    Telecommunications: FCC Should Include Call Quality in Its Annual
    Report on Competition in Mobile Phone Services (28-APR-03,
    GAO-03-501).

    Over the past decade, Americans have come to rely increasingly on
    mobile phones to meet their business and personal needs. However,
    because of the nature of radio transmission and other
    constraints, consumers are not always able to complete calls or
    to hear their calls clearly. As reliance on mobile phones has
    increased, state officials, consumer groups, the media, and
    others have raised concerns about the extent of call quality
    problems. With regard to call quality, GAO agreed to describe the
    regulatory framework; determine the extent to which consumers are
    experiencing problems; and discuss actions for improving call
    quality suggested by interested parties.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-03-501
        ACCNO:   A06736
      TITLE:     Telecommunications: FCC Should Include Call Quality in
    Its Annual Report on Competition in Mobile Phone Services
         DATE:   04/28/2003
      SUBJECT:   Cellular telephone
    	     Internal controls
    	     Strategic planning
    	     Telecommunication industry
    	     Customer service
    	     Competition

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    GAO-03-501

                                           A

    Report to the Honorable Anthony D. Weiner, House of Representatives

    April 2003 TELECOMMUNICATIONS FCC Should Include Call Quality in Its
    Annual Report on Competition in Mobile Phone Services

    GAO- 03- 501

    Letter 1 Results in Brief 2 Background 5 Under the Regulatory Framework
    for the Mobile Phone Industry,

    FCC Relies on Competitive Market Forces to Determine Call Quality and Has
    Not Set Specific Quality Standards 11 Concerns Have Been Raised, but
    Available Data Are Inconclusive on

    Extent of Call Quality Problems 20 Interested Parties Have Suggested
    Actions for Improving Call

    Quality 30 Conclusions 35 Recommendation for Executive Action 36 Agency
    Comments 36

    Appendixes

    Appendix I: Scope and Methodology 38

    Appendix II: Results of Consumer Survey on Mobile Phone Service 42

    Appendix III: FCC Fact Sheet on Mobile Phone Service 47

    Appendix IV: Comments from the Federal Communications Commission 56

    Appendix V: Key Contacts and Major Contributors 59 GAO Contacts 59 Staff
    Acknowledgments 59

    Tables Table 1: Consumer Complaints about Mobile Phone Service Filed with
    the California Public Utilities Commission,

    1999- 2002 26 Table 2: Mobile Phone Call Quality Problems Based on
    November

    2002 Consumer Survey 29 Figures Figure 1: Key Components of a Mobile Phone
    System 6

    Figure 2: Estimated Average Number of Minutes of Mobile Phone Service Used
    Per Month in the United States, 1997- 2002 9 Figure 3: Common Call Quality
    Problems Associated with Mobile

    Phones 11 Figure 4: U. S. Market Shares and Annualized Turnover Rates for

    Mobile Phone Service Carriers, Third Quarter, 2002 16 Figure 5: FCC Mobile
    Phone Consumer Complaints by Category,

    2002 25

    Figure 6: Overall Customer Satisfaction with Call Quality, November 2002
    Consumer Survey 28

    Abbreviations

    CDMA code division multiple access CTIA Cellular Telecommunications &
    Internet Association FCC Federal Communications Commission FTC Federal
    Trade Commission GSM global system for mobile communications MHz megahertz
    NARUC National Association of Regulatory Utility Commissioners OFTEL
    Office of Telecommunications TDMA time division multiple access

    This is a work of the U. S. Government and is not subject to copyright
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    Letter

    April 28, 2003 The Honorable Anthony D. Weiner House of Representatives
    Dear Mr. Weiner: Over the past decade, mobile phone service has gone from
    being a luxury item to an everyday part of life. 1 In 2002, over 140
    million Americans had mobile phone service, and these customers used about
    55.5 billion minutes of mobile phone service a month. 2 As the public has
    come to rely more on mobile phones for its business and personal needs,
    concerns have been

    raised by state officials, consumer groups, the media, and others about
    call quality* the ability to make and complete calls with good sound
    quality.

    You asked us to examine several issues related to the regulation and
    assessment of mobile phone call quality. We agreed to (1) describe the
    regulatory framework that exists regarding mobile phone call quality, (2)
    determine the extent to which consumers are experiencing call quality
    problems, and (3) discuss actions for improving call quality suggested by

    interested parties. To meet these objectives, we reviewed laws and
    regulations governing the mobile phone industry. At the federal level, we
    spoke to officials at the Federal Communications Commission (FCC)* the
    agency that oversees the mobile phone industry* regarding their views on
    the regulatory framework; the extent of problems with call quality,
    including consumer complaints; and potential actions to improve call
    quality. We contacted state public utility commissions to determine how
    they regulate mobile phone service in their states. Thirty- three states
    provided information. We also spoke to officials in attorney general
    offices and/ or public utility

    commissions in California, New York, Illinois, Massachusetts, Nebraska,
    New Jersey, and Texas. To obtain data on call quality and other
    information, we contacted officials at the six largest national mobile
    phone service carriers: AT& T Wireless Services, Inc. (AT& T Wireless);
    Cingular

    1 For purposes of this report, the term mobile phone service includes the
    provision of mobile phone services by cellular, broadband personal
    communications service, and digital specialized mobile radio carriers.

    2 Data provided by the Cellular Telecommunications & Internet Association
    (CTIA), an industry trade association.

    Wireless, LLC (Cingular); Nextel Communications, Inc. (Nextel); Sprint
    PCS; T- Mobile USA, Inc. (T- Mobile USA, formerly VoiceStream); and
    Verizon Wireless, LLC (Verizon Wireless). We also contacted officials at
    other firms* Telephia, Inc.; LCC International, Inc.; and Scoreboard* that
    collect network data. In addition, we spoke to an official at the Federal
    Trade Commission (FTC) concerning consumer complaints they have

    received about mobile phone service. We also spoke to consumer advocates,
    financial analysts, and attorneys engaged in class- action lawsuits
    against carriers about various aspects of the mobile phone industry.

    We contracted with a market research firm to administer 26 questions as
    part of a national telephone survey conducted in November 2002. Our
    questions addressed issues such as experiences with certain call quality
    problems, satisfaction with the quality of mobile phone service,
    complaintmaking practices, and factors involved in decisions to change
    companies. We projected the results of the survey to the population of
    adult mobile phone users. However, we are concerned about the potential
    for those who

    did not respond to the survey to differ from those who did respond in some
    way that could affect the results. We have no explicit reason for
    suspecting that the survey suffers from this shortcoming. Instead, our
    concern arises

    out of the large sample of telephone numbers (about 19,000) dialed to
    produce about 1,000 survey respondents, about 550 of whom use mobile
    phones.

    In addition, we contacted a number of experts who are knowledgeable about
    mobile phone issues to give us their opinions about potential actions the
    federal government might take to improve call quality. This report also
    draws on information collected for our recent report on spectrum
    management issues. 3 We conducted our work from March 2002 through March
    2003 in accordance with generally accepted government auditing standards.
    For a more detailed discussion of our scope and methodology, see appendix
    I.

    Results in Brief Under the regulatory framework for mobile phone service,
    FCC generally relies on competitive market forces to determine mobile
    phone call quality. 3 See U. S. General Accounting Office,
    Telecommunications: Comprehensive Review of U. S.

    Spectrum Management with Broad Stakeholder Involvement Is Needed, GAO- 03-
    277 (Washington, D. C.: January 2003).

    The Omnibus Budget Reconciliation Act of 1993 provided a regulatory
    framework that directed FCC to encourage the promotion of competitive
    market conditions for mobile phone service and limited the ability of the
    states to regulate it. In the 1993 Act and other legislation, the Congress
    granted FCC flexibility in regulating mobile phone services. In
    implementing this legislation, FCC has taken actions to encourage the

    growth of competitive markets that have resulted in most parts of the
    country having several competing carriers. FCC believes that this
    competitive market will provide consumers with the level of call quality
    they desire and that adopting federal regulations that require a certain
    minimum level of call quality are not necessary. At the direction of the
    Congress, FCC reports annually on whether or not there is effective
    competition in the market for mobile phone services. Over the last 7
    years, these reports have included key aspects of mobile phone service*
    such as the number of competitors in the marketplace, trends in
    subscribership and the prices of service, deployment in rural areas, and
    features provided by carriers* but have not included information on call
    quality.

    Concerns about mobile phone call quality have been raised by state
    officials, consumer groups, the media, and others. Based on the results of
    our consumer survey, conducted in November 2002, we estimate that

    nearly 83 percent of mobile phone users were satisfied with their service
    at that time, about 9 percent were dissatisfied, and the remainder were
    indifferent. 4 In addition, we estimate that about 47 percent of adult
    mobile phone users believed their call quality was improving, while about
    5 percent believed that their call quality was getting worse. We also
    found that users were experiencing some call quality problems, including a
    lack

    of coverage, limited network capacity at times, dropped calls, and poor
    sound quality. For example, we estimate that 22 percent of users were
    unable to successfully complete 10 percent or more of their calls, because
    the calls were dropped by the network. Data sources other than consumer
    surveys would be useful in assessing the extent of mobile phone call
    quality problems; however, these data were either not available or were of
    limited usefulness because they were not collected systematically. The
    major carriers are not required to report data on the performance of their
    mobile phone networks (such as the number of dropped calls or detailed
    coverage information) to FCC, and they declined to provide us with those
    data as well. The carriers said that this information was proprietary and
    would be

    4 All percentage estimates from the survey have sampling errors of plus or
    minus 8 percentage points or less, unless otherwise noted. For details,
    see appendix I.

    difficult to interpret, even if made available. Carriers also declined to
    provide us with their data on customer complaints. Complaint data from
    other sources, such as state public utility commissions, were not useful
    in determining the extent of call quality problems for a number of
    reasons, including inconsistencies in the method of collecting and
    classifying complaints. Interested parties, such as state officials and
    consumer advocates, have suggested possible actions to address call
    quality concerns. These actions would have varying potential benefits and
    drawbacks. For example, some

    of the possible actions that have been proposed would give consumers more
    information on carriers* coverage areas, their rates of dropped and
    blocked calls, or complaints against them prior to consumers choosing a
    carrier. Some interested parties have also suggested that carriers give
    consumers longer trial periods before they commit to a long- term contract
    with a carrier. These actions could better enable consumers to choose the
    carrier that best meets their needs regarding call quality. Some parties

    would also like to see minimum industrywide call quality standards set for
    the carriers. Others have noted, however, that some of the suggested
    actions have drawbacks that could potentially drive up the price of mobile

    phone service, limit the entry of new carriers and thus affect competition
    in the marketplace, or lead to a reduction of service in regions that are
    technically difficult or costly to serve, such as mountainous or sparsely
    populated rural areas. The carriers say that they are taking actions to
    improve call quality and further regulation is not needed. However, they

    maintain that their ability to improve call quality is hampered by
    financial and regulatory constraints, such as local government land use
    and zoning restrictions on the siting of new base stations for
    transmitting and receiving mobile phone signals.

