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 The  Wireless  Experience 
 So  lets  move  on  to  the  wireless  work.  The  wireless  industry,  and  in  particular  the  mobile  wireless  sector,  is  a  shining  example  of  what  a  well-  functioning  market  can  achieve  when 
 it  is  not  hindered  by  unnecessary  regulation.  The  FCC  reaffirmed  in  its  recent  annual  report  on  the  state  of  wireless  competition  that  the  industry  has  continued  to  show 
 significant  growth  despite  a  difficult  economic  environment.  More  specifically,  we  found  that  in  2002,  the  wireless  industry  continued  to  innovate,  offered  a  wider  variety  of 
 service  offerings,  and  increased  the  availability  of  its  services,  all  while  reducing  the  prices  charged  to  consumers.  The  wireless  industry  by  all  accounts  is  a  hotbed  of 
 competition,  demonstrating  how  market-  based  solutions  can  best  served  customers.  Because  of  competition,  per-  minute  prices  for  mobile  calling  have  dropped  steadily  for 
 nearly  a  decade,  declining  76%  since  1994    30%  in  the  past  3  years.  At  the  same  time,  carriers  have  invested  over  $126  billion  in  their  networks,  thus  improving  service, 
 creating  jobs,  and  spurring  economic  growth. 
 Perhaps  most  significant,  there  is  no  dominant  provider  in  the  wireless  sector.  Instead,  with  the  FCC  applying  a  light  regulatory  touch,  vigorous  competition  has  produced  a 
 marketplace  with  six  nationwide  operators  and  several  major  regional  providers.  Wireless  carriers  have  nimbly  responded  to  consumer  preferences,  and  as  a  result,  the 
 public  has  increased  its  use  of  and  reliance  on  wireless  networks  for  basic  voice  communications,  for  news  and  information  through  Internet  services,  and  even  for 
 entertainment. 
 How  Did  We  Get  Here? 
 To  what  can  we  attribute  the  tremendous  success  of  wireless  growth?  Certainly,  technological  developments  over  the  past  decade  have  played  a  major  role,  giving  us 
 digital  communications,  higher  bandwidth,  smaller  devices  and  longer  battery  life,  and  helping  to  spark  increased  demand.  But  I  also  think  that  the  decisions  of  a  decade  ago  to 
 refrain  from  imposing  burdensome  regulations  on  this  expanding  industry  contributed  to  the  explosive  growth  of  wireless. 


