Subject: [NEXTEL-1] 8th Annual Report and Analysis of Competitive Market Conditions With Respect to Commercial Mobile Services

From: [email-masked]
Date: Tue, 15 Jul 2003 16:08:16 -0400

Before the
Federal Communications Commission
Washington, D.C. 20554

In the Matter of

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

WT Docket No. 02-379

EIGHTH REPORT

   Adopted: June 26, 2003 Released: July 14, 2003

By the Commission:  Chairman Powell issuing a statement; Commissioner Copps
concurring and issuing a statement.

http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-03-150A1.doc

Table of Contents

Page
I. INTRODUCTION 3

A. Background 3
B. Sources of Information 5
C. Status of Competition 9
D. Structure of Report 10
E. Industry Development 11
II. Discussion and ANALYSIS 13

A. Spectrum Allocation 13
1. Current Allocation/Licensing 13
2. 700 MHz Bands 16
3. Future Allocation/Licensing 19

B. Network Overview 20
1. Network Design 20
2. Network Technology 21

C. CMRS Industry 22
1. Mobile Telephony Overview and Analysis 22
a. Market Structure 23
b. Market Performance 30
c. Pricing Data and Trends 44
d. Wireless/Wireline Competition 49
e. Geographical Comparisons: Urban vs. Rural 52
2. Resellers 56
3. Mobile Data 57
a. Introduction 57
b. CMRS Spectrum: Data-Only 59
c. CMRS Networks: Data-Only 60
d. Services, Content, and Applications 61
e. Devices 76
f. Wi-Fi 79
g. Telemetry and Telematics 82
4. Satellite Operators 83
5. International Comparisons 85
a. Performance 85
b. Market Environment 87
c. Mobile Data Developments 92

III. CONCLUSION 94
IV. ADMINISTRATIVE MATTERS 96

Statement of Chairman Powell
Statement of Commissioner Copps

APPENDIX A: Fixed Wireless Voice and Data Services
APPENDIX B: US Investment in Foreign Mobile Operators
APPENDIX C: Lower 700 MHz Auction #44 Results
APPENDIX D: Mobile Telephony Tables
APPENDIX E: Mobile Data Tables
APPENDIX F: Maps
APPENDIX G: List of NOI Commenters

 I. INTRODUCTION
A. Background
1. In 1993, Congress created the statutory classification of Commercial Mobile
Services  to promote the consistent regulation of mobile radio services that are
similar in nature.   At the same time, Congress established the promotion of
competition as a fundamental goal for CMRS policy formation and regulation.  To
measure progress toward this goal, Congress required the Federal Communications
Commission (“FCC” or “Commission”) to submit annual reports that analyze
competitive conditions in the industry.   This report is the eighth of the
Commission’s annual reports  on the state of CMRS competition.

2. Since the release of the Seventh Report, the Commission has expanded its
efforts to improve the quality and granularity of the data used to examine
competition in the CMRS industry.  In December 2002, the Commission released a
Notice of Inquiry (“NOI”) seeking data and information on the status of
competition in the CMRS industry.   The questions asked in the NOI and the
comments received are discussed in detail below.

3. The statute requiring the annual report on CMRS competition states,

The Commission shall review competitive market conditions with respect to
commercial mobile services and shall include in its annual report an analysis of
those conditions. Such analysis shall 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 of such competitors
have a dominant share of the market for such services, and a statement of whether
additional providers or classes of providers in those services would be likely to
enhance competition.

4. With the Eighth Report, we continue to comply with each of the four statutory
requirements for analyzing competitive market conditions with respect to
commercial mobile services.  First, Section II.C.1.b(ix), infra, identifies the
number of CMRS competitors.  Second, Section I.C, infra, discusses the
Commission’s analysis of effective competition.  Like previous reports, this
report addresses the third issue of whether any competitor has a dominant market
share in two main ways.  First, the report provides data on the total number of
subscribers served by the 25 largest carriers, which can be used to derive
subscribership market share figures for such carriers on a nationwide basis.
Second, the report includes measures of competition, such as churn,  service
quality, pricing, and market entry, which provide evidence that no single carrier
is able to act anti-competitively in the marketplace.   These figures indicate
that while there are several large, established carriers in the CMRS industry,
they have no guarantee of maintaining their market share, and they are faced with
consumers that would readily leave carriers that attempted to raise prices or
diminish service quality.  Furthermore, in exercising its forbearance authority,
the Commission has routinely acknowledged that it has chosen not to regulate CMRS
providers as dominant carriers.

5. In addressing the final statutory requirement to provide a statement of whether
additional providers would likely enhance competition, we conclude that the
market, as it is currently structured, is competitive,  and we include, as has
been done in previous reports, an analysis of how entry by new competitors has
enhanced competition.   Nevertheless, we continue to examine ways to eliminate
barriers to spectrum access in order to encourage entry for new competitors.