    To assist FCC in determining whether further action concerning mobile
    phone call quality is necessary, we are recommending that FCC include call
    quality in its mandated annual report analyzing whether there is effective
    competition in the market for mobile phone services. In commenting on a
    draft of this report, FCC generally agreed with our recommendation stating
    that, to the extent possible, it would include information related to call
    quality in its future reports on competition in mobile phone services.
    However, FCC noted some difficulties in implementing the recommendation,
    such as data not being readily available, the lack of objective
    performance standards, and difficulties in measuring call quality against
    consumer expectations.

    Background Carriers deliver mobile phone service by subdividing large
    geographic areas into smaller overlapping sections called cells. 5 Each
    cell has a base station equipped with an antenna to receive and transmit
    radio signals to

    the mobile phones within its coverage area. This area can vary in size
    from under a mile to 20 miles from the base station. Mobile phones are
    lowpowered radio transceivers (a combination radio transmitter and
    receiver) that use radio waves to communicate with the base stations. A
    mobile phone*s communications are generally associated with the base
    station of the cell in which it is presently located. When a call is
    initiated, the base station assigns a radiofrequency to the mobile phone
    from among the group

    of frequencies that the station controls. The number of frequencies
    available at a base station will depend primarily on the amount of
    radiofrequency spectrum assigned to the carrier by FCC, the number of base
    stations in the carrier*s service area, and the carrier*s signaling
    standard. 6 Each base station is linked to a mobile phone switching
    office,

    which is also connected to the local wireline telephone network. The
    mobile phone switching office directs calls to the desired locations,
    whether to another mobile phone or a traditional wireline telephone. This
    office is also responsible for handing off calls from one cell to another
    in a

    smooth and seamless manner as a customer changes locations during a call.
    Figure 1 provides a simplified picture of the key components of a mobile
    phone system.

    5 Mobile phone service carriers offer three types of service* cellular,
    personal communications service, and digital specialized mobile radio*
    each with specific system characteristics that are not apparent to users.

    6 The radiofrequency spectrum is the medium that enables wireless
    communications of all kinds, such as mobile phone and paging services,
    radio and television broadcasting, radar, and satellite- based services.

    Figure 1: Key Components of a Mobile Phone System Local wireline phone
    company

    Mobile phone switching office

    Mobile phone Mobile phone

    Cell Base station with antenna

    Source: GAO.

    FCC is the federal agency that oversees interstate telecommunications in
    the United States, including mobile phone service. The mobile phone
    industry began to develop in the mid- 1980s when FCC awarded
    radiofrequencies to two cellular carriers in each geographic market. FCC
    awarded one cellular license to the incumbent wireline telephone company

    and a second license to an independent carrier. If there was only one
    applicant for the second license, that applicant received the license.
    When more than one applicant applied, FCC used comparative hearings, which
    give competing applicants a quasi- judicial forum in which to argue why
    they should be awarded a license instead of other applicants. Later, at
    the direction of the Congress, FCC held lotteries to award licenses. In
    establishing the rules under which the cellular phone industry would
    operate, FCC made several key decisions:

     All carriers would use the same analog technology to provide service.
    Within 3 years of receiving a construction permit, carriers would have to
    build networks that could theoretically serve the areas for which they
    obtained a license. At the end of the 3 years, licenses for those areas
    that could not theoretically be served might be made available to some
    other carrier.  Carriers would have to inform customers of the area in
    which reliable

    service could be expected.  No other call quality standards would be
    required. That is, no minimum

    requirements concerning the probability that calls would be completed with
    good sound quality were established. FCC considered establishing such
    standards, but decided to let the marketplace determine the level of call
    quality.

     Carriers would have to notify FCC if they turned away a customer because
    of a lack of capacity and state how they intended to remedy this lack of
    capacity. 7

    Since it was first launched, the industry has migrated from using only
    analog technologies to primarily using digital technologies. Originally
    carriers used an analog technology that is similar to that used for the
    transmission of FM radio broadcasts. While analog technologies are still
    being used, most service is now provided with digital technologies, which
    have several advantages over analog technologies: they provide for better
    security, allow for services such as caller identification, allow noise to
    be 7 As other mobile phone services began to develop, FCC granted carriers
    greater flexibility.

    reduced on calls, and conserve on the use of scarce spectrum resources. 8
    FCC did not specify a single digital technology. Instead, carriers were
    free to adopt one of several signaling standards: code division multiple
    access (CDMA), time division multiple access (TDMA), and global system for
    mobile communications (GSM). In addition, Nextel Communications uses a
    technology called integrated Digital Enhanced Network, a derivative of
    TDMA. 9 The industry has grown dramatically over time. In terms of annual
    revenues, the industry has mushroomed: from about $482 million in 1985 to

    over $27 billion in 1997 and then to over $76 billion in 2002. In recent
    years, from 1997 through 2002, average monthly minutes of use of mobile
    phone use grew almost 900 percent, from about 5.6 billion minutes per
    month in 1997 to about 55.5 billion in 2002 (see fig. 2). This growth
    resulted not only

    from an increase in subscribership but also from a marked increase in the
    average number of minutes used by each subscriber. 8 In 1988, FCC
    permitted cellular carriers to use digital technology but required
    carriers to continue to offer analog service as well. In 2002, FCC
    provided a 5- year period to sunset the

    rules governing the provision of analog service by cellular carriers. 9
    With CDMA, a spread spectrum approach to digital transmission, each
    conversation is digitized and then tagged with a code. The mobile phone is
    than instructed to decipher only a particular code to pluck the right
    conversation off the air. TDMA allows a large number of users to access
    (in sequence) a single radio frequency channel without interference by
    allocating unique time slots to each user within each channel. GSM, a
    standard that was developed in Europe, uses a TDMA scheme, under which
    separate time slots are used to send and receive calls.

    Figure 2: Estimated Average Number of Minutes of Mobile Phone Service Used
    Per Month in the United States, 1997- 2002 60

    Minutes of use in billions 50 40 30 20 10

    0 1997

    1998 1999 2000 2001 2002 Years

    Source: Cellular Telecommunications & Internet Association. Note: GAO
    analysis of CTIA data.

    To subscribe to mobile phone service, a customer must sign- up with a
    mobile phone service carrier, either by signing a contract and choosing a
    plan, or by purchasing prepaid minutes of airtime and buying a phone that
    works with the prepaid service. Most customers sign contracts that specify
    a geographically based rate plan and the size of the block of minutes the
    customer is buying for a flat monthly fee. New customers sometimes pay up-
    front fees for *network activation* of their phones and usually agree to

    pay an *early termination fee* if they should quit a carrier*s network
    before the date specified on the contract. In return for signing the
    contract, customers often receive mobile phones, suitable for their
    carrier*s network, at a price lower than that which they would have to pay
    without a service contract.

    Because of the nature of radio transmission, the amount of radiofrequency
    spectrum allocated by FCC for mobile phone service, and the challenge of
    building the infrastructure to meet a rapidly growing consumer base,
    consumers are not always able to complete their phone calls or to hear

    them clearly. The following, some of which are illustrated in figure 3,
    are examples of such call quality concerns.

     Consumers may not be able to complete calls because the radiofrequencies
    used for mobile phone service can be blocked by terrain, such as hills, or
    by man- made structures. The structural features of some buildings can
    block signals from reaching the interior of the buildings. Similarly,
    signals may not be able to penetrate into subways or tunnels.

     Consumers* calls may be disrupted by temporary conditions, such as
    weather or interference from other wireless devices.

     A consumer may be unable to initiate a call because the local base
    station*s available radiofrequencies are all in use by other consumers.
    The consumer may receive a fast busy signal instead of a dial tone or some
    other indication that frequencies are not available.

     Consumers* calls may be dropped when moving from a cell that has
    capacity to an adjacent cell that cannot handle additional calls because
    it is already at capacity.

     A consumer*s call may not be connected because of a *dead spot* within a
    carrier*s service area where there is no base station coverage. This may
    be due to decisions made by carriers concerning the building of base
    stations, or difficulties in finding a suitable location or obtaining
    zoning approval to construct additional base stations.

     Consumers may be unable to initiate calls because their service carrier
    does not cover the area from which the call is being made and the carrier
    does not have an agreement with a competitor to serve its subscribers
    under a *roaming* agreement.

    Figure 3: Common Call Quality Problems Associated with Mobile Phones
    Blocked calls

    Insufficient capacity Dead spots

    Lack of coverage (hills, tunnels, buildings, (no vacant frequencies, (cell
    within service

    (calls outside of or temporary conditions

    adjacent cell full, etc.) area but lacking base

    carrier's service area) such as weather)

    station coverage)

    Source: GAO.

    Under the Regulatory Beginning in 1993, the Congress enacted legislation
    aimed at developing a Framework for the

    regulatory framework that would treat commercial carriers in a consistent
    manner and encourage the growth of competitive markets for mobile Mobile
    Phone Industry,

    phone services. FCC has acted to implement this regulatory framework and
    FCC Relies on

    is relying on consumer choice in a competitive marketplace to determine
    Competitive Market

    the level of call quality, rather than setting a minimum standard for the
    industry to meet. At the direction of the Congress, FCC analyzes and

    Forces to Determine reports on competitive market conditions in the mobile
    phone industry

    Call Quality and Has annually. To date, these reports have included issues
    such as the number of carriers, prices, and subscribership but not call
    quality.

    Not Set Specific Quality Standards

    The Congress Has Promoted In the early 1990s, types of mobile phone
    services other than cellular had

    Development of been or were about to be developed. These new services were

    Competitive Mobile Phone demonstrating that greater competition could
    exist in this marketplace;

    Markets however, two different regulatory regimes had developed: one for
    the

    original cellular service and another for newer mobile phone services that
    used other technologies or portions of the radiofrequency spectrum. In
    1993, the Congress enacted legislation* the Omnibus Budget

    Reconciliation Act (1993 Act)* that promoted consistent regulation of
    commercial mobile phone service carriers and established the promotion of
    competition as a fundamental goal for the development of mobile phone

    policies and regulation. The 1993 Act included several provisions to
    achieve these goals:

     All commercial mobile phone services were to be regulated similarly,
    without regard to the specific technology or radiofrequency spectrum used
    by a carrier. 10  FCC was to auction spectrum licenses when more than one
    user wanted to use certain frequencies for the transmission of mobile
    phone calls. This method of assigning licenses requires mobile phone
    service

    carriers to pay for the right to use the spectrum and awards the spectrum
    to the carrier willing to pay the highest price for it under certain
    conditions.

     Numerous licenses were to be auctioned in each mobile phone market so
    that a wide variety of bidders could participate.

     FCC was given the authority to refrain from applying certain provisions
    of the Communications Act of 1934 that FCC found to be unnecessary under
    specific statutory criteria. For example, FCC did not apply provisions
    that restricted market entry or exit. 11

     FCC was required to report annually on competitive market conditions in
    the industry. The report was to 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
    competitors have a dominant share of the market, and a statement of
    whether additional providers or classes of providers would be likely to
    enhance competition.

