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entitled 'Telecommunications: FCC Should Include Call Quality in Its 
Annual Report on Competition in Mobile Phone Services' which was 
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Report to the Honorable
Anthony D. Weiner, House of Representatives:

April 2003:

Telecommunications:

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

GAO-03-501:

GAO Highlights:

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

Why GAO Did This Study:

Over the past decade, Americans have come to rely increasingly on 
mobile phones to meet their business and personal needs.  However, 
because of the nature of radio transmission and other constraints, 
consumers are not always able to complete calls or to hear their calls 
clearly.  As reliance on mobile phones has increased, state officials, 
consumer groups, the media, and others have raised concerns about the 
extent of call quality problems. With regard to call quality, GAO 
agreed to describe the regulatory framework; determine the extent to 
which consumers are experiencing problems; and discuss actions for 
improving call quality suggested by interested parties.

What GAO Found:

In establishing a regulatory framework for mobile phone services, the 
Congress directed the Federal Communications Commission (FCC) to 
encourage competition among carriers.  FCC believes that competition 
enables consumers to choose carriers that offer a desired level of 
call quality and that regulatory action establishing a minimum level of 
call quality would not be beneficial in a competitive environment. The 
Congress requires FCC to report annually on whether or not there is 
effective competition in mobile phone services. While call quality has 
been identified as a factor that affects consumers choices of a 
carrier, FCC does not discuss call quality in this report.  

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

Interested parties have proposed actions that could provide consumers 
with better information to help them choose a carrier that matches 
their needs or would set industrywide call quality standards for all 
consumers. However, some of the suggested actions could drive up the 
price of service, limit the entry of new carriers, or lead to a 
reduction of service in regions that are technically difficult or 
costly to serve. The carriers themselves say that they are taking 
actions to improve call quality and further regulation is not needed.

What GAO Recommends:

GAO recommends that FCC include call quality in its mandated annual 
report analyzing whether there is effective competition in the market 
for mobile phone services.  Including call quality in this analysis 
would provide an ongoing record to help FCC and the Congress determine 
whether market competition is sufficient to ensure that carriers are 
meeting consumers expectations and desires regarding call quality or 
whether further regulatory action is needed.  In response, FCC stated 
that to, the extent possible, it plans to include information related 
to call quality in its future annual reports on competition in mobile 
phone services. 

www.gao.gov/cgi-bin/getrpt?GAO-03-501.

To view the full report, including the scope
and methodology, click on the link above.
For more information, contact William B. Shear at (202) 512-4325 or 
shearw@gao.gov.

[End of section]

Letter:

Results in Brief:

Background:

Under the Regulatory Framework for the Mobile Phone Industry, FCC 
Relies on Competitive Market Forces to Determine Call Quality and Has 
Not Set Specific Quality Standards:

Concerns Have Been Raised, but Available Data Are Inconclusive on 
Extent of Call Quality Problems:

Interested Parties Have Suggested Actions for Improving Call Quality:

Conclusions:

Recommendation for Executive Action:

Agency Comments:

Appendixes:

Appendix I: Scope and Methodology:

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

Appendix III: FCC Fact Sheet on Mobile Phone Service:

Appendix IV: Comments from the Federal Communications Commission:

Appendix V: Key Contacts and Major Contributors:

GAO Contacts:

Staff Acknowledgments:

Tables :

Table 1: Consumer Complaints about Mobile Phone Service Filed with the 
California Public Utilities Commission, 1999-2002:

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

Figures:

Figure 1: Key Components of a Mobile Phone System:

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

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

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

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

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

Abbreviations:

CDMA: code division multiple access:

CTIA: Cellular Telecommunications & Internet Association:

FCC: Federal Communications Commission:

FTC: Federal Trade Commission:

GSM: global system for mobile communications:

MHz: megahertz:

NARUC: National Association of Regulatory Utility Commissioners:

OFTEL: Office of Telecommunications:

TDMA: time division multiple access:

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Letter April 28, 2003:

The Honorable Anthony D. Weiner
House of Representatives:

Dear Mr. Weiner:

Over the past decade, mobile phone service has gone from being a luxury 
item to an everyday part of life.[Footnote 1] In 2002, over 140 million 
Americans had mobile phone service, and these customers used about 55.5 
billion minutes of mobile phone service a month.[Footnote 2] As the 
public has come to rely more on mobile phones for its business and 
personal needs, concerns have been raised by state officials, consumer 
groups, the media, and others about call quality--the ability to make 
and complete calls with good sound quality.

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

To meet these objectives, we reviewed laws and regulations governing 
the mobile phone industry. At the federal level, we spoke to officials 
at the Federal Communications Commission (FCC)--the agency that 
oversees the mobile phone industry--regarding their views on the 
regulatory framework; the extent of problems with call quality, 
including consumer complaints; and potential actions to improve call 
quality. We contacted state public utility commissions to determine how 
they regulate mobile phone service in their states. Thirty-three states 
provided information. We also spoke to officials in attorney general 
offices and/or public utility commissions in California, New York, 
Illinois, Massachusetts, Nebraska, New Jersey, and Texas. To obtain 
data on call quality and other information, we contacted officials at 
the six largest national mobile phone service carriers: AT&T Wireless 
Services, Inc. (AT&T Wireless); Cingular Wireless, LLC (Cingular); 
Nextel Communications, Inc. (Nextel); Sprint PCS; T-Mobile USA, Inc. 
(T-Mobile USA, formerly VoiceStream); and Verizon Wireless, LLC 
(Verizon Wireless). We also contacted officials at other firms--
Telephia, Inc.; LCC International, Inc.; and Scoreboard--that collect 
network data. In addition, we spoke to an official at the Federal Trade 
Commission (FTC) concerning consumer complaints they have received 
about mobile phone service. We also spoke to consumer advocates, 
financial analysts, and attorneys engaged in class-action lawsuits 
against carriers about various aspects of the mobile phone industry.

We contracted with a market research firm to administer 26 questions as 
part of a national telephone survey conducted in November 2002. Our 
questions addressed issues such as experiences with certain call 
quality problems, satisfaction with the quality of mobile phone 
service, complaint-making practices, and factors involved in decisions 
to change companies. We projected the results of the survey to the 
population of adult mobile phone users. However, we are concerned about 
the potential for those who did not respond to the survey to differ 
from those who did respond in some way that could affect the results. 
We have no explicit reason for suspecting that the survey suffers from 
this shortcoming. Instead, our concern arises out of the large sample 
of telephone numbers (about 19,000) dialed to produce about 1,000 
survey respondents, about 550 of whom use mobile phones.

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

Results in Brief:

Under the regulatory framework for mobile phone service, FCC generally 
relies on competitive market forces to determine mobile phone call 
quality. The Omnibus Budget Reconciliation Act of 1993 provided a 
regulatory framework that directed FCC to encourage the promotion of 
competitive market conditions for mobile phone service and limited the 
ability of the states to regulate it. In the 1993 Act and other 
legislation, the Congress granted FCC flexibility in regulating mobile 
phone services. In implementing this legislation, FCC has taken actions 
to encourage the growth of competitive markets that have resulted in 
most parts of the country having several competing carriers. FCC 
believes that this competitive market will provide consumers with the 
level of call quality they desire and that adopting federal regulations 
that require a certain minimum level of call quality are not necessary. 
At the direction of the Congress, FCC reports annually on whether or 
not there is effective competition in the market for mobile phone 
services. Over the last 7 years, these reports have included key 
aspects of mobile phone service--such as the number of competitors in 
the marketplace, trends in subscribership and the prices of service, 
deployment in rural areas, and features provided by carriers--but have 
not included information on call quality.

Concerns about mobile phone call quality have been raised by state 
officials, consumer groups, the media, and others. Based on the results 
of our consumer survey, conducted in November 2002, we estimate that 
nearly 83 percent of mobile phone users were satisfied with their 
service at that time, about 9 percent were dissatisfied, and the 
remainder were indifferent.[Footnote 4] In addition, we estimate that 
about 47 percent of adult mobile phone users believed their call 
quality was improving, while about 5 percent believed that their call 
quality was getting worse. We also found that users were experiencing 
some call quality problems, including a lack of coverage, limited 
network capacity at times, dropped calls, and poor sound quality. For 
example, we estimate that 22 percent of users were unable to 
successfully complete 10 percent or more of their calls, because the 
calls were dropped by the network. Data sources other than consumer 
surveys would be useful in assessing the extent of mobile phone call 
quality problems; however, these data were either not available or were 
of limited usefulness because they were not collected systematically. 
The major carriers are not required to report data on the performance 
of their mobile phone networks (such as the number of dropped calls or 
detailed coverage information) to FCC, and they declined to provide us 
with those data as well. The carriers said that this information was 
proprietary and would be difficult to interpret, even if made 
available. Carriers also declined to provide us with their data on 
customer complaints. Complaint data from other sources, such as state 
public utility commissions, were not useful in determining the extent 
of call quality problems for a number of reasons, including 
inconsistencies in the method of collecting and classifying complaints.

