[Federal Register Volume 69, Number 79 (Friday, April 23, 2004)]
[Notices]
[Pages 22032-22042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-9295]


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FEDERAL COMMUNICATIONS COMMISSION

[WT Docket No. 04-111; FCC 04-38]


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

AGENCY: Federal Communications Commission.

ACTION: Notice of inquiry.

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SUMMARY: This document solicits data and information on the status of 
competition in the CMRS industry for our Ninth Annual Report and 
Analysis of Competitive Market Conditions with Respect to Commercial 
Mobile Services (Ninth Report). The Ninth Report will provide an 
assessment of the current state of competition and changes in the CMRS 
competitive environment.

DATES: Comments are due on or before April 26, 2004, and reply comments 
are due on or before May 10, 2004.

ADDRESSES: All filings must be addressed to the Commission's Secretary, 
Office of the Secretary, Federal Communications Commission. Parties 
also should send four (4) paper copies of their filings to Rachel 
Kazan, Federal Communications Commission, Room 6126, 445 12th Street, 
SW., Washington, DC 20554. See SUPPLEMENTARY INFORMATION for comment 
and reply comment filing instructions.

FOR FURTHER INFORMATION CONTACT: Rachel Kazan at (202) 418-0651 or 
Susan Singer at (202) 418-1340.

SUPPLEMENTARY INFORMATION: This is a summary of the Notice of Inquiry 
released on March 24, 2004. The complete text of the Notice of Inquiry, 
including statements, is available for public inspection and copying 
during regular business hours at the FCC Reference Information Center, 
Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. 
The Notice of Inquiry may also be purchased from the Commission's 
duplicating contractor, Qualex International, Portals II, 445 12th 
Street, SW., Room CY-B402, Washington, DC, 20554, telephone 202-863-
2893, facsimile 202-863-2898, or via e-mail [email protected].

I. Introduction

    1. In 1993, Congress created the statutory classification of 
Commercial Mobile Services to promote the consistent regulation of 
similar mobile radio services. At the same time, Congress established 
the promotion of competition as a fundamental goal for Commercial 
Mobile Radio Services (CMRS) policy formation and regulation. To 
measure progress toward this goal, Congress required the Commission to 
submit annual reports (CMRS Reports) that analyze competitive 
conditions in the industry. The Notice of Inquiry (NOI) solicits data 
and information in order to evaluate the state of competition among 
providers of CMRS for its Ninth Annual Report and Analysis of 
Competitive Market Conditions with Respect to Commercial Mobile 
Services (Ninth Report). The statute requiring the Commission to submit 
annual reports providing an analysis of competitive market conditions 
with respect to CMRS stipulates that this analysis shall include, among 
other things, ``an analysis of whether or not there is effective 
competition.'' To this end, previous CMRS Reports have presented a 
variety of standard indicators commonly used for the assessment of 
competitive market conditions, including the number of market 
participants, developments in carriers' pricing plans, service 
offerings, technology deployment, consumer churn, pricing data, 
subscriber growth, usage, and the diffusion of product innovations. For 
the Ninth Report the Commission proposes to enhance its analysis by 
restructuring the presentation of the various indicators of the status 
of competition to conform to a framework that groups such indicators 
into four distinct categories (A) Market Structure, (B) Carrier 
Conduct, (C) Consumer Behavior, and (D) Market Performance. The 
analysis of market performance will evaluate competitive conditions in 
the CMRS industry from the consumer's point of view, including both 
personal and business users. In particular, the analysis of market 
performance will focus on the benefits to consumers of effective 
competition such as lower prices, higher quality, greater variety, and 
more rapid innovation. A key premise of the proposed framework is that 
market structure, carrier conduct, consumer behavior and the 
interrelationships among these categories are important determinants of 
consumer outcomes.
    2. Based on an overall assessment of the indicators that the 
Commission considered, the Eighth Report, 68 FR 730, January 7, 2003 
concluded that there is effective competition in the CMRS market. These 
indicators included the nature and number of market participants, the 
geographic extent of service deployment, technological improvements and 
upgrades, price competition, investment, usage patterns, churn, 
subscriber growth, and product innovations, among other things. The 
Eighth Report stated that 95 percent of the U.S. population has three 
or more different operators offering mobile telephone service in the 
counties in which they live and 83 percent have a choice of 5 mobile 
telephone providers. Further, the Commission found that the

[[Page 22033]]

price consumers pay for mobile telephony service continued to fall, 
while subscribership increased. In addition, innovative and enhanced 
services such as advanced wireless services and larger digital 
footprints were introduced. These metrics were the basis of the Report 
indicating that CMRS carriers have no guarantee of maintaining their 
market share, and that customers are able to change providers if a 
carrier attempts to raise rates or diminish service quality.
    3. In this proceeding, the Commission seeks to update the 
indicators of competition for its next report to Congress and to assist 
in determining if there is still effective competition in the CMRS 
market. In its ongoing effort to improve its information gathering and 
competitive analysis, the Commission issues the NOI to solicit 
detailed, comprehensive, and independent data for the Ninth Report and 
to augment information from the Commission and publicly available 
sources. The Commission requests data that will allow us to evaluate 
the interrelationships among market structure, carrier conduct, 
consumer behavior, and market performance in order to determine whether 
there is still ``effective competition'' among providers of CMRS. The 
Commission invites comment on the new analytic framework proposed to 
assess the state of competition among providers of CMRS in the Ninth 
Report. As will be discussed in more detail later in the NOI, the 
Commission seeks the following data and ask commenters to address the 
following general questions:
     The Commission asks for comment on ``what is 
effective competition?'' and which indicators are useful to determine 
whether there is effective competition among providers of CMRS.
     The Commission seeks comment on what metrics are 
available that will give us greater insight into the performance of the 
CMRS industry. The Commission is particularly interested in gathering 
accurate and reliable information on the number of subscribers, 
penetration rates, usage, average price per minute, quality of service, 
pricing trends, and profits, and whether these metrics vary between 
urban and rural areas as well as among different demographic groups.
     The Commission seeks comment on how the metrics 
pertaining to the CMRS industry's structure, carrier conduct, consumer 
behavior, and market performance vary across different geographic 
areas, in particular between rural and urban areas? If so, how?
     The Commission seeks comment on how barriers to 
entry (e.g. access to sufficient spectrum, cost of capital, first mover 
advantages and siting cell towers) affect the industry's market 
structure. The Commission seeks comment on which entities compete to 
provide CMRS services, the extent of deployment of CMRS services, and 
whether the same types of services are available in all of a carrier's 
service areas.
     The Commission seeks comment on the most 
significant changes or developments in pricing plans, advertising and 
marketing, capital expenditures, and new technology deployment during 
the past year.
     The Commission seeks comment on significant 
changes and developments have occurred in the provision of wireless 
data and Internet services, both mobile and nomadic, since the 
publication of the Eighth Report.
     The Commission seeks data on current and 
prospective deployment and usage of wireless high-speed internet access 
services through mobile and portable computing devices using Wi-Fi and 
similar technologies and how such data should be considered in 
assessing the competitive conditions of the CMRS market.
     The Commission seeks comment on how competitive 
conditions and performance in the CMRS industry in the United States 
compare to that in other countries, including data on key industry 
performance metrics, such as subscribership, penetration rates, usage, 
pricing, quality of service, and service availability.
    4. In addition, The Commission seeks comment on the Commission's 
market-oriented policies, including those that promote facilities-based 
competition among providers of CMRS and that the Commission believes 
have provided important benefits to consumers. For example, the 
Commission's policy to let market forces determine the number of 
providers operating in a given geographic area, subject to antitrust 
restrictions and other appropriate limits, has allowed providers to 
operate at a competitive and efficient scale of operation. This policy 
enables these providers to serve consumers at prices that reflect the 
cost savings of efficient operation among other factors. Over the past 
decade, with respect to broadband personal communications services 
(PCS) and other mobile radio services, the Commission has adopted a 
licensing model in which licensees have ``exclusive and transferable 
flexible rights'' to the use of specified spectrum within a defined 
geographic area, with spectrum use rights that are governed primarily 
by technical rules to protect against harmful interference. The 
Commission seeks further input on how, for purposes of assessing and 
comparing competitive market conditions, this approach leads to the 
deployment of the spectrum for its highest and most valued use, and 
how, in turn these trends have facilitated the provision of services 
that are tailored to the preferences of consumers.
    5. The Commission seeks comment on how the market structure in this 
industry has evolved due to specific actions by the Commission, 
especially the application of the above-referenced spectrum usage model 
for CMRS and other market-oriented policies. What other effects have 
resulted from these policies? Are these effects the same in urban and 
rural areas? If not, how do they differ, and why? Do these effects vary 
among CMRS providers? If so, why? Are there other policies that the 
Commission could adopt that would enhance competition in the mobile 
telecommunications industry?
    6. Industry members, members of the public, and other interested 
parties should submit information, comments, and analyses regarding 
competition in the provision of CMRS services. Commenters desiring 
confidential treatment of their submissions should request that their 
submission, or a specific part thereof, be withheld from public 
inspection. In order to facilitate its analysis of competitive trends 
over time, the Commission requests that parties submit current data as 
well as historic data that are comparable over time. In addition to the 
comments submitted in this proceeding, the Ninth Report, as all past 
CMRS Reports, will also include information from publicly-available and 
Commission sources.

