[Federal Register: April 23, 2004 (Volume 69, Number 79)]
[Notices]
[Page 22032-22042]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23ap04-70]
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FEDERAL COMMUNICATIONS COMMISSION
[WT Docket No. 04-111; FCC 04-38]
Annual Report and Analysis of Competitive Market Conditions With
Respect to Commercial Mobile Services
AGENCY: Federal Communications Commission.
ACTION: Notice of inquiry.
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SUMMARY: This document solicits data and information on the status of
competition in the CMRS industry for our Ninth Annual Report and
Analysis of Competitive Market Conditions with Respect to Commercial
Mobile Services (Ninth Report). The Ninth Report will provide an
assessment of the current state of competition and changes in the CMRS
competitive environment.
DATES: Comments are due on or before April 26, 2004, and reply comments
are due on or before May 10, 2004.
ADDRESSES: All filings must be addressed to the Commission's Secretary,
Office of the Secretary, Federal Communications Commission. Parties
also should send four (4) paper copies of their filings to Rachel
Kazan, Federal Communications Commission, Room 6126, 445 12th Street,
SW., Washington, DC 20554. See SUPPLEMENTARY INFORMATION for comment
and reply comment filing instructions.
FOR FURTHER INFORMATION CONTACT: Rachel Kazan at (202) 418-0651 or
Susan Singer at (202) 418-1340.
SUPPLEMENTARY INFORMATION: This is a summary of the Notice of Inquiry
released on March 24, 2004. The complete text of the Notice of Inquiry,
including statements, is available for public inspection and copying
during regular business hours at the FCC Reference Information Center,
Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554.
The Notice of Inquiry may also be purchased from the Commission's
duplicating contractor, Qualex International, Portals II, 445 12th
Street, SW., Room CY-B402, Washington, DC, 20554, telephone 202-863-
2893, facsimile 202-863-2898, or via e-mail qualexint@aol.com.
I. Introduction
1. In 1993, Congress created the statutory classification of
Commercial Mobile Services to promote the consistent regulation of
similar mobile radio services. At the same time, Congress established
the promotion of competition as a fundamental goal for Commercial
Mobile Radio Services (CMRS) policy formation and regulation. To
measure progress toward this goal, Congress required the Commission to
submit annual reports (CMRS Reports) that analyze competitive
conditions in the industry. The Notice of Inquiry (NOI) solicits data
and information in order to evaluate the state of competition among
providers of CMRS for its Ninth Annual Report and Analysis of
Competitive Market Conditions with Respect to Commercial Mobile
Services (Ninth Report). The statute requiring the Commission to submit
annual reports providing an analysis of competitive market conditions
with respect to CMRS stipulates that this analysis shall include, among
other things, ``an analysis of whether or not there is effective
competition.'' To this end, previous CMRS Reports have presented a
variety of standard indicators commonly used for the assessment of
competitive market conditions, including the number of market
participants, developments in carriers' pricing plans, service
offerings, technology deployment, consumer churn, pricing data,
subscriber growth, usage, and the diffusion of product innovations. For
the Ninth Report the Commission proposes to enhance its analysis by
restructuring the presentation of the various indicators of the status
of competition to conform to a framework that groups such indicators
into four distinct categories (A) Market Structure, (B) Carrier
Conduct, (C) Consumer Behavior, and (D) Market Performance. The
analysis of market performance will evaluate competitive conditions in
the CMRS industry from the consumer's point of view, including both
personal and business users. In particular, the analysis of market
performance will focus on the benefits to consumers of effective
competition such as lower prices, higher quality, greater variety, and
more rapid innovation. A key premise of the proposed framework is that
market structure, carrier conduct, consumer behavior and the
interrelationships among these categories are important determinants of
consumer outcomes.
2. Based on an overall assessment of the indicators that the
Commission considered, the Eighth Report, 68 FR 730, January 7, 2003
concluded that there is effective competition in the CMRS market. These
indicators included the nature and number of market participants, the
geographic extent of service deployment, technological improvements and
upgrades, price competition, investment, usage patterns, churn,
subscriber growth, and product innovations, among other things. The
Eighth Report stated that 95 percent of the U.S. population has three
or more different operators offering mobile telephone service in the
counties in which they live and 83 percent have a choice of 5 mobile
telephone providers. Further, the Commission found that the
[[Page 22033]]
price consumers pay for mobile telephony service continued to fall,
while subscribership increased. In addition, innovative and enhanced
services such as advanced wireless services and larger digital
footprints were introduced. These metrics were the basis of the Report
indicating that CMRS carriers have no guarantee of maintaining their
market share, and that customers are able to change providers if a
carrier attempts to raise rates or diminish service quality.
3. In this proceeding, the Commission seeks to update the
indicators of competition for its next report to Congress and to assist
in determining if there is still effective competition in the CMRS
market. In its ongoing effort to improve its information gathering and
competitive analysis, the Commission issues the NOI to solicit
detailed, comprehensive, and independent data for the Ninth Report and
to augment information from the Commission and publicly available
sources. The Commission requests data that will allow us to evaluate
the interrelationships among market structure, carrier conduct,
consumer behavior, and market performance in order to determine whether
there is still ``effective competition'' among providers of CMRS. The
Commission invites comment on the new analytic framework proposed to
assess the state of competition among providers of CMRS in the Ninth
Report. As will be discussed in more detail later in the NOI, the
Commission seeks the following data and ask commenters to address the
following general questions:
The Commission asks for comment on ``what is
effective competition?'' and which indicators are useful to determine
whether there is effective competition among providers of CMRS.
The Commission seeks comment on what metrics are
available that will give us greater insight into the performance of the
CMRS industry. The Commission is particularly interested in gathering
accurate and reliable information on the number of subscribers,
penetration rates, usage, average price per minute, quality of service,
pricing trends, and profits, and whether these metrics vary between
urban and rural areas as well as among different demographic groups.
The Commission seeks comment on how the metrics
pertaining to the CMRS industry's structure, carrier conduct, consumer
behavior, and market performance vary across different geographic
areas, in particular between rural and urban areas? If so, how?
The Commission seeks comment on how barriers to
entry (e.g. access to sufficient spectrum, cost of capital, first mover
advantages and siting cell towers) affect the industry's market
structure. The Commission seeks comment on which entities compete to
provide CMRS services, the extent of deployment of CMRS services, and
whether the same types of services are available in all of a carrier's
service areas.
The Commission seeks comment on the most
significant changes or developments in pricing plans, advertising and
marketing, capital expenditures, and new technology deployment during
the past year.
The Commission seeks comment on significant
changes and developments have occurred in the provision of wireless
data and Internet services, both mobile and nomadic, since the
publication of the Eighth Report.
The Commission seeks data on current and
prospective deployment and usage of wireless high-speed internet access
services through mobile and portable computing devices using Wi-Fi and
similar technologies and how such data should be considered in
assessing the competitive conditions of the CMRS market.
The Commission seeks comment on how competitive
conditions and performance in the CMRS industry in the United States
compare to that in other countries, including data on key industry
performance metrics, such as subscribership, penetration rates, usage,
pricing, quality of service, and service availability.