B. Sources of Information
6. As mentioned above, the Commission issued an NOI in December 2002 seeking data
and information on the status of competition in the CMRS industry for this
report.   The Commission requested data based on several metrics, including
service availability, subscribership, average revenue per unit (“ARPU”), usage,
churn, and pricing.   For each of these metrics, it requested data on both
national and sub-national levels, for different demographic groups, and broken
down by urban and rural areas.   The NOI also sought comment on the extent to
which these various metrics contribute to an analysis of CMRS competition.   In
order to enhance our analysis of CMRS service availability and competition, the
Commission asked service providers to submit their coverage maps in an electronic,
mapable format and to distinguish between the areas where they offer coverage to
subscribers and the areas where they market service to new customers.   The NOI
also requested input on whether there is meaningful competition in rural areas and
on how the Commission should define “rural” for purposes of its analysis of CMRS
competition.   Furthermore, the NOI asked for information on service quality, cost
of capital, wireless-wireline competition, mobile telephone service resellers, and
satellite providers, as well as mobile data services, service availability, and
pricing.

7. Parties that submitted comments in response to the NOI included regional and
national wireless operators, rural telephone companies, industry trade groups,
technology advocacy consortiums, and resellers.   Many commenters stated that the
CMRS marketplace is competitive and cited the data presented in previous reports
as evidence of that assertion.   These commenters also noted that the
publicly-available data on the industry that is included in our reports is
sufficient for analyzing CMRS competition.   Furthermore, many commenters
addressed the issue of the extent of competition in rural areas, and offered
suggestions on how to analyze data more effectively and how to define rural for
purposes of this report; such statements and suggestions have been integrated into
the Eighth Report below.   Other commenters provided input on the extent to which
mobile satellite providers and mobile telephone resellers compete in the CMRS
industry, and some parties submitted information on networks that providers use
and plan to use to offer high-speed mobile data services.   On the other hand,
many of the questions posed in the NOI were not directly addressed in the
comments.  For example, the Commission did not receive from commenters any new
data on subscribership, ARPU, usage, churn, or pricing on a national or
sub-national level, or broken down by demographic groups or urban/rural areas.  In
addition, service providers did not submit maps of their coverage areas or
distinguish between areas where they provide coverage and areas where they market
service.

8. Prior to the Seventh Report, the Commission based its analysis of competition
in the CMRS industry solely on numerous publicly-available sources of data on the
industry.  These sources included: company filings with the Securities and
Exchange Commission (“SEC”), data compiled and released by trade associations and
by other government agencies, reports by securities analysts and other research
companies and consultants, company news releases and web sites, newspaper and
periodical articles, and the Commission’s Universal Licensing System (“ULS”)
database.  In the Seventh Report, the Commission added two new sources of
information: the Numbering Resource Utilization / Forecast (“NRUF”) database,
described below, and information submitted at a Public Forum held in February
2002.  The Public Forum was held in order to examine ways in which to better
gather and analyze data for its reports, in particular data regarding the
development of competition in rural and underserved areas.   And for the Eighth
Report, we have included the relevant information submitted in response to the
NOI.  Nevertheless, we continue to rely primarily on the aforementioned
publicly-available sources and believe that they, when taken together, allow us to
analyze the extent of competition in the industry on a nationwide basis.  Because
many of these publicly-available sources report national averages that reflect
trends in the nation as a whole or in urban markets, they may provide limited
insight into the extent of competition in sub-national markets and in rural
areas.  However, the additional sources included in the Seventh and Eighth Reports
– the NRUF data and the information submitted at the Public Forum and in response
to the NOI – have enabled us to conduct a more granular analysis of competition on
a sub-national level and on an urban/rural basis.

9. In order to further uphold the integrity of our data on CMRS competition, we
include, in many places, multiple data sources to report on the same metric or
depict the same trend.  For example, this report and previous reports have
included data from three separate sources – the U.S. Department of Commerce Bureau
of Labor Statistics (“BLS”); economic research and consulting firm, Econ One; and
the Cellular Telecommunications and Internet Association (“CTIA”) – on the average
price of mobile telephone service, all of which have shown the price of service
declining.   In addition to using multiple sources for many metrics, we also
emphasize that some of the sources upon which we rely, particularly SEC filings,
are required by law to be accurate, and are scrutinized by independent third
parties.  The CTIA metrics used in the report are compiled and aggregated by an
independent third party in a manner that protects carrier confidentiality,
provides an incentive for carrier participation, and maintains the integrity of
the results.   Furthermore, other carrier-reported data included in the report,
such as coverage maps, are subject to contractual obligations with customers.
Because all carrier-reported data is compiled by the carriers themselves and
typically released in the aggregate to protect confidentiality, we are unable to
have in-depth knowledge of the minutia of such data.  However, we believe it is
appropriate to use these sources in our analysis of CMRS competition for the
reasons stated above.

10. As mentioned above, the Seventh Report integrated a new source of data
submitted directly to the FCC, the NRUF database.   The NRUF data tracks phone
number usage by all telecommunications carriers, including wireless carriers, in
the United States.  All mobile wireless carriers must report to the FCC which of
their phone numbers have been assigned to end users, thereby permitting the
Commission to make an accurate estimate of the total number of mobile
subscribers.  As in the Seventh Report, we continue to use the NRUF data to
determine the total number of mobile telephone subscribers and paging
subscribers.   In addition, because we collect NRUF data on a small, rate center
area basis,  we can use this information to estimate mobile telephone
subscribership levels and penetration rates on a regional basis in addition to a
national basis.  In the Seventh Report, the Commission therefore began reporting
mobile telephone penetration rates on an EA basis and continues to report them in
this manner in this report.

