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Report to the Honorable
Anthony D. Weiner, House of Representatives:
April 2003:
Telecommunications:
FCC Should Include Call Quality in Its Annual Report on Competition in
Mobile Phone Services:
GAO-03-501:
GAO Highlights:
Highlights of GAO-03-501, a report to the Honorable Anthony D. Weiner,
House of Representatives
Why GAO Did This Study:
Over the past decade, Americans have come to rely increasingly on
mobile phones to meet their business and personal needs. However,
because of the nature of radio transmission and other constraints,
consumers are not always able to complete calls or to hear their calls
clearly. As reliance on mobile phones has increased, state officials,
consumer groups, the media, and others have raised concerns about the
extent of call quality problems. With regard to call quality, GAO
agreed to describe the regulatory framework; determine the extent to
which consumers are experiencing problems; and discuss actions for
improving call quality suggested by interested parties.
What GAO Found:
In establishing a regulatory framework for mobile phone services, the
Congress directed the Federal Communications Commission (FCC) to
encourage competition among carriers. FCC believes that competition
enables consumers to choose carriers that offer a desired level of
call quality and that regulatory action establishing a minimum level of
call quality would not be beneficial in a competitive environment. The
Congress requires FCC to report annually on whether or not there is
effective competition in mobile phone services. While call quality has
been identified as a factor that affects consumers’ choices of a
carrier, FCC does not discuss call quality in this report.
To assess the extent to which consumers are experiencing call quality
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 industrywide call quality standards for all
consumers. However, some of the suggested actions could drive up the
price of service, limit the entry of new carriers, or lead to a
reduction of service in regions that are technically difficult or
costly to serve. The carriers themselves say that they are taking
actions to improve call quality and further regulation is not needed.
What GAO Recommends:
GAO recommends that FCC include call quality in its mandated annual
report analyzing whether there is effective competition in the market
for mobile phone services. Including call quality in this analysis
would provide an ongoing record to help FCC and the Congress determine
whether market competition is sufficient to ensure that carriers are
meeting consumers’ expectations and desires regarding call quality or
whether further regulatory action is needed. In response, FCC stated
that to, the extent possible, it plans to include information related
to call quality in its future annual reports on competition in mobile
phone services.
www.gao.gov/cgi-bin/getrpt?GAO-03-501.
To view the full report, including the scope
and methodology, click on the link above.
For more information, contact William B. Shear at (202) 512-4325 or
shearw@gao.gov.
[End of section]
Letter:
Results in Brief:
Background:
Under the Regulatory Framework for the Mobile Phone Industry, FCC
Relies on Competitive Market Forces to Determine Call Quality and Has
Not Set Specific Quality Standards:
Concerns Have Been Raised, but Available Data Are Inconclusive on
Extent of Call Quality Problems:
Interested Parties Have Suggested Actions for Improving Call Quality:
Conclusions:
Recommendation for Executive Action:
Agency Comments:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: Results of Consumer Survey on Mobile Phone Service:
Appendix III: FCC Fact Sheet on Mobile Phone Service:
Appendix IV: Comments from the Federal Communications Commission:
Appendix V: Key Contacts and Major Contributors:
GAO Contacts:
Staff Acknowledgments:
Tables :
Table 1: Consumer Complaints about Mobile Phone Service Filed with the
California Public Utilities Commission, 1999-2002:
Table 2: Mobile Phone Call Quality Problems Based on November 2002
Consumer Survey:
Figures:
Figure 1: Key Components of a Mobile Phone System:
Figure 2: Estimated Average Number of Minutes of Mobile Phone
Service Used Per Month in the United States, 1997-2002:
Figure 3: Common Call Quality Problems Associated with Mobile
Phones:
Figure 4: U. S. Market Shares and Annualized Turnover Rates for
Mobile Phone Service Carriers, Third Quarter, 2002:
Figure 5: FCC Mobile Phone Consumer Complaints by Category,
2002:
Figure 6: Overall Customer Satisfaction with Call Quality,
November 2002 Consumer Survey:
Abbreviations:
CDMA: code division multiple access:
CTIA: Cellular Telecommunications & Internet Association:
FCC: Federal Communications Commission:
FTC: Federal Trade Commission:
GSM: global system for mobile communications:
MHz: megahertz:
NARUC: National Association of Regulatory Utility Commissioners:
OFTEL: Office of Telecommunications:
TDMA: time division multiple access:
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Letter April 28, 2003:
The Honorable Anthony D. Weiner
House of Representatives:
Dear Mr. Weiner:
Over the past decade, mobile phone service has gone from being a luxury
item to an everyday part of life.[Footnote 1] In 2002, over 140 million
Americans had mobile phone service, and these customers used about 55.5
billion minutes of mobile phone service a month.[Footnote 2] As the
public has come to rely more on mobile phones for its business and
personal needs, concerns have been raised by state officials, consumer
groups, the media, and others about call quality--the ability to make
and complete calls with good sound quality.
You asked us to examine several issues related to the regulation and
assessment of mobile phone call quality. We agreed to (1) describe the
regulatory framework that exists regarding mobile phone call quality,
(2) determine the extent to which consumers are experiencing call
quality problems, and (3) discuss actions for improving call quality
suggested by interested parties.
To meet these objectives, we reviewed laws and regulations governing
the mobile phone industry. At the federal level, we spoke to officials
at the Federal Communications Commission (FCC)--the agency that
oversees the mobile phone industry--regarding their views on the
regulatory framework; the extent of problems with call quality,
including consumer complaints; and potential actions to improve call
quality. We contacted state public utility commissions to determine how
they regulate mobile phone service in their states. Thirty-three states
provided information. We also spoke to officials in attorney general
offices and/or public utility commissions in California, New York,
Illinois, Massachusetts, Nebraska, New Jersey, and Texas. To obtain
data on call quality and other information, we contacted officials at
the six largest national mobile phone service carriers: AT&T Wireless
Services, Inc. (AT&T Wireless); Cingular Wireless, LLC (Cingular);
Nextel Communications, Inc. (Nextel); Sprint PCS; T-Mobile USA, Inc.
(T-Mobile USA, formerly VoiceStream); and Verizon Wireless, LLC
(Verizon Wireless). We also contacted officials at other firms--
Telephia, Inc.; LCC International, Inc.; and Scoreboard--that collect
network data. In addition, we spoke to an official at the Federal Trade
Commission (FTC) concerning consumer complaints they have received
about mobile phone service. We also spoke to consumer advocates,
financial analysts, and attorneys engaged in class-action lawsuits
against carriers about various aspects of the mobile phone industry.
We contracted with a market research firm to administer 26 questions as
part of a national telephone survey conducted in November 2002. Our
questions addressed issues such as experiences with certain call
quality problems, satisfaction with the quality of mobile phone
service, complaint-making practices, and factors involved in decisions
to change companies. We projected the results of the survey to the
population of adult mobile phone users. However, we are concerned about
the potential for those who did not respond to the survey to differ
from those who did respond in some way that could affect the results.
We have no explicit reason for suspecting that the survey suffers from
this shortcoming. Instead, our concern arises out of the large sample
of telephone numbers (about 19,000) dialed to produce about 1,000
survey respondents, about 550 of whom use mobile phones.
In addition, we contacted a number of experts who are knowledgeable
about mobile phone issues to give us their opinions about potential
actions the federal government might take to improve call quality. This
report also draws on information collected for our recent report on
spectrum management issues.[Footnote 3]We conducted our work from March
2002 through March 2003 in accordance with generally accepted
government auditing standards. For a more detailed discussion of our
scope and methodology, see appendix I.
Results in Brief:
Under the regulatory framework for mobile phone service, FCC generally
relies on competitive market forces to determine mobile phone call
quality. The Omnibus Budget Reconciliation Act of 1993 provided a
regulatory framework that directed FCC to encourage the promotion of
competitive market conditions for mobile phone service and limited the
ability of the states to regulate it. In the 1993 Act and other
legislation, the Congress granted FCC flexibility in regulating mobile
phone services. In implementing this legislation, FCC has taken actions
to encourage the growth of competitive markets that have resulted in
most parts of the country having several competing carriers. FCC
believes that this competitive market will provide consumers with the
level of call quality they desire and that adopting federal regulations
that require a certain minimum level of call quality are not necessary.
At the direction of the Congress, FCC reports annually on whether or
not there is effective competition in the market for mobile phone
services. Over the last 7 years, these reports have included key
aspects of mobile phone service--such as the number of competitors in
the marketplace, trends in subscribership and the prices of service,
deployment in rural areas, and features provided by carriers--but have
not included information on call quality.
Concerns about mobile phone call quality have been raised by state
officials, consumer groups, the media, and others. Based on the results
of our consumer survey, conducted in November 2002, we estimate that
nearly 83 percent of mobile phone users were satisfied with their
service at that time, about 9 percent were dissatisfied, and the
remainder were indifferent.[Footnote 4] In addition, we estimate that
about 47 percent of adult mobile phone users believed their call
quality was improving, while about 5 percent believed that their call
quality was getting worse. We also found that users were experiencing
some call quality problems, including a lack of coverage, limited
network capacity at times, dropped calls, and poor sound quality. For
example, we estimate that 22 percent of users were unable to
successfully complete 10 percent or more of their calls, because the
calls were dropped by the network. Data sources other than consumer
surveys would be useful in assessing the extent of mobile phone call
quality problems; however, these data were either not available or were
of limited usefulness because they were not collected systematically.
The major carriers are not required to report data on the performance
of their mobile phone networks (such as the number of dropped calls or
detailed coverage information) to FCC, and they declined to provide us
with those data as well. The carriers said that this information was
proprietary and would be difficult to interpret, even if made
available. Carriers also declined to provide us with their data on
customer complaints. Complaint data from other sources, such as state
public utility commissions, were not useful in determining the extent
of call quality problems for a number of reasons, including
inconsistencies in the method of collecting and classifying complaints.
Interested parties, such as state officials and consumer advocates,
have suggested possible actions to address call quality concerns. These
actions would have varying potential benefits and drawbacks. For
example, some of the possible actions that have been proposed would
give consumers more information on carriers' coverage areas, their
rates of dropped and blocked calls, or complaints against them prior to
consumers choosing a carrier. Some interested parties have also
suggested that carriers give consumers longer trial periods before they
commit to a long-term contract with a carrier. These actions could
better enable consumers to choose the carrier that best meets their
needs regarding call quality. Some parties would also like to see
minimum industrywide call quality standards set for the carriers.
