EA 34), with the highest density, had a penetration
rate of 89 percent. As previously stated, based on an analysis of NRUF data, the national penetration rate
is 86 percent.

C.

Network Quality

214.
A semi-annual study conducted by J.D. Power and Associates measures wireless call
quality performance in terms of the number of problems per 100 calls (PP100), where a lower score
reflects fewer problems and higher wireless call quality performance.604 The overall industry score in the
J.D. Power and Associates 2008 Wireless Call Quality Performance Study (Volume 2) is 15 problems per
100 calls.605 This is the same as the overall industry score in the J.D. Power and Associates 2007
Wireless Call Quality Performance Study (Volume 2).606 Prior to the 2008 study, the number of reported
(Continued from previous page)
access charges paid to ILECs. Therefore, in each market, wireless operators are present in only a small number of
rate centers. According to our industry sources, this percentage is probably below 20%, and could be meaningfully
lower than 20%.").
600 "Once the NPA-NXX (i.e., 212-449) is assigned to the wireless carrier, the carrier may select any one of its
NPA-NXXs when allocating that number to a particular subscriber. Therefore, with regard to wireless, the
subscriber's physical location is not necessarily a requirement in determining the phone number assignment which
is very different from how wireline numbers are assigned." Linda Mutschler et al., US Wireless Services: Wireless
Number Portability Breaking Rules
, Merrill Lynch, Equity Research, Feb. 28, 2003, at 3. As described above,
however, EAs in some respects may not accurately represent market share. See supra note 87.
601 See also Appendix B, Map B-44: Mobile Wireless Penetration Estimated by Economic Area, infra.
602 Penetration rates close to, and over, 100 percent may be due to subscribers having more than one mobile phone
line.
603 We excluded New Orleans, LA-MS (EA 83) from this analysis due to what we believe to be an aberration with
the statistics. See note 1 at the end of Table A-3: Economic Area Penetration Rates, Appendix A.
604 J.D. Power and Associates Reports: Alltel, Sprint Nextel, U.S. Cellular and Verizon Wireless Each Rank Highest
in Wireless Call Quality Performance in Their Respective Regions
, Press Release, J.D. Power and Associates, Sept.
4, 2008 ("2008 Wireless Call Quality Performance Study--Volume 2"). The study measures wireless call quality
based on seven customer-reported problem areas that impact overall carrier performance: dropped/disconnected
calls; static/interference; failed connection on first try; voice distortion; echoes; no immediate voice mail
notification; and no immediate text message notification. The 2008 Wireless Call Quality Performance Study
(Volume 2) is based on responses from 22,407 wireless users, and the results are from the fielding period between
February and June 2008.
605 Id.; e-mail communication with Kirk Parsons, Senior Director, Wireless Services, J.D. Power and Associates,
Sept. 5, 2008.
606 Twelfth Report, 23 FCC Rcd at 2332, 223.

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Federal Communications Commission DA 09-54

wireless call quality problems declined for three consecutive reporting periods, reaching the lowest levels
in the five-year history of the study.607
215.
While the overall industry score for wireless call quality performance in the 2008 study
remained the same as in the 2007 study, the study found that the rate of call quality problems among
customers who say they "definitely will" switch wireless providers in the next 12 months increased by 16
percent over the previous year.608 The study concluded that dropped calls are primarily driving the
increase in PP100 rates among this group of customers. In particular, customers who say they "definitely
will" switch carriers within the next year and also said they had at least one dropped call experienced an
average of 22 dropped calls per 100 calls, a 47 percent increase compared with the same reporting period
in 2007 (15 PP100).609 In addition, the average number of call quality problems reported by wireless
subscribers who say they "definitely will" switch their current wireless provider is 51 PP100, which is
five times higher than the problem rates of customers who report they "definitely will not" switch
providers in the next 12 months (9 PP100).610 At the same time, the study found that only 14 percent of
customers say they "definitely/probably will" switch wireless providers in the next 12 months.611
216.
In Volume 1 of the J.D. Power and Associates 2008 Wireless Call Quality Performance
Study, the company also found that there is a lower rate of call quality problems with certain network
technologies used by wireless providers.612 In particular, the study found that the average number of call
quality problems reported by customers using CDMA technology is 14 PP100, while the average for
wireless customers using GSM networks is 17 PP100.613 In addition, customers using iDEN network
technology reported an average of 23 PP100.614 The study also found wireless customers who use third-
generation enabled mobile devices that support higher data speeds experience fewer problems than
customers who do not use these 3G devices. For example, problems occur at a 12 percent lower rate
when calls are placed or received using a 3G-enabled mobile device compared with calls placed or
received using earlier-generation devices.615

D.

International Comparisons

1.

Mobile Voice

217.
This section compares mobile market performance in the United States, Western Europe
and Asia-Pacific countries of comparable income levels with regard to mobile penetration, usage, and
pricing.616 To ensure that a consistent methodology is used to compile the data for different countries, the

607 Id.
608 2008 Wireless Call Quality Performance Study--Volume 2.
609 Id.
610 Id.
611 Id.
612 J.D. Power and Associates Reports: Alltel, T-Mobile, U.S. Cellular and Verizon Wireless Each Make a Sound
Connection with Wireless Users and Rank Highest in Customer Satisfaction with Call Quality
, Press Release, J.D.
Power and Associates, Mar. 27, 2008.
613 Id.
614 Id.
615 Id.
616 In accordance with established practice in using international benchmarking to assess effective competition in
mobile markets, the comparison of mobile market performance is restricted to Western Europe and parts of the Asia-
Pacific in order to ensure that the countries being compared are roughly similar to the United States with regard to
(continued....)

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Federal Communications Commission DA 09-54

comparison is based on international cross-section data compiled by Merrill Lynch.617 Consequently, the
estimates of mobile penetration, MOUs, and revenue per minute for the U.S. mobile market cited in this
section differ somewhat from estimates provided in previous sections of the Report because they come
from different sources.618
218.
As in the Twelfth Report619 and previous reports, this comparison shows that U.S. mobile
subscribers continue to fare extremely well relative to mobile subscribers in Western Europe and
comparable Asia-Pacific countries. In particular, mobile calls continue to be significantly less expensive
on a per minute basis in the United States than in Western Europe and Japan, and U.S. mobile subscribers
continue to lead the world in average voice usage by a wide margin.

Table 16: Mobile Market Performance in Selected Countries


Country Penetration Prepaid
MOUs Revenue
per
Data
(% of Pops) (% of Subs)
Minute ($)
(% of ARPU)

Receiving Party Pays

USA 84.4
16.1
812
0.06
19.8
Canada 60.9 22.1
439
0.11 12.5
Hong Kong
138.3
40.8
510
NA
NA
Singapore
125.0
46.4
349
0.08
24.5

Calling Party Pays

UK
121.7
64.6
185
0.19
26.4
Germany
118.2
55.2
102
0.21
23.3
Italy
152.8
89.5
139
0.18
21.9
Sweden
115.1
50.4
191
0.15
13.0
France 89.0
36.7
249
0.17 15.6
Finland
122.4
19.0
307
0.12
16.8
Japan 82.3
2.0
138
0.26
34.4
South Korea
89.9
3.0
319
0.11
18.6
Australia
104.3
48.0
208
0.16
25.2
Source: Interactive Global Wireless Matrix 4Q07.


219.
As noted above, some analysts regard average revenue per minute as a good proxy for
mobile pricing.620 Revenue per minute in Western Europe averaged about $0.20 in the fourth quarter of
(Continued from previous page)
their level of economic and telecommunications infrastructure development. See, for example, UK regulator Oftel's
review of effective competition in the mobile market: Effective Competition Review: Mobile, Office of
Telecommunications, Feb. 2001, at 7.
617 Interactive Global Wireless Matrix 4Q07.
618 In addition, Merrill Lynch has noted that these data have certain limitations for comparing countries that use
calling party pays ("CPP") versus mobile party pays (also known as receiving party pays). For reasons explained
below, the figures for minutes of use may be somewhat understated, and the revenue figures used to calculate
average revenue per minute may be somewhat overstated, in markets where CPP is used relative to non-CPP
markets.
619 Twelfth Report, 23 FCC Rcd at 2334, 229.
620 See Section VI.A.1, Pricing Trends, supra. Average revenue per minute ("RPM") is calculated by dividing
monthly voice-only ARPU by MOUs. Service revenues included in ARPU reflect the fees mobile operators collect
from other network operators for terminating incoming calls on their networks as well as monthly service charges
and usage fees paid by mobile subscribers. As noted above, MOUs figures may be somewhat understated in CPP
(continued....)

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Federal Communications Commission DA 09-54

2007, and ranged from a low of $0.12 in Finland to a high of $0.32 in Switzerland.621 At $0.06, average
revenue per minute in the United States during the same period remained less than one-third of the
European average.622 Revenue per minute in Japan, at $0.26, was more than four times the U.S. figure at
the end of 2007.623
220.
Merrill Lynch estimates that U.S. mobile subscribers talked an average of 812 minutes
per month on their mobile phones in the fourth quarter of 2007.624 This compares with 138 MOUs in
Japan and an average across Western Europe of 161 MOUs, with estimated MOUs in individual European
countries ranging from a low of 102 in Germany to a high of 307 in Finland.625
221.
Mobile penetration averaged an estimated 118.7 percent in Western Europe at the end of
2007.626 In most West European countries, estimated mobile penetration exceeded 100 percent at the end
of 2007, due in part to greater use of prepaid service plans and ownership of multiple devices or
subscriber identity module ("SIM") cards.627 As in years past, France finished 2007 with the lowest
mobile penetration rate in Western Europe at 89 percent.628
(Continued from previous page)
markets relative to non-CPP markets (due to the aforementioned double-counting of on-net mobile-to-mobile
minutes in non-CPP markets), and the revenue figures used to calculate ARPU may be somewhat overstated in CPP
markets relative to non-CPP markets (due to double-counting of mobile termination revenues for off-net mobile-to-
mobile calls in CPP markets). Consequently, the RPM figures (ARPU divided by MOUs) probably overstate the
difference between RPM in the United States and CPP markets. The potential for service revenues to be somewhat
overstated in CPP markets was brought to the Commission's attention by Professor Stephen Littlechild, and
confirmed by Merrill Lynch through e-mail correspondence.
621 Interactive Global Wireless Matrix 4Q07.
622 Id. In e-mail correspondence, Merrill Lynch has indicated that RPM figures may overstate the difference
between RPM in CPP and non-CPP markets by about 15 percent due to the two factors mentioned above.
623 Id.
624 Id. For purposes of comparing metrics in different countries, average MOUs include both incoming and
outgoing minutes, and usually exclude traffic related to mobile data services. Figures for MOUs are potentially
somewhat understated in markets that employ CPP as compared to the U.S. mobile market and other non-CPP
markets due to double-counting of same-network ("on-net") mobile-to-mobile minutes under the mobile party pays
system used in the U.S. and other non-CPP markets. The double counting occurs because each minute of an on-net
call is billed to both the caller and the receiver under the mobile party pays system, whereas under CPP each on-net
minute is billed only to the calling party, and therefore counted only once. See Tenth Report, 20 FCC Rcd at 15976,
n.457.
625 Interactive Global Wireless Matrix 4Q07.
626 Interactive Global Wireless Matrix 4Q07.
627 Id. Reported mobile subscriber figures and therefore penetration may be overstated in some countries,
particularly those with a high percentage of prepaid subscribers, due to a combination of factors: (1) slow clearing
out of inactive users (for example, subscribers who have switched service providers) from their former provider's
subscriber base; (2) multiple device ownership (for example, users of a Blackberry plus a mobile phone); and (3)
multiple SIM card ownership (for example, users who switch between operators in order to take advantage of
different tariffs at different times of the day or week). See Jeff Kvaal et al., Wireless Equipment Industry Update:
Strong Net Adds Drive Higher Phone Units
, Lehman Brothers, Equity Research, Jan. 16, 2007, at 4. As noted in
previous reports, carriers have widely different policies to determine when to cut off inactive subscribers and to
remove them from their reported subscriber base. In addition, it is becoming more prevalent for people to subscribe
to multiple mobile service providers. See, e.g., Eleventh Report, 21 FCC Rcd at 11021, 190 n.506; Tenth Report,
20 FCC Rcd at 15976, n.452; Seventh Report, 17 FCC Rcd at 13033, and Sixth Report, 16 FCC Rcd at 13391.
628 Interactive Global Wireless Matrix 4Q07.

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Federal Communications Commission DA 09-54

222.
Japan finished 2007 with a mobile penetration level of 82.3 percent.629 In the Twelfth
Report, we found that the increase in the number of U.S. mobile telephone subscribers in 2006 raised the
nationwide penetration rate to a level that is virtually on a par with the mobile penetration level in
Japan.630 In light of both the Merrill Lynch estimate of the U.S. mobile penetration level (84.4 percent)
and the Commission's own estimate based on NRUF (86 percent), in this Report we find that the U.S.
mobile penetration rate has now surpassed the mobile penetration rate in Japan.
223.
As noted in the Twelfth Report631 and previous reports, one of the reasons revenue per
minute is higher in Western Europe and Japan than in the United States is that the calling party pays
system used throughout Western Europe and in Japan tends to give mobile operators the ability and the
incentive to set mobile termination charges that are high relative to those in the United States and other
countries that use the mobile party pays system.632 In addition, because these higher mobile termination
charges are absorbed by the calling party, the calling party pays system may also reduce usage relative to
mobile party pays system by increasing the cost of calls to mobile phones.633 Based on a regression
analysis of international cross-section data for countries with high per capita income, economist Stephen
Littlechild finds that a mobile party pays system significantly reduces average revenue per minute (by
about twelve cents per minute compared to a calling party pays system), while significantly increasing
average usage (by about 143 minutes per month).634
224.
Apart from the effects of a calling party pays system on mobile termination charges,
analysts have argued that intense competition led U.S. mobile operators to price aggressively through
bucket plans and various promotions, driving prices down well below levels in Western Europe and
Japan.635 Accordingly, the results of this international comparison can be interpreted as evidence that the
U.S. mobile market is effectively competitive relative to mobile markets in Western Europe and also
Japan.
2.