4. In addition, The Commission seeks comment on the Commission's
market-oriented policies, including those that promote facilities-based
competition among providers of CMRS and that the Commission believes
have provided important benefits to consumers. For example, the
Commission's policy to let market forces determine the number of
providers operating in a given geographic area, subject to antitrust
restrictions and other appropriate limits, has allowed providers to
operate at a competitive and efficient scale of operation. This policy
enables these providers to serve consumers at prices that reflect the
cost savings of efficient operation among other factors. Over the past
decade, with respect to broadband personal communications services
(PCS) and other mobile radio services, the Commission has adopted a
licensing model in which licensees have ``exclusive and transferable
flexible rights'' to the use of specified spectrum within a defined
geographic area, with spectrum use rights that are governed primarily
by technical rules to protect against harmful interference. The
Commission seeks further input on how, for purposes of assessing and
comparing competitive market conditions, this approach leads to the
deployment of the spectrum for its highest and most valued use, and
how, in turn these trends have facilitated the provision of services
that are tailored to the preferences of consumers.
5. The Commission seeks comment on how the market structure in this
industry has evolved due to specific actions by the Commission,
especially the application of the above-referenced spectrum usage model
for CMRS and other market-oriented policies. What other effects have
resulted from these policies? Are these effects the same in urban and
rural areas? If not, how do they differ, and why? Do these effects vary
among CMRS providers? If so, why? Are there other policies that the
Commission could adopt that would enhance competition in the mobile
telecommunications industry?
6. Industry members, members of the public, and other interested
parties should submit information, comments, and analyses regarding
competition in the provision of CMRS services. Commenters desiring
confidential treatment of their submissions should request that their
submission, or a specific part thereof, be withheld from public
inspection. In order to facilitate its analysis of competitive trends
over time, the Commission requests that parties submit current data as
well as historic data that are comparable over time. In addition to the
comments submitted in this proceeding, the Ninth Report, as all past
CMRS Reports, will also include information from publicly-available and
Commission sources.
II. Matters on Which Comment Is Requested
7. In prior CMRS Reports, mobile telecommunications have been
divided into two sectors: (i) Mobile voice; and (ii) mobile data. As
noted in the Eighth Report, however, mobile voice and mobile data
services are no longer clearly separate services in the CMRS industry.
Many mobile voice operators also offer mobile data services using the
same spectrum, network facilities, and customer equipment. Furthermore,
many United States mobile carriers have integrated the marketing of
mobile voice and data services. Therefore, for purposes of the NOI, the
Commission inquires about a single mobile telecommunications sector
that includes interconnected mobile voice and mobile data services
provided on the same handset, as well as providers that offer only
mobile data services. Providers of mobile telecommunications services
primarily use cellular radiotelephone,
[[Page 22034]]
broadband Personal Communications Services (PCS), and Specialized
Mobile Radio (SMR) licenses. Because these licensees offer mobile
telecommunications services that are essentially indistinguishable by
most consumers, they are discussed in the NOI as a single industry
sector. Resellers and satellite operators also offer mobile
telecommunications services. In addition, in an effort to continue to
provide the most complete picture of competition among providers of
CMRS to Congress, the Ninth Report will also look at mobile wireless
service offerings outside the umbrella of ``services'' specifically
designated as CMRS by the Commission. Because providers of these
services may compete now or in the future with CMRS providers, the
Commission believes it is important to consider them in its analysis
and collect information on mobile wireless services regardless of their
regulatory classification. The Commission asks if there are other
providers that compete in this market. If so, to what extent are these
providers creating competition in the mobile telecommunications
industry?
A. Mobile Telecommunications Market Structure
8. The analysis of market structure will focus on the current level
of concentration and the ease or difficulty with which new operators
can enter the mobile telecommunications market. Examples of key metrics
collected in the past that assisted in the determination of market
structure include: The current number of operators per county; planned
spectrum auctions that may enable the entry of additional operators;
and consolidation and exit of operators from the mobile
telecommunications market. The sources of data and analysis of these
and other metrics. The Commission invites commenters to address whether
there are other metrics that should be used to evaluate the market
structure of the mobile telecommunications market? Are data for these
metrics available on a national and/or sub-national level?
i. Geographic Market Definition and Service Availability
9. Defining Geographic Markets. In order to analyze the structure
of the mobile telecommunications market, it is necessary to accurately
define the relevant product and geographic markets, and to identify the
number of carriers providing service in those markets. Defining the
relevant geographic market requires, among other things, the
identification of a geographic area within which customers face similar
competitive choices. Defining geographic markets is complicated and
time consuming due to the large number of mobile operators, the wide
variation in their geographic footprints, and the resulting patchwork
of numerous and relatively small geographic areas in which consumers
face the same choices of mobile telecommunications providers.
10. The Commission seeks comment on how best to define geographic
markets to analyze the structure of the mobile telecommunications
market for the Ninth Report. The Commission also requests comment on
how to improve the methodology the Commission uses to determine the
number of carriers serving a defined geographic area. The methodology
used in prior reports inherently includes some undetermined degree of
overcounting. Do commenters believe that this degree of overcounting is
significant and materially affects the determination of mobile
telecommunications service availability and market structure? Is there
an alternate methodology that could be used to estimate service
availability more accurately?
11. Service Availability by Billing Address. In conducting its
analysis of service availability and market structure, the Commission
seeks information about the extent to which consumers are able to, and
do, purchase service plans from carriers whose networks do not cover
their residential location or billing address. Carriers frequently
query potential subscribers about the zip code of their billing
address. Should this be taken as an indication that carriers do not
provide service to consumers whose billing address zip codes are
outside the range of the carriers' network coverage areas, even if such
consumers wish to purchase service plans in order to use their phones
inside the coverage areas? To what extent are mobile telecommunications
subscribers' residential locations or billing addresses located outside
of their carrier's network coverage area? To what degree would an
analysis of the population of smaller geographic areas that underlie
carriers' network coverage boundaries undercount those subscribers?
Furthermore, would the use of other, smaller geographic areas in
addition to or in place of counties be appropriate in analyzing service
availability? If so, which areas would be appropriate? Do such data
currently exist?
12. Rural Markets. Since the release of the Sixth Report, the
Commission has attempted to obtain a better understanding of the state
of competition below the national level, and particularly in rural
areas. In order to analyze the mobile telecommunications market
structure in rural areas, it is necessary first to define ``rural
areas.'' The federal government has multiple ways of defining rural,
reflecting the multiple purposes for which the definitions are used. In
the Eighth Report, the Commission analyzed service availability in
rural areas using three different proxy definitions, and similar
results were obtained for each definition. The Commission compared the
number of competitors in: (i) Rural Statistical Areas (RSA) counties
versus Metropolitan Statistical Areas (MSA) counties; (ii) non-nodal
Economic Areas (EA) counties versus nodal EA counties; and (iii)
counties with population densities below 100 persons per square mile
versus those with population densities above 100 persons per square
mile. In addition, the Commission recently released a Notice of
Proposed Rulemaking (Rural NPRM), 68 FR 64050, November 12, 2003, to
examine ways to promote the rapid and efficient deployment of spectrum-
based services in rural areas. The Commission requests comment on how
the Commission should define ``rural areas'' for purposes of the Ninth
Report. Should there be a single distinction between rural and non-
rural areas, or should rural and non-rural be defined on a continuum,
for example by looking at different population densities? Should the
Commission adopt one of the proposed definitions in the Rural NPRM, or
some combination of the elements contained in those proposed
definitions, for the Ninth Report?
13. Service Deployment and Coverage Maps. In order to improve the
accuracy of its analysis and to reduce overcounting in the Ninth
Report, the Commission asks service providers to submit as part of
their comments to the Commission, in electronic format, the coverage
maps that they already make available to the public. Specifically, the
Commission requests carriers to submit as part of their comments the
maps they employ to advertise their coverage areas in brochures and on
their web sites in a geo-referenced, mapable format, such as MapInfo
table (.tab), Tagged Image Format (.TIF), or Shapefile (.shp) files.
