**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | WT Docket No. 04-111         |
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**NOTICE OF INQUIRY**

**Adopted: February 24, 2004** **Released: March 24, 2004**

**Comment Date: April 25, 2004**

**Reply Comment Date: May 10, 2004**

By the Commission: Commissioners Abernathy and Copps issuing separate
statements.

Paragraph \#

[I. INTRODUCTION 2](#introduction)

[II. MATTERS ON WHICH COMMENT IS REQUESTED
5](#matters-on-which-comment-is-requested)

[A. Mobile Telecommunications Market Structure
6](#mobile-telecommunications-market-structure)

[1. Geographic Market Definition and Service Availability
6](#geographic-market-definition-and-service-availability)

[2. Horizontal Concentration and Vertical Integration
10](#horizontal-concentration-and-vertical-integration)

[3. Consolidation and Exit 11](#consolidation-and-exit)

[4. Barriers to Entry 12](#barriers-to-entry)

[B. Carrier Conduct in the Mobile Telecommunications Market
13](#carrier-conduct-in-the-mobile-telecommunications-market)

[1. Price Rivalry 13](#price-rivalry)

[2. Non-Price Rivalry 14](#non-price-rivalry)

[3. Absence of Coordinated Interaction and Unilateral Effects
16](#absence-of-coordinated-interaction-and-unilateral-effects)

[C. Consumer Behavior in the Mobile Telecommunications Market
17](#consumer-behavior-in-the-mobile-telecommunications-market)

[1. Access to Information on Mobile Telecommunications Services
17](#access-to-information-on-mobile-telecommunications-services)

[2. Consumer Ability to Switch Service Providers
17](#consumer-ability-to-switch-service-providers)

[D. Mobile Telecommunications Market Performance
18](#mobile-telecommunications-market-performance)

[1. Pricing Levels and Trends 18](#pricing-levels-and-trends)

[2. Quantity of Services Purchased 21](#quantity-of-services-purchased)

[3. Variety, Innovation, and Diffusion of Service Offerings
22](#variety-innovation-and-diffusion-of-service-offerings)

[4. Quality of Service 23](#quality-of-service)

[5. Wireless -- Wireline Competition 23](#wireless-wireline-competition)

[E. International Comparisons of Mobile Telecommunications
24](#international-comparisons-of-mobile-telecommunications)

[III. PROCEDURAL MATTERS 25](#procedural-matters)

[A. *Ex Parte* Presentations 25](#ex-parte-presentations)

[B. Filing of Comments and Reply Comments
25](#filing-of-comments-and-reply-comments)

[IV. ORDERING CLAUSES 25](#ordering-clauses)

# INTRODUCTION

1.  In 1993, Congress created the statutory classification of Commercial
    Mobile Services[^1] to promote the consistent regulation of similar
    mobile radio services.[^2] At the same time, Congress established
    the promotion of competition as a fundamental goal for Commercial
    Mobile Radio Services ("CMRS") policy formation and regulation. To
    measure progress toward this goal, Congress required the Commission
    to submit annual reports ("*CMRS Reports*") that analyze competitive
    conditions in the industry.[^3] This *Notice of Inquiry* ("*NOI*")
    solicits data and information in order to evaluate the state of
    competition among providers of CMRS for its Ninth Annual Report and
    Analysis of Competitive Market Conditions with Respect to Commercial
    Mobile Services ("*Ninth Report*"). The statute requiring the
    Commission to submit annual reports providing an analysis of
    competitive market conditions with respect to CMRS stipulates that
    this analysis shall include, among other things, "an analysis of
    whether or not there is effective competition."[^4] To this end,
    previous *CMRS Reports* have presented a variety of standard
    indicators commonly used for the assessment of competitive market
    conditions, including the number of market participants,
    developments in carriers' pricing plans, service offerings,
    technology deployment, consumer churn, pricing data, subscriber
    growth, usage, and the diffusion of product innovations. For the
    *Ninth Report* the Commission proposes to enhance its analysis by
    restructuring the presentation of the various indicators of the
    status of competition to conform to a framework that groups such
    indicators into four distinct categories (A) Market Structure, (B)
    Carrier Conduct, (C) Consumer Behavior, and (D) Market
    Performance.[^5] The analysis of market performance will evaluate
    competitive conditions in the CMRS industry from the consumer's
    point of view, including both personal and business users. In
    particular, the analysis of market performance will focus on the
    benefits to consumers of effective competition such as lower prices,
    higher quality, greater variety, and more rapid innovation. A key
    premise of the proposed framework is that market structure, carrier
    conduct, consumer behavior and the interrelationships among these
    categories are important determinants of consumer outcomes.

2.  Based on an overall assessment of the indicators that the Commission
    considered, the *Eighth Report* concluded that there is effective
    competition in the CMRS market.[^6] These indicators included the
    nature and number of market participants, the geographic extent of
    service deployment, technological improvements and upgrades, price
    competition, investment, usage patterns, churn, subscriber growth,
    and product innovations, among other things.[^7] The *Eighth Report*
    stated that 95 percent of the U.S. population has three or more
    different operators offering mobile telephone service in the
    counties in which they live and 83 percent have a choice of 5 mobile
    telephone providers.[^8] Further, the Commission found that the
    price consumers pay for mobile telephony service continued to fall,
    while subscribership increased.[^9] In addition, innovative and
    enhanced services such as advanced wireless services and larger
    digital footprints were introduced. These metrics were the basis of
    the Report indicating that CMRS carriers have no guarantee of
    maintaining their market share, and that customers are able to
    change providers if a carrier attempts to raise rates or diminish
    service quality.[^10]

3.  In this proceeding, the Commission seeks to update the indicators of
    competition for its next report to Congress and to assist in
    determining if there is still effective competition in the CMRS
    market. In its ongoing effort to improve its information gathering
    and competitive analysis, the Commission issues this *NOI* to
    solicit detailed, comprehensive, and independent data for the *Ninth
    Report* and to augment information from the Commission and publicly
    available sources. The Commission requests data that will allow us
    to evaluate the interrelationships among market structure, carrier
    conduct, consumer behavior, and market performance in order to
    determine whether there is still "effective competition" among
    providers of CMRS. The Commission invites comment on the new
    analytic framework proposed to assess the state of competition among
    providers of CMRS in the *Ninth Report*. As will be discussed in
    more detail later in this *NOI*, the Commission seeks the following
    data and ask commenters to address the following general questions:

-   The Commission asks for comment on "what is effective competition?"
    and which indicators are useful to determine whether there is
    effective competition among providers of CMRS.

-   The Commission seeks comment on what metrics are available that will
    give us greater insight into the performance of the CMRS industry.
    The Commission is particularly interested in gathering accurate and
    reliable information on the number of subscribers, penetration
    rates, usage, average price per minute, quality of service, pricing
    trends, and profits, and whether these metrics vary between urban
    and rural areas as well as among different demographic groups.

-   The Commission seeks comment on how the metrics pertaining to the
    CMRS industry's structure, carrier conduct, consumer behavior, and
    market performance vary across different geographic areas, in
    particular between rural and urban areas? If so, how?

-   The Commission seeks comment on how barriers to entry (e.g. access
    to sufficient spectrum, cost of capital, first mover advantages and
    siting cell towers) affect the industry's market structure. The
    Commission seeks comment on which entities compete to provide CMRS
    services, the extent of deployment of CMRS services, and whether the
    same types of services are available in all of a carrier's service
    areas.

-   The Commission seeks comment on the most significant changes or
    developments in pricing plans, advertising and marketing, capital
    expenditures, and new technology deployment during the past year.

-   The Commission seeks comment on significant changes and developments
    have occurred in the provision of wireless data and Internet
    services, both mobile and nomadic,[^11] since the publication of the
    *Eighth Report*.

-   The Commission seeks data on current and prospective deployment and
    usage of wireless high-speed internet access services through mobile
    and portable computing devices using Wi-Fi and similar technologies
    and how such data should be considered in assessing the competitive
    conditions of the CMRS market.

-   The Commission seeks comment on how competitive conditions and
    performance in the CMRS industry in the United States compare to
    that in other countries, including data on key industry performance
    metrics, such as subscribership, penetration rates, usage, pricing,
    quality of service, and service availability.

4.  In addition, The Commission seeks comment on the Commission\'s
    market-oriented policies, including those that promote
    facilities-based competition among providers of CMRS and that the
    Commission believes have provided important benefits to consumers.
    For example, the Commission\'s policy to let market forces determine
    the number of providers operating in a given geographic area,
    subject to antitrust restrictions and other appropriate limits, has
    allowed providers to operate at a competitive and efficient scale of
    operation. This policy enables these providers to serve consumers at
    prices that reflect the cost savings of efficient operation among
    other factors. Over the past decade, with respect to broadband
    personal communications services ("PCS") and other mobile radio
    services, the Commission has adopted a licensing model in which
    licensees have "exclusive and transferable flexible rights" to the
    use of specified spectrum within a defined geographic area, with
    spectrum use rights that are governed primarily by technical rules
    to protect against harmful interference.[^12] The Commission seeks
    further input on how, for purposes of assessing and comparing
    competitive market conditions, this approach leads to the deployment
    of the spectrum for its highest and most valued use, and how, in
    turn these trends have facilitated the provision of services that
    are tailored to the preferences of consumers.

5.  The Commission seeks comment on how the market structure in this
    industry has evolved due to specific actions by the Commission,
    especially the application of the above-referenced spectrum usage
    model for CMRS and other market-oriented policies. What other
    effects have resulted from these policies? Are these effects the
    same in urban and rural areas? If not, how do they differ, and why?
    Do these effects vary among CMRS providers? If so, why? Are there
    other policies that the Commission could adopt that would enhance
    competition in the mobile telecommunications industry?[^13]

6.  Industry members, members of the public, and other interested
    parties should submit information, comments, and analyses regarding
    competition in the provision of CMRS services. Commenters desiring
    confidential treatment of their submissions should request that
    their submission, or a specific part thereof, be withheld from
    public inspection.[^14] In order to facilitate its analysis of
    competitive trends over time, the Commission requests that parties
    submit current data as well as historic data that are comparable
    over time. In addition to the comments submitted in this proceeding,
    the *Ninth Report*, as all past *CMRS Reports*, will also include
    information from publicly-available and Commission sources.

# MATTERS ON WHICH COMMENT IS REQUESTED

7.  In prior *CMRS Reports*, mobile telecommunications have been divided
    into two sectors: (1) mobile voice[^15]; and (2) mobile data.[^16]
    As noted in the *Eighth Report,*[^17] however, mobile voice and
    mobile data services are no longer clearly separate services in the
    CMRS industry. Many mobile voice operators also offer mobile data
    services using the same spectrum, network facilities, and customer
    equipment. Furthermore, many United States mobile carriers have
    integrated the marketing of mobile voice and data services.
    Therefore, for purposes of this *NOI*, the Commission inquires about
    a single mobile telecommunications sector that includes
    interconnected mobile voice and mobile data services provided on the
    same handset, as well as providers that offer only mobile data
    services.[^18] Providers of mobile telecommunications services
    primarily use cellular radiotelephone, broadband Personal
    Communications Services ("PCS"), and Specialized Mobile Radio
    ("SMR") licenses.[^19] Because these licensees offer mobile
    telecommunications services that are essentially indistinguishable
    by most consumers, they are discussed in this *NOI* as a single
    industry sector. Resellers and satellite[^20] operators also offer
    mobile telecommunications services. In addition, in an effort to
    continue to provide the most complete picture of competition among
    providers of CMRS to Congress, the *Ninth Report* will also look at
    mobile wireless service offerings outside the umbrella of "services"
    specifically designated as CMRS by the Commission.[^21] Because
    providers of these services may compete now or in the future with
    CMRS providers, the Commission believes it is important to consider
    them in its analysis and collect information on mobile wireless
    services regardless of their regulatory classification. The
    Commission asks if there are other providers that compete in this
    market. If so, to what extent are these providers creating
    competition in the mobile telecommunications industry?