Mobile Data

225.
The Twelfth Report and previous reports found that the percentage of mobile service
revenues from data services was higher in Western Europe and parts of Asia than in the United States.636

629 Id.
630 Twelfth Report, 23 FCC Rcd at 2336, 231
631 Id. at 2337, 235.
632 See, for example, Robert W. Crandall and J. Gregory Sidak, Should Regulators Set Rates to Terminate Calls on
Mobile Networks?
, YALE JOURNAL ON REGULATION, Vol. 21, No. 2, Summer 2004, at 1-46, at 6-8; Stephen C.
Littlechild, Mobile Termination Charges: Calling Party Pays Versus Receiving Party Pays, TELECOMMUNICATIONS
POLICY, Vol. 30, No. 5-6, June-July 2006, at 242-277, at 244-245, 253-254 ("Calling Party Pays Versus Receiving
Party Pays
").
633 Calling Party Pays Versus Receiving Party Pays, at 255. While theory also suggests the possibility that mobile
party pays may lead mobile subscribers to switch off their phones or withhold their mobile phone numbers to avoid
paying for incoming calls, in practice U.S. mobile operators have overcome the disincentive to receive calls under
mobile party pays through the introduction of bucket plans with low per-minute rates and other schemes for
stimulating usage, such as free night and weekend minutes. Id. at 254, 268.
634 Id. at 259. Littlechild also concludes there is no evidence that mobile party pays lowers the mobile penetration
rate compared to calling party pays. Id.
635 See, e.g., Timothy Horan et al., International Wireless Trends Reinforce Our Bullish View On U.S. Wireless,
CIBC World Markets, Equity Research, June 6, 2005, at 4-6.
636 See Twelfth Report, 23 FCC Rcd at 2337, 237.

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In this Report we find that the percentage of mobile service revenues from data services is still higher in
parts of Western Europe and Asia than in the United States, but on average there is no longer much
difference between the U.S. and Western Europe with regard to this metric. In the fourth quarter of 2007
revenues from mobile data services contributed an estimated 20.4 percent of European mobile carriers'
service revenues on average, and ranged from a low of 12.2 percent of service revenues in Greece to a
high of 26.4 percent of service revenues in the UK. 637 This compares with 19.8 percent of U.S. mobile
carriers' service revenues in the same period.638 The percentage of service revenues derived from mobile
data services was significantly higher in Japan (34.4 percent) than in Western Europe or the United
States.639
226.
ComScore recently reported that, after a slower start, the United States has caught up
with Western Europe in the adoption of 3G enabled devices.640 As noted previously, comScore has
estimated that 28.4 percent of U.S. mobile subscribers had 3G devices in mid-2008.641 This compares
with an average of 28.3 percent of mobile subscribers in the five largest West European countries
(Germany, Spain, France, Italy and the United Kingdom).642 ComScore also reported that the only
individual major European countries exceeding the United States in penetration of 3G enabled devices are
Italy (38.3 percent) and Spain (37.2 percent). In mid-2007, penetration of 3G enabled devices was 16.7
percent of U.S. mobile subscribers, as compared with an average of 20.3 percent of mobile subscribers in
the five largest European countries.643
227.
Penetration of mobile data services among mobile telephone subscribers varies by
country and by type of application. For example, Nielson Mobile finds that the United States leads
among 16 countries in mobile Internet penetration with 15.6 percent of wireless subscribers, followed by,
among others, the United Kingdom (12.9%), Italy (11.9%), Spain (10.8%), France (9.6%), and Germany
(7.4%).644 Similarly, M:Metrics finds that the percentage of mobile subscribers who use their mobile
phones for certain content and applications in particular, accessing news and information via a browser,
accessing downloaded applications, purchasing ringtones, using e-mail, and accessing social networking
sites is somewhat higher in the United States than in other Western European countries included in the
M:Metrics survey with the exception, in the case of some of these applications, of the United Kingdom.645
However, other mobile data applications continue to be more widely used by mobile subscribers in
Western Europe than in the United States, including photo and video messaging, watching video, and

637 Interactive Global Wireless Matrix 4Q07.
638 Id.
639 Interactive Global Wireless Matrix 4Q06.
640 Comscore Reports that the U.S. Catches Up With Western Europe in Adoption of 3G Mobile Devices, Press
Release, comScore, Sept. 4, 2008 ("U.S. Catches Up With Western Europe in Adoption of 3G Mobile Devices").
641 See Section VI.B.1.b, Subscriber Growth Mobile Data, supra.
642 U.S. Catches Up With Western Europe in Adoption of 3G Mobile Devices.
643 Id.
644 Critical Mass The Worldwide State of the Mobile Web, Nielsen Mobile, July 2008, at 3. The remaining
countries are Russia (11.2%), Thailand (10.0%), China (6.8%), Philippines (3.4%), Singapore (3.0%), Brazil (2.6%),
Taiwan (1.9%), India (1.8%), New Zealand (1.6%), and Indonesia (1.1%).
645 M:Metrics: Americans Spend More than 4.5 Hours Per Month Browsing on Smartphones, Nearly Double the
Rate of the British
, Press Release, M:Metrics, May 21, 2008, at 3. The estimates are based on a three-month moving
average for the period ending March 31, 2008.

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Federal Communications Commission DA 09-54

listening to music.646

646 Id.

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Federal Communications Commission DA 09-54

Table 17: Mobile Data Penetration in the United States and Europe



U.S. EU France Germany Italy Spain UK

(percent of total mobile subscribers)
Watched
video
6.0 9.2 7.3
6.2 11.2 12.8 9.4
Listened to music
7.4 17.9
16.1
17.6
14.7
22.5 19.9
Accessed news/info via browser
13.7 9.5
10.1
5.7
7.8
7.2
16.3
Received SMS ads
19.2 49.6
63.5 29.7 53.9
73.0
35.4
Played downloaded game
9.0
8.3
4.4
7.3
9.0
11.4 10.3
Accessed downloaded application 4.9
2.9
1.8
2.6
4.1
2.5
3.4
Sent/received photos or videos
23.0 27.6 25.0 20.9 32.0 31.0 30.2
Purchased ringtones
9.2
3.8
4.1
3.6
4.0
4.1
3.2
Used e-mail
12.6 8.6
6.5
7.2
11.2
9.1
9.1
Accessed social networking sites
4.8
2.8
2.4
1.3
2.7
2.5
4.9
Source M:Metrics.

VII.

INTERMODAL ISSUES

A.

Wireless Wireline Competition

228.
Once solely a business tool, wireless phones are now a mass-market consumer device.647
As one journalist reported in early 2008:
There is now one cellphone for every two humans on earth. From essentially
zero, we've passed a watershed of more than 3.3 billion active cellphones on a
planet of some 6.6 billion humans in 26 years. This is the fastest global
diffusion of any technology in human history faster even than the polio
vaccine.648

Indeed, one analyst noted in early 2007 that in the U.S.: "Cellphones rank just behind keys when it comes
to items that Americans do not leave home without."649 The overall wireless penetration rate in the
United States is now at 86 percent.650 Mobile phones are an integral part of American culture; they are
everywhere. As stated in the Twelfth Report, virtually everyone in the United States between the ages of
15 and 69 has a wireless phone, and even among the very young, an estimated 51 percent of children aged

647 See Sixth Report, 16 FCC Rcd at 13381. See also 10-Year Wireless Projections, KAGAN WIRELESS TELECOM
INVESTOR, June 6, 2005, at 2 (estimating that, in 2004, only 25 percent of wireless users were business customers,
with the remaining 75 percent being ordinary consumers).
648 Joel Garreau, Our Cells, Ourselves, washingtonpost.com, Feb. 24, 2008, available at
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/22/AR2008022202283_pf.html (last visited Sept.
9, 2008) ("Our Cells, Ourselves").
649 Marguerite Reardon, Will 'Unlocked' Cellphones Consumers?, USATODAY.COM (citing Albert Lin, an analyst
with American Technology Research).
650 See Section VI.B.1, Subscriber Growth, supra.

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Federal Communications Commission DA 09-54

10 to 14 years old, and 25 percent of children aged 5 to 9 years old, have mobile phones.651 One reporter
commented in early 2007, "Cell phones are the most pervasive media device, beating out computers and
televisions, as consumers keep their mobile phones at their side nearly every moment of the day."652 As
observed in the Twelfth Report, wireless phones have become a fashion accessory, and CTIA hosts
fashion shows at its conventions.653 As one analyst has noted: "Mobile phones are more than utilitarian.
They are an important means of self-expression."654 For example, there are many colors of phones from
which consumers may choose, or phones can be bejeweled with crystals or rubies. In addition, there are
many types of accessories for phones, such as Hello Kitty charms.655
1.

Wireless Substitution

229.
While exact percentages are difficult to determine, wireless substitution has grown
significantly in recent years. Between the end of 2001 and 2006, total RBOC access lines dropped 23
percent, from 161 million to 124 million lines.656 In 2006 alone, the RBOCs lost almost 7 percent of their
wireline access lines, with wireless substitution being a significant reason.657 According to the 2007
National Health Interview Survey ("NHIS"), 14.5 percent of adults, or one out of every 7, lived in
households with only wireless phones in the second half of 2007, up from 11.8 percent in 2006, 7.8
percent in the second half of 2005, and more than quadruple the percentage (3.5 percent) in the second
half of 2003.658 The survey also found that wireless-only households are more prevalent among younger
adults, with one-half of all wireless-only adults under 30 years of age. One in three adults aged 18-24
years (31 percent) lived in households with only wireless telephones, and nearly 34.5 percent of adults
aged 25-29 years lived in households with only wireless telephones. Above 30 years old, as age
increased, the survey found that the percentage of adults living in households with only wireless
telephones decreased: 15.5 percent for adults aged 30-44 years; 8.0 percent for adults aged 45-64 years;
and 2.2 percent for adults aged 65 years or over.

651 Twelfth Report, 23 FCC Rcd at 2340, 244 (citing Simon Flannery et al., Deteriorating Wireless Trends,
Revisited
, Morgan Stanley, Equity Research, Jan. 18, 2007, at 5.)
652 Louise Story, Cell Phone Carriers Planning Screen Ads, CHICAGO TRIBUNE ONLINE, Jan. 22, 2007.
653 Twelfth Report, 23 FCC Rcd at 2340, 245 (citing Edward C. Baig, Cellphones Hit Fashion's Runway As
Accessories
, USA TODAY, May 3, 2007).
654 Our Cells, Ourselves, at 5-6.
655 Id.
656 Simon Flannery, et al., Telecom Services 4Q06 Preview/2007 Outlook: Is Telecom Back for Good?, Morgan
Stanley, Equity Research, Jan. 24, 2007, at 7-8.
657 Jason Armstrong, et al., The Quarter in Pictures: 3Q2006 US Telecom Services Review, Goldman Sachs, Equity
Research, Nov. 2006, at 6 (wireless substitution being a key reason for many companies line loses); Simon Flannery,
et al., Telecom Services 4Q06 Preview/2007 Outlook: Is Telecom Back for Good?, Morgan Stanley, Equity
Research, Jan. 24, 2007, at 7 (percent of line loss).
658 Stephen J. Blumberg, Ph.D., and Julian V. Luke, Wireless Substitution: Early Release of Estimates From The
Data from the National Health Interview Survey, July December 2007
, National Center for Health Statistics,
Centers for Disease Control, available at http://www.cdc.gov/nchs/data/nhis/earlyrelease/wireless200805.pdf (last
visited Sept. 8, 2008).

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Chart 2: Wireless-Only Households

659



230.
In the last half of 2007, according to the NHIS survey, 15.8 percent of households (as
opposed to adults) were wireless-only, up from 12.8 percent at the end of 2006, 8.4 percent at the end of
2005, and 4.2 percent at the end of 2003.660 The Trends in Telephone Report published in August 2008
by the Industry Analysis and Technology Division of the Federal Communication Commission's Wireline
Competition Bureau states that as of year end 2006, there were 108.8 million households in the U.S. with
telephone service, and of those households, 19.3 million were "wireless only";661 thus, approximately
18% of households are "wireless only".662 Similarly, Nielsen Mobile reports that more than 20 million
U.S. telephone households, or approximately 17 percent, rely solely on mobile phones.663 It appears that
customers are switching to wireless from wireline because of wireless's relatively low cost and
widespread availability. As discussed in past Reports, a number of analysts have argued that wireless
service is competitive or cheaper than wireline, particularly if one is making a long-distance call or when

659 Id.
660 Id.
661 The number of households with wireless only is calculated as a difference between households with telephone
service and primary residential lines. As such, the estimate may include some VoIP customers.
662 Trends in Telephone, Industry Analysis and Technology Division, Wireline Competition Bureau, FCC, at 7-6,
Aug. 2008, http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-284932A1.pdf (last visited Sept. 9, 2008).
663 Nielsen: Wireless Households On The Rise; One In Five U.S. Households Could Be Cordless-Only By Year's
End
, Adweek.com, Sept. 17, 2008. Nielsen Mobile also found that wireless only households tend to have lower
income levels. Fifty-nine percent of household incomes were $40,000 or less per year. Id. In addition, it found that
"[t]en percent of landline phone customers have experimented with wireless-only in their household, but then
returned to landlines. Nielsen found that needing a landline for other services (satellite TV, pay-per-view, etc) is the
primary reason people mend the cord." Id.

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Federal Communications Commission DA 09-54

traveling.664 With the introduction of the unlimited calling option plans (see Section IV.A.1 for
discussion of these plans), one analyst believes that consumers are more likely to discontinue their
landline phone service.665 Moreover, according to an analyst at Morgan Stanley, by 2012 almost one-
third of households will be wireless only "This phenomenon is driven by improved wireless coverage
and better pricing and will be supported by new handsets and new wireless technologies."666
2.