Others have noted, however, that some of the suggested actions have
drawbacks that could potentially drive up the price of mobile phone
service, limit the entry of new carriers and thus affect competition in
the marketplace, or lead to a reduction of service in regions that are
technically difficult or costly to serve, such as mountainous or
sparsely populated rural areas. The carriers say that they are taking
actions to improve call quality and further regulation is not needed.
However, they maintain that their ability to improve call quality is
hampered by financial and regulatory constraints, such as local
government land use and zoning restrictions on the siting of new base
stations for transmitting and receiving mobile phone signals.
To assist FCC in determining whether further action concerning mobile
phone call quality is necessary, we are recommending that FCC include
call quality in its mandated annual report analyzing whether there is
effective competition in the market for mobile phone services. In
commenting on a draft of this report, FCC generally agreed with our
recommendation stating that, to the extent possible, it would include
information related to call quality in its future reports on
competition in mobile phone services. However, FCC noted some
difficulties in implementing the recommendation, such as data not being
readily available, the lack of objective performance standards, and
difficulties in measuring call quality against consumer expectations.
Background
Carriers deliver mobile phone service by subdividing large geographic
areas into smaller overlapping sections called cells.[Footnote 5] Each
cell has a base station equipped with an antenna to receive and
transmit radio signals to the mobile phones within its coverage area.
This area can vary in size from under a mile to 20 miles from the base
station. Mobile phones are low-powered radio transceivers (a
combination radio transmitter and receiver) that use radio waves to
communicate with the base stations. A mobile phone's communications are
generally associated with the base station of the cell in which it is
presently located. When a call is initiated, the base station assigns a
radiofrequency to the mobile phone from among the group of frequencies
that the station controls. The number of frequencies available at a
base station will depend primarily on the amount of radiofrequency
spectrum assigned to the carrier by FCC, the number of base stations in
the carrier's service area, and the carrier's signaling
standard.[Footnote 6]Each base station is linked to a mobile phone
switching office, which is also connected to the local wireline
telephone network. The mobile phone switching office directs calls to
the desired locations, whether to another mobile phone or a traditional
wireline telephone. This office is also responsible for handing off
calls from one cell to another in a smooth and seamless manner as a
customer changes locations during a call. Figure 1 provides a
simplified picture of the key components of a mobile phone system.
Figure 1: Key Components of a Mobile Phone System:
[See PDF for image]
[End of figure]
FCC is the federal agency that oversees interstate telecommunications
in the United States, including mobile phone service. The mobile phone
industry began to develop in the mid-1980s when FCC awarded
radiofrequencies to two cellular carriers in each geographic market.
FCC awarded one cellular license to the incumbent wireline telephone
company and a second license to an independent carrier. If there was
only one applicant for the second license, that applicant received the
license. When more than one applicant applied, FCC used comparative
hearings, which give competing applicants a quasi-judicial forum in
which to argue why they should be awarded a license instead of other
applicants. Later, at the direction of the Congress, FCC held lotteries
to award licenses. In establishing the rules under which the cellular
phone industry would operate, FCC made several key decisions:
* All carriers would use the same analog technology to provide service.
* Within 3 years of receiving a construction permit, carriers would
have to build networks that could theoretically serve the areas for
which they obtained a license. At the end of the 3 years, licenses for
those areas that could not theoretically be served might be made
available to some other carrier.
* Carriers would have to inform customers of the area in which reliable
service could be expected.
* No other call quality standards would be required. That is, no
minimum requirements concerning the probability that calls would be
completed with good sound quality were established. FCC considered
establishing such standards, but decided to let the marketplace
determine the level of call quality.
* Carriers would have to notify FCC if they turned away a customer
because of a lack of capacity and state how they intended to remedy
this lack of capacity.[Footnote 7]
Since it was first launched, the industry has migrated from using only
analog technologies to primarily using digital technologies. Originally
carriers used an analog technology that is similar to that used for the
transmission of FM radio broadcasts. While analog technologies are
still being used, most service is now provided with digital
technologies, which have several advantages over analog technologies:
they provide for better security, allow for services such as caller
identification, allow noise to be
reduced on calls, and conserve on the use of scarce spectrum
resources.[Footnote 8]FCC did not specify a single digital technology.
Instead, carriers were free to adopt one of several signaling
standards: code division multiple access (CDMA), time division multiple
access (TDMA), and global system for mobile communications (GSM). In
addition, Nextel Communications uses a technology called integrated
Digital Enhanced Network, a derivative of TDMA.[Footnote 9]
The industry has grown dramatically over time. In terms of annual
revenues, the industry has mushroomed: from about $482 million in 1985
to over $27 billion in 1997 and then to over $76 billion in 2002. In
recent years, from 1997 through 2002, average monthly minutes of use of
mobile phone use grew almost 900 percent, from about 5.6 billion
minutes per month in 1997 to about 55.5 billion in 2002 (see fig. 2).
This growth resulted not only from an increase in subscribership but
also from a marked increase in the average number of minutes used by
each subscriber.
Figure 2: Estimated Average Number of Minutes of Mobile Phone Service
Used Per Month in the United States, 1997-2002:
[See PDF for image]
Note: GAO analysis of CTIA data.
[End of figure]
To subscribe to mobile phone service, a customer must sign-up with a
mobile phone service carrier, either by signing a contract and choosing
a plan, or by purchasing prepaid minutes of airtime and buying a phone
that works with the prepaid service. Most customers sign contracts that
specify a geographically based rate plan and the size of the block of
minutes the customer is buying for a flat monthly fee. New customers
sometimes pay up-front fees for "network activation" of their phones
and usually agree to pay an "early termination fee" if they should quit
a carrier's network before the date specified on the contract. In
return for signing the contract, customers often receive mobile phones,
suitable for their carrier's network, at a price lower than that which
they would have to pay without a service contract.
Because of the nature of radio transmission, the amount of
radiofrequency spectrum allocated by FCC for mobile phone service, and
the challenge of building the infrastructure to meet a rapidly growing
consumer base, consumers are not always able to complete their phone
calls or to hear them clearly. The following, some of which are
illustrated in figure 3, are examples of such call quality concerns.
* Consumers may not be able to complete calls because the
radiofrequencies used for mobile phone service can be blocked by
terrain, such as hills, or by man-made structures. The structural
features of some buildings can block signals from reaching the interior
of the buildings. Similarly, signals may not be able to penetrate into
subways or tunnels.
* Consumers' calls may be disrupted by temporary conditions, such as
weather or interference from other wireless devices.
* A consumer may be unable to initiate a call because the local base
station's available radiofrequencies are all in use by other consumers.
The consumer may receive a fast busy signal instead of a dial tone or
some other indication that frequencies are not available.
* Consumers' calls may be dropped when moving from a cell that has
capacity to an adjacent cell that cannot handle additional calls
because it is already at capacity.
* A consumer's call may not be connected because of a "dead spot"
within a carrier's service area where there is no base station
coverage. This may be due to decisions made by carriers concerning the
building of base stations, or difficulties in finding a suitable
location or obtaining zoning approval to construct additional base
stations.
* Consumers may be unable to initiate calls because their service
carrier does not cover the area from which the call is being made and
the carrier does not have an agreement with a competitor to serve its
subscribers under a "roaming" agreement.
Figure 3: Common Call Quality Problems Associated with Mobile Phones:
[See PDF for image]
[End of figure]
Under the Regulatory Framework for the Mobile Phone Industry, FCC
Relies on Competitive Market Forces to Determine Call Quality and Has
Not Set Specific Quality Standards:
Beginning in 1993, the Congress enacted legislation aimed at developing
a regulatory framework that would treat commercial carriers in a
consistent manner and encourage the growth of competitive markets for
mobile phone services. FCC has acted to implement this regulatory
framework and is relying on consumer choice in a competitive
marketplace to determine the level of call quality, rather than setting
a minimum standard for the industry to meet. At the direction of the
Congress, FCC analyzes and reports on competitive market conditions in
the mobile phone industry annually. To date, these reports have
included issues such as the number of carriers, prices, and
subscribership but not call quality.
:
The Congress Has Promoted Development of Competitive Mobile Phone
Markets:
In the early 1990s, types of mobile phone services other than cellular
had been or were about to be developed. These new services were
demonstrating that greater competition could exist in this marketplace;
however, two different regulatory regimes had developed: one for the
original cellular service and another for newer mobile phone services
that used other technologies or portions of the radiofrequency
spectrum. In 1993, the Congress enacted legislation--the Omnibus Budget
Reconciliation Act (1993 Act)--that promoted consistent regulation of
commercial mobile phone service carriers and established the promotion
of competition as a fundamental goal for the development of mobile
phone policies and regulation. The 1993 Act included several provisions
to achieve these goals:
* All commercial mobile phone services were to be regulated similarly,
without regard to the specific technology or radiofrequency spectrum
used by a carrier.[Footnote 10]
* FCC was to auction spectrum licenses when more than one user wanted
to use certain frequencies for the transmission of mobile phone calls.
This method of assigning licenses requires mobile phone service
carriers to pay for the right to use the spectrum and awards the
spectrum to the carrier willing to pay the highest price for it under
certain conditions.
* Numerous licenses were to be auctioned in each mobile phone market so
that a wide variety of bidders could participate.
* FCC was given the authority to refrain from applying certain
provisions of the Communications Act of 1934 that FCC found to be
unnecessary under specific statutory criteria. For example, FCC did not
apply provisions that restricted market entry or exit.[Footnote 11]
* FCC was required to report annually on competitive market conditions
in the industry. The report was to include an identification of the
number of competitors in various commercial mobile services, an
analysis of whether or not there is effective competition, an analysis
of whether any competitors have a dominant share of the market, and a
statement of whether additional providers or classes of providers would
be likely to enhance competition.
In addition, the 1993 Act preempted states and local governments from
regulating the entry of or the rate charged by any mobile service
carrier. However, states could petition FCC for authority to regulate
commercial rates under certain conditions. Shortly after the 1993 Act
was enacted, eight states[Footnote 12]sought the right to continue
regulating wireless rates. FCC denied all of the petitions. One state
appealed the denial of its petition, and the court affirmed FCC's
decision.[Footnote 13] However, the 1993 Act expressly reserved to the
states the right to regulate other "terms and conditions" of commercial
mobile phone service, and FCC has provided guidance over time on the
scope of these rights. For example, FCC has concluded that billing
information, practices, and disputes fall within other terms and
conditions and may be regulated under state contract or consumer law.