## Mobile Telecommunications Market Structure

8.  The analysis of market structure will focus on the current level of
    concentration and the ease or difficulty with which new operators
    can enter the mobile telecommunications market. Examples of key
    metrics collected in the past that assisted in the determination of
    market structure include: the current number of operators per
    county; planned spectrum auctions that may enable the entry of
    additional operators; and consolidation and exit of operators from
    the mobile telecommunications market. The sources of data and
    analysis of these and other metrics are discussed below. The
    Commission invites commenters to address whether there are other
    metrics that should be used to evaluate the market structure of the
    mobile telecommunications market? Are data for these metrics
    available on a national and/or sub-national level?

### Geographic Market Definition and Service Availability

9.  **Defining Geographic Markets.** In order to analyze the structure
    of the mobile telecommunications market, it is necessary to
    accurately define the relevant product and geographic markets, and
    to identify the number of carriers providing service in those
    markets.[^22] Defining the relevant geographic market requires,
    among other things, the identification of a geographic area within
    which customers face similar competitive choices. Defining
    geographic markets is complicated and time consuming due to the
    large number of mobile operators, the wide variation in their
    geographic footprints, and the resulting patchwork of numerous and
    relatively small geographic areas in which consumers face the same
    choices of mobile telecommunications providers.

10. The Commission seeks comment on how best to define geographic
    markets to analyze the structure of the mobile telecommunications
    market for the *Ninth Report*.[^23] The Commission also requests
    comment on how to improve the methodology the Commission uses to
    determine the number of carriers serving a defined geographic area.
    The methodology used in prior reports inherently includes some
    undetermined degree of overcounting.[^24] Do commenters believe that
    this degree of overcounting is significant and materially affects
    the determination of mobile telecommunications service availability
    and market structure? Is there an alternate methodology that could
    be used to estimate service availability more accurately?

11. **Service Availability by Billing Address.** In conducting its
    analysis of service availability and market structure, the
    Commission seeks information about the extent to which consumers are
    able to, and do, purchase service plans from carriers whose networks
    do not cover their residential location or billing address. Carriers
    frequently query potential subscribers about the zip code of their
    billing address. Should this be taken as an indication that carriers
    do not provide service to consumers whose billing address zip codes
    are outside the range of the carriers' network coverage areas, even
    if such consumers wish to purchase service plans in order to use
    their phones inside the coverage areas? To what extent are mobile
    telecommunications subscribers' residential locations or billing
    addresses located outside of their carrier's network coverage area?
    To what degree would an analysis of the population of smaller
    geographic areas that underlie carriers' network coverage boundaries
    undercount those subscribers? Furthermore, would the use of other,
    smaller geographic areas in addition to or in place of counties be
    appropriate in analyzing service availability? If so, which areas
    would be appropriate? Do such data currently exist?

12. **Rural Markets.** Since the release of the *Sixth Report,*[^25] the
    Commission has attempted to obtain a better understanding of the
    state of competition below the national level, and particularly in
    rural areas.[^26] In order to analyze the mobile telecommunications
    market structure in rural areas, it is necessary first to define
    "rural areas." The federal government has multiple ways of defining
    rural, reflecting the multiple purposes for which the definitions
    are used.[^27] In the *Eighth Report*, the Commission analyzed
    service availability in rural areas using three different proxy
    definitions, and similar results were obtained for each
    definition.[^28] The Commission compared the number of competitors
    in: 1) Rural Statistical Areas ("*RSA*") counties versus
    Metropolitan Statistical Areas ("*MSA* ")counties; 2) non-nodal
    Economic Areas ("EA") counties versus nodal EA counties;[^29] and 3)
    counties with population densities below 100 persons per square mile
    versus those with population densities above 100 persons per square
    mile.[^30] In addition, the Commission recently released a *Notice
    of Proposed Rulemaking* to examine ways to promote the rapid and
    efficient deployment of spectrum-based services in rural areas.[^31]
    The Commission requests comment on how the Commission should define
    "rural areas" for purposes of the *Ninth Report*. Should there be a
    single distinction between rural and non-rural areas, or should
    rural and non-rural be defined on a continuum, for example by
    looking at different population densities? Should the Commission
    adopt one of the proposed definitions in the *Rural NPRM*, or some
    combination of the elements contained in those proposed definitions,
    for the *Ninth Report?*

13. **Service Deployment and Coverage Maps**. In order to improve the
    accuracy of its analysis and to reduce overcounting in the *Ninth
    Report*, the Commission asks service providers to submit as part of
    their comments to the Commission, in electronic format, the coverage
    maps that they already make available to the public.[^32]
    Specifically, the Commission requests carriers to submit as part of
    their comments the maps they employ to advertise their coverage
    areas in brochures and on their web sites in a geo-referenced,
    mapable format, such as MapInfo table (.tab), Tagged Image Format
    (.TIF), or Shapefile (.shp) files.[^33] The Commission requested
    this data in last year's NOI and no carrier responded. Besides
    requesting the information in an NOI, how else could the Commission
    obtain this information? Would signatories to Cellular
    Telecommunications and Internet Association ("CTIA") Voluntary
    Consumer Code be willing to submit their coverage maps to the
    Commission in one of the aforementioned electronic formats? In the
    alternative, the Commission asks carriers to provide a list of
    counties where they provide facilities-based services. The
    Commission has used the contours filed by 800 MHz cellular licensees
    to estimate the availability of analog mobile telephone service, and
    therefore does not require additional maps showing analog coverage
    from cellular licensees.[^34] However, the Commission requests that
    cellular licensees submit, as part of their comments, their publicly
    available maps in the aforementioned formats showing where they
    offer reliable digital service, or else supply lists of counties in
    which the service is offered. In addition to employing more accurate
    coverage maps, The Commission seeks comment on other ways its
    analysis of service availability can be improved?

14. In order to continue to improve the accuracy of its analysis, the
    Commission seeks information on whether carriers market service to
    new customers in all of the geographic areas in which they have
    coverage. Do carriers provide coverage in certain areas, such as
    near major roads, where they do not also market service to residents
    of those areas? If this is true, could the Commission's analysis be
    further improved if carriers indicated the parts of their coverage
    areas in which they compete to offer new service and the parts that
    are used only to provide coverage to traveling subscribers based in
    other locations? Also, in what respect do infrastructure sharing
    agreements, such as those between carriers along highways in
    low-population areas, affect service availability in rural areas?
    [^35] Do such agreements effectively increase the number of
    competitors in those areas? Do these arrangements increase wireless
    usage in areas adjacent to such areas?

15. **Mobile Data Deployment.** The Commission also seeks comment on
    deployment of next-generation network technologies such as 1X and
    GPRS, which will bridge the gap between second and third generation
    technologies. The Commission is particularly interested in changes
    that have occurred in such deployment since the *Eighth Report.* For
    example, in what portion of their license and network footprints
    have carriers deployed these technologies, and what advanced
    wireless applications are being offered using these technologies?
    Are the same types of advanced services available in all areas, and
    in particular, does the availability of advanced services vary
    between urban and rural areas? Specifically, the Commission requests
    carriers to submit as part of their comments the maps they employ to
    advertise their mobile data coverage areas in brochures and on their
    web sites in a geo-referenced, mapable format, such as MapInfo table
    (.tab), Tagged Image Format (.TIF), or Shapefile (.shp) files
    including the type of mobile data services being offered there. In
    the alternative, the Commission asks carriers to provide a list of
    counties where they provide these mobile data services.

16. **Reliability of Data.** The Commission's service availability
    analysis relies on information reported by service providers,
    including their news releases, filings with the Security and
    Exchange Commission ("SEC"), web site coverage maps, and network
    buildout notifications filed with the Commission. In addition, there
    are independent web sites and public reports that include some
    information about service coverage and dead zones.[^36] The
    Commission seeks comment on the advantages and disadvantages to this
    approach, including the potential biases arising from relying
    exclusively on data supplied by parties that may have a financial
    interest in the use of such data as part of Commission decisions.
    Since the Commission, in some cases, reports on information supplied
    only by one or two sources, the Commission also seeks comment on
    ways of obtaining independent verification of competition
    information provided for the *Ninth Report*. Which independent
    sources can be reliably used to verify carrier-supplied coverage
    information? Do commenters believe such verification is necessary in
    analyzing service availability and competition?

17. **Resale Providers.** Resellers offer service to consumers by
    purchasing airtime at wholesale rates from facilities-based
    providers and reselling it at retail prices. According to
    information provided to the Commission in its ongoing local
    competition and broadband data gathering program, the resale sector
    accounted for approximately 5 percent of all mobile telephone
    subscribers as of December 2002.[^37] To what extent are resellers
    creating competitive pressures in the mobile telephone sector? Who
    are the major resellers in the United Sates? How many subscribers do
    they have? From the consumer's perspective, what are the benefits of
    buying from a reseller versus a facilities-based provider? Are
    resellers selling to specific demographic segments? The Commission
    also seeks comment on the impact of the November 24, 2002 sunset of
    the CMRS resale rule on the extent and vigor of resale
    activity.[^38] The *Eighth Report* discusses "mobile virtual network
    operators" ("MVNOs") as a type of reseller focusing on brand
    development, with the intent to offer a niche product and to have
    better customer retention.[^39] The Commission asks for comment on
    how this resale model has affected the provision of resale services.
    The Commission also asks for information about companies employing
    the MVNO resale model since the *Eighth Report*.

18. **Satellite Providers.** Certain satellite services are by
    definition CMRS. At least four satellite carriers currently provide
    mobile satellite services ("MSS") in the United States: Globalstar
    Telecommunications LTD, Iridium Satellite LLC, Inmarsat Limited, and
    Mobile Satellite Ventures.[^40] The Commission requests carriers to
    submit as part of their comments information detailing the
    geographic areas of the United States in which they provide coverage
    as well as those areas in which they offer service to new customers.
    Taking into account such information on MSS service availability,
    The Commission seeks comment on the extent of competition among MSS
    providers. To what extent do MSS providers compete with
    terrestrial-based mobile telecommunications providers? Are MSS
    services substitutes for terrestrial-based mobile voice and data
    services?

### Horizontal Concentration and Vertical Integration

19. Concentration measures based on output metrics, such as market share
    of subscribers or revenues, are common tools used to assess market
    structure. Previous CMRS reports have not provided concentration
    measures, in part because of the difficulty in defining geographic
    markets and limitations on available output data. Can the use of
    concentration measures, such as the Herfindahl-Hirshman Index
    ("HHI"), give additional insight into whether effective competition
    exists as well as into whether a service provider has a dominant
    share of the market? The Commission requests comment on whether
    concentration measures should be included in the *Ninth Report*.
    Commenters who recommend that the Commission include concentration
    measure(s) in the *Ninth Report* are requested to provide comments
    on various concentration measures and how these metrics may enhance
    its analysis of market structure. The *DOJ/FTC Guidelines* provide
    HHI thresholds that indicate concentrated markets.[^41] If HHIs are
    employed, what should constitute a high degree of concentration for
    the mobile telecommunications market? One possible HHI threshold
    level would be those listed in the DOJ/FTC merger guidelines. Are
    these appropriate to use when looking at whether there is effective
    competition in the mobile telecommunications market?

20. One possible data source that could be used to calculate output
    market concentration statistics is the Numbering Resource
    Utilization / Forecast (NRUF) data that are submitted to the
    Commission on a rate center basis.[^42] Rate center boundaries are
    much smaller than, and not coextensive with, mobile
    telecommunications license boundaries such as Cellular Market Areas
    ("CMAs"), Metropolitan Trading Areas ("MTAs"), or Basic Trading
    Areas ("BTAs").[^43] Due to their relatively small size, rate
    centers are not necessarily indicative of where a mobile
    telecommunications subscriber lives, works, or uses a mobile
    telecommunications device. In addition, in order to protect the
    confidentiality of the companies submitting NRUF data, the
    Commission does not report the number of subscribers for geographic
    areas in which there are three or fewer carriers.