Wireless Alternatives

231.
A number of mobile wireless providers offer service plans with a price point designed to
compete directly with wireline local telephone service. Many of these providers offer plans with
unlimited local calling for around $30 to $40 a month. The two largest such providers, Leap, under its
"Cricket" brand, and MetroPCS, served a combined total of 6.9 million customers at the end of 2007.667
Leap offers service in markets in 23 states,668 while MetroPCS offers service in certain major
metropolitan areas in California, Florida, Georgia, Texas, and Michigan.669
232.
In addition to unlimited local wireless calling plans, many operators, including the
nationwide carriers, offer plans of large buckets of minutes, with around 900 to 1,000 "anytime" minutes
and unlimited night and weekend minutes (some with free "in-network" calling), for around $60 per
month.670 In June 2008, T-Mobile announced that it was launching a $10 home phone service, featuring
unlimited domestic calling, call waiting, caller ID, three-way conferencing, voicemail, call forwarding,
and ringback tones. Customers can keep their home numbers with T-Mobile's @Home service. "To
use the service, customers simply need the touch-tone corded or cordless phone they currently use, an
existing broadband Internet connection, and the T-Mobile @Home HiPortTM Wireless Router with Home
Phone Connection, available from T-Mobile for just $49.99 with a two-year service agreement."671 The
calls are transmitted from the home phone handsets to the T-Mobile router (which uses Wi-Fi technology)

664 See Eighth Report, 18 FCC Rcd at 14832-14833, 102-104; Ninth Report, 19 FCC Rcd at 20684-20685,
213-214; Tenth Report, 20 FCC Rcd at 15980, 196-198; Eleventh Report, 21 FCC Rcd at 11027-11028, 205-
207.
665 Marguerite Reardon, Cutting The Cord For All-You-Can-Eat Wireless Plans, CNET News, Mar. 4, 2008,
http://news.cnet.com/8301-10784_3-9884689-7.html (last visited Sept. 8, 2008) (citing Roger Etner, Senior Vice
President at IAG Research, "[t]hese new voice plans give consumers a much more realistic option for cutting the
cord . . . .")
666 CTIA Comments at 7 (citing Simon Flannery, et. al., Cutting the Cord: Wireless Substitution Accelerating,
Morgan Stanley Telecom Services (Sept. 27, 2007)).
667 In Leap's Annual Report for 2007, it reported that Cricket had 2.9 million customers as of December 31, 2007.
Leap Wireless International Inc. - Leap, SEC Form 10-K, at 2, filed Feb. 29, 2008 ("Leap's 2007 Annual Report").
MetroPCS reported approximately 4 million customers as of December 31, 2007. MetroPCS Communications, Inc.,
SEC Form 10-K, at 2, filed Feb. 29, 2008 ("MetroPCS's 2007 Annual Report").
668 See Leap's 2007 Annual Report, at 2.
669 See MetroPCS's 2007 Annual Report, at 2.
670 See, e.g., T-Mobile, All Plans, available at http://www.t-mobile.com/shop/plans/ (last visited Dec. 15, 2008);
AT&T, Cell Phone Plans, available at http://www.wireless.att.com/cell-phone-service/cell-phone-plans/ (last visited
Dec. 15, 2008); Verizon Wireless, Voice Plans, available at http://www.verizonwireless.com/ (hyperlink "Plans")
(last visited Dec. 15, 2008); and, Sprint Nextel, Plans, available at http://www.sprintnextel.com/ (hyperlink "Plans")
(last visited Dec. 15, 2008).
671 T-Mobile To Launch $10 Home Phone Service, News Release, T-Mobile (June 25, 2008).

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onto the Internet which is then routed to the T-Mobile network.672 As discussed below, both T-Mobile
and Cincinatti Bell have introduced unlimited domestic calls from a consumer's cell phone through a Wi-
Fi connection at home for $10 per month.

B.

Wireless Local Area Networks and Wireless-Wireline Convergence

233.
Wireless local area networks ("WLANs") are playing an increasingly important role as a
competitor and supplement to the services offered by the CMRS industry.673 WLANs are widely
deployed and enable consumers to obtain high-speed wireless Internet connections within a range of 150
to 250 feet from a wireless access point. The most prevalent WLAN technology is equipment
manufactured in accordance with the IEEE 802.11 family of standards, commonly known as "Wi-Fi,"
short for wireless fidelity. Basic WLAN data transfer rates range from speeds of up to 11 Mbps for
802.11b and up to 54 Mbps for 802.11a and 802.11g.
234.
WLAN users can access high-speed Internet connections at so-called "hot spots,"
including locations such as restaurants, coffee shops, hotels, airports, convention centers, and city
parks.674 Estimates of the number of public Wi-Fi hot spots in the United States vary considerably, and
there are a number of WiFi directories available on-line for consumers to find public Wi-Fi hot spots.675
In addition to public hot spots, WLANs are also proliferating in homes and businesses.676
235.
Several mobile telephone providers have entered the hot spot operation business through
acquisitions, partnerships, or independent deployments.677 For instance, T-Mobile offers Wi-Fi access at
more than 8,900 HotSpot-branded locations in the United States,678 while Sprint Nextel's Wi-Fi network
includes more than 8,000 hot spot locations across North America.679 AT&T offers Wi-Fi connectivity at
over 17,000 hot spot locations in the United States as well.680 In February 2008, Starbucks announced

672 COMMUNICATIONS DAILY, June 26, 2008, at 10. See also Walter S. Mossberg, T-Mobile Service Ties Cellphones
to Home, With Some Sacrifices
, THE WALL STREET JOURNAL, B1 (Feb. 28, 2008). The service is not VoIP, and the
service works even if a consumer's home is not covered by T-Mobile's cell phone network. Consumers must be a
T-Mobile wireless customer to purchase the @Home service.
673 Services provided over WLANs are not CMRS services. See 47 C.F.R. 20.3, 20.9 for a discussion of
commercial mobile radio services. WLANs are permitted to operate on an unlicensed basis under Part 15 of the
FCC's rules. See 47 C.F.R. 15, et seq.
674 See Seventh Report, 17 FCC Rcd at 13062-13063. Hot spots typically rely on high-speed landline technologies,
such as T-1 lines, DSL, or cable modems, to connect to the Internet.
675 See Hotspotr, Find WiFi Hotspots, http://hotspotr.com/wifi (14,546 hot spots) (last visited Sept. 10, 2008);
Jiwire, Wi-Fi Hot Spot Directory, available at http://www.jiwire.com/hot-spot-directory-browse-by-
state.htm?country_id=1&provider_id=0 (60,551 hot spots) (last visited Sept. 10, 2008).
676 Off-the-shelf, "plug-and-play" WLAN network equipment sold by companies such as Linksys and Netgear has
allowed consumers to easily extend the reach of their wireline broadband connections and enabled portability within
and around the home.
677 Ninth Report, 19 FCC Rcd at 20687, 221.
678 T-Mobile Hot Spot, U.S. Locations, https://selfcare.hotspot.t-mobile.com/locations/viewLocationMap.do (last
visited Sept. 10, 2008).
679 Sprint Nextel, Unlimited WiFi HotSpot Plan, available at
http://www.nextel.com/en/solutions/dataaccess/wifi_hotspot_plan.shtml?id16=unlimited_wifi_hotspot_plan (last
visited Sept. 10, 2008).
680 AT&T, AT&T WiFi & Hotspots, available at http://www.wireless.att.com/businesscenter/solutions/wireless-
laptop/wifi-hotspots.jsp;dsessionid=55WT00NARGSHRB4R0ENCFFQ (last visited Sept. 10, 2008). For customers
(continued....)

113




Federal Communications Commission DA 09-54

that it was switching Wi-Fi network operators from T-Mobile to AT&T.681 Starbucks now offers
complimentary two-hours per day of Wi-Fi access for Starbucks' customers when they register a
Starbucks' Card and use it once a month, and AT&T's Wi-Fi customers have complimentary access to the
Starbucks' hot spots.682 T-Mobile's WiFi customers also continue to have access to the hot spots in
Starbucks' stores through a roaming agreement between AT&T and T-Mobile.683
236.
According to ABI Research, there is significant growth in Wi-Fi hot spots globally, and it
predicts that in 2008, global hot spots will grow by 40 percent over 2007.684 ABI Research Vice
President and Research Director, Stan Schatt stated:
Starbucks' decision to go to a virtually free Wi-Fi hotspot model
is having a profound impact. Hotspot owners are beginning to
see Wi-Fi as a cost of doing business and an operation expense,
rather than as a profit center.685
Mr. Schatt expects that major retailers will begin offering free service in phases. "The first phase is likely
to be a free or almost free service for good customers, those who have signed up for loyalty cards."686
237.
To augment their wide-area data service offerings, mobile telephone providers have
typically offered WLAN services for high-speed, in-building data access.687 Certain providers including
T-Mobile, Sprint Nextel, and AT&T offer at least dual-mode handsets that operate on both cellular and
Wi-Fi networks. For example, T-Mobile currently offers several devices that can connect to either the
company's GPRS/EDGE network or Wi-Fi network.688 Sprint Nextel also offers numerous devices that
operate on its Wi-Fi network in addition to its EV-DO network,689 and the iPhone launched by Apple and
AT&T in June 2007 runs on AT&T's EDGE network and can connect to any Wi-Fi hot spot for Internet
(Continued from previous page)
who purchase AT&T's DataConnect plans of $59.99 or more, they now have access to AT&T's Wi-Fi hot spots free
of charge. "The company plans to expand free Wi-Fi access to additional wireless customers in the future." AT&T
Launches Free Wi-Fi For LapTopConnect Customers
, News Release, AT&T, May 20, 2008.
681 Glenn Fleishman, T-Mobile Loses Starbucks; AT&T Becomes Wi-Fi Hotspot Giant, WNN Wi-Fi Net News (Feb.
11, 2008).
682 Starbucks, Highspeed Wireless Internet Access, available at http://www.starbucks.com/retail/wireless.asp (last
visited Sept. 10, 2008).
683 Id.
684 Wi-Fi Hotspots Stay Hot In 2008, CELLULAR-NEWS.COM, July 17, 2008.
685 Id.
686 Id.
687 See Tenth Report, 20 FCC Rcd at 15983, 203. Carriers offer a range of WLAN Internet access service plans,
typically designed for use with laptop computers with Wi-Fi modems, including annual access, month-to-month
access, daily access, and metered access.
688 T-Mobile, HotSpot Phones : Talk Away !, available at http://www.t-
mobile.com/templates/ListAllPhones.aspx/?features=4ce9c948-6b53-4b76-a3f7-
9116f33bd25b&WT.mc_n=TMHSDevice_WiFiLP&WT.mc_t=Offsite (last visited Sept. 10, 2008).
689 Sprint Nextel, Unlimited WiFi HotSpot Plan, available at
http://www.nextel.com/en/solutions/dataaccess/wifi_hotspot_plan.shtml?id16=unlimited_wifi_hotspot_plan (last
visited Sept. 10, 2008). Under "What You Need," click on "Internet ready phone with data cable" for a list of
devices available in a specified zip code.

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Federal Communications Commission DA 09-54

access service.690
238.
In addition to using Wi-Fi as a means of data access, certain mobile operators use
WLANs to augment their CMRS-based voice services with voice connections at Wi-Fi hot spots. As
discussed above, T-Mobile has introduced a Wi-Fi-enabled service @Home for consumers' home
phones for $10 per month. T-Mobile and Cincinnati Bell also offer Wi-Fi-based services
"HotSpot@Home" and "Home Run," respectively featuring dual-mode mobile handsets that offer
seamless voice connections on both Wi-Fi and the operators' GSM cellular networks for about $10 per
month.691 These services offer improved, in-building coverage, unlimited calling through a specified
home or office Wi-Fi router or at carrier-branded hot spot locations. Through these services, consumers
can avoid using their GSM voice minutes from their monthly service plans when they use service through
a Wi-Fi hot spot.692
239.
Sprint Nextel also offers a similar service, called AiraveTM, which allows subscribers to
make unlimited wireless calls from their homes without deducting minutes from their monthly service
plans.693 However, instead of connecting calls through a home Wi-Fi router, AiraveTM relies on a
femtocell device.694 A femtocell is a miniature base station that transmits in the licensed spectrum of the
wireless operator offering the device and provides improved coverage within a subscriber's home. It uses
the subscriber's home broadband connection for backhaul. The AiraveTM service was first made available
in Indianapolis and Denver in late 2007.695 Sprint Nextel began offering the service nationwide on
August 17, 2008.696

VIII. MOBILE SATELLITE SERVICES

A.

Introduction

240.
Any mobile satellite service (MSS) that involves the provision of CMRS directly to end

690 Walter S. Mossberg and Katherine Boehret, Testing Out the iPhone, WALL STREET JOURNAL, June 27, 2007, at
D1. The iPhone can seamlessly switch from an EDGE to a Wi-Fi connection, and will automatically display a list of
new Wi-Fi networks in range as the user moves to a new location.
691 Cincinnati Bell, CB Home Run, available at http://www.cincinnatibell.com/business/soho/wireless/home_run/
(last visited Sept. 10, 2008); HotSpot @Home by T-Mobile, T-Mobile Unlimited Hot Spot Calling,
http://www.onlyphoneyouneed.com/?WT.srch=2&Result_Inq=Link_Title_AtHome&Inq_Source=TMO (last visited
Sept. 10, 2008).
692 Id. Unlicensed Mobile Access (UMA) technology enables the seamless mobility afforded by these services, in
which calls are automatically switched or handed off from a Wi-Fi to a cellular network, or vice versa, without
interruption as a subscriber moves from one location to another. Glenn Fleishman, T-Mobile Might Make Home
VoIP Play on Top of Converged Calling
, WI-FI NET NEWS, Aug. 10, 2007.
693 Sprint Nextel, Sprint AiraveTM, available at http://www.nextel.com/en/services/airave/index.shtml (last visited
Sept. 12, 2008). See also Sprint Nextel, AiraveTM Frequently Asked Questions, at 3, available at
http://www.nextel.com/assets/pdfs/en/services/sprint_airave_faqs.pdf (last visited Sept. 10, 2008). The AiraveTM
includes voice, not data, services. Id. at 3.
694 Sprint Customers Nationwide Can Soon Get Enhanced Coverage, Unlimited Calling in Homes, Offices With The
Award-Winning Sprint AIRAVETM By Samsung
, Press Release, Sprint Nextel (July 30, 2008) ("Sprint Nextel
AiraveTM Press Release
").
695 See Twelfth Report, 23 FCC Rcd at 2345, 258.
696 See Sprint Nextel AiraveTM Press Release.