11. One of the most important metrics that the Commission has tracked since 1995
is the number of facilities-based mobile telephone carriers providing service in a
particular geographic area.   To track service launches by broadband Personal
Communications Services (“broadband PCS” or “PCS”) and Specialized Mobile Radio
(“SMR”) operators, the Commission has analyzed publicly-available information
released by the operators, such as news releases, filings with the SEC, coverage
maps available on operators’ Internet sites, and filings with the Commission.  The
Commission has based its analysis of cellular coverage on cellular licensees’
service area boundary maps, which are filed with the Commission.  The Commission
began tracking service launches on a BTA-by-BTA  basis in 1995, but switched to
the more detailed, county-by-county basis in the Fifth Report in an effort to
improve accuracy and significantly reduce the level of overcounting.   It has
derived from this data the number of competitors operating in every U.S. county
and hence the percentage of the U.S. population living in areas with a certain
number of competitors.   This data has also been used to derive the percentage of
the U.S. population living in counties with digital coverage.  As mentioned in
previous reports, there are several important caveats to note when considering the
data.  First, to be considered as “covering” a county, an operator need only be
offering any service in a portion of that county.  Second, multiple operators
shown as covering the same county are not necessarily providing service to the
same portion of that county.  Third, the figures for POPs  and land area in this
analysis include all of the POPs and every square mile in a county considered to
have coverage.  Therefore, our analysis overstates to some unknown and unavoidable
degree the total coverage in terms of both geographic areas and population
covered.  On the other hand, we believe our analysis to be the most accurate in
the industry today given the coverage data that is publicly available.

C. Status of Competition
12. Using the various information sources described above – the publicly-available
sources used in several previous reports, the NRUF database, as well as the data
and statements provided at the Public Forum and in the NOI comments – we have been
able to examine in this report several structural and performance measures of
competition in the CMRS industry.  These measures include the nature and number of
market participants, the geographic extent of service deployment, technological
improvements and upgrades, price competition, investment, usage patterns, churn,
subscriber growth, and product innovations, among other things.  After analyzing
these various measures, we conclude that there is effective competition in the
CMRS marketplace.

13. Regarding rural areas specifically, we also conclude that CMRS providers are
competing effectively in such areas.  Moreover, while it appears that, on average,
a smaller number of operators are serving rural areas than urban areas, this
difference does not necessarily indicate that effective CMRS competition does not
exist in rural areas.   On the contrary, as discussed in more detail below, data
and statements presented by Public Forum participants and NOI commenters provide
evidence that, despite the differing structure of rural markets, effective CMRS
competition does exist in rural areas.   Wireless carriers serving rural areas
describe the competition as “real,”  “significant”  and “sufficient.”   The most
recently released data provided by Econ One, which was also included in the
Seventh Report, showed that the average price of mobile telephone service in rural
areas appears to be very similar to the average price in urban areas.   Indeed, at
least one NOI commenter noted that nationwide and urban price trends have acted to
constrain prices in rural areas, even where the total number of operators may be
lower.   Furthermore, in addition to competing with each other, CMRS carriers in
rural areas may also provide competition to incumbent local exchange carriers.
One commenter that provides mobile telephone services in rural areas stated that
it “competes with wireline telephone companies as well as wireless companies” and
that “[c]onsumers are enjoying a facilities-based competitive alternative to the
local service formerly offered on a monopoly basis by the ILECs.”   In rural areas
where wireless networks may be an efficient technology for providing any type of
telephone service, additional CMRS providers may enhance not only CMRS competition
but wireline competition as well, benefiting consumers by increasing customer
choice, offering innovative services, and introducing new technologies.

14. In preparation for its ninth annual report and analysis of CMRS competition,
the Commission will be issuing another Notice of Inquiry seeking additional and
updated data from the public on the state of CMRS competition, particularly in
rural areas and on a sub-national level.  With this next Notice, we hope to build
on the information employed in this year’s report and to obtain a wider range of
facts and opinions from the public comments in order to assist in our analysis.
We also plan to explore other avenues for data collection, such as contract
research, for the next report.   In addition, for the next report, we will
continue efforts to improve our approaches to collecting and evaluating the
various types of data and information that are available in order to assess the
status of competition in the CMRS industry.  In particular, we plan to seek
comment on the interrelationship among dimensions of industry structure,
indicators of operator conduct, and other relevant measures of market conditions.

D. Structure of Report
15. As stated in previous reports, mobile voice and mobile data  services are no
longer clearly delineated in the marketplace.  Many mobile voice operators also
offer mobile data services using the same spectrum, network facilities, and
customer equipment.  Furthermore, many U.S. mobile carriers have integrated the
marketing of mobile voice and data services.  For these reasons, we find it
reasonable to analyze these services together in the Eighth Report in a larger,
more cohesive section on the CMRS industry as a whole (Section II.C).  This
section includes a sub-section discussing the market structure and performance
metrics and analyses related to mobile telephone operators,  many of which are now
relevant to both mobile voice and mobile data services.   Section II.C includes
another sub-section discussing individual mobile data services, devices, and
related developments.   This sub-section also provides information on those mobile
data providers that offer only mobile data services, instead of both voice and
data services, in many cases on networks distinct from those traditionally used to
provide mobile voice.