21. If concentration measures are included in the *Ninth Report*, given
    the caveats discussed above, are the NRUF data a reasonable proxy
    for output in the mobile telecommunications market? Also, The
    Commission seeks comment on how to determine which geographic area
    or areas should be used to calculate mobile telecommunications
    concentration measures. In particular, The Commission seeks comment
    on the appropriateness of various geographic market delineations
    given the limitations of the NRUF data discussed above.

22. In addition to the issue of horizontal concentration in the relevant
    end-user service market, the Commission also seeks information on
    the extent of, and the factors giving rise to, vertical integration
    and disintegration in the CMRS industry. In other words, under what
    circumstances and for what reasons do CMRS providers employ their
    own inputs[^44] rather than purchasing them from outside vendors?
    The Commission seeks comment and information on the vertical
    structure of the CMRS industry. How prevalent is vertical
    integration or disintegration with respect to the different elements
    of physical network infrastructure, spectrum, and content, and are
    there any discernible trends toward vertical integration or
    disintegration with respect to any of these inputs? What
    considerations shape the decisions of CMRS providers to make or buy
    their inputs? What is the actual or potential impact of vertical
    integration or disintegration, if any, on competition among
    providers of CMRS, the cost of providing service, or other aspects
    of the performance of the CMRS industry?

### Consolidation and Exit

23. Consolidation and exit of service providers, whether through
    secondary market transactions or bankruptcy, may affect the
    structure of the mobile telecommunications market. For example, a
    reduction in the number of service providers may increase the market
    power of any given service provider which could lead to higher
    prices, fewer services, and/or less innovation.[^45] The Commission
    seeks comment on the effects of consolidation in the mobile
    telecommunications market. Are the effects of consolidation
    different for mergers and acquisitions, swaps, joint ventures, and
    bankruptcies? Has consolidation affected mobile data services
    differently than mobile telephone services? Has consolidation
    affected rural areas differently than urban areas? Among the
    policies potentially affecting consolidation in this market, the
    Commission eliminated (effective January 1, 2003) a rule limiting
    the amount of spectrum a CMRS licensee could own or control in a
    given licensed area.[^46] The Commission seeks comment on how
    consolidation of spectrum and facilities has affected the mobile
    telecommunications market structure since the sunset of the
    Commission's CMRS Spectrum Aggregation Rule.

### Barriers to Entry[^47] 

24. If entry into a market is easy, then entry or the threat of entry
    may prevent incumbent operators from exercising market power, either
    collectively or unilaterally, even in highly concentrated
    markets.[^48] The ease or difficulty of entry generally depends on
    the nature and significance of entry barriers. Barriers to entry in
    the mobile telecommunications market may include first-mover
    advantages, large sunk costs, and access to spectrum. [^49] The
    Commission seeks comment on these and other types and level of
    barriers to entry in the mobile telecommunications market. What are
    the most significant barriers to entry in the mobile
    telecommunications market? Are barriers to entry different in rural
    and urban areas?

25. **Access to Spectrum**. The Commission seeks comment on whether
    there is access to sufficient spectrum, either through Commission
    auctions or through secondary market transactions, to prevent
    spectrum from becoming a significant barrier to entry in the CMRS
    industry. Are existing service providers spectrum constrained? If
    so, in which geographic markets are carriers most likely to be
    constrained? Have these carriers become more spectrum constrained
    after rolling out next generation services? Do potential entrants
    have sufficient opportunities to access spectrum? As advanced
    wireless technologies become more prevalent, will potential entrants
    have more or fewer opportunities to access spectrum?

26. The Commission's recent action to facilitate leasing and other
    transactions via secondary markets addressed the question of
    spectrum access in a number of services.[^50] In the *Secondary
    Markets R&O*, the Commission allowed licensees in the Wireless Radio
    Services, including CMRS, to lease all or a portion of their
    spectrum usage rights, for any length of time within the license
    term, and over any geographic area encompassed by the license. The
    Commission seeks comment on whether this new policy to facilitate
    spectrum leasing, combined with future spectrum auctions such as
    that for Advanced Wireless Services,[^51] will provide sufficient
    opportunities both for existing carriers to expand their operations
    and for new mobile telecommunications providers to enter the market.
    Are there other barriers that limit access to spectrum?

27. The Commission requests comment from licensees and potential
    spectrum lessees regarding their experience exploring possible
    spectrum leases following Commission adoption of the *Secondary
    Markets R&O*. Are licensees and potential spectrum lessees able to
    identify potential spectrum leasing partners? What considerations
    are driving negotiations regarding spectrum leases? Are there
    impediments to leasing, and if so, what is the nature of these
    impediments? Are pricing considerations, either the price sought by
    licensees or the amount the lessees are willing to pay, acting as an
    impediment? Are there other considerations, such as high transaction
    costs, that may affect the willingness of either licensees or
    potential lessees to undertake spectrum leasing negotiations? What
    types of leasing arrangements are being sought by both licensees and
    potential spectrum lessees? Are the spectrum leasing negotiations
    targeted at providing additional spectrum to meet the needs of an
    existing licensee in the geographic area encompassed by the lease,
    or aiding an existing licensee to fill out its footprint, or
    providing spectrum access to a new entrant, or to achieve some other
    objective?

28. **Other Barriers to Entry.** The Commission also seeks comment on
    other market conditions that may present barriers to entry in the
    CMRS market. For example, the Commission recognizes that cellular
    licensees, like early entrants in other industries, have benefited
    from a first-mover advantage.[^52] Do cellular licensees continue to
    benefit from this advantage, and if so, to what extent and in which
    markets? In addition, might access to capital create a barrier to
    entry in the mobile telecommunications market? To what degree do
    mobile telecommunications providers face capital market constraints
    in financing the purchase of spectrum licenses, or the leasing of
    spectrum rights, or the construction of facilities? Do the
    nationwide carriers face a different capital market than do smaller
    regional and local providers? The Commission seeks comment on the
    height of scale economy barriers in mobile telecommunications.
    Finally, The Commission seeks comment on the extent to which the
    ability to site cell towers in a carrier's licensed market area
    creates a barrier to entry. Some carriers have reported problems
    obtaining permission to site cell towers in certain geographic
    markets.[^53] How widespread is this problem? Is this a greater
    problem in certain regions of the country?

## Carrier Conduct in the Mobile Telecommunications Market

29. Whether there is effective competition in the mobile
    telecommunications market also depends on the conduct and
    interaction of the carriers in the market. For example, while
    coordinated interaction and unilateral effects may lessen
    competition, such conduct may be averted by the presence of one or
    more carriers who have the ability and incentive to expand sales by
    offering innovative service packages, undercutting the prices of
    rivals, and/or engaging in extensive advertising and promotional
    campaigns. [^54] The Commission asks for information on the degree
    and extent of (1) price rivalry and (2) non-price rivalry. Are there
    other indicators related to carrier conduct that the Commission
    should examine?

### Price Rivalry

30. Past *CMRS Reports* examined new types of pricing plans in order to
    report on major developments in the industry and to assess the new
    plans' impact on competition.[^55] This information is relevant in
    determining the intensity and degree of price rivalry in the mobile
    telecommunications market. To what extent do new types of pricing
    plans reflect price rivalry among the providers? What are the major
    innovations that have occurred with pricing plans since the *Eighth
    Report*? Have these pricing innovations spread throughout the mobile
    telecommunications market or have they been limited to a subset of
    carriers? In addition, The Commission seeks comment on the extent to
    which carriers in their pricing plans differentiate between data
    services offered over 2G networks and those offered over newer
    generation technologies such as 1X and GPRS networks. Have past
    pricing innovations been more widely adopted in the last year?

31. The Commission seeks information on which carriers offer nationwide
    pricing plans, particularly those that are not typically described
    as being nationwide operators, and request descriptions of the terms
    of such plans. The Commission asks carriers that offer nationwide
    pricing plans whether they offer the same rates and terms to
    consumers throughout all parts of the country where they offer such
    plans, including Alaska and Hawaii as well as the U.S. Territories.
    Furthermore, do carriers charge different prices (monthly and per
    minute) or offer different terms for their local and regional plans
    across the various areas that they serve, for example, between rural
    and urban areas? If so, are these geographic variations substantial,
    and what are the major reasons for such variations? If there are no
    geographic variations, why not?

32. Are there patterns where certain demographic groups subscribe to
    similar pricing plans? For example, do subscribers with lower
    personal or household incomes tend to purchase local or regional
    plans rather than national plans? Are particular plans associated
    with teenagers, college students or seniors? Are prepaid services
    used by a group of consumers with similar characteristics? Also, The
    Commission seeks information on the existence and the extent of
    contracts with terms and prices other than those that are widely
    advertised. Are these types of contracts associated with or targeted
    to a certain type of demographic group? Do consumers that use
    specific types of mobile telecommunication services such as mobile
    data services have similar demographic characteristics? Have the
    introduction of new types of pricing plans increased mobile
    telephone penetration among specific demographic groups or in
    certain geographic areas?

### Non-Price Rivalry

33. Service providers in the mobile telecommunications market also
    compete on non-price characteristics such as coverage, quality of
    service, and ancillary services. Non-price competition is a response
    to consumer preferences and demand. Indicators of non-price rivalry
    include advertising and marketing, capital expenditures, technology
    deployment and upgrades, and the provision of ancillary services.
    The Commission seeks information on non-price rivalry.

34. **Advertising and Marketing.** Firms may engage in advertising and
    marketing either to inform consumers of available products or
    services or to increase sales by changing consumer preferences.
    Mobile telecommunications service is an "experience good,"[^56] and
    in general, advertising for an experience good tends to be
    persuasive rather than informational in nature. What type of
    advertising do mobile telecommunications carriers engage in? Do they
    utilize promotional or informational advertising or a mix of both?
    Does the type of advertising vary with the medium? Are there studies
    on the national or sub-national level that provide data and/or
    analysis of advertising by mobile telecommunications firms? The
    Commission also seeks comment on the extent to which CMRS providers'
    efforts to brand their services through advertising and marketing
    cultivate brand loyalty.

35. **Capital Expenditures.** Capital expenditures are funds spent
    during a particular period to acquire or improve long-term assets
    such as property, plant, or equipment. In the mobile
    telecommunications market, capital expenditures consist primarily of
    spending to expand and improve the geographic coverage of networks,
    to increase the capacity of existing networks to serve more
    customers, and to improve the capabilities of networks (by allowing
    for higher transmission speeds, for example).[^57] Have capital
    expenditures by mobile telecommunications providers increased or
    decreased since the *Eighth Report*? What are the underlying reasons
    for the change? Are there any studies or analyst reports on the
    capital expenditures of nationwide carriers versus regional/local
    providers? Does data exist on capital expenditures by geographic
    region?

36. **Technology Deployment and Upgrades.** Mobile telecommunications
    carriers have been deploying next-generation network technologies,
    which offer mobile data services at higher data transfer speeds than
    earlier versions.[^58] The *Eighth Report* discussed the progress of
    nationwide and regional carriers in deploying these
    technologies.[^59] For the *Ninth Report*, the Commission requests
    information on the extent to which mobile telecommunications
    carriers are continuing to upgrade, or plan to upgrade their
    networks to these advanced services and/or even more advanced
    technologies \-- such as EDGE, WCDMA, and 1xEV-DO. Specifically, do
    carriers plan to deploy more advanced technologies? If yes, how
    extensively are carriers planning these deployments to be (*e.g*.,
    will carriers focus on urban areas only, or will they deploy these
    technologies in rural areas as well)? With regard to GSM-based
    carriers, the Commission asks whether carriers are planning to
    upgrade their GPRS systems. If yes, are they planning to upgrade to
    EDGE, WCDMA or some other technology? With regard to CDMA-based
    carriers, to what extent are they planning to upgrade their networks
    to include 1xEV-DO technology? Are there other new wireless
    technologies that will improve wireless providers' coverage,
    capacity and/or service offerings for mobile telecommunication
    services?