The Commission requested this data in last year's NOI and no carrier
responded. Besides requesting the information in an NOI, how else could
the Commission obtain this information? Would signatories to Cellular
Telecommunications and Internet Association (CTIA) Voluntary Consumer
Code be willing to submit
[[Page 22035]]
their coverage maps to the Commission in one of the aforementioned
electronic formats? In the alternative, the Commission asks carriers to
provide a list of counties where they provide facilities-based
services. The Commission has used the contours filed by 800 MHz
cellular licensees to estimate the availability of analog mobile
telephone service, and therefore does not require additional maps
showing analog coverage from cellular licensees. However, the
Commission requests that cellular licensees submit, as part of their
comments, their publicly available maps in the aforementioned formats
showing where they offer reliable digital service, or else supply lists
of counties in which the service is offered. In addition to employing
more accurate coverage maps, The Commission seeks comment on other ways
its analysis of service availability can be improved?
14. In order to continue to improve the accuracy of its analysis,
the Commission seeks information on whether carriers market service to
new customers in all of the geographic areas in which they have
coverage. Do carriers provide coverage in certain areas, such as near
major roads, where they do not also market service to residents of
those areas? If this is true, could the Commission's analysis be
further improved if carriers indicated the parts of their coverage
areas in which they compete to offer new service and the parts that are
used only to provide coverage to traveling subscribers based in other
locations? Also, in what respect do infrastructure sharing agreements,
such as those between carriers along highways in low-population areas,
affect service availability in rural areas? Do such agreements
effectively increase the number of competitors in those areas? Do these
arrangements increase wireless usage in areas adjacent to such areas?
15. Mobile Data Deployment. The Commission also seeks comment on
deployment of next-generation network technologies such as 1X and GPRS,
which will bridge the gap between second and third generation
technologies. The Commission is particularly interested in changes that
have occurred in such deployment since the Eighth Report. For example,
in what portion of their license and network footprints have carriers
deployed these technologies, and what advanced wireless applications
are being offered using these technologies? Are the same types of
advanced services available in all areas, and in particular, does the
availability of advanced services vary between urban and rural areas?
Specifically, the Commission requests carriers to submit as part of
their comments the maps they employ to advertise their mobile data
coverage areas in brochures and on their web sites in a geo-referenced,
mapable format, such as MapInfo table (.tab), Tagged Image Format
(.TIF), or Shapefile (.shp) files including the type of mobile data
services being offered there. In the alternative, the Commission asks
carriers to provide a list of counties where they provide these mobile
data services.
16. Reliability of Data. The Commission's service availability
analysis relies on information reported by service providers, including
their news releases, filings with the Security and Exchange Commission
(SEC), web site coverage maps, and network buildout notifications filed
with the Commission. In addition, there are independent web sites and
public reports that include some information about service coverage and
dead zones. The Commission seeks comment on the advantages and
disadvantages to this approach, including the potential biases arising
from relying exclusively on data supplied by parties that may have a
financial interest in the use of such data as part of Commission
decisions. Since the Commission, in some cases, reports on information
supplied only by one or two sources, the Commission also seeks comment
on ways of obtaining independent verification of competition
information provided for the Ninth Report. Which independent sources
can be reliably used to verify carrier-supplied coverage information?
Do commenters believe such verification is necessary in analyzing
service availability and competition?
17. Resale Providers. Resellers offer service to consumers by
purchasing airtime at wholesale rates from facilities-based providers
and reselling it at retail prices. According to information provided to
the Commission in its ongoing local competition and broadband data
gathering program, the resale sector accounted for approximately 5
percent of all mobile telephone subscribers as of December 2002. To
what extent are resellers creating competitive pressures in the mobile
telephone sector? Who are the major resellers in the United Sates? How
many subscribers do they have? From the consumer's perspective, what
are the benefits of buying from a reseller versus a facilities-based
provider? Are resellers selling to specific demographic segments? The
Commission also seeks comment on the impact of the November 24, 2002
sunset of the CMRS resale rule on the extent and vigor of resale
activity. The Eighth Report discusses ``mobile virtual network
operators'' (MVNOs) as a type of reseller focusing on brand
development, with the intent to offer a niche product and to have
better customer retention. The Commission asks for comment on how this
resale model has affected the provision of resale services. The
Commission also asks for information about companies employing the MVNO
resale model since the Eighth Report.
18. Satellite Providers. Certain satellite services are by
definition CMRS. At least four satellite carriers currently provide
mobile satellite services (MSS) in the United States: Globalstar
Telecommunications LTD, Iridium Satellite LLC, Inmarsat Limited, and
Mobile Satellite Ventures. The Commission requests carriers to submit
as part of their comments information detailing the geographic areas of
the United States in which they provide coverage as well as those areas
in which they offer service to new customers. Taking into account such
information on MSS service availability, The Commission seeks comment
on the extent of competition among MSS providers. To what extent do MSS
providers compete with terrestrial-based mobile telecommunications
providers? Are MSS services substitutes for terrestrial-based mobile
voice and data services?
ii. Horizontal Concentration and Vertical Integration
19. Concentration measures based on output metrics, such as market
share of subscribers or revenues, are common tools used to assess
market structure. Previous CMRS reports have not provided concentration
measures, in part because of the difficulty in defining geographic
markets and limitations on available output data. Can the use of
concentration measures, such as the Herfindahl-Hirshman Index (HHI),
give additional insight into whether effective competition exists as
well as into whether a service provider has a dominant share of the
market? The Commission requests comment on whether concentration
measures should be included in the Ninth Report. Commenters who
recommend that the Commission include concentration measure(s) in the
Ninth Report are requested to provide comments on various concentration
measures and how these metrics may enhance its analysis of market
structure. The DOJ/FTC Guidelines provide HHI thresholds that indicate
concentrated markets. If HHIs are employed, what should constitute a
high degree of concentration for the mobile telecommunications market?
One
[[Page 22036]]
possible HHI threshold level would be those listed in the DOJ/FTC
merger guidelines. Are these appropriate to use when looking at whether
there is effective competition in the mobile telecommunications market?
20. One possible data source that could be used to calculate output
market concentration statistics is the Numbering Resource Utilization/
Forecast (NRUF) data that are submitted to the Commission on a rate
center basis. Rate center boundaries are much smaller than, and not
coextensive with, mobile telecommunications license boundaries such as
Cellular Market Areas (CMAs), Metropolitan Trading Areas (MTAs), or
Basic Trading Areas (BTAs). Due to their relatively small size, rate
centers are not necessarily indicative of where a mobile
telecommunications subscriber lives, works, or uses a mobile
telecommunications device. In addition, in order to protect the
confidentiality of the companies submitting NRUF data, the Commission
does not report the number of subscribers for geographic areas in which
there are three or fewer carriers.
21. If concentration measures are included in the Ninth Report,
given the caveats discussed above, are the NRUF data a reasonable proxy
for output in the mobile telecommunications market? Also, the
Commission seeks comment on how to determine which geographic area or
areas should be used to calculate mobile telecommunications
concentration measures. In particular, the Commission seeks comment on
the appropriateness of various geographic market delineations given the
limitations of the NRUF data.