 Now  for  a  little  bit  of  history.  In  1993,  Congress  amended  the  law  regarding  commercial  mobile  services.  Up  until  then,  cellular  carriers  were  subject  to  state  certification  and 
 tariff  requirements.  The  new  law  preempted  the  states  from  regulating  in  those  areas,  and  teed  up  for  the  Commission  a  key  decision:  whether  to  apply  the  heavy  hand  of  strict 
 Title  II  common  carrier  regulation  on  the  wireless  industry.  Some  argued  that  price  regulation,  service  quality  controls,  and  mandated  technologies  were  necessary  to  protect 
 consumers  and  promote  competition.  However,  the  Commission    correctly,  in  my  view    judged  that  the  costs  of  traditional  common  carrier  regulation  would  outweigh  any 
 benefits,  and  chose  not  to  burden  the  wireless  industry  with  rules  on  pricing  and  the  terms  and  conditions  of  service.  The  Commission  largely  freed  wireless  services  from 
 regulation. 
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 In  two  key  areas,  however,  the  Commission  did  decide  that  the  marketplace  required  regulatory  intervention:  First,  in  order  to  ensure  that  new  entrants  using  PCS  spectrum 
 would  be  able  to  take  root,  the  Commission  imposed,  at  least  initially,  a  spectrum  cap;  and  second,  it  adopted  strict  technical  rules  to  prevent  carriers  from  interfering  with  each 
 other. 
 The  1993  law  gave  states  an  opportunity  to  petition  the  FCC  for  permission  to  continue  to  regulate  rates  charged  by  wireless  carriers.  A  number  of  states  did  so  and  the 
 Commission  was  forced  to  grapple  with  these  petitions.  I  was  working  in  the  wireless  industry  at  the  time,  and  I  can  recall  the  economic  studies  that  were  conducted  at  that 
 time  to  assess  the  effects  of  state  regulation  on  consumer  costs.  These  studies  found  that  state  regulation  of  wireless  services  actually  harmed  consumer  welfare,  impeded  market 
 forces  and  increased  consumer  prices  significantly.  The  FCC    rightfully,  in  my  view    ultimately  concluded  that  the  statutory  conditions  for  allowing  state  regulation  were  not 
 met,  and  denied  all  of  the  state  petitions  that  were  filed. 
 As  a  consequence  of  these  decisions,  the  marketplace  for  wireless  services  was  allowed  to  develop  freely,  and  wireless  consumers  now  enjoy  unparalleled  choice  in  calling  plans, 
 innovative  services,  and  dramatically  lower  prices. 
 A  competitive  marketplace,  however,  does  not  mean  that  our  job  as  regulators  is  complete.  In  several  instances,  the  Commission  has  required  wireless  carriers  to  take  up 
 several  public  policy  priorities  that  markets  typically  would  not  address. 
 A  good  example  is  E-  911.  Over  150,000  times  a  day,  someone  uses  a  wireless  phone  to  call  911  to  save  a  life,  to  stop  a  crime,  or  to  help  someone  in  need.  In  the  mid-  1990s,  the 
 Commission  adopted  a  two-  tiered  approach  to  improve  wireless  E-  911:  first,  it  required  wireless  carriers  to  provide  dispatchers  with  a  call-  back  number  and  the  location  of  the 
 cell  site  receiving  the  911  call;  and  then  it  required  wireless  carriers  to  provide  the  precise  location  of  the  wireless  911  call.  The  E-  911  proceedings  have  been  arduous  and 
 implementation  has  presented  technical  challenges    but  my  colleagues  and  I  are  deeply  committed  to  ensuring  access  to  emergency  services  and  the  wireless  industry  has 
 responded  to  this  challenge. 
 Another  example  involves  our  decision  to  ensure  that  digital  wireless  phones  are  available  for  all  Americans,  including  the  hearing  disabled  community.  In  this  situation, 
 we  were  driven  by  congressional  mandate,  not  market  forces.  The  Hearing  Aid  Compatibility  Act  set  forth  the  goal  of  ensuring  access  to  telecommunications  services 
 for  individuals  with  hearing  disabilities.  In  our  recent  action,  we  concluded  that  technology  had  developed  to  the  point  that  it  was  appropriate  to  require  wireless  phone 
 manufacturers  and  service  providers  to  modify  handsets  so  that  individuals  with  hearing  disabilities  could  access  digital  wireless  phones.  So  this  is  the  wireless  world  of  today. 
 The  question  for  ongoing  debate  is  whether  more  regulation  is  necessary. 
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 Is  More  Regulation  Necessary? 
 Before  jumping  to  any  conclusions,  we  must  first  take  into  account  the  current  state  of  the  market  itself,  then  identify  any  problems  that  exist,  and  only  then  can  we  determine 
 whether  a  better  outcome  will  result  from  regulation,  or  from  letting  the  existing  market  forces  work  their  will.  The  real  question,  therefore,  is  whether  current  marketplace 
 failures  compel  us  to  adopt  additional  regulation. 
 Unlike  the  duopoly  cellular  market  of  10  years  ago,  todays  wireless  industry  is  intensely  competitive.  Carriers  compete  on  price,  on  service,  on  handset  choice  and  on 
 applications.  It  seems  that  new  applications  and  services  are  being  introduced  constantly,  and  all  the  while  rates  for  wireless  services  have  been  falling  sharply. 