37. As discussed in the *Eighth Report,* most of the major mobile
    telecommunications carriers have introduced the capability to
    exchange text messages with subscribers on other carriers'
    networks.[^60] The Commission seeks information on the extent to
    which this intercarrier interoperability has affected Short
    Messaging Service ("SMS") adoption rates.

38. The Commission requests information on the number of users of SMS
    and the volume of SMS traffic. In addition, the Commission requests
    comment as to the actual data transfer speeds that are being
    experienced with GPRS and 1X systems (as well as EDGE and 1xEV-DO
    systems, where those technologies have been deployed) and the degree
    to which individual users' data speeds vary with the number of
    subscribers concurrently operating on these systems within a given
    area.

39. There are a growing number of service providers that offer data-only
    services. These providers include traditional one-way paging service
    providers as well as two-way data-only service providers. For
    example, as discussed in the *Eighth Report*, Monet Mobile, offers
    data-only service using CDMA1xEV-DO technology and broadband PCS
    spectrum. Two other carriers, Cingular Wireless and Motient Corp.
    operate two-way data networks using the 900 MHz SMR and 800 MHz SMR
    spectrum bands, respectively.[^61] The Commission asks for
    information on carriers providing one-way and two-way data-only
    services, including deployment, technology employed, data speeds,
    pricing, number of subscribers and usage.

40. The Commission asks for comment on new or enhanced mobile data
    services and devices that have been introduced since the *Eighth
    Report* such as new or enhanced location-based services, games,
    digital photo and video technologies, and downloadable music. To
    what extent do providers bundle different mobile data services with
    each other and/or with voice service? The Commission asks for
    information on the types of devices upon which these services are
    offered; how they are priced (e.g. bundled or stand-alone, bulk or
    per usage); where the services are available; and, the usage and
    subscribership levels?

41. The Commission also asks for comment on the availability of mobile
    Internet services. Do providers offer mobile Internet services
    throughout their entire licensed service areas, or only in areas
    that have been upgraded to next generation technologies, such as
    GPRS and 1X? Which types of devices are used most for mobile
    Internet access? Do any of the features of mobile data devices --
    such as battery life, data storage capacity, and screen size --
    constrain the ability of users to access mobile Internet services,
    and therefore limit the demand for these services? To what extent
    are users of wireless high-speed internet access services getting
    this access through mobile and portable computing devices using
    Wi-Fi and similar technologies? How does such use, whether on a
    subscription or non-subscription basis, compare to Internet access
    services using licensed spectrum? To the extent that mobile service
    providers are integrating Wi-Fi technology into their devices, how
    is this affecting the use of mobile Internet services? In how many
    locations is Wi-Fi and similar technologies currently available and
    in which types of locations do most users establish high speed
    connections to the Internet (*e.g.,* airports, coffee shops,
    community networking[^62])? Are those locations part of a retail or
    wholesale network, or independent stand-alone locations? What data
    transfer speeds do most users experience with the various unlicensed
    technologies and other standards? How are subscription-based
    offerings priced to consumers? Is service offered as part of a
    bundled package, an add-on or as a stand-alone product? Are voice
    services available using these connections and if so, by whom, where
    and how are they priced?

42. **Provision of Ancillary Services and Promotional Offers.** Mobile
    telecommunications providers offer ancillary services and promotions
    such as caller ID, voice mail, call forwarding, long distance,
    push-to-talk, free or reduced priced handsets, and free night and
    weekend minutes. The cost of these services is either included in
    the monthly charge or billed separately. Carriers use ancillary
    services and promotional offers to differentiate their products from
    those of their competitors. They compete not only in terms of the
    monthly charge, but also with the price and scope of ancillary
    services and promotions. The Commission seeks comment on whether
    carriers offer different ancillary services or promotional products
    and services in different geographic markets. What are these
    differences and why do they occur?

### Absence of Coordinated Interaction and Unilateral Effects

43. Anti-competitive outcomes may result from two distinct types of firm
    conduct \--coordinated interaction (both tacit and explicit
    collusion) among two or more competitors, or the unilateral actions
    of a single firm.[^63] In order to fully evaluate carrier conduct in
    the mobile telecommunications market, The Commission seeks comments
    on the potential for and likelihood of coordinated interaction and
    unilateral effects. Are coordinated effects likely in the mobile
    telecommunications market? If so, why? Do conditions in the mobile
    telecommunications market make unilateral price increases or other
    non-price unilateral effects likely? Also, The Commission seeks
    comment on any instances of potential coordinated interaction or
    unilateral effects in the United States' mobile telecommunications
    market.

## Consumer Behavior in the Mobile Telecommunications Market

44. The ability and inclination of consumers to purchase a product or
    service or to change firms may influence market structure, carrier
    conduct, and market performance. When initially purchasing a product
    or service or changing providers, consumers may incur transactions
    costs in doing so. These transactions costs may in some instances
    make the initial purchase or subsequent switching of firms
    prohibitively expensive. The level of these costs may affect
    concentration measures, marketing and advertising, pricing plans,
    and penetration rates, among other metrics. Therefore, for the
    *Ninth Report,* the Commission intends to analyze and collect
    information on these consumer costs as they relate to the market
    structure, firm conduct, and market performance.

### Access to Information on Mobile Telecommunications Services

45. It is apparent that wireless consumers are demanding more
    information on the availability and quality of mobile
    telecommunications services, and that numerous third parties have
    been responding to this demand by compiling and reporting such
    information. There are considerable sources of information available
    to consumers, including publications such as *Consumer Reports*,
    trade associations, marketing and consulting firms, and several web
    sites dedicated to giving consumers an overview and comparison of
    the mobile telephone services available in their area.[^64] The
    Commission seeks comment on the development of consumer information
    sources for the mobile telecommunications market. Are there new
    avenues for consumers to gain information, such as retailers
    providing on-line and in-store comparisons of pricing plans,
    services, and handsets? Also, are consumers demanding information on
    mobile data services such as SMS, email, and Internet access? If so,
    are any sources providing consumers with this information?

### Consumer Ability to Switch Service Providers

46. **Churn.** The Commission seeks comment on the use of churn rates as
    a tool in its analysis of consumer behavior in the mobile
    telecommunications market. Churn refers to the number of customers
    an operator loses over a given period of time.[^65] Carriers may
    calculate churn using different methodologies. For example, when a
    customer moves from New York to Los Angeles, changes numbers but
    keeps the same provider, do any companies count this as churn? When
    a customer's service contract expires and the customer signs up for
    a new plan with the same provider, do any companies count this as
    churn? The Commission asks carriers to submit descriptions of how
    they calculate churn. Do the differences in how churn is calculated
    prohibit a meaningful comparison of churn figures across the
    wireless industry? In *the Eighth Report*, the Commission found that
    most carriers report company-wide churn rates between 1.5 and 3
    percent per month.[^66] How reliable are these churn estimates? Are
    there other sources of churn data available that should be included
    in the *Ninth Report*? Further, The Commission seeks sub-national or
    regional churn data, and churn data by demographic groups.

47. The Commission noted in the *Eighth Report* that customers have
    consistently indicated cost and network quality as the main reasons
    for changing providers.[^67] Have the reasons consumer churn
    remained the same? If not, what are the reasons for consumer churn?
    The Commission also found that average monthly churn rates for
    mobile telephone service have remained fairly constant over the past
    three years.[^68] Since the *Eighth Report*, has there been a change
    in the churn rate? If there has been a change, what is the magnitude
    of this change?

48. **Local Number Portability.** As of November 24, 2003, wireless
    carriers in the top 100 markets were required to permit subscribers
    to take their phone numbers with them to a new carrier in the same
    market area.[^69] This process, called local number portability
    (LNP), is expected to make it easier for wireless subscribers to
    change carriers by eliminating some of the cost and inconvenience of
    having to change their phone numbers whenever they change to a
    different wireless carrier. Having to change to a new telephone
    number upon subscribing to a new wireless service provider can
    involve both direct and indirect switching costs. The wireless
    subscriber may have to change business cards and stationery, and
    must give the new number by whom he or she wishes to be reached in
    the future. Such costs make some subscribers more reluctant to
    switch carriers. The LNP requirement will expand beyond the top 100
    markets beginning in May 2004 as wireless carriers in those markets
    make formal requests to other wireless carriers to provide this
    capability.[^70] The Commission seeks comment on the effects of LNP
    on wireless competition and consumer behavior. Has wireless LNP
    caused wireless carriers to offer new services or features or to
    adjust their pricing strategies, either to attract new customers
    interested in porting their numbers from competing carriers or to
    induce their existing customers to stay? Has LNP affected wireless
    customer churn rates in the top 100 markets? If so, has the effect
    been significant?

## Mobile Telecommunications Market Performance

49. The structural and behavioral characteristics of a competitive
    market identified above are desirable not as ends in themselves, but
    rather as a means of bringing tangible benefits to consumers such as
    lower prices, higher quality, and greater choice of services. Such
    consumer outcomes are the ultimate test of effective competition. In
    order to determine if these goals are met and whether there is still
    effective competition in the market, the Commission intends to
    analyze various metrics including pricing levels and trends,
    subscriber growth and penetration, Minutes of Use ("MOU"),
    innovation and diffusion of services, and quality of service. Are
    there any other metrics that would add to its analysis of the mobile
    telecommunications market? Are these metrics available on a national
    or sub-national level?

### Pricing Levels and Trends

50. **Pricing Trends.** The *Eighth Report* contained pricing data from
    a variety of sources, all of which indicated that the average price
    of mobile telephone service has been decreasing over time. The
    *Eighth Report* cited information from the United States Department
    of Labor's Bureau of Labor Statistics ("BLS"), Econ One, and trends
    based on CTIA data.[^71] BLS began reporting a cellular telephone
    component of the Consumer Price Index ("CPI") in December 1997
    ("cellular CPI"). In addition, using CTIA data, the Commission
    calculated a national average Revenue per Minute ("RPM") by dividing
    the Average Revenue per Unit ("ARPU") by MOUs.[^72] The Commission
    used this RPM figure as an estimate of the average price per minute
    of mobile telephone service. In contrast to the Commission's
    estimate of RPM and BLS's cellular CPI, which attempt to capture
    national pricing trends, Econ One analyzes pricing plans for the top
    25 United States' cities. The firm also calculates the average price
    of service across four different monthly usage levels and derives an
    average for all users.[^73]

51. The Commission seeks comment on the use of these various pricing
    estimates as a tool in its analysis of the mobile telecommunications
    market, including to what extent price decreases are evidence of
    effective competition. The Commission asks for feedback on the
    sources of the pricing data used in the *Eighth Report* and request
    additional national and sub-national pricing data for the *Ninth
    Report*. Are there additional analyses that can be performed or
    conclusions that can be drawn from new or existing pricing data? The
    Commission also seeks comment on pricing trends for mobile data
    services offered by mobile telecommunications providers. Are there
    data on these services available on a national or sub-national
    level? Have prices of mobile data services fallen since their
    introduction? Are most data pricing plans bases on the amount of
    minutes used, or do they offer a flat rate for unlimited use? How
    are new or enhanced mobile data services such as location-based
    services, games, digital photos and downloadable music priced? Are
    there any reports or analyses that discuss pricing trends of mobile
    data services?

52. **Pricing in Rural Areas.** As described below, the Commission has
    identified a study by Econ One that compares mobile telephone
    pricing in urban versus rural areas. Are commenters aware of other
    pricing studies that look at urban versus rural or other
    sub-national mobile telecommunications pricing? Econ One completed a
    study that compared pricing in the 25 largest United States' cities
    (with an average population of 4.4 million) with 25
    randomly-selected towns or cities (with an average population of
    95,611) located in RSAs.[^74] The Commission asks for additional
    information on whether there are meaningful pricing differences
    between urban and rural areas. To the extent that such differences
    exist, what are the reasons for such differences? Should additional
    analyses on the differences between urban and rural mobile
    telecommunications pricing be performed? What additional conclusions
    can be drawn, and what are the limitations of those conclusions?