    In addition, the 1993 Act preempted states and local governments from
    regulating the entry of or the rate charged by any mobile service carrier.
    However, states could petition FCC for authority to regulate commercial

    10 Commercial mobile phone service carriers were to be treated as common
    carriers and regulated under Title II of the 1934 Communications Act. 11
    FCC was authorized to refrain from applying certain provisions of Title II
    that they found to be unnecessary under specific statutory criteria.
    However, FCC was required to apply sections 201, 202, and 208 of the
    Communications Act of 1934. Respectively, these provisions provide for
    service and interconnection upon reasonable request and terms; no unjust
    or unreasonable discrimination; and complaint procedures. 47 U. S. C. S:S:
    201, 202, and 208.

    rates under certain conditions. Shortly after the 1993 Act was enacted,
    eight states 12 sought the right to continue regulating wireless rates.
    FCC denied all of the petitions. One state appealed the denial of its
    petition, and the court affirmed FCC*s decision. 13 However, the 1993 Act
    expressly reserved to the states the right to regulate other *terms and
    conditions* of commercial mobile phone service, and FCC has provided
    guidance over time on the scope of these rights. For example, FCC has
    concluded that billing information, practices, and disputes fall within
    other terms and conditions and may be regulated under state contract or
    consumer law. Similarly, FCC has found that state contract or consumer
    fraud laws

    governing disclosure or rates are generally not preempted and that as a
    general matter, state courts are not preempted from awarding damages to
    customers of commercial mobile phone carriers, based on violations of

    state contract or consumer fraud laws. Several lawsuits are now before
    state courts making claims against carriers under state fraud or consumer
    protection laws.

    In the 1996 Telecommunications Act (1996 Act), a law that deregulated
    various aspects of the telecommunications industry, the Congress provided
    FCC with additional tools that could be used to promote competition in the
    mobile phone service industry. The 1996 Act requires FCC to refrain from
    imposing unnecessary regulation on telecommunications carriers, including
    mobile phone carriers. 14 The 1996 Act also requires that every 2

    years FCC engage in a review (the biennial review) of its rules, including
    those related to mobile phone service, to determine whether any of them
    are no longer necessary as a result of meaningful competition among the
    carriers. In addition, the 1996 Act requires FCC to take actions that
    would allow consumers to keep their phone number when changing among
    wireline telephone companies, referred to as local number portability.
    Further, the 1996 Act preserved the rights of states and localities to use

    land- use and zoning laws to regulate the placement of carriers* base
    station 12 The states were Arizona, California, Connecticut, Hawaii,
    Louisiana, New York, Ohio, and Wyoming. 13 Connecticut Dept. for Pub.
    Util. Control v. FCC, 78 F. 3d 842 (2 nd Cir 1996).

    14 The 1996 forbearance standard is similar to the standard included in
    the 1993 Act. See 47 U. S. C. S:160, 47 U. S. C. S:332( c).

    antennas. 15 This has enabled states and localities to affect both the
    level of competition and the quality of mobile phone calls.

    FCC Has Promoted In implementing the 1993 and 1996 Acts, FCC has taken
    several actions to

    Competitive Markets to promote competition in the mobile phone market.
    These actions included

    Determine the Level of Call auctions, spectrum caps, and local number
    portability.

    Quality

    Auctions: From 1994 through 2002, FCC conducted 42 auctions for spectrum
    dedicated to various kinds of wireless phone services. In accord with the
    1993 Act, FCC*s licensing scheme has also helped to ensure that

    many carriers were available in each geographic market. In every region,
    FCC authorized up to eight different mobile phone licenses.

    Spectrum cap: Until recently, FCC limited the number of radiofrequencies
    any one carrier could have rights to in any one market. By limiting any
    one carrier to 45 megahertz (MHz) of spectrum in any metropolitan market
    or 55 MHz in any one rural market, FCC aimed to prevent any one mobile
    phone service carrier from dominating a market. As a result of the 2000
    biennial review, FCC phased out the cap, fully eliminating it on January
    1, 2003. In doing so, FCC asserted that competition in mobile phone
    markets was robust enough that it was no longer appropriate to impose caps
    on spectrum rights.

    Local number portability: FCC extended the 1996 requirement that local
    number portability be implemented for wireline telephone customers to
    include mobile customers as well. FCC concluded that while the 1996 Act
    did not specifically require local number portability for mobile phone
    service carriers, making it a requirement would serve the public interest
    by promoting competition among the various types of telephone services and
    facilitating consumer choice. Because of certain implementation issues,
    FCC has extended the deadline for mobile phone service carriers that
    operate within the 100 largest metropolitan areas to offer local number
    portability from the original deadline of June 30, 1999, until November
    24, 2003.

    As a result of these actions, industry developments, and consumer
    interest, FCC, in its most recent annual report on competitive conditions
    in the

    15 Certain limitations were placed on this authority. For example, states
    or local governments must not unreasonably discriminate among carriers of
    functionally equivalent services.

    mobile phone industry, 16 noted that the industry has experienced
    increased numbers of competitors in various markets, innovation, lower
    prices for consumers, and increased diversity of service offerings.
    Regarding the number of competitors, for example, FCC reported that 94
    percent of the U. S. population lives in counties with access to three or
    more mobile phone carriers, and 80 percent lives in counties with at least
    five carriers. FCC reported further that there are six national carriers:
    AT& T Wireless, Cingular, Nextel, Sprint PCS, T- Mobile USA, and Verizon
    Wireless. Other large regional carriers, including ALLTEL Corp., Western
    Wireless Corp., United States Cellular Corp., and Dobson Communications
    Corp., are also

    active in the market. Data we obtained from Yankee Group, Inc. (a market
    research firm specializing in telecommunications issues) for the third
    quarter of 2002 are consistent with the competitive picture of the
    industry provided by FCC*s annual report. These data, presented in figure
    4, show that none of the six national carriers dominates the national
    market. Their market shares range from T- Mobile USA*s 7 percent to
    Verizon Wireless*s 24 percent. This figure also shows that each of the
    carriers was experiencing a substantial level of customer turnover during
    2002, ranging on an annualized basis from Nextel*s 24 percent to T- Mobile
    USA*s 50 percent. The percentage of mobile phone customers who change
    carriers in a given year suggests that carriers are actively competing.

    16 See Federal Communications Commission, Annual Report and Analysis of
    Competitive Market Conditions With Respect to Commercial Mobile Services,
    FCC 02- 179 (Washington, D. C.: July 3, 2002).

    Figure 4: U. S. Market Shares and Annualized Turnover Rates for Mobile
    Phone Service Carriers, Third Quarter, 2002 Market shares Annualized
    turnover rates

    Verizon Wireless

    50 Percent

    T- Mobile USA 50

    46

    40 7%

    Nextel

    8%

    35 36

    24% 30

    13%

    Sprint PCS 28

    24

    20 17%

    14%

    Other

    10 17%

    0

    AT& T Wireless

    AT& T Cingular Nextel Sprint

    T- Mobile Verizon

    Cingular

    Wireless PCS USA Wireless Source: Yankee Group. Note: GAO analysis of
    Yankee Group data.

    FCC has concluded that competition is sufficient to provide incentives for
    carriers to meet consumers* expectations and desires for call quality. For
    example, in its 2000 biennial review to determine whether any of its rules
    were no longer necessary as a result of the development of meaningful
    competition among mobile phone service carriers, FCC removed requirements
    that carriers provide consumers with information showing their reliable
    coverage areas. These requirements had been placed on the original
    cellular services, but had not been placed on newer mobile phone

    services. FCC found that although carriers providing newer mobile phone
    services were not required to supply consumers of these services with
    coverage information, they nevertheless provided these consumers with the
    same types of information that they provided to consumers of the original
    cellular services. As a result, FCC concluded that competitive pressures
    were strong enough to ensure that carriers would continue to supply
    consumers with information on coverage, even after FCC removed

    the requirement. 17 However, some consumer advocates have questioned
    whether competitive pressures are strong enough to ensure that carriers
    will provide consumers with adequate information on coverage. Recently, in
    February 2003, the Chairman of FCC stated that competition provides
    incentives for carriers to improve call quality. 18 Specifically, he noted
    that to attract and keep customers, carriers are having to offer better
    packages of rates, coverage, and service quality than their competitors.

    Although FCC relies primarily on the marketplace to determine the level of
    call quality, it has also acted to provide consumers with additional
    information on the nature of mobile phone service and the types of
    problems that consumers may encounter. FCC now provides the public with
    information on the quantity and types of complaints and inquiries it
    receives concerning mobile phone service. This information is updated
    quarterly. FCC provides additional information to consumers through its

    brochure on mobile phone service, which is posted on FCC*s Web site 19 and
    appears in appendix III of this report. This brochure explains the nature
    of mobile phone service, including coverage, other call quality issues,
    pricing, and handset features. FCC has also suggested questions that
    consumers should ask carriers when purchasing service and recommended that
    consumers obtain information from neighbors and coworkers concerning the
    call quality they receive from various carriers. In addition, FCC has
    taken action to promote the public interest in the area of implementing
    enhanced 911 service (E- 911) for mobile phones. This service will allow
    emergency responders to determine the location of a mobile phone caller
    within some specified area.

    17 At the same time, FCC removed the requirement that cellular service
    carriers notify FCC if they lacked the capacity to service certain
    customers. 18 Letter from FCC Chairman Michael Powell to Senator Charles
    E. Schumer, dated February 5, 2003.

    19 See www. fcc. gov/ cgb/ wirelessphone. pdf.

    FCC Reports Annually on At the direction of the Congress, FCC has issued
    seven annual reports and

    Competitive Market analyses of competitive market conditions in mobile
    phone services. The

    Conditions in the Mobile Congress stated that the report should include an
    identification of the

    Phone Industry but Does number of competitors in various commercial mobile
    services, an analysis

    of whether or not there is effective competition, an analysis of whether
    any Not Include Information on

    competitors have a dominant share of the market, and a statement of Call
    Quality

    whether additional providers or classes of providers would be likely to
    enhance competition. FCC*s reports have concentrated on a discussion of
    the structure of the industry, especially the number of competitors in the
    marketplace and their location. In addition, the reports include a
    discussion of the number of subscribers, the prices charged for services,
    deployment in rural areas, and information on features provided by
    carriers. Call quality is an important aspect of mobile phone service, and
    FCC said that carriers appear to be competing for customers in this area.
    However, FCC has not included call quality, beyond a discussion of the
    number of carriers providing service, in its annual analysis of whether or
    not there is

    effective competition in mobile phone services. By way of contrast, the
    Office of Telecommunications (OFTEL) in the United Kingdom, the regulatory
    body that monitors competition in telecommunications markets in that
    country, includes call quality in its reports on competition in the mobile
    phone industry. 20 As part of its ongoing monitoring of competition, OFTEL
    conducts quarterly surveys of mobile phone users. From these surveys OFTEL
    has reported that reception quality and geographic coverage are among the
    most important reasons for consumers in that country to choose a carrier.
    In addition, OFTEL has used the information it collects on network
    performance and other factors to determine that there is effective
    competition among carriers regarding those aspects of service that we have
    identified as call quality. Although, at the time of our review, FCC had
    not indicated that it planned

    to include call quality in its annual report on competitive market
    conditions in the mobile phone service industry in the future, it was
    attempting to improve the overall quality of the data used in that report.
    For example, FCC held hearings in February 2002 in order to improve the
    quality of the data that would be used in its seventh annual report, which
    was released in

    20 See for example United Kingdom Office of Telecommunications, Effective
    competition review: mobile*- A Statement issued by the Director General of
    Telecommunications, (London, U. K.: Sept. 26, 2001).