Interested parties, such as state officials and consumer advocates, 
have suggested possible actions to address call quality concerns. These 
actions would have varying potential benefits and drawbacks. For 
example, some of the possible actions that have been proposed would 
give consumers more information on carriers' coverage areas, their 
rates of dropped and blocked calls, or complaints against them prior to 
consumers choosing a carrier. Some interested parties have also 
suggested that carriers give consumers longer trial periods before they 
commit to a long-term contract with a carrier. These actions could 
better enable consumers to choose the carrier that best meets their 
needs regarding call quality. Some parties would also like to see 
minimum industrywide call quality standards set for the carriers. 
Others have noted, however, that some of the suggested actions have 
drawbacks that could potentially drive up the price of mobile phone 
service, limit the entry of new carriers and thus affect competition in 
the marketplace, or lead to a reduction of service in regions that are 
technically difficult or costly to serve, such as mountainous or 
sparsely populated rural areas. The carriers say that they are taking 
actions to improve call quality and further regulation is not needed. 
However, they maintain that their ability to improve call quality is 
hampered by financial and regulatory constraints, such as local 
government land use and zoning restrictions on the siting of new base 
stations for transmitting and receiving mobile phone signals.

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

Background

Carriers deliver mobile phone service by subdividing large geographic 
areas into smaller overlapping sections called cells.[Footnote 5] Each 
cell has a base station equipped with an antenna to receive and 
transmit radio signals to the mobile phones within its coverage area. 
This area can vary in size from under a mile to 20 miles from the base 
station. Mobile phones are low-powered radio transceivers (a 
combination radio transmitter and receiver) that use radio waves to 
communicate with the base stations. A mobile phone's communications are 
generally associated with the base station of the cell in which it is 
presently located. When a call is initiated, the base station assigns a 
radiofrequency to the mobile phone from among the group of frequencies 
that the station controls. The number of frequencies available at a 
base station will depend primarily on the amount of radiofrequency 
spectrum assigned to the carrier by FCC, the number of base stations in 
the carrier's service area, and the carrier's signaling 
standard.[Footnote 6]Each base station is linked to a mobile phone 
switching office, which is also connected to the local wireline 
telephone network. The mobile phone switching office directs calls to 
the desired locations, whether to another mobile phone or a traditional 
wireline telephone. This office is also responsible for handing off 
calls from one cell to another in a smooth and seamless manner as a 
customer changes locations during a call. Figure 1 provides a 
simplified picture of the key components of a mobile phone system.

Figure 1: Key Components of a Mobile Phone System:

[See PDF for image]

[End of figure]

FCC is the federal agency that oversees interstate telecommunications 
in the United States, including mobile phone service. The mobile phone 
industry began to develop in the mid-1980s when FCC awarded 
radiofrequencies to two cellular carriers in each geographic market. 
FCC awarded one cellular license to the incumbent wireline telephone 
company and a second license to an independent carrier. If there was 
only one applicant for the second license, that applicant received the 
license. When more than one applicant applied, FCC used comparative 
hearings, which give competing applicants a quasi-judicial forum in 
which to argue why they should be awarded a license instead of other 
applicants. Later, at the direction of the Congress, FCC held lotteries 
to award licenses. In establishing the rules under which the cellular 
phone industry would operate, FCC made several key decisions:

* All carriers would use the same analog technology to provide service.

* Within 3 years of receiving a construction permit, carriers would 
have to build networks that could theoretically serve the areas for 
which they obtained a license. At the end of the 3 years, licenses for 
those areas that could not theoretically be served might be made 
available to some other carrier.

* Carriers would have to inform customers of the area in which reliable 
service could be expected.

* No other call quality standards would be required. That is, no 
minimum requirements concerning the probability that calls would be 
completed with good sound quality were established. FCC considered 
establishing such standards, but decided to let the marketplace 
determine the level of call quality.

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

Since it was first launched, the industry has migrated from using only 
analog technologies to primarily using digital technologies. Originally 
carriers used an analog technology that is similar to that used for the 
transmission of FM radio broadcasts. While analog technologies are 
still being used, most service is now provided with digital 
technologies, which have several advantages over analog technologies: 
they provide for better security, allow for services such as caller 
identification, allow noise to be
reduced on calls, and conserve on the use of scarce spectrum 
resources.[Footnote 8]FCC did not specify a single digital technology. 
Instead, carriers were free to adopt one of several signaling 
standards: code division multiple access (CDMA), time division multiple 
access (TDMA), and global system for mobile communications (GSM). In 
addition, Nextel Communications uses a technology called integrated 
Digital Enhanced Network, a derivative of TDMA.[Footnote 9]

The industry has grown dramatically over time. In terms of annual 
revenues, the industry has mushroomed: from about $482 million in 1985 
to over $27 billion in 1997 and then to over $76 billion in 2002. In 
recent years, from 1997 through 2002, average monthly minutes of use of 
mobile phone use grew almost 900 percent, from about 5.6 billion 
minutes per month in 1997 to about 55.5 billion in 2002 (see fig. 2). 
This growth resulted not only from an increase in subscribership but 
also from a marked increase in the average number of minutes used by 
each subscriber.

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

[See PDF for image]

Note: GAO analysis of CTIA data.

[End of figure]

To subscribe to mobile phone service, a customer must sign-up with a 
mobile phone service carrier, either by signing a contract and choosing 
a plan, or by purchasing prepaid minutes of airtime and buying a phone 
that works with the prepaid service. Most customers sign contracts that 
specify a geographically based rate plan and the size of the block of 
minutes the customer is buying for a flat monthly fee. New customers 
sometimes pay up-front fees for "network activation" of their phones 
and usually agree to pay an "early termination fee" if they should quit 
a carrier's network before the date specified on the contract. In 
return for signing the contract, customers often receive mobile phones, 
suitable for their carrier's network, at a price lower than that which 
they would have to pay without a service contract.

Because of the nature of radio transmission, the amount of 
radiofrequency spectrum allocated by FCC for mobile phone service, and 
the challenge of building the infrastructure to meet a rapidly growing 
consumer base, consumers are not always able to complete their phone 
calls or to hear them clearly. The following, some of which are 
illustrated in figure 3, are examples of such call quality concerns.

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

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

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

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

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

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

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

[See PDF for image]

[End of figure]

Under the Regulatory Framework for the Mobile Phone Industry, FCC 
Relies on Competitive Market Forces to Determine Call Quality and Has 
Not Set Specific Quality Standards:

Beginning in 1993, the Congress enacted legislation aimed at developing 
a regulatory framework that would treat commercial carriers in a 
consistent manner and encourage the growth of competitive markets for 
mobile phone services. FCC has acted to implement this regulatory 
framework and is relying on consumer choice in a competitive 
marketplace to determine the level of call quality, rather than setting 
a minimum standard for the industry to meet. At the direction of the 
Congress, FCC analyzes and reports on competitive market conditions in 
the mobile phone industry annually. To date, these reports have 
included issues such as the number of carriers, prices, and 
subscribership but not call quality.

:

The Congress Has Promoted Development of Competitive Mobile Phone 
Markets:

In the early 1990s, types of mobile phone services other than cellular 
had been or were about to be developed. These new services were 
demonstrating that greater competition could exist in this marketplace; 
however, two different regulatory regimes had developed: one for the 
original cellular service and another for newer mobile phone services 
that used other technologies or portions of the radiofrequency 
spectrum. In 1993, the Congress enacted legislation--the Omnibus Budget 
Reconciliation Act (1993 Act)--that promoted consistent regulation of 
commercial mobile phone service carriers and established the promotion 
of competition as a fundamental goal for the development of mobile 
phone policies and regulation. The 1993 Act included several provisions 
to achieve these goals:

* All commercial mobile phone services were to be regulated similarly, 
without regard to the specific technology or radiofrequency spectrum 
used by a carrier.[Footnote 10]

* FCC was to auction spectrum licenses when more than one user wanted 
to use certain frequencies for the transmission of mobile phone calls. 
This method of assigning licenses requires mobile phone service 
carriers to pay for the right to use the spectrum and awards the 
spectrum to the carrier willing to pay the highest price for it under 
certain conditions.