53. Given the scarcity of studies that provide direct information on
    pricing, the Commission is interested in finding alternative ways of
    determining whether pricing in rural areas conform to national
    pricing plans. Are there other ways of studying this issue? Can an
    economic model be constructed that provides answers to this question
    in the absence of direct data on rural pricing? Are there existing
    studies or data sets that would give us the ability to explore this
    issue?

54. **Cost.** Since price changes may reflect corresponding changes in
    underlying costs rather than a change in the competitive
    environment, pricing data and trends can be a misleading indicator
    of the status of competition. One way to evaluate the connection
    between prices and costs is the Price-Cost margin.[^75] In theory, a
    relatively narrow Price-Cost margin would be an indicator of
    effective competition. The Commission invites comments on the use of
    the Price-Cost margin to analyze the connection between prices and
    costs in the mobile telecommunications market. Are there other
    measures that the Commission should consider in evaluating the
    relationship between prices and costs in the mobile
    telecommunications market?

55. One possible estimate for the price component of the Price-Cost
    margin is RPM. The Commission seeks comment on the use of RPM as a
    proxy for pricing of mobile telecommunications services for the
    purpose of estimating the Price-Cost margin. The Commission also
    invites suggestions on alternative pricing metrics and sources of
    associated data that could be used for the purpose of providing a
    price-cost comparison. The Commission asks for submissions of RPM
    estimates for mobile data services or for mobile voice and data
    services combined.

56. Available cost studies for the mobile voice market that the
    Commission has identified focus narrowly on estimating the cost of
    terminating calls on mobile networks.[^76] If, as one study
    concludes, there are no significant cost differences between
    origination and termination of calls on a mobile network in terms of
    network elements used,[^77] then estimates of the cost of mobile
    call termination could be used to approximate the network costs of
    mobile voice services; however, since call termination is a
    wholesale activity, estimates of the cost of call termination
    generally do not include certain non-network retailing costs such as
    customer billing costs and advertising and marketing expenses. The
    Commission seeks comment on the adjustments that should be made to
    the network cost estimates to take into account non-network costs.
    Does the provision of mobile data services affect network and
    non-network costs, and, if so, how? The Commission also invites
    estimates of the impact of the deployment of next generation
    advanced technologies on the per-minute cost of mobile
    telecommunications traffic.

57. **Roaming.** The Commission also seeks data on the availability of
    roaming for wireless customers. To what extent do carriers have
    agreements that enable their customers to use automatic roaming
    throughout the United States? Are there geographic areas in which
    some carriers do not have automatic roaming agreements? If so, where
    are those areas and is there any correlation to the number of
    wireless providers operating in those areas? Are rural customers
    more affected than non-rural customers? How many customers use
    manual roaming? Where are those customers located when they use
    manual roaming, and how frequent is their usage? How has the
    deployment of mobile data services affected the provision of roaming
    service? Are consumers able to access mobile data services when
    roaming?

58. **Average Revenue Per Unit.** Average monthly revenue per subscriber
    is another key metric presented in past *CMRS Reports*. One source
    of this metric is the industry-wide ARPU figure reported by CTIA in
    its semi-annual mobile telephone survey.[^78] In addition, many
    carriers report their individual ARPU figures periodically in their
    SEC filings. The Commission seeks comment on the use of ARPU as a
    metric in its analysis of the mobile telecommunications industry.
    Are additional ARPU data available that should be considered, in
    particular data depicting whether and how ARPU varies by region
    and/or demographic group? Are there additional analyses that can be
    performed or conclusions that can be drawn in the *Ninth Report*
    from new or existing data?

59. CTIA reported that ARPU declined almost continuously from 1987 to
    1998, going from a peak of \$98.02 in December 1988 to a low of
    \$39.43 in December 1998.[^79] However, since 1999, ARPU has been
    increasing, rising to \$48.40 in December 2002.[^80] The *Eighth
    Report* stated that the growth in ARPU might be the result of a
    variety of factors, including increased usage offsetting per-minute
    price declines, as well as the selection of higher-priced monthly
    calling plans by consumers.[^81] The Commission requests from
    commenters additional input on the possible causes for the recent
    rise in ARPU, as well as additional data that may support various
    hypotheses. What role, if any, do changes in ARPU have on
    competition?

### Quantity of Services Purchased

60. **Subscriber Growth.** Since the *Seventh Report*, the Commission
    has estimated the number of United States' subscribers using NRUF
    data. The Commission estimates the total number of mobile telephone
    subscribers by using assigned telephone numbers in the NRUF data as
    a proxy for subscribers.[^82] In the *Eighth Report*, the Commission
    estimated that there were 141.8 million subscribers in the United
    States as of December 31, 2002.[^83] NRUF data, however, do not
    include information on the actual subscribers. Therefore, the
    Commission requests information on subscribers that would assist in
    a greater understanding of the mobile telecommunications inventory,
    such as penetration rates by age groups and/or household penetration
    rates.

61. Prior to the *Seventh Report*, the Commission relied on estimated
    national subscribership data from a semi-annual survey, started in
    1985, conducted by CTIA.[^84] The CTIA estimate for December 31,
    2002 was 140.8 million subscribers, less than a 1.0% difference from
    the Commission's NRUF estimate.[^85] The Commission had reported
    CTIA's semi-annual estimates in order to present time series
    information on subscribership growth. The Commission asks for
    comment whether to continue to present these data.

62. **Sub-National Penetration Rates.** For purposes of the *Eighth
    Report*, the Commission chose to use EAs as the geographic unit for
    its sub-national subscribership analysis using NRUF data.[^86] EAs,
    which are defined by the United States Department of Commerce,
    consist of one or more economic nodes and the surrounding areas that
    are economically related to the node.[^87] The main factor in
    determining the economic relationship between the economic node(s)
    and the surrounding areas is commuting patterns, so that each EA
    includes, as far as possible, the place of work and the place of
    residence of its labor force. While wireless carriers have
    considerable discretion in how they assign telephone numbers across
    the rate centers in their operating areas, they generally assign
    numbers to subscribers from rate centers in the same EAs in which
    the subscribers live.

63. The Commission asks for comment on how to determine which geographic
    area or areas should be used to calculate mobile telecommunications
    subscribership and penetration rates for the *Ninth Report*.[^88]
    The Commission requests comment on the appropriateness of using EAs
    for such calculations. Would other geographic areas be appropriate
    to use in place of or in addition to EAs, such as states, MTAs,
    BTAs, CMAs, or counties, noting the limitations of the NRUF data
    discussed above? In addition, are there other ways to interpret
    existing national and sub-national subscribership data for purposes
    of the *Ninth Report*? Also, are there data on either a national or
    sub-national basis on the number of mobile telecommunications
    customers that use mobile data services?

64. **Minutes of Use.** To analyze mobile telecommunications usage, the
    Commission has used MOUs as a key metric in previous *CMRS Reports*.
    The *Eighth Report* includes MOU estimates from CTIA, Paul Kagan and
    Associates, and J.D. Powers & Associates.[^89] All of these sources
    showed MOUs increasing substantially during 2001. The Commission
    seeks comment on the use of MOUs as an indicator of the demand for
    mobile telecommunications services. For purposes of the *Ninth
    Report*, the Commission asks for comment on the sources of the MOU
    data presented in the *Eighth Report* and request additional MOU
    data. In addition, should the Commission perform other analyses or
    draw additional conclusions from new or existing data? All of the
    MOU sources presented in the *Eighth Report* estimate MOUs on a
    national basis. In order to increase the granularity of its analysis
    for the *Ninth Report*, the Commission requests data on MOUs on a
    sub-national basis and/or broken down by various demographic groups.

### Variety, Innovation, and Diffusion of Service Offerings

65. The Commission observed in the *Eighth Report* that the continued
    rollout of differentiated service offerings indicated a competitive
    marketplace.[^90] In the mobile telephone sector, the Commission is
    able to observe independent pricing behavior, in the form of
    continued experimentation with varying pricing levels and
    structures, for varying service packages, with various available
    handsets and policies on handset pricing. AT&T Wireless's Digital
    One Rate ("DOR") plan, introduced in May 1998, is one notable
    example of an independent pricing action that altered the market and
    benefited consumers. Today, all of the nationwide operators offer
    some version of DOR pricing plan in which customers can purchase a
    bucket of minutes to use on a nationwide or nearly nationwide
    network without incurring roaming or long distance charges. Another
    trend in mobile telephone pricing has been the introduction of
    on-network, or "on-net," national pricing plans.[^91] These plans
    are similar to DOR plans, with the exception that subscribers incur
    roaming charges when they use their phones off the carrier's network
    ("off-net"). In addition, some mobile wireless carriers offer
    service plans designed to compete directly with wireline local
    telephone service. As reported in the *Eighth Report*, the largest
    of such providers, Leap, under its "Cricket" brand, offers mobile
    telephone service in 40 markets in 20 states.[^92] Leap's service
    allows subscribers to make unlimited local calls and receive calls
    from anywhere for about \$30 per month.[^93] Since the *Eighth
    Report*, have providers introduced new pricing plans and/or services
    to differentiate themselves? What other sorts of plans are being
    used to distinguish service providers and/or serve particular market
    segments?

### Quality of Service

66. In addition to competing on price, in a competitive market firms
    also compete on the basis of service quality.[^94] Mobile
    telecommunications service is an experience good, and therefore the
    quality of the product is unknown until the consumer actually uses
    it. Further, service quality in this market is dependent on when and
    where the service is used. The Commission found in the *Eighth*
    *Report* that carriers have been aggressively building and upgrading
    their networks with digital technology.[^95] This has resulted in
    improved voice quality and additional calling features to consumers,
    as well as higher capacity for operators, thereby allowing more
    customers to access the network and use their phones at the same
    time.[^96] However, some reports indicate that consumers perceive
    that there is a problem with service quality.[^97] Service quality
    issues may be a result of market structure or carrier conduct.[^98]
    In some cases, however, service quality issues may be due to factors
    that are not under a firm's control or influence.

67. In order to analyze quality of service in the mobile
    telecommunications market, specific service problems need to be
    identified. However, information on service issues - whether from
    consumer surveys, marketing reports, or other sources - generally
    convey only what the existing problems are and do not in themselves
    indicate non-competitive behavior. Quality of service data must be
    analyzed along with the metrics for market structure, carrier
    conduct, consumer behavior, and market performance in order to
    evaluate the underlying causes, their significance, and whether the
    current level of service quality has an impact on competition in the
    market.

68. The Commission seeks comment on service quality in the mobile
    telecommunications market. Does objective data on quality of service
    exist? Are there any consumer surveys on service quality in the
    mobile telecommunications market? How reliable are the data
    collected from these consumer surveys? Also, what other sources
    provide information on service quality in the mobile
    telecommunications market, and how reliable are these sources? How
    do market structure and carrier conduct affect service quality? Are
    there other metrics that should be used to analyze service quality
    as it relates to competitive behavior? In addition, The Commission
    seeks comment on whether LNP affects the quality of services offered
    by wireless telecommunication providers.

### Wireless -- Wireline Competition

69. In the Eighth Report, the Commission noted that there is evidence
    that consumers are substituting wireless service for traditional
    wireline communications.[^99] However, it appears that only a small
    percent of wireless customers use their wireless phones as their
    only phone, and that relatively few wireless customers have "cut the
    cord" in the sense of canceling their subscription to wireline
    telephone service.[^100] The Eighth Report also discussed the
    effects of mobile telephone service on the operational and financial
    results of companies that offer wireline services. Such effects
    include a decrease in the number of residential access lines, a drop
    in long distance revenues, and a decline in payphone profits[^101].
    More recently, the Commission has affirmed that the LNP rules that
    went into effect on November 24, 2003 require "intermodal" number
    porting between wireline and wireless carriers, thus enabling a
    wireline customer to port his or her telephone number to a wireless
    carrier serving the customer's local calling area.[^102] Given these
    developments, the Commission asks for comment on the extent to which
    mobile telephone service competes with wireline service. Has the
    introduction of intermodal LNP affected consumer behavior or had any
    impact on wireless-wireline competition? Are there any other new
    developments in wireless-wireline competition that have occurred
    since the Eighth Report? What are the major reasons for these
    developments? What effect have they had on the provision of
    telecommunications services other than wireless?