22. In addition to the issue of horizontal concentration in the
relevant end-user service market, the Commission also seeks information
on the extent of, and the factors giving rise to, vertical integration
and disintegration in the CMRS industry. In other words, under what
circumstances and for what reasons do CMRS providers employ their own
inputs rather than purchasing them from outside vendors? The Commission
seeks comment and information on the vertical structure of the CMRS
industry. How prevalent is vertical integration or disintegration with
respect to the different elements of physical network infrastructure,
spectrum, and content, and are there any discernible trends toward
vertical integration or disintegration with respect to any of these
inputs? What considerations shape the decisions of CMRS providers to
make or buy their inputs? What is the actual or potential impact of
vertical integration or disintegration, if any, on competition among
providers of CMRS, the cost of providing service, or other aspects of
the performance of the CMRS industry?
iii. Consolidation and Exit
23. Consolidation and exit of service providers, whether through
secondary market transactions or bankruptcy, may affect the structure
of the mobile telecommunications market. For example, a reduction in
the number of service providers may increase the market power of any
given service provider which could lead to higher prices, fewer
services, and/or less innovation. The Commission seeks comment on the
effects of consolidation in the mobile telecommunications market. Are
the effects of consolidation different for mergers and acquisitions,
swaps, joint ventures, and bankruptcies? Has consolidation affected
mobile data services differently than mobile telephone services? Has
consolidation affected rural areas differently than urban areas? Among
the policies potentially affecting consolidation in this market, the
Commission eliminated, effective January 1, 2003 a rule limiting the
amount of spectrum a CMRS licensee could own or control in a given
licensed area. The Commission seeks comment on how consolidation of
spectrum and facilities has affected the mobile telecommunications
market structure since the sunset of the Commission's CMRS Spectrum
Aggregation Rule.
iv. Barriers to Entry
24. If entry into a market is easy, then entry or the threat of
entry may prevent incumbent operators from exercising market power,
either collectively or unilaterally, even in highly concentrated
markets. The ease or difficulty of entry generally depends on the
nature and significance of entry barriers. Barriers to entry in the
mobile telecommunications market may include first-mover advantages,
large sunk costs, and access to spectrum. The Commission seeks comment
on these and other types and level of barriers to entry in the mobile
telecommunications market. What are the most significant barriers to
entry in the mobile telecommunications market? Are barriers to entry
different in rural and urban areas?
25. Access to Spectrum. The Commission seeks comment on whether
there is access to sufficient spectrum, either through Commission
auctions or through secondary market transactions, to prevent spectrum
from becoming a significant barrier to entry in the CMRS industry. Are
existing service providers spectrum constrained? If so, in which
geographic markets are carriers most likely to be constrained? Have
these carriers become more spectrum constrained after rolling out next
generation services? Do potential entrants have sufficient
opportunities to access spectrum? As advanced wireless technologies
become more prevalent, will potential entrants have more or fewer
opportunities to access spectrum?
26. The Commission's recent action to facilitate leasing and other
transactions via secondary markets addressed the question of spectrum
access in a number of services. In the Secondary Markets R&O, 69 FR
5711, February 6, 2004 the Commission allowed licensees in the Wireless
Radio Services, including CMRS, to lease all or a portion of their
spectrum usage rights, for any length of time within the license term,
and over any geographic area encompassed by the license. The Commission
seeks comment on whether this new policy to facilitate spectrum
leasing, combined with future spectrum auctions such as that for
Advanced Wireless Services, will provide sufficient opportunities both
for existing carriers to expand their operations and for new mobile
telecommunications providers to enter the market. Are there other
barriers that limit access to spectrum?
27. The Commission requests comment from licensees and potential
spectrum lessees regarding their experience exploring possible spectrum
leases following Commission adoption of the Secondary Markets R&O. Are
licensees and potential spectrum lessees able to identify potential
spectrum leasing partners? What considerations are driving negotiations
regarding spectrum leases? Are there impediments to leasing, and if so,
what is the nature of these impediments? Are pricing considerations,
either the price sought by licensees or the amount the lessees are
willing to pay, acting as an impediment? Are there other
considerations, such as high transaction costs, that may affect the
willingness of either licensees or potential lessees to undertake
spectrum leasing negotiations? What types of leasing arrangements are
being sought by both licensees and potential spectrum lessees? Are the
spectrum leasing negotiations targeted at providing additional spectrum
to meet the needs of an existing licensee in the geographic area
encompassed by the lease, or aiding an existing licensee to fill out
its footprint, or providing spectrum access to a new entrant, or to
achieve some other objective?
[[Page 22037]]
28. Other Barriers to Entry. The Commission also seeks comment on
other market conditions that may present barriers to entry in the CMRS
market. For example, the Commission recognizes that cellular licensees,
like early entrants in other industries, have benefited from a first-
mover advantage. Do cellular licensees continue to benefit from this
advantage, and if so, to what extent and in which markets? In addition,
might access to capital create a barrier to entry in the mobile
telecommunications market? To what degree do mobile telecommunications
providers face capital market constraints in financing the purchase of
spectrum licenses, or the leasing of spectrum rights, or the
construction of facilities? Do the nationwide carriers face a different
capital market than do smaller regional and local providers? The
Commission seeks comment on the height of scale economy barriers in
mobile telecommunications. Finally, The Commission seeks comment on the
extent to which the ability to site cell towers in a carrier's licensed
market area creates a barrier to entry. Some carriers have reported
problems obtaining permission to site cell towers in certain geographic
markets. How widespread is this problem? Is this a greater problem in
certain regions of the country?
B. Carrier Conduct in the Mobile Telecommunications Market
29. Whether there is effective competition in the mobile
telecommunications market also depends on the conduct and interaction
of the carriers in the market. For example, while coordinated
interaction and unilateral effects may lessen competition, such conduct
may be averted by the presence of one or more carriers who have the
ability and incentive to expand sales by offering innovative service
packages, undercutting the prices of rivals, and/or engaging in
extensive advertising and promotional campaigns. The Commission asks
for information on the degree and extent of (i) price rivalry and (ii)
non-price rivalry. Are there other indicators related to carrier
conduct that the Commission should examine?
i. Price Rivalry
30. Past CMRS Reports examined new types of pricing plans in order
to report on major developments in the industry and to assess the new
plans' impact on competition. This information is relevant in
determining the intensity and degree of price rivalry in the mobile
telecommunications market. To what extent do new types of pricing plans
reflect price rivalry among the providers? What are the major
innovations that have occurred with pricing plans since the Eighth
Report? Have these pricing innovations spread throughout the mobile
telecommunications market or have they been limited to a subset of
carriers? In addition, The Commission seeks comment on the extent to
which carriers in their pricing plans differentiate between data
services offered over 2G networks and those offered over newer
generation technologies such as 1X and GPRS networks. Have past pricing
innovations been more widely adopted in the last year?
31. The Commission seeks information on which carriers offer
nationwide pricing plans, particularly those that are not typically
described as being nationwide operators, and request descriptions of
the terms of such plans. The Commission asks carriers that offer
nationwide pricing plans whether they offer the same rates and terms to
consumers throughout all parts of the country where they offer such
plans, including Alaska and Hawaii as well as the U.S. Territories.
Furthermore, do carriers charge different prices (monthly and per
minute) or offer different terms for their local and regional plans
across the various areas that they serve, for example, between rural
and urban areas? If so, are these geographic variations substantial,
and what are the major reasons for such variations? If there are no
geographic variations, why not?
32. Are there patterns where certain demographic groups subscribe
to similar pricing plans? For example, do subscribers with lower
personal or household incomes tend to purchase local or regional plans
rather than national plans? Are particular plans associated with
teenagers, college students or seniors? Are prepaid services used by a
group of consumers with similar characteristics? Also, the Commission
seeks information on the existence and the extent of contracts with
terms and prices other than those that are widely advertised. Are these
types of contracts associated with or targeted to a certain type of
demographic group? Do consumers that use specific types of mobile
telecommunication services such as mobile data services have similar
demographic characteristics? Have the introduction of new types of
pricing plans increased mobile telephone penetration among specific
demographic groups or in certain geographic areas?
ii. Non-Price Rivalry
33. Service providers in the mobile telecommunications market also
compete on non-price characteristics such as coverage, quality of
service, and ancillary services. Non-price competition is a response to
consumer preferences and demand. Indicators of non-price rivalry
include advertising and marketing, capital expenditures, technology
deployment and upgrades, and the provision of ancillary services. The
Commission seeks information on non-price rivalry.