II. Matters on Which Comment Is Requested

    7. In prior CMRS Reports, mobile telecommunications have been 
divided into two sectors: (i) Mobile voice; and (ii) mobile data. As 
noted in the Eighth Report, however, mobile voice and mobile data 
services are no longer clearly separate services in the CMRS industry. 
Many mobile voice operators also offer mobile data services using the 
same spectrum, network facilities, and customer equipment. Furthermore, 
many United States mobile carriers have integrated the marketing of 
mobile voice and data services. Therefore, for purposes of the NOI, the 
Commission inquires about a single mobile telecommunications sector 
that includes interconnected mobile voice and mobile data services 
provided on the same handset, as well as providers that offer only 
mobile data services. Providers of mobile telecommunications services 
primarily use cellular radiotelephone,

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broadband Personal Communications Services (PCS), and Specialized 
Mobile Radio (SMR) licenses. Because these licensees offer mobile 
telecommunications services that are essentially indistinguishable by 
most consumers, they are discussed in the NOI as a single industry 
sector. Resellers and satellite operators also offer mobile 
telecommunications services. In addition, in an effort to continue to 
provide the most complete picture of competition among providers of 
CMRS to Congress, the Ninth Report will also look at mobile wireless 
service offerings outside the umbrella of ``services'' specifically 
designated as CMRS by the Commission. Because providers of these 
services may compete now or in the future with CMRS providers, the 
Commission believes it is important to consider them in its analysis 
and collect information on mobile wireless services regardless of their 
regulatory classification. The Commission asks if there are other 
providers that compete in this market. If so, to what extent are these 
providers creating competition in the mobile telecommunications 
industry?

A. Mobile Telecommunications Market Structure

    8. The analysis of market structure will focus on the current level 
of concentration and the ease or difficulty with which new operators 
can enter the mobile telecommunications market. Examples of key metrics 
collected in the past that assisted in the determination of market 
structure include: The current number of operators per county; planned 
spectrum auctions that may enable the entry of additional operators; 
and consolidation and exit of operators from the mobile 
telecommunications market. The sources of data and analysis of these 
and other metrics. The Commission invites commenters to address whether 
there are other metrics that should be used to evaluate the market 
structure of the mobile telecommunications market? Are data for these 
metrics available on a national and/or sub-national level?
i. Geographic Market Definition and Service Availability
    9. Defining Geographic Markets. In order to analyze the structure 
of the mobile telecommunications market, it is necessary to accurately 
define the relevant product and geographic markets, and to identify the 
number of carriers providing service in those markets. Defining the 
relevant geographic market requires, among other things, the 
identification of a geographic area within which customers face similar 
competitive choices. Defining geographic markets is complicated and 
time consuming due to the large number of mobile operators, the wide 
variation in their geographic footprints, and the resulting patchwork 
of numerous and relatively small geographic areas in which consumers 
face the same choices of mobile telecommunications providers.
    10. The Commission seeks comment on how best to define geographic 
markets to analyze the structure of the mobile telecommunications 
market for the Ninth Report. The Commission also requests comment on 
how to improve the methodology the Commission uses to determine the 
number of carriers serving a defined geographic area. The methodology 
used in prior reports inherently includes some undetermined degree of 
overcounting. Do commenters believe that this degree of overcounting is 
significant and materially affects the determination of mobile 
telecommunications service availability and market structure? Is there 
an alternate methodology that could be used to estimate service 
availability more accurately?
    11. Service Availability by Billing Address. In conducting its 
analysis of service availability and market structure, the Commission 
seeks information about the extent to which consumers are able to, and 
do, purchase service plans from carriers whose networks do not cover 
their residential location or billing address. Carriers frequently 
query potential subscribers about the zip code of their billing 
address. Should this be taken as an indication that carriers do not 
provide service to consumers whose billing address zip codes are 
outside the range of the carriers' network coverage areas, even if such 
consumers wish to purchase service plans in order to use their phones 
inside the coverage areas? To what extent are mobile telecommunications 
subscribers' residential locations or billing addresses located outside 
of their carrier's network coverage area? To what degree would an 
analysis of the population of smaller geographic areas that underlie 
carriers' network coverage boundaries undercount those subscribers? 
Furthermore, would the use of other, smaller geographic areas in 
addition to or in place of counties be appropriate in analyzing service 
availability? If so, which areas would be appropriate? Do such data 
currently exist?
    12. Rural Markets. Since the release of the Sixth Report, the 
Commission has attempted to obtain a better understanding of the state 
of competition below the national level, and particularly in rural 
areas. In order to analyze the mobile telecommunications market 
structure in rural areas, it is necessary first to define ``rural 
areas.'' The federal government has multiple ways of defining rural, 
reflecting the multiple purposes for which the definitions are used. In 
the Eighth Report, the Commission analyzed service availability in 
rural areas using three different proxy definitions, and similar 
results were obtained for each definition. The Commission compared the 
number of competitors in: (i) Rural Statistical Areas (RSA) counties 
versus Metropolitan Statistical Areas (MSA) counties; (ii) non-nodal 
Economic Areas (EA) counties versus nodal EA counties; and (iii) 
counties with population densities below 100 persons per square mile 
versus those with population densities above 100 persons per square 
mile. In addition, the Commission recently released a Notice of 
Proposed Rulemaking (Rural NPRM), 68 FR 64050, November 12, 2003, to 
examine ways to promote the rapid and efficient deployment of spectrum-
based services in rural areas. The Commission requests comment on how 
the Commission should define ``rural areas'' for purposes of the Ninth 
Report. Should there be a single distinction between rural and non-
rural areas, or should rural and non-rural be defined on a continuum, 
for example by looking at different population densities? Should the 
Commission adopt one of the proposed definitions in the Rural NPRM, or 
some combination of the elements contained in those proposed 
definitions, for the Ninth Report?
    13. Service Deployment and Coverage Maps. In order to improve the 
accuracy of its analysis and to reduce overcounting in the Ninth 
Report, the Commission asks service providers to submit as part of 
their comments to the Commission, in electronic format, the coverage 
maps that they already make available to the public. Specifically, the 
Commission requests carriers to submit as part of their comments the 
maps they employ to advertise their coverage areas in brochures and on 
their web sites in a geo-referenced, mapable format, such as MapInfo 
table (.tab), Tagged Image Format (.TIF), or Shapefile (.shp) files. 
The Commission requested this data in last year's NOI and no carrier 
responded. Besides requesting the information in an NOI, how else could 
the Commission obtain this information? Would signatories to Cellular 
Telecommunications and Internet Association (CTIA) Voluntary Consumer 
Code be willing to submit