70. In order to track and analyze competition between mobile
    telecommunications and wireline services more effectively, the
    Commission requests data on: 1) the number of mobile
    telecommunications subscribers who do not subscribe to residential
    wireline service; 2) the percentage of consumers' total monthly
    voice communication minutes that are made from mobile phones; 3) the
    percentage of consumers' total monthly long distance minutes that
    are made from mobile phones; 4) the percentage of mobile
    telecommunications subscribers' calls and minutes that occur in
    their homes using their mobile phones; 5) the percentage of both
    mobile telecommunications and wireline calls and minutes that
    terminate on mobile phones; and 6) demographic data on which groups
    of consumers have allocated a substantial portion of their voice
    communications to mobile telecommunications service. Should the
    Commission gather additional data, perform additional analyses, or
    draw new conclusions on wireless-wireline competition?

## International Comparisons of Mobile Telecommunications

71. The *Eighth Report* compared the mobile telephone sectors in the
    United States, Western Europe, and parts of the Asia-Pacific by
    examining a number of performance measures, including penetration
    levels, subscriber growth, MOUs, and pricing. The scope of
    international comparisons in the *Eighth Report* and previous *CMRS*
    *Reports* has been constrained by the availability of comparable
    international data. For the purposes of the *Ninth Report*, The
    Commission seeks data to update and possibly expand upon these
    international comparisons. The international comparisons in the
    *Eighth Report* were based on various sources of data that were
    generally current as of the second half of 2002.[^103] The
    Commission requests suggestions on sources of data for updating
    international comparisons of penetration levels, subscriber growth,
    and usage for the year 2003. The Commission also invites suggestions
    on additional performance measures and associated data sources for
    comparing mobile telecommunications sectors in the United States and
    other countries.

# PROCEDURAL MATTERS

## *Ex Parte* Presentations

72. This is an exempt proceeding in which *ex parte* presentations are
    permitted (except during the Sunshine Agenda period) and need not be
    disclosed.[^104]

## Filing of Comments and Reply Comments

73. The Commission invites comment on the issues and questions set forth
    above. Pursuant to sections 1.415 and 1.419 of the Commission's
    rules, 47 C.F.R. §§ 1.415, 1.419, interested parties may file
    comments on or before April 25, 2004, and reply comments on or
    before May 10, 2004. Comments may be filed using the Commission's
    Electronic Comment Filing System (ECFS) or by filing paper copies.
    See Electronic Filing of Documents in Rulemaking Proceedings, 63
    Fed. Reg. 24121 (1998).

74. Comments filed through the ECFS can be sent as an electronic file
    via the Internet to \<http://www.fcc.gov/e-file/ecfs.html\>.
    Generally, only one copy of an electronic submission must be filed.
    If multiple docket or rulemaking numbers appear in the caption of
    this proceeding, however, commenters must transmit one electronic
    copy of the comments to each docket or rulemaking number referenced
    in the caption. In completing the transmittal screen, commenters
    should include their full name, United States Postal Service mailing
    address, and the applicable docket or rulemaking number. Parties may
    also submit an electronic comment by Internet email. To get filing
    instructions for email comments, commenters should send an email to
    ecfs@fcc.gov, and should include the following words in the body of
    the message: "get form." A sample form and directions will be sent
    in reply. Parties who choose to file by paper must file an original
    and four (4) copies of each filing. Parties choosing to submit, as
    part of their comments, map files in response to requests in
    ¶¶ 13-14, ¶ Error: Reference source not found, *supra*, should
    submit a CD (compact disc) containing one copy of the maps of their
    service areas, with the various distinctions described above, in one
    of the following formats: MapInfo table (.tab), Tagged Image Format
    (.TIF), or Shaped file (.shp). If you have questions about
    submitting map files, please contact Benjamin Freeman at (202)
    418-0628. Paper filings and CDs containing map files can be sent by
    hand or messenger delivery, by commercial overnight courier, or by
    first-class or overnight United States Postal Service mail. The
    Commission's contractor, Natek, Inc., will receive hand-delivered or
    messenger-delivered paper filings for the Commission's Secretary at
    236 Massachusetts Avenue, N.E., Suite 110, Washington, D.C. 20002.
    The filing hours at this location are 8:00 a.m. to 7:00 p.m. All
    hand deliveries must be held together with rubber bands or
    fasteners. Any envelopes must be disposed of before entering the
    building. Commercial overnight mail (other than United States Postal
    Service Express Mail and Priority Mail) must be sent to 9300 East
    Hampton Drive, Capitol Heights, MD 20743. United States Postal
    Service first-class mail, Express Mail, and Priority Mail should be
    addressed to 445 12th Street, S.W., Washington, D.C. 20554. All
    filings must be addressed to the Commission's Secretary, Office of
    the Secretary, Federal Communications Commission. Parties also
    should send four (4) paper copies of their filings to Rachel Kazan,
    Federal Communications Commission, Room 6126, 445 12th Street, S.W.,
    Washington, DC 20554.

# ORDERING CLAUSES

75. Accordingly, IT IS ORDERED that, pursuant to the authority contained
    in Sections 4(i), 4(j), and 403 of the Communications Act of 1934,
    as amended, this Notice of Inquiry is ADOPTED.

> FEDERAL COMMUNICATIONS COMMISSION
>
> Marlene H. Dortch
>
> Secretary

**SEPARATE STATEMENT OF**

**COMMISSIONER KATHLEEN Q. ABERNATHY**

> *Re: Implementation of Section 6002(b) of the Omnibus Budget
> Reconciliation Act of 1993, Annual Report and Analysis of Competitive
> Market Conditions with Respect to Commercial Mobile Services, Notice
> of Inquiry, WT Docket No. 04-111.*

Pursuant to the mandate of section 332(c)(1)(C) of the Communications
Act, the Commission annually submits a report to Congress analyzing
"whether or not there is effective competition" in the CMRS industry
("the Competition Report"). In last year's report to Congress, the
Commission affirmatively concluded that the CMRS industry had become
"effectively competitive."[^105] This is not a surprising conclusion
given the dramatic increase in choice and decrease in prices. It would
therefore seem appropriate to start this year's inquiry with a
presumption of effective competition. But we don't. We start from
scratch as if there has never been any data gathered about the nature of
the wireless industry, the competitiveness of the market, and the wide
variety of service offerings available to consumers.

It is not that I object to gathering useful data to inform our decision
making efforts and to respond to Congress' mandate. At the same time,
however, we should not have to reinvent the wheel year after year. Given
the maturity of the wireless industry and last year's finding perhaps
the question we should have asked this year is whether any changes over
the past 12 months would lead us to conclude that the CMRS industry is
no longer effectively competitive. We could have further pointed out
that there have been no major industry mergers and that the Commission
recently implemented wireless number portability in an effort to
increase competition and choice in the wireless sector.

Virtually everyone is in agreement that the CMRS industry is a shining
example of what a well-functioning market can achieve when not hindered
by unnecessary regulation. In last year's Competition Report, the
Commission found that the wireless industry continued to show
significant growth despite a difficult economic environment. There was
continuing innovation and carriers offered a wider variety of service
offerings, all the while reducing prices charged to consumers. Because
of competition, per-minute prices for mobile calling have dropped
steadily for nearly a decade, declining *76%* since 1994 ― *30%* in the
past 3 years. At the same time, carriers have invested over *\$126*
*billion* in their networks, thus improving service, creating jobs, and
spurring economic growth.

Perhaps most significant, as the Commission determined last year, there
is no dominant provider in the wireless sector. Instead, vigorous
competition has produced a marketplace with six nationwide operators and
several major regional providers. Wireless carriers have nimbly
responded to consumer preferences, and as a result, the public has
increased its use of and reliance on wireless networks for basic voice
communications, for news and information through Internet services, and
for public safety.

In light of these facts, our inquiry should begin with a recognition of
the robustly competitive state of the wireless sector. Instead we go
beyond our inquiry of last year and ask for data regarding the business
and strategy decisions of CMRS providers. For example, we seek
information on advertising by CMRS providers. While such questions might
be relevant for an industry that is concentrated or one where there is a
dominant service provider, that is not the situation we find ourselves
in. Similarly, the NOI asks for substantial information on service
quality. While the question is relevant for consumers deciding which
carrier to select, the data will have no bearing on whether the market
remains effectively competitive. There are other examples of questions
within the NOI that I believe go beyond the scope of our mandate under
Section 332(c)(1)(C), but I will not belabor the point. I simply outline
my concerns to point out that government sometimes gets carried away
with data gathering at the expense of focusing on real problems and real
solutions. I have no doubt that the information we gather will be
interesting but I am not sure that is a sufficient reason to burden
staff resources that could be better spent on other projects, or to
burden service providers that could better spend their resources
competing in the marketplace.

**STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

*Re: Implementation of Section 6002(b) of the Omnibus Budget
Reconciliation Act of 1993, Annual Report and Analysis of Competitive
Market Conditions with Respect to Commercial Mobile Services, Notice of
Inquiry*

This is an important Report. It is used in our Commission's proceedings
on general regulatory reforms and individual mergers. The data that we
rely on for this report is incomplete, as has been noted in the Report
itself for the past several years. Given our reliance on the Report and
our lack of data on important issues such as churn, rural pricing, and
the presence or absence of head-to-head competition, we should strive to
improve our data gathering. Rigorous and non-arbitrary government
decision making demands that we obtain a more complete picture of the
marketplace than we have. And I should note that this process does not
currently require carriers to file any data. We rely on voluntary
filings and our own investigation.

But even if we Commissioners did not believe that we need to gather data
each year, we would still be required to undertake this task and to
perform a rigorous analysis of the data we gather. That is because
Congress told us to do so in the Telecommunications Act. Congress did
not say to make assumptions about competitiveness or to rely on last
year's data. It compelled us to "review competitive market conditions
with respect to commercial mobile services" and to perform an "analysis
of those conditions." We should not exchange our judgment of where to
place Commission resources for Congress's judgment. So, although there
may be changes to this item that I would make, and other data that I
would seek, I congratulate the staff for their hard work in putting
together this NOI so that we can fulfill our responsibility.

[^1]: The term "commercial mobile service" is defined by the
    Communications Act of 1934, as amended ("the Act"), as "any mobile
    service ... that is provided for profit and makes interconnected
    service available (A) to the public or (B) to such classes of
    eligible users as to be effectively available to a substantial
    portion of the public, as specified by the Commission."
    Communications Act § 332(d)(1), 47 U.S.C. § 332(d)(1). "Mobile
    service" is defined at Section 3 of the Act. Communications Act §
    3(27), 47 U.S.C. § 153(27). The term "commercial mobile service"
    came to be known as the "commercial mobile radio service" ("CMRS").
    47 C.F.R. § 20.3.

[^2]: The Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66,
    Title VI, § 6002(b), amending the Communications Act of 1934 and
    codified at 47 U.S.C. § 332(c).

[^3]: 47 U.S.C. § 332(c)(1)(C).

[^4]: 47 U.S.C. § 332(c)(1)(C).

[^5]: The Commission notes that the proposed approach is broadly
    consistent with the methodology for the assessment of
    telecommunications competition outlined in a paper issued by the
    Organization for Economic Cooperation and Development ("OECD")
    (*Indicators for the Assessment of Telecommunications Competition*,
    Organization for Economic Cooperation and Development, Apr. 24,
    2002); the guidelines for conducting effective competition reviews
    issued by Office of Telecommunications ("*OFTEL*"), the national
    telecommunications regulatory authority in the United Kingdom
    (*Implementing OFTEL's Strategy: Effective Competition Review
    Guidelines*, OFTEL, August 2000); as well as the methodology
    underpinning the Horizontal Merger Guidelines issued by the U.S.
    Department of Justice and the Federal Trade Commission (U.S.
    Department of Justice and the Federal Trade Commission, Horizontal
    Merger Guidelines, 57 Fed. Reg. 41557 (Apr. 2, 1992, as revised Apr.
    8, 1997) ("*DOJ/FTC Guidelines*").

