Telecommunications: FCC Should Include Call Quality in Its Annual Report on Competition in Mobile Phone Services
Published: 2003-04-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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 problems--such as blocked or dropped calls, insufficient capacity, dead spots, or lack of coverage--we included questions on a national survey of adult consumers, conducted in November 2002. Our survey indicated that about four-fifths of adult mobile phone users were satisfied with their service, about one-tenth were dissatisfied, and the remainder indifferent. However, we also found that consumers are experiencing some call quality problems. For example, we estimate that about 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 industry-wide 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.

section_title: Letter
paragraphs: Over the past decade, mobile phone service has gone from being a luxury  item to an everyday part of life. 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. 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.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.
subsections: section_title: Background
paragraphs: Carriers deliver mobile phone service by subdividing large geographic  areas into smaller overlapping sections called cells. 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.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.
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.
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.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.
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.
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.
section_title: 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
paragraphs: 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.
subsections: section_title: The Congress Has Promoted Development of Competitive Mobile Phone Markets
paragraphs: 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.
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.
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 statessought 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.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.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.This has enabled states and localities to affect both the level of  competition and the quality of mobile phone calls.
section_title: FCC Has Promoted Competitive Markets to Determine the Level of Call Quality
paragraphs: 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, 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.
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.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.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 siteand  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.
section_title: FCC Reports Annually on Competitive Market Conditions in the Mobile Phone Industry but Does Not Include Information on Call Quality
paragraphs: 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.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.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.
section_title: Concerns Have Been Raised, but Available Data Are Inconclusive on Extent of Call Quality Problems
paragraphs: 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.
subsections: section_title: Concerns Have Been Raised about Mobile Phone Call Quality
paragraphs: 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.
section_title: Carriers Provided Limited Information on Extent of Call Quality Problems
paragraphs: 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.
section_title: Consumer Complaint Data Provide a Limited Indication of Call Quality Concerns
paragraphs: 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. 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.
FTC also receives complaints about mobile phone service and forwards  them to FCC.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.
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.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.
section_title: Our Survey on Call Quality Yielded Mixed Results
paragraphs: 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.
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.
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.
section_title: Interested Parties Have Suggested Actions for Improving Call Quality
paragraphs: 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.
subsections: section_title: Local Number Portability Could Increase the Competitiveness of Mobile Phone Markets
paragraphs: 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.
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.
section_title: Many Proposals that Center on Giving Consumers More Detailed Information Are Difficult to Implement
paragraphs: 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.
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.
section_title: Suggestions Included Setting Minimum Call Quality Standards
paragraphs: 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.
section_title: Carriers Say They Are Taking Actions to Improve Call Quality
paragraphs: 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.
section_title: Conclusions
paragraphs: 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.
section_title: Recommendation for Executive Action
paragraphs: 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.
section_title: Agency Comments
paragraphs: 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.
section_title: Scope and Methodology
paragraphs: 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” 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. 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.
section_title: Results of Consumer Survey on Mobile Phone Service
paragraphs: The following results, which are based on responses to our national telephone  survey of adults in the United States, were used in our analysis of the extent to  which consumers are experiencing call quality problems.  Not shown are some of  the interviewer’s transitions between questions or explanations of the options for  answering.  After each question, the number of responses (n) that were included  in our analysis is noted.  For questions where the number of responses is greater  than 400, the sampling error is plus or minus 8 percentage points or less.  For the  other questions the sampling error is plus or minus 15 percentage points, or less. Percentages may not add up to 100 percent due to rounding.