[[Page 22035]]

their coverage maps to the Commission in one of the aforementioned 
electronic formats? In the alternative, the Commission asks carriers to 
provide a list of counties where they provide facilities-based 
services. The Commission has used the contours filed by 800 MHz 
cellular licensees to estimate the availability of analog mobile 
telephone service, and therefore does not require additional maps 
showing analog coverage from cellular licensees. However, the 
Commission requests that cellular licensees submit, as part of their 
comments, their publicly available maps in the aforementioned formats 
showing where they offer reliable digital service, or else supply lists 
of counties in which the service is offered. In addition to employing 
more accurate coverage maps, The Commission seeks comment on other ways 
its analysis of service availability can be improved?
    14. In order to continue to improve the accuracy of its analysis, 
the Commission seeks information on whether carriers market service to 
new customers in all of the geographic areas in which they have 
coverage. Do carriers provide coverage in certain areas, such as near 
major roads, where they do not also market service to residents of 
those areas? If this is true, could the Commission's analysis be 
further improved if carriers indicated the parts of their coverage 
areas in which they compete to offer new service and the parts that are 
used only to provide coverage to traveling subscribers based in other 
locations? Also, in what respect do infrastructure sharing agreements, 
such as those between carriers along highways in low-population areas, 
affect service availability in rural areas? Do such agreements 
effectively increase the number of competitors in those areas? Do these 
arrangements increase wireless usage in areas adjacent to such areas?
    15. Mobile Data Deployment. The Commission also seeks comment on 
deployment of next-generation network technologies such as 1X and GPRS, 
which will bridge the gap between second and third generation 
technologies. The Commission is particularly interested in changes that 
have occurred in such deployment since the Eighth Report. For example, 
in what portion of their license and network footprints have carriers 
deployed these technologies, and what advanced wireless applications 
are being offered using these technologies? Are the same types of 
advanced services available in all areas, and in particular, does the 
availability of advanced services vary between urban and rural areas? 
Specifically, the Commission requests carriers to submit as part of 
their comments the maps they employ to advertise their mobile data 
coverage areas in brochures and on their web sites in a geo-referenced, 
mapable format, such as MapInfo table (.tab), Tagged Image Format 
(.TIF), or Shapefile (.shp) files including the type of mobile data 
services being offered there. In the alternative, the Commission asks 
carriers to provide a list of counties where they provide these mobile 
data services.
    16. Reliability of Data. The Commission's service availability 
analysis relies on information reported by service providers, including 
their news releases, filings with the Security and Exchange Commission 
(SEC), web site coverage maps, and network buildout notifications filed 
with the Commission. In addition, there are independent web sites and 
public reports that include some information about service coverage and 
dead zones. The Commission seeks comment on the advantages and 
disadvantages to this approach, including the potential biases arising 
from relying exclusively on data supplied by parties that may have a 
financial interest in the use of such data as part of Commission 
decisions. Since the Commission, in some cases, reports on information 
supplied only by one or two sources, the Commission also seeks comment 
on ways of obtaining independent verification of competition 
information provided for the Ninth Report. Which independent sources 
can be reliably used to verify carrier-supplied coverage information? 
Do commenters believe such verification is necessary in analyzing 
service availability and competition?
    17. Resale Providers. Resellers offer service to consumers by 
purchasing airtime at wholesale rates from facilities-based providers 
and reselling it at retail prices. According to information provided to 
the Commission in its ongoing local competition and broadband data 
gathering program, the resale sector accounted for approximately 5 
percent of all mobile telephone subscribers as of December 2002. To 
what extent are resellers creating competitive pressures in the mobile 
telephone sector? Who are the major resellers in the United Sates? How 
many subscribers do they have? From the consumer's perspective, what 
are the benefits of buying from a reseller versus a facilities-based 
provider? Are resellers selling to specific demographic segments? The 
Commission also seeks comment on the impact of the November 24, 2002 
sunset of the CMRS resale rule on the extent and vigor of resale 
activity. The Eighth Report discusses ``mobile virtual network 
operators'' (MVNOs) as a type of reseller focusing on brand 
development, with the intent to offer a niche product and to have 
better customer retention. The Commission asks for comment on how this 
resale model has affected the provision of resale services. The 
Commission also asks for information about companies employing the MVNO 
resale model since the Eighth Report.
    18. Satellite Providers. Certain satellite services are by 
definition CMRS. At least four satellite carriers currently provide 
mobile satellite services (MSS) in the United States: Globalstar 
Telecommunications LTD, Iridium Satellite LLC, Inmarsat Limited, and 
Mobile Satellite Ventures. The Commission requests carriers to submit 
as part of their comments information detailing the geographic areas of 
the United States in which they provide coverage as well as those areas 
in which they offer service to new customers. Taking into account such 
information on MSS service availability, The Commission seeks comment 
on the extent of competition among MSS providers. To what extent do MSS 
providers compete with terrestrial-based mobile telecommunications 
providers? Are MSS services substitutes for terrestrial-based mobile 
voice and data services?
ii. Horizontal Concentration and Vertical Integration
    19. Concentration measures based on output metrics, such as market 
share of subscribers or revenues, are common tools used to assess 
market structure. Previous CMRS reports have not provided concentration 
measures, in part because of the difficulty in defining geographic 
markets and limitations on available output data. Can the use of 
concentration measures, such as the Herfindahl-Hirshman Index (HHI), 
give additional insight into whether effective competition exists as 
well as into whether a service provider has a dominant share of the 
market? The Commission requests comment on whether concentration 
measures should be included in the Ninth Report. Commenters who 
recommend that the Commission include concentration measure(s) in the 
Ninth Report are requested to provide comments on various concentration 
measures and how these metrics may enhance its analysis of market 
structure. The DOJ/FTC Guidelines provide HHI thresholds that indicate 
concentrated markets. If HHIs are employed, what should constitute a 
high degree of concentration for the mobile telecommunications market? 
One