Similarly, FCC has found that state contract or consumer fraud laws
governing disclosure or rates are generally not preempted and that as a
general matter, state courts are not preempted from awarding damages to
customers of commercial mobile phone carriers, based on violations of
state contract or consumer fraud laws. Several lawsuits are now before
state courts making claims against carriers under state fraud or
consumer protection laws.
In the 1996 Telecommunications Act (1996 Act), a law that deregulated
various aspects of the telecommunications industry, the Congress
provided FCC with additional tools that could be used to promote
competition in the mobile phone service industry. The 1996 Act requires
FCC to refrain from imposing unnecessary regulation on
telecommunications carriers, including mobile phone carriers.[Footnote
14]The 1996 Act also requires that every 2 years FCC engage in a review
(the biennial review) of its rules, including those related to mobile
phone service, to determine whether any of them are no longer necessary
as a result of meaningful competition among the carriers. In addition,
the 1996 Act requires FCC to take actions that would allow consumers to
keep their phone number when changing among wireline telephone
companies, referred to as local number portability. Further, the 1996
Act preserved the rights of states and localities to use land-use and
zoning laws to regulate the placement of carriers' base station
antennas.[Footnote 15]This has enabled states and localities to affect
both the level of competition and the quality of mobile phone calls.
FCC Has Promoted Competitive Markets to Determine the Level of Call
Quality:
In implementing the 1993 and 1996 Acts, FCC has taken several actions
to promote competition in the mobile phone market. These actions
included auctions, spectrum caps, and local number portability.
Auctions: From 1994 through 2002, FCC conducted 42 auctions for
spectrum dedicated to various kinds of wireless phone services. In
accord with the 1993 Act, FCC's licensing scheme has also helped to
ensure that many carriers were available in each geographic market. In
every region, FCC authorized up to eight different mobile phone
licenses.
Spectrum cap: Until recently, FCC limited the number of
radiofrequencies any one carrier could have rights to in any one
market. By limiting any one carrier to 45 megahertz (MHz) of spectrum
in any metropolitan market or 55 MHz in any one rural market, FCC aimed
to prevent any one mobile phone service carrier from dominating a
market. As a result of the 2000 biennial review, FCC phased out the
cap, fully eliminating it on January 1, 2003. In doing so, FCC asserted
that competition in mobile phone markets was robust enough that it was
no longer appropriate to impose caps on spectrum rights.
Local number portability: FCC extended the 1996 requirement that local
number portability be implemented for wireline telephone customers to
include mobile customers as well. FCC concluded that while the 1996 Act
did not specifically require local number portability for mobile phone
service carriers, making it a requirement would serve the public
interest by promoting competition among the various types of telephone
services and facilitating consumer choice. Because of certain
implementation issues, FCC has extended the deadline for mobile phone
service carriers that operate within the 100 largest metropolitan areas
to offer local number portability from the original deadline of June
30, 1999, until November 24, 2003.
As a result of these actions, industry developments, and consumer
interest, FCC, in its most recent annual report on competitive
conditions in the mobile phone industry,[Footnote 16] noted that the
industry has experienced increased numbers of competitors in various
markets, innovation, lower prices for consumers, and increased
diversity of service offerings. Regarding the number of competitors,
for example, FCC reported that 94 percent of the U.S. population lives
in counties with access to three or more mobile phone carriers, and 80
percent lives in counties with at least five carriers. FCC reported
further that there are six national carriers: AT&T Wireless, Cingular,
Nextel, Sprint PCS, T-Mobile USA, and Verizon Wireless. Other large
regional carriers, including ALLTEL Corp., Western Wireless Corp.,
United States Cellular Corp., and Dobson Communications Corp., are also
active in the market.
Data we obtained from Yankee Group, Inc. (a market research firm
specializing in telecommunications issues) for the third quarter of
2002 are consistent with the competitive picture of the industry
provided by FCC's annual report. These data, presented in figure 4,
show that none of the six national carriers dominates the national
market. Their market shares range from T-Mobile USA's 7 percent to
Verizon Wireless's 24 percent. This figure also shows that each of the
carriers was experiencing a substantial level of customer turnover
during 2002, ranging on an annualized basis from Nextel's 24 percent to
T-Mobile USA's 50 percent. The percentage of mobile phone customers who
change carriers in a given year suggests that carriers are actively
competing.
Figure 4: U. S. Market Shares and Annualized Turnover Rates for Mobile
Phone Service Carriers, Third Quarter, 2002:
[See PDF for image]
Note: GAO analysis of Yankee Group data.
[End of figure]
FCC has concluded that competition is sufficient to provide incentives
for carriers to meet consumers' expectations and desires for call
quality. For example, in its 2000 biennial review to determine whether
any of its rules were no longer necessary as a result of the
development of meaningful competition among mobile phone service
carriers, FCC removed requirements that carriers provide consumers with
information showing their reliable coverage areas. These requirements
had been placed on the original cellular services, but had not been
placed on newer mobile phone services. FCC found that although carriers
providing newer mobile phone services were not required to supply
consumers of these services with coverage information, they
nevertheless provided these consumers with the same types of
information that they provided to consumers of the original cellular
services. As a result, FCC concluded that competitive pressures were
strong enough to ensure that carriers would continue to supply
consumers with information on coverage, even after FCC removed
the requirement.[Footnote 17]However, some consumer advocates have
questioned whether competitive pressures are strong enough to ensure
that carriers will provide consumers with adequate information on
coverage. Recently, in February 2003, the Chairman of FCC stated that
competition provides incentives for carriers to improve call
quality.[Footnote 18] Specifically, he noted that to attract and keep
customers, carriers are having to offer better packages of rates,
coverage, and service quality than their competitors.
Although FCC relies primarily on the marketplace to determine the level
of call quality, it has also acted to provide consumers with additional
information on the nature of mobile phone service and the types of
problems that consumers may encounter. FCC now provides the public with
information on the quantity and types of complaints and inquiries it
receives concerning mobile phone service. This information is updated
quarterly. FCC provides additional information to consumers through its
brochure on mobile phone service, which is posted on FCC's Web
site[Footnote 19]and appears in appendix III of this report. This
brochure explains the nature of mobile phone service, including
coverage, other call quality issues, pricing, and handset features. FCC
has also suggested questions that consumers should ask carriers when
purchasing service and recommended that consumers obtain information
from neighbors and coworkers concerning the call quality they receive
from various carriers. In addition, FCC has taken action to promote the
public interest in the area of implementing enhanced 911 service (E-
911) for mobile phones. This service will allow emergency responders to
determine the location of a mobile phone caller within some specified
area.
FCC Reports Annually on Competitive Market Conditions in the Mobile
Phone Industry but Does Not Include Information on Call Quality:
At the direction of the Congress, FCC has issued seven annual reports
and analyses of competitive market conditions in mobile phone services.
The Congress stated that the report should include an identification of
the number of competitors in various commercial mobile services, an
analysis of whether or not there is effective competition, an analysis
of whether any competitors have a dominant share of the market, and a
statement of whether additional providers or classes of providers would
be likely to enhance competition. FCC's reports have concentrated on a
discussion of the structure of the industry, especially the number of
competitors in the marketplace and their location. In addition, the
reports include a discussion of the number of subscribers, the prices
charged for services, deployment in rural areas, and information on
features provided by carriers.
Call quality is an important aspect of mobile phone service, and FCC
said that carriers appear to be competing for customers in this area.
However, FCC has not included call quality, beyond a discussion of the
number of carriers providing service, in its annual analysis of whether
or not there is effective competition in mobile phone services. By way
of contrast, the Office of Telecommunications (OFTEL) in the United
Kingdom, the regulatory body that monitors competition in
telecommunications markets in that country, includes call quality in
its reports on competition in the mobile phone industry.[Footnote 20]As
part of its ongoing monitoring of competition, OFTEL conducts quarterly
surveys of mobile phone users. From these surveys OFTEL has reported
that reception quality and geographic coverage are among the most
important reasons for consumers in that country to choose a carrier. In
addition, OFTEL has used the information it collects on network
performance and other factors to determine that there is effective
competition among carriers regarding those aspects of service that we
have identified as call quality.
Although, at the time of our review, FCC had not indicated that it
planned to include call quality in its annual report on competitive
market conditions in the mobile phone service industry in the future,
it was attempting to improve the overall quality of the data used in
that report. For example, FCC held hearings in February 2002 in order
to improve the quality of the data that would be used in its seventh
annual report, which was released in July 2002. Participants at those
hearings noted several shortcomings in the data used for the report and
analysis of competitive market conditions, including FCC's almost sole
reliance on unaudited data from industry trade associations and
financial analysts, the failure to include consumer input, and the lack
of credible data on prices and profits. Hearing participants also noted
a marked contrast between the data regularly collected in other
industries such as the airline and electricity industries. In those
industries, oversight agencies have access to data on operations and
the actual prices paid by consumers. With regard to measuring the
extent of competition, FCC has noted some limitations in the data they
collect for their congressionally mandated annual report. Specifically,
in the seventh report, FCC noted that--as a result of treating carriers
that serve any part of a county as if they served the entire county--
the report likely overstates the number of carriers serving consumers
in various locations. Thus, both the amount of coverage and the extent
of competition are likely to be overstated.
In recognition of these continuing data limitations, FCC issued a
Notice of Inquiry in December 2002 seeking comment on how it could gain
more detailed, comprehensive, and independent data to use in its 2003
report on competitive market conditions.[Footnote 21]According to the
notice, FCC was looking for data that would allow it to evaluate the
extent to which consumers can choose among mobile phone service
carriers as well as services and technologies. Specifically, FCC was
looking for information on a broad range of items related to the
structure and performance of the industry. And, for the first time, FCC
included quality of service as an area that might be explored in the
report. The 13 organizations that responded to the inquiry either did
not comment on service quality or asserted that data on service quality
were not needed. The consumer advocates who have raised concerns about
call quality did not respond to this notice. Two of the consumer
advocates said that they support efforts for FCC to collect and report
more information on call quality, but they did not respond to the
notice because of more pressing priorities at that time.