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Federal Communications Commission DA 09-54

users is by definition, CMRS.697 Therefore, the Commission has included MSS in its analysis of
competitive market conditions with respect to CMRS since the First Report.698 Similar to the discussion
of the terrestrial CMRS market, this section discusses spectrum bands available for MSS, product and
geographic markets, market structure, provider conduct, and performance.

B.

Spectrum Bands Potentially Available for MSS

241.
To date, the Commission has approved satellite systems for operation in four MSS
spectrum bands. The bands include the L-Band, Big LEO,699 Little LEO, and 2 GHz bands. Voice and
data services are permitted in the L-band, Big LEO and 2 GHz bands. The Little LEO band is limited to
non-voice services only (and is not depicted in the band plans below).

Table 18: Spectrum Bands Potentially Available for MSS


Spectrum Band
Megahertz
L-Band 68.0
Big LEO
45.7
Little LEO
4.0
2 GHz
40.0
Total 157.7

242.
L-band In the United States, the Commission has allocated spectrum for MSS
downlinks in the 1525-1559 MHz bands and for MSS uplinks in the 1626.5-1660.5 MHz bands.700 This
MSS spectrum, first used by the Inmarsat system, is often referred to as the L-Band.701 This band was
the first one that was used for extensive commercial MSS offerings; it was the first band used for
maritime mobile uses, including safety communications, and it was later used for aeronautical mobile and
land mobile satellite services.
243.
Big LEO The Big LEO band refers to the 1.6/2.4 GHz bands. The Big LEO band MSS
allocation consists of an uplink at 1610-1626.5 MHz and downlinks at 1613.8-1626.5 and 2483.5-2500
MHz. The Commission allocated this spectrum in 1993 to permit two-way voice and data
communications anywhere in the world.
244.
Little LEO The Little LEO bands are located below 1 GHz. The Little LEO band MSS
allocation consists of an uplink at 148-150 MHz and downlinks at 137-138 and 400-401 MHz. This
spectrum was allocated by the Commission in 1993. Little LEO services include a variety of non-voice,
data communications services; this includes, but is not limited to, remote meter reading, vehicle tracking

697 47 C.F.R. 20.9(a)(10). This rule section also contains an exception for "mobile satellite licensees and other
entities that sell or lease space segment capacity, to the extent that it does not provide commercial radio service
directly to end users." The exception permits such entities to provide space segment capacity to commercial mobile
radio service providers on a non-common carrier basis, if authorized by the Commission.
698 See First Report, 10 FCC Rcd at 8858, 42-44. See also Annual Report and Analysis of Competitive Market
Conditions with Respect to Domestic and International Satellite Communication Services, First Report, 22 FCC Rcd
5954 (2007).
699 LEO refers to "Low-Earth Orbit."
700 See 47 C.F.R. 2.106.
701 The term "L-Band" refers generally and more broadly to the frequency band between 1 and 2 GHz.

116




Federal Communications Commission DA 09-54

and two-way data messaging services to customers anywhere in the world. 702
245.
2 GHz The 2 GHz MSS band allocation consists of an uplink at 2000-2020 MHz and a
downlink at 2180-2200 MHz. The Commission allocated this spectrum in 1997 for the provision of new
and expanded regional and global data, voice and messaging MSS.703

1500-
1
1
500- 70
7 0
0 MH
M z:

H MSS

MS Spect
c r
t um
r

Big

L-band

L-band

LEO

15
15
15
16
16
16
167 16
170
0
2
5
1
2
6
7
0
5
9
0
6
0
0 5
0

1700-2
00 200 MH
M z

H :

z MSS

Sp
S e
p ctr
t um
u

Pro

r posed AW
A S-2
- Blo
2
ck
c

Pro

r po
p sed AW
sed A S-2
- Bl
2 ock

S

S

AWS-1

-

Broadband p

p
band r

Broadband

b
r

MSS

AWS-1

-

AWS MSS

i
i

PCS

n
n

PCS

t
N

PCS

PC

t
N

3
exte
exte
l
l
17
17
17
18
19
19
19
199
20
202
202
21
215
21 218
22
0
1
5
5
1
2
3
0
1
7
0
0
5
0
0
0
0
0
0
0
5
1
5
0
5
5 0
0
0
0

2300-2
00 700 MH
M z

H :

z MSS

Sp
S e
p ctr
t u
r m
u
m

Lice

Lic ns

e
e
ns -
e

WCS

WC

WCS

C

Exe

Ex m

e pt
p
t

Big

BRS/EBS

ISM B

IS

a

M B n

a d
n

LEO

LE

(e
( .g
e . W
.g
i-
i F
- i)

F

23
230
23
23
23
24
24
24
269
27
0
2
4
6
0
8
0
2
6
0
9
0
0
5
0
5
0
0
3
6
0
0


C.

Product and Geographic Markets

1.

Product Market

246.
Mobile satellite services range from voice-based applications, fax and paging to highly
customized data services for tailored enterprise applications. Retail MSS for individual consumers
include offerings such as voice and Internet access for travelers seeking remote connectivity. Wholesale
services include both voice and data applications. These services are often customized for specific
customer groups.
247.
In the past, the Commission has recognized the importance of satellite services in the
provision of mobile communications services to remote areas stating, "[W]e believe satellites are an
excellent technology for delivering basic and advanced telecommunications services to unserved, rural,

702 In re Amendment of the Commission's Rules to Establish Rules and Policies Pertaining to a Non-Voice, Non-
Geostationary Mobile-Satellite Service, Report and Order 8 FCC Rcd 8450 (1993).
703 Amendment of Section 2.106 of the Commission's Rules to Allocate Spectrum at 2 GHz for Use by the Mobile-
Satellite Service, 12 FCC Rcd 7388 (1997).


117




Federal Communications Commission DA 09-54

insular or economically isolated areas[.]"704 The Commission also recognized that terrestrial and satellite
MSS are not fully interchangeable and serve separate markets. In particular, while terrestrial and satellite
CMRS operators provide wireless mobile voice and data connectivity, the Satellite Flexibility Order
noted in 2003 that, because terrestrial CMRS and MSS are expected to have different prices, coverage,
product acceptance and distribution, the two services appear, at best, to be imperfect substitutes for one
another that would be operating in predominately different market segments.705 In a different proceeding,
the Commission observed that MSS data services are not substitutes for other terrestrially-delivered
mobile data services.706 SIA, in its comments filed in this proceeding, concurred with this, stating "...
although MSS providers continue to adopt innovative technologies to make their equipment more user
friendly and cost effective, the current MSS services and products nevertheless remain harder to use and
more expensive than the products offered by terrestrial CMRS operators. For these reasons, the current
service offerings of MSS providers typically focus on a different market segment than terrestrial mobile
services."707
2.

Geographic Market

248.
The Commission considers that MSS is provided on a nationwide basis.708 This implies
that United States consumers face the choice of the same competitive alternatives with respect to MSS;
therefore, the relevant geographic market is nationwide.

D.

Market Structure

1.

Number of Carriers

249.
As of year-end 2007, there were five MSS systems operating in the United States. There
are two MSS systems that provide service in the United States using L-Band spectrum. They are the
Mobile Satellite Ventures ("MSV") and Inmarsat 709systems. Two other systems, Globalstar and Iridium,
provide mobile voice and data services using Big LEO spectrum.710 Lastly, the Orbcomm system

704 See Establishment of Policies and Service Rules for the Mobile Satellite Service in the 2 GHz Band, Report and
Order
, 15 FCC Rcd 16127, 35 (2000).
705 See Flexibility for Delivery of Communications by Mobile Satellite Service Providers in the 2 GHz Band, the L-
Band, and the 1.6/2.4 GHz bands; Review of the Spectrum Sharing Plan Among Non-Geostationary Satellite Orbit
Mobile Satellite Service Systems in the 1.6/2.4 GHz Bands, Report and Order and Notice of Proposed Rulemaking,
18 FCC Rcd 1962, 1984, 39 (2003) ("Satellite Flexibility Order"), modified sua sponte, Order on
Reconsideration
, 18 FCC Rcd 13590 (2003), on reconsideration, Memorandum Opinion and Order and Second
Order on Reconsideration
, 20 FCC Rcd 4616 (2005), further recon pending.
706 Prior to introduction of commercial Little LEO service, the Commission noted that such services are "expected to
be more oriented towards non-voice communications for businesses and government entities." See First Report, 10
FCC Rcd at 8858.
707 See Satellite Industry Association Comments, at 4-5 (filed Mar. 26, 2008) ("SIA Comments").
708 See First Report, at 8866.
709 Inmarsat is based in the United Kingdom.
710 The two-way capabilities of Globalstar's first generation system are impaired by technical problems. Globalstar
can provide two-way voice and data services at least 95 percent of the time in the United States, except in the area of
Alaska above 64 North latitude, and can provide one-way, transmit-only data service all of the time throughout the
fifty states, Puerto Rico, and the U.S. Virgin Islands. See Letter dated Jan. 4, 2008, to Helen Domenici, Chief,
International Bureau, from William F. Adler, Secretary, Globalstar Licensee LLC, Vice President, Legal and
Regulatory Affairs, Globalstar Inc., at 3. To minimize the adverse impact of the malfunctions pending launch of
second-generation replacement satellites, Globalstar has apprised dealers and customers of the unavailability of two-
(continued....)

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Federal Communications Commission DA 09-54

provides non-voice data services, which includes tracking, monitoring and two-way messaging, using
Little LEO spectrum.
250.
Two additional systems using 2 GHz spectrum, the ICO Global Communications ("ICO")
and TerreStar Networks ("TerreStar") systems, have been under development. ICO launched its G1
satellite from Cape Canaveral on April 14, 2008,711 and TerreStar awaits the launch of its geostationary
spacecraft to begin commercial service.712
2.

Privatization, Consolidation and Exit

251.
Today's MSS market reflects a number of significant changes in organizational structure
that occurred over the past eight years. One significant change involved the privatization of the
commercial satellite operations of the International Maritime Satellite Organization, an intergovernmental
treaty-based organization created in 1978. The commercial satellite assets of that organization were
transferred to a private company in 1999. In addition, several MSS companies reorganized out of
bankruptcy in the early 2000s. They include: ICO (2000); Iridium (2002); Orbcomm (2002); and
Globalstar (2004). Lastly, the MSV system has evolved through a series of transactions in which MSV,
and its predecessor in interest, Motient Services Inc. ("Motient"), joined with Canadian satellite company,
TMI Communications and Company LP ("TMI"). These companies joined together to combine certain
aspects of their respective U.S. and Canadian operations. TerreStar is a product of this series of
transactions, and as a result of recent transactions, MSV and TerreStar are now owned by substantially
different investor groups.713
252.
On July 25, 2008, SkyTerra Communications, Inc. (Sky Terra) and MSV announced that
the Harbinger Capital Partners Funds (Harbinger) had agreed to provide $500 million of debt financing to
fund SkyTerra's business plan through the third quarter of 2010. Additionally, the board of directors of
SkyTerra and the management of SkyTerra's largest shareholder, Harbinger, announced their intention to
make an offer to acquire the entire issued and to be issued share capital of Inmarsat plc, a U.K. company,
not already held by SkyTerra and Harbinger, on terms to be announced following the satisfactory
outcome of certain regulatory approvals.714

E.

Provider Conduct

253.
The following is a brief description of the services offered by facilities-based MSS
providers in the United States. The descriptions include both satellite CMRS and non-CMRS offerings.
254.
Inmarsat Inmarsat acts as wholesaler of satellite airtime, with services sold through
partner vendors in over 80 countries worldwide.715 Inmarsat services for the land mobile sector have been
enhanced by their Broadband Global Area Network (BGAN) and handheld voice services. BGAN offers
(Continued from previous page)
way service at certain times in certain locations and has developed a web-based software tool that customers can use
to identify optimum calling periods. Id. at 6.
711 See, e.g., ICO Files Final Milestone Certification With FCC, Satellite System Declared Operational, Company
Selects its Spectrum Position,
(release dated May 12, 2008),
http://investor.ico.com/releasedetail.cfm?ReleaseID=309568.
712 TerreStar Networks Inc., available at http://www.terrestar.com (last visited Sept. 8, 2008)
713 MSV is a subsidiary of MSV L.P, which is a wholly-owned subsidiary of SkyTerra.
714 See SkyTerra Communications Inc., SEC Form 8-K, filed July 25, 2008.
715 Inmarsat PLC, SEC Form 10-K ("Inmarsat 2007 10-K").

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Federal Communications Commission DA 09-54

simultaneous broadband data speeds and voice connectivity.716 The service is marketed through
Inmarsat's reseller network. Inmarsat resellers also offer LandPhone, satellite-based connectivity for
fixed phones for private or business applications or as a payphone for remote communities.717 In
addition, in July 2007 Inmarsat introduced a dual-mode satellite-GSM handheld phone, IsatPhone, for the
users within Asia, Africa, and Middle Eastern markets, using Inmarsat's latest generation I-4 satellite over
the Indian Ocean Region.718 For the maritime community, Inmarsat services include voice telephony,
such as crew-calling and payphone applications, Internet, and data services, such as position reporting,
weather and navigational chart updates.719 For the aeronautical sector, Inmarsat resellers offer specialized
services, such as in-flight voice and data communications. SwiftBroadband offers enhanced capabilities
for the aeronautical customers; it was launched in October 2007.720
255.
MSV MSV offers a full range of mobile satellite services, including voice and data,
using both its own U.S.-licensed satellite and the Canadian-licensed L band satellite licensed to Mobile
Satellite Ventures (Canada) Inc. ("MSV Canada").721 MSV currently provides switched and packet data
services to approximately 33,000 units (including 12,363 mobile data units) through wholesale and retail
sales channels that includes a direct sales force, dealers, and resellers.722 Their customers include federal,
state and local government agencies involved in public safety and security that depend on the MSV
system for redundant and ubiquitous wireless services during daily operations and in the case of
emergencies.723 In addition, MSV sells bulk satellite capacity on a wholesale basis for specialized
networks, such as fleet management and asset tracking services.724
256.
Globalstar The Globalstar Big LEO system offers mobile and fixed two-way voice and
data services using CDMA handsets in over 120 countries worldwide. Globalstar's voice telephony
products include both Handheld Phone, a Car Kit for hands-free use while driving, and fixed satellite
antennas for remote offices or dwellings.725 The company also offers specialized data modems to send
and/or receive information from remote jobsites through Internet applications or fax capabilities, and to
track and monitor company assets.726 Globalstar sells its products and services directly through its own
sales force, on-line and through subsidiaries. In the fourth quarter of 2007, Globalstar introduced the
SPOT satellite messenger, aimed at attracting both the recreational and commercial markets that require

716 Inmarsat describes the BGAN service, which is available in over 175 countries, as simultaneous voice and data
using a single portable terminal. Inmarsat PLC, Land Mobile, available at http://www.inmarsat.com (last visited
Sept. 8, 2008).
717 Inmarsat PLC, LandPhone, available at http://www.inmarsat.com (last visited Sept. 8, 2008).
718 Inmarsat PLC, IsatPhone, available at http://www.inmarsat.com (last visited Sept. 8, 2008).
719 Inmarsat PLC, Maritime Services, available at http://www.inmarsat.com (last visited Sept. 8, 2008).
720 Inmarsat PLC, Aeronautical Service, available at http://www.inmarsat.com (last visited Sept. 8, 2008). This
service is not yet authorized for U.S. operations.
721 MSV Comments at 1 (filed Mar. 26, 2008).
722 Id. at 2.
723 Id. at 2.
724 Id. at 2.
725 Globalstar, Products, available at http://www.globalstarusa.com (last visited Sept. 8, 2008).
726 Globalstar, Services, available at http://www.globalstarusa.com (last visited Sept. 8, 2008).