16. The Eighth Report also provides an overview, for background purposes, of the
spectrum and networks that mobile telephone operators currently use to offer both
voice and data services, prior to the discussion of CMRS industry developments.

E. Industry Development
17. During 2002, the CMRS industry continued to experience increased service
availability, lower prices for consumers, innovation, and a wider variety of
service offerings.   The mobile telephony sector of CMRS has shown significant
growth in spite of the difficult general economic environment, and mobile data
services have begun to play a more significant role in the CMRS industry.  In the
12 months ending December 2002, the mobile telephony sector generated over $76
billion in revenues,  increased subscribership from 128.5 million to 141.8
million,  and produced a nationwide penetration rate of roughly 49 percent.   One
analyst estimates that 11.9 million, or 8 percent, of the 141.8 mobile telephone
subscribers at the end of 2002 subscribed to some type of mobile Internet
service.   An additional 2.3 million consumers subscribed to mobile Internet
services on data-only mobile devices at the end of 2002.

18. To date, 270 million people, or 95 percent of the total U.S. population, live
in counties with access to three or more different operators (cellular, broadband
PCS, and/or digital SMR providers) offering mobile telephone service, a slight
increase from what the Commission found in the Seventh Report.   More than 236
million people, or 83 percent of the U.S. population, live in counties with five
or more mobile telephone operators competing to offer service.   Mobile telephone
carriers continued to upgrade their networks with next generation technologies
that allow them to offer mobile data services at higher data transfer speeds
typically ranging from 30 to 70 kilobits per second (“kbps”), with maximum data
rates of up to 144 kbps for some carriers.  As of March 2003, operators were
offering services over these next generation networks in at least some portion of
U.S. counties containing 265 million people, or 93 percent of the U.S.
population.   Furthermore, the average price of mobile telephone service has
declined during the year since the Seventh Report, continuing the trend of the
last several years.   At the same time, one survey indicates that the average
revenue per minute of mobile telephone use fell 9 percent between 2001 and 2002.

19. Mobile data providers, which include both mobile telephone carriers and
companies that offer data-only mobile services, began offering a variety of new
services to consumers during the past year, including downloadable ring tones and
graphics, multimedia messaging services (“MMS”),  and interactive gaming.   In
addition, the more established mobile data services, such as text messaging and
e-mail, continued to grow in popularity.   It is estimated that 20 percent of all
mobile telephone subscribers used text messaging services during the fourth
quarter of 2002.   Furthermore, while the use of paging devices has declined
substantially over the past four years, we estimate there were 14.1 million paging
units in service at the end of 2002.

II. DISCUSSION AND ANALYSIS
A. Spectrum Allocation
1. Current Allocation/Licensing
20. Currently, mobile telephone operators primarily use three types of spectrum
licenses to provide mobile voice and, in most cases, mobile data services:
cellular, broadband PCS, and SMR.   This information is provided as a basis for
understanding the formation of the current industry structure. However, we
continue to take steps to increase spectrum flexibility and availability.

21. Cellular – The Commission began licensing commercial cellular providers in
1982 and completed licensing the majority of operators by 1991.  The Commission
divided the United States and its possessions into 734 cellular market areas
(“CMAs”), including 305 MSAs, 428 RSAs, and a market for the Gulf of Mexico.   Two
cellular systems were licensed in each market area.  The Commission designated 50
megahertz of spectrum in the 800 MHz frequency band for the two competing cellular
systems in each market (25 megahertz for each system).  Initially, cellular
systems offered service using analog technology, but today most of the service
offered using cellular spectrum is digital.

22. Broadband PCS – Broadband PCS is similar to cellular service, except that
broadband PCS systems operate in different spectrum bands and have been designed
from the beginning to use a digital format.  Broadband PCS licenses have been
assigned through auction, beginning in 1995.    The most recent broadband PCS
auction was completed in 2001.   The Commission has set aside the spectrum between
1850 MHz and 1990 MHz for broadband PCS.  This spectrum includes 120 megahertz
used for mobile telephony, divided originally into three blocks of 30 megahertz
each (blocks A, B, and C) and three blocks of 10 megahertz each (blocks D, E, and
F).   Two of the 30 megahertz blocks (A and B blocks) are assigned on the basis of
51 Major Trading Areas (“MTAs”).   One of the 30 megahertz blocks (C block) and
all three of the 10 megahertz blocks are assigned on the basis of 493 BTAs.