In some other countries, such as Australia, France, and the United
Kingdom, regulators collect network performance information or survey
consumers to determine their level of satisfaction or the extent to
which they are knowledgeable about certain aspects of mobile phone
service. For example, in France, the French regulatory authority for
telecommunications conducts its own tests of call quality to determine
if certain carriers are meeting the call quality requirements specified
in their licenses. These tests have generally been conducted in cities
with 50,000 or more inhabitants. As noted above, in the United Kingdom,
OFTEL conducts quarterly surveys of business and residential phone
users. These surveys allow the agency to track consumer satisfaction
rates as well as measure consumer knowledge about mobile phone service,
including the availability of a range of price plans. In addition,
OFTEL collects network performance and capital investment data from
mobile phone service carriers. In Australia, the Australian
Communications Authority also collects and publishes information on
various aspects of consumer satisfaction and quality in its annual
report on telecommunications performance.
Concerns Have Been Raised, but Available Data Are Inconclusive on
Extent of Call Quality Problems:
Interested parties, such as state officials and consumer advocates,
have raised concerns about mobile phone call quality. Fully assessing
the extent of call quality problems would likely require network
performance data from the carriers as well as information on the extent
to which consumers are satisfied or dissatisfied with the call quality
of their mobile phone service. Carrier network performance data are not
available to the public and are not reported to FCC. Carrier data on
complaints are also not available and customer complaint data from
other sources, such as FCC, FTC, states, and consumer organizations, do
not provide reliable measures of the extent to which customers are
dissatisfied with their call quality. Consequently, we have only the
results of our survey of mobile phone customers on which to base our
assessment of the extent of call quality problems. We estimate from the
results of this survey that, while mobile phone customers are
experiencing call quality problems, a fairly high percentage are
satisfied with their current overall level of call quality.
Concerns Have Been Raised about Mobile Phone Call Quality:
Some state utility commissioners have been expressing concerns about
what they say are an increasing number of consumer complaints about
mobile phone service. Their trade association, the National Association
of Regulatory Utility Commissioners (NARUC), sponsored panels on mobile
phone service issues at their quarterly meetings held in July and
November 2002. The topics covered by the panels included local number
portability, service quality, cost, and best practices for carriers to
better serve their customers. However, NARUC's Consumer Affairs
Committee defeated a proposed resolution to have mobile phone carriers
provide consumers with adequate service area coverage information when
making purchase decisions and to have FCC monitor this information. As
a result of the panel discussion held in July and carriers' desires to
talk to state commissioners about the issues raised there, in October
2002 NARUC and FCC facilitated an informal discussion of these issues
between concerned state officials and mobile phone service carriers.
Following this meeting, NARUC began developing a list of suggestions
for FCC and mobile phone service carriers. These suggestions included
FCC reporting on complaints by carrier and carriers giving consumers a
15-to 30-day period during which they could opt out of new service
contracts.
At least two states are investigating whether carriers' advertising
claims about call quality are being met. An official with the New York
Attorney General's office told us that the office is concerned that two
major carriers advertise coverage areas that appear more extensive than
they, in fact, are. Meanwhile, the California Public Utilities
Commission is investigating whether another major carrier has adequate
coverage in customers' area of use and sufficient system capacity to
meet the claims it makes about its service. A number of lawsuits
raising questions involving coverage claims have also been filed in
state courts.
The press and consumer advocates have raised concerns about call
quality as well. For example, over the last couple of years, articles
on these issues have appeared in several well-known, widely read
publications, including Forbes Magazine, the Wall Street Journal, the
Washington Post, and the New York Times. In addition, several consumer
advocacy groups--including the Wireless Consumers Alliance, AARP
(formerly known as the American Association of Retired Persons), and
Consumers Union--have raised concerns about the coverage and price
information consumers receive when buying mobile phone service,
consumers' ability to complete calls, and the cost of terminating
contracts if call quality is not adequate.
Carriers Provided Limited Information on Extent of Call Quality
Problems:
Carriers said that information on blocked and dropped calls is
collected at each base station in their networks. However, none of this
network performance data is publicly available nor are the carriers
required to report this information to FCC. As part of our effort to
determine the extent to which calls cannot be completed or lack
clarity, we asked the six largest carriers if they would be willing to
provide us such data. All of the carriers declined. The reasons given
for not providing the data include the following:
* The information is business sensitive and proprietary. Revealing it
could damage a carrier's competitiveness by alerting its competitors to
the strengths and weaknesses of its network.
* The information would not be useful to consumers trying to compare
one carrier's performance with that of another carrier. Data would not
be suitable for comparisons because carriers do not measure performance
using a single set of standards. Also, systems using different
transmission technologies respond differently to overcrowding on the
network.
* The information might not be completely accurate. For example, if
callers turn off the power on their phones to end a call instead of
pressing the "end" button, the network might record that as a dropped
call.
* Because their networks are changing rapidly, network performance data
would be out-of-date before it could be used.
* Performance is affected by various transient factors, such as time of
year, weather, and unusual periods of demand that tax network capacity.
While carriers did not provide us with detailed information on blocked
and dropped calls, network officials at two carriers said that their
goal was to have a 98 percent call-completion rate. That is, the calls
would go through and not be dropped before they were completed at least
98 percent of the time on average. These officials and those at other
carriers said that 98 percent is generally the industry standard;
however, they noted further that this standard for completed calls is a
network average. Thus, even if carriers were meeting that standard,
performance at various geographic locations or times of day could
differ substantially from the network average. Because consumers use
their phones at specific locations and times of day, these network
averages may not be useful in helping them compare one carrier with
another.
Network information can also be collected through "drive tests," which
are generally performed along major road arteries at various times of
the day. These tests are done in moving vehicles that use computers to
simultaneously place calls on the networks of various carriers. The
computer then records whether calls went through and whether they were
dropped within some specified call time, such as 2 minutes. These tests
are performed by the carriers themselves and by contractors such as
Telephia. Data from drive test contractors are also proprietary;
however, Telephia has performed tests for CTIA--an industry trade
association--and Consumers Union, and these entities have shared that
information with the public.
* CTIA's July 2001 study measured various aspects of mobile phone call
quality in core urban and suburban areas. The study found that between
November 1999 and April 2001 there was no change in overall call
quality as measured by the percentage of time a call goes through with
adequate sound quality. During this period, the percentage of blocked
calls went down in both the core urban and suburban areas, while
dropped calls rose in suburban areas. Telephia concluded that, at the
time of their study, on average, consumers could place, hold, and
complete calls of acceptable audio quality 96 to 99 percent of the
time.
* In the February 2002 issue of Consumer Reports, Consumers Union
published averages of call quality data that Telephia had collected in
9 major metropolitan areas--New York, Boston, Philadelphia, the
District of Columbia, Los Angeles, Dallas, Houston, Chicago, and
Detroit--in October 2001. These data show that on Telephia's 5-point
scale--with 1 being the worst service and 5 the best--call quality
ranged from a low of 3.3 in Houston to a high of 4.7 for Philadelphia.
Consumers Union notes that these are averages of individual carrier
data. In its February 2003 issue of Consumer Reports, Consumers Union
used a survey of its subscribers to rank carriers for the first time in
six major cities.
Some carriers also said that they have detailed coverage and service
maps that are based on engineering models that predict service rather
than on actual service data. Again, carriers did not share these maps
with us for several reasons similar to those for not providing actual
network performance data. The reasons included competitiveness,
accuracy, and timeliness of data.
Consumer Complaint Data Provide a Limited Indication of Call Quality
Concerns:
Consumer complaint data are a potential source of information on
customer dissatisfaction with their mobile phone service, but these
data are either not publicly available or suffer from methodological
limitations. The carriers were unwilling to share information on the
quantity and kinds of complaints they receive. Some complaint data are
available from other sources, including federal and state government
agencies, consumer advocates, and Web sites. However, these complaint
databases are not adequate to determine the extent of call quality
problems because they do not employ a scientific method in collecting
the data. Instead, they depend on individual, dissatisfied consumers to
know where to call or write, and to take the time to do so. In
addition, many of the groups collecting complaints said that the
categorization of complaints was difficult and, as a result, complaints
were probably not being categorized in a consistent manner.
Federal government: FCC takes complaints about mobile phone service
that it receives from consumers and others and refers them to
consumers' carriers for resolution. FCC defines a complaint as a
communication received from or on behalf of an individual that alleges
harm or injury and seeks relief. It accepts complaints from consumers
by phone, by facsimile, through the Internet, or by electronic or
regular mail.[Footnote 22] FCC has been receiving consumer complaints
about mobile phone services and referring them to consumers' carriers
since the mid-1980s. In the spring of 2001, FCC began categorizing
complaints and, in fall 2001, began publishing complaints by category.
However, officials cautioned that their complaint numbers could include
requests for information as well as complaints, and that the existence
of a complaint against a carrier does not necessarily indicate
wrongdoing by that carrier. FCC also said that it tracks complaints to
identify trends in types of complaints or to determine if a carrier has
received excessive numbers of complaints. In either instance, FCC said
that it contacts carriers and asks them to provide an explanation.
Based on feedback from carriers and consumers, FCC estimated that as a
result of this process, consumer complaints are resolved to the
satisfaction of the consumer close to 80 percent of the time. Should
complaints go unresolved or should a carrier receive excessive numbers
of complaints without an acceptable justification, a carrier could be
subject to an FCC enforcement action. FCC officials noted that they
have not been categorizing complaints for a long enough time to show
any trends. In 2002, FCC logged about 14,000 consumer complaints about
mobile phone service. As figure 5 shows, over 60 percent of the
complaints concerned billing and rate issues. The next largest
categories were service quality (a category that includes call quality
issues), contract-early termination fee, and marketing and advertising.
Figure 5: FCC Mobile Phone Consumer Complaints by Category, 2002:
[See PDF for image]
Note: GAO analysis of FCC data.
[A] FCC includes those items that we have identified as call quality,
such as dropped calls and dead spots, in its service quality category;
however, it also includes complaints about not being able to use a
mobile phone because the carrier had ceased to do business in the
consumer's area or ceased to do business altogether.
[End of figure]
FTC also receives complaints about mobile phone service and forwards
them to FCC.[Footnote 23]FTC compiled their mobile phone complaint data
by the complaining consumer's state and by the carrier's state, but
could not categorize the data by type of complaint. According to an FTC
official, in 2000, 2001, and the first half of 2002, FTC's mobile phone
complaints were equal to or less than one-half of 1 percent of all of
the complaints FTC received about all products.