34. Advertising and Marketing. Firms may engage in advertising and
marketing either to inform consumers of available products or services
or to increase sales by changing consumer preferences. Mobile
telecommunications service is an ``experience good,'' and in general,
advertising for an experience good tends to be persuasive rather than
informational in nature. What type of advertising do mobile
telecommunications carriers engage in? Do they utilize promotional or
informational advertising or a mix of both? Does the type of
advertising vary with the medium? Are there studies on the national or
sub-national level that provide data and/or analysis of advertising by
mobile telecommunications firms? The Commission also seeks comment on
the extent to which CMRS providers' efforts to brand their services
through advertising and marketing cultivate brand loyalty.
35. Capital Expenditures. Capital expenditures are funds spent
during a particular period to acquire or improve long-term assets such
as property, plant, or equipment. In the mobile telecommunications
market, capital expenditures consist primarily of spending to expand
and improve the geographic coverage of networks, to increase the
capacity of existing networks to serve more customers, and to improve
the capabilities of networks (by allowing for higher transmission
speeds, for example). Have capital expenditures by mobile
telecommunications providers increased or decreased since the Eighth
Report? What are the underlying reasons for the change? Are there any
studies or analyst reports on the capital expenditures of nationwide
carriers versus regional/local providers? Does data exist on capital
expenditures by geographic region?
36. Technology Deployment and Upgrades. Mobile telecommunications
carriers have been deploying next-generation network technologies,
which offer mobile data services at higher data
[[Page 22038]]
transfer speeds than earlier versions. The Eighth Report discussed the
progress of nationwide and regional carriers in deploying these
technologies. For the Ninth Report, the Commission requests information
on the extent to which mobile telecommunications carriers are
continuing to upgrade, or plan to upgrade their networks to these
advanced services and/or even more advanced technologies--such as EDGE,
WCDMA, and 1xEV-DO. Specifically, do carriers plan to deploy more
advanced technologies? If yes, how extensively are carriers planning
these deployments to be (e.g., will carriers focus on urban areas only,
or will they deploy these technologies in rural areas as well)? With
regard to GSM-based carriers, the Commission asks whether carriers are
planning to upgrade their GPRS systems. If yes, are they planning to
upgrade to EDGE, WCDMA or some other technology? With regard to CDMA-
based carriers, to what extent are they planning to upgrade their
networks to include 1xEV-DO technology? Are there other new wireless
technologies that will improve wireless providers' coverage, capacity
and/or service offerings for mobile telecommunication services?
37. As discussed in the Eighth Report, most of the major mobile
telecommunications carriers have introduced the capability to exchange
text messages with subscribers on other carriers' networks. The
Commission seeks information on the extent to which this intercarrier
interoperability has affected Short Messaging Service (SMS) adoption
rates.
38. The Commission requests information on the number of users of
SMS and the volume of SMS traffic. In addition, the Commission requests
comment as to the actual data transfer speeds that are being
experienced with GPRS and 1X systems (as well as EDGE and 1xEV-DO
systems, where those technologies have been deployed) and the degree to
which individual users' data speeds vary with the number of subscribers
concurrently operating on these systems within a given area.
39. There are a growing number of service providers that offer
data-only services. These providers include traditional one-way paging
service providers as well as two-way, data-only service providers. For
example, as discussed in the Eighth Report, Monet Mobile offers data-
only service using CDMA1xEV-DO technology and broadband PCS spectrum.
Two other carriers, Cingular Wireless and Motient Corp. operate two-way
data networks using the 900 MHz SMR and 800 MHz SMR spectrum bands,
respectively. The Commission asks for information on carriers providing
one-way and two-way data-only services, including deployment,
technology employed, data speeds, pricing, number of subscribers and
usage.
40. The Commission asks for comment on new or enhanced mobile data
services and devices that have been introduced since the Eighth Report
such as new or enhanced location-based services, games, digital photo
and video technologies, and downloadable music. To what extent do
providers bundle different mobile data services with each other and/or
with voice service? The Commission asks for information on the types of
devices upon which these services are offered; how they are priced
(e.g., bundled or stand-alone, bulk or per usage); where the services
are available; and the usage and subscribership levels?
41. The Commission also asks for comment on the availability of
mobile Internet services. Do providers offer mobile Internet services
throughout their entire licensed service areas, or only in areas that
have been upgraded to next generation technologies, such as GPRS and
1X? Which types of devices are used most for mobile Internet access? Do
any of the features of mobile data devices--such as battery life, data
storage capacity, and screen size--constrain the ability of users to
access mobile Internet services, and therefore limit the demand for
these services? To what extent are users of wireless high-speed
Internet access services getting this access through mobile and
portable computing devices using Wi-Fi and similar technologies? How
does such use, whether on a subscription or non-subscription basis,
compare to Internet access services using licensed spectrum? To the
extent that mobile service providers are integrating Wi-Fi technology
into their devices, how is this affecting the use of mobile Internet
services? In how many locations is Wi-Fi and similar technologies
currently available and in which types of locations do most users
establish high-speed connections to the Internet (e.g., airports,
coffee shops, community networking)? Are those locations part of a
retail or wholesale network, or independent stand-alone locations? What
data transfer speeds do most users experience with the various
unlicensed technologies and other standards? How are subscription-based
offerings priced to consumers? Is service offered as part of a bundled
package, an add-on or as a stand-alone product? Are voice services
available using these connections and if so, by whom, where and how are
they priced?
42. Provision of Ancillary Services and Promotional Offers. Mobile
telecommunications providers offer ancillary services and promotions
such as caller ID, voice mail, call forwarding, long distance, push-to-
talk, free or reduced priced handsets, and free night and weekend
minutes. The cost of these services is either included in the monthly
charge or billed separately. Carriers use ancillary services and
promotional offers to differentiate their products from those of their
competitors. They compete not only in terms of the monthly charge, but
also with the price and scope of ancillary services and promotions. The
Commission seeks comment on whether carriers offer different ancillary
services or promotional products and services in different geographic
markets. What are these differences and why do they occur?
iii. Absence of Coordinated Interaction and Unilateral Effects
43. Anti-competitive outcomes may result from two distinct types of
firm conduct--coordinated interaction (both tacit and explicit
collusion) among two or more competitors, or the unilateral actions of
a single firm. In order to fully evaluate carrier conduct in the mobile
telecommunications market, the Commission seeks comments on the
potential for and likelihood of coordinated interaction and unilateral
effects. Are coordinated effects likely in the mobile
telecommunications market? If so, why? Do conditions in the mobile
telecommunications market make unilateral price increases or other non-
price unilateral effects likely? Also, the Commission seeks comment on
any instances of potential coordinated interaction or unilateral
effects in the United States' mobile telecommunications market.
iv. Consumer Behavior in the Mobile Telecommunications Market
44. The ability and inclination of consumers to purchase a product
or service or to change firms may influence market structure, carrier
conduct, and market performance. When initially purchasing a product or
service or changing providers, consumers may incur transactions costs
in doing so. These transactions costs may in some instances make the
initial purchase or subsequent switching of firms prohibitively
expensive. The level of these costs may affect concentration measures,
marketing and advertising, pricing plans, and penetration rates, among
other metrics. Therefore, for the Ninth Report, the Commission intends
to analyze and collect information on
[[Page 22039]]
these consumer costs as they relate to the market structure, firm
conduct, and market performance.
v. Access to Information on Mobile Telecommunications Services
45. It is apparent that wireless consumers are demanding more
information on the availability and quality of mobile
telecommunications services, and that numerous third parties have been
responding to this demand by compiling and reporting such information.