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Federal Communications Commission DA 09-54

personal tracking, emergency location and messaging solutions.727
257.
Iridium The Iridium Big LEO system offers global satellite voice and data
communications solutions with complete coverage of the entire Earth including oceans, airways and Polar
Regions.728 Iridium's services and products are sold through authorized service providers, resellers,
manufacturers and developers.729 Terrestrial-based Iridium services include a prepaid land-mobile
telephony service, paging and other data or machine-to-machine ("M2M") services, such as asset
tracking.730 Additionally, Iridium offers a variety of maritime services including crew calling, a
networked ship-to-ship calling service called "InNetwork," maritime data services, which includes vessel
monitoring and tracking, ship safety and alert systems and fax.731 For the aviation sector, Iridium offers
cockpit flight communications, tracking and monitoring services.732
258.
ORBCOMM ORBCOMM's Little LEO system provides narrowband two-way M2M
data communications services on a global basis, including digital messaging, data communications, and
geo-positioning and weather services. 733 ORBCOMM serves customers through resellers who provide
whole product solutions and customer support to end users, including the following services: monitoring
and controlling assets; fleet tracking and management; and, messaging and remote data for various
customer groups, including transportation (trucks, trailers, railcars, containers, heavy equipment), natural
resources (fluid tanks, utility meters, pipelines, and oil wells), and marine vessels.734 Orbcomm's
hardware, software and airtime are sold directly to equipment manufacturers and government customers.
These sales are through value-added resellers and representatives.

F.

Pricing

259.
Pricing for MSS varies considerably among MSS providers and resellers, and the services
are often bundled with MSS equipment purchases. Similar to terrestrial CMRS services, retail consumers
of satellite CMRS services typically purchase a handset bundled with a service plan. While prices for
satellite phone handsets have fallen, they still exceed most terrestrial CMRS equipment. The prices for
MSS handsets range between $500 and $4,000 or more. MSS retail service plans vary greatly and
typically include monthly or annual plans with a specific number of minutes per month or year, additional
minutes starting at $0.99 per minute, with additional roaming charges.
260.
In 2007, Globalstar introduced a new pricing structure when it launched a promotional
satellite airtime rate plan for both new and existing customers in the United States. The "Unlimited
Loyalty" rate plan includes a $39.99 per month charge for Globalstar satellite network access and
unlimited home minutes for calls to the United States, Canada and the Caribbean. The advertised
monthly fee will be reduced at the completion of each calendar year, falling to $19.99 per month in 2009
and 2010.735 For the international travelers, Globalstar offers two plans, Emergency Plan and Global

727 Globalstar, Inc. SEC Form 10-K, filed Mar. 17, 2008 ("Globalstar 2007 10-K").
728 Iridium Satellite LLC, Company Profile, available at http://www.iridium.com (last visited Sept. 8, 2008).
729 Iridium Satellite LLC, Where to Buy, available at http://www.iridium.com (last visited Sept. 8, 2008).
730 Iridium Satellite LLC, Solutions, available at http://www.iridium.com (last visited Sept. 8, 2008).
731 Iridium Satellite LLC, Solutions, available at http://www.iridium.com (last visited Sept. 8, 2008).
732 Id.
733 ORBCOMM, Company Information, available at http://www.orbcomm.com (last visited Sept. 8, 2008).
734 Id.
735 Globalstar, Airtime Pricing, available at http://www.globalstarusa.com (hyperlink "United States," then
hyperlink "Air Time Pricing") (last visited Dec. 15, 2008).

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Federal Communications Commission DA 09-54

Traveler Plan. Emergency Plan offers an annual or monthly system access fee with per-minute fees based
on usage,736 combined with $1.39 international roaming rates.737 Global Traveler Plan offers an annual
pre-paid plan that costs $750 for up to 750 minutes.738 The annual service fees for Globalstar's SPOT
products and services range from $99.99 for the basic level plan, with the option of additional tracking
capability for $149.98. The maximum suggested retail price for the SPOT equipment is $169.00 per
unit.739
261.
In April 2007, Iridium also introduced a new pricing plan for calls originating in or
coming to United States, Canadian and Caribbean customers. Under the new structure, Iridium will offer
prepaid airtime packages for six months of service for as low as 30 to 40 cents per minute. Additional
discounted packages for higher use customers begin at rates below 15 cents per minute.740 Iridium also
offers a network quality guarantee program, providing credits of up to 100 minutes of airtime and three
months of free subscription fees if the Iridium network fails to complete properly initiated voice calls.
Iridium's service plans are often bundled with equipment sales. One user estimated a 96-handset system
would cost between $300,000 to $400,000.741
262.
Examples of other MSS voice pricing plans being offered to retail consumers include
MSV's mobile telephony and PTT services. MSV's mobile telephony prices average approximately
$1.00 per minute for monthly contracts, while the PTT plans offer unlimited dispatch calling within the
PTT access group with additional charges of $1.19 per minute for mobile telephony charges. Also,
MSAT-G2 Mobile Satellite Radio, MSS handset offered by MSV, costs $4,800.742 Lastly, Inmarsat
currently offers MSS voice service using its recently introduced BGAN service at $0.99 per minute.

G.

Technology Deployment and Upgrades

1.

Ancillary Terrestrial Component

263.
In 2003, the Commission released a Report and Order that permitted MSS licensees to
provide ATC to their satellite systems.743 In future MSS systems with ATC, a terrestrial base station may
be sited within the much larger footprint of a satellite beam to extend communications to indoor or urban
areas where the satellite signal may be blocked by buildings and other infrastructure. The Commission
permits MSS providers in the 2 GHz, Big LEO, and L-Band frequency bands to implement ATC,
provided that the MSS licensee: (1) has launched and operates its own satellite facilities; (2) provides
substantial satellite service to the public; (3) provides integrated ATC; (4) observes existing satellite
geographic coverage requirements; and (5) limits ATC operations only to the authorized satellite

736 E-Star Liberty plan offers $359.88 annual access fee plus $1.39-$4.99 rate per minute, $95.40 for voice mail, and
$119.40 for E-mail/Internet Express Data. E-Star Monthly plan offers $29.99 monthly access fee plus $1.39-$4.99
per minute, $7.95 voice mail, $9.95 for E-mail/Internet data. Id. (hyperlink "Global Traveler").
737 Id.
738 Id.
739 Globalstar 2007 10-K, at 10.
740 Iridium Satellite Announces New North American Pricing Plan, News Release, Iridium Satellite, LLC, Apr. 25,
2007.
741 Chris Kirkham, Satellite Phone Firm Focuses on Crisis Network, WASHINGTON POST, June 26, 2006, at D1.
742 See MSV Comments at 4, filed Mar. 26, 2008.
743 See generally Satellite Flexibility Order, 18 FCC Rcd 1962 (2003), modified sua sponte, 18 FCC Rcd 13590
(2003), rev'd, 20 FCC Rcd 4616 (2005), further recon pending.

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Federal Communications Commission DA 09-54

footprint.744
264.
The Commission has granted ATC authorizations to MSV for its operations in the L-
Band745 and to Globalstar for its operations in the Big LEO band.746 Two other companies ICO and
TerreStar have applied for ATC authority.747 Both the authorized and prospective MSS/ATC operators
are actively planning for the deployment of their ATC systems. They anticipate that MSS/ATC will
prove to be a valuable enhancement to their MSS systems by improving their ability to provide service in
urban and other areas where MSS signals are blocked, expanding the variety of services they are able to
provide to both urban and unserved and underserved areas. This would enable them to make more
efficient and intensive use of their assigned spectrum. 748
265.
Although no ATC service is currently being provided, the satellite industry is optimistic
about the potential positive effects of the ATC Order. The Comments filed jointly by five satellite
companies stated that "[o]nce deployed, MSS/ATC systems will dramatically enhance MSS carriers'
service offerings and expand their customer base."749 In addition, the commenters stated that:
[O]nce deployed, MSS/ATC systems will be poised to bring to the marketplace the high-quality,
affordable mobile services for their current and future public safety and commercial customers
no matter where they are located that the Commission envisioned when it decided to permit
MSS providers to incorporate ATC into their MSS systems. Furthermore, because MSS/ATC
providers will offer user equipment that resembles traditional mobile consumer devices, they will
be able to take better advantage of economies of scale for equipment, making it possible for them
to offer high quality voice, broadband, and other services to their subscribers at prices that more
closely approximate those of cellular and PCS operators. Moreover, some MSS/ATC operators
will be able to offer smaller, less expensive handsets comparable to those offered by terrestrial
providers.750
2.

Satellite System Deployment Plans

266.
The two 2 GHz MSS licensees, ICO and TerreStar, were scheduled to launch new
spacecraft in 2008. While ICO's first satellite was successfully launched in April 2008, TerreStar has
postponed its TerreStar-1 satellite's launch to 2009. In addition, several current MSS operators have
announced plans to replace or augment their existing constellations.
267.
ICO In a letter dated May 9, 2008, New ICO Satellite Services, G.P. ("New ICO")
gave the Commission notice that the ICO G1 satellite reached its intended orbit on April 25, 2008 and
that New ICO has chosen the 2010-2020 MHz and 2180-2190 MHz frequency bands as its Selected

744 Satellite Flexibility Order, at 1965, 3.
745 Mobile Satellite Ventures Subsidiary LLC Application for Minor Modification of Space Station License for
AMSC-1, Order and Authorization, 19 FCC Rcd 22144 (2004).
746 Globalstar LLC Request for Authority to Implement an Ancillary Terrestrial Component for the Globalstar Big
LEO Mobile Satellite Service (MSS) System, Order and Authorization, 21 FCC Rcd 398 (2006).
747 See Mobile Satellite Service Providers Comments ("MSS Providers Comments") (ICO, MSV, Inmarsat,
Globalstar, TerreStar) at 7 (filed Mar. 26, 2008) (citing File No. SAT-AMD-20071130-00167; File No. SES-AMD-
20070907-01253).
748 See id. at 7.
749 See id. at 8.
750 See id. at 10.

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Federal Communications Commission DA 09-54

Assignment.751 The Commission has determined that New ICO has met the launch and operation
milestones associated with its reservation of spectrum in the 2 GHz frequency band for the ICO-G1
satellite.752 New ICO is a subsidiary of ICO. Market trials of ICO service offerings were planned for
mid-2008 in Las Vegas and Raleigh-Durham, North Carolina.753 ICO is developing and deploying a next-
generation multimedia service known as ICO mim. ICO mim will combine ICO's interactive satellite
capability with nationwide coverage to deliver an interactive navigation, enhanced roadside assistance
and mobile video service, with 10-15 channels of television content.754 ICO's Car TV service, expected
to launch in 2010, also offers navigation and emergency services, and ICO is experimenting with
delivering Internet to the car.755 In addition, ICO signed an agreement with Space Systems Loral to
design additional MEO756 spacecraft. 757 In September 2008, ICO and SkyTerra announced that they had
entered into an agreement with Qualcomm, wherein Qualcomm agreed to "integrate satellite and cellular
communication technology in select multi-mode mobile baseband chips."758 Accordingly, the companies
report that satellite connectivity will be enabled in mass market wireless handsets and devices which will
permit them to benefit from the economies of scale enjoyed by other mobile phone providers.
268.
Inmarsat Over the past several years, Inmarsat has invested well over $1.5 billion in the
deployment of its fourth-generation, Inmarsat 4 ("I-4") satellite network, which is today providing
innovative MSS services to the United States and globally.759 Inmarsat successfully launched the third of
its fourth generation satellites, the I4F3, on August 18, 2008, completing world-wide coverage for their
broadband capabilities, including BGAN.760 Inmarsat will also introduce world-wide Global Satellite
Phone Service (GSPS) over its I4 geostationary fleet with a modernized handset. This device is being
optimized to operate over the I-4 network, and it will support both MSS and GSM service. Inmarsat
indicates that it expects service to be available in the United States by 2009. 761
269.
TerreStar TerreStar is constructing two Space Systems Loral-built geostationary
spacecraft TerreStar-I (TS-1), which was initially scheduled for launch in 2008, and TerreStar-II, which
is a ground spare. TS-1 has successfully completed its Thermal Vacuum (TVAC) testing, and High
Power and Passive Intermodulation (PIM) testing on the flight model S Band feed array for its 2 GHz

751 Policy Branch Information, Report No., Public Notice, SAT-00526, DA No. 08-1265 (May 30, 2008).
752 Id.
753 MSS Providers Comments at 2 (filed Mar. 26, 2008).
754 ICO Global Communications, Overview, available at http://www.ico.com (last visited Sept. 8, 2008)
755 ICO Car TV Service Launches in 2010, TWICE, Sept. 4, 2008, available at http://www.wtice.com/article (last
visited Sept. 8, 2008)
756 MEO refers to "Medium-Earth Orbit."
757 ICO Signs Design/Option Agreement with Space Systems/Loral for MEO Satellites, News Release, ICO Global
Holdings, July 3, 2007.
758 SkyTerra's Mobile Satellite Ventures, ICO Global Communications, and Qualcomm Sign Groundbreaking
Technology Agreement Enabling First-Ever Integration Of Satellite Communications Into Mass Market Cellular
Handsets And Devices
, Press Release, Skyterra Communications, ICO, and Qualcomm, Sept. 22, 2008, at 1.
759 MSS Providers' Comments at 2 (filed Mar. 26, 2008).
760 Successful Launch for third Inmarsat-4 satellite, Inmarsat PLC, Aug. 19, 2008.
761 MSS Providers' Comments at 3 (filed Mar. 26, 2008).