State public utility commissions: State public utility commissions vary
on whether they collect complaints about mobile phone service. Thirty-
three state commissions responded voluntarily to our request for
information on how they regulate mobile phone service or categorize
complaints. Of these state commissions, 23 said that they direct
consumers with complaints to their state attorneys general, FCC, or the
mobile phone service carrier identified in the complaint. Six state
commissions reported that they collect and categorize complaint data
from mobile users. While most of the commissions who collect data
categorize some complaints as billing complaints, they use a variety of
categories for the other complaints they receive. For example, one
state categorizes its other complaints as tower issues, while another
state uses many categories, including dead zones and dropped calls,
company practices, service quality, and contracts. Of the state
commissions we heard from, California was the only one that provided us
with specific data on call quality complaints gathered over a number of
years. As table 1 shows, complaints about call quality were about 8
percent of total mobile phone complaints for 2002.
Table 1: Consumer Complaints about Mobile Phone Service Filed with the
California Public Utilities Commission, 1999-2002:
Year: 1999; Company: practices: 47; Disputed: bills: 1,135; Call:
quality[ A]: 205; Contract issues: 9; Miscellaneous[B]: 518; Totals:
1,914.
Year: 2000; Company: practices: 112; Disputed: bills: 1,550; Call:
quality[ A]: 231; Contract issues: 13; Miscellaneous[B]: 363; Totals:
2,269.
Year: 2001; Company: practices: 232; Disputed: bills: 3,379; Call:
quality[ A]: 459; Contract issues: 37; Miscellaneous[B]: 901; Totals:
5,008.
Year: 2002; Company: practices: 117; Disputed: bills: 1,386; Call:
quality[ A]: 186; Contract issues: 13; Miscellaneous[B]: 585; Totals:
2,287.
Source: California Public Utilities Commission.
Note: GAO analysis of California Public Utilities Commission data.
[A] Includes dead zones, dropped calls, and static.
[B] Miscellaneous includes a variety of issues such as billing format and
back billing issues, cramming, advertising and marketing issues, rate
design, and taxes and surcharges.
[End of table]
Consumer advocates: Two consumer groups--the Better Business Bureau and
the Wireless Consumer Alliance--said that they receive and collect
complaints about mobile phone service. However, both groups said that
they do not collect complaints in a systematic way and use broad,
general categories to classify complaints. The Better Business Bureau
collects complaints on mobile phone equipment, supplies, and services.
The Bureau said that, between 1998 and 2002, complaints in this
category rose from 615
complaints to 21,534 complaints.[Footnote 24]The Bureau was unable to
identify whether the increase in complaints was attributable to call
quality issues or to other issues in the mobile phone industry. Some
consumer advocates, such as the Utility Consumer's Action Network in
San Diego, California, have Web sites where consumers can post
information about carriers' dead spots--locations within carriers'
coverage areas where service is not available. Generally, these data
are not verified nor are they regularly updated if service becomes
available.
Our Survey on Call Quality Yielded Mixed Results:
To obtain information about the extent to which consumers are concerned
about various aspects of mobile phone call quality, we included
questions on call quality in a national telephone survey of adults
conducted in November 2002. We projected the results of the survey to
the population of adult mobile phone users. However, we are concerned
about the potential for those who did not respond to the survey to
differ from those who did respond in some way that could affect the
results. We have no explicit reason for suspecting that the survey
suffers from this shortcoming. Instead, our concern arises out of the
large sample of phone numbers dialed to produce about 1,000 survey
respondents. Some users may not have answered the call because they
could not identify the caller on their caller identification system.
Others may not have been available during the calling time, and still
others may have been unwilling to participate in the survey when they
were contacted. (Appendix I includes a discussion of the survey
methodology and its limitations; appendix II includes the survey
instrument and the responses.) The results of the survey provided mixed
evidence on the extent to which consumers are troubled by call quality
problems.
Based on the survey responses, we found that a fairly high percentage
of consumers were satisfied with the overall call quality of their
mobile phone service. Using the results of our survey of mobile phone
users, we estimate that about 83 percent of consumers were satisfied
with their call quality and about 9 percent were dissatisfied. The
sampling error for our survey was plus or minus 8 percentage points or
less unless otherwise noted. The other users were neither satisfied nor
dissatisfied (see fig. 6). In addition, we estimate that about 47
percent of adult mobile phone users believed their call quality was
improving, while about 5 percent believed that their call quality was
getting worse. The other users believed that call quality had not
changed since they acquired their phones. Finally, we estimate that 83
percent of adult mobile phone users would not be willing to pay more
for better quality calls, while 12 percent would be willing to pay more
and another 5 percent would be willing to pay more under certain
conditions.
Figure 6: Overall Customer Satisfaction with Call Quality, November
2002 Consumer Survey:
[See PDF for image]
[End of figure]
Despite the many mobile phone customers who appeared to be satisfied
with their overall call quality, a number of survey respondents
reported that they were experiencing specific problems. Using the
results of our survey, we found that although some mobile phone users
never had problems placing calls, some had problems occasionally, and
others experienced call quality problems on 10 percent or more of their
calls (see table 2). As shown in the last column of table 2, we
estimate that about one-fifth of customers were not able to get through
on 10 percent or more of their calls because the cell from which they
were calling was at capacity, and about one-third of customers could
not complete 10 percent or more of their calls because they were in a
cell where their carrier did not provide service.
Table 2: Mobile Phone Call Quality Problems Based on November 2002
Consumer Survey:
Type of problem[A]: No coverage; Percent of users who did not
experience the problem: 22; Percent of users who had problem on fewer
than 10 percent of their calls: 44; Percent of users who had problem on
10 percent or more of their calls: 34.
Type of problem[A]: Fast busy; Percent of users who did not experience
the problem: 32; Percent of users who had problem on fewer than 10
percent of their calls: 47; Percent of users who had problem on 10
percent or more of their calls: 21.
Type of problem[A]: Dropped calls; Percent of users who did not
experience the problem: 39; Percent of users who had problem on fewer
than 10 percent of their calls: 39; Percent of users who had problem on
10 percent or more of their calls: 22.
Type of problem[A]: Poor sound; Percent of users who did not experience
the problem: 32; Percent of users who had problem on fewer than 10
percent of their calls: 38; Percent of users who had problem on 10
percent or more of their calls: 30.
Source: GAO.
Note: Row percentages may not add to 100 due to rounding. Individual
respondents may have reported having several problems. Therefore, the
column percentages cannot be added to determine the total percentage
with or without problems.
[A] No coverage - consumers cannot complete calls because their carrier
does not provide service in the cell where they are placing the call
and does not have a roaming agreement with another carrier that
provides service in that cell.
[End of table]
Fast busy - consumers cannot complete calls because the cell from which
they are calling is at capacity. Dropped calls - consumers lose
connections during a call because they have moved into a cell where
their carrier either does not have service or the cell is at capacity.
Poor sound - consumers cannot hear their calls clearly because of
static or feedback:
Our survey also indicates that call quality problems vary, depending on
where consumers are when they are making or receiving calls. For
example, we estimate that about 45 percent of users experienced
problems when they are in buildings, 37 percent when they were in a
vehicle, and 18 percent when they were outside. Carriers and other
experts note that reception inside buildings may not reflect the call
quality being provided in the area. As mentioned earlier, buildings may
be constructed of materials that do not allow mobile phone radio waves
to pass easily into their interiors. We found that some businesses have
added devices, such as antennas and signal repeaters, inside their
buildings to facilitate better in-building coverage. In buildings where
multiple carriers serve customers or residents, such as shopping
centers, office buildings with multiple tenants, or apartment
buildings, improving call quality may be the responsibility of the
building owner rather than any one service carrier.
Our survey also sheds some light on why consumers change carriers. We
estimate from our survey that about 73 percent of consumers made
carrier decisions for themselves, while the remaining 27 percent had
someone else, such as an employer or family member, choose their
carrier. For consumers who made carrier decisions for themselves, we
estimate that 35 percent had changed carriers since they first acquired
mobile phones and that better call quality was an important incentive
for those changes. Yet, call quality may have been a less important
incentive than getting a better price. That is, we estimate that for
about 55 percent of the consumers who had changed carriers, obtaining
better call quality was a very or somewhat important reason for the
change. However, we estimate that for a larger proportion of consumers
who had changed carriers--about 83 percent of them--price was very or
somewhat important. Because only a small number of survey respondents
had changed carriers--about 145, the sampling error for these estimates
is plus or minus 13 percentage points or less.
The ability of consumers to take advantage of the range of choices in
the marketplace, which provides incentives for carriers to respond to
customer demands for call quality, depends to some degree on customers
being able to switch from lower-quality carriers to higher-quality
carriers. We estimate that while about 35 percent of those who made
carrier decisions for themselves had changed carriers since they first
started using their phones, about another 28 percent wanted to change
carriers, but did not. We asked customers who wanted to change
carriers, but didn't, whether certain factors were important to their
decision. These factors included having to pay a fee to terminate a
contract before the contract period ended and not being able to keep
their current mobile phone number--the local number portability issue-
-or their handsets when they change carriers. Respondents could cite
more than one reason as being important. We estimate that for about
two-thirds of adult mobile phone users who wanted to change carriers
but did not, the termination fee was a very or somewhat important
factor. Further, we estimate that for about 41 percent of adult mobile
phone users, the lack of local number portability was very or somewhat
important; and for a similar proportion, not being able to keep their
handset was a very or somewhat important factor. Because only a small
number of survey respondents--about 115--had considered, but not
changed carriers, the sampling error for these estimates is plus or
minus 15 percentage points or less.
Interested Parties Have Suggested Actions for Improving Call Quality:
Interested parties, such as state officials and consumer advocates, who
have raised concerns about mobile phone call quality have also
suggested actions--such as local number portability or mandating that
certain information be provided to consumers--that might lead
indirectly to changes in call quality by making the market more
competitive or providing consumers with better information. Some
interested parties have also suggested actions, such as establishing
minimum call quality standards, by which call quality might be improved
more directly. All of the suggestions have various benefits and
drawbacks.
Local Number Portability Could Increase the Competitiveness of Mobile
Phone Markets:
Several interested parties have supported adoption of local number
portability, which will make the market for mobile phone service more
competitive by reducing the costs to consumers of changing carriers.