    July 2002. Participants at those hearings noted several shortcomings in
    the data used for the report and analysis of competitive market
    conditions, including FCC*s almost sole reliance on unaudited data from
    industry trade associations and financial analysts, the failure to include
    consumer input, and the lack of credible data on prices and profits.
    Hearing participants also noted a marked contrast between the data
    regularly collected in other industries such as the airline and
    electricity industries. In those industries, oversight agencies have
    access to data on operations and the actual prices paid by consumers. With
    regard to measuring the extent of competition, FCC has noted some
    limitations in the data they collect for their congressionally mandated
    annual report. Specifically, in the seventh report, FCC noted that* as a
    result of treating carriers that serve any part of a county as if they
    served the entire county* the report likely overstates the number of
    carriers serving consumers in various locations. Thus, both the amount of
    coverage and the extent of competition are likely to be overstated.

    In recognition of these continuing data limitations, FCC issued a Notice
    of Inquiry in December 2002 seeking comment on how it could gain more
    detailed, comprehensive, and independent data to use in its 2003 report on
    competitive market conditions. 21 According to the notice, FCC was looking

    for data that would allow it to evaluate the extent to which consumers can
    choose among mobile phone service carriers as well as services and
    technologies. Specifically, FCC was looking for information on a broad
    range of items related to the structure and performance of the industry.
    And, for the first time, FCC included quality of service as an area that
    might be explored in the report. The 13 organizations that responded to
    the inquiry either did not comment on service quality or asserted that
    data on service quality were not needed. The consumer advocates who have
    raised concerns about call quality did not respond to this notice. Two of
    the consumer advocates said that they support efforts for FCC to collect
    and report more information on call quality, but they did not respond to
    the notice because of more pressing priorities at that time.

    In some other countries, such as Australia, France, and the United
    Kingdom, regulators collect network performance information or survey
    consumers to determine their level of satisfaction or the extent to which

    21 See Federal Communications Commission, Annual Report and Analysis of
    Competitive Market Conditions with Respect to Commercial Mobile Services,
    Notice of Inquiry, FCC 02- 327 (Washington, D. C.: Dec. 13, 2002).

    they are knowledgeable about certain aspects of mobile phone service. For
    example, in France, the French regulatory authority for telecommunications
    conducts its own tests of call quality to determine if certain carriers
    are meeting the call quality requirements specified in their licenses.
    These tests have generally been conducted in cities with 50,000 or more
    inhabitants. As noted above, in the United Kingdom, OFTEL conducts
    quarterly surveys of business and residential phone users. These surveys
    allow the agency to track consumer satisfaction rates as well as measure
    consumer knowledge about mobile phone service, including the availability
    of a range of price plans. In addition, OFTEL collects network performance
    and capital investment data from mobile phone service carriers. In
    Australia, the Australian Communications Authority also collects and
    publishes information on various aspects of consumer satisfaction and
    quality in its annual report on telecommunications performance. Concerns
    Have Been

    Interested parties, such as state officials and consumer advocates, have
    Raised, but Available raised concerns about mobile phone call quality.
    Fully assessing the extent of call quality problems would likely require
    network performance data Data Are Inconclusive

    from the carriers as well as information on the extent to which consumers
    on Extent of Call

    are satisfied or dissatisfied with the call quality of their mobile phone
    Quality Problems

    service. Carrier network performance data are not available to the public
    and are not reported to FCC. Carrier data on complaints are also not
    available and customer complaint data from other sources, such as FCC,
    FTC, states, and consumer organizations, do not provide reliable measures
    of the extent to which customers are dissatisfied with their call quality.
    Consequently, we have only the results of our survey of mobile phone

    customers on which to base our assessment of the extent of call quality
    problems. We estimate from the results of this survey that, while mobile
    phone customers are experiencing call quality problems, a fairly high
    percentage are satisfied with their current overall level of call quality.

    Concerns Have Been Raised Some state utility commissioners have been
    expressing concerns about

    about Mobile Phone Call what they say are an increasing number of consumer
    complaints about

    Quality mobile phone service. Their trade association, the National
    Association of Regulatory Utility Commissioners (NARUC), sponsored panels
    on mobile

    phone service issues at their quarterly meetings held in July and November
    2002. The topics covered by the panels included local number portability,
    service quality, cost, and best practices for carriers to better serve
    their customers. However, NARUC*s Consumer Affairs Committee defeated a

    proposed resolution to have mobile phone carriers provide consumers with
    adequate service area coverage information when making purchase decisions
    and to have FCC monitor this information. As a result of the panel
    discussion held in July and carriers* desires to talk to state
    commissioners about the issues raised there, in October 2002 NARUC and FCC
    facilitated an informal discussion of these issues between concerned state
    officials and mobile phone service carriers. Following this meeting, NARUC
    began developing a list of suggestions for FCC and mobile phone service
    carriers. These suggestions included FCC reporting on complaints by
    carrier and carriers giving consumers a 15- to 30- day period during which
    they could opt out of new service contracts. At least two states are
    investigating whether carriers* advertising claims about call quality are
    being met. An official with the New York Attorney

    General*s office told us that the office is concerned that two major
    carriers advertise coverage areas that appear more extensive than they, in
    fact, are. Meanwhile, the California Public Utilities Commission is
    investigating whether another major carrier has adequate coverage in
    customers* area of use and sufficient system capacity to meet the claims
    it makes about its service. A number of lawsuits raising questions
    involving coverage claims have also been filed in state courts.

    The press and consumer advocates have raised concerns about call quality
    as well. For example, over the last couple of years, articles on these
    issues have appeared in several well- known, widely read publications,
    including

    Forbes Magazine, the Wall Street Journal, the Washington Post, and the New
    York Times. In addition, several consumer advocacy groups* including the
    Wireless Consumers Alliance, AARP (formerly known as the American
    Association of Retired Persons), and Consumers Union* have raised concerns
    about the coverage and price information consumers receive when buying
    mobile phone service, consumers* ability to complete calls, and the cost
    of terminating contracts if call quality is not adequate.

    Carriers Provided Limited Carriers said that information on blocked and
    dropped calls is collected at

    Information on Extent of each base station in their networks. However,
    none of this network

    Call Quality Problems performance data is publicly available nor are the
    carriers required to

    report this information to FCC. As part of our effort to determine the
    extent to which calls cannot be completed or lack clarity, we asked the
    six largest carriers if they would be willing to provide us such data. All
    of the carriers declined. The reasons given for not providing the data
    include the following:

     The information is business sensitive and proprietary. Revealing it
    could damage a carrier*s competitiveness by alerting its competitors to
    the strengths and weaknesses of its network.

     The information would not be useful to consumers trying to compare one
    carrier*s performance with that of another carrier. Data would not be
    suitable for comparisons because carriers do not measure performance using
    a single set of standards. Also, systems using

    different transmission technologies respond differently to overcrowding on
    the network.

     The information might not be completely accurate. For example, if
    callers turn off the power on their phones to end a call instead of
    pressing the *end* button, the network might record that as a dropped
    call.

     Because their networks are changing rapidly, network performance data
    would be out- of- date before it could be used.

     Performance is affected by various transient factors, such as time of
    year, weather, and unusual periods of demand that tax network capacity.

    While carriers did not provide us with detailed information on blocked and
    dropped calls, network officials at two carriers said that their goal was
    to have a 98 percent call- completion rate. That is, the calls would go
    through and not be dropped before they were completed at least 98 percent
    of the time on average. These officials and those at other carriers said
    that 98 percent is generally the industry standard; however, they noted
    further that this standard for completed calls is a network average. Thus,
    even if carriers were meeting that standard, performance at various
    geographic locations or times of day could differ substantially from the
    network average. Because consumers use their phones at specific locations
    and times of day, these network averages may not be useful in helping them
    compare one carrier with another. Network information can also be
    collected through *drive tests,* which are

    generally performed along major road arteries at various times of the day.
    These tests are done in moving vehicles that use computers to
    simultaneously place calls on the networks of various carriers. The
    computer then records whether calls went through and whether they were
    dropped within some specified call time, such as 2 minutes. These tests
    are performed by the carriers themselves and by contractors such as
    Telephia.

    Data from drive test contractors are also proprietary; however, Telephia
    has performed tests for CTIA* an industry trade association* and Consumers
    Union, and these entities have shared that information with the public.
    CTIA*s July 2001 study measured various aspects of mobile phone call

    quality in core urban and suburban areas. The study found that between
    November 1999 and April 2001 there was no change in overall call quality
    as measured by the percentage of time a call goes through with

    adequate sound quality. During this period, the percentage of blocked
    calls went down in both the core urban and suburban areas, while dropped
    calls rose in suburban areas. Telephia concluded that, at the time of
    their study, on average, consumers could place, hold, and complete calls
    of acceptable audio quality 96 to 99 percent of the time.

     In the February 2002 issue of Consumer Reports, Consumers Union
    published averages of call quality data that Telephia had collected in 9
    major metropolitan areas* New York, Boston, Philadelphia, the District of
    Columbia, Los Angeles, Dallas, Houston, Chicago, and Detroit* in October
    2001. These data show that on Telephia*s 5- point scale* with 1 being the
    worst service and 5 the best* call quality ranged from a low of 3.3 in
    Houston to a high of 4.7 for Philadelphia. Consumers Union notes

    that these are averages of individual carrier data. In its February 2003
    issue of Consumer Reports, Consumers Union used a survey of its
    subscribers to rank carriers for the first time in six major cities.

    Some carriers also said that they have detailed coverage and service maps
    that are based on engineering models that predict service rather than on
    actual service data. Again, carriers did not share these maps with us for
    several reasons similar to those for not providing actual network
    performance data. The reasons included competitiveness, accuracy, and
    timeliness of data.

    Consumer Complaint Data Consumer complaint data are a potential source of
    information on

    Provide a Limited Indication customer dissatisfaction with their mobile
    phone service, but these data

    of Call Quality Concerns are either not publicly available or suffer from
    methodological limitations.

    The carriers were unwilling to share information on the quantity and kinds
    of complaints they receive. Some complaint data are available from other
    sources, including federal and state government agencies, consumer
    advocates, and Web sites. However, these complaint databases are not
    adequate to determine the extent of call quality problems because they do

    not employ a scientific method in collecting the data. Instead, they
    depend on individual, dissatisfied consumers to know where to call or
    write, and to take the time to do so. In addition, many of the groups
    collecting complaints said that the categorization of complaints was
    difficult and, as a result, complaints were probably not being categorized
    in a consistent manner.