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possible HHI threshold level would be those listed in the DOJ/FTC 
merger guidelines. Are these appropriate to use when looking at whether 
there is effective competition in the mobile telecommunications market?
    20. One possible data source that could be used to calculate output 
market concentration statistics is the Numbering Resource Utilization/
Forecast (NRUF) data that are submitted to the Commission on a rate 
center basis. Rate center boundaries are much smaller than, and not 
coextensive with, mobile telecommunications license boundaries such as 
Cellular Market Areas (CMAs), Metropolitan Trading Areas (MTAs), or 
Basic Trading Areas (BTAs). Due to their relatively small size, rate 
centers are not necessarily indicative of where a mobile 
telecommunications subscriber lives, works, or uses a mobile 
telecommunications device. In addition, in order to protect the 
confidentiality of the companies submitting NRUF data, the Commission 
does not report the number of subscribers for geographic areas in which 
there are three or fewer carriers.
    21. If concentration measures are included in the Ninth Report, 
given the caveats discussed above, are the NRUF data a reasonable proxy 
for output in the mobile telecommunications market? Also, the 
Commission seeks comment on how to determine which geographic area or 
areas should be used to calculate mobile telecommunications 
concentration measures. In particular, the Commission seeks comment on 
the appropriateness of various geographic market delineations given the 
limitations of the NRUF data.
    22. In addition to the issue of horizontal concentration in the 
relevant end-user service market, the Commission also seeks information 
on the extent of, and the factors giving rise to, vertical integration 
and disintegration in the CMRS industry. In other words, under what 
circumstances and for what reasons do CMRS providers employ their own 
inputs rather than purchasing them from outside vendors? The Commission 
seeks comment and information on the vertical structure of the CMRS 
industry. How prevalent is vertical integration or disintegration with 
respect to the different elements of physical network infrastructure, 
spectrum, and content, and are there any discernible trends toward 
vertical integration or disintegration with respect to any of these 
inputs? What considerations shape the decisions of CMRS providers to 
make or buy their inputs? What is the actual or potential impact of 
vertical integration or disintegration, if any, on competition among 
providers of CMRS, the cost of providing service, or other aspects of 
the performance of the CMRS industry?
iii. Consolidation and Exit
    23. Consolidation and exit of service providers, whether through 
secondary market transactions or bankruptcy, may affect the structure 
of the mobile telecommunications market. For example, a reduction in 
the number of service providers may increase the market power of any 
given service provider which could lead to higher prices, fewer 
services, and/or less innovation. The Commission seeks comment on the 
effects of consolidation in the mobile telecommunications market. Are 
the effects of consolidation different for mergers and acquisitions, 
swaps, joint ventures, and bankruptcies? Has consolidation affected 
mobile data services differently than mobile telephone services? Has 
consolidation affected rural areas differently than urban areas? Among 
the policies potentially affecting consolidation in this market, the 
Commission eliminated, effective January 1, 2003 a rule limiting the 
amount of spectrum a CMRS licensee could own or control in a given 
licensed area. The Commission seeks comment on how consolidation of 
spectrum and facilities has affected the mobile telecommunications 
market structure since the sunset of the Commission's CMRS Spectrum 
Aggregation Rule.
iv. Barriers to Entry
    24. 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. 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 first-mover advantages, 
large sunk costs, and access to spectrum. The Commission seeks comment 
on these and other types and level of barriers to entry in the mobile 
telecommunications market. What are the most significant barriers to 
entry in the mobile telecommunications market? Are barriers to entry 
different in rural and urban areas?
    25. Access to Spectrum. The Commission seeks comment on whether 
there is access to sufficient spectrum, either through Commission 
auctions or through secondary market transactions, to prevent spectrum 
from becoming a significant barrier to entry in the CMRS industry. Are 
existing service providers spectrum constrained? If so, in which 
geographic markets are carriers most likely to be constrained? Have 
these carriers become more spectrum constrained after rolling out next 
generation services? Do potential entrants have sufficient 
opportunities to access spectrum? As advanced wireless technologies 
become more prevalent, will potential entrants have more or fewer 
opportunities to access spectrum?
    26. The Commission's recent action to facilitate leasing and other 
transactions via secondary markets addressed the question of spectrum 
access in a number of services. In the Secondary Markets R&O, 69 FR 
5711, February 6, 2004 the Commission allowed licensees in the Wireless 
Radio Services, including CMRS, 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. The Commission 
seeks comment on whether this new policy to facilitate spectrum 
leasing, combined with future spectrum auctions such as that for 
Advanced Wireless Services, will provide sufficient opportunities both 
for existing carriers to expand their operations and for new mobile 
telecommunications providers to enter the market. Are there other 
barriers that limit access to spectrum?
    27. The Commission requests comment from licensees and potential 
spectrum lessees regarding their experience exploring possible spectrum 
leases following Commission adoption of the Secondary Markets R&O. Are 
licensees and potential spectrum lessees able to identify potential 
spectrum leasing partners? What considerations are driving negotiations 
regarding spectrum leases? Are there impediments to leasing, and if so, 
what is the nature of these impediments? Are pricing considerations, 
either the price sought by licensees or the amount the lessees are 
willing to pay, acting as an impediment? Are there other 
considerations, such as high transaction costs, that may affect the 
willingness of either licensees or potential lessees to undertake 
spectrum leasing negotiations? What types of leasing arrangements are 
being sought by both licensees and potential spectrum lessees? Are the 
spectrum leasing negotiations targeted at providing additional spectrum 
to meet the needs of an existing licensee in the geographic area 
encompassed by the lease, or aiding an existing licensee to fill out 
its footprint, or providing spectrum access to a new entrant, or to 
achieve some other objective?

[[Page 22037]]

    28. Other Barriers to Entry. The Commission also seeks comment on 
other market conditions that may present barriers to entry in the CMRS 
market. For example, the Commission recognizes that cellular licensees, 
like early entrants in other industries, have benefited from a first-
mover advantage. Do cellular licensees continue to benefit from this 
advantage, and if so, to what extent and in which markets? In addition, 
might access to capital create a barrier to entry in the mobile 
telecommunications market? To what degree do mobile telecommunications 
providers face capital market constraints in financing the purchase of 
spectrum licenses, or the leasing of spectrum rights, or the 
construction of facilities? Do the nationwide carriers face a different 
capital market than do smaller regional and local providers? The 
Commission seeks comment on the height of scale economy barriers in 
mobile telecommunications. Finally, The Commission seeks comment on the 
extent to which the ability to site cell towers in a carrier's licensed 
market area creates a barrier to entry. Some carriers have reported 
problems obtaining permission to site cell towers in certain geographic 
markets. How widespread is this problem? Is this a greater problem in 
certain regions of the country?

B. Carrier Conduct in the Mobile Telecommunications Market

    29. Whether there is effective competition in the mobile 
telecommunications market also depends on the conduct and interaction 
of the carriers in the market. For example, while coordinated 
interaction and unilateral effects may lessen competition, such conduct 
may be averted by the presence of one or more carriers who have the 
ability and incentive to expand sales by offering innovative service 
packages, undercutting the prices of rivals, and/or engaging in 
extensive advertising and promotional campaigns. The Commission asks 
for information on the degree and extent of (i) price rivalry and (ii) 
non-price rivalry. Are there other indicators related to carrier 
conduct that the Commission should examine?
i. Price Rivalry
    30. Past CMRS Reports examined new types of pricing plans in order 
to report on major developments in the industry and to assess the new 
plans' impact on competition. This information is relevant in 
determining the intensity and degree of price rivalry in the mobile 
telecommunications market. To what extent do new types of pricing plans 
reflect price rivalry among the providers? What are the major 
innovations that have occurred with pricing plans since the Eighth 
Report? Have these pricing innovations spread throughout the mobile 
telecommunications market or have they been limited to a subset of 
carriers? In addition, The Commission seeks comment on the extent to 
which carriers in their pricing plans differentiate between data 
services offered over 2G networks and those offered over newer 
generation technologies such as 1X and GPRS networks. Have past pricing 
innovations been more widely adopted in the last year?
    31. The Commission seeks information on which carriers offer 
nationwide pricing plans, particularly those that are not typically 
described as being nationwide operators, and request descriptions of 
the terms of such plans. The Commission asks carriers that offer 
nationwide pricing plans whether they offer the same rates and terms to 
consumers throughout all parts of the country where they offer such 
plans, including Alaska and Hawaii as well as the U.S. Territories. 
Furthermore, do carriers charge different prices (monthly and per 
minute) or offer different terms for their local and regional plans 
across the various areas that they serve, for example, between rural 
and urban areas? If so, are these geographic variations substantial, 
and what are the major reasons for such variations? If there are no 
geographic variations, why not?
    32. Are there patterns where certain demographic groups subscribe 
to similar pricing plans? For example, do subscribers with lower 
personal or household incomes tend to purchase local or regional plans 
rather than national plans? Are particular plans associated with 
teenagers, college students or seniors? Are prepaid services used by a 
group of consumers with similar characteristics? Also, the Commission 
seeks information on the existence and the extent of contracts with 
terms and prices other than those that are widely advertised. Are these 
types of contracts associated with or targeted to a certain type of 
demographic group? Do consumers that use specific types of mobile 
telecommunication services such as mobile data services have similar 
demographic characteristics? Have the introduction of new types of 
pricing plans increased mobile telephone penetration among specific 
demographic groups or in certain geographic areas?
ii. Non-Price Rivalry
    33. Service providers in the mobile telecommunications market also 
compete on non-price characteristics such as coverage, quality of 
service, and ancillary services. Non-price competition is a response to 
consumer preferences and demand. Indicators of non-price rivalry 
include advertising and marketing, capital expenditures, technology 
deployment and upgrades, and the provision of ancillary services. The 
Commission seeks information on non-price rivalry.
    34. Advertising and Marketing. 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,'' and in general, 
advertising for an experience good tends to be persuasive rather than 
informational in nature. What type of advertising do mobile 
telecommunications carriers engage in? Do they utilize promotional or 
informational advertising or a mix of both? Does the type of 
advertising vary with the medium? Are there studies on the national or 
sub-national level that provide data and/or analysis of advertising by 
mobile telecommunications firms? The Commission also seeks comment on 
the extent to which CMRS providers' efforts to brand their services 
through advertising and marketing cultivate brand loyalty.
    35. Capital Expenditures. Capital expenditures are funds spent 
during a particular period to acquire or improve long-term assets such 
as property, plant, or equipment. In the mobile telecommunications 
market, capital expenditures consist primarily of spending to expand 
and improve the geographic coverage of networks, to increase the 
capacity of existing networks to serve more customers, and to improve 
the capabilities of networks (by allowing for higher transmission 
speeds, for example). Have capital expenditures by mobile 
telecommunications providers increased or decreased since the Eighth 
Report? What are the underlying reasons for the change? Are there any 
studies or analyst reports on the capital expenditures of nationwide 
carriers versus regional/local providers? Does data exist on capital 
expenditures by geographic region?
    36. Technology Deployment and Upgrades. Mobile telecommunications 
carriers have been deploying next-generation network technologies, 
which offer mobile data services at higher data