 And  wireless  services  are  more  pervasive  than  ever.  According  to  the  Commissions  recent  annual  report  on  competition  in  the  commercial  wireless  industry,  over  140  million 
 Americans  now  subscribe  to  mobile  wireless  services,  up  over  60%  in  just  3  years.  Consumers  are  relying  more  and  more  on  their  wireless  services,  with  the  average 
 monthly  minutes  of  use  up  from  185  to  427  over  the  last  3  years    an  increase  of  230%.  Consumers  are  increasingly  using  wireless  networks  not  just  to  make  voice  calls,  but  to 
 send  messages,  to  surf  the  Internet,  and  to  take  and  transmit  pictures. 
 With  this  explosion  of  wireless  services,  consumer  expectations  are  higher  than  ever.  As  consumers,  we  expect  service  to  be  available  when  we  want  it,  we  expect  our  phones  to 
 work  even  when  dropped  on  the  ground  repeatedly,  and  we  expect  our  calls  to  be  completed  and  not  dropped.  We  also  expect  to  be  treated  fairly  and  to  know  what  we  are 
 buying.  Let  me  first  address  the  issue  of  service  quality  and  then  turn  to  the  customer  rights  issue. 


 Surveys  have  shown  that  concerns  about  service  quality  and  coverage  top  the  list  of  consumer  complaints.  As  a  wireless  consumer,  I  know  how  frustrating  a  dropped  call  or 
 dead  spot  can  be.  As  a  regulator,  however,  I  recognize  the  physical  realities  of  providing  a  service  that  relies  on  the  use  of  radio  frequencies.  It  is  self-  evident  yet  occasionally 
 forgotten  that  radio  signals  can  be  blocked  by  hilly  terrain,  excessive  foliage,  and  tall  buildings,  or  zoning  prohibitions  and  that  propagation  distances  are  finite.  That  is  why 
 for  most  consumers  today  wireless  is  a  supplement  to  their  wireline  service,  not  a  substitute. 


 As  a  regulator,  I  also  recognize  that  in  an  industry  as  competitive  as  the  wireless  sector,  market  forces  have  driven  greater  value  to  consumers  than  regulatory  fixes.  The 
 competitiveness  of  the  market  forces  service  providers  to  respond  to  their  customers  expectations.  Specifically,  carriers  race  to  build  out  more  robust  networks  and  compete 
 on  the  basis  of  service  quality.  Weve  all  heard  Verizons  Can  you  hear  me  now  Campaign.  This  is  a  classic  example  of  how  providers  will  strive  to  improve  their 
 services  to  differentiate  themselves  from  competitors  offerings.  In  light  of  such  competition,  I  believe  that  imposing  regulation  of  service  quality  in  the  commercial 
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 mobile  service  sector  not  only  is  unnecessary,  but  would  risk  freezing  technology  at  a  specific  point  in  time  and  diminish  the  benefits  of  head-  to-  head  competition. 
 In  addition,  we  must  recognize  that  regulation  by  its  nature  imposes  costs,  creates  unintended  consequences,  and  restricts  competitors  abilities  to  respond  quickly  to 
 consumer  demand.  Regulations  take  a  long  time  to  enact,  and  it  takes  even  longer  to  change  them.  And  I  have  never  believed  that  regulators  are  in  a  very  good  position  to 
 predict  the  twists  and  turns  of  the  marketplace.  Even  market  experts  sometime  find  their  crystal  balls  a  little  cloudy. 


 In  contrast,  markets  are  set  up  specifically  to  react  to  current  conditions.  When  consumers  are  unhappy  with  their  service    and  with  140  million  subscribers,  there  are 
 certain  to  be  valid  complaints    they  can  and  should  complain.  In  a  competitive  market,  and  especially  one  in  which  firms  incur  steep  acquisition  costs  for  each  new  subscriber, 
 carriers  have  every  incentive  to  keep  their  subscribers  happy  by  providing  high-  quality  service  and  top-  notch  customer  care. 