    Federal government: FCC takes complaints about mobile phone service that
    it receives from consumers and others and refers them to consumers*
    carriers for resolution. FCC defines a complaint as a communication
    received from or on behalf of an individual that alleges harm or injury
    and seeks relief. It accepts complaints from consumers by phone, by
    facsimile, through the Internet, or by electronic or regular mail. 22 FCC
    has been

    receiving consumer complaints about mobile phone services and referring
    them to consumers* carriers since the mid- 1980s. In the spring of 2001,
    FCC began categorizing complaints and, in fall 2001, began publishing
    complaints by category. However, officials cautioned that their complaint
    numbers could include requests for information as well as complaints, and
    that the existence of a complaint against a carrier does not necessarily
    indicate wrongdoing by that carrier. FCC also said that it tracks
    complaints

    to identify trends in types of complaints or to determine if a carrier has
    received excessive numbers of complaints. In either instance, FCC said
    that it contacts carriers and asks them to provide an explanation. Based
    on

    feedback from carriers and consumers, FCC estimated that as a result of
    this process, consumer complaints are resolved to the satisfaction of the
    consumer close to 80 percent of the time. Should complaints go unresolved
    or should a carrier receive excessive numbers of complaints without an
    acceptable justification, a carrier could be subject to an FCC enforcement
    action. FCC officials noted that they have not been categorizing
    complaints for a long enough time to show any trends. In 2002, FCC logged
    about 14,000 consumer complaints about mobile phone service. As figure 5
    shows, over 60 percent of the complaints concerned billing and rate
    issues. The next largest categories were service quality (a category that
    includes call quality issues), contract- early termination fee, and
    marketing and advertising.

    22 Complaints can be filed by phone at 1- 888- Call- FCC (1- 888- 225-
    5322) voice, 1- 888- Tell- FCC (1- 888- 835- 5322) TTY; by facsimile at
    202- 418- 0232; through the Internet at www. fcc. gov/ cgb/ complaints.
    html; by e- mail at fccinfo@ fcc. gov; or by mail to Federal

    Communications Commission, Consumer & Governmental Affairs Bureau,
    Consumer Complaints, 445 12 th Street, SW, Washington, D. C. 20554.

    Figure 5: FCC Mobile Phone Consumer Complaints by Category, 2002

    Equipment

    4%

    Marketing and advertising

    11% 11%

    Contract* early termination fee

    62% 12% Service quality a

    Billing and rates Source: FCC.

    Note: GAO analysis of FCC data. a FCC includes those items that we have
    identified as call quality, such as dropped calls and dead

    spots, in its service quality category; however, it also includes
    complaints about not being able to use a mobile phone because the carrier
    had ceased to do business in the consumer*s area or ceased to do business
    altogether.

    FTC also receives complaints about mobile phone service and forwards them
    to FCC. 23 FTC compiled their mobile phone complaint data by the
    complaining consumer*s state and by the carrier*s state, but could not
    categorize the data by type of complaint. According to an FTC official, in
    2000, 2001, and the first half of 2002, FTC*s mobile phone complaints were
    equal to or less than one- half of 1 percent of all of the complaints FTC
    received about all products. State public utility commissions: State
    public utility commissions vary on

    whether they collect complaints about mobile phone service. Thirty- three
    state commissions responded voluntarily to our request for information on
    how they regulate mobile phone service or categorize complaints. Of these

    23 FTC has broad law enforcement responsibilities under the Federal Trade
    Commission Act, 15 U. S. C. S: 41 et seq. With certain exceptions, the
    statute provides the agency with jurisdiction over nearly every economic
    sector. Certain entities, such as depository institutions and common
    carriers (e. g., telephone companies), as well as the business of
    insurance, are wholly or partly exempt from FTC jurisdiction.

    state commissions, 23 said that they direct consumers with complaints to
    their state attorneys general, FCC, or the mobile phone service carrier
    identified in the complaint. Six state commissions reported that they
    collect and categorize complaint data from mobile users. While most of the
    commissions who collect data categorize some complaints as billing
    complaints, they use a variety of categories for the other complaints they
    receive. For example, one state categorizes its other complaints as tower

    issues, while another state uses many categories, including dead zones and
    dropped calls, company practices, service quality, and contracts. Of the
    state commissions we heard from, California was the only one that provided
    us with specific data on call quality complaints gathered over a number of
    years. As table 1 shows, complaints about call quality were

    about 8 percent of total mobile phone complaints for 2002. Table 1:
    Consumer Complaints about Mobile Phone Service Filed with the California
    Public Utilities Commission, 1999- 2002 Company

    Disputed Call

    Contract Year practices bills quality a issues Miscellaneous b Tot al s

    1999 47 1, 135 205 9 518 1,914

    2000 112 1,550 231 13 363 2,269

    2001 232 3,379 459 37 901 5,008

    2002 117 1,386 186 13 585 2,287

    Source: California Public Utilities Commission. Note: GAO analysis of
    California Public Utilities Commission data. a Includes dead zones,
    dropped calls, and static.

    b Miscellaneous includes a variety of issues such as billing format and
    back billing issues, cramming, advertising and marketing issues, rate
    design, and taxes and surcharges.

    Consumer advocates: Two consumer groups* the Better Business Bureau and
    the Wireless Consumer Alliance* said that they receive and collect
    complaints about mobile phone service. However, both groups said that they
    do not collect complaints in a systematic way and use broad, general
    categories to classify complaints. The Better Business Bureau collects
    complaints on mobile phone equipment, supplies, and services. The Bureau
    said that, between 1998 and 2002, complaints in this category rose from
    615

    complaints to 21,534 complaints. 24 The Bureau was unable to identify
    whether the increase in complaints was attributable to call quality issues
    or to other issues in the mobile phone industry. Some consumer advocates,
    such as the Utility Consumer*s Action Network in San Diego, California,
    have Web sites where consumers can post information about carriers* dead
    spots* locations within carriers* coverage areas where service is not
    available. Generally, these data are not verified nor are they regularly
    updated if service becomes available.

    Our Survey on Call Quality To obtain information about the extent to which
    consumers are concerned

    Yielded Mixed Results about various aspects of mobile phone call quality,
    we included questions

    on call quality in a national telephone survey of adults conducted in
    November 2002. We projected the results of the survey to the population of
    adult mobile phone users. However, we are concerned about the potential
    for those who did not respond to the survey to differ from those who did
    respond in some way that could affect the results. We have no explicit
    reason for suspecting that the survey suffers from this shortcoming.
    Instead, our concern arises out of the large sample of phone numbers
    dialed to produce about 1,000 survey respondents. Some users may not have
    answered the call because they could not identify the caller on their

    caller identification system. Others may not have been available during
    the calling time, and still others may have been unwilling to participate
    in the survey when they were contacted. (Appendix I includes a discussion
    of the survey methodology and its limitations; appendix II includes the
    survey instrument and the responses.) The results of the survey provided
    mixed evidence on the extent to which consumers are troubled by call
    quality

    problems. Based on the survey responses, we found that a fairly high
    percentage of consumers were satisfied with the overall call quality of
    their mobile phone service. Using the results of our survey of mobile
    phone users, we estimate that about 83 percent of consumers were satisfied
    with their call quality and about 9 percent were dissatisfied. The
    sampling error for our survey was plus or minus 8 percentage points or
    less unless otherwise noted. The other users were neither satisfied nor
    dissatisfied (see fig. 6). In addition, we estimate that about 47 percent
    of adult mobile phone users believed their call quality was improving,
    while about 5 percent believed that their

    24 According to CTIA, mobile phone subscribership grew by over 103 percent
    between December 1998 and December 2002.

    call quality was getting worse. The other users believed that call quality
    had not changed since they acquired their phones. Finally, we estimate
    that 83 percent of adult mobile phone users would not be willing to pay
    more for better quality calls, while 12 percent would be willing to pay
    more and another 5 percent would be willing to pay more under certain
    conditions.

    Figure 6: Overall Customer Satisfaction with Call Quality, November 2002
    Consumer Survey

    Neither satisfied

    8%

    nor dissatisfied

    9%

    Dissatisfied

    83%

    Satisfied Source: GAO.

    Despite the many mobile phone customers who appeared to be satisfied with
    their overall call quality, a number of survey respondents reported that
    they were experiencing specific problems. Using the results of our survey,
    we found that although some mobile phone users never had problems placing
    calls, some had problems occasionally, and others experienced call quality
    problems on 10 percent or more of their calls (see table 2). As shown in
    the last column of table 2, we estimate that about one- fifth of customers
    were not able to get through on 10 percent or more of their calls because
    the cell from which they were calling was at capacity, and about one-
    third of customers could not complete 10 percent or more of their calls
    because they were in a cell where their carrier did not provide service.

    Table 2: Mobile Phone Call Quality Problems Based on November 2002
    Consumer Survey

    Percent of users who Percent of users who

    Percent of users who had problem on

    had problem on 10 Type of did not experience

    fewer than 10 percent or more of

    problem a the problem

    percent of their calls their calls

    No coverage 22 44 34 Fast busy 32 47 21 Dropped calls 39 39 22 Poor sound
    32 38 30 Source: GAO. Note: Row percentages may not add to 100 due to
    rounding. Individual respondents may have reported having several
    problems. Therefore, the column percentages cannot be added to determine

    the total percentage with or without problems. a No coverage * consumers
    cannot complete calls because their carrier does not provide service in
    the

    cell where they are placing the call and does not have a roaming agreement
    with another carrier that provides service in that cell.

    Fast busy * consumers cannot complete calls because the cell from which
    they are calling is at capacity. Dropped calls * consumers lose
    connections during a call because they have moved into a cell where their
    carrier either does not have service or the cell is at capacity. Poor
    sound * consumers cannot hear their calls clearly because of static or
    feedback

    Our survey also indicates that call quality problems vary, depending on
    where consumers are when they are making or receiving calls. For example,
    we estimate that about 45 percent of users experienced problems when they
    are in buildings, 37 percent when they were in a vehicle, and 18 percent
    when they were outside. Carriers and other experts note that

    reception inside buildings may not reflect the call quality being provided
    in the area. As mentioned earlier, buildings may be constructed of
    materials that do not allow mobile phone radio waves to pass easily into
    their interiors. We found that some businesses have added devices, such as
    antennas and signal repeaters, inside their buildings to facilitate better
    inbuilding coverage. In buildings where multiple carriers serve customers
    or residents, such as shopping centers, office buildings with multiple
    tenants, or apartment buildings, improving call quality may be the
    responsibility of the building owner rather than any one service carrier.
    Our survey also sheds some light on why consumers change carriers. We
    estimate from our survey that about 73 percent of consumers made carrier

    decisions for themselves, while the remaining 27 percent had someone else,
    such as an employer or family member, choose their carrier. For consumers
    who made carrier decisions for themselves, we estimate that 35

    percent had changed carriers since they first acquired mobile phones and
    that better call quality was an important incentive for those changes.
    Yet, call quality may have been a less important incentive than getting a
    better price. That is, we estimate that for about 55 percent of the
    consumers who had changed carriers, obtaining better call quality was a
    very or somewhat

    important reason for the change. However, we estimate that for a larger
    proportion of consumers who had changed carriers* about 83 percent of
    them* price was very or somewhat important. Because only a small number of
    survey respondents had changed carriers* about 145, the sampling error for
    these estimates is plus or minus 13 percentage points or less.