This may affect the level of call quality because customers who are
dissatisfied with their current carrier will be more likely to change
to a carrier with better call quality if they do not have to experience
the costs and inconvenience associated with changing their mobile phone
numbers. As a result, carriers would have a greater incentive to
upgrade their call quality to keep their customers. The costs and
inconvenience associated with changing a mobile phone number are likely
to grow for consumers as mobile phone service becomes an ever more
important part of everyday life. Carriers are now scheduled to
implement local number portability in November 2003.[Footnote 25]
Other countries have had varying experiences with number portability
and support for it varies among U.S. carriers. Officials of Hong Kong,
China said that local number portability has increased the
competitiveness of their mobile phone market and has led to a dramatic
fall in the price of that service. Australian officials have reported,
however, that not many consumers are changing carriers and taking their
numbers with them. They report that termination fees may still be
discouraging customers from changing carriers prior to the expiration
of their contracts. Some U.S. carriers have said that implementing
local number portability is difficult and expensive and will thus
offset the savings consumers experience from not having to change their
phone numbers. These carriers have been successful in getting FCC to
extend the deadline for implementing local number portability from the
original June 1999 to the new November 2003 deadline.[Footnote 26]
Many Proposals that Center on Giving Consumers More Detailed
Information Are Difficult to Implement:
Many of the actions that have been proposed to give consumers more
information about call quality--more detailed coverage information,
information on dropped and blocked calls by carrier, or data on
complaints against various carriers--could be meaningful to consumers
choosing among carriers if they were measured consistently across
carriers. This issue was evident in Australia where the Australian
Communications Authority requires that carriers report regularly on a
set of key performance indicators defined by the Authority. In its 2001
to 2002 Telecommunications Performance Report, however, the Authority
did not publish these data because, while all of the carriers were in
compliance with the requirements, they were not reporting these data to
the Authority in a consistent, comparable manner.[Footnote 27]
We have already noted several issues that make it difficult to measure
call quality or complaints. For example, we have described how blocked
or dropped call rates and coverage might change over relatively short
periods of time because of changes in carriers' networks or other
transient factors such as weather. In addition, we have described how
collecting and reporting complaints is difficult because of the need to
classify them consistently and to determine if they are valid.
Officials at FCC, the carriers, and state officials we spoke with
mentioned several other limitations to finding consistent measurements
of call quality:
* Carriers might have to start measuring things that they had not
previously been measuring. This would likely raise costs for these
carriers. A representative of smaller carriers said that providing any
additional information to FCC would be especially burdensome for them
because these carriers do not have staff to collect and report the
data.
* An official at one carrier explained that measurements could be
created that give carriers using one technology an advantage over those
using a different technology. That is, because TDMA technologies have a
fixed capacity while CDMA technologies can trade off increased capacity
for poorer sound quality, certain measures, such as number of times
callers find the network overloaded, could benefit carriers that use
CDMA over those who use TDMA.
* An FCC official noted that carriers might manage their businesses to
improve their scores on whatever is being measured and reported rather
than to better satisfy customers. For example, if the percent of
dropped calls has to be reported, carriers may let sound quality
deteriorate rather than drop the call.
* If the information comes directly from the carriers, someone--FCC or
state officials--would need to monitor the measurements to ensure that
all carriers were complying with the regulations, and this could add to
the cost of government oversight.
As a result of these potential drawbacks, FCC and industry participants
and representatives note that efforts to require FCC or carriers to
report more detailed call quality information or complaints could drive
up the price of mobile phone service, limit entry of new carriers,
create an uneven playing field in terms of carriers using various
technologies, provide the marketplace with measurements that may not
reflect better service, and drive up the costs of government oversight
of the industry.
According to some parties, giving customers longer trial periods before
they have to commit to a 1-or 2-year contract--an option that provides
customers with a first-hand opportunity to ascertain whether a
carrier's call quality meets their needs--could avoid some of these
potential drawbacks. The Consumer & Governmental Affairs Bureau at FCC
recommends that consumers read contracts thoroughly and insist on being
given a period of time to test the phone and service before being tied
to a long-term contract. FCC officials noted that no information from
carriers is going to be tailored to the specific usage patterns of
individual consumers. For example, because some building materials
block radio signals in areas where carrier information shows that
service is available, service may not be available inside some
buildings where customers want to use mobile phones. The largest
carriers have been extending their trial periods and now generally
allow 14 to 30 days. Some interested parties have suggested that longer
periods of up to 2 months would be more effective. However, giving
longer trial periods may raise the cost of signing up customers and
could lead to an increase in the price of service.
FCC, industry representatives, and the press have also noted that
consumers have access to various sources of information other than the
carriers. For example, some have pointed to the brochure on the FCC Web
site, which is included as appendix III in this report. In addition,
they noted that information is available from news and magazine stories
and from various Internet sites. Finally, they noted that one of the
best sources of information on call quality may be neighbors and
coworkers who are using their phones in ways that are similar to a new
customer's potential use.
Suggestions Included Setting Minimum Call Quality Standards:
To more directly affect call quality, some interested parties suggested
that carriers should be required to meet certain minimum quality
standards, such as a minimum percentage of calls that must be
successfully completed. As a result, consumers could expect that all
calls would meet these minimum standards. This proposal would require
establishing and measuring a common set of network performance
standards. In addition, some entity would need to oversee compliance
with the standard. FCC officials said that requiring a specific level
of service quality, such as a percentage of calls that must be
completed, might actually reduce the amount of competition and service
in the mobile phone market. Officials said, for example, that if a
certain level of service had to be provided, some carriers now offering
service might have to leave a particular market. If fewer carriers
provide service in these markets, prices would likely rise, and
consumers would likely have fewer choices. Moreover, in rural,
mountainous, and other hard-to-serve areas where some service is now
available, requiring minimal levels of service might discourage
carriers from serving these areas at all.
Carriers Say They Are Taking Actions to Improve Call Quality:
The national carriers we spoke with said that they recognize that call
quality is important to consumers and that they are taking actions to
improve call quality. However, carriers noted that they face financial
and regulatory constraints when they attempt to add base stations to
either provide service where none previously existed or increase
network capacity. These constraints include the following:
* Adding base stations involves capital expenditures. While carriers
had easy access to capital markets in the 1990s, the downturn in the
telecommunications industry made it more difficult for carriers to
access these markets. In addition, carriers and financial analysts
noted that carriers are facing a number of regulatory requirements--
such as local number portability and E-911 service--and that, to meet
these requirements, they must use scarce capital resources that could
be used to build out their networks.
* Adding base stations also involves securing suitable locations and
zoning approvals. According to industry data, almost 36,000 antennas
were installed between June 2000 and June 2002. Officials at all six of
the national carriers we spoke with said that local zoning provisions
limit their ability to site antennas in the most desirable locations.
Some of these carriers said that it often takes many months to obtain
permission to construct antennas.
Carriers noted that they could offset some of the need to build more
base stations if the federal government would allocate additional
radiofrequency spectrum for commercial mobile phone service. However,
other commercial and government users are already using other parts of
the spectrum that are suitable for mobile phone service. Thus,
providing more spectrum has proved to be a difficult and contentious
issue.[Footnote 28]
Conclusions:
As Americans have come to rely more on mobile phones to meet their
business and personal needs, it is important that FCC evaluate whether
competition is adequate to ensure that mobile phone consumers are
receiving the level of call quality they desire and expect. However,
FCC has not yet undertaken such an evaluation in its annual report on
competitive market conditions in the mobile phone service industry.
Collecting and analyzing information on call quality would provide an
ongoing record to help determine whether the current regulatory
framework for call quality is adequate or whether certain actions--such
as establishing call quality standards, mandating additional consumer
information, or reducing local government control over the siting of
new base stations--are needed.
Recommendation for Executive Action:
To assist FCC in determining whether further regulatory action
concerning mobile phone call quality is necessary, FCC should include
call quality in its congressionally mandated annual report on
competitive market conditions in the mobile phone industry. This report
should incorporate an analysis of whether market competition is
effective in ensuring that carriers are meeting consumers' expectations
and desires regarding call quality.
Agency Comments:
We provided a draft of this report to FCC for review and comment. In
its comments, which are reprinted in appendix IV, FCC said that it
believes that the ability of consumers to make informed choices in the
marketplace is critical to the growth of mobile phone services. FCC
noted that competition and deregulation in the mobile phone industry
have benefited consumers in several ways, including lower prices and an
increased diversity of service offerings. FCC also noted that for
carriers to attract and maintain customers, they must continue to offer
better packages of rates, network coverage, and call quality than their
competitors. FCC believes that these competitive forces will continue
to compel carriers to monitor and improve the quality and performance
of their networks. Regarding our recommendation, FCC agreed, to the
extent possible, to include information related to call quality in its
future reports on competition in mobile phone services. However, FCC
noted some difficulties in implementing the recommendation, such as
data not being readily available, the lack of objective performance
standards, and difficulties in measuring call quality against consumer
expectations.
:
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 5 days
after the date of this letter. At that time, we will send copies of
this report to the appropriate congressional committees; the Chairman,
FCC; and other interested parties. We will make copies available to
others upon request as well. In addition, the report will be available
at no charge on the GAO Web site at www.gao.gov. If you have any
questions about this report,
please contact me at 202-512-4325 or shearw@gao.gov. Key contacts and
major contributors to this report are listed in appendix V.
Sincerely yours,
William B. Shear
Acting Director, Physical Infrastructure Issues:
Signed by William B. Shear:
[End of section]
Appendixes:
Appendix I: Scope and Methodology:
To respond to the objectives of this report, we gathered information
from a variety of sources. First, we reviewed the relevant literature
on mobile phone networks, the relevant laws and regulations governing
the delivery of mobile phone service, and studies of competition and
consumer satisfaction in the mobile phone industry in the United States
and selected foreign countries. Second, we obtained the views of a
variety of experts on various aspects of mobile phone call quality.
These experts included government officials from the Wireless
Telecommunications Bureau and Consumer & Governmental Affairs Bureau at
FCC, FTC, and the offices of attorneys general or public utility
commissions in California, New York, Illinois, Massachusetts, Nebraska,
New Jersey, and Texas. We also contacted representatives of the six
nationwide U.S. mobile phone service carriers--AT&T Wireless, Cingular,
Nextel, Sprint PCS, T-Mobile USA, and Verizon Wireless. Representatives
of all of the carriers except AT&T Wireless answered our questions in
person or over the phone; AT&T Wireless responded to questions in
writing. In addition, we interviewed representatives of the mobile
phone industry's primary trade group, the Cellular Telecommunications &
Internet Association; consumer advocates; lawyers representing various
interested parties; financial analysts; consulting firms; companies
that install equipment to improve call quality; and companies that
conduct drive tests of the networks. Third, we provided questions on
call quality for a nationwide phone survey of adult consumers that
included questions on multiple topics submitted by various
organizations. Finally, we reviewed Web sites to determine the types
and quality of information on call quality available to consumers on
the Internet.