[^6]: Implementation of Section 6002(b) of the Omnibus Budget
    Reconciliation Act of 1993, Annual Report and Analysis of
    Competitive Market Conditions with Respect to Commercial Mobile
    Services, *Eighth Report*, 18 FCC Rcd 14783, 14787 ¶ 5 (2003)
    ("*Eighth Report*").

[^7]: *See Eighth Report*, 18 FCC Rcd at 14791, ¶ 12.

[^8]: *See Eighth Report*, 18 FCC Rcd at 14823, ¶ 84.

[^9]: *See Eighth Report,* 18 FCC Rcd at 14813-14, 14827, ¶¶ 59, 90.

[^10]: *See Eighth Report,* 18 FCC Rcd at 14786, ¶ 4.

[^11]: Nomadic service refers to the ability to communicate through a
    wireless network from various locations while stationary. Nomadic
    networks, such as Wi-Fi, provide high-speed access to users
    operating within discrete service areas. Nomadic networks are not,
    however, engineered to provide high-speed service to users operating
    their devices while in motion.

[^12]: *See, e.g.*, Principles for Reallocation of Spectrum to Encourage
    the Development of Telecommunications Technologies for the New
    Millennium, *Policy Statement*, 14 FCC Rcd 19868 (1999). This
    licensing model is an example of a licensing model that has been
    referred to as the "exclusive use" spectrum usage model. Under this
    model, "exclusive and transferable flexible property rights in
    spectrum" should not be read to imply or require creation of "full"
    private property rights in spectrum. *See* Federal Communications
    Commission, Spectrum Policy Task Force Report, ET Docket No. 02-135
    (rel. Nov. 2002) ("*Spectrum Policy Task Force Report*").

[^13]: 47 U.S.C. § 332(c)(1)(C).

[^14]: 47 C.F.R. § 0.459.

[^15]: Mobile voice is a sector that has been defined to include all
    operators that offer commercially available, interconnected mobile
    voice services, and provide access to the public switched telephone
    network ("PSTN") via mobile communication devices employing
    radiowave technology.

[^16]: For purposes of the *CMRS Reports*, mobile data service is
    considered to be the delivery of non-voice information to a mobile
    device. Two-way mobile data services include not only the ability to
    receive non-voice information on an end-user device but to send it
    from an end-user device to another mobile or landline device using
    wireless technology. *See Eighth Report*, 18 FCC Rcd at 14839, ¶
    124.

[^17]: S*ee Eighth Report*, 18 FCC Rcd at 14792, ¶ 15.

[^18]: As a matter of analytic convenience, for purposes of this *NOI*
    mobile voice and data services are discussed under the general
    category of "mobile telecommunications services." This in no way is
    meant to contradict the Commission's statutory obligations to adhere
    to the Act's distinctions between "telecommunications services" and
    "information services," conflict with judicial rulings in this
    regard, or add to or modify any of the Commission's rules,
    pronouncements, and policies that follow from the Commission's
    application of these terms. Communications Act § 3(43), 47 U.S.C. §
    153(43); Communications Act § 3(46), 47 U.S.C. § 153(46).

[^19]: *See Eighth Report*, 18 FCC Rcd at 14795, ¶ 20.

[^20]: 47 C.F.R. § 20.9 (10).

[^21]: For example, wireless local area network ("WLAN") services, such
    as Wi-Fi, may compete with CMRS providers but are outside the
    umbrella of CMRS services.

[^22]: *See* ¶ 7, *supra*, for discussion of product markets.

[^23]: Any individual proceeding in which the Commission defines
    relevant product and geographic markets, such as an application for
    approval of a license assignment or transfer, may present facts
    pointing to narrower or broader product or geographic markets than
    any used, suggested, or implied in the *CMRS Reports*.

[^24]: Previous *CMRS Reports* have included several notable caveats
    about the Commission's analysis of service availability. *See, e.g.
    Eighth Report*, 18 FCC Rcd at 14822, ¶ 82. First, to be considered
    as "covering" a county, an operator need only be offering any
    service in a portion of that county. Second, multiple operators
    shown as covering the same county are not necessarily providing
    service to the same portion of that county. Consequently, some of
    the counties included in this analysis may have limited coverage
    from a particular provider. Third, the figures for POPs and land
    area in this analysis include all of the POPs and every square mile
    in a county considered to have coverage (POPs is an industry term
    referring to population, usually the number of people covered by a
    given wireless license or footprint \-- one "POP" equals one
    person). Therefore, this analysis overstates to some degree both the
    level of competition and total coverage in terms of both geographic
    area and population covered.

[^25]: Implementation of Section 6002(b) of the Omnibus Budget
    Reconciliation Act of 1993, Annual Report and Analysis of
    Competitive Market Conditions with Respect to Commercial Mobile
    Services, *Sixth Report*, 16 FCC Rcd 13350 (2001) ("*Sixth
    Report*").

[^26]: The Commission held a public forum in February 2002 to discuss,
    among other things, CMRS competition issues in rural areas. In
    addition, the *NOI* issued to solicit comments and data for the
    *Eighth CMRS Report* included questions on a range of rural wireless
    issues. Implementation of Section 6002(B) of the Omnibus Budget
    Reconciliation Act of 1993, Annual Report and Analysis of
    Competitive Market Conditions with Respect to Commercial Mobile
    Services, WT Docket No. 02-379, *Notice of Inquiry,* 17 FCC Rcd
    24923 (2002).

[^27]: *See Eighth Report,* 18 FCC Rcd at 14834, ¶ 108-109. *See*
    Biennial Regulatory Review, Spectrum Aggregation Limits for Wireless
    Telecommunications Carriers, *Report and Order*, 15 FCC Rcd 9219,
    9256 n.203 (1999). Consistent with this approach, the Commission
    recently applied this distinction between rural and urban areas in
    its review of the cellular cross-interest rule, deciding to maintain
    this rule in RSAs while eliminating it in Metropolitan Statistical
    Areas ("MSAs"). *See also* 2000 Biennial Regulatory Review Spectrum
    Aggregation Limits for Commercial Mobile Radio Services, *Report and
    Order*, 16 FCC Rcd 22668, 22694 ¶ 48 (2001) ("*Spectrum Aggregation
    R&O*"), *petitions for reconsideration pending*. Based on data in
    its records, the Commission found that RSAs typically have fewer
    competitors offering two-way mobile service, and fewer nationwide
    service providers, than do MSAs. *Spectrum Aggregation R&O*, 16 FCC
    Rcd at 22705, ¶ 79. *See* 47 U.S.C. § 153(37), 47 C.F.R.
    § 1.2110(c)(4). *See also* Facilitating the Provision of
    Spectrum-Based Service to Rural Areas and Promoting Opportunities
    for Rural Telephone Companies to Provide Spectrum-Based Services, 18
    FCC Rcd 20802, 20808-11 ¶¶ 10-12 (2003) ("*Rural NPRM*").

[^28]: *See Eighth Report*, 18 FCC Rcd at 14835-37, ¶¶ 111-121.

[^29]: Each EA consists of one or more counties that are "Economic
    Nodes" and the surrounding counties that are economically related to
    it. An EA may have more than one economic node. The counties that
    are economic nodes are metropolitan areas or similar areas that
    serve as the EA's center(s) of economic activity. As a proxy for
    urban and rural geographic areas, the Commission looked at counties
    which make up economic nodes, i.e. nodal counties, versus those
    counties that do not make up economic nodes, i.e. non-nodal
    counties. *See Eighth Report*, 18 FCC Rcd at 14836, ¶ 112.

[^30]: *See Eighth Report*, 18 FCC Rcd at 14837, ¶ 114.

[^31]: *See* *Rural NPRM*, 18 FCC Rcd at 20803-04, ¶1. The Rural NPRM
    addresses regulations and policies pertaining to the provision of
    commercial and private terrestrial wireless services and, in certain
    respects, unlicensed systems and devices. In addition, pursuant to
    Section 11 of the Communications Act, the Rural NPRM examines
    whether the cellular cross-interest rule continues to be necessary
    in the public interest, in light of meaningful economic competition.
    *See* 47 U.S.C. §§ 161(a)(1), (2). While the policies and proposals
    discussed in the Rural NPRM are targeted at promoting wireless
    services to consumers in rural areas, certain of its proposals have
    broader application to non-rural areas as well.

[^32]: As mentioned in previous reports, there are several important
    caveats to note when considering the data. First, to be considered
    as "covering" a county, an operator need only be offering any
    service in a portion of that county. Second, multiple operators
    shown as covering the same county are not necessarily providing
    service to the same portion of that county. Third, the figures for
    POPs and land area in this analysis include all of the POPs and
    every square mile in a county considered to have coverage.
    Therefore, its analysis overstates to some unknown and unavoidable
    degree the total coverage in terms of both geographic areas and
    population covered. On the other hand, the Commission believes its
    analysis to be the most accurate in the industry today given the
    coverage data that is publicly available. *See Eighth Report*, 18
    FCC Rcd at 14822, ¶ 82.

[^33]: For information on how these map files should be submitted, see
    ¶ 74, *infra*.

[^34]: Cellular licensees have submitted maps of their service contours
    as part of the filings required to establish Cellular Geographic
    Service Area ("CGSA") boundaries. *See* 47 C.F.R. §§ 22.947(c),
    22.953(a)(1)-(2).

[^35]: In January 2002, Cingular Wireless, LLC and AT&T Wireless
    Services announced the formation of an infrastructure joint venture
    to build out a GSM/GPRS network along 3,000 miles of interstate
    highways predominantly in western and midwestern states. *See Eighth
    Report*, 18 FCC Rcd at 14807, ¶ 45.

[^36]: *See* Federal Communications Commission, Consumer and
    Governmental Affairs Bureau, *What You Should Know About Wireless
    Phone Service* \<\<http://www.fcc.gov/cgb/wirelessphone.pdf\>\>, for
    a list of web sites.

[^37]: *See Eighth Report,* 18 FCC Rcd at 14838, ¶ 122.

[^38]: 47 C.F.R. § 20.12.

[^39]: *Eighth Report*, 18 FCC Rcd at 14838-39, ¶ 123. An example of an
    MVNO is Virgin Group LLC ("Virgin"). Virgin has an arrangement with
    Sprint PCS whereby Virgin markets prepaid mobile telephone service
    using Sprint PCS's network.

[^40]: *Eighth Report*, 18 FCC Rcd at 14866, ¶ 189.

[^41]: The HHI is the sum of the squares of the output-based market
    shares of each firm participating in the market. *See* *DOJ/FTC
    Guidelines* at § 1.5.

[^42]: There are approximately 20,000 rate centers in the country. *See
    Eighth Report* 18 FCC Rcd at 14815 n.223*. See also* ¶ 60, *infra*.

[^43]: ^?^ Implementation of Section 6002(b) of the Omnibus Budget
    Reconciliation Act of 1993, Annual Report and Analysis of
    Competitive Market Conditions with Respect to Commercial Mobile
    Services, Seventh *Report*, 17 FCC Rcd 12985, 13004, (2002)
    ("*Seventh Report*"). MTAs and BTAs are Material Copyright © 1992
    Rand McNally & Company. Rights granted pursuant to a license from
    Rand McNally & Company through an arrangement with the Federal
    Communications Commission.

[^44]: Inputs to mobile telecommunication include such things as
    electromagnetic spectrum and network infrastructure.

[^45]: Consolidation, however, does not always result in a negative
    impact on consumers. Consolidation in the mobile telecommunications
    market may enable carriers to achieve certain economies of scale and
    increased efficiencies compared to smaller operators. These benefits
    could result in lower prices and new and innovative services for
    consumers. *See Eighth Report*, 18 FCC Rcd at 14805, ¶ 41.