There are considerable sources of information available to consumers,
including publications such as Consumer Reports, trade associations,
marketing and consulting firms, and several Web sites dedicated to
giving consumers an overview and comparison of the mobile telephone
services available in their area. The Commission seeks comment on the
development of consumer information sources for the mobile
telecommunications market. Are there new avenues for consumers to gain
information, such as retailers providing on-line and in-store
comparisons of pricing plans, services, and handsets? Also, are
consumers demanding information on mobile data services such as SMS,
email, and Internet access? If so, are any sources providing consumers
with this information?
vi. Consumer Ability to Switch Service Providers
46. Churn. The Commission seeks comment on the use of churn rates
as a tool in its analysis of consumer behavior in the mobile
telecommunications market. Churn refers to the number of customers an
operator loses over a given period of time. Carriers may calculate
churn using different methodologies. For example, when a customer moves
from New York to Los Angeles, changes numbers but keeps the same
provider, do any companies count this as churn? When a customer's
service contract expires and the customer signs up for a new plan with
the same provider, do any companies count this as churn? The Commission
asks carriers to submit descriptions of how they calculate churn. Do
the differences in how churn is calculated prohibit a meaningful
comparison of churn figures across the wireless industry? In the Eighth
Report, the Commission found that most carriers report company-wide
churn rates between 1.5 and 3 percent per month. How reliable are these
churn estimates? Are there other sources of churn data available that
should be included in the Ninth Report? Further, the Commission seeks
sub-national or regional churn data, and churn data by demographic
groups.
47. The Commission noted in the Eighth Report that customers have
consistently indicated cost and network quality as the main reasons for
changing providers. Have the reasons consumers churn remained the same?
If not, what are the reasons for consumer churn? The Commission also
found that average monthly churn rates for mobile telephone service
have remained fairly constant over the past three years. Since the
Eighth Report, has there been a change in the churn rate? If there has
been a change, what is the magnitude of this change?
48. Local Number Portability. As of November 24, 2003, wireless
carriers in the top 100 markets were required to permit subscribers to
take their phone numbers with them to a new carrier in the same market
area. This process, called local number portability (LNP), is expected
to make it easier for wireless subscribers to change carriers by
eliminating some of the cost and inconvenience of having to change
their phone numbers whenever they change to a different wireless
carrier. Having to change to a new telephone number upon subscribing to
a new wireless service provider can involve both direct and indirect
switching costs. The wireless subscriber may have to change business
cards and stationery, and must give the new number by whom he or she
wishes to be reached in the future. Such costs make some subscribers
more reluctant to switch carriers. The LNP requirement will expand
beyond the top 100 markets beginning in May 2004 as wireless carriers
in those markets make formal requests to other wireless carriers to
provide this capability. The Commission seeks comment on the effects of
LNP on wireless competition and consumer behavior. Has wireless LNP
caused wireless carriers to offer new services or features or to adjust
their pricing strategies, either to attract new customers interested in
porting their numbers from competing carriers or to induce their
existing customers to stay? Has LNP affected wireless customer churn
rates in the top 100 markets? If so, has the effect been significant?
C. Mobile Telecommunications Market Performance
49. The structural and behavioral characteristics of a competitive
market identified above are desirable not as ends in themselves, but
rather as a means of bringing tangible benefits to consumers such as
lower prices, higher quality, and greater choice of services. Such
consumer outcomes are the ultimate test of effective competition. In
order to determine if these goals are met and whether there is still
effective competition in the market, the Commission intends to analyze
various metrics including pricing levels and trends, subscriber growth
and penetration, Minutes of Use (MOU), innovation and diffusion of
services, and quality of service. Are there any other metrics that
would add to its analysis of the mobile telecommunications market? Are
these metrics available on a national or sub-national level?
i. Pricing Levels and Trends
50. Pricing Trends. The Eighth Report contained pricing data from a
variety of sources, all of which indicated that the average price of
mobile telephone service has been decreasing over time. The Eighth
Report cited information from the United States Department of Labor's
Bureau of Labor Statistics (BLS), Econ One, and trends based on CTIA
data. BLS began reporting a cellular telephone component of the
Consumer Price Index (CPI) in December 1997 (cellular CPI). In
addition, using CTIA data, the Commission calculated a national average
Revenue per Minute (RPM) by dividing the Average Revenue per Unit
(ARPU) by MOUs. The Commission used this RPM figure as an estimate of
the average price per minute of mobile telephone service. In contrast
to the Commission's estimate of RPM and BLS's cellular CPI, which
attempt to capture national pricing trends, Econ One analyzes pricing
plans for the top 25 United States' cities. The firm also calculates
the average price of service across four different monthly usage levels
and derives an average for all users.
51. The Commission seeks comment on the use of these various
pricing estimates as a tool in its analysis of the mobile
telecommunications market, including to what extent price decreases are
evidence of effective competition. The Commission asks for feedback on
the sources of the pricing data used in the Eighth Report and request
additional national and sub-national pricing data for the Ninth Report.
Are there additional analyses that can be performed or conclusions that
can be drawn from new or existing pricing data? The Commission also
seeks comment on pricing trends for mobile data services offered by
mobile telecommunications providers. Are there data on these services
available on a national or sub-national level? Have prices of mobile
data services fallen since their introduction? Are most data pricing
plans based on the amount of
[[Page 22040]]
minutes used, or do they offer a flat rate for unlimited use? How are
new or enhanced mobile data services such as location-based services,
games, digital photos and downloadable music priced? Are there any
reports or analyses that discuss pricing trends of mobile data
services?
52. Pricing in Rural Areas. The Commission has identified a study
by Econ One that compares mobile telephone pricing in urban versus
rural areas. Are commenters aware of other pricing studies that look at
urban versus rural or other sub-national mobile telecommunications
pricing? Econ One completed a study that compared pricing in the 25
largest United States' cities (with an average population of 4.4
million) with 25 randomly-selected towns or cities (with an average
population of 95,611) located in RSAs. The Commission asks for
additional information on whether there are meaningful pricing
differences between urban and rural areas. To the extent that such
differences exist, what are the reasons for such differences? Should
additional analyses on the differences between urban and rural mobile
telecommunications pricing be performed? What additional conclusions
can be drawn, and what are the limitations of those conclusions?
53. Given the scarcity of studies that provide direct information
on pricing, the Commission is interested in finding alternative ways of
determining whether pricing in rural areas conform to national pricing
plans. Are there other ways of studying this issue? Can an economic
model be constructed that provides answers to this question in the
absence of direct data on rural pricing? Are there existing studies or
data sets that would give us the ability to explore this issue?
54. Cost. Since price changes may reflect corresponding changes in
underlying costs rather than a change in the competitive environment,
pricing data and trends can be a misleading indicator of the status of
competition. One way to evaluate the connection between prices and
costs is the Price-Cost margin. In theory, a relatively narrow Price-
Cost margin would be an indicator of effective competition. The
Commission invites comments on the use of the Price-Cost margin to
analyze the connection between prices and costs in the mobile
telecommunications market. Are there other measures that the Commission
should consider in evaluating the relationship between prices and costs
in the mobile telecommunications market?