23. SMR - The Commission first established SMR in 1979 to provide for land mobile
communications on a commercial basis.  The Commission initially licensed spectrum
in the 800 and 900 MHz bands for this service, in non-contiguous bands, on a
site-by-site basis.   The Commission has since licensed additional SMR spectrum
through auctions.   In total, the Commission has licensed 19 megahertz of SMR
spectrum, plus an additional 7.5 megahertz of spectrum that is available for SMR
as well as other services.   While Commission policy permits flexible use of this
spectrum, including the provision of paging, dispatch, mobile voice, mobile data,
facsimile, or combinations of these services,  the primary use for SMR
traditionally has been dispatch services.   Dispatch differs from mobile voice
communications offered by PCS and cellular carriers in that it allows both
one-to-one and one-to-many communication (including real-time conferencing with
groups), and it generally does not operate through interconnection with the public
switched telephone network.   SMR systems have also had the ability to offer
interconnected service, but until the development of digital technologies, analog
SMR systems had limited capacity to provide mobile telephony.  In recent years,
however, the nature of SMR service has evolved significantly.  SMR providers such
as Nextel Communications, Inc. (“Nextel”) and Southern LINC, a unit of energy
concern Southern Company, have used digital technologies to increase spectral
efficiency and to become more significant competitors in mobile telephony, while
also providing dispatch functionality (also know as “push-to-talk”) as a part of
their service offerings.   Furthermore, in apparent response to the dispatch
functionality of SMR services, cellular and broadband PCS carriers have recently
begun to offer dispatch-like options (e.g., group calling and conferencing) as
part of their service offerings, particularly for businesses.   Some cellular and
broadband PCS carriers have said that they plan to offer push-to-talk
functionality on their networks in 2003.   SMR spectrum is also used for certain
data-only networks.

24. Available Licenses – In every geographical area of the country, the Commission
initially authorized up to eight different mobile telephony licenses (two cellular
and six broadband PCS), not including additional digital SMR licenses.   Moreover,
under Commission rules, broadband PCS, cellular, and auctioned SMR licensees may,
with Commission approval, disaggregate (divide the spectrum into smaller amounts
of bandwidth) or partition (divide the license into smaller geographical areas)
their licenses, or both, to other entities.   Many licensees hold more than one
license in a particular market.  While no longer in operation, the Commission’s
CMRS spectrum cap molded the current distribution of spectrum licenses.  Under the
spectrum cap, no entity could control more than 45 megahertz of cellular,
broadband PCS, and SMR  spectrum in an MSA, or more than 55 megahertz in an RSA.
In November 2001, however, the Commission raised the spectrum cap to 55 megahertz
in all markets, and decided to eliminate the restriction entirely effective
January 1, 2003.   In addition, the Commission restricts an entity from having
certain cross-interests in cellular licenses on both blocks within an RSA.

2. 700 MHz Bands
25. One of the Commission’s primary goals in recent years has been to establish
service rules in new and reallocated spectrum bands that will promote innovative
services and encourage the flexible and efficient use of the spectrum resource.
In recent years the Commission has addressed its statutory directives under
Section 309(j) of the Communications Act by addressing the growing complexities of
spectrum management using approaches consistent with general market-based
principles.  One example of this is the 700 MHz spectrum that is being reclaimed
from use by broadcast services in connection with the transition of the analog
television service to digital television.  The reclamation of television spectrum
has been addressed in two parts, primarily as a result of different statutory
requirements applicable to the two bands and differing degrees of incumbency in
the two bands.   These two bands are the 698-746 MHz (known as the “Lower 700
MHz”) band and the 746-806 MHz (or “Upper 700 MHz”) band.  The Upper 700 MHz Band
is currently used by TV stations on Channels 60-69 and comprises 60 megahertz,
while the Lower 700 MHz Band, which is used by TV stations on Channels 52-59,
comprises 48 megahertz of spectrum.

26. Seventy-eight megahertz of the total 108 megahertz of Upper and Lower 700 MHz
spectrum will generally be open to a broad range of flexible uses.   Pursuant to
statutory mandate, licenses for this spectrum will be assigned through competitive
bidding.   These bands have many permissible uses: winning bidders may use the
spectrum for fixed, mobile (including mobile wireless commercial services), and
broadcast services.   The Commission expects that many of the new technologies to
be developed and deployed in this band will support advanced wireless
applications.   However, much of the Upper and Lower 700 MHz spectrum is currently
encumbered by television broadcasters, and may remain so until the end of period
when broadcasters convert from analog to digital transmission systems.   That
period is defined by statute.   Nevertheless, there may be some portions of these
bands that are not so encumbered and are available for immediate use by new
entrants.

27. The Balanced Budget Act of 1997 and subsequent legislation initially directed
the Commission to license these reclaimed spectrum bands well in advance of the
end of the DTV transition period.   Pursuant to statutory deadlines established in
that legislation, the Commission announced that it would conduct auctions of the
Upper 700 MHz band (Auction No. 31) and Lower 700 MHz band (Auction No. 44)
starting on June 19, 2002.   In response to concerns over this schedule and
questions about whether the statutory auction deadlines that had been enacted in
that legislation were “consistent with sound telecommunications policy and
spectrum management principles,” Congress passed, and the President signed into
law, the Auction Reform Act of 2002.   The Auction Reform Act eliminated these
statutory deadlines.  Further, the Auction Reform Act provided the Commission with
discretion to “determine the timing of and deadlines for the conduct of
competitive bidding under [Section 309(j) of the Communications Act of 1934, as
amended], including the timing of, and deadlines for, qualifying for bidding;
conducting auctions; collecting, depositing, and reporting revenues; and
completing licensing processes and assigning licenses.”