    The ability of consumers to take advantage of the range of choices in the
    marketplace, which provides incentives for carriers to respond to customer
    demands for call quality, depends to some degree on customers being able
    to switch from lower- quality carriers to higher- quality carriers. We
    estimate that while about 35 percent of those who made carrier decisions
    for themselves had changed carriers since they first started using their
    phones, about another 28 percent wanted to change carriers, but did not.
    We asked customers who wanted to change carriers, but didn*t, whether
    certain factors were important to their decision. These factors included
    having to pay a fee to terminate a contract before the contract period
    ended and not being able to keep their current mobile phone number* the
    local number portability issue* or their handsets when they change
    carriers. Respondents could cite more than one reason as being important.
    We estimate that for about two- thirds of adult mobile phone users who
    wanted

    to change carriers but did not, the termination fee was a very or somewhat
    important factor. Further, we estimate that for about 41 percent of adult
    mobile phone users, the lack of local number portability was very or
    somewhat important; and for a similar proportion, not being able to keep
    their handset was a very or somewhat important factor. Because only a
    small number of survey respondents* about 115* had considered, but not
    changed carriers, the sampling error for these estimates is plus or minus
    15 percentage points or less.

    Interested Parties Have Interested parties, such as state officials and
    consumer advocates, who

    Suggested Actions for have raised concerns about mobile phone call quality
    have also suggested

    actions* such as local number portability or mandating that certain
    Improving Call Quality

    information be provided to consumers* that might lead indirectly to
    changes in call quality by making the market more competitive or providing
    consumers with better information. Some interested parties have also

    suggested actions, such as establishing minimum call quality standards, by
    which call quality might be improved more directly. All of the suggestions
    have various benefits and drawbacks.

    Local Number Portability Several interested parties have supported
    adoption of local number

    Could Increase the portability, which will make the market for mobile
    phone service more

    Competitiveness of Mobile competitive by reducing the costs to consumers
    of changing carriers. This

    Phone Markets may affect the level of call quality because customers who
    are dissatisfied with their current carrier will be more likely to change
    to a carrier with

    better call quality if they do not have to experience the costs and
    inconvenience associated with changing their mobile phone numbers. As a
    result, carriers would have a greater incentive to upgrade their call
    quality

    to keep their customers. The costs and inconvenience associated with
    changing a mobile phone number are likely to grow for consumers as mobile
    phone service becomes an ever more important part of everyday life.
    Carriers are now scheduled to implement local number portability in
    November 2003. 25 Other countries have had varying experiences with number
    portability and

    support for it varies among U. S. carriers. Officials of Hong Kong, China
    said that local number portability has increased the competitiveness of
    their mobile phone market and has led to a dramatic fall in the price of
    that service. Australian officials have reported, however, that not many
    consumers are changing carriers and taking their numbers with them. They

    report that termination fees may still be discouraging customers from
    changing carriers prior to the expiration of their contracts. Some U. S.
    carriers have said that implementing local number portability is difficult

    and expensive and will thus offset the savings consumers experience from
    not having to change their phone numbers. These carriers have been
    successful in getting FCC to extend the deadline for implementing local

    25 Under FCC*s rules promulgated in its Memorandum Opinion and Order, FCC-
    02- 215 (Washington, D. C.: July 2002) a commercial mobile phone carrier
    located in one of the largest 100 metropolitan statistical areas that
    receives a request by February 24, 2003, from another carrier must be
    capable of providing local number portability by November 24, 2003. For
    requests received after February 24, 2003, carriers must be capable of
    providing local number portability, depending on the upgrades needed,
    within 30 to 180 days after November 24, 2003, or 30 to 180 days after
    receiving the request, whichever is later. Outside of the largest
    metropolitan statistical areas, the other carriers must be able to provide
    local number portability within 6 months of the request or within 6 months
    of November 24, 2003, whichever is later.

    number portability from the original June 1999 to the new November 2003
    deadline. 26 Many Proposals that Center Many of the actions that have been
    proposed to give consumers more on Giving Consumers More

    information about call quality* more detailed coverage information,
    Detailed Information Are

    information on dropped and blocked calls by carrier, or data on complaints
    Difficult to Implement

    against various carriers* could be meaningful to consumers choosing among
    carriers if they were measured consistently across carriers. This issue
    was evident in Australia where the Australian Communications Authority
    requires that carriers report regularly on a set of key performance
    indicators defined by the Authority. In its 2001 to 2002
    Telecommunications Performance Report, however, the Authority did not
    publish these data because, while all of the carriers were in compliance
    with the requirements, they were not reporting these data to the Authority
    in a consistent, comparable manner. 27 We have already noted several
    issues that make it difficult to measure call

    quality or complaints. For example, we have described how blocked or
    dropped call rates and coverage might change over relatively short periods
    of time because of changes in carriers* networks or other transient
    factors such as weather. In addition, we have described how collecting and
    reporting complaints is difficult because of the need to classify them
    consistently and to determine if they are valid. Officials at FCC, the
    carriers, and state officials we spoke with mentioned several other

    limitations to finding consistent measurements of call quality:  Carriers
    might have to start measuring things that they had not

    previously been measuring. This would likely raise costs for these
    carriers. A representative of smaller carriers said that providing any
    additional information to FCC would be especially burdensome for

    26 CTIA and a major carrier have challenged how FCC applied the
    forbearance standard when requiring mobile phone service carriers to offer
    local number portability. In FCC- 02- 205, FCC denied a petition to
    permanently refrain from enforcing local number portability requirements
    for mobile phone service carriers; instead, FCC granted a 1- year
    extension in the implementation of this requirement to November 2003.
    These parties have continued to contest the implementation of local number
    portability in the courts.

    27 See Australian Communications Authority, Telecommunications Performance
    Report 2001- 2002 (Melbourne, Australia: November 2002).

    them because these carriers do not have staff to collect and report the
    data.

     An official at one carrier explained that measurements could be created
    that give carriers using one technology an advantage over those using a
    different technology. That is, because TDMA technologies have a fixed
    capacity while CDMA technologies can trade off increased capacity for
    poorer sound quality, certain measures, such as number of times callers
    find the network overloaded, could benefit carriers that use CDMA over
    those who use TDMA.

     An FCC official noted that carriers might manage their businesses to
    improve their scores on whatever is being measured and reported rather
    than to better satisfy customers. For example, if the percent of dropped
    calls has to be reported, carriers may let sound quality deteriorate
    rather than drop the call.

     If the information comes directly from the carriers, someone* FCC or
    state officials* would need to monitor the measurements to ensure that all
    carriers were complying with the regulations, and this could add to the
    cost of government oversight.

    As a result of these potential drawbacks, FCC and industry participants
    and representatives note that efforts to require FCC or carriers to report
    more detailed call quality information or complaints could drive up the
    price of mobile phone service, limit entry of new carriers, create an
    uneven playing field in terms of carriers using various technologies,
    provide the marketplace with measurements that may not reflect better
    service, and drive up the costs of government oversight of the industry.
    According to some parties, giving customers longer trial periods before

    they have to commit to a 1- or 2- year contract* an option that provides
    customers with a first- hand opportunity to ascertain whether a carrier*s
    call quality meets their needs* could avoid some of these potential
    drawbacks.

    The Consumer & Governmental Affairs Bureau at FCC recommends that
    consumers read contracts thoroughly and insist on being given a period of
    time to test the phone and service before being tied to a long- term
    contract. FCC officials noted that no information from carriers is going
    to be tailored to the specific usage patterns of individual consumers. For
    example, because some building materials block radio signals in areas
    where carrier

    information shows that service is available, service may not be available
    inside some buildings where customers want to use mobile phones. The

    largest carriers have been extending their trial periods and now generally
    allow 14 to 30 days. Some interested parties have suggested that longer
    periods of up to 2 months would be more effective. However, giving longer
    trial periods may raise the cost of signing up customers and could lead to
    an increase in the price of service.

    FCC, industry representatives, and the press have also noted that
    consumers have access to various sources of information other than the
    carriers. For example, some have pointed to the brochure on the FCC Web
    site, which is included as appendix III in this report. In addition, they
    noted that information is available from news and magazine stories and
    from various Internet sites. Finally, they noted that one of the best
    sources of information on call quality may be neighbors and coworkers who
    are using

    their phones in ways that are similar to a new customer*s potential use.
    Suggestions Included

    To more directly affect call quality, some interested parties suggested
    that Setting Minimum Call carriers should be required to meet certain
    minimum quality standards, Quality Standards such as a minimum percentage
    of calls that must be successfully completed. As a result, consumers could
    expect that all calls would meet these minimum standards. This proposal
    would require establishing and measuring a common set of network
    performance standards. In addition, some entity would need to oversee
    compliance with the standard. FCC officials said that requiring a specific
    level of service quality, such as a percentage of calls that must be
    completed, might actually reduce the amount of competition and service in
    the mobile phone market. Officials said, for example, that if a certain
    level of service had to be provided, some carriers now offering service
    might have to leave a particular market. If

    fewer carriers provide service in these markets, prices would likely rise,
    and consumers would likely have fewer choices. Moreover, in rural,
    mountainous, and other hard- to- serve areas where some service is now

    available, requiring minimal levels of service might discourage carriers
    from serving these areas at all.

    Carriers Say They Are The national carriers we spoke with said that they
    recognize that call

    Taking Actions to Improve quality is important to consumers and that they
    are taking actions to Call Quality

    improve call quality. However, carriers noted that they face financial and
    regulatory constraints when they attempt to add base stations to either
    provide service where none previously existed or increase network
    capacity. These constraints include the following:

     Adding base stations involves capital expenditures. While carriers had
    easy access to capital markets in the 1990s, the downturn in the
    telecommunications industry made it more difficult for carriers to access
    these markets. In addition, carriers and financial analysts noted that
    carriers are facing a number of regulatory requirements* such as local
    number portability and E- 911 service* and that, to meet these
    requirements, they must use scarce capital resources that could be used to
    build out their networks.

     Adding base stations also involves securing suitable locations and
    zoning approvals. According to industry data, almost 36,000 antennas were
    installed between June 2000 and June 2002. Officials at all six of the
    national carriers we spoke with said that local zoning provisions limit
    their ability to site antennas in the most desirable locations. Some

    of these carriers said that it often takes many months to obtain
    permission to construct antennas. Carriers noted that they could offset
    some of the need to build more base stations if the federal government
    would allocate additional radiofrequency spectrum for commercial mobile
    phone service. However, other commercial and government users are already
    using other parts of the spectrum that are suitable for mobile phone
    service. Thus, providing more spectrum has proved to be a difficult and
    contentious issue. 28 Conclusions As Americans have come to rely more on
    mobile phones to meet their

    business and personal needs, it is important that FCC evaluate whether
    competition is adequate to ensure that mobile phone consumers are
    receiving the level of call quality they desire and expect. However, FCC
    has not yet undertaken such an evaluation in its annual report on
    competitive market conditions in the mobile phone service industry.
    Collecting and analyzing information on call quality would provide an
    ongoing record to help determine whether the current regulatory framework
    for call quality is adequate or whether certain actions* such as
    establishing call quality

    28 See U. S. General Accounting Office, Defense Spectrum Management: More
    Analysis Needed to Support Spectrum Use Decisions for the 1755- 1850 MHz
    Band, GAO- 01- 795 (Washington, D. C.: August 2001); Telecommunications:
    Better Coordination and Enhanced Accountability Needed to Improve Spectrum
    Management, GAO- 02- 906 (Washington, D. C.: September 2002); and GAO- 03-
    277.

    standards, mandating additional consumer information, or reducing local
    government control over the siting of new base stations* are needed.