55. One possible estimate for the price component of the Price-Cost
margin is RPM. The Commission seeks comment on the use of RPM as a
proxy for pricing of mobile telecommunications services for the purpose
of estimating the Price-Cost margin. The Commission also invites
suggestions on alternative pricing metrics and sources of associated
data that could be used for the purpose of providing a price-cost
comparison. The Commission asks for submissions of RPM estimates for
mobile data services or for mobile voice and data services combined.
56. Available cost studies for the mobile voice market that the
Commission has identified focus narrowly on estimating the cost of
terminating calls on mobile networks. If, as one study concludes, there
are no significant cost differences between origination and termination
of calls on a mobile network in terms of network elements used, then
estimates of the cost of mobile call termination could be used to
approximate the network costs of mobile voice services; however, since
call termination is a wholesale activity, estimates of the cost of call
termination generally do not include certain non-network retailing
costs such as customer billing costs and advertising and marketing
expenses. The Commission seeks comment on the adjustments that should
be made to the network cost estimates to take into account non-network
costs. Does the provision of mobile data services affect network and
non-network costs, and, if so, how? The Commission also invites
estimates of the impact of the deployment of next generation advanced
technologies on the per-minute cost of mobile telecommunications
traffic.
57. Roaming. The Commission also seeks data on the availability of
roaming for wireless customers. To what extent do carriers have
agreements that enable their customers to use automatic roaming
throughout the United States? Are there geographic areas in which some
carriers do not have automatic roaming agreements? If so, where are
those areas and is there any correlation to the number of wireless
providers operating in those areas? Are rural customers more affected
than non-rural customers? How many customers use manual roaming? Where
are those customers located when they use manual roaming, and how
frequent is their usage? How has the deployment of mobile data services
affected the provision of roaming service? Are consumers able to access
mobile data services when roaming?
58. Average Revenue Per Unit. Average monthly revenue per
subscriber is another key metric presented in past CMRS Reports. One
source of this metric is the industry-wide ARPU figure reported by CTIA
in its semi-annual mobile telephone survey. In addition, many carriers
report their individual ARPU figures periodically in their SEC filings.
The Commission seeks comment on the use of ARPU as a metric in its
analysis of the mobile telecommunications industry. Are additional ARPU
data available that should be considered, in particular data depicting
whether and how ARPU varies by region and/or demographic group? Are
there additional analyses that can be performed or conclusions that can
be drawn in the Ninth Report from new or existing data?
59. CTIA reported that ARPU declined almost continuously from 1987
to 1998, going from a peak of $98.02 in December 1988 to a low of
$39.43 in December 1998. However, since 1999, ARPU has been increasing,
rising to $48.40 in December 2002. The Eighth Report stated that the
growth in ARPU might be the result of a variety of factors, including
increased usage offsetting per-minute price declines, as well as the
selection of higher-priced monthly calling plans by consumers. The
Commission requests from commenters additional input on the possible
causes for the recent rise in ARPU, as well as additional data that may
support various hypotheses. What role, if any, do changes in ARPU have
on competition?
ii. Quantity of Services Purchased
60. Subscriber Growth. Since the Seventh Report, (information not
published in the Federal Register), the Commission has estimated the
number of United States' subscribers using NRUF data. The Commission
estimates the total number of mobile telephone subscribers by using
assigned telephone numbers in the NRUF data as a proxy for subscribers.
In the Eighth Report, the Commission estimated that there were 141.8
million subscribers in the United States as of December 31, 2002. NRUF
data, however, do not include information on the actual subscribers.
Therefore, the Commission requests information on subscribers that
would assist in a greater understanding of the mobile
telecommunications inventory, such as penetration rates by age groups
and/or household penetration rates.
61. Prior to the Seventh Report, the Commission relied on estimated
national subscribership data from a semi-annual survey, started in
1985, conducted by CTIA. The CTIA estimate for December 31, 2002 was
140.8 million subscribers, less than a 1.0% difference from the
Commission's NRUF estimate. The Commission had reported
[[Page 22041]]
CTIA's semi-annual estimates in order to present time series
information on subscribership growth. The Commission asks for comment
whether to continue to present these data.
62. Sub-National Penetration Rates. For purposes of the Eighth
Report, the Commission chose to use EAs as the geographic unit for its
sub-national subscribership analysis using NRUF data. EAs, which are
defined by the United States Department of Commerce, consist of one or
more economic nodes and the surrounding areas that are economically
related to the node. The main factor in determining the economic
relationship between the economic node(s) and the surrounding areas is
commuting patterns, so that each EA includes, as far as possible, the
place of work and the place of residence of its labor force. While
wireless carriers have considerable discretion in how they assign
telephone numbers across the rate centers in their operating areas,
they generally assign numbers to subscribers from rate centers in the
same EAs in which the subscribers live.
63. The Commission asks for comment on how to determine which
geographic area or areas should be used to calculate mobile
telecommunications subscribership and penetration rates for the Ninth
Report. The Commission requests comment on the appropriateness of using
EAs for such calculations. Would other geographic areas be appropriate
to use in place of or in addition to EAs, such as states, MTAs, BTAs,
CMAs, or counties, noting the limitations of the NRUF data? In
addition, are there other ways to interpret existing national and sub-
national subscribership data for purposes of the Ninth Report? Also,
are there data on either a national or sub-national basis on the number
of mobile telecommunications customers that use mobile data services?
64. Minutes of Use. To analyze mobile telecommunications usage, the
Commission has used MOUs as a key metric in previous CMRS Reports. The
Eighth Report includes MOU estimates from CTIA, Paul Kagan and
Associates, and J.D. Powers & Associates. All of these sources showed
MOUs increasing substantially during 2001. The Commission seeks comment
on the use of MOUs as an indicator of the demand for mobile
telecommunications services. For purposes of the Ninth Report, the
Commission asks for comment on the sources of the MOU data presented in
the Eighth Report and request additional MOU data. In addition, should
the Commission perform other analyses or draw additional conclusions
from new or existing data? All of the MOU sources presented in the
Eighth Report estimate MOUs on a national basis. In order to increase
the granularity of its analysis for the Ninth Report, the Commission
requests data on MOUs on a sub-national basis and/or broken down by
various demographic groups.
iii. Variety, Innovation, and Diffusion of Service Offerings
65. The Commission observed in the Eighth Report that the continued
rollout of differentiated service offerings indicated a competitive
marketplace. In the mobile telephone sector, the Commission is able to
observe independent pricing behavior, in the form of continued
experimentation with varying pricing levels and structures, for varying
service packages, with various available handsets and policies on
handset pricing. AT&T Wireless's Digital One Rate (DOR) plan,
introduced in May 1998, is one notable example of an independent
pricing action that altered the market and benefited consumers. Today,
all of the nationwide operators offer some version of DOR pricing plan
in which customers can purchase a bucket of minutes to use on a
nationwide or nearly nationwide network without incurring roaming or
long distance charges. Another trend in mobile telephone pricing has
been the introduction of on-network, or ``on-net,'' national pricing
plans. These plans are similar to DOR plans, with the exception that
subscribers incur roaming charges when they use their phones off the
carrier's network (off-net). In addition, some mobile wireless carriers
offer service plans designed to compete directly with wireline local
telephone service. As reported in the Eighth Report, the largest of
such providers, Leap, under its ``Cricket'' brand, offers mobile
telephone service in 40 markets in 20 states. Leap's service allows
subscribers to make unlimited local calls and receive calls from
anywhere for about $30 per month. Since the Eighth Report, have
providers introduced new pricing plans and/or services to differentiate
themselves? What other sorts of plans are being used to distinguish
service providers and/or serve particular market segments?
iv. Quality of Service
66. In addition to competing on price, in a competitive market
firms also compete on the basis of service quality. Mobile
telecommunications service is an experience good, and therefore the
quality of the product is unknown until the consumer actually uses it.