28. The Auction Reform Act ordered the Commission to delay the A, B, and E block
portion of Auction No. 44 (Lower 700 MHz) and the entire Auction No. 31 (Upper 700
MHz), yet it also directed the Commission to proceed with an auction of the C and
D blocks starting “no earlier than August 19, 2002, and no later than September
19, 2002.”   On September 18, 2002, the initial auction of Lower 700 MHz C and D
block licenses (Auction No. 44) closed, raising $88.7 million in net bids.   The
Commission offered 740 licenses:  one 12 megahertz license in 734 CMAs, and one 6
megahertz license in 6 Economic Area Groupings (“EAG”).   The Commission selected
CMAs as the license areas in part to address the needs of small, regional, and
rural carriers.   A total of 102 bidders won 484 licenses;  47 of the winning
bidders were rural telcos, and they won 136 licenses.

29. On March 4, 2003, the Commission announced that it would reauction the
licenses that did not have winning bidders in auction 44.   On June 13, 2003, the
Federal Communications Commission completed the auction of 256 licenses in the
Lower 700 MHz band C and D blocks (Auction No. 49), raising (in net high bids) a
total of $56.8 million.   In that auction, 35 winning bidders won a total of 251
licenses.

30. As required by the Auction Reform Act, we have prepared a report announcing
when we  intend to reschedule the remaining 700 MHz band auctions, and submitted
the report to Congress on June 19, 2003.

3. Future Allocation/Licensing
31. As discussed in the Seventh Report, U.S. mobile carriers have the flexibility
to deploy technologies, including those commonly called Third Generation or “3G,”
that will allow them to offer high-speed mobile data services using their existing
CMRS spectrum.   Nevertheless, the Commission has continued its efforts over the
past year to allocate and license additional spectrum suitable for offering
advanced wireless services.  Since the publication of the Seventh Report, the
Commission, in conjunction with the National Telecommunications and Information
Administration (“NTIA”), allocated 90 megahertz of spectrum that can be used to
offer advanced wireless, including 3G, services: 1710-1755 MHz, which is currently
used by the Department of Defense, and 2110-2155 MHz, which is currently used by
private and common carrier fixed microwave licensees and by Multipoint
Distribution Service (“MDS”) licensees.   In November 2002, the Commission
released a Notice of Proposed Rulemaking seeking comment on service rules for
offering advanced wireless services in these bands, including provisions for
licensing, operational and technical rules, and for competitive bidding.   On
February 10, 2003, we released an order reallocating 30 megahertz of spectrum from
the Mobile Satellite Service in the 2 GHz band (“2 GHz MSS”) to fixed and mobile
services that can be used to provide a variety of advanced wireless services.
With this action, we preserved 40 megahertz of spectrum in the 2 GHz band for MSS.

32. In addition, the Commission in May 2002 implemented service rules for 27
megahertz of spectrum in seven different bands that had been reallocated for
non-government use.   The Commission determined that four of these bands –
1390-1392 MHz, 1392-1395/1432-1435 MHz, 1670-1675 MHz, and 2385-2390 MHz – would
be open to flexible use and licensed by competitive bidding, while the remaining
three would be licensed for telemetry services on a frequency coordinated
site-by-site basis.  In April 2003, the Commission auctioned the 1670-1675 MHz
band as a single, nationwide license, and the license was purchased by OP
Corporation for $12.6 million.
B. Network Overview
33. As mentioned above, many mobile telephony carriers use not only the same
spectrum bands but also the same network design and technologies to offer both
voice and data services.  While different carriers have chosen different
technology migration paths, which are described below,  all are in the process of
upgrading their networks in order to improve capacity, increase their advanced
service offerings, and/or provide compatibility for their roaming partners’
customers.  Furthermore, many carriers have continued to expand their networks in
order to increase their competitiveness with more established operators.

1. Network Design
34. Cellular, PCS, and digital SMR networks use the same basic design.  All use a
series of low-power transmitters to serve relatively small areas (“cells”), and
all employ frequency reuse to maximize spectrum efficiency.   In the past,
cellular and SMR networks used an analog technology, while PCS networks were
designed from the start to use a digital format.  Digital technology provides
better sound quality and increased spectral efficiency than analog technology.
Competitive forces combined with increased capacity have induced companies to
offer calling plans with large buckets of relatively inexpensive minutes, free
enhanced services such as voicemail and caller ID, and wireless data and mobile
Internet offerings.   From a customer’s perspective, digital service in the
cellular band or SMR bands is virtually identical to digital service in the PCS
band.  Digital technology is now dominant in the mobile telephone sector, with
approximately 88 percent of all wireless subscribers using digital service.

2. Network Technology
35. The four main digital technologies used in the United States are: Code
Division Multiple Access (“CDMA”), Global System for Mobile Communications
(“GSM”), integrated Digital Enhanced Network (“iDEN”), and Time Division Multiple
Access (“TDMA”).  These four technologies are commonly referred to as Second
Generation, or “2G,” because they succeeded the first generation of analog
cellular technology, Advanced Mobile Phone Systems (“AMPS”).   As discussed in the
Seventh Report, as a result of industry developments, this report no longer
distinguishes between TDMA and GSM networks in its analysis of digital coverage,
but considers the two as one migration path towards more advanced digital
capabilities.  We recognize that TDMA as currently deployed will continue to be
used by millions of subscribers for a number of years.