[[Page 22038]]

transfer speeds than earlier versions. The Eighth Report discussed the 
progress of nationwide and regional carriers in deploying these 
technologies. For the Ninth Report, the Commission requests information 
on the extent to which mobile telecommunications carriers are 
continuing to upgrade, or plan to upgrade their networks to these 
advanced services and/or even more advanced technologies--such as EDGE, 
WCDMA, and 1xEV-DO. Specifically, do carriers plan to deploy more 
advanced technologies? If yes, how extensively are carriers planning 
these deployments to be (e.g., will carriers focus on urban areas only, 
or will they deploy these technologies in rural areas as well)? With 
regard to GSM-based carriers, the Commission asks whether carriers are 
planning to upgrade their GPRS systems. If yes, are they planning to 
upgrade to EDGE, WCDMA or some other technology? With regard to CDMA-
based carriers, to what extent are they planning to upgrade their 
networks to include 1xEV-DO technology? Are there other new wireless 
technologies that will improve wireless providers' coverage, capacity 
and/or service offerings for mobile telecommunication services?
    37. As discussed in the Eighth Report, most of the major mobile 
telecommunications carriers have introduced the capability to exchange 
text messages with subscribers on other carriers' networks. The 
Commission seeks information on the extent to which this intercarrier 
interoperability has affected Short Messaging Service (SMS) adoption 
rates.
    38. The Commission requests information on the number of users of 
SMS and the volume of SMS traffic. In addition, the Commission requests 
comment as to the actual data transfer speeds that are being 
experienced with GPRS and 1X systems (as well as EDGE and 1xEV-DO 
systems, where those technologies have been deployed) and the degree to 
which individual users' data speeds vary with the number of subscribers 
concurrently operating on these systems within a given area.
    39. There are a growing number of service providers that offer 
data-only services. These providers include traditional one-way paging 
service providers as well as two-way, data-only service providers. For 
example, as discussed in the Eighth Report, Monet Mobile offers data-
only service using CDMA1xEV-DO technology and broadband PCS spectrum. 
Two other carriers, Cingular Wireless and Motient Corp. operate two-way 
data networks using the 900 MHz SMR and 800 MHz SMR spectrum bands, 
respectively. The Commission asks for information on carriers providing 
one-way and two-way data-only services, including deployment, 
technology employed, data speeds, pricing, number of subscribers and 
usage.
    40. The Commission asks for comment on new or enhanced mobile data 
services and devices that have been introduced since the Eighth Report 
such as new or enhanced location-based services, games, digital photo 
and video technologies, and downloadable music. To what extent do 
providers bundle different mobile data services with each other and/or 
with voice service? The Commission asks for information on the types of 
devices upon which these services are offered; how they are priced 
(e.g., bundled or stand-alone, bulk or per usage); where the services 
are available; and the usage and subscribership levels?
    41. The Commission also asks for comment on the availability of 
mobile Internet services. Do providers offer mobile Internet services 
throughout their entire licensed service areas, or only in areas that 
have been upgraded to next generation technologies, such as GPRS and 
1X? Which types of devices are used most for mobile Internet access? Do 
any of the features of mobile data devices--such as battery life, data 
storage capacity, and screen size--constrain the ability of users to 
access mobile Internet services, and therefore limit the demand for 
these services? To what extent are users of wireless high-speed 
Internet access services getting this access through mobile and 
portable computing devices using Wi-Fi and similar technologies? How 
does such use, whether on a subscription or non-subscription basis, 
compare to Internet access services using licensed spectrum? To the 
extent that mobile service providers are integrating Wi-Fi technology 
into their devices, how is this affecting the use of mobile Internet 
services? In how many locations is Wi-Fi and similar technologies 
currently available and in which types of locations do most users 
establish high-speed connections to the Internet (e.g., airports, 
coffee shops, community networking)? Are those locations part of a 
retail or wholesale network, or independent stand-alone locations? What 
data transfer speeds do most users experience with the various 
unlicensed technologies and other standards? How are subscription-based 
offerings priced to consumers? Is service offered as part of a bundled 
package, an add-on or as a stand-alone product? Are voice services 
available using these connections and if so, by whom, where and how are 
they priced?
    42. Provision of Ancillary Services and Promotional Offers. Mobile 
telecommunications providers offer ancillary services and promotions 
such as caller ID, voice mail, call forwarding, long distance, push-to-
talk, free or reduced priced handsets, and free night and weekend 
minutes. The cost of these services is either included in the monthly 
charge or billed separately. Carriers use ancillary services and 
promotional offers to differentiate their products from those of their 
competitors. They compete not only in terms of the monthly charge, but 
also with the price and scope of ancillary services and promotions. The 
Commission seeks comment on whether carriers offer different ancillary 
services or promotional products and services in different geographic 
markets. What are these differences and why do they occur?
iii. Absence of Coordinated Interaction and Unilateral Effects
    43. Anti-competitive outcomes may result from two distinct types of 
firm conduct--coordinated interaction (both tacit and explicit 
collusion) among two or more competitors, or the unilateral actions of 
a single firm. In order to fully evaluate carrier conduct in the mobile 
telecommunications market, the Commission seeks comments on the 
potential for and likelihood of coordinated interaction and unilateral 
effects. Are coordinated effects likely in the mobile 
telecommunications market? If so, why? Do conditions in the mobile 
telecommunications market make unilateral price increases or other non-
price unilateral effects likely? Also, the Commission seeks comment on 
any instances of potential coordinated interaction or unilateral 
effects in the United States' mobile telecommunications market.
iv. Consumer Behavior in the Mobile Telecommunications Market
    44. The ability and inclination of consumers to purchase a product 
or service or to change firms may influence market structure, carrier 
conduct, and market performance. When initially purchasing a product or 
service or changing providers, consumers may incur transactions costs 
in doing so. These transactions costs may in some instances make the 
initial purchase or subsequent switching of firms prohibitively 
expensive. The level of these costs may affect concentration measures, 
marketing and advertising, pricing plans, and penetration rates, among 
other metrics. Therefore, for the Ninth Report, the Commission intends 
to analyze and collect information on