Further, service quality in this market is dependent on when and where
the service is used. The Commission found in the Eighth Report that
carriers have been aggressively building and upgrading their networks
with digital technology. This has resulted in improved voice quality
and additional calling features to consumers, as well as higher
capacity for operators, thereby allowing more customers to access the
network and use their phones at the same time. However, some reports
indicate that consumers perceive that there is a problem with service
quality. Service quality issues may be a result of market structure or
carrier conduct. In some cases, however, service quality issues may be
due to factors that are not under a firm's control or influence.
67. In order to analyze quality of service in the mobile
telecommunications market, specific service problems need to be
identified. However, information on service issues--whether from
consumer surveys, marketing reports, or other sources--generally convey
only what the existing problems are and do not in themselves indicate
non-competitive behavior. Quality of service data must be analyzed
along with the metrics for market structure, carrier conduct, consumer
behavior, and market performance in order to evaluate the underlying
causes, their significance, and whether the current level of service
quality has an impact on competition in the market.
68. The Commission seeks comment on service quality in the mobile
telecommunications market. Does objective data on quality of service
exist? Are there any consumer surveys on service quality in the mobile
telecommunications market? How reliable are the data collected from
these consumer surveys? Also, what other sources provide information on
service quality in the mobile telecommunications market, and how
reliable are these sources? How do market structure and carrier conduct
affect service quality? Are there other metrics that should be used to
analyze service quality as it relates to competitive behavior? In
addition, The Commission seeks comment on whether LNP affects the
quality of services offered by wireless telecommunication providers.
v. Wireless--Wireline Competition
69. In the Eighth Report, the Commission noted that there is
evidence that consumers are substituting wireless service for
traditional wireline communications. However, it appears that only a
small percent of wireless customers use their wireless phones as their
only phone, and that relatively few wireless
[[Page 22042]]
customers have ``cut the cord'' in the sense of canceling their
subscription to wireline telephone service. The Eighth Report also
discussed the effects of mobile telephone service on the operational
and financial results of companies that offer wireline services. Such
effects include a decrease in the number of residential access lines, a
drop in long distance revenues, and a decline in payphone profits. More
recently, the Commission has affirmed that the LNP rules that went into
effect on November 24, 2003 require ``intermodal'' number porting
between wireline and wireless carriers, thus enabling a wireline
customer to port his or her telephone number to a wireless carrier
serving the customer's local calling area. Given these developments,
the Commission asks for comment on the extent to which mobile telephone
service competes with wireline service. Has the introduction of
intermodal LNP affected consumer behavior or had any impact on
wireless-wireline competition? Are there any other new developments in
wireless-wireline competition that have occurred since the Eighth
Report? What are the major reasons for these developments? What effect
have they had on the provision of telecommunications services other
than wireless?
70. In order to track and analyze competition between mobile
telecommunications and wireline services more effectively, the
Commission requests data on: (i) The number of mobile
telecommunications subscribers who do not subscribe to residential
wireline service; (ii) the percentage of consumers' total monthly voice
communication minutes that are made from mobile phones; (iii) the
percentage of consumers' total monthly long distance minutes that are
made from mobile phones; (iv) the percentage of mobile
telecommunications subscribers' calls and minutes that occur in their
homes using their mobile phones; (v) the percentage of both mobile
telecommunications and wireline calls and minutes that terminate on
mobile phones; and (vi) demographic data on which groups of consumers
have allocated a substantial portion of their voice communications to
mobile telecommunications service. Should the Commission gather
additional data, perform additional analyses, or draw new conclusions
on wireless-wireline competition?
D. International Comparisons of Mobile Telecommunications
71. The Eighth Report compared the mobile telephone sectors in the
United States, Western Europe, and parts of the Asia-Pacific by
examining a number of performance measures, including penetration
levels, subscriber growth, MOUs, and pricing. The scope of
international comparisons in the Eighth Report and previous CMRS
Reports has been constrained by the availability of comparable
international data. For the purposes of the Ninth Report, The
Commission seeks data to update and possibly expand upon these
international comparisons. The international comparisons in the Eighth
Report were based on various sources of data that were generally
current as of the second half of 2002. The Commission requests
suggestions on sources of data for updating international comparisons
of penetration levels, subscriber growth, and usage for the year 2003.
The Commission also invites suggestions on additional performance
measures and associated data sources for comparing mobile
telecommunications sectors in the United States and other countries.
III. Procedural Matters
A. Ex Parte Presentations
72. This is an exempt proceeding in which ex parte presentations
are permitted (except during the Sunshine Agenda period) and need not
be disclosed.
B. Filing of Comments and Reply Comments
73. The Commission invites comment on the issues and questions set
forth above. Pursuant to Sec. Sec. 1.415 and 1.419 of the Commission's
rules, 47 CFR 1.415, 1.419, interested parties may file comments on or
before April 26, 2004, and reply comments on or before May 10, 2004.
Comments may be filed using the Commission's Electronic Comment Filing
System (ECFS) or by filing paper copies. See Electronic Filing of
Documents in Rulemaking Proceedings, 63 FR 24121, May 1, 1998.
74. Comments filed through the ECFS can be sent as an electronic
file via the Internet to http://www.fcc.gov/e-file/ecfs.html.
Generally, only one copy of an electronic submission must be filed. If
multiple docket or rulemaking numbers appear in the caption of this
proceeding, however, commenters must transmit one electronic copy of
the comments to each docket or rulemaking number referenced in the
caption. In completing the transmittal screen, commenters should
include their full name, United States Postal Service mailing address,
and the applicable docket or rulemaking number. Parties may also submit
an electronic comment by Internet email. To get filing instructions for
email comments, commenters should send an e-mail to ecfs@fcc.gov, and
should include the following words in the body of the message: ``get
form.'' A sample form and directions will be sent in reply. Parties who
choose to file by paper must file an original and four (4) copies of
each filing. Parties choosing to submit, as part of their comments, map
files in response to requests in ]] 13 through 14, ], supra, should
submit a CD (compact disc) containing one copy of the maps of their
service areas, with the various distinctions described above, in one of
the following formats: MapInfo table (.tab), Tagged Image Format
(.TIF), or Shaped file (.shp). If you have questions about submitting
map files, please contact Benjamin Freeman at (202) 418-0628. Paper
filings and CDs containing map files can be sent by hand or messenger
delivery, by commercial overnight courier, or by first-class or
overnight United States Postal Service mail. The Commission's
contractor, Natek, Inc., will receive hand-delivered or messenger-
delivered paper filings for the Commission's Secretary at 236
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be
held together with rubber bands or fasteners. Any envelopes must be
disposed of before entering the building. Commercial overnight mail
(other than United States Postal Service Express Mail and Priority
Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD
20743. United States Postal Service first-class mail, Express Mail, and
Priority Mail should be addressed to 445 12th Street, SW., Washington,
DC 20554. All filings must be addressed to the Commission's Secretary,
Office of the Secretary, Federal Communications Commission. Parties
also should send four (4) paper copies of their filings to Rachel
Kazan, Federal Communications Commission, Room 6126, 445 12th Street,
SW., Washington, DC 20554.
IV. Ordering Clauses
75. Accordingly, it is ordered that, pursuant to the authority
contained in sections 4(i), 4(j), and 403 of the Communications Act of
1934, as amended, the Notice of Inquiry is adopted.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 04-9295 Filed 4-22-04; 8:45 am]
BILLING CODE 6712-01-P