[^46]: *Spectrum Aggregation R&O*, 16 FCC Rcd at 22693, ¶ 49.

[^47]: *DOJ/FTC Guidelines* at § 3.0. For a discussion of barriers to
    entry, *see* Dennis W. Carlton and Jeffrey M. Perloff, *Modern
    Industrial Organization*, 76-82 (3^rd^ ed., Addison, Wellsley,
    Longman, Inc., 1999). The cost of capital is the firm's cost of
    funds provided by creditors and shareholders. A firm's cost of
    capital is the cost of its long-term sources of funds: debt,
    preferred stock, and common stock. The cost of each source reflects
    the risk of the assets in which the firm invests.

[^48]: *See* *DOJ/FTC Guidelines* at § 3.0; s*ee also* Dennis W. Carlton
    and Jeffrey M. Perloff, *Modern Industrial Organization*, 77 (3^rd^
    ed., Addison, Wellsley, Longman, Inc., 1999).

[^49]: *See Spectrum Aggregation R&O*, 16 FCC Rcd at 22688-91, ¶¶ 39-43.

[^50]: Promoting Efficient Use of Spectrum through Elimination of
    Barriers to the Development of Secondary Markets, *Report and Order
    and Further Notice of Proposed Rulemaking*, 18 FCC Rcd 20604 (2003)
    ("*Secondary Markets R&O"*).

[^51]: Service Rules for Advanced Wireless Services in the 1.7 GHz and
    2.1 GHz Bands, WT Docket No. 02-353, *Report and Order*, 18 FCC Rcd
    25,162 (2003).

[^52]: *See Spectrum Aggregation R&O*, 16 FCC Rcd at 22708, ¶ 89.

[^53]: *Sprint PCS Reply Comments* at 8-10 in Year 2000 Biennial
    Regulatory Review---Amendment of Part 22 of the Commission's Rules
    to Modify or Eliminate Outdated Rules Affecting the Cellular
    Radiotelephone Service and Other Commercial Mobile Radio Services,
    WT Docket No. 01-08.

[^54]: An example is when AT&T introduced its digital-one-rate plan in
    May 1998, which was the first plan to include a large quantity of
    monthly minutes at a fixed rate and no long distance charges when
    used on the operator's network Implementation of Section 6002(b) of
    the Omnibus Budget Reconciliation Act of 1993, Annual Report and
    Analysis of Competitive Market Conditions with Respect to Commercial
    Mobile Services, *Fourth Report*, 14 FCC Rcd 10145, 10155 (2000)
    ("*Fourth Report*") and Implementation of Section 6002(b) of the
    Omnibus Budget Reconciliation Act of 1993, Annual Report and
    Analysis of Competitive Market Conditions with Respect to Commercial
    Mobile Services, *Fifth Report*, 15 FCC Rcd 17660, 17677-78 (1999)
    ("*Fifth Report*").

[^55]: *Eighth Report*, 18 FCC Rcd at 14828-29, ¶¶ 94-95.

[^56]: An experience good is a product or service that the customer must
    consume before determining its quality. *See* Dennis W. Carlton and
    Jeffrey M. Perloff, *Modern Industrial Organization*, 484 (3^rd^
    ed., Addison, Wellsley, Longman, Inc., 1999).

[^57]: *Eighth Report*, 18 FCC Rcd at 14818, ¶ 70.

[^58]: *Eighth Report*, 18 FCC Rcd at 14803-04, ¶¶ 36-37.

[^59]: *Eighth Report*, 18 FCC Rcd at 14819-20, ¶¶ 71-77.

[^60]: *Eighth Report*, 18 FCC Rcd at 14847, ¶ 144.

[^61]: *Eighth Report*, 18 FCC Rcd at 14842-43, ¶¶ 133-134.

[^62]: Communities often in collaboration with government agencies,
    non-profits, or businesses, are developing community computer
    network systems.  These networks are either free or inexpensive to
    use and the primary purpose of the networks is to support the local
    community.  *See* \<http://www.scn.org/commnet/\> (last visited Mar.
    15, 2004).

[^63]: Coordinated interaction can manifest itself in various forms,
    with firms simultaneously raising their prices above the competitive
    level being the most well known example. For a discussion of
    coordinated interaction *see DOJ/FTC Guidelines* at § 2.1.
    Unilateral effects involve the ability of a firm profitably to raise
    price by restricting its output or to undertake other
    anticompetitive actions on its own. For a discussion of unilateral
    effects see *DOJ/FTC Guidelines* at § 2.2.

[^64]: *See Eighth Report*, 18 FCC Rcd at 14826, ¶ 89.

[^65]: For example, an operator might report an average monthly churn of
    2 percent in a given fiscal quarter. In other words, on average, the
    operator lost 2 percent of its customers in each of the quarter's
    three months. At this rate, the operator would lose roughly 24
    percent of its customers in a single year. *Eighth Report,* 18 FCC
    Rcd at 14817, ¶ 68.

[^66]: *Eighth Report,* 18 FCC Rcd at 14817, ¶ 68.

[^67]: *Eighth Report,* 18 FCC Rcd at 14817-8, ¶ 69.

[^68]: *Eighth Report,* 18 FCC Rcd at 14817, ¶ 68.

[^69]: *See* In the Matter of Verizon Wireless' Petition for Partial
    Forbearance from the CMRS Number Portability Obligation and
    Telephone Number Portability, *Memorandum Opinion and Order,* 17 FCC
    Rcd 41972, 14985-6, ¶ 31 (2002) ("*LNP Forbearance Order*").

[^70]: *LNP Forbearance Order*, 17 FCC Rcd at 14985-6, ¶ 31.

[^71]: *Eighth Report,* 18 FCC Rcd at 14827-28, ¶¶ 91-93.

[^72]: *Eighth Report,* 18 FCC Rcd at 14828, ¶ 93.

[^73]: *Eighth Report,* 18 FCC Rcd at 14827, ¶ 91.

[^74]: *Seventh Report,* 17 FCC Rcd at 13023.

[^75]: The Price-Cost margin is (Price -- Marginal Costs)/Price. *See*
    Dennis W. Carlton and Jeffrey M. Perloff, *Modern Industrial
    Organization*, 246 (3^rd^ ed., Addison, Wellsley, Longman, Inc.,
    1999).

[^76]: For example, estimates of the cost of mobile call termination
    have been made available by Sprint PCS for several of its U.S.
    markets and by OFTEL for the U.K. mobile market. The methodology and
    results of the Sprint PCS cost study are summarized in Jonathan
    Chambers, *Costs of Terminating Traffic on Mobile Networks*,
    Callahan Associates International LLC., Aug. 28, 2001. OFTEL's cost
    methodology and estimates of the cost of mobile termination are
    summarized in Olivier Bomsel, Martin Cave, Gilles Le Blanc, and
    Karl-Heinz Neumann, *How Mobile Termination Charges Shape the
    Dynamics of the Telecom Sector*, Final Report, July 9, 2003, at
    45-49.

[^77]: *See* Europe Economics, *Cost Structures in Mobile Networks and
    their Relationship to Prices*, Final Report for the European
    Commission, Nov. 28, 2001, at 38, 46-47.

[^78]: *Eighth Report,* 18 FCC Rcd at 14816-17, ¶ 67.

[^79]: *Eighth Report,* 18 FCC Rcd at 14816-17, ¶ 67.

[^80]: *Eighth Report,* 18 FCC Rcd at 14817, ¶ 67.

[^81]: *Eighth Report,* 18 FCC Rcd at 14817, ¶ 67.

[^82]: *Eighth Report,* 18 FCC Rcd at 14813, ¶ 58. An assigned number is
    one that is in use by an end-user customer. *Eighth Report,* 18 FCC
    Rcd at 14789-90, ¶10. Carriers also report other phone number
    categories, including: intermediate -- numbers given to other
    companies; aging -- numbers held out of circulation; administrative
    -- numbers for internal uses; reserved -- numbers reserved for later
    activation; and available -- numbers available to be assigned.
    Assigned numbers are not necessarily from facilities-based carriers.
    A reseller can assign a number to an end user. This does not
    double-count in the assigned total, since the facilities-based
    carrier only counts that number as an "intermediate" number given to
    the reseller. *Eighth Report,* 18 FCC Rcd at 14813 n.210.

[^83]: *See Eighth Report,* 18 FCC Rcd at 14813, ¶ 59.

[^84]: CTIA's survey is voluntary; it does not receive information from
    all carriers and must therefore estimate the subscribership of
    carriers not reporting. For example, in the survey for the period
    ending June 30, 2001, subscribers captured through survey response
    made up 109,674,358 out of a total subscriber estimate of
    118,397,734, a difference of 8 percent (8,723,376). *Eighth Report,*
    18 FCC Rcd at 14813 n.211.

[^85]: *See* *Eighth Report,* 18 FCC Rcd at 14813-14, ¶¶ 59-60.

[^86]: *See Eighth Report,* 18 FCC Rcd at 14815, ¶ 62.

[^87]: EAs are defined by the U. S. Department of Commerce's Bureau of
    Economic Analysis. *See Seventh Report* 17 FCC Rcd at 13005 n.122.

[^88]: The use of any geographic area to calculate mobile
    telecommunications subscribership and penetration rates for purposes
    of the *Ninth Report* does not imply that the same geographic area
    will be used in any other Commission proceedings to define the
    relevant geographic markets. Such proceedings could include an
    application for a license transfer and may present facts pointing to
    a narrower or broader geographic market definition than any used,
    suggested, or implied in the *CMRS Reports*.

[^89]: *See* *Eighth Report,* 18 FCC Rcd at 14816, ¶ 65.

[^90]: *See Eighth Report*, 18 FCC Rcd at 14828, ¶ 94.

[^91]: *See Eighth Report*, 18 FCC Rcd at 14828, ¶ 95.

[^92]: *See Eighth Report*, 18 FCC Rcd at 14833, ¶ 105.

[^93]: *See Eighth Report*, 18 FCC Rcd at 14833, ¶ 105.

[^94]: *See Eighth Report*, 18 FCC Rcd at 14824, ¶ 85.

[^95]: *See Eighth Report*, 18 FCC Rcd at 14824, ¶ 86.

[^96]: *See Eighth Report*, 18 FCC Rcd at 14824, ¶ 86.

[^97]: *FCC Should Include Call Quality in its Annual Report on
    Competition in Mobile Phone Services*, General Accounting Office,
    GAO-03-501, Apr. 2003; Consumer Reports, *Three Steps to Better
    Cellular*, Feb. 2003, pages 15-17.

[^98]: S*ee* Dennis W. Carlton and Jeffrey M. Perloff, *Modern
    Industrial Organization*, 319 (3^rd^ ed., Addison, Wellsley,
    Longman, Inc., 1999); Jean Tirole, *Theory of Industrial
    Organization*, 115 (MIT Press, Cambridge, MA, 1988.).

[^99]: *See Eighth Report*, 18 FCC Rcd at 14831, ¶ 102.

[^100]: *See Eighth Report,* 18 FCC Rcd at 14831, ¶ 102.

[^101]: *See* *Eighth Report,* 18 FCC Rcd at 14832, ¶ 103.

[^102]: Telephone Number Portability, CC Docket No. 95-116, *Memorandum
    Opinion and Order and Further Notice of Proposed Rulemaking*, 18 FCC
    Rcd. 23,697 (2003).

[^103]: *See Eighth Report,* 18 FCC Rcd at 14867-75, ¶¶ 192-215.

[^104]: 47 C.F.R. § 1.1204(b)(1).

[^105]: *Implementation of Section 6002(b) of the Omnibus Budget
    Reconciliation Act of 19993, Annual Report and Analysis of
    Competitive Market Conditions with Respect to Commercial Mobile
    Services*, Eighth Report*,* 18 FCC Rcd 14783, para. 5 (2003).