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. 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. 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. 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. 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. 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. Some state utility commissioners have been expressing concerns about what they say are an increasing number of consumer complaints about mobile phone service. Their trade association, the National Association of Regulatory Utility Commissioners (NARUC), sponsored panels on mobile phone service issues at their quarterly meetings held in July and November 2002. The topics covered by the panels included local number portability, service quality, cost, and best practices for carriers to better serve their customers. However, NARUC’s Consumer Affairs Committee defeated a proposed resolution to have mobile phone carriers provide consumers with adequate service area coverage information when making purchase decisions and to have FCC monitor this information. As a result of the panel discussion held in July and carriers’ desires to talk to state commissioners about the issues raised there, in October 2002 NARUC and FCC facilitated an informal discussion of these issues between concerned state officials and mobile phone service carriers. Following this meeting, NARUC began developing a list of suggestions for FCC and mobile phone service carriers. These suggestions included FCC reporting on complaints by carrier and carriers giving consumers a 15- to 30-day period during which they could opt out of new service contracts. At least two states are investigating whether carriers’ advertising claims about call quality are being met. An official with the New York Attorney General’s office told us that the office is concerned that two major carriers advertise coverage areas that appear more extensive than they, in fact, are. Meanwhile, the California Public Utilities Commission is investigating whether another major carrier has adequate coverage in customers’ area of use and sufficient system capacity to meet the claims it makes about its service. A number of lawsuits raising questions involving coverage claims have also been filed in state courts. The press and consumer advocates have raised concerns about call quality as well. For example, over the last couple of years, articles on these issues have appeared in several well-known, widely read publications, including Forbes Magazine, the Wall Street Journal, the Washington Post, and the New York Times. In addition, several consumer advocacy groups— including the Wireless Consumers Alliance, AARP (formerly known as the American Association of Retired Persons), and Consumers Union—have raised concerns about the coverage and price information consumers receive when buying mobile phone service, consumers’ ability to complete calls, and the cost of terminating contracts if call quality is not adequate. Carriers said that information on blocked and dropped calls is collected at each base station in their networks. However, none of this network performance data is publicly available nor are the carriers required to report this information to FCC. As part of our effort to determine the extent to which calls cannot be completed or lack clarity, we asked the six largest carriers if they would be willing to provide us such data. All of the carriers declined. The reasons given for not providing the data include the following: The information is business sensitive and proprietary. Revealing it could damage a carrier’s competitiveness by alerting its competitors to the strengths and weaknesses of its network. The information would not be useful to consumers trying to compare one carrier’s performance with that of another carrier. Data would not be suitable for comparisons because carriers do not measure performance using a single set of standards. Also, systems using different transmission technologies respond differently to overcrowding on the network. The information might not be completely accurate. For example, if callers turn off the power on their phones to end a call instead of pressing the “end” button, the network might record that as a dropped call. Because their networks are changing rapidly, network performance data would be out-of-date before it could be used. Performance is affected by various transient factors, such as time of year, weather, and unusual periods of demand that tax network capacity. While carriers did not provide us with detailed information on blocked and dropped calls, network officials at two carriers said that their goal was to have a 98 percent call-completion rate. That is, the calls would go through and not be dropped before they were completed at least 98 percent of the time on average. These officials and those at other carriers said that 98 percent is generally the industry standard; however, they noted further that this standard for completed calls is a network average. Thus, even if carriers were meeting that standard, performance at various geographic locations or times of day could differ substantially from the network average. Because consumers use their phones at specific locations and times of day, these network averages may not be useful in helping them compare one carrier with another. Network information can also be collected through “drive tests,” which are generally performed along major road arteries at various times of the day. These tests are done in moving vehicles that use computers to simultaneously place calls on the networks of various carriers. The computer then records whether calls went through and whether they were dropped within some specified call time, such as 2 minutes. These tests are performed by the carriers themselves and by contractors such as Telephia. Data from drive test contractors are also proprietary; however, Telephia has performed tests for CTIA—an industry trade association—and Consumers Union, and these entities have shared that information with the public. CTIA’s July 2001 study measured various aspects of mobile phone call quality in core urban and suburban areas. The study found that between November 1999 and April 2001 there was no change in overall call quality as measured by the percentage of time a call goes through with adequate sound quality. During this period, the percentage of blocked calls went down in both the core urban and suburban areas, while dropped calls rose in suburban areas. Telephia concluded that, at the time of their study, on average, consumers could place, hold, and complete calls of acceptable audio quality 96 to 99 percent of the time. In the February 2002 issue of Consumer Reports, Consumers Union published averages of call quality data that Telephia had collected in 9 major metropolitan areas—New York, Boston, Philadelphia, the District of Columbia, Los Angeles, Dallas, Houston, Chicago, and Detroit—in October 2001. These data show that on Telephia’s 5-point scale—with 1 being the worst service and 5 the best—call quality ranged from a low of 3.3 in Houston to a high of 4.7 for Philadelphia. Consumers Union notes that these are averages of individual carrier data. In its February 2003 issue of Consumer Reports, Consumers Union used a survey of its subscribers to rank carriers for the first time in six major cities. Some carriers also said that they have detailed coverage and service maps that are based on engineering models that predict service rather than on actual service data. Again, carriers did not share these maps with us for several reasons similar to those for not providing actual network performance data. The reasons included competitiveness, accuracy, and timeliness of data. Consumer complaint data 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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) 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. 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. The General Accounting Office, the audit, evaluation and investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability. The fastest and easiest way to obtain copies of GAO documents at no cost is through the Internet. 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Summary: 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. 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.