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

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

* FCC was required to report annually on competitive market conditions 
in the industry. The report was to include an identification of the 
number of competitors in various commercial mobile services, an 
analysis of whether or not there is effective competition, an analysis 
of whether any competitors have a dominant share of the market, and a 
statement of whether additional providers or classes of providers would 
be likely to enhance competition.

In addition, the 1993 Act preempted states and local governments from 
regulating the entry of or the rate charged by any mobile service 
carrier. However, states could petition FCC for authority to regulate 
commercial rates under certain conditions. Shortly after the 1993 Act 
was enacted, eight states[Footnote 12]sought the right to continue 
regulating wireless rates. FCC denied all of the petitions. One state 
appealed the denial of its petition, and the court affirmed FCC's 
decision.[Footnote 13] However, the 1993 Act expressly reserved to the 
states the right to regulate other "terms and conditions" of commercial 
mobile phone service, and FCC has provided guidance over time on the 
scope of these rights. For example, FCC has concluded that billing 
information, practices, and disputes fall within other terms and 
conditions and may be regulated under state contract or consumer law. 
Similarly, FCC has found that state contract or consumer fraud laws 
governing disclosure or rates are generally not preempted and that as a 
general matter, state courts are not preempted from awarding damages to 
customers of commercial mobile phone carriers, based on violations of 
state contract or consumer fraud laws. Several lawsuits are now before 
state courts making claims against carriers under state fraud or 
consumer protection laws.

In the 1996 Telecommunications Act (1996 Act), a law that deregulated 
various aspects of the telecommunications industry, the Congress 
provided FCC with additional tools that could be used to promote 
competition in the mobile phone service industry. The 1996 Act requires 
FCC to refrain from imposing unnecessary regulation on 
telecommunications carriers, including mobile phone carriers.[Footnote 
14]The 1996 Act also requires that every 2 years FCC engage in a review 
(the biennial review) of its rules, including those related to mobile 
phone service, to determine whether any of them are no longer necessary 
as a result of meaningful competition among the carriers. In addition, 
the 1996 Act requires FCC to take actions that would allow consumers to 
keep their phone number when changing among wireline telephone 
companies, referred to as local number portability. Further, the 1996 
Act preserved the rights of states and localities to use land-use and 
zoning laws to regulate the placement of carriers' base station
antennas.[Footnote 15]This has enabled states and localities to affect 
both the level of competition and the quality of mobile phone calls.

FCC Has Promoted Competitive Markets to Determine the Level of Call 
Quality:

In implementing the 1993 and 1996 Acts, FCC has taken several actions 
to promote competition in the mobile phone market. These actions 
included auctions, spectrum caps, and local number portability.

Auctions: From 1994 through 2002, FCC conducted 42 auctions for 
spectrum dedicated to various kinds of wireless phone services. In 
accord with the 1993 Act, FCC's licensing scheme has also helped to 
ensure that many carriers were available in each geographic market. In 
every region, FCC authorized up to eight different mobile phone 
licenses.

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

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

As a result of these actions, industry developments, and consumer 
interest, FCC, in its most recent annual report on competitive 
conditions in the mobile phone industry,[Footnote 16] noted that the 
industry has experienced increased numbers of competitors in various 
markets, innovation, lower prices for consumers, and increased 
diversity of service offerings. Regarding the number of competitors, 
for example, FCC reported that 94 percent of the U.S. population lives 
in counties with access to three or more mobile phone carriers, and 80 
percent lives in counties with at least five carriers. FCC reported 
further that there are six national carriers: AT&T Wireless, Cingular, 
Nextel, Sprint PCS, T-Mobile USA, and Verizon Wireless. Other large 
regional carriers, including ALLTEL Corp., Western Wireless Corp., 
United States Cellular Corp., and Dobson Communications Corp., are also 
active in the market.

Data we obtained from Yankee Group, Inc. (a market research firm 
specializing in telecommunications issues) for the third quarter of 
2002 are consistent with the competitive picture of the industry 
provided by FCC's annual report. These data, presented in figure 4, 
show that none of the six national carriers dominates the national 
market. Their market shares range from T-Mobile USA's 7 percent to 
Verizon Wireless's 24 percent. This figure also shows that each of the 
carriers was experiencing a substantial level of customer turnover 
during 2002, ranging on an annualized basis from Nextel's 24 percent to 
T-Mobile USA's 50 percent. The percentage of mobile phone customers who 
change carriers in a given year suggests that carriers are actively 
competing.

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

[See PDF for image]

Note: GAO analysis of Yankee Group data.

[End of figure]

FCC has concluded that competition is sufficient to provide incentives 
for carriers to meet consumers' expectations and desires for call 
quality. For example, in its 2000 biennial review to determine whether 
any of its rules were no longer necessary as a result of the 
development of meaningful competition among mobile phone service 
carriers, FCC removed requirements that carriers provide consumers with 
information showing their reliable coverage areas. These requirements 
had been placed on the original cellular services, but had not been 
placed on newer mobile phone services. FCC found that although carriers 
providing newer mobile phone services were not required to supply 
consumers of these services with coverage information, they 
nevertheless provided these consumers with the same types of 
information that they provided to consumers of the original cellular 
services. As a result, FCC concluded that competitive pressures were 
strong enough to ensure that carriers would continue to supply 
consumers with information on coverage, even after FCC removed
the requirement.[Footnote 17]However, some consumer advocates have 
questioned whether competitive pressures are strong enough to ensure 
that carriers will provide consumers with adequate information on 
coverage. Recently, in February 2003, the Chairman of FCC stated that 
competition provides incentives for carriers to improve call 
quality.[Footnote 18] Specifically, he noted that to attract and keep 
customers, carriers are having to offer better packages of rates, 
coverage, and service quality than their competitors.

Although FCC relies primarily on the marketplace to determine the level 
of call quality, it has also acted to provide consumers with additional 
information on the nature of mobile phone service and the types of 
problems that consumers may encounter. FCC now provides the public with 
information on the quantity and types of complaints and inquiries it 
receives concerning mobile phone service. This information is updated 
quarterly. FCC provides additional information to consumers through its 
brochure on mobile phone service, which is posted on FCC's Web 
site[Footnote 19]and appears in appendix III of this report. This 
brochure explains the nature of mobile phone service, including 
coverage, other call quality issues, pricing, and handset features. FCC 
has also suggested questions that consumers should ask carriers when 
purchasing service and recommended that consumers obtain information 
from neighbors and coworkers concerning the call quality they receive 
from various carriers. In addition, FCC has taken action to promote the 
public interest in the area of implementing enhanced 911 service (E-
911) for mobile phones. This service will allow emergency responders to 
determine the location of a mobile phone caller within some specified 
area.

FCC Reports Annually on Competitive Market Conditions in the Mobile 
Phone Industry but Does Not Include Information on Call Quality:

At the direction of the Congress, FCC has issued seven annual reports 
and analyses of competitive market conditions in mobile phone services. 
The Congress stated that the report should include an identification of 
the number of competitors in various commercial mobile services, an 
analysis of whether or not there is effective competition, an analysis 
of whether any competitors have a dominant share of the market, and a 
statement of whether additional providers or classes of providers would 
be likely to enhance competition. FCC's reports have concentrated on a 
discussion of the structure of the industry, especially the number of 
competitors in the marketplace and their location. In addition, the 
reports include a discussion of the number of subscribers, the prices 
charged for services, deployment in rural areas, and information on 
features provided by carriers.

Call quality is an important aspect of mobile phone service, and FCC 
said that carriers appear to be competing for customers in this area. 
However, FCC has not included call quality, beyond a discussion of the 
number of carriers providing service, in its annual analysis of whether 
or not there is effective competition in mobile phone services. By way 
of contrast, the Office of Telecommunications (OFTEL) in the United 
Kingdom, the regulatory body that monitors competition in 
telecommunications markets in that country, includes call quality in 
its reports on competition in the mobile phone industry.[Footnote 20]As 
part of its ongoing monitoring of competition, OFTEL conducts quarterly 
surveys of mobile phone users. From these surveys OFTEL has reported 
that reception quality and geographic coverage are among the most 
important reasons for consumers in that country to choose a carrier. In 
addition, OFTEL has used the information it collects on network 
performance and other factors to determine that there is effective 
competition among carriers regarding those aspects of service that we 
have identified as call quality.