    Recommendation for To assist FCC in determining whether further regulatory
    action concerning

    Executive Action mobile phone call quality is necessary, FCC should
    include call quality in its

    congressionally mandated annual report on competitive market conditions in
    the mobile phone industry. This report should incorporate an analysis of
    whether market competition is effective in ensuring that carriers are
    meeting consumers* expectations and desires regarding call quality.

    Agency Comments We provided a draft of this report to FCC for review and
    comment. In its comments, which are reprinted in appendix IV, FCC said
    that it believes

    that the ability of consumers to make informed choices in the marketplace
    is critical to the growth of mobile phone services. FCC noted that
    competition and deregulation in the mobile phone industry have benefited
    consumers in several ways, including lower prices and an increased

    diversity of service offerings. FCC also noted that for carriers to
    attract and maintain customers, they must continue to offer better
    packages of rates, network coverage, and call quality than their
    competitors. FCC believes that these competitive forces will continue to
    compel carriers to monitor and improve the quality and performance of
    their networks. Regarding our

    recommendation, FCC agreed, to the extent possible, to include information
    related to call quality in its future reports on competition in mobile
    phone services. However, FCC noted some difficulties in implementing the
    recommendation, such as data not being readily available, the lack of
    objective performance standards, and difficulties in measuring call
    quality against consumer expectations.

    As agreed with your office, unless you publicly announce its contents
    earlier, we plan no further distribution of this report until 5 days after
    the date of this letter. At that time, we will send copies of this report
    to the appropriate congressional committees; the Chairman, FCC; and other
    interested parties. We will make copies available to others upon request
    as well. In addition, the report will be available at no charge on the GAO
    Web site at www. gao. gov. If you have any questions about this report,

    please contact me at 202- 512- 4325 or shearw@ gao. gov. Key contacts and
    major contributors to this report are listed in appendix V.

    Sincerely yours, William B. Shear Acting Director, Physical Infrastructure
    Issues

    App e nd x I i Appendi xes Scope and Methodology To respond to the
    objectives of this report, we gathered information from a variety of
    sources. First, we reviewed the relevant literature on mobile phone
    networks, the relevant laws and regulations governing the delivery of
    mobile phone service, and studies of competition and consumer

    satisfaction in the mobile phone industry in the United States and
    selected foreign countries. Second, we obtained the views of a variety of
    experts on various aspects of mobile phone call quality. These experts
    included government officials from the Wireless Telecommunications Bureau
    and Consumer & Governmental Affairs Bureau at FCC, FTC, and the offices of
    attorneys general or public utility commissions in California, New York,
    Illinois, Massachusetts, Nebraska, New Jersey, and Texas. We also
    contacted representatives of the six nationwide U. S. mobile phone service
    carriers* AT& T Wireless, Cingular, Nextel, Sprint PCS, T- Mobile USA, and
    Verizon Wireless. Representatives of all of the carriers except AT& T

    Wireless answered our questions in person or over the phone; AT& T
    Wireless responded to questions in writing. In addition, we interviewed
    representatives of the mobile phone industry*s primary trade group, the
    Cellular Telecommunications & Internet Association; consumer advocates;
    lawyers representing various interested parties; financial analysts;

    consulting firms; companies that install equipment to improve call
    quality; and companies that conduct drive tests of the networks. Third, we
    provided questions on call quality for a nationwide phone survey of adult
    consumers that included questions on multiple topics submitted by various
    organizations. Finally, we reviewed Web sites to determine the types and
    quality of information on call quality available to consumers on the
    Internet.

    To better understand the regulatory framework we reviewed the FCC
    rulemakings and notices that set up the original cellular rules, and other
    relevant rulemakings, hearings, and notices that relate to setting rules
    of the operation of mobile phone markets. We also examined the
    Communications Act of 1934, Omnibus Budget Reconciliation Act of 1993, and
    Telecommunications Act of 1996, the three major pieces of legislation that
    set the statutory framework for mobile phone markets. In addition, we
    reviewed several recent cases and court rulings, including several
    focusing upon the jurisdictions of the state and federal government over
    this sector.

    Furthermore, we examined FCC*s recent annual reports on competitive market
    conditions in the mobile phone service industry. Finally, we spoke with
    mobile phone industry representatives and financial analysts to learn
    their views on the extent of competition.

    To determine the extent to which consumers are experiencing call quality
    problems, we sought data regarding call quality problems through several
    means. Carriers and other firms: We asked the six nationwide carriers for
    their

    data on the extent of call quality problems and other aspects of their
    services, including billing, contracts, marketing, and customer service.
    We also asked the carriers about factors they see affecting call quality.
    While all

    of the carriers provided us with some information about their networks,
    they did not provide us with geographic specific call quality data that we
    would need to help determine the extent of call quality problems. The
    carriers also provided us with information about factors that affect call
    quality, and we obtained further information on these factors by speaking
    with companies in investment banking, antenna leasing, and the development
    and manufacturing of mobile phone equipment. Finally, we contacted several
    companies that collect network performance data, including Telephia Inc.,
    LCC International Inc., and Scoreboard. Some of these companies conduct
    *drive tests* 1 for the carriers. During these tests, computers are used
    to simultaneously place calls on the networks of various carriers. The
    computers then record whether calls went through and whether they were
    dropped within some specified call time, such as 2 minutes.

    Consumer complaints: We attempted to determine the extent of call quality
    problems, as experienced by consumers. The six nationwide carriers were
    unwilling to share information on customer surveys or complaint data. We
    contacted the state public utility commissions to learn whether they
    collect complaint data on mobile phone service or otherwise regulate
    mobile phone service. Thirty- three state commissions responded
    voluntarily to our request for information on whether they regulate mobile

    phone service or categorize complaints. Of the six states that collect
    complaints, California and Texas provided us with their data. We collected
    consumer complaint data from FCC and FTC. We turned to consumer groups
    that collect such complaints* including the Wireless Consumer Alliance and
    Better Business Bureau* as well. Because none of these sources adhere to a
    common standard for categorizing complaints or a system to ensure that
    several sources are not collecting complaints from the same consumer, we
    were not able to use these data to reach overall conclusions about the
    extent to which consumers are experiencing call

    1 Drive tests are generally performed in vehicles traveling along major
    road arteries.

    quality problems. Finally, we reviewed sources of information on the
    Internet. Several sites allow consumers to report their experiences with
    their mobile phone service; however, none of the sites we visited said
    that they verify the information or delete it when it is no longer timely.

    Consumer surveys: We collected data from consumer surveys. We spoke to
    officials at Yankee Group, J. D. Power & Associates, and AARP about the
    surveys they have conducted. Because these surveys did not provide all of

    the information about call quality in which we were interested, we also
    contracted with an international market research firm to administer 26
    questions as part of a nationwide, multipurpose, Random Digit Dialing
    telephone survey of adults conducted between November 8 and 10, 2002. Our
    questions addressed issues such as call quality, satisfaction with the
    quality of mobile phone service, complaint- making practices, and factors
    involved in decisions to change companies. Five hundred fifty- two of the
    1,027 survey respondents had mobile phones and answered at least some of
    the 25 questions in addition to the preliminary screener question. The
    survey results were weighted by various demographic characteristics*
    gender, age, race, and education level.

    The survey results are derived from a sample of the population. This
    sample was one of a large number of samples that might have been drawn
    from that population. The results from the sample that was actually
    selected are subject to sampling error; that is, the extent to which they
    differ from what would have been obtained if information had been gathered
    from the entire population. We express confidence in the precision of
    survey results as 95- percent confidence intervals, for example, plus or
    minus 8 percentage points. For this survey, we estimate that for the

    survey questions that applied to all of the respondents who used mobile
    phones (417 or more) the 95- percent confidence intervals are plus or
    minus 8 percentage points, or less. Because fewer respondents answered the

    questions relating to changing carriers (between 112 and 144), the
    confidence intervals for these estimates are generally larger* plus or
    minus 15 percentage points, or less. Practical difficulties encountered in
    conducting this survey may introduce nonsampling errors as well. As in any
    survey, differences in the wording of questions, the sources of
    information available to respondents, and the types of people who do not
    respond may have led to errors that we could not assess. We took several
    steps to minimize some of these nonsampling errors. For example, we
    developed our survey questions with the aid of a survey specialist and
    pretested the questions. However, we are concerned

    about the potential for those who did not respond to the survey to differ
    from those who did respond in some way that could affect the results. We
    have no explicit reason for suspecting that the survey suffers from this

    shortcoming. Instead, our concern arises out of the large sample of phone
    numbers dialed to produce about 1,000 survey respondents* a response rate
    of about 13 percent of the estimated eligible population. 2 The survey
    results were weighted so that the overall demographic characteristics of
    our sample match the gender, age, race, and educational characteristics of
    the national population as measured in the Census Bureau*s March 2001
    Current Population Survey. We have no basis for determining to what extent
    this weighting adjusted for the views of the 87 percent of the sample who
    were not interviewed.

    2 Of the 19,194 numbers called, 4,572 numbers were ineligible for reasons
    such as the respondent*s telephone was not working or the number was not a
    residential household number. Of the remaining 14,622 numbers, for 1,027
    of the numbers, an eligible respondent completed the survey; for 2,055 of
    the numbers, the telephone was answered, but the interview was not
    completed for reasons such as the appropriate respondent was not available
    or refused to participate in the survey. For the other 11,540 numbers, no
    interview was conducted for reasons such as there was no answer or the
    call was answered by an answering machine. As a result, we were not able
    to determine if these numbers met the eligibility requirements for our
    survey. Of these 11,540 telephone numbers, we estimate that 4,646 were
    eligible, for an overall estimated total of 7,728 numbers that met the
    eligibility

    requirements for our survey.

    Results of Consumer Survey on Mobile Phone

    Appendi x II

    Service The following results, which are based on responses to our
    national telephone survey of adults in the United States, were used in our
    analysis of the extent to which consumers are experiencing call quality
    problems. Not shown are some of the interviewer*s transitions between
    questions or explanations of the options for answering. After each
    question, the number of responses (n) that were included in our analysis
    is noted. For questions where the number of responses is greater than 400,
    the sampling error is plus or minus 8 percentage points or less. For the
    other questions the sampling error is plus or minus 15 percentage points,
    or less. Percentages may not add up to 100 percent due to rounding.