To better understand the regulatory framework we reviewed the FCC
rulemakings and notices that set up the original cellular rules, and
other relevant rulemakings, hearings, and notices that relate to
setting rules of the operation of mobile phone markets. We also
examined the Communications Act of 1934, Omnibus Budget Reconciliation
Act of 1993, and Telecommunications Act of 1996, the three major pieces
of legislation that set the statutory framework for mobile phone
markets. In addition, we reviewed several recent cases and court
rulings, including several focusing upon the jurisdictions of the state
and federal government over this sector. Furthermore, we examined FCC's
recent annual reports on competitive market conditions in the mobile
phone service industry. Finally, we spoke with mobile phone industry
representatives and financial analysts to learn their views on the
extent of competition.
To determine the extent to which consumers are experiencing call
quality problems, we sought data regarding call quality problems
through several means.
Carriers and other firms: We asked the six nationwide carriers for
their data on the extent of call quality problems and other aspects of
their services, including billing, contracts, marketing, and customer
service. We also asked the carriers about factors they see affecting
call quality. While all of the carriers provided us with some
information about their networks, they did not provide us with
geographic specific call quality data that we would need to help
determine the extent of call quality problems. The carriers also
provided us with information about factors that affect call quality,
and we obtained further information on these factors by speaking with
companies in investment banking, antenna leasing, and the development
and manufacturing of mobile phone equipment. Finally, we contacted
several companies that collect network performance data, including
Telephia Inc., LCC International Inc., and Scoreboard. Some of these
companies conduct "drive tests"[Footnote 29] for the carriers. During
these tests, computers are used to simultaneously place calls on the
networks of various carriers. The computers then record whether calls
went through and whether they were dropped within some specified call
time, such as 2 minutes.
Consumer complaints: We attempted to determine the extent of call
quality problems, as experienced by consumers. The six nationwide
carriers were unwilling to share information on customer surveys or
complaint data. We contacted the state public utility commissions to
learn whether they collect complaint data on mobile phone service or
otherwise regulate mobile phone service. Thirty-three state commissions
responded voluntarily to our request for information on whether they
regulate mobile phone service or categorize complaints. Of the six
states that collect complaints, California and Texas provided us with
their data. We collected consumer complaint data from FCC and FTC. We
turned to consumer groups that collect such complaints--including the
Wireless Consumer Alliance and Better Business Bureau--as well. Because
none of these sources adhere to a common standard for categorizing
complaints or a system to ensure that several sources are not
collecting complaints from the same consumer, we were not able to use
these data to reach overall conclusions about the extent to which
consumers are experiencing call quality problems. Finally, we reviewed
sources of information on the Internet. Several sites allow consumers
to report their experiences with their mobile phone service; however,
none of the sites we visited said that they verify the information or
delete it when it is no longer timely.
Consumer surveys: We collected data from consumer surveys. We spoke to
officials at Yankee Group, J.D. Power & Associates, and AARP about the
surveys they have conducted. Because these surveys did not provide all
of the information about call quality in which we were interested, we
also contracted with an international market research firm to
administer 26 questions as part of a nationwide, multipurpose, Random
Digit Dialing telephone survey of adults conducted between November 8
and 10, 2002. Our questions addressed issues such as call quality,
satisfaction with the quality of mobile phone service, complaint-making
practices, and factors involved in decisions to change companies. Five
hundred fifty-two of the 1,027 survey respondents had mobile phones and
answered at least some of the 25 questions in addition to the
preliminary screener question. The survey results were weighted by
various demographic characteristics--gender, age, race, and education
level.
The survey results are derived from a sample of the population. This
sample was one of a large number of samples that might have been drawn
from that population. The results from the sample that was actually
selected are subject to sampling error; that is, the extent to which
they differ from what would have been obtained if information had been
gathered from the entire population. We express confidence in the
precision of survey results as 95-percent confidence intervals, for
example, plus or minus 8 percentage points. For this survey, we
estimate that for the survey questions that applied to all of the
respondents who used mobile phones (417 or more) the 95-percent
confidence intervals are plus or minus 8 percentage points, or less.
Because fewer respondents answered the questions relating to changing
carriers (between 112 and 144), the confidence intervals for these
estimates are generally larger--plus or minus 15 percentage points, or
less.
Practical difficulties encountered in conducting this survey may
introduce nonsampling errors as well. As in any survey, differences in
the wording of questions, the sources of information available to
respondents, and the types of people who do not respond may have led to
errors that we could not assess. We took several steps to minimize some
of these nonsampling errors. For example, we developed our survey
questions with the aid of a survey specialist and pretested the
questions. However, we are concerned about the potential for those who
did not respond to the survey to differ from those who did respond in
some way that could affect the results. We have no explicit reason for
suspecting that the survey suffers from this shortcoming. Instead, our
concern arises out of the large sample of phone numbers dialed to
produce about 1,000 survey respondents--a response rate of about 13
percent of the estimated eligible population.[Footnote 30] The survey
results were weighted so that the overall demographic characteristics
of our sample match the gender, age, race, and educational
characteristics of the national population as measured in the Census
Bureau's March 2001 Current Population Survey. We have no basis for
determining to what extent this weighting adjusted for the views of the
87 percent of the sample who were not interviewed.
[End of section]
Appendix II: Results of Consumer Survey on Mobile Phone Service:
[See PDF for image]
[End of figure]
[End of section]
Appendix III: FCC Fact Sheet on Mobile Phone Service:
Among its duties, FCC's Consumer & Governmental Affairs Bureau educates
and informs consumers about telecommunications services. To this end,
the Bureau has produced a number of consumer alerts and fact sheets,
six of them dealing with mobile phone service. Among these, is a new
fact sheet called What You Should Know About Wireless Phone Service.
Posted on FCC's Web site at www.fcc.gov/cgb/wirelessphone.pdf, the new
fact sheet has been accessed an average of 60,000 to 70,000 times per
month, according to FCC officials. This fact sheet appears on the
following page.
[See PDF for image]
[End of figure]
[End of section]
Appendix IV: Comments from the Federal Communications Commission:
Federal Communications Commission:
Washington, D.C.
CHAIRMAN:
April 11, 2003:
Mr. William B. Shear:
Acting Director, Physical Infrastructure Issues United States General
Accounting Office:
441 G Street, N.W. Washington, D.C. 20548:
Dear Mr. Shear:
Thank you for sharing the General Accounting Office's ("GAO's") draft
report, titled "FCC Should Include Call Quality in Its Annual Report on
Competition in Mobile Phone Services." GAO's draft report recommends
that the Federal Communications Commission ("FCC" or "Commission")
include call quality in its mandated annual report analyzing whether
there is effective competition in the market for mobile phone services
("Competition Report"). The FCC values GAO's analysis of the call
quality issue and shares the belief that the ability of consumers to
make informed choices in the marketplace is critical to the growth of
mobile phone services. To that end, to the extent possible, the FCC
plans to include information related to call quality in its future
Competition Reports.
As the mobile telephone market matures, we believe that the industry
has already witnessed marked improvement in both call quality and
network performance. In this regard, we note your survey indicates that
most consumers are satisfied with the overall call quality of their
mobile phone service. Moreover, other competitive indicators such as
the number of cell sites deployed, the extent of digital coverage,
minutes of use, and subscribership have all increased substantially.
And, perhaps most significantly, the per-minute price of mobile
telephone service has fallen dramatically, thereby allowing more
consumers access to mobile telephone services.
As GAO recognizes in its draft report, the FCC has focused on a
deregulatory paradigm for the commercial mobile industry, which we
believe has been successful in allowing for marketplace forces to
improve consumer benefits for the more than 140 million consumers who
subscribe to wireless services. The rapid proliferation of wireless
services, in large part due to this deregulatory approach, has had an
enormous impact on our country, consumers, and public safety. From the
Commission's perspective, and as indicated in our annual reports
analyzing the competitive conditions in the commercial mobile telephone
industry, our pro-competitive, deregulatory policies are working in the
wireless industry, and the state of this industry from a consumer
perspective is strong. Competition and deregulation have resulted in
lower prices and an increased diversity of service offerings, which in
turn have stimulated rapid growth in the demand for wireless services
and substantial consumer benefits. In this competitive environment, in
order for wireless carriers to attract and maintain customers, they
must continue to offer better packages of rates, network coverage, and
call quality than their competitors. We
believe that these competitive forces will continue to compel carriers
to monitor and improve the quality and performance of their networks.
Thus, as the mobile telephone industry continues to evolve, we believe
that call quality will also benefit from further improvements.
Market forces not only provide an incentive for carriers to make call
quality a high priority, they have also created an incentive for
numerous third parties to produce consumer information on mobile
telephone service. As a result, there is considerable data currently
available to consumers, and most of it is at little or no cost. The
sources of information include publications, trade associations,
marketing and consulting firms, and at least eight websites dedicated
to giving consumers an overview and comparison of the mobile telephone
services available in their area. Some of these information sources
even rate carriers on call quality issues. Moreover, as noted in the
draft report, the FCC has developed a pamphlet that helps consumers
evaluate wireless services (available on our website at http://
www.fcc.gov/cgb/wirelessphone.pdf). This wide variety of information,
in conjunction with trial periods offered by service providers, allows
consumers to determine for themselves whether a carrier's coverage and
services meet their individual needs.
The Commission remains dedicated to allowing market forces to work in
order to provide high quality mobile phone services. To that end, we
believe that the strongest way for a consumer to let a provider know of
dissatisfaction with service quality is to change service providers.
However, as noted in your Report, consumers surveyed who wanted to
change carriers, but did not do so, identified the inability to keep
their mobile telephone number, or lack of wireless local number
portability ("LNP"), as an important factor in making that decision.
The Commission has been aware of this issue and wireless LNP
implementation is scheduled to begin this November. We believe that
this initiative will further reduce the transaction costs for consumers
wishing to change providers.