Although, at the time of our review, FCC had not indicated that it 
planned to include call quality in its annual report on competitive 
market conditions in the mobile phone service industry in the future, 
it was attempting to improve the overall quality of the data used in 
that report. For example, FCC held hearings in February 2002 in order 
to improve the quality of the data that would be used in its seventh 
annual report, which was released in July 2002. Participants at those 
hearings noted several shortcomings in the data used for the report and 
analysis of competitive market conditions, including FCC's almost sole 
reliance on unaudited data from industry trade associations and 
financial analysts, the failure to include consumer input, and the lack 
of credible data on prices and profits. Hearing participants also noted 
a marked contrast between the data regularly collected in other 
industries such as the airline and electricity industries. In those 
industries, oversight agencies have access to data on operations and 
the actual prices paid by consumers. With regard to measuring the 
extent of competition, FCC has noted some limitations in the data they 
collect for their congressionally mandated annual report. Specifically, 
in the seventh report, FCC noted that--as a result of treating carriers 
that serve any part of a county as if they served the entire county--
the report likely overstates the number of carriers serving consumers 
in various locations. Thus, both the amount of coverage and the extent 
of competition are likely to be overstated.

In recognition of these continuing data limitations, FCC issued a 
Notice of Inquiry in December 2002 seeking comment on how it could gain 
more detailed, comprehensive, and independent data to use in its 2003 
report on competitive market conditions.[Footnote 21]According to the 
notice, FCC was looking for data that would allow it to evaluate the 
extent to which consumers can choose among mobile phone service 
carriers as well as services and technologies. Specifically, FCC was 
looking for information on a broad range of items related to the 
structure and performance of the industry. And, for the first time, FCC 
included quality of service as an area that might be explored in the 
report. The 13 organizations that responded to the inquiry either did 
not comment on service quality or asserted that data on service quality 
were not needed. The consumer advocates who have raised concerns about 
call quality did not respond to this notice. Two of the consumer 
advocates said that they support efforts for FCC to collect and report 
more information on call quality, but they did not respond to the 
notice because of more pressing priorities at that time.

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

Concerns Have Been Raised, but Available Data Are Inconclusive on 
Extent of Call Quality Problems:

Interested parties, such as state officials and consumer advocates, 
have raised concerns about mobile phone call quality. Fully assessing 
the extent of call quality problems would likely require network 
performance data from the carriers as well as information on the extent 
to which consumers are satisfied or dissatisfied with the call quality 
of their mobile phone service. Carrier network performance data are not 
available to the public and are not reported to FCC. Carrier data on 
complaints are also not available and customer complaint data from 
other sources, such as FCC, FTC, states, and consumer organizations, do 
not provide reliable measures of the extent to which customers are 
dissatisfied with their call quality. Consequently, we have only the 
results of our survey of mobile phone customers on which to base our 
assessment of the extent of call quality problems. We estimate from the 
results of this survey that, while mobile phone customers are 
experiencing call quality problems, a fairly high percentage are 
satisfied with their current overall level of call quality.

Concerns Have Been Raised about Mobile Phone Call Quality:

Some state utility commissioners have been expressing concerns about 
what they say are an increasing number of consumer complaints about 
mobile phone service. Their trade association, the National Association 
of Regulatory Utility Commissioners (NARUC), sponsored panels on mobile 
phone service issues at their quarterly meetings held in July and 
November 2002. The topics covered by the panels included local number 
portability, service quality, cost, and best practices for carriers to 
better serve their customers. However, NARUC's Consumer Affairs 
Committee defeated a proposed resolution to have mobile phone carriers 
provide consumers with adequate service area coverage information when 
making purchase decisions and to have FCC monitor this information. As 
a result of the panel discussion held in July and carriers' desires to 
talk to state commissioners about the issues raised there, in October 
2002 NARUC and FCC facilitated an informal discussion of these issues 
between concerned state officials and mobile phone service carriers. 
Following this meeting, NARUC began developing a list of suggestions 
for FCC and mobile phone service carriers. These suggestions included 
FCC reporting on complaints by carrier and carriers giving consumers a 
15-to 30-day period during which they could opt out of new service 
contracts.

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

The press and consumer advocates have raised concerns about call 
quality as well. For example, over the last couple of years, articles 
on these issues have appeared in several well-known, widely read 
publications, including Forbes Magazine, the Wall Street Journal, the 
Washington Post, and the New York Times. In addition, several consumer 
advocacy groups--including the Wireless Consumers Alliance, AARP 
(formerly known as the American Association of Retired Persons), and 
Consumers Union--have raised concerns about the coverage and price 
information consumers receive when buying mobile phone service, 
consumers' ability to complete calls, and the cost of terminating 
contracts if call quality is not adequate.

Carriers Provided Limited Information on Extent of Call Quality 
Problems:

Carriers said that information on blocked and dropped calls is 
collected at each base station in their networks. However, none of this 
network performance data is publicly available nor are the carriers 
required to report this information to FCC. As part of our effort to 
determine the extent to which calls cannot be completed or lack 
clarity, we asked the six largest carriers if they would be willing to 
provide us such data. All of the carriers declined. The reasons given 
for not providing the data include the following:

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

* The information would not be useful to consumers trying to compare 
one carrier's performance with that of another carrier. Data would not 
be suitable for comparisons because carriers do not measure performance 
using a single set of standards. Also, systems using different 
transmission technologies respond differently to overcrowding on the 
network.

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

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

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

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

Network information can also be collected through "drive tests," which 
are generally performed along major road arteries at various times of 
the day. These tests are done in moving vehicles that use computers to 
simultaneously place calls on the networks of various carriers. The 
computer then records whether calls went through and whether they were 
dropped within some specified call time, such as 2 minutes. These tests 
are performed by the carriers themselves and by contractors such as 
Telephia. Data from drive test contractors are also proprietary; 
however, Telephia has performed tests for CTIA--an industry trade 
association--and Consumers Union, and these entities have shared that 
information with the public.

* CTIA's July 2001 study measured various aspects of mobile phone call 
quality in core urban and suburban areas. The study found that between 
November 1999 and April 2001 there was no change in overall call 
quality as measured by the percentage of time a call goes through with 
adequate sound quality. During this period, the percentage of blocked 
calls went down in both the core urban and suburban areas, while 
dropped calls rose in suburban areas. Telephia concluded that, at the 
time of their study, on average, consumers could place, hold, and 
complete calls of acceptable audio quality 96 to 99 percent of the 
time.

* In the February 2002 issue of Consumer Reports, Consumers Union 
published averages of call quality data that Telephia had collected in 
9 major metropolitan areas--New York, Boston, Philadelphia, the 
District of Columbia, Los Angeles, Dallas, Houston, Chicago, and 
Detroit--in October 2001. These data show that on Telephia's 5-point 
scale--with 1 being the worst service and 5 the best--call quality 
ranged from a low of 3.3 in Houston to a high of 4.7 for Philadelphia. 
Consumers Union notes that these are averages of individual carrier 
data. In its February 2003 issue of Consumer Reports, Consumers Union 
used a survey of its subscribers to rank carriers for the first time in 
six major cities.

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

Consumer Complaint Data Provide a Limited Indication of Call Quality 
Concerns:

Consumer complaint data are a potential source of information on 
customer dissatisfaction with their mobile phone service, but these 
data are either not publicly available or suffer from methodological 
limitations. The carriers were unwilling to share information on the 
quantity and kinds of complaints they receive. Some complaint data are 
available from other sources, including federal and state government 
agencies, consumer advocates, and Web sites. However, these complaint 
databases are not adequate to determine the extent of call quality 
problems because they do not employ a scientific method in collecting 
the data. Instead, they depend on individual, dissatisfied consumers to 
know where to call or write, and to take the time to do so. In 
addition, many of the groups collecting complaints said that the 
categorization of complaints was difficult and, as a result, complaints 
were probably not being categorized in a consistent manner.

Federal government: FCC takes complaints about mobile phone service 
that it receives from consumers and others and refers them to 
consumers' carriers for resolution. FCC defines a complaint as a 
communication received from or on behalf of an individual that alleges 
harm or injury and seeks relief. It accepts complaints from consumers 
by phone, by facsimile, through the Internet, or by electronic or 
regular mail.[Footnote 22] FCC has been receiving consumer complaints 
about mobile phone services and referring them to consumers' carriers 
since the mid-1980s. In the spring of 2001, FCC began categorizing 
complaints and, in fall 2001, began publishing complaints by category. 
However, officials cautioned that their complaint numbers could include 
requests for information as well as complaints, and that the existence 
of a complaint against a carrier does not necessarily indicate 
wrongdoing by that carrier. FCC also said that it tracks complaints to 
identify trends in types of complaints or to determine if a carrier has 
received excessive numbers of complaints. In either instance, FCC said 
that it contacts carriers and asks them to provide an explanation. 
Based on feedback from carriers and consumers, FCC estimated that as a 
result of this process, consumer complaints are resolved to the 
satisfaction of the consumer close to 80 percent of the time. Should 
complaints go unresolved or should a carrier receive excessive numbers 
of complaints without an acceptable justification, a carrier could be 
subject to an FCC enforcement action. FCC officials noted that they 
have not been categorizing complaints for a long enough time to show 
any trends. In 2002, FCC logged about 14,000 consumer complaints about 
mobile phone service. As figure 5 shows, over 60 percent of the 
complaints concerned billing and rate issues. The next largest 
categories were service quality (a category that includes call quality 
issues), contract-early termination fee, and marketing and advertising.