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Federal Communications Commission DA 09-54

MSS satellite. TS-1 is now in the final stages of construction,762 but due to an accident involving the
satellite's reflector antenna, the launch of TS-1 has been postponed from the fourth quarter of 2008 to the
second quarter of 2009. 763
270.
MSV MSV is ahead of Commission's milestone schedule and is planning to launch two
Boeing-built second generation geostationary satellites in September 2009 and July 2010, respectively.764
The satellites will have ten times the capacity of MSV's existing fleet and will be optimized for mobile
broadband services. MSV envisions offering its new satellite infrastructure as a "carrier's carrier"
wholesale model to strategic partners and other wholesale customers for differentiated broadband
services.765
271.
Globalstar Globalstar has invested an estimated $120 million to launch eight satellites
in 2007, to augment its existing constellation of LEO satellites.766 Additionally, the company contracted
with Alcatel Alenia, now Thales Alenia Space ("Thales Alenia") to build a next-generation LEO network
of 48 spacecraft for an estimated $868 million.767 The construction of the second generation constellation
has begun. These satellites will be backward compatible with Globalstar's existing satellite constellation
and with its global gateways, and they will have an expected lifespan to at least 2025.768
272.
Iridium In February 2007, Iridium announced that it was planning for the future
sustainability of its constellation, making major investment in network enhancements and launching the
Iridium NEXT initiative, its next generation satellite constellation, which is planned to be fully
operational by 2016.769 The company estimates it will spend $2 billion to construct and deploy the new
network, which could launch as early as 2013 and may include enhanced capabilities such as imaging.770

H.

Market Performance

273.
As discussed in the Twelfth Report, based on a 2007 study prepared by Futron
Corporation (the "SIA/Futron study"), SIA estimates that the world mobile satellite services industry had
1.5 million end-user terminals.771 As shown in the table below, MSS providers active in the United States

762 TerreStar Networks Inc. TerreStar Announces Satellite Update Satellite Main Body in Final Phase; Reflector
Delayed
, June 30, 2008, www,terrestar.com/news/press (last visited Sept. 8, 2008); see also IBFS File No. SAT-
MOD-20080718-00143 (requesting extension of launch milestone).
763 TerreStar Networks Inc. TerreStar Announces Satellite Update Satellite Main Body in Final Phase; Reflector
Delayed
, June 30, 2008, available at http://www.terrestar.com/news/press (last visited Sept. 8, 2008).
764 MSS Providers Comments at 5 (filed Mar. 26, 2008).
765 MSV Note to Shareholders, at 38.
766 Globalstar Announces Successful Launch of Four Satellites, News Release, Globalstar, Inc., May 30, 2007.
767 Globalstar, Inc. Signs Contract with Alcatel Alenia Space for Second-Generation LEO Satellite Constellation,
News Release, Globalstar, Inc., Dec. 4, 2006. See also MSS Providers Comments at 6 (filed Mar. 26, 2008).
768 MSS Providers Comments at 6 (filed at Mar. 26, 2008).
769 Iridium Satellite LLC, What's Next?, available at http://www.iridium.com/about/about.php (last visited Sept. 8,
2008).
770 Andy Pasztor, Iridium Weighs Upgrade of Satellites, WALL STREET JOURNAL, Feb. 17, 2007, at 1.
771 Satellite Industry Association and Futron Corporation, State of the Satellite Industry Report, 2007, at 21 ("SIA
Futron Report
"). The SIA Futron Report does not include mobile services in the FSS frequency range in these
statistics. Id.

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Federal Communications Commission DA 09-54

market consisted of over 1.1 million subscribers, based on year-end 2007 company reports.772 Compared
to 2006, the industry added approximately 209,800 subscribers by the end of 2007, which represents a 23
percent increase in subscribers.

772 Due to the inherently global nature of many of the mobile satellite networks, many companies do not
disaggregate United States subscriber terminal numbers from worldwide subscriber terminal data.

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Federal Communications Commission DA 09-54

Table 19: Number Of Subscribers773

For Major United States Mobile Satellite Service Providers



Year-End 2005
Year-End 2006
Year-End 2007
Inmarsat774 199,500
220,300
233,400
Globalstar775 196,000
262,800
284,126
MSV776 19,854
19,201
19,581
Iridium777 142,000
175,000
234,000
Orbcomm778 113,000
225,000
351,000
TOTAL 670,354
902,301
1,112,107

IX.

CONCLUSION

274.
U.S. consumers continue to benefit from effective competition in the CMRS marketplace.
During 2007, the CMRS industry experienced another year of strong growth, demonstrating the
continuing demand for and reliance upon mobile services. As of December 2007, we estimate there were
approximately 263 million mobile telephone subscribers, which translates into a nationwide penetration
rate of approximately 86 percent.779 Consumers continue to increase their use of mobile telephones for
both voice and data services. Partly because of the prevalence of mobile service packages with large
buckets of inexpensive minutes, the average amount of time U.S. mobile subscribers spend talking on
their mobile phones rose to approximately 769 minutes per month in the second half of 2007, an increase
of 55 minutes from a year earlier and more than quadruple the average usage of mobile subscribers in
Western Europe and Japan.780 Survey evidence also indicates that U.S. mobile subscribers have
experienced an improvement in call quality in the past year. Moreover, although U.S. mobile subscribers
still prefer to use their mobile phones to talk rather than to send text messages, they sent 362.5 billion text
messages and 6.1 billion photo messages or other types of multimedia messages in 2007, more than
double the volume of text messages and more than double the volume of multimedia messages in the
same period of 2006.781 Relatively low prices on mobile voice and data services appear to have been a
key factor stimulating subscriber growth and usage. While the average price of a mobile call as measured
by an estimate of average revenue per minute in December 2007 decreased by one percent from the

773 Number of subscribers provided in the company's Annual Reports is listed below, except where noted.
774Inmarsat 2007 Annual Report at 15, available at http://www.inmarsat.com (last visited Sept. 8, 2008). Inmarsat's
Annual Report indicates the number of terminals, instead of subscribers.
775 Globalstar 2007 10-K, at 50 (filed Mar. 17, 2008).
776 MSV Report to Noteholders, at 46, Financial Statements for the Period Ended Dec. 31, 2007 ("MSV 2007 10-
K") (filed Mar. 4, 2008).
777 Iridium Announces Q4 and Full-Year 2007 Results, News Release, Iridium Satellite LLC, Feb. 25, 2008.
("Iridium 2007 Results").
778 Orbcomm Announces 2007 Net Additions of More Than 126,000 Billable Subscriber Communicators, News
Release, ORBCOMM, Jan. 04, 2008.
779 See Section VI.B.1, Subscriber Growth, supra.
780 See Section VI.B.2, Minutes of Use, supra, and VI.D, International Comparisons, supra.
781 See Section VI.B.1, Subscriber Growth, supra, and Section VI.B.3, Mobile Broadband and Other Data Usage,
supra.

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Federal Communications Commission DA 09-54

previous year,782 mobile telephone service in the United States remains relatively inexpensive on a per
minute basis compared with that in Western Europe and Japan.783
275.
In addition to the indicators of mobile market performance cited in the preceding
paragraph, a wide variety of indicators of provider conduct and market structure also show that
competition in mobile telecommunications markets is flourishing. For example, mobile telephone
providers continued to build out their networks and expand service availability during 2007.784 Providers
also continued to deploy networks based on EV-DO Rev. A or WCDMA/HSDPA technologies that allow
them to offer mobile Internet access services for mobile telephone handsets, PDAs, and laptops at speeds
comparable to what many users get from fixed broadband connections, such as DSL. With respect to
market structure, there was an approximate eight percent increase in the percentage of the U.S. population
living in census blocks with access to five or more different mobile telephone operators in one year, from
nearly 57 percent at the end of 2006 to almost 65 percent at the end of 2007. Moreover, approximately 96
percent of the total U.S. population continues to live in census blocks where three or more different
operators compete to offer mobile telephone service in some parts of those counties, while nearly 91
percent of the U.S. population continues to live in counties with four or more mobile telephone operators
competing to offer service.785
276.
In addition, a growing number of wireless customers have "cut the cord" in the sense of
canceling their subscription to wireline telephone service. According to one 2007 survey, 14.5 percent of
adults, or one out of every seven, lived in households with only wireless phones in the second half of
2007, up from 11.8 percent in 2006, 7.8 percent in the second half of 2005, and more than quadruple the
percentage (3.5 percent) in the second half of 2003.
277.
Using the various data sources and metrics discussed above, we have met our statutory
requirement to analyze the competitive market conditions with respect to commercial mobile services,786
and conclude that the CMRS marketplace is effectively competitive.

X.

PROCEDURAL MATTERS

278.
This Thirteenth 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. 332(c)(1)(C).
279.
It is ORDERED that copies of this Report be sent to the appropriate committees and
subcommittees of the United States House of Representatives and the United States Senate.

782 See Section VI.A.1, Pricing Trends, supra.
783 See Section VI.D, International Comparisons, supra.
784 See Section IV.B.1, Technology Deployment and Upgrades, supra.
785 See Table 1: Estimated Mobile Telephone Rollouts, supra.
786 See Section II.A, Background, supra.

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Federal Communications Commission DA 09-54

280.
It is FURTHER ORDERED that the proceeding in the WT Docket No. 08-27 IS
TERMINATED.


FEDERAL COMMUNICATIONS COMMISSION




James D. Schlichting
Acting Chief
Wireless Telecommunications Bureau


129




Federal Communications Commission DA 09-54


APPENDIX A


Mobile Telephony



Table of Contents


Table A-1: CTIA's Semi-Annual Mobile Telephone Industry Survey................................................................. 2

Table A-2: FCC's Semi-Annual Local Telephone Competition Survey: Mobile Telephone Subscribership ...... 3

Table A-3: Economic Area Penetration Rates ...................................................................................................... 4

Table A-4: Top 20 Mobile Telephone Operators by Subscribers ........................................................................ 9
130

Federal Communications Commission DA 09-54



Table A-1: CTIA's Semi-Annual Mobile Telephone Industry Survey

Date Estimated
Year End over
12-Month
12-Month
Cell Sites Direct Service
Average Local
Total
Year End
Total Service Roamer Services
Provider
Monthly Bill (Dec.
Subscribers
Subscriber
Revenues (in
Revenues (in
Employees
Survey
Increase
$000s)
$000s)
Periods)

1985 340,213 248,613
$482,428
N/A
913 2,727
N/A
1986 681,825 341,612
$823,052
N/A
1,531 4,334
N/A
1987
1,230,855
549,030
$1,151,519
N/A
2,305
7,147
$96.83
1988
2,069,441
838,586
$1,959,548
N/A
3,209
11,400
$98.02
1989
3,508,944
1,439,503
$3,340,595
$294,567
4,169
15,927
$83.94
1990
5,283,055
1,774,111
$4,548,820
$456,010
5,616
21,382
$80.90
1991
7,557,148
2,274,093
$5,708,522
$703,651
7,847
26,327
$72.74
1992
11,032,753
3,475,605
$7,822,726
$973,871
10,307
34,348
$68.68
1993
16,009,461
4,976,708
$10,892,175 $1,361,613
12,805
39,775
$61.48
1994
24,134,421
8,124,960
$14,229,922 $1,830,782
17,920
53,902
$56.21
1995
33,785,661
9,651,240
$19,081,239 $2,542,570
22,663
68,165
$51.00
1996
44,042,992
10,257,331
$23,634,971 $2,780,935
30,045
84,161
$47.70
1997
55,312,293
11,269,301
$27,485,633 $2,974,205
51,600
109,387
$42.78
1998
69,209,321
13,897,028
$33,133,175 $3,500,469
65,887
134,754
$39.43
1999
86,047,003
16,837,682
$40,018,489 $4,085,417
81,698
155,817
$41.24
2000
109,478,031 23,431,028
$52,466,020 $3,882,981
104,288 184,449
$45.27
2001
128,374,512 18,896,481
$65,316,235 $3,752,826
127,540 203,580
$47.37
2002
140,766,842 12,392,330
$76,508,187 $3,895,512
139,338 192,410
$48.40
2003
158,721,981 17,955,139
$87,624,093 $3,766,267
162,986 205,629
$49.91
2004 182,140,362
23,418,381 $102,121,210
$4,210,331
175,725
226,016 $50.64
2005
207,896,198 25,755,836
$113,538,221 $3,786,331
183,689 233,067
$49.98
2006 233,040,781
25,144,583 $125,456,825
$3,494,294 195,613
253,793 $50.56
2007 255,395,599
22,354,818 $138,869,304
$3,742,014 213,299
266,782 $49.79
Source: CTIA, Background on CTIA's Semi-Annual Wireless Industry Survey
<
http://files.ctia.org/pdf/CTIA_Survey_Year_End_2007_Graphics.pdf>; (Annualized Wireless Industry Survey
Results December 1985 To December 2007: Reflecting Domestic U.S. Commercially-Operational Cellular, ESMR
and PCS Providers).
131

Federal Communications Commission DA 09-54



Table A-2: FCC's Semi-Annual Local Telephone Competition Survey:

Mobile Telephone Subscribership



Source: Local Telephone Competition: Status as of Dec. 31, 2007, Federal Communications Commission, September 2008 (Table 14: Mobile
Wireless Telephone Subscribers).
132