    Question 1: Do you have a cell phone? (n= 1,026) Yes 56% No 44% Question
    2: About how many times a week do you try to use your cellular phone

    to either make or receive phone calls? (n= 566) None 6% 1 * 20 times 55%

    21- 50 times 20% Over 50 times 20% Question 3: How often do you have a
    problem making a call because you are in

    an area where there is no service? (n= 567) Never 22% Less than 10 percent
    of the time 44% Between 10 percent and one- third of the time 21% More
    than one- third of the time 12%

    Question 4: How often do you have a problem with getting a call through
    because you get a fast busy signal or a message that says the call failed?
    (n= 566) Never 32% Less than 10 percent of the time 47% Between 10 percent
    and one- third of the time 16% More than one- third of the time 5%

    Question 5: How often do you have a problem with a call being cut off or
    dropped before you finish a call? (n= 566) Never 39% Less than 10 percent
    of the time 39% Between 10 percent and one- third of the time 16% More
    than one- third of the time 6%

    Question 6: How often do you have a problem hearing or understanding what
    the other person on the phone is saying because of a bad connection or an
    echo? (n= 569) Never 32% Less than 10 percent of the time 38% Between 10
    percent and one- third of the time 21% More than one- third of the time 9%

    Question 7: Where do any of these problems with the quality of your calls
    most often occur? (n= 519) Inside a building 45% Traveling in a car or
    other vehicle 37% Somewhere else outside 18%

    Question 8: Now we would like to sum up your satisfaction with the overall
    quality of your cellular calls, including how often the calls go through,
    stay connected, and can be clearly heard. Are you satisfied, dissatisfied,
    or neither with the overall quality of your calls? (n= 566) Satisfied 83%

    Very satisfied 47% Somewhat satisfied 36% Dissatisfied 9%

    Very dissatisfied 3% Somewhat dissatisfied 6% Neither 8%

    Question 9: Since you first started using cellular phones, do you think
    that the general quality of your cellular calls, including how often the
    calls go through, stay connected, and can be clearly heard, has improved,
    gotten worse or stayed the same? (n= 563) Improved 47%

    Somewhat improved 25% Greatly improved 22% Gotten worse 5%

    Gotten somewhat worse 4% Gotten much worse 1% Stayed the same 47%

    Question 10: Consider the accuracy of the bills you receive for your
    cellular phone service and think about whether you have been charged for
    calls or services you didn*t make or didn*t sign up for. Would you say
    that you are satisfied, dissatisfied, or neither with the accuracy of your
    bills? (n= 543) Satisfied 81%

    Very satisfied 57% Somewhat satisfied 24% Dissatisfied 11%

    Very dissatisfied 4% Somewhat dissatisfied 7% Neither 8%

    Question 11: Considering what you pay for the package you get, the
    features you get on the phone, any problems you may have, and the quality
    of service you receive, are you satisfied, dissatisfied, or neither with
    the value you get for the money you pay? (n= 548) Satisfied 78%

    Very satisfied 45% Somewhat satisfied 33% Dissatisfied 15%

    Very dissatisfied 5% Somewhat dissatisfied 10% Neither 8%

    Question 12: Would you be willing to pay more than you are now paying to
    have higher overall call quality, including more completed calls, fewer
    dropped calls, and better connections? (n= 565) Yes 12% No 83% It depends
    5%

    Question 13: Have you been able to use your cell phone in all the areas
    and places you had expected when you purchased your service? (n= 562) Yes
    74% No 26% Question 14: In the past year, did you ever complain about the
    quality of your

    calls to your cellular phone company? (n= 571) Yes 19% No 81% Question 15:
    In the past year, did you ever complain about the quality of your

    calls anywhere else, like the FCC, a state agency, the Better Business
    Bureau? (n= 571) Yes 1% No 99%

    Question 16: Have you used your cellular phone for 2 years or less or for
    more than 2 years? (n= 571) 2 years or less 37% More than 2 years 63%

    Question 17: Are you the person who decides which cellular phone company*s
    service you will use, or does someone else like another family member or
    employer make that decision for you? (n= 569) I decide 73% Someone else
    decides 27%

    Question 18: Since you first became a cellular service customer, have you
    changed your cellular phone company? (n= 417) Yes 35% No 65% Changed
    because original company quit 0%

    providing service Question 19: How important in your decision to change
    cellular companies were

    call quality problems such as calls not going through, calls not staying
    connected, or not being clearly heard? (n= 142) Very 34% Somewhat 21% Not
    at all 45%

    Question 20: How important in your decision to change cellular companies
    were billing problems such as incorrect charges or confusing billing? (n=
    144) Very 28% Somewhat 19% Not at all 53%

    Question 21: How important was the cellular phone handset provided by your
    new cellular company in motivating you to change cellular companies? This
    includes things like available features, or phone style and appearance.
    Were the differences in handsets very, somewhat, or not at all important?
    (n= 142) Very 15% Somewhat 27% Not at all 58%

    Question 22: How important was getting a lower price in your decision to
    change cellular companies? (n= 144) Very 57% Somewhat 26% Not at all 17%

    Question 23: Have you ever wanted to change your cellular phone company
    but did not change for some reason? (n= 417) Yes 28% No 72% Question 24:
    We would like to know why you may not have changed cellular

    companies, even though you wanted to. How important was a contract
    termination fee required by your current cellular company in keeping you
    from changing cellular companies? Was the contract termination fee very,
    somewhat, or not at all important? (n= 112) Very 52% Somewhat 18% Not at
    all 25%

    No termination fee applied 6% Question 25: How important was having to get
    a new telephone number in

    keeping you from changing cellular companies? Was having to change
    telephone numbers very, somewhat, or not at all important? (n= 114) Very
    23% Somewhat 18% Not at all 58%

    Number not changed 1% Question 26: How important was the inability to
    continue using your current

    cellular phone handset in keeping you from changing cellular companies?
    Was having to change handsets very, somewhat, or not at all important? (n=
    113) Very 21% Somewhat 21% Not at all 57%

    Handset stayed same 1%

    Appendi x III

    FCC Fact Sheet on Mobile Phone Service Among its duties, FCC*s Consumer &
    Governmental Affairs Bureau educates and informs consumers about
    telecommunications services. To this end, the Bureau has produced a number
    of consumer alerts and fact sheets, six of them dealing with mobile phone
    service. Among these, is a new fact sheet called What You Should Know
    About Wireless Phone Service. Posted on FCC*s Web site at www. fcc. gov/
    cgb/ wirelessphone. pdf, the new fact sheet has been accessed an average
    of 60,000 to 70, 000 times per month, according to FCC officials. This
    fact sheet appears on the following page.

    Comments from the Federal Communications

    Appendi x IV Commission

    Appendi x V

    Key Contacts and Major Contributors GAO Contacts John P. Finedore, (202)
    512- 6248 Nancy S. Barry, (617) 788- 0550 Staff

    In addition to those named above, David Dornisch, Christine Houle,
    Acknowledgments

    Sara Ann Moessbauer, Tom Taydus, Ed Warner, and Mindi Weisenbloom made key
    contributions to this report.

    (545014)

    a

    GAO United States General Accounting Office

    In establishing a regulatory framework for mobile phone services, the
    Congress directed the Federal Communications Commission (FCC) to encourage
    competition among carriers. FCC believes that competition enables
    consumers to choose carriers that offer a desired level of call quality
    and that regulatory action establishing a minimum level of call quality
    would not be beneficial in a competitive environment. The

    Congress requires FCC to report annually on whether or not there is
    effective competition in mobile phone services. While call quality has
    been identified as a factor that affects consumers* choices of a carrier,
    FCC does not discuss call quality in this report.

    Common Call Quality Problems Associated with Mobile Phones Blocked calls
    (hills, tunnels, buildings, or temporary conditions

    such as weather) Insufficient capacity

    (no vacant frequencies, adjacent cell full, etc.) Dead spots

    (cell within service area but lacking base

    station coverage) Lack of coverage

    (calls outside of carrier's service area)

    Source: GAO. To assess the extent to which consumers are experiencing call
    quality problems* such as blocked or dropped calls, insufficient capacity,
    dead spots, or lack of coverage* we included questions on a national
    survey of adult consumers, conducted in November 2002. Our survey
    indicated that about four- fifths of adult mobile phone users were
    satisfied with their service, about one- tenth were dissatisfied, and the
    remainder indifferent. However, we also found that consumers are
    experiencing some call quality problems. For example, we estimate that
    about onefifth of users were unable to successfully complete 10 percent or
    more of their calls, because their mobile phone network dropped the calls.
    Only limited information on call quality problems is available to the
    public or FCC.

    Interested parties have proposed actions that could provide consumers with
    better information to help them choose a carrier that matches their needs
    or would set industrywide call quality standards for all consumers.
    However, some of the suggested actions could drive up the price of
    service, limit the entry of new carriers, or lead to a reduction of
    service in regions that are technically difficult or costly to serve. The
    carriers

    themselves say that they are taking actions to improve call quality and
    further regulation is not needed. Over the past decade, Americans have
    come to rely increasingly on

    mobile phones to meet their business and personal needs. However, because
    of the nature of radio transmission and other constraints, consumers are
    not always able to complete calls or to hear their calls clearly. As
    reliance on mobile phones has increased,

    state officials, consumer groups, the media, and others have raised
    concerns about the extent of call quality problems. With regard to call
    quality, GAO agreed to describe the regulatory framework; determine the
    extent to which consumers are experiencing problems; and discuss actions
    for

    improving call quality suggested by interested parties. GAO recommends
    that FCC include call quality in its mandated annual report analyzing
    whether there is effective competition in the market for mobile phone
    services. Including call quality in this analysis would provide an ongoing

    record to help FCC and the Congress determine whether market competition
    is sufficient to ensure that carriers are meeting consumers* expectations
    and

    desires regarding call quality or whether further regulatory action is
    needed. In response, FCC stated that to, the extent possible, it plans to
    include information related to call quality in its future annual reports
    on competition in mobile phone services.

    www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 501. To view the full report,
    including the scope and methodology, click on the link above. For more
    information, contact William B. Shear at (202) 512- 4325 or shearw@ gao.
    gov.

    Highlights of GAO- 03- 501, a report to the Honorable Anthony D. Weiner,
    House of Representatives

    April 2003

    TELECOMMUNICATIONS

    FCC Should Include Call Quality in its Annual Report on Competition in
    Mobile Phone Services

    Page i GAO- 03- 501 Mobile Phone Call Quality

    Contents

    Contents

    Page ii GAO- 03- 501 Mobile Phone Call Quality

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    Appendix I

    Appendix I Scope and Methodology

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    Appendix I Scope and Methodology

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    Appendix I Scope and Methodology

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    Appendix II

    Appendix II Results of Consumer Survey on Mobile Phone Service

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    Appendix II Results of Consumer Survey on Mobile Phone Service

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    Appendix II Results of Consumer Survey on Mobile Phone Service

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    Appendix II Results of Consumer Survey on Mobile Phone Service

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    Appendix III

    Appendix III FCC Fact Sheet on Mobile Phone Service

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    Appendix III FCC Fact Sheet on Mobile Phone Service

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    Appendix III FCC Fact Sheet on Mobile Phone Service

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    Appendix III FCC Fact Sheet on Mobile Phone Service

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    Appendix III FCC Fact Sheet on Mobile Phone Service

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    Appendix III FCC Fact Sheet on Mobile Phone Service

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    Appendix III FCC Fact Sheet on Mobile Phone Service

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    Appendix III FCC Fact Sheet on Mobile Phone Service

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    Appendix IV

    Appendix IV Comments from the Federal Communications Commission

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    Appendix IV Comments from the Federal Communications Commission

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    Appendix V

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