 Ultimately,  of  course,  customers  can  and  do  vote  with  their  feet  by  changing  carriers    The  industrys  30%  annual  churn  rates  indicate  the  degree  to  which  consumers  walk 
 away  dissatisfied.  We  know  based  on  data  released  today  that  the  introduction  of  wireless  number  portability  has  increased  customer  choice  and  created  even  greater 
 flexibility  for  consumers. 
 So  when  I  ask  myself  what  characteristics  define  todays  wireless  market  Im  left  with:  Intense  competition,  no  dominant  player,  multiple  service  and  pricing  options,  and  a 
 customer  base  willing  to  walk.  Fundamentally  this  is  the  stuff  of  a  well-  functioning  market. 


 We  are  fortunate  that  the  current  wireless  marketplace  offers  a  classic  example  of  carriers  self-  interest  coinciding  with  the  public  interest.  I  believe  that,  when  these  stars 
 align,  we  in  government  should  be  very  reluctant  to  add  more  layers  of  regulation,  particularly  when  wireless  carriers  are  continuing  to  invest  billions  of  dollars  every  year 
 to  increase  network  coverage  and  expand  their  capacity  and  service  offerings.  This  is  good  for  consumers  and  good  for  our  economy.  Rather  than  imposing  unnecessary 
 compliance  costs,  we  should  be  doing  what  we  can  to  encourage  this  on-  going  investment. 


 Some  would  respond  to  this  position  by  saying  What  are  you  going  to  do  about  consumer  rights?  Well,  I  believe  that,  in  a  competitive  market,  regulators  can  best  foster 
 consumer  welfare  by  focusing  their  efforts  on  education  and  enforcement.  Only  educated  consumers  can  reap  the  benefits  of  a  highly  competitive  marketplace.  We  need  only  look 
 at  what  the  marketplace  has  achieved  on  its  own  to  know  the  power  of  an  informed  consumer.  For  example,  as  nationwide  wireless  carriers  extended  their  footprints  into 
 rural  areas  and  began  to  advertise  their  services  nationwide,  rural  residents  became  better  informed  about  the  available  choices  and  began  to  demand  better  prices  and  greater 
 choice.  As  a  result,  rural  markets  have  quickly  become  associated  with  the  nationwide 
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 market  for  wireless  services,  and  consumers  in  rural  markets  now  have  access  to  the  same  services  at  the  same  prices  as  consumers  throughout  the  rest  of  the  country. 
 To  be  sure,  wireless  service  choices  can  be  complex,  and  consumers  often  can  be  overwhelmed  and  under  informed.  That  is  why  both  the  industry  and  government  have  a 
 responsibility  to  help  ensure  that  consumers  have  access  to  the  information  they  need  to  make  intelligent  purchasing  decisions.  This  is  no  different  than  ensuring  consumers  are 
 properly  educated  when  making  other  major  purchasing  decisions,  such  as  a  car  or  a  dishwasher.  So  I  am  very  pleased  that  the  wireless  industry  has  established  a  voluntary 
 Code  of  Conduct,  and  that  all  of  the  major  carriers  have  committed  to  following  it.  I  also  expect  many  of  the  smaller  carriers  will  follow  their  lead.  Ultimately  the  Code  will 
 educate  consumers  about  wireless  service  offerings.  And,  the  better  educated  the  consumer,  the  more  they  will  be  able  to  get  better  value  and  service.  At  the  end  of  the 
 day,  the  industrys  willingness  to  implement  a  voluntary  code  of  conduct  reaffirms  the  decision  by  the  FCC  ten  years  ago  to  avoid  costly  regulatory  oversight.  This  Code  exists 
 because  competition  is  driving  wireless  carriers  to  better  serve  consumers  and  increase  customer  loyalty. 