Federal Communications Commission DA 09-54



Table A-3: Economic Area Penetration Rates

EA EA
Name Subscribers
2007
2007
2007
2006
EA
Estimated Penetration HHI HHI density
EA
Rate
Population
83 New Orleans, LA-MS (see note 1)
1,538,443
1,470,467
105% 3038
3011
171.93
57 Detroit-Ann Arbor-Flint, MI
7,021,660
7,013,036
100% 2822
2926
364.07
161 San Diego, CA
2,972,182
2,974,859
100% 2605
2725
660.48
82 Biloxi-Gulfport-Pascagoula, MS
379,413
383,558
99% 2255
2130
143.45
13 Washington-Baltimore, DC-MD-VA-WV-PA
9,025,962
9,155,458 99%
2734
2739
402.76
78 Birmingham, AL
1,585,947
1,649,607
96% 2714
2631
137.13
155 Farmington, NM-CO
203,903
212,248
96% 3817
3495
16.04
160 Los Angeles-Riverside-Orange County, CA-AZ
18,217,695 19,585,261
93% 2542
2633
286.10
81 Pensacola, FL
635,347
687,831
92% 2085
2077
154.06
10 New York-North New Jersey-Long Island, NY-NJ-CT-PA
24,389,516 26,446,042
92% 2632
2651
890.56
172 Honolulu, HI
1,179,112
1,283,388
92% 2369
2394
187.20
85 Lafayette, LA
571,569
625,686
91% 4436
4338
99.99
87 Beaumont-Port Arthur, TX
406,449
445,024
91% 3094
3125
89.20
12 Philadelphia-Wilmington-Atlantic City, PA-NJ-DE-MD
6,885,256
7,550,516
91% 2652
2739
778.84
29 Jacksonville, FL-GA
1,950,606 2,139,928
91% 2228
2317
112.52
40 Atlanta, GA-AL-NC
6,065,926
6,664,345
91% 2342
2360
246.04
170 Seattle-Tacoma-Bremerton, WA 4,096,592
4,513,097
91% 2571
2585
190.45
131 Houston-Galveston-Brazoria, TX
5,966,229
6,585,373
91% 2278
2349
169.25
132 Corpus Christi, TX
505,137
558,325
90% 2850
2984
46.47
80 Mobile, AL
638,255
706,200
90% 2801
2727
74.75
20 Norfolk-Virginia Beach-Newport News, VA-NC
1,639,592
1,816,024 90%
2058
2057
289.89
22 Fayetteville, NC
490,391
545,754
90% 1988
1967
164.57
122 Wichita, KS-OK
1,052,998
1,174,261
90% 1967
1716
20.49
30 Orlando, FL
3,934,649
4,397,664
89% 2539
2829
265.84
34 Tampa-St. Petersburg-Clearwater, FL
2,433,976
2,723,949
89% 1801
1863
890.99
26 Charleston-North Charleston, SC
595,726
669,003
89% 1961
2035
149.80
97 Springfield, IL-MO
457,763
514,372
89% 3800
3717
58.20
163 San Francisco-Oakland-San Jose, CA
8,466,625
9,514,955
89% 2526
2585
271.07
135 Odessa-Midland, TX
354,468
399,292
89% 3512
3531
10.13
133 McAllen-Edinburg-Mission, TX
1,046,868
1,180,070
89% 3803
3637
221.96
153 Las Vegas, NV-AZ-UT
2,005,432
2,274,898
88% 2517
2515
23.74
42 Asheville, NC
426,857 484,698 88%
3930 3690
128.63
79 Montgomery, AL
434,744
494,311
88% 1838
1847
66.86
127 Dallas-Fort Worth, TX-AR-OK
7,665,033
8,771,941
87% 2479
2560
119.00
15 Richmond-Petersburg, VA
1,379,469
1,579,419
87% 2355
2335
124.03
90 Little Rock-North Little Rock, AR
1,466,440
1,679,886 87%
4044
4563
46.09
35 Tallahassee, FL-GA
677,120
775,755
87% 2287
2253
63.51
3 Boston-Worcester-Lawrence-Lowewell-Brockton, MA-NH
7,096,846
8,146,812
87% 2700
2700
421.83
25 Wilmington, NC-SC
873,485
1,002,746
87% 1910
1903
107.39
70 Louisville, KY-IN
1,302,825 1,497,970
87%
2534 2433
180.92
84 Baton Rouge, LA-MS
698,173
803,294
87% 4686
4531
140.30
23 Charlotte-Gastonia-Rock Hill, NC-SC 2,093,738
2,411,666 87%
2273
2245
240.50
141 Denver-Boulder-Greeley, CO-KS-NE
3,875,792
4,466,904
87% 2326
2341
52.02
28 Savannah, GA-SC
647,709
747,104
87% 1795
1609
91.95
133

Federal Communications Commission DA 09-54


EA EA
Name Subscribers
2007
2007
2007
2006
EA
Estimated Penetration HHI HHI density
EA
Rate
Population
86 Lake Charles, LA
464,766
536,830
87% 3154
3087
52.41
130 Austin-San Marcos, TX
1,476,566
1,710,522
86% 2632
2705
156.06
99 Kansas City, MO-KS
2,271,304
2,631,408
86% 2237
2243
88.73
143 Casper, WY-ID-UT
371,806
432,103
86% 5031
4801
5.17
64 Chicago-Gary-Kenosha, IL-IN-WI
9,284,982 10,812,904
86% 2151
2155
556.54
89 Monroe, LA
282,284
329,450
86% 4271
4237
56.12
59 Green Bay, WI-MI
582,409
681,486
85% 2708
2311
34.15
134 San Antonio, TX
2,110,444
2,472,903
85% 2481
2793
82.99
55 Cleveland-Akron, OH-PA
3,931,761
4,607,309
85% 2641
2371
427.84
73 Memphis, TN-AR-MS-KY
1,664,886
1,953,453
85% 2593
2678
102.99
24 Columbia, SC
852,012
1,000,368
85% 2235
2221
125.95
39 Columbus, GA-AL
432,484
507,899
85% 2122
1997
84.08
19 Raleigh-Durham-Chapel Hill, NC 1,846,675
2,173,275 85%
2141
2174
188.38
128 Abilene, TX
184,144
216,830
85% 3371
3407
20.35
41 Greenville-Spartanburg-Anderson, SC-NC
1,133,163 1,344,731
84%
2792 2785
183.62
50 Dayton-Springfield, OH
938,418
1,116,575
84% 2590
2644
318.52
51 Columbus, OH
2,096,741
2,496,958
84% 2839
2827
190.40
71 Nashville, TN-KY
2,303,310 2,747,911
84%
2699 2666
105.12
93 Joplin, MO-KS-OK
231,792
276,668
84% 3404
3377
74.68
69 Evansville-Henderson, IN-KY-IL 717,375
859,059
84% 4340
4256
75.31
44 Knoxville, TN
896,105
1,078,226 83%
2739
2658
165.64
37 Albany, GA
407,162
491,409
83% 2228
2163
62.74
167 Portland-Salem, OR-WA
2,674,607
3,241,023
83% 2315
2401
76.01
33 Sarasota-Bradenton, FL
720,949
874,670
82% 2074
2148
273.56
43 Chattanooga, TN-GA
640,767
777,737
82% 3294
3066
145.32
142 Scottsbluff, NE-WY
73,141
88,890
82% 5666
6258
7.81
96 St. Louis, MO-IL
3,013,666
3,669,964
82% 2708
2736
127.01
77 Jackson, MS-AL-LA
1,207,670
1,472,744
82% 3225
3276
49.67
159 Tucson, AZ
932,979
1,137,800
82% 2006
2005
60.03
67 Indianapolis, IN-IL
2,657,062
3,243,769
82% 2983
3005
171.37
137 Lubbock, TX
314,954
385,295
82% 2878
2853
27.17
164 Sacramento-Yolo, CA
2,172,296
2,659,155
82% 2600
2534
188.08
98 Columbia, MO
320,614
392,739
82% 3843
3898
58.00
136 Hobbs, NM-TX
158,273
194,012
82% 3548
3516
11.21
38 Macon, GA
661,281
811,622
81% 2958
2594
62.88
36 Dothan, AL-FL-GA
280,049
344,187
81% 2080
2062
53.70
107 Minneapolis-St. Paul, MN-WI-IA
3,904,230
4,800,023
81% 2061
1983
82.98
18 Greensboro-Winston-Salem-High Point, NC-VA
1,608,530
1,978,667
81% 1985
1990
189.09
124 Tulsa, OK-KS
1,170,276
1,441,867
81% 3227
2925
72.44
53 Pittsburgh, PA-WV
2,341,070 2,896,267
81%
3079 2914
284.77
103 Cedar Rapids, IA
335,921
415,734
81% 2600
2728
101.33
31 Miami-Fort Lauderdale, FL
4,929,653
6,109,424
81% 2557
2279
483.20
158 Phoenix-Mesa, AZ-NM
3,495,935
4,335,584
81% 2108
2091
93.91
49 Cincinnati-Hamilton, OH-KY-IN
1,863,462
2,315,671
80% 2225
2283
294.08
21 Greenville, NC
696,971 866,589 80%
2235 2398
87.74
88 Shreveport-Bossier City, LA-AR
465,855
579,692
80% 3374
3469
57.96
151 Reno, NV-CA
614,709
765,074
80% 2282
2263
7.56
134

Federal Communications Commission DA 09-54


EA EA
Name Subscribers
2007
2007
2007
2006
EA
Estimated Penetration HHI HHI density
EA
Rate
Population
154 Flagstaff, AZ-UT
378,246
472,365
80% 2835
2731
8.24
156 Albuquerque, NM-AZ
818,456
1,023,969
80% 2103
2039
20.89
27 Augusta-Aiken, GA-SC
501,644
629,509
80% 2203
2063
89.79
126 Western Oklahoma, OK
107,718
135,675
79% 3110
2366
12.04
45 Johnson City-Kingsport-Bristol, TN-VA
472,515
595,261
79% 2293
2190
144.51
125 Oklahoma City, OK
1,423,515
1,798,740
79% 3486
2926
65.04
11 Harrisburg-Lebanon-Carlisle, PA 949,470
1,201,777
79%
3130
3175
292.42
5 Albany-Schenectady-Troy, NY
948,813
1,202,737
79% 3289
3170
134.71
63 Milwaukee-Racine, WI
1,828,910
2,321,587
79% 2200
2222
366.88
102 Davenport-Moline-Rock Island, IA-IL
437,956
556,617
79% 2548
2601
108.27
101 Peoria-Pekin, IL
412,266
524,449
79% 3366
3308
90.99
138 Amarillo, TX-NM
384,970
490,174
79% 2644
2309
11.79
95 Jonesboro, AR-MO
239,327
304,949
78% 4778
5195
51.30
152 Salt Lake City-Ogden, UT-ID
1,916,057
2,448,334
78% 2226
2206
35.68
148 Idaho Falls, ID-WY
267,684
343,546
78% 2388
2415
10.85
75 Tupelo, MS-AL-TN
487,767
626,217
78% 5275
5418
49.76
56 Toledo, OH
995,020
1,278,090
78% 3258
3181
163.94
2 Portland, ME
606,679
782,159
78% 2493
2488
98.56
120 Grand Island, NE
219,818
284,318
77% 5989
6418
11.56
118 Omaha, NE-IA-MO
843,909
1,094,029
77% 2128
2146
62.40
111 Minot, ND
81,125
105,378
77% 4117
3977
7.00
106 Rochester, MN-IA-WI
257,296
334,227
77% 2799
3058
55.65
166 Eugene-Springfield, OR-CA
648,151
842,355
77% 1850
1858
43.10
150 Boise City, ID-OR
537,005
699,836
77% 2703
2679
13.69
8 Buffalo-Niagara Falls, NY-PA
1,114,362
1,452,472
77% 3222
3052
212.89
157 El Paso, TX-NM
792,413
1,035,466
77% 2050
2106
33.04
66 Fort Wayne, IN
566,761
740,697
77% 3088
3161
158.50
108 Wausau, WI
372,745
488,870
76% 2371
2221
34.13
68 Champaign-Urbana, IL
477,710
626,590
76% 3265
3095
73.47
139 Santa Fe, NM
207,326
272,119
76% 2806
2904
13.06
149 Twin Falls, ID
132,534
174,057
76% 2232
2302
14.08
72 Paducah, KY-IL
174,050
228,983
76% 5846
5631
70.02
17 Roanoke, VA-NC-WV
648,196
852,903
76% 1831
1892
97.83
119 Lincoln, NE
302,751
400,610
76% 4251
4469
50.24
7 Rochester, NY-PA
1,114,202
1,476,375
75% 4247
4187
167.21
6 Syracuse, NY-PA
1,424,523
1,889,593
75% 3884
3771
104.74
100 Des Moines, IA-IL-MO
1,290,969
1,718,453
75% 2679
2789
47.32
169 Richland-Kennewick-Pasco, WA
560,628
747,448
75% 2516
2537
27.68
94 Springfield, MO
704,420
942,029
75% 3514
3510
48.14
60 Appleton-Oshkosh-Neenah, WI
340,737
456,991
75% 1927
1895
143.62
32 Fort Myers-Cape Coral, FL
675,051
906,403
74% 2515
2189
234.27
46 Hickory-Morganton, NC-TN
404,938
544,205
74% 2646
2542
131.90
147 Spokane, WA-ID
671,368
903,621
74% 3076
2931
23.63
144 Billings, MT-WY
320,711 435,548 74%
5062 4826
4.89
65 Elkhart-Goshen, IN-MI
702,441
954,092
74% 2332
2335
185.73
123 Topeka, KS
338,006
459,542
74% 1850
1757
35.62
165 Redding, CA-OR
264,723
360,546
73% 2273
2347
14.36
135