Question 1: Do you have a cell phone?  (n=1,026)  Yes         No          Question 2:  About how many times a week do you try to use your cellular phone  to either make or receive phone calls?  (n=566)
21- 50 times  Over 50 times  6%  55%  20%  20%   Question 3:  How often do you have a problem making a call because you are in  an area where there is no service?  (n=567)
Never    Less than 10 percent of the time   Between 10 percent and one-third of the time   More than one-third of the time      22%  44%  21%  12%  Question 4:  How often do you have a problem with getting a call through  because you get a fast busy signal or a message that says the call failed? (n=566)
Never    Less than 10 percent of the time   Between 10 percent and one-third of the time   More than one-third of the time      32%  47%  16%    5%  Question 5:  How often do you have a problem with a call being cut off or  dropped before you finish a call?  (n=566)
Never    Less than 10 percent of the time  Between 10 percent and one-third of the time   More than one-third of the time     39%  39%  16%    6%  Question 6:   How often do you have a problem hearing or understanding what  the other person on the phone is saying because of a bad connection or an  echo?  (n=569)
Never    Less than 10 percent of the time   Between 10 percent and one-third of the time   More than one-third of the time   32%  38%  21%    9%  Question 7:  Where do any of these problems with the quality of your calls most  often occur?  (n=519)
Traveling in a car or other vehicle    Somewhere else outside     45%  37%  18%  Question 8:  Now we would like to sum up your satisfaction with the overall  quality of your cellular calls, including how often the calls go through, stay  connected, and can be clearly heard.  Are you satisfied, dissatisfied, or neither  with the overall quality of your calls?  (n=566)
Question 9:  Since you first started using cellular phones, do you think that the  general quality of your cellular calls, including how often the calls go through,  stay connected, and can be clearly heard, has improved, gotten worse or  stayed the same?  (n=563)
Improved    Somewhat improved    Greatly improved   Gotten worse      Gotten somewhat worse      Gotten much worse  Stayed the same    47%  Question 10:  Consider the accuracy of the bills you receive for your cellular  phone service and think about whether you have been charged for calls or  services you didn’t make or didn’t sign up for.  Would you say that you are  satisfied, dissatisfied, or neither with the accuracy of your bills?  (n=543)
Question 11: Considering what you pay for the package you get, the features you  get on the phone, any problems you may have, and the quality of service you  receive, are you satisfied, dissatisfied, or neither with the value you get for the  money you pay?  (n=548)
Question 12:  Would you be willing to pay more than you are now paying to have  higher overall call quality, including more completed calls, fewer dropped  calls, and better connections?  (n=565)  12%  83%    5%  Question 13:  Have you been able to use your cell phone in all the areas and places  you had expected when you purchased your service?  (n=562)
Question 14:  In the past year, did you ever complain about the quality of your  calls to your cellular phone company?  (n=571)
Question 15:  In the past year, did you ever complain about the quality of your  calls anywhere else, like the FCC, a state agency, the Better Business Bureau? (n=571)   1%  99%  Question 16:  Have you used your cellular phone for 2 years or less or for more  than 2 years?  (n=571)  2 years or less    More than 2 years   Question 17:  Are you the person who decides which cellular phone company’s  service you will use, or does someone else like another family member or  employer make that decision for you?  (n=569)
I decide      Someone else decides   Question 18:  Since you first became a cellular service customer, have you  changed your cellular phone company?  (n=417)
Changed because original company quit   Question 19: How important in your decision to change cellular companies were  call quality problems such as calls not going through, calls not staying  connected, or not being clearly heard?  (n=142)
Very   Somewhat   Not at all   34%  21%  45%  Question 20:  How important in your decision to change cellular companies were  billing problems such as incorrect charges or confusing billing?  (n=144)
Very   Somewhat    Not at all   28%  19%  53%  Question 21: How important was the cellular phone handset provided by your new  cellular company in motivating you to change cellular companies?  This  includes things like available features, or phone style and appearance.  Were  the differences in handsets very, somewhat, or not at all important?  (n=142)
Very   Somewhat   Not at all   15%  27%  58%  Question 22: How important was getting a lower price in your decision to change  cellular companies?  (n=144)
Very   Somewhat   Not at all   57%  26%  17%  Question 23: Have you ever wanted to change your cellular phone company but  did not change for some reason?  (n=417)
Question 24: We would like to know why you may not have changed cellular  companies, even though you wanted to.  How important was a contract  termination fee required by your current cellular company in keeping you from  changing cellular companies?  Was the contract termination fee very,  somewhat, or not at all important?  (n=112)  52%  18%  25%    6%  Question 25: How important was having to get a new telephone number in  keeping you from changing cellular companies?  Was having to change  telephone numbers very, somewhat, or not at all important?  (n=114)  23%  18%  58%    1%  Question 26: How important was the inability to continue using your current  cellular phone handset in keeping you from changing cellular companies?  Was  having to change handsets very, somewhat, or not at all important?  (n=113)
section_title: FCC Fact Sheet on Mobile Phone Service
paragraphs: 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.
section_title: Comments from the Federal Communications Commission
section_title: Key Contacts and Major Contributors
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: 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.
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