36. Beyond the 2G digital technologies, mobile telephone carriers have been
deploying next-generation network technologies  that allow them to offer mobile
data services at higher data transfer speeds and, in some cases, increase voice
capacity.  TDMA/GSM carriers are deploying General Packet Radio Service (“GPRS” or
“GSM/GPRS”), a packet-based data-only network upgrade that allows for faster data
rates by aggregating up to eight 14.4 kbps channels.   GPRS’s maximum data
throughput rate is 115 kbps, but customers typically experience download speeds
ranging from 30 to 60 kbps.   After rolling out GPRS, most U.S. TDMA/GSM carriers
plan to deploy Enhanced Data Rates for GSM Evolution (“EDGE”) and eventually
Wideband CDMA (“WCDMA,” also known as Universal Mobile Telecommunications System,
or “UMTS”).   EDGE and WCDMA are expected to raise peak network speeds to 384-473
kbps and 2-2.4 Mbps, respectively.

37. Many CDMA carriers have been upgrading their networks to CDMA2000 1xRTT (also
referred to as “CDMA2000 1X” or “1xRTT”), a technology that doubles voice capacity
and allows maximum data throughput rates of 144 kbps.   Actual download speeds
range from 30 to 70 kbps.   The next step in the CDMA migration beyond 1xRTT is
CDMA2000 1X EV-DO (evolution-data only, “EV-DO”) or 1X EV-DV (evolution data and
voice, “EV-DV”), which allow maximum data throughput speeds of 2.4 and 3.09 Mbps,
respectively, and actual speeds ranging from 300 to 700 kbps.

C. CMRS Industry
1. Mobile Telephony Overview and Analysis
38. This report defines the mobile telephone sector to include all operators that
offer commercially available, interconnected mobile voice services.  These
operators provide access to the public switched telephone network (“PSTN”) via
mobile communication devices employing radiowave technology to transmit calls. As
discussed above, providers using cellular radiotelephone, broadband PCS, and SMR
licenses dominate this sector.   Because these licensees offer mobile telephone
services that are essentially interchangeable from the perspective of most
consumers, they are discussed in this report as a cohesive industry sector.

39. The discussion below describes the mobile telephone sector as a whole and
includes sections on market structure, market performance, pricing,
wireless-wireline competition, and urban-rural comparisons.  This is followed by
discussions of resellers, mobile data services, and mobile telephone satellite
providers, as well as international comparisons.

a. Market Structure
40. In the United States, there are six mobile telephone operators that analysts
typically describe as nationwide: AT&T Wireless, Sprint PCS,  Verizon Wireless,
LLC (“Verizon Wireless”),  T-Mobile,  Cingular Wireless, LLC (“Cingular Wireless”
or “Cingular”),  and Nextel.  When an operator is described as being “nationwide,”
it does not necessarily mean that the operator’s license areas, service areas, or
pricing plans cover the entire land area of the United States.  The six mobile
telephony carriers that analyst reports typically describe as nationwide all offer
service in at least some portion of the western, midwestern, and eastern United
States.  In addition, each of the six national operators has networks covering at
least 200 million people, while the next largest provider covers less than 60
million people.   In addition to the nationwide operators, there are a number of
large regional players, including ALLTEL Corp. (“ALLTEL”), Western Wireless Corp.
(“Western Wireless”), United States Cellular Corp. (“US Cellular”), and Dobson.

41. Since the end of 1999, carriers have been building nationwide footprints
through various forms of transactions.   One of the driving forces behind many of
these transactions has been the desire of large regional carriers to enhance their
ability to compete with existing nationwide operators that offer attractive
nationwide pricing plans.   Also, as the Commission has previously concluded,
operators with larger footprints can achieve certain economies of scale and
increased efficiencies compared to operators with smaller footprints.   More
recently, national operators have sought to fill in gaps in their coverage areas,
as well as to increase the capacity of their existing networks.  Since the writing
of the Seventh Report, a number of transactions between market participants have
been announced.  We discuss the transactions involving the largest impact, either
through the exchange of subscribers or spectrum licenses, on the structure of the
market below.  In addition, we discuss some of the carriers that have declared
bankruptcy and/or announced other restructuring plans during the past year.

(a) Sales and Swaps
42. Verizon Wireless/Northcoast Communications – On December 19, 2002, Verizon
Wireless announced that it had signed an agreement with Northcoast Communications,
LLC (“Northcoast”) to purchase 50 of Northcoast’s 56 PCS licenses, as well as
related network assets, for approximately $750 million in cash.   The fifty
10-megahertz licenses cover roughly 47 million people in parts of the Midwest and
East Coast, including New York and Boston.   Verizon Wireless stated that the
additional spectrum would help it to increase capacity on its network.   The deal
did not include the Cleveland market, where Northcoast is currently providing
service under the brand name “Northcoast PCS.”   The Wireless Telecommunications
Bureau granted consent to the transaction on April 8, 2003.