Federal Communications Commission DA 09-54


EA EA
Name Subscribers
2007
2007
2007
2006
EA
Estimated Penetration HHI HHI density
EA
Rate
Population
62 Grand Rapids-Muskegon-Holland, MI
1,438,580
1,962,008
73% 2709
2832
206.76
14 Salisbury, MD-DE-VA
296,424
405,167
73% 5263
5018
111.17
91 Fort Smith, AR-OK
252,934
346,163
73% 4114
4053
46.51
140 Pueblo, CO-NM
210,769
289,294
73% 2646
2583
8.71
104 Madison, WI-IA-IL
720,379
996,238
72% 3530
3515
71.33
117 Sioux City, IA-NE-SD
179,224
248,545
72% 4025
3911
39.51
116 Sioux Falls, SD-IA-MN-NE
394,386
549,186
72% 4288
4174
15.11
4 Burlington, VT-NY
443,543
619,733
72% 4776
4893
57.62
9 State College, PA
571,149
799,734
71% 4238
4152
92.41
162 Fresno, CA
1,152,858
1,616,289
71% 2932
2988
98.64
129 San Angelo, TX
145,888
205,600
71% 2464
3290
10.05
61 Traverse City, MI
213,446
300,996
71% 4178
4390
50.67
146 Missoula, MT
305,627
431,128
71% 6043
5276
10.79
110 Grand Forks, ND-MN
157,004
221,855
71% 3848
3880
10.16
47 Lexington, KY-TN-VA-WV
1,352,022
1,910,776
71% 3683
2958
80.39
16 Staunton, VA-WV
246,324
349,424
70% 2093
1974
50.99
52 Wheeling, WV-OH
216,331
307,676
70% 4436
4113
124.54
48 Charleston, WV-KY-OH
825,722
1,178,717
70% 2999
2655
85.35
171 Anchorage, AK
478,203
683,478
70% 3873
3925
1.07
1 Bangor, ME
374,086
535,048
70% 4365
4693
20.94
109 Duluth-Superior, MN-WI
242,638
348,448
70% 3504
3440
18.53
92 Fayetteville-Springdale-Rogers, AR-MO-OK 344,496
498,022
69%
4629
4316
88.43
113 Fargo-Moorhead, ND-MN
262,770
382,242
69% 3286
3145
16.40
121 North Platte, NE-CO
40,782
59,604
68% 6272
6551
4.95
115 Rapid City, SD-MT-ND-NE
149,991
222,452
67% 4952
4850
5.04
112 Bismarck, ND-MT-SD
119,027
177,872
67% 4891
4819
6.26
54 Erie, PA
340,107
510,487
67% 4120
4037
116.41
58 Northern Michigan, MI
175,682
269,983
65% 4270
4637
28.53
76 Greenville, MS
148,143 227,678 65%
3491 3540
40.96
168 Pendleton, OR-WA
129,670
203,776
64% 2150
2472
8.67
145 Great Falls, MT
103,313
163,495
63% 4685
4602
4.23
105 La Crosse, WI-MN
157,072
250,723
63% 3815
3551
53.67
114 Aberdeen, SD
47,602
78,108
61% 4983
*
5.39
74 Huntsville, AL-TN (see note 2)
*
1,054,137
*
*
2307
119.14

*Data withheld to maintain firm confidentiality.

Source: Federal Communications Commission internal analysis based on preliminary year-end 2007 filings for
Numbering Resource Utilization in the United States. Density is persons per square mile. EA populations are based
on Census estimates as of July 1, 2007. EA penetration rates are not directly comparable with previous year reports
since, in previous years, EA populations were based on Census 2000.

Note 1: As discussed in the Twelfth Report, the penetration rate in EA83 (New Orleans) appears to be an aberration.
That EA lost over 260,000 people between 2000 and 2006, while its subscriber count remained relatively
unchanged, creating a large increase in its penetration rate. One explanation for this may be that, after the flooding,
people leaving the area took their cell phones (and cell phone numbers) with them. Thus, those numbers may still
be associated with New Orleans rate centers, even though the people actually no longer live anywhere near there.

Note 2: We believe there was a discrepancy in the data for this EA, making the subscriber data and HHI for this
136

Federal Communications Commission DA 09-54


market unreliable.

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Table A-4: Top 20 Mobile Telephone Operators by Subscribers

(with publicly-available subscriber counts, in thousands)


Year-End 2006
Year-End 2007
Operator
Total Operator
Total
1 AT&T/Cingular
Wireless
60,962 AT&T
70,052
2
Verizon Wireless
59,052 Verizon Wireless
65,707
3
Sprint Nextel
52,175 Sprint Nextel (1)
45,329
4 T-Mobile
25,041 T-Mobile
28,685
5
Alltel
11,824 Alltel (2)
13,400
6
US Cellular
5,815 US Cellular
6,122
7 MetroPCS
2,941 MetroPCS
3,963
8 Leap
2,229 Leap
2,864
9
Dobson Comm. (3)
1,667 SunCom (4)
1,100
10 SunCom
1,087 Centennial
1,093
11 Centennial
1,059 Rural Cellular (5)
791
12 Rural Cellular
706 Amrica Mvil / Claro (6)
786
13 iPCS
562 iPCS
630
14 Amrica Mvil / Claro
554 Cincinnati Bell Wireless
571
15 Cincinnati
Bell
Wireless
528 Ntelos
407
16 Ntelos
367 SouthernLINC
(7)
300
17 SouthernLINC
300 Corr Wireless (8)
300
Shenendoah Telecomm.
18 Shenendoah
Telecomm.
203 (SHENTEL) 187
19 Pocket Comm.
175 Pocket Comm. (9)
175
20 Edge Wireless
172 Edge Wireless (9, 10)
172

Sources: For 2006, see Twelfth Report, at 2362. For 2007, publicly available company documents such as
operators' news releases and filings made with the Securities and Exchange Commission. AT&T purchases Edge
Wireless
, TELEPHONY ONLINE, Dec. 4, 2007 (Edge Wireless); T-Mobile agrees to Acquire SunCom Wireless,
SMARTBRIEF, September 17, 2007 (SunCom); Sanford Nowlin, New Executive Revamps Pocket, SAN ANTONIO
EXPRESS NEWS, Nov. 14, 2007, available at
<http://www.mysanantonio.com/business/stories/MYSA111507.01E.pocket.1ee720b.html>; (visited Dec. 4, 2007)
(Pocket Comm.); CORR WIRELESS DEPLOYS INTEROP TECHNOLOGIES SMS CENTER, INTEROP
TECHNOLOGIES, August 30, 2007 (Corr Wireless), available at
<http://www.interoptechnologies.com/news/2007/07_08-30_corrwireless.php>; (visited November 13, 2008).

Notes
(1) This includes direct and wholesale subscribers (including Boost subscribers), but not affiliate company
subscribers.
(2) On June 5, 2008, Verizon Wireless announced that it was acquiring Alltel.
(3) On November 15, 2007, AT&T completed its acquisition of Dobson Communications.
(4) On February 22, 2008, T-Mobile completed its acquisition of SunCom.
(5) On August 7, 2008, Verizon Wireless completed its acquisition of Rural Cellular.
(6) This includes Claro subscribers in Puerto Rico and Jamaica. Puerto Rico consolidated with Amrica Mvil on
April 1, 2007 and Jamaica on December 1, 2007. No separated subscriber counts were reported.
(7) The subscriber count from the Twelfth Report is used for 2007 as an estimate because no publicly available data
was found.
(8) As of end of August 2007, Corr Wireless had more than 300,000 subscribers using its SMS service. The total
subscriber number maybe higher than 300,000.
(9) The subscriber counts are as of late 2007.
(10) On April 18, 2008, AT&T completed its acquisition of Edge Wireless.


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Federal Communications Commission DA 09-54



APPENDIX B


Maps


Table of Contents


Map B-1: Coverage of Top 4 Mobile Telephone Operators................................................................................. 11

Maps B-2 B-3: Wireless Coverage by Number of Providers Estimated by Census Block................................ 12

Maps B-4 - B-20: Wireless Coverage by Number of Providers Estimated by Census Blocks By Region ........... 14

Map B-21: U.S. Federal Lands ............................................................................................................................. 31

Maps B-22 - B-32: Nationwide Spectrum Licensees............................................................................................ 32

Map B-33: U.S. County Density........................................................................................................................... 43

Map B-34: Spectrum Not Licensed to the Nationwide Carriers & Their Affiliates ............................................. 44

Map B-35: Available Licensed Spectrum............................................................................................................. 45

Maps B-36 - B-37: Mobile Telephone Digital Coverage ..................................................................................... 46

Maps B-38 - B-39: Mobile Telephone NextGen Coverage: CDMA Path ............................................................ 48

Maps B-40 - B-41: Mobile Telephone NextGen Coverage: GSM Path ............................................................... 50

Maps B-42 - B-43: Mobile Broadband Network Coverage by Number of Providers .......................................... 52

Map B-44: Mobile Wireless Penetration Estimated by Economic Area............................................................... 54

Table B-1: Geographic Licensing Schemes......................................................................................................... 55

Map B-45: Basic Trading Areas ........................................................................................................................... 56

Map B-46: Major Trading Areas .......................................................................................................................... 57

Map B-47: Cellular Market Areas ........................................................................................................................ 58

Map B-48: Economic Areas ................................................................................................................................. 59

Map B-49: Regional Economic Area Groupings.................................................................................................. 60
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Map B-1: Coverage of Top 4 Mobile Telephone Operators


140


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Map B-2: Wireless Coverage by Number of Providers


141


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Map B-3: Wireless Coverage by Number of Providers (2)




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Map B-4: Wireless Coverage by Number of Providers By Region (overview)


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Map B-5: Wireless Coverage by Number of Providers By Region (1)


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Map B-6: Wireless Coverage by Number of Providers By Region (2)



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Map B-7: Wireless Coverage by Number of Providers By Region (3)


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Map B-8: Wireless Coverage by Number of Providers By Region (4)


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Map B-9: Wireless Coverage by Number of Providers By Region (5)



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Map B-10: Wireless Coverage by Number of Providers By Region (6)



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Map B-11: Wireless Coverage by Number of Providers By Region (7)



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Map B-12: Wireless Coverage by Number of Providers By Region (8)



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Map B-13: Wireless Coverage by Number of Providers By Region (9)



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Map B-14: Wireless Coverage by Number of Providers By Region (10)



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Map B-15: Wireless Coverage by Number of Providers By Region (11)



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Map B-16: Wireless Coverage by Number of Providers By Region (12)



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Map B-17: Wireless Coverage by Number of Providers By Region (13)


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Map B-18: Wireless Coverage by Number of Providers By Region (14)


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Map B-19: Wireless Coverage by Number of Providers By Region (15)


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Map B-20: Wireless Coverage by Number of Providers By Region (16)



159

Federal Communications Commission DA 09-54


Map B-21: U.S. Federal Lands


160

Federal Communications Commission DA 09-54


Map B-22: Nationwide Spectrum Licensee: Alltel


161

Federal Communications Commission DA 09-54


Map B-23: Nationwide Spectrum Licensee: AT&T


162


Federal Communications Commission DA 09-54


Map B-24: Nationwide Spectrum Licensee: Globalstar


163

Federal Communications Commission DA 09-54


Map B-25: Nationwide Spectrum Licensee: Leap


164

Federal Communications Commission DA 09-54


Map B-26: Nationwide Spectrum Licensee: MetroPCS



165


Federal Communications Commission DA 09-54


Map B-27: Nationwide Spectrum Licensee: MSV



166


Federal Communications Commission DA 09-54


Map B-28: Nationwide Spectrum Licensee: Qualcomm

167

Federal Communications Commission DA 09-54


Map B-29: Nationwide Spectrum Licensee: SpectrumCo



168

Federal Communications Commission DA 09-54


Map B-30: Nationwide Spectrum Licensee: Sprint Nextel



169

Federal Communications Commission DA 09-54


Map B-31: Nationwide Spectrum Licensee: T-Mobile



170

Federal Communications Commission DA 09-54


Map B-32: Nationwide Spectrum Licensee: Verizon Wireless



171


Federal Communications Commission DA 09-54


Map B-33: U.S. County Density



172

Federal Communications Commission DA 09-54


Map B-34: Spectrum Not Licensed to the Nationwide Carriers & Their Affiliates


173





Federal Communications Commission DA 09-54


Map B-35: Available Licensed Spectrum


174

Federal Communications Commission DA 09-54


Map B-36: Mobile Telephone Digital Coverage


175

Federal Communications Commission DA 09-54


Map B-37: Mobile Telephone Digital Coverage (2)


176

Federal Communications Commission DA 09-54


Map B-38: Mobile Telephone NextGen Coverage: CDMA Path


177

Federal Communications Commission DA 09-54


Map B-39: Mobile Telephone NextGen Coverage: CDMA Path (2)


178

Federal Communications Commission DA 09-54


Map B-40: Mobile Telephone NextGen Coverage: GSM Path



179

Federal Communications Commission DA 09-54


Map B-41: Mobile Telephone NextGen Coverage: GSM Path (2)


180

Federal Communications Commission DA 09-54


Map B-42: Mobile Broadband Network Coverage


181

Federal Communications Commission DA 09-54


Map B-43: Mobile Broadband Network Coverage (2)

182


Federal Communications Commission DA 09-54


Map B-44: Mobile Wireless Penetration





183

Federal Communications Commission DA 09-54



Table B1: Geographic Licensing Schemes


Geographic Licensing Schemes

Number of

Note

Market Areas

Basic Trading Areas (BTAs)
493
BTAs make up MTAs
Major Trading Areas (MTAs)
51

Also known as MSAs and
Cellular Market Areas (CMAs)
734
RSAs
Economic Areas (EAs)
175

Regional Economic Area Groupings
(REAGS) 12


184

Federal Communications Commission DA 09-54


Map B-45


185

Federal Communications Commission DA 09-54


Map B-46

186

Federal Communications Commission DA 09-54


Map B-47



187

Federal Communications Commission DA 09-54


Map B-48


188

Federal Communications Commission DA 09-54


Map B-49


189

Federal Communications Commission DA 09-54



APPENDIX C


List of Commenters


Comments
CTIA The Wireless Association
Comnet Wireless, LLC
Mobile Satellite Service Providers
Mobile Satellite Ventures Subsidiary LLC
National Telecommunications Cooperative Association ("NTCA")
National Tribal Telecommunications Association
Satellite Industry Association
Sprint Nextel Corporation
Russ Ward

Replies to Comments
3G Americas
CTIA The Wireless Association
Ericsson Inc.
T-Mobile USA, Inc.
National Emergency Number Association


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