[[Page 22039]]

these consumer costs as they relate to the market structure, firm 
conduct, and market performance.
v. Access to Information on Mobile Telecommunications Services
    45. It is apparent that wireless consumers are demanding more 
information on the availability and quality of mobile 
telecommunications services, and that numerous third parties have been 
responding to this demand by compiling and reporting such information. 
There are considerable sources of information available to consumers, 
including 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. The Commission seeks comment on the 
development of consumer information sources for the mobile 
telecommunications market. Are there new avenues for consumers to gain 
information, such as retailers providing on-line and in-store 
comparisons of pricing plans, services, and handsets? Also, are 
consumers demanding information on mobile data services such as SMS, 
email, and Internet access? If so, are any sources providing consumers 
with this information?
vi. Consumer Ability to Switch Service Providers
    46. Churn. The Commission seeks comment on the use of churn rates 
as a tool in its analysis of consumer behavior in the mobile 
telecommunications market. Churn refers to the number of customers an 
operator loses over a given period of time. Carriers may calculate 
churn using different methodologies. For example, when a customer moves 
from New York to Los Angeles, changes numbers but keeps the same 
provider, do any companies count this as churn? When a customer's 
service contract expires and the customer signs up for a new plan with 
the same provider, do any companies count this as churn? The Commission 
asks carriers to submit descriptions of how they calculate churn. Do 
the differences in how churn is calculated prohibit a meaningful 
comparison of churn figures across the wireless industry? In the Eighth 
Report, the Commission found that most carriers report company-wide 
churn rates between 1.5 and 3 percent per month. How reliable are these 
churn estimates? Are there other sources of churn data available that 
should be included in the Ninth Report? Further, the Commission seeks 
sub-national or regional churn data, and churn data by demographic 
groups.
    47. The Commission noted in the Eighth Report that customers have 
consistently indicated cost and network quality as the main reasons for 
changing providers. Have the reasons consumers churn remained the same? 
If not, what are the reasons for consumer churn? The Commission also 
found that average monthly churn rates for mobile telephone service 
have remained fairly constant over the past three years. Since the 
Eighth Report, has there been a change in the churn rate? If there has 
been a change, what is the magnitude of this change?
    48. Local Number Portability. As of November 24, 2003, wireless 
carriers in the top 100 markets were required to permit subscribers to 
take their phone numbers with them to a new carrier in the same market 
area. This process, called local number portability (LNP), is expected 
to make it easier for wireless subscribers to change carriers by 
eliminating some of the cost and inconvenience of having to change 
their phone numbers whenever they change to a different wireless 
carrier. Having to change to a new telephone number upon subscribing to 
a new wireless service provider can involve both direct and indirect 
switching costs. The wireless subscriber may have to change business 
cards and stationery, and must give the new number by whom he or she 
wishes to be reached in the future. Such costs make some subscribers 
more reluctant to switch carriers. The LNP requirement will expand 
beyond the top 100 markets beginning in May 2004 as wireless carriers 
in those markets make formal requests to other wireless carriers to 
provide this capability. The Commission seeks comment on the effects of 
LNP on wireless competition and consumer behavior. Has wireless LNP 
caused wireless carriers to offer new services or features or to adjust 
their pricing strategies, either to attract new customers interested in 
porting their numbers from competing carriers or to induce their 
existing customers to stay? Has LNP affected wireless customer churn 
rates in the top 100 markets? If so, has the effect been significant?

C. Mobile Telecommunications Market Performance

    49. The structural and behavioral characteristics of a competitive 
market identified above 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. In 
order to determine if these goals are met and whether there is still 
effective competition in the market, the Commission intends to analyze 
various metrics including pricing levels and trends, subscriber growth 
and penetration, Minutes of Use (MOU), innovation and diffusion of 
services, and quality of service. Are there any other metrics that 
would add to its analysis of the mobile telecommunications market? Are 
these metrics available on a national or sub-national level?
i. Pricing Levels and Trends
    50. Pricing Trends. The Eighth Report contained pricing data from a 
variety of sources, all of which indicated that the average price of 
mobile telephone service has been decreasing over time. The Eighth 
Report cited information from the United States Department of Labor's 
Bureau of Labor Statistics (BLS), Econ One, and trends based on CTIA 
data. BLS began reporting a cellular telephone component of the 
Consumer Price Index (CPI) in December 1997 (cellular CPI). In 
addition, using CTIA data, the Commission calculated a national average 
Revenue per Minute (RPM) by dividing the Average Revenue per Unit 
(ARPU) by MOUs. The Commission used this RPM figure as an estimate of 
the average price per minute of mobile telephone service. In contrast 
to the Commission's estimate of RPM and BLS's cellular CPI, which 
attempt to capture national pricing trends, Econ One analyzes pricing 
plans for the top 25 United States' cities. The firm also calculates 
the average price of service across four different monthly usage levels 
and derives an average for all users.
    51. The Commission seeks comment on the use of these various 
pricing estimates as a tool in its analysis of the mobile 
telecommunications market, including to what extent price decreases are 
evidence of effective competition. The Commission asks for feedback on 
the sources of the pricing data used in the Eighth Report and request 
additional national and sub-national pricing data for the Ninth Report. 
Are there additional analyses that can be performed or conclusions that 
can be drawn from new or existing pricing data? The Commission also 
seeks comment on pricing trends for mobile data services offered by 
mobile telecommunications providers. Are there data on these services 
available on a national or sub-national level? Have prices of mobile 
data services fallen since their introduction? Are most data pricing 
plans based on the amount of

[[Page 22040]]