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

[See PDF for image]

Note: GAO analysis of FCC data.

[A] FCC includes those items that we have identified as call quality, 
such as dropped calls and dead spots, in its service quality category; 
however, it also includes complaints about not being able to use a 
mobile phone because the carrier had ceased to do business in the 
consumer's area or ceased to do business altogether.

[End of figure]

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

State public utility commissions: State public utility commissions vary 
on whether they collect complaints about mobile phone service. Thirty-
three state commissions responded voluntarily to our request for 
information on how they regulate mobile phone service or categorize 
complaints. Of these state commissions, 23 said that they direct 
consumers with complaints to their state attorneys general, FCC, or the 
mobile phone service carrier identified in the complaint. Six state 
commissions reported that they collect and categorize complaint data 
from mobile users. While most of the commissions who collect data 
categorize some complaints as billing complaints, they use a variety of 
categories for the other complaints they receive. For example, one 
state categorizes its other complaints as tower issues, while another 
state uses many categories, including dead zones and dropped calls, 
company practices, service quality, and contracts. Of the state 
commissions we heard from, California was the only one that provided us 
with specific data on call quality complaints gathered over a number of 
years. As table 1 shows, complaints about call quality were about 8 
percent of total mobile phone complaints for 2002.

Table 1: Consumer Complaints about Mobile Phone Service Filed with the 
California Public Utilities Commission, 1999-2002:

Year: 1999; Company: practices: 47; Disputed: bills: 1,135; Call: 
quality[ A]: 205; Contract issues: 9; Miscellaneous[B]: 518; Totals: 
1,914.

Year: 2000; Company: practices: 112; Disputed: bills: 1,550; Call: 
quality[ A]: 231; Contract issues: 13; Miscellaneous[B]: 363; Totals: 
2,269.

Year: 2001; Company: practices: 232; Disputed: bills: 3,379; Call: 
quality[ A]: 459; Contract issues: 37; Miscellaneous[B]: 901; Totals: 
5,008.

Year: 2002; Company: practices: 117; Disputed: bills: 1,386; Call: 
quality[ A]: 186; Contract issues: 13; Miscellaneous[B]: 585; Totals: 
2,287.

Source: California Public Utilities Commission.

Note: GAO analysis of California Public Utilities Commission data.

[A] Includes dead zones, dropped calls, and static.

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

[End of table]

Consumer advocates: Two consumer groups--the Better Business Bureau and 
the Wireless Consumer Alliance--said that they receive and collect 
complaints about mobile phone service. However, both groups said that 
they do not collect complaints in a systematic way and use broad, 
general categories to classify complaints. The Better Business Bureau 
collects complaints on mobile phone equipment, supplies, and services. 
The Bureau said that, between 1998 and 2002, complaints in this 
category rose from 615
complaints to 21,534 complaints.[Footnote 24]The Bureau was unable to 
identify whether the increase in complaints was attributable to call 
quality issues or to other issues in the mobile phone industry. Some 
consumer advocates, such as the Utility Consumer's Action Network in 
San Diego, California, have Web sites where consumers can post 
information about carriers' dead spots--locations within carriers' 
coverage areas where service is not available. Generally, these data 
are not verified nor are they regularly updated if service becomes 
available.

Our Survey on Call Quality Yielded Mixed Results:

To obtain information about the extent to which consumers are concerned 
about various aspects of mobile phone call quality, we included 
questions on call quality in a national telephone survey of adults 
conducted in November 2002. We projected the results of the survey to 
the population of adult mobile phone users. However, we are concerned 
about the potential for those who did not respond to the survey to 
differ from those who did respond in some way that could affect the 
results. We have no explicit reason for suspecting that the survey 
suffers from this shortcoming. Instead, our concern arises out of the 
large sample of phone numbers dialed to produce about 1,000 survey 
respondents. Some users may not have answered the call because they 
could not identify the caller on their caller identification system. 
Others may not have been available during the calling time, and still 
others may have been unwilling to participate in the survey when they 
were contacted. (Appendix I includes a discussion of the survey 
methodology and its limitations; appendix II includes the survey 
instrument and the responses.) The results of the survey provided mixed 
evidence on the extent to which consumers are troubled by call quality 
problems.

Based on the survey responses, we found that a fairly high percentage 
of consumers were satisfied with the overall call quality of their 
mobile phone service. Using the results of our survey of mobile phone 
users, we estimate that about 83 percent of consumers were satisfied 
with their call quality and about 9 percent were dissatisfied. The 
sampling error for our survey was plus or minus 8 percentage points or 
less unless otherwise noted. The other users were neither satisfied nor 
dissatisfied (see fig. 6). In addition, we estimate that about 47 
percent of adult mobile phone users believed their call quality was 
improving, while about 5 percent believed that their call quality was 
getting worse. The other users believed that call quality had not 
changed since they acquired their phones. Finally, we estimate that 83 
percent of adult mobile phone users would not be willing to pay more 
for better quality calls, while 12 percent would be willing to pay more 
and another 5 percent would be willing to pay more under certain 
conditions.

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

[See PDF for image]

[End of figure]

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

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

Type of problem[A]: No coverage; Percent of users who did not 
experience the problem: 22; Percent of users who had problem on fewer 
than 10 percent of their calls: 44; Percent of users who had problem on 
10 percent or more of their calls: 34.

Type of problem[A]: Fast busy; Percent of users who did not experience 
the problem: 32; Percent of users who had problem on fewer than 10 
percent of their calls: 47; Percent of users who had problem on 10 
percent or more of their calls: 21.

Type of problem[A]: Dropped calls; Percent of users who did not 
experience the problem: 39; Percent of users who had problem on fewer 
than 10 percent of their calls: 39; Percent of users who had problem on 
10 percent or more of their calls: 22.

Type of problem[A]: Poor sound; Percent of users who did not experience 
the problem: 32; Percent of users who had problem on fewer than 10 
percent of their calls: 38; Percent of users who had problem on 10 
percent or more of their calls: 30.

Source: GAO.

Note: Row percentages may not add to 100 due to rounding. Individual 
respondents may have reported having several problems. Therefore, the 
column percentages cannot be added to determine the total percentage 
with or without problems.

[A] No coverage - consumers cannot complete calls because their carrier 
does not provide service in the cell where they are placing the call 
and does not have a roaming agreement with another carrier that 
provides service in that cell.

[End of table]

Fast busy - consumers cannot complete calls because the cell from which 
they are calling is at capacity. Dropped calls - consumers lose 
connections during a call because they have moved into a cell where 
their carrier either does not have service or the cell is at capacity.

Poor sound - consumers cannot hear their calls clearly because of 
static or feedback:

Our survey also indicates that call quality problems vary, depending on 
where consumers are when they are making or receiving calls. For 
example, we estimate that about 45 percent of users experienced 
problems when they are in buildings, 37 percent when they were in a 
vehicle, and 18 percent when they were outside. Carriers and other 
experts note that reception inside buildings may not reflect the call 
quality being provided in the area. As mentioned earlier, buildings may 
be constructed of materials that do not allow mobile phone radio waves 
to pass easily into their interiors. We found that some businesses have 
added devices, such as antennas and signal repeaters, inside their 
buildings to facilitate better in-building coverage. In buildings where 
multiple carriers serve customers or residents, such as shopping 
centers, office buildings with multiple tenants, or apartment 
buildings, improving call quality may be the responsibility of the 
building owner rather than any one service carrier.

Our survey also sheds some light on why consumers change carriers. We 
estimate from our survey that about 73 percent of consumers made 
carrier decisions for themselves, while the remaining 27 percent had 
someone else, such as an employer or family member, choose their 
carrier. For consumers who made carrier decisions for themselves, we 
estimate that 35 percent had changed carriers since they first acquired 
mobile phones and that better call quality was an important incentive 
for those changes. Yet, call quality may have been a less important 
incentive than getting a better price. That is, we estimate that for 
about 55 percent of the consumers who had changed carriers, obtaining 
better call quality was a very or somewhat important reason for the 
change. However, we estimate that for a larger proportion of consumers 
who had changed carriers--about 83 percent of them--price was very or 
somewhat important. Because only a small number of survey respondents 
had changed carriers--about 145, the sampling error for these estimates 
is plus or minus 13 percentage points or less.