With respect to GAO's recommendation that the FCC should include call
quality in its Competition Report, we note that the Commission's past
seven Competition Reports have been written in accordance with Section
332 (c)(1)(C) of the Telecommunications Act.[Note 1] And, although the Seventh
Annual CMRS Competition Report did not track technical data on call
quality, per se, it did, like the reports before it, include important
consumer information on numerous advances in service innovations. We
believe that such service innovations are generally an indication of
competition in a market, and are, among other things, often
representative of improvements in call quality. Similarly, the
Commission's past Competition Reports have included discussions of the
rollout of digital service. Digital service has provided better call
quality, greater reliability, and additional calling features for
consumers. Our annual Competition Reports have also focused on trends
in pricing plans, churn and service provision, all of which affect a
consumer's ability to respond to a particular carrier's call quality.
Furthermore, in the Commission's recent Notice of Inquiry, [Note 2] we sought
additional information
on call quality, asking whether "quality of service" is an available
metric that will give us insight into the level of competition in the
provision of CMRS services, whether "CMRS providers' cost of capital
affect service availability, including ... the quality of service," and
how quality of service, among other performance metrics, vary between
the United States and other countries. [Note 3] The Commission also asked
specifically "How would the Commission measure service quality?"
[Note 4]
GAO concludes, specific data on call quality is not readily available.
Call quality, particularly dropped calls, is a reflection of a
carrier's density of coverage, and fundamentally, coverage is driven by
a carrier's ability to place additional cellular towers, which is a
difficult and cumbersome process because of the environmental, zoning,
historical preservation, and endangered species issues involved. Thus,
these sorts of call quality issues are difficult to identify and
categorize. To the limited extent other countries have collected
quality of service data independently, what they have found is that
such data is often subjective, of questionable reliability, and costly
to acquire. From our perspective, this lack of available data is
further complicated by the fact that there are no current objective
performance standards. Without an objective measurement system,
reporting such data may not serve to inform consumers.
The FCC is concerned that call quality is not reliably measurable
against consumer expectations as recommended by your Report. Because
consumer expectation and desire is a subjective standard, it would seem
quite difficult for the Competition Report to analyze to what degree
competition has met such a benchmark. In order to be more responsive to
consumer concerns in future Competition Reports, the Commission can,
however, isolate the available quantifiable information relating to
call quality in a manner that better allows the reader to understand
and locate this topic within the report.
I commend you and your staff for your fine work in helping to develop
ideas for improving access to information on call quality issues, both
for the FCC and for consumers. We support efforts to ensure that
consumer needs are met in this area.
Sincerely,
Michael K. Powell:
Signed by Michael K. Powell:
[1] 47 U.S.C. § 332(c)(1)(C).
[2] Implementation of Section 6002(b) of the Omnibus Budget
Reconciliation Act of 1993, Annual Report and Analysis of Competitive
Market Conditions With Respect to Commercial Mobile Services, Notice of
Inquiry, 17 FCC Rcd 24923 (2002).
[3] See id. at para. 4.
[4] ID. AT PARA. 18.8.
[End of section]
Appendix V: Key Contacts and Major Contributors:
GAO Contacts:
John P. Finedore, (202) 512-6248
Nancy S. Barry, (617) 788-0550:
Staff Acknowledgments:
In addition to those named above, David Dornisch, Christine Houle,
Sara Ann Moessbauer, Tom Taydus, Ed Warner, and Mindi Weisenbloom made
key contributions to this report.
(545014):
FOOTNOTES
[1] For purposes of this report, the term mobile phone service includes
the provision of mobile phone services by cellular, broadband personal
communications service, and digital specialized mobile radio carriers.
[2] Data provided by the Cellular Telecommunications & Internet
Association (CTIA), an industry trade association.
[3] See U.S. General Accounting Office, Telecommunications:
Comprehensive Review of U.S. Spectrum Management with Broad Stakeholder
Involvement Is Needed, GAO-03-277 (Washington, D.C.: January 2003).
[4] All percentage estimates from the survey have sampling errors of
plus or minus 8 percentage points or less, unless otherwise noted. For
details, see appendix I.
[5] Mobile phone service carriers offer three types of service--
cellular, personal communications service, and digital specialized
mobile radio--each with specific system characteristics that are not
apparent to users.
[6] The radiofrequency spectrum is the medium that enables wireless
communications of all kinds, such as mobile phone and paging services,
radio and television broadcasting, radar, and satellite-based services.
[7] As other mobile phone services began to develop, FCC granted
carriers greater flexibility.
[8] In 1988, FCC permitted cellular carriers to use digital technology
but required carriers to continue to offer analog service as well. In
2002, FCC provided a 5-year period to sunset the rules governing the
provision of analog service by cellular carriers.
[9] With CDMA, a spread spectrum approach to digital transmission, each
conversation is digitized and then tagged with a code. The mobile phone
is than instructed to decipher only a particular code to pluck the
right conversation off the air. TDMA allows a large number of users to
access (in sequence) a single radio frequency channel without
interference by allocating unique time slots to each user within each
channel. GSM, a standard that was developed in Europe, uses a TDMA
scheme, under which separate time slots are used to send and receive
calls.
[10] Commercial mobile phone service carriers were to be treated as
common carriers and regulated under Title II of the 1934 Communications
Act.
[11] FCC was authorized to refrain from applying certain provisions of
Title II that they found to be unnecessary under specific statutory
criteria. However, FCC was required to apply sections 201, 202, and 208
of the Communications Act of 1934. Respectively, these provisions
provide for service and interconnection upon reasonable request and
terms; no unjust or unreasonable discrimination; and complaint
procedures. 47 U.S.C. §§ 201, 202, and 208.
[12] The states were Arizona, California, Connecticut, Hawaii,
Louisiana, New York, Ohio, and Wyoming.
[13] Connecticut Dept. for Pub. Util. Control v. FCC, 78 F.3d 842 (2ND
Cir 1996).
[14] The 1996 forbearance standard is similar to the standard included
in the 1993 Act. See 47 U.S.C. §160, 47 U.S.C. §332(c).
[15] Certain limitations were placed on this authority. For example,
states or local governments must not unreasonably discriminate among
carriers of functionally equivalent services.
[16] See Federal Communications Commission, Annual Report and Analysis
of Competitive Market Conditions With Respect to Commercial Mobile
Services, FCC 02-179 (Washington, D.C.: July 3, 2002).
[17] At the same time, FCC removed the requirement that cellular
service carriers notify FCC if they lacked the capacity to service
certain customers.
[18] Letter from FCC Chairman Michael Powell to Senator Charles E.
Schumer, dated February 5, 2003.
[19] See www.fcc.gov/cgb/wirelessphone.pdf.
[20] See for example United Kingdom Office of Telecommunications,
Effective competition review: mobile--A Statement issued by the
Director General of Telecommunications, (London, U.K.: Sept. 26, 2001).
[21] See Federal Communications Commission, Annual Report and Analysis
of Competitive Market Conditions with Respect to Commercial Mobile
Services, Notice of Inquiry, FCC 02-327 (Washington, D.C.: Dec. 13,
2002).
[22] Complaints can be filed by phone at 1-888-Call-FCC (1-888-225-
5322) voice, 1-888-Tell-FCC (1-888-835-5322) TTY; by facsimile at 202-
418-0232; through the Internet at www.fcc.gov/cgb/complaints.html; by
e-mail at fccinfo@fcc.gov; or by mail to Federal Communications
Commission, Consumer & Governmental Affairs Bureau, Consumer
Complaints, 445 12TH Street, SW, Washington, D.C. 20554.
[23] FTC has broad law enforcement responsibilities under the Federal
Trade Commission Act, 15 U.S.C. § 41 et seq. With certain exceptions,
the statute provides the agency with jurisdiction over nearly every
economic sector. Certain entities, such as depository institutions and
common carriers (e.g., telephone companies), as well as the business of
insurance, are wholly or partly exempt from FTC jurisdiction.
[24] According to CTIA, mobile phone subscribership grew by over 103
percent between December 1998 and December 2002.
[25] Under FCC's rules promulgated in its Memorandum Opinion and Order,
FCC-02-215 (Washington, D.C.: July 2002) a commercial mobile phone
carrier located in one of the largest 100 metropolitan statistical
areas that receives a request by February 24, 2003, from another
carrier must be capable of providing local number portability by
November 24, 2003. For requests received after February 24, 2003,
carriers must be capable of providing local number portability,
depending on the upgrades needed, within 30 to 180 days after November
24, 2003, or 30 to 180 days after receiving the request, whichever is
later. Outside of the largest metropolitan statistical areas, the other
carriers must be able to provide local number portability within 6
months of the request or within 6 months of November 24, 2003,
whichever is later.
[26] CTIA and a major carrier have challenged how FCC applied the
forbearance standard when requiring mobile phone service carriers to
offer local number portability. In
FCC-02-205, FCC denied a petition to permanently refrain from enforcing
local number portability requirements for mobile phone service
carriers; instead, FCC granted a 1-year extension in the implementation
of this requirement to November 2003. These parties have continued to
contest the implementation of local number portability in the courts.
[27] See Australian Communications Authority, Telecommunications
Performance Report 2001-2002 (Melbourne, Australia: November 2002).
[28] See U.S. General Accounting Office, Defense Spectrum Management:
More Analysis Needed to Support Spectrum Use Decisions for the 1755-
1850 MHz Band, GAO-01-795 (Washington, D.C.: August 2001);
Telecommunications: Better Coordination and Enhanced Accountability
Needed to Improve Spectrum Management, GAO-02-906 (Washington, D.C.:
September 2002); and GAO-03-277.
[29] Drive tests are generally performed in vehicles traveling along
major road arteries.
[30] Of the 19,194 numbers called, 4,572 numbers were ineligible for
reasons such as the respondent's telephone was not working or the
number was not a residential household number. Of the remaining 14,622
numbers, for 1,027 of the numbers, an eligible respondent completed the
survey; for 2,055 of the numbers, the telephone was answered, but the
interview was not completed for reasons such as the appropriate
respondent was not available or refused to participate in the survey.
For the other 11,540 numbers, no interview was conducted for reasons
such as there was no answer or the call was answered by an answering
machine. As a result, we were not able to determine if these numbers
met the eligibility requirements for our survey. Of these 11,540
telephone numbers, we estimate that 4,646 were eligible, for an overall
estimated total of 7,728 numbers that met the eligibility requirements
for our survey.
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