minutes used, or do they offer a flat rate for unlimited use? How are 
new or enhanced mobile data services such as location-based services, 
games, digital photos and downloadable music priced? Are there any 
reports or analyses that discuss pricing trends of mobile data 
services?
    52. Pricing in Rural Areas. The Commission has identified a study 
by Econ One that compares mobile telephone pricing in urban versus 
rural areas. Are commenters aware of other pricing studies that look at 
urban versus rural or other sub-national mobile telecommunications 
pricing? Econ One completed a study that compared pricing in the 25 
largest United States' cities (with an average population of 4.4 
million) with 25 randomly-selected towns or cities (with an average 
population of 95,611) located in RSAs. The Commission asks for 
additional information on whether there are meaningful pricing 
differences between urban and rural areas. To the extent that such 
differences exist, what are the reasons for such differences? Should 
additional analyses on the differences between urban and rural mobile 
telecommunications pricing be performed? What additional conclusions 
can be drawn, and what are the limitations of those conclusions?
    53. Given the scarcity of studies that provide direct information 
on pricing, the Commission is interested in finding alternative ways of 
determining whether pricing in rural areas conform to national pricing 
plans. Are there other ways of studying this issue? Can an economic 
model be constructed that provides answers to this question in the 
absence of direct data on rural pricing? Are there existing studies or 
data sets that would give us the ability to explore this issue?
    54. Cost. Since price changes may reflect corresponding changes in 
underlying costs rather than a change in the competitive environment, 
pricing data and trends can be a misleading indicator of the status of 
competition. One way to evaluate the connection between prices and 
costs is the Price-Cost margin. In theory, a relatively narrow Price-
Cost margin would be an indicator of effective competition. The 
Commission invites comments on the use of the Price-Cost margin to 
analyze the connection between prices and costs in the mobile 
telecommunications market. Are there other measures that the Commission 
should consider in evaluating the relationship between prices and costs 
in the mobile telecommunications market?
    55. One possible estimate for the price component of the Price-Cost 
margin is RPM. The Commission seeks comment on the use of RPM as a 
proxy for pricing of mobile telecommunications services for the purpose 
of estimating the Price-Cost margin. The Commission also invites 
suggestions on alternative pricing metrics and sources of associated 
data that could be used for the purpose of providing a price-cost 
comparison. The Commission asks for submissions of RPM estimates for 
mobile data services or for mobile voice and data services combined.
    56. Available cost studies for the mobile voice market that the 
Commission has identified focus narrowly on estimating the cost of 
terminating calls on mobile networks. If, as one study concludes, there 
are no significant cost differences between origination and termination 
of calls on a mobile network in terms of network elements used, then 
estimates of the cost of mobile call termination could be used to 
approximate the network costs of mobile voice services; however, since 
call termination is a wholesale activity, estimates of the cost of call 
termination generally do not include certain non-network retailing 
costs such as customer billing costs and advertising and marketing 
expenses. The Commission seeks comment on the adjustments that should 
be made to the network cost estimates to take into account non-network 
costs. Does the provision of mobile data services affect network and 
non-network costs, and, if so, how? The Commission also invites 
estimates of the impact of the deployment of next generation advanced 
technologies on the per-minute cost of mobile telecommunications 
traffic.
    57. Roaming. The Commission also seeks data on the availability of 
roaming for wireless customers. To what extent do carriers have 
agreements that enable their customers to use automatic roaming 
throughout the United States? Are there geographic areas in which some 
carriers do not have automatic roaming agreements? If so, where are 
those areas and is there any correlation to the number of wireless 
providers operating in those areas? Are rural customers more affected 
than non-rural customers? How many customers use manual roaming? Where 
are those customers located when they use manual roaming, and how 
frequent is their usage? How has the deployment of mobile data services 
affected the provision of roaming service? Are consumers able to access 
mobile data services when roaming?
    58. Average Revenue Per Unit. Average monthly revenue per 
subscriber is another key metric presented in past CMRS Reports. One 
source of this metric is the industry-wide ARPU figure reported by CTIA 
in its semi-annual mobile telephone survey. In addition, many carriers 
report their individual ARPU figures periodically in their SEC filings. 
The Commission seeks comment on the use of ARPU as a metric in its 
analysis of the mobile telecommunications industry. Are additional ARPU 
data available that should be considered, in particular data depicting 
whether and how ARPU varies by region and/or demographic group? Are 
there additional analyses that can be performed or conclusions that can 
be drawn in the Ninth Report from new or existing data?
    59. CTIA reported that ARPU declined almost continuously from 1987 
to 1998, going from a peak of $98.02 in December 1988 to a low of 
$39.43 in December 1998. However, since 1999, ARPU has been increasing, 
rising to $48.40 in December 2002. The Eighth Report stated that the 
growth in ARPU might be the result of a variety of factors, including 
increased usage offsetting per-minute price declines, as well as the 
selection of higher-priced monthly calling plans by consumers. The 
Commission requests from commenters additional input on the possible 
causes for the recent rise in ARPU, as well as additional data that may 
support various hypotheses. What role, if any, do changes in ARPU have 
on competition?
ii. Quantity of Services Purchased
    60. Subscriber Growth. Since the Seventh Report, (information not 
published in the Federal Register), the Commission has estimated the 
number of United States' subscribers using NRUF data. The Commission 
estimates the total number of mobile telephone subscribers by using 
assigned telephone numbers in the NRUF data as a proxy for subscribers. 
In the Eighth Report, the Commission estimated that there were 141.8 
million subscribers in the United States as of December 31, 2002. NRUF 
data, however, do not include information on the actual subscribers. 
Therefore, the Commission requests information on subscribers that 
would assist in a greater understanding of the mobile 
telecommunications inventory, such as penetration rates by age groups 
and/or household penetration rates.
    61. Prior to the Seventh Report, the Commission relied on estimated 
national subscribership data from a semi-annual survey, started in 
1985, conducted by CTIA. The CTIA estimate for December 31, 2002 was 
140.8 million subscribers, less than a 1.0% difference from the 
Commission's NRUF estimate. The Commission had reported

[[Page 22041]]

CTIA's semi-annual estimates in order to present time series 
information on subscribership growth. The Commission asks for comment 
whether to continue to present these data.
    62. Sub-National Penetration Rates. For purposes of the Eighth 
Report, the Commission chose to use EAs as the geographic unit for its 
sub-national subscribership analysis using NRUF data. EAs, which are 
defined by the United States Department of Commerce, consist of one or 
more economic nodes and the surrounding areas that are economically 
related to the node. The main factor in determining the economic 
relationship between the economic node(s) and the surrounding 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. While 
wireless carriers have considerable discretion in how they assign 
telephone numbers across the rate centers in their operating areas, 
they generally assign numbers to subscribers from rate centers in the 
same EAs in which the subscribers live.
    63. The Commission asks for comment on how to determine which 
geographic area or areas should be used to calculate mobile 
telecommunications subscribership and penetration rates for the Ninth 
Report. The Commission requests comment on the appropriateness of using 
EAs for such calculations. Would other geographic areas be appropriate 
to use in place of or in addition to EAs, such as states, MTAs, BTAs, 
CMAs, or counties, noting the limitations of the NRUF data? In 
addition, are there other ways to interpret existing national and sub-
national subscribership data for purposes of the Ninth Report? Also, 
are there data on either a national or sub-national basis on the number 
of mobile telecommunications customers that use mobile data services?
    64. Minutes of Use. To analyze mobile telecommunications usage, the 
Commission has used MOUs as a key metric in previous CMRS Reports. The 
Eighth Report includes MOU estimates from CTIA, Paul Kagan and 
Associates, and J.D. Powers & Associates. All of these sources showed 
MOUs increasing substantially during 2001. The Commission seeks comment 
on the use of MOUs as an indicator of the demand for mobile 
telecommunications services. For purposes of the Ninth Report, the 
Commission asks for comment on the sources of the MOU data presented in 
the Eighth Report and request additional MOU data. In addition, should 
the Commission perform other analyses or draw additional conclusions 
from new or existing data? All of the MOU sources presented in the 
Eighth Report estimate MOUs on a national basis. In order to increase 
the granularity of its analysis for the Ninth Report, the Commission 
requests data on MOUs on a sub-national basis and/or broken down by 
various demographic groups.
iii. Variety, Innovation, and Diffusion of Service Offerings
    65. The Commission observed in the Eighth Report that the continued 
rollout of differentiated service offerings indicated a competitive 
marketplace. In the mobile telephone sector, the Commission is able to 
observe independent pricing behavior, in the form of continued 
experimentation with varying pricing levels and structures, for varying 
service packages, with various available handsets and policies on 
handset pricing. AT&T Wireless's Digital One Rate (DOR) plan, 
introduced in May 1998, is one notable example of an independent 
pricing action that altered the market and benefited consumers. Today, 
all of the nationwide operators offer some version of DOR 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. Another trend in mobile telephone pricing has 
been the introduction of on-network, or ``on-net,'' national pricing 
plans. These plans are similar to DOR plans, with the exception that 
subscribers incur roaming charges when they use their phones off the 
carrier's network (off-net). In addition, some mobile wireless carriers 
offer service plans designed to compete directly with wireline local 
telephone service. As reported in the Eighth Report, the largest of 
such providers, Leap, under its ``Cricket'' brand, offers mobile 
telephone service in 40 markets in 20 states. Leap's service allows 
subscribers to make unlimited local calls and receive calls from 
anywhere for about $30 per month. Since the Eighth Report, have 
providers introduced new pricing plans and/or services to differentiate 
themselves? What other sorts of plans are being used to distinguish 
service providers and/or serve particular market segments?
iv. Quality of Service
    66. In addition to competing on price, in a competitive market 
firms also compete on the basis of service quality. Mobile 
telecommunications service is an experience good, and therefore the 
quality of the product is unknown until the consumer actually uses it. 
Further, service quality in this market is dependent on when and where 
the service is used. The Commission found in the Eighth Report that 
carriers have been aggressively building and upgrading their networks 
with digital technology. This has resulted in improved voice quality 
and additional calling features to consumers, as well as higher 
capacity for operators, thereby allowing more customers to access the 
network and use their phones at the same time. However, some reports 
indicate that consumers perceive that there is a problem with service 
quality. Service quality issues may be a result of market structure or 
carrier conduct. In some cases, however, service quality issues may be 
due to factors that are not under a firm's control or influence.
    67. In order to analyze quality of service in the mobile 
telecommunications market, specific service problems need to be 
identified. However, information on service issues--whether from 
consumer surveys, marketing reports, or other sources--generally convey 
only what the existing problems are and do not in themselves indicate 
non-competitive behavior. Quality of service data must be analyzed 
along with the metrics for market structure, carrier conduct, consumer 
behavior, and market performance in order to evaluate the underlying 
causes, their significance, and whether the current level of service 
quality has an impact on competition in the market.
    68. The Commission seeks comment on service quality in the mobile 
telecommunications market. Does objective data on quality of service 
exist? Are there any consumer surveys on service quality in the mobile 
telecommunications market? How reliable are the data collected from 
these consumer surveys? Also, what other sources provide information on 
service quality in the mobile telecommunications market, and how 
reliable are these sources? How do market structure and carrier conduct 
affect service quality? Are there other metrics that should be used to 
analyze service quality as it relates to competitive behavior? In 
addition, The Commission seeks comment on whether LNP affects the 
quality of services offered by wireless telecommunication providers.
v. Wireless--Wireline Competition
    69. In the Eighth Report, the Commission noted that there is 
evidence that consumers are substituting wireless service for 
traditional wireline communications. However, it appears that only a 
small percent of wireless customers use their wireless phones as their 
only phone, and that relatively few wireless