The ability of consumers to take advantage of the range of choices in 
the marketplace, which provides incentives for carriers to respond to 
customer demands for call quality, depends to some degree on customers 
being able to switch from lower-quality carriers to higher-quality 
carriers. We estimate that while about 35 percent of those who made 
carrier decisions for themselves had changed carriers since they first 
started using their phones, about another 28 percent wanted to change 
carriers, but did not. We asked customers who wanted to change 
carriers, but didn't, whether certain factors were important to their 
decision. These factors included having to pay a fee to terminate a 
contract before the contract period ended and not being able to keep 
their current mobile phone number--the local number portability issue-
-or their handsets when they change carriers. Respondents could cite 
more than one reason as being important. We estimate that for about 
two-thirds of adult mobile phone users who wanted to change carriers 
but did not, the termination fee was a very or somewhat important 
factor. Further, we estimate that for about 41 percent of adult mobile 
phone users, the lack of local number portability was very or somewhat 
important; and for a similar proportion, not being able to keep their 
handset was a very or somewhat important factor. Because only a small 
number of survey respondents--about 115--had considered, but not 
changed carriers, the sampling error for these estimates is plus or 
minus 15 percentage points or less.

Interested Parties Have Suggested Actions for Improving Call Quality:

Interested parties, such as state officials and consumer advocates, who 
have raised concerns about mobile phone call quality have also 
suggested actions--such as local number portability or mandating that 
certain information be provided to consumers--that might lead 
indirectly to changes in call quality by making the market more 
competitive or providing consumers with better information. Some 
interested parties have also suggested actions, such as establishing 
minimum call quality standards, by which call quality might be improved 
more directly. All of the suggestions have various benefits and 
drawbacks.

Local Number Portability Could Increase the Competitiveness of Mobile 
Phone Markets:

Several interested parties have supported adoption of local number 
portability, which will make the market for mobile phone service more 
competitive by reducing the costs to consumers of changing carriers. 
This may affect the level of call quality because customers who are 
dissatisfied with their current carrier will be more likely to change 
to a carrier with better call quality if they do not have to experience 
the costs and inconvenience associated with changing their mobile phone 
numbers. As a result, carriers would have a greater incentive to 
upgrade their call quality to keep their customers. The costs and 
inconvenience associated with changing a mobile phone number are likely 
to grow for consumers as mobile phone service becomes an ever more 
important part of everyday life. Carriers are now scheduled to 
implement local number portability in November 2003.[Footnote 25]

Other countries have had varying experiences with number portability 
and support for it varies among U.S. carriers. Officials of Hong Kong, 
China said that local number portability has increased the 
competitiveness of their mobile phone market and has led to a dramatic 
fall in the price of that service. Australian officials have reported, 
however, that not many consumers are changing carriers and taking their 
numbers with them. They report that termination fees may still be 
discouraging customers from changing carriers prior to the expiration 
of their contracts. Some U.S. carriers have said that implementing 
local number portability is difficult and expensive and will thus 
offset the savings consumers experience from not having to change their 
phone numbers. These carriers have been successful in getting FCC to 
extend the deadline for implementing local number portability from the 
original June 1999 to the new November 2003 deadline.[Footnote 26]

Many Proposals that Center on Giving Consumers More Detailed 
Information Are Difficult to Implement:

Many of the actions that have been proposed to give consumers more 
information about call quality--more detailed coverage information, 
information on dropped and blocked calls by carrier, or data on 
complaints against various carriers--could be meaningful to consumers 
choosing among carriers if they were measured consistently across 
carriers. This issue was evident in Australia where the Australian 
Communications Authority requires that carriers report regularly on a 
set of key performance indicators defined by the Authority. In its 2001 
to 2002 Telecommunications Performance Report, however, the Authority 
did not publish these data because, while all of the carriers were in 
compliance with the requirements, they were not reporting these data to 
the Authority in a consistent, comparable manner.[Footnote 27]

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

* Carriers might have to start measuring things that they had not 
previously been measuring. This would likely raise costs for these 
carriers. A representative of smaller carriers said that providing any 
additional information to FCC would be especially burdensome for them 
because these carriers do not have staff to collect and report the 
data.

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

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

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

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

According to some parties, giving customers longer trial periods before 
they have to commit to a 1-or 2-year contract--an option that provides 
customers with a first-hand opportunity to ascertain whether a 
carrier's call quality meets their needs--could avoid some of these 
potential drawbacks. The Consumer & Governmental Affairs Bureau at FCC 
recommends that consumers read contracts thoroughly and insist on being 
given a period of time to test the phone and service before being tied 
to a long-term contract. FCC officials noted that no information from 
carriers is going to be tailored to the specific usage patterns of 
individual consumers. For example, because some building materials 
block radio signals in areas where carrier information shows that 
service is available, service may not be available inside some 
buildings where customers want to use mobile phones. The largest 
carriers have been extending their trial periods and now generally 
allow 14 to 30 days. Some interested parties have suggested that longer 
periods of up to 2 months would be more effective. However, giving 
longer trial periods may raise the cost of signing up customers and 
could lead to an increase in the price of service.

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

Suggestions Included Setting Minimum Call Quality Standards:

To more directly affect call quality, some interested parties suggested 
that carriers should be required to meet certain minimum quality 
standards, such as a minimum percentage of calls that must be 
successfully completed. As a result, consumers could expect that all 
calls would meet these minimum standards. This proposal would require 
establishing and measuring a common set of network performance 
standards. In addition, some entity would need to oversee compliance 
with the standard. FCC officials said that requiring a specific level 
of service quality, such as a percentage of calls that must be 
completed, might actually reduce the amount of competition and service 
in the mobile phone market. Officials said, for example, that if a 
certain level of service had to be provided, some carriers now offering 
service might have to leave a particular market. If fewer carriers 
provide service in these markets, prices would likely rise, and 
consumers would likely have fewer choices. Moreover, in rural, 
mountainous, and other hard-to-serve areas where some service is now 
available, requiring minimal levels of service might discourage 
carriers from serving these areas at all.

Carriers Say They Are Taking Actions to Improve Call Quality:

The national carriers we spoke with said that they recognize that call 
quality is important to consumers and that they are taking actions to 
improve call quality. However, carriers noted that they face financial 
and regulatory constraints when they attempt to add base stations to 
either provide service where none previously existed or increase 
network capacity. These constraints include the following:

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

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

Carriers noted that they could offset some of the need to build more 
base stations if the federal government would allocate additional 
radiofrequency spectrum for commercial mobile phone service. However, 
other commercial and government users are already using other parts of 
the spectrum that are suitable for mobile phone service. Thus, 
providing more spectrum has proved to be a difficult and contentious 
issue.[Footnote 28]

Conclusions:

As Americans have come to rely more on mobile phones to meet their 
business and personal needs, it is important that FCC evaluate whether 
competition is adequate to ensure that mobile phone consumers are 
receiving the level of call quality they desire and expect. However, 
FCC has not yet undertaken such an evaluation in its annual report on 
competitive market conditions in the mobile phone service industry. 
Collecting and analyzing information on call quality would provide an 
ongoing record to help determine whether the current regulatory 
framework for call quality is adequate or whether certain actions--such 
as establishing call quality standards, mandating additional consumer 
information, or reducing local government control over the siting of 
new base stations--are needed.

Recommendation for Executive Action:

To assist FCC in determining whether further regulatory action 
concerning mobile phone call quality is necessary, FCC should include 
call quality in its congressionally mandated annual report on 
competitive market conditions in the mobile phone industry. This report 
should incorporate an analysis of whether market competition is 
effective in ensuring that carriers are meeting consumers' expectations 
and desires regarding call quality.

Agency Comments:

We provided a draft of this report to FCC for review and comment. In 
its comments, which are reprinted in appendix IV, FCC said that it 
believes that the ability of consumers to make informed choices in the 
marketplace is critical to the growth of mobile phone services. FCC 
noted that competition and deregulation in the mobile phone industry 
have benefited consumers in several ways, including lower prices and an 
increased diversity of service offerings. FCC also noted that for 
carriers to attract and maintain customers, they must continue to offer 
better packages of rates, network coverage, and call quality than their 
competitors. FCC believes that these competitive forces will continue 
to compel carriers to monitor and improve the quality and performance 
of their networks. Regarding our recommendation, FCC agreed, to the 
extent possible, to include information related to call quality in its 
future reports on competition in mobile phone services. However, FCC 
noted some difficulties in implementing the recommendation, such as 
data not being readily available, the lack of objective performance 
standards, and difficulties in measuring call quality against consumer 
expectations.