 The  Commission  also  is  doing  its  part  to  provide  information  to  wireless  consumers.  Our  Consumer  and  Governmental  Affairs  Bureau  has  published  a  handbook    which  is 
 available  on  the  FCC  website  (www.  fcc.  gov)    to  help  consumers  understand  wireless  service  and  how  to  assess  competing  service  offerings.  Along  the  same  lines,  a  section  of 
 my  office  webpage  titled  Focus  on  Consumer  Concerns  is  devoted  to  offering  helpful  and  up-  to-  date  information  to  consumers  about  issues  that  directly  impact  them,  such  as 
 E911,  hearing  aid  compatibility,  phone  bill  charges,  and  telemarketing  practices.  Because  of  my  strong  belief  that  the  FCC  is  and  should  be  a  service  organization,  I  regard 
 providing  useful  information  to  the  public  as  one  of  my  basic  responsibilities  as  an  FCC  Commissioner. 


 The  States  Role 
 Now,  as  to  the  role  that  state  regulators  should  play  in  protecting  wireless  consumers,  once  again  I  fall  back  on  my  general  regulatory  philosophy  and  find  it  equally  applicable. 
 Unless  there  is  some  overriding  public  policy  priority  that  is  not  market  driven,  such  as  E911,  state  regulators  should  trust  competitive  market  forces  to  deliver  value  and  choice 
 to  consumers.  Therefore,  regulatory  efforts  should  focus  on  facilitating  consumer  education  without  imposing  prescriptive  regulations.  That  is  why  I  have  serious 
 reservations  about  at  least  one  version  of  the  California  consumer  rights  regulations  under  consideration  today.  Regulation  such  as  this  invariably  imposes  costs,  some  of  which 
 cannot  be  predicted.  And  it  is  reasonable  to  assume  that  costs  imposed  on  an  entire  industry  will  be  passed  on  to  consumers  without  delivering  any  increased  value. 


 Its  also  important  to  recognize  that  the  market  for  mobile  wireless  services  has  become  increasingly  a  national  market.  To  efficiently  provide  a  nationwide  service,  carriers 
 create  billing  and  customer  care  systems  that  cross  state  lines.  And  it  is  efficiencies  such  as  these  that  have  enabled  wireless  carriers  to  reduce  rates  year  after  year. 
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 Especially  in  wireless  markets  that  cross  state  lines,  I  have  to  question  the  wisdom  of  enacting  disparate  regulatory  regimes  to  govern  the  relationship  between  wireless  carriers 
 and  their  customers.  Congress  has  expressed  an  intent  on  numerous  occasions  to  achieve  substantial  national  uniformity  over  the  operation  and  regulation  of  wireless 
 telecommunications  services. 
 The  FCCs  light  regulatory  touch  in  the  early  1990s,  coupled  with  the  1993  budget  acts  preemption  of  state  regulation  of  wireless  rates  and  entry,  ushered  in  a  period  of  huge 
 investment  in  wireless  infrastructure,  adding  jobs  and  increasing  productivity  across  the  economy.  And  today,  the  wireless  industry  is  poised  to  unleash  a  new  generation  of 
 services  that  promise  additional  consumer  benefits. 
 Before  launching  a  new  round  of  regulation    with  the  potential  for  51  distinct  sets  of  regulatory  obligations    I  believe  we  should  first  ask  ourselves,  what  problems  are  we 
 trying  to  fix  and  are  we  adding  any  value?  Enacting  a  patchwork  quilt  of  state  wireless  consumer  rights  regulations  may  very  well  result  in  greater  consumer  confusion  and 
 frustration.  Although  it  is  tempting  to  believe  that  additional  government  intervention  can  only  improve  the  landscape,  I  believe  sometimes  less  is  more.  So  I  offer  an 
 alternative  course  of  action;  one  where  government  regulators  continue  to  inform  and  educate  consumers;  one  where  health  and  public  safety  mandates  continue  to  be  driven 
 by  the  government;  and  one  where  competitors  battle  fiercely  for  each  and  every  customer  through  innovative  and  creative  service  prices,  bundles  and  packages. 


 So,  I  thank  you  for  the  opportunity  to  speak  with  you  today,  and  if  we  have  time,  Id  be  happy  to  take  a  few  questions.  Thank  you  very  much. 
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