[[Page 22042]]

customers have ``cut the cord'' in the sense of canceling their 
subscription to wireline telephone service. The Eighth Report also 
discussed the effects of mobile telephone service on the operational 
and financial results of companies that offer wireline services. Such 
effects include a decrease in the number of residential access lines, a 
drop in long distance revenues, and a decline in payphone profits. More 
recently, the Commission has affirmed that the LNP rules that went into 
effect on November 24, 2003 require ``intermodal'' number porting 
between wireline and wireless carriers, thus enabling a wireline 
customer to port his or her telephone number to a wireless carrier 
serving the customer's local calling area. Given these developments, 
the Commission asks for comment on the extent to which mobile telephone 
service competes with wireline service. Has the introduction of 
intermodal LNP affected consumer behavior or had any impact on 
wireless-wireline competition? Are there any other new developments in 
wireless-wireline competition that have occurred since the Eighth 
Report? What are the major reasons for these developments? What effect 
have they had on the provision of telecommunications services other 
than wireless?
    70. In order to track and analyze competition between mobile 
telecommunications and wireline services more effectively, the 
Commission requests data on: (i) The number of mobile 
telecommunications subscribers who do not subscribe to residential 
wireline service; (ii) the percentage of consumers' total monthly voice 
communication minutes that are made from mobile phones; (iii) the 
percentage of consumers' total monthly long distance minutes that are 
made from mobile phones; (iv) the percentage of mobile 
telecommunications subscribers' calls and minutes that occur in their 
homes using their mobile phones; (v) the percentage of both mobile 
telecommunications and wireline calls and minutes that terminate on 
mobile phones; and (vi) demographic data on which groups of consumers 
have allocated a substantial portion of their voice communications to 
mobile telecommunications service. Should the Commission gather 
additional data, perform additional analyses, or draw new conclusions 
on wireless-wireline competition?

D. International Comparisons of Mobile Telecommunications

    71. The Eighth Report compared the mobile telephone sectors in the 
United States, Western Europe, and parts of the Asia-Pacific by 
examining a number of performance measures, including penetration 
levels, subscriber growth, MOUs, and pricing. The scope of 
international comparisons in the Eighth Report and previous CMRS 
Reports has been constrained by the availability of comparable 
international data. For the purposes of the Ninth Report, The 
Commission seeks data to update and possibly expand upon these 
international comparisons. The international comparisons in the Eighth 
Report were based on various sources of data that were generally 
current as of the second half of 2002. The Commission requests 
suggestions on sources of data for updating international comparisons 
of penetration levels, subscriber growth, and usage for the year 2003. 
The Commission also invites suggestions on additional performance 
measures and associated data sources for comparing mobile 
telecommunications sectors in the United States and other countries.

III. Procedural Matters

A. Ex Parte Presentations

    72. This is an exempt proceeding in which ex parte presentations 
are permitted (except during the Sunshine Agenda period) and need not 
be disclosed.

B. Filing of Comments and Reply Comments

    73. The Commission invites comment on the issues and questions set 
forth above. Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's 
rules, 47 CFR 1.415, 1.419, interested parties may file comments on or 
before April 26, 2004, and reply comments on or before May 10, 2004. 
Comments may be filed using the Commission's Electronic Comment Filing 
System (ECFS) or by filing paper copies. See Electronic Filing of 
Documents in Rulemaking Proceedings, 63 FR 24121, May 1, 1998.
    74. Comments filed through the ECFS can be sent as an electronic 
file via the Internet to http://www.fcc.gov/e-file/ecfs.html. 
Generally, only one copy of an electronic submission must be filed. If 
multiple docket or rulemaking numbers appear in the caption of this 
proceeding, however, commenters must transmit one electronic copy of 
the comments to each docket or rulemaking number referenced in the 
caption. In completing the transmittal screen, commenters should 
include their full name, United States Postal Service mailing address, 
and the applicable docket or rulemaking number. Parties may also submit 
an electronic comment by Internet email. To get filing instructions for 
email comments, commenters should send an e-mail to [email protected], and 
should include the following words in the body of the message: ``get 
form.'' A sample form and directions will be sent in reply. Parties who 
choose to file by paper must file an original and four (4) copies of 
each filing. Parties choosing to submit, as part of their comments, map 
files in response to requests in ]] 13 through 14, ], supra, should 
submit a CD (compact disc) containing one copy of the maps of their 
service areas, with the various distinctions described above, in one of 
the following formats: MapInfo table (.tab), Tagged Image Format 
(.TIF), or Shaped file (.shp). If you have questions about submitting 
map files, please contact Benjamin Freeman at (202) 418-0628. Paper 
filings and CDs containing map files can be sent by hand or messenger 
delivery, by commercial overnight courier, or by first-class or 
overnight United States Postal Service mail. The Commission's 
contractor, Natek, Inc., will receive hand-delivered or messenger-
delivered paper filings for the Commission's Secretary at 236 
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing 
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be 
held together with rubber bands or fasteners. Any envelopes must be 
disposed of before entering the building. Commercial overnight mail 
(other than United States Postal Service Express Mail and Priority 
Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 
20743. United States Postal Service first-class mail, Express Mail, and 
Priority Mail should be addressed to 445 12th Street, SW., Washington, 
DC 20554. All filings must be addressed to the Commission's Secretary, 
Office of the Secretary, Federal Communications Commission. Parties 
also should send four (4) paper copies of their filings to Rachel 
Kazan, Federal Communications Commission, Room 6126, 445 12th Street, 
SW., Washington, DC 20554.

IV. Ordering Clauses

    75. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 4(i), 4(j), and 403 of the Communications Act of 
1934, as amended, the Notice of Inquiry is adopted.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 04-9295 Filed 4-22-04; 8:45 am]
BILLING CODE 6712-01-P