:

As agreed with your office, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 5 days 
after the date of this letter. At that time, we will send copies of 
this report to the appropriate congressional committees; the Chairman, 
FCC; and other interested parties. We will make copies available to 
others upon request as well. In addition, the report will be available 
at no charge on the GAO Web site at www.gao.gov. If you have any 
questions about this report, 
please contact me at 202-512-4325 or shearw@gao.gov. Key contacts and 
major contributors to this report are listed in appendix V.

Sincerely yours,

William B. Shear
Acting Director, Physical Infrastructure Issues:

Signed by William B. Shear:

[End of section]

Appendixes:

Appendix I: Scope and Methodology:

To respond to the objectives of this report, we gathered information 
from a variety of sources. First, we reviewed the relevant literature 
on mobile phone networks, the relevant laws and regulations governing 
the delivery of mobile phone service, and studies of competition and 
consumer satisfaction in the mobile phone industry in the United States 
and selected foreign countries. Second, we obtained the views of a 
variety of experts on various aspects of mobile phone call quality. 
These experts included government officials from the Wireless 
Telecommunications Bureau and Consumer & Governmental Affairs Bureau at 
FCC, FTC, and the offices of attorneys general or public utility 
commissions in California, New York, Illinois, Massachusetts, Nebraska, 
New Jersey, and Texas. We also contacted representatives of the six 
nationwide U.S. mobile phone service carriers--AT&T Wireless, Cingular, 
Nextel, Sprint PCS, T-Mobile USA, and Verizon Wireless. Representatives 
of all of the carriers except AT&T Wireless answered our questions in 
person or over the phone; AT&T Wireless responded to questions in 
writing. In addition, we interviewed representatives of the mobile 
phone industry's primary trade group, the Cellular Telecommunications & 
Internet Association; consumer advocates; lawyers representing various 
interested parties; financial analysts; consulting firms; companies 
that install equipment to improve call quality; and companies that 
conduct drive tests of the networks. Third, we provided questions on 
call quality for a nationwide phone survey of adult consumers that 
included questions on multiple topics submitted by various 
organizations. Finally, we reviewed Web sites to determine the types 
and quality of information on call quality available to consumers on 
the Internet.

To better understand the regulatory framework we reviewed the FCC 
rulemakings and notices that set up the original cellular rules, and 
other relevant rulemakings, hearings, and notices that relate to 
setting rules of the operation of mobile phone markets. We also 
examined the Communications Act of 1934, Omnibus Budget Reconciliation 
Act of 1993, and Telecommunications Act of 1996, the three major pieces 
of legislation that set the statutory framework for mobile phone 
markets. In addition, we reviewed several recent cases and court 
rulings, including several focusing upon the jurisdictions of the state 
and federal government over this sector. Furthermore, we examined FCC's 
recent annual reports on competitive market conditions in the mobile 
phone service industry. Finally, we spoke with mobile phone industry 
representatives and financial analysts to learn their views on the 
extent of competition.

To determine the extent to which consumers are experiencing call 
quality problems, we sought data regarding call quality problems 
through several means.

Carriers and other firms: We asked the six nationwide carriers for 
their data on the extent of call quality problems and other aspects of 
their services, including billing, contracts, marketing, and customer 
service. We also asked the carriers about factors they see affecting 
call quality. While all of the carriers provided us with some 
information about their networks, they did not provide us with 
geographic specific call quality data that we would need to help 
determine the extent of call quality problems. The carriers also 
provided us with information about factors that affect call quality, 
and we obtained further information on these factors by speaking with 
companies in investment banking, antenna leasing, and the development 
and manufacturing of mobile phone equipment. Finally, we contacted 
several companies that collect network performance data, including 
Telephia Inc., LCC International Inc., and Scoreboard. Some of these 
companies conduct "drive tests"[Footnote 29] for the carriers. During 
these tests, computers are used to simultaneously place calls on the 
networks of various carriers. The computers then record whether calls 
went through and whether they were dropped within some specified call 
time, such as 2 minutes.

Consumer complaints: We attempted to determine the extent of call 
quality problems, as experienced by consumers. The six nationwide 
carriers were unwilling to share information on customer surveys or 
complaint data. We contacted the state public utility commissions to 
learn whether they collect complaint data on mobile phone service or 
otherwise regulate mobile phone service. Thirty-three state commissions 
responded voluntarily to our request for information on whether they 
regulate mobile phone service or categorize complaints. Of the six 
states that collect complaints, California and Texas provided us with 
their data. We collected consumer complaint data from FCC and FTC. We 
turned to consumer groups that collect such complaints--including the 
Wireless Consumer Alliance and Better Business Bureau--as well. Because 
none of these sources adhere to a common standard for categorizing 
complaints or a system to ensure that several sources are not 
collecting complaints from the same consumer, we were not able to use 
these data to reach overall conclusions about the extent to which 
consumers are experiencing call quality problems. Finally, we reviewed 
sources of information on the Internet. Several sites allow consumers 
to report their experiences with their mobile phone service; however, 
none of the sites we visited said that they verify the information or 
delete it when it is no longer timely.

Consumer surveys: We collected data from consumer surveys. We spoke to 
officials at Yankee Group, J.D. Power & Associates, and AARP about the 
surveys they have conducted. Because these surveys did not provide all 
of the information about call quality in which we were interested, we 
also contracted with an international market research firm to 
administer 26 questions as part of a nationwide, multipurpose, Random 
Digit Dialing telephone survey of adults conducted between November 8 
and 10, 2002. Our questions addressed issues such as call quality, 
satisfaction with the quality of mobile phone service, complaint-making 
practices, and factors involved in decisions to change companies. Five 
hundred fifty-two of the 1,027 survey respondents had mobile phones and 
answered at least some of the 25 questions in addition to the 
preliminary screener question. The survey results were weighted by 
various demographic characteristics--gender, age, race, and education 
level.

The survey results are derived from a sample of the population. This 
sample was one of a large number of samples that might have been drawn 
from that population. The results from the sample that was actually 
selected are subject to sampling error; that is, the extent to which 
they differ from what would have been obtained if information had been 
gathered from the entire population. We express confidence in the 
precision of survey results as 95-percent confidence intervals, for 
example, plus or minus 8 percentage points. For this survey, we 
estimate that for the survey questions that applied to all of the 
respondents who used mobile phones (417 or more) the 95-percent 
confidence intervals are plus or minus 8 percentage points, or less. 
Because fewer respondents answered the questions relating to changing 
carriers (between 112 and 144), the confidence intervals for these 
estimates are generally larger--plus or minus 15 percentage points, or 
less.

Practical difficulties encountered in conducting this survey may 
introduce nonsampling errors as well. As in any survey, differences in 
the wording of questions, the sources of information available to 
respondents, and the types of people who do not respond may have led to 
errors that we could not assess. We took several steps to minimize some 
of these nonsampling errors. For example, we developed our survey 
questions with the aid of a survey specialist and pretested the 
questions. However, we are concerned about the potential for those who 
did not respond to the survey to differ from those who did respond in 
some way that could affect the results. We have no explicit reason for 
suspecting that the survey suffers from this shortcoming. Instead, our 
concern arises out of the large sample of phone numbers dialed to 
produce about 1,000 survey respondents--a response rate of about 13 
percent of the estimated eligible population.[Footnote 30] The survey 
results were weighted so that the overall demographic characteristics 
of our sample match the gender, age, race, and educational 
characteristics of the national population as measured in the Census 
Bureau's March 2001 Current Population Survey. We have no basis for 
determining to what extent this weighting adjusted for the views of the 
87 percent of the sample who were not interviewed.

[End of section]

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

[See PDF for image]

[End of figure]

[End of section]

Appendix III: FCC Fact Sheet on Mobile Phone Service:

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

[See PDF for image]

[End of figure]

[End of section]

Appendix IV: Comments from the Federal Communications Commission:

Federal Communications Commission:

Washington, D.C.

CHAIRMAN:

April 11, 2003:

Mr. William B. Shear:

Acting Director, Physical Infrastructure Issues United States General 
Accounting Office:

441 G Street, N.W. Washington, D.C. 20548:

Dear Mr. Shear:

Thank you for sharing the General Accounting Office's ("GAO's") draft 
report, titled "FCC Should Include Call Quality in Its Annual Report on 
Competition in Mobile Phone Services." GAO's draft report recommends 
that the Federal Communications Commission ("FCC" or "Commission") 
include call quality in its mandated annual report analyzing whether 
there is effective competition in the market for mobile phone services 
("Competition Report"). The FCC values GAO's analysis of the call 
quality issue and shares the belief that the ability of consumers to 
make informed choices in the marketplace is critical to the growth of 
mobile phone services. To that end, to the extent possible, the FCC 
plans to include information related to call quality in its future 
Competition Reports.

As the mobile telephone market matures, we believe that the industry 
has already witnessed marked improvement in both call quality and 
network performance. In this regard, we note your survey indicates that 
most consumers are satisfied with the overall call quality of their 
mobile phone service. Moreover, other competitive indicators such as 
the number of cell sites deployed, the extent of digital coverage, 
minutes of use, and subscribership have all increased substantially. 
And, perhaps most significantly, the per-minute price of mobile 
telephone service has fallen dramatically, thereby allowing more 
consumers access to mobile telephone services.

As GAO recognizes in its draft report, the FCC has focused on a 
deregulatory paradigm for the commercial mobile industry, which we 
believe has been successful in allowing for marketplace forces to 
improve consumer benefits for the more than 140 million consumers who 
subscribe to wireless services. The rapid proliferation of wireless 
services, in large part due to this deregulatory approach, has had an 
enormous impact on our country, consumers, and public safety. From the 
Commission's perspective, and as indicated in our annual reports 
analyzing the competitive conditions in the commercial mobile telephone 
industry, our pro-competitive, deregulatory policies are working in the 
wireless industry, and the state of this industry from a consumer 
perspective is strong. Competition and deregulation have resulted in 
lower prices and an increased diversity of service offerings, which in 
turn have stimulated rapid growth in the demand for wireless services 
and substantial consumer benefits. In this competitive environment, in 
order for wireless carriers to attract and maintain customers, they 
must continue to offer better packages of rates, network coverage, and 
call quality than their competitors. We
believe that these competitive forces will continue to compel carriers 
to monitor and improve the quality and performance of their networks. 
Thus, as the mobile telephone industry continues to evolve, we believe 
that call quality will also benefit from further improvements.

Market forces not only provide an incentive for carriers to make call 
quality a high priority, they have also created an incentive for 
numerous third parties to produce consumer information on mobile 
telephone service. As a result, there is considerable data currently 
available to consumers, and most of it is at little or no cost. The 
sources of information include publications, trade associations, 
marketing and consulting firms, and at least eight websites dedicated 
to giving consumers an overview and comparison of the mobile telephone 
services available in their area. Some of these information sources 
even rate carriers on call quality issues. Moreover, as noted in the 
draft report, the FCC has developed a pamphlet that helps consumers 
evaluate wireless services (available on our website at http://
www.fcc.gov/cgb/wirelessphone.pdf). This wide variety of information, 
in conjunction with trial periods offered by service providers, allows 
consumers to determine for themselves whether a carrier's coverage and 
services meet their individual needs.

The Commission remains dedicated to allowing market forces to work in 
order to provide high quality mobile phone services. To that end, we 
believe that the strongest way for a consumer to let a provider know of 
dissatisfaction with service quality is to change service providers. 
However, as noted in your Report, consumers surveyed who wanted to 
change carriers, but did not do so, identified the inability to keep 
their mobile telephone number, or lack of wireless local number 
portability ("LNP"), as an important factor in making that decision. 
The Commission has been aware of this issue and wireless LNP 
implementation is scheduled to begin this November. We believe that 
this initiative will further reduce the transaction costs for consumers 
wishing to change providers.

With respect to GAO's recommendation that the FCC should include call 
quality in its Competition Report, we note that the Commission's past 
seven Competition Reports have been written in accordance with Section 
332 (c)(1)(C) of the Telecommunications Act.[Note 1] And, although the Seventh 
Annual CMRS Competition Report did not track technical data on call 
quality, per se, it did, like the reports before it, include important 
consumer information on numerous advances in service innovations. We 
believe that such service innovations are generally an indication of 
competition in a market, and are, among other things, often 
representative of improvements in call quality. Similarly, the 
Commission's past Competition Reports have included discussions of the 
rollout of digital service. Digital service has provided better call 
quality, greater reliability, and additional calling features for 
consumers. Our annual Competition Reports have also focused on trends 
in pricing plans, churn and service provision, all of which affect a 
consumer's ability to respond to a particular carrier's call quality. 
Furthermore, in the Commission's recent Notice of Inquiry, [Note 2] we sought 
additional information
on call quality, asking whether "quality of service" is an available 
metric that will give us insight into the level of competition in the 
provision of CMRS services, whether "CMRS providers' cost of capital 
affect service availability, including ... the quality of service," and 
how quality of service, among other performance metrics, vary between 
the United States and other countries. [Note 3] The Commission also asked 
specifically "How would the Commission measure service quality?" 
[Note 4]
GAO concludes, specific data on call quality is not readily available. 
Call quality, particularly dropped calls, is a reflection of a 
carrier's density of coverage, and fundamentally, coverage is driven by 
a carrier's ability to place additional cellular towers, which is a 
difficult and cumbersome process because of the environmental, zoning, 
historical preservation, and endangered species issues involved. Thus, 
these sorts of call quality issues are difficult to identify and 
categorize. To the limited extent other countries have collected 
quality of service data independently, what they have found is that 
such data is often subjective, of questionable reliability, and costly 
to acquire. From our perspective, this lack of available data is 
further complicated by the fact that there are no current objective 
performance standards. Without an objective measurement system, 
reporting such data may not serve to inform consumers.

The FCC is concerned that call quality is not reliably measurable 
against consumer expectations as recommended by your Report. Because 
consumer expectation and desire is a subjective standard, it would seem 
quite difficult for the Competition Report to analyze to what degree 
competition has met such a benchmark. In order to be more responsive to 
consumer concerns in future Competition Reports, the Commission can, 
however, isolate the available quantifiable information relating to 
call quality in a manner that better allows the reader to understand 
and locate this topic within the report.

I commend you and your staff for your fine work in helping to develop 
ideas for improving access to information on call quality issues, both 
for the FCC and for consumers. We support efforts to ensure that 
consumer needs are met in this area.

Sincerely,

Michael K. Powell:

Signed by Michael K. Powell:

[1] 47 U.S.C.  332(c)(1)(C).

[2] 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, 17 FCC Rcd 24923 (2002).

[3] See id. at para. 4. 

[4] ID. AT PARA. 18.8.

[End of section]

Appendix V: Key Contacts and Major Contributors:

GAO Contacts:

John P. Finedore, (202) 512-6248
Nancy S. Barry, (617) 788-0550:

Staff Acknowledgments:

In addition to those named above, David Dornisch, Christine Houle, 
Sara Ann Moessbauer, Tom Taydus, Ed Warner, and Mindi Weisenbloom made 
key contributions to this report.

(545014):

FOOTNOTES

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

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

[3] See U.S. General Accounting Office, Telecommunications: 
Comprehensive Review of U.S. Spectrum Management with Broad Stakeholder 
Involvement Is Needed, GAO-03-277 (Washington, D.C.: January 2003).

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

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

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

[7] As other mobile phone services began to develop, FCC granted 
carriers greater flexibility. 

[8] In 1988, FCC permitted cellular carriers to use digital technology 
but required carriers to continue to offer analog service as well. In 
2002, FCC provided a 5-year period to sunset the rules governing the 
provision of analog service by cellular carriers.

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

[10] Commercial mobile phone service carriers were to be treated as 
common carriers and regulated under Title II of the 1934 Communications 
Act.

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

[12] The states were Arizona, California, Connecticut, Hawaii, 
Louisiana, New York, Ohio, and Wyoming.

[13] Connecticut Dept. for Pub. Util. Control v. FCC, 78 F.3d 842 (2ND 
Cir 1996).

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

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

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

[17] At the same time, FCC removed the requirement that cellular 
service carriers notify FCC if they lacked the capacity to service 
certain customers.

[18] Letter from FCC Chairman Michael Powell to Senator Charles E. 
Schumer, dated February 5, 2003.

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

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

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

[22] Complaints can be filed by phone at 1-888-Call-FCC (1-888-225-
5322) voice, 1-888-Tell-FCC (1-888-835-5322) TTY; by facsimile at 202-
418-0232; through the Internet at www.fcc.gov/cgb/complaints.html; by 
e-mail at fccinfo@fcc.gov; or by mail to Federal Communications 
Commission, Consumer & Governmental Affairs Bureau, Consumer 
Complaints, 445 12TH Street, SW, Washington, D.C. 20554.

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

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

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

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

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

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

[29] Drive tests are generally performed in vehicles traveling along 
major road arteries. 

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

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