43. Triton PCS/Lafayette Communications – During 2002, Triton PCS announced
agreements to acquire substantially all of the spectrum licenses of its affiliate,
Lafayette Communications (“Lafayette”).   Triton PCS completed the acquisition of
nine Lafayette licenses in the third quarter of 2002, paid for with the
extinguishment of approximately $22 million in debt that Lafayette owed to Triton
PCS.   Triton PCS said that the acquisition was undertaken to meet the spectrum
needs of its current network overlay of GSM/GPRS technology.   In the fourth
quarter of 2002, Triton PCS entered into agreements with Lafayette for the
acquisition of most of Lafayette’s remaining spectrum licenses for approximately
$127 million.   The Wireless Telecommunications Bureau granted consent to the
transactions on April 30, 2003.   During 2001, Lafayette had acquired PCS licenses
covering a population of approximately 6.3 million people in areas of Georgia,
South Carolina, Tennessee, and Virginia.

44. AT&T Wireless/US Cellular – On March 10, 2003, AT&T Wireless and US Cellular
announced that they had signed an agreement to swap licenses and assets across 15
states and covering more than 18 million people.   In this transaction, US
Cellular is acquiring PCS licenses (but no networks) in 13 states in the Midwest
and Northeast covering 16.6 million people, as well as $31 million in cash.   AT&T
Wireless is acquiring cellular licenses in Florida and Georgia, covering about 1.5
million people, as well as network facilities and 141,000 customers.   The
acquisition fills a gap in AT&T Wireless’s network  and may reduce the company’s
roaming expenses in Florida.   The deal, pending regulatory approval, is expected
to close in the second half of 2003.

(b) Joint Ventures
45. Cingular Wireless/AT&T Wireless – As discussed in the Seventh Report, in
January 2002, Cingular Wireless and AT&T Wireless announced the formation of an
infrastructure joint venture to build out a GSM/GPRS network along 3,000 miles of
interstate highways predominantly in western and midwestern states.   The
companies have since expanded the venture to include highways in New England,
increasing the coverage of the joint venture to more than 4,000 miles of roads.
The companies also recently announced a new agreement to reduce roaming costs on
each other’s networks.

46. AT&T Wireless/Sprint PCS – In January 2003, AT&T Wireless and Sprint PCS
signed an agreement through which they will cooperate in the construction of new
wireless towers.   Under the terms of the agreement, the companies will share
information about their current tower inventories and future construction plans.
This includes identifying areas of overlap; determining which company will build
and maintain the tower; and deciding which will co-locate its network facilities
on it.   The companies claim that the arrangement will enable them to reduce the
number of towers needed and the associated capital expenditures, thus enhancing
their wireless footprints faster and at lower cost.

47. Cingular Wireless/T-Mobile – As mentioned in the Seventh Report, Cingular
Wireless and T-Mobile (then known as VoiceStream) announced an infrastructure
sharing joint venture in October 2001 whereby the companies would share their
existing GSM networks in California, Nevada, and New York.    Since then, in July
2002, T-Mobile launched service in California and Nevada (where Cingular already
offered service), while Cingular launched service in New York City (where T-Mobile
already offered service).

(c) Restructurings
48. Leap Bankruptcy – On April 13, 2003, Leap Wireless International, Inc.
(“Leap”)  filed a voluntary petition for reorganization under Chapter 11 of the
U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern
District of California.   Based on Leap’s fiscal 2002 results, the company’s net
loss for 2002 was $664.8 million on revenues of $618.5 million, with debt of
almost $2.5 billion.   The company stated that daily operations will continue
during reorganization, and that it does not expect to implement any organization
changes or dismiss employees as a result of the filing.   The company also expects
that, under any plan of reorganization agreed to with its creditors, there will be
little or no value left in the company for common stockholders.   Leap’s stock was
delisted from the NASDAQ stock exchange in December 2002.

49. Ntelos Bankruptcy – Ntelos, Inc. (“Ntelos”) filed for Chapter 11 bankruptcy
protection in the U.S Bankruptcy Court for the Eastern District of Virginia on
March 4, 2003.   Ntelos, which had 266,000 wireless customers at the end of 2002
in Virginia, West Virginia, Kentucky, Tennessee, and North Carolina, had missed
interest payments of more than $24 million on loans from commercial debt holders
in February 2003.   Under the terms of its loan agreements, Ntelos had a 30-day
grace period before it was considered to be in default.   The company does not
expect the bankruptcy filing to affect its operations.

50. iPCS Bankruptcy – On February 24, 2003, Sprint PCS affiliate AirGate PCS, Inc.
(“AirGate”) announced that its wholly-owned subsidiary, iPCS Inc. (“iPCS”) filed a
Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the
Northern District of Georgia.   At the time of its acquisition by AirGate in
November 2001,  iPCS had licenses covering more than 7.4 million people in
Illinois, Michigan, Iowa, and eastern Nebraska, and served roughly 30,000
customers.

51. NextWave Telecommunications Inc. and NextWave Power Partners, Inc.
(“NextWave”) –NextWave, a wireless carrier with 95 C, D, E and F block PCS
licenses covering 174 million POPs, recently announced that it will move forward
with its bankruptcy reorganization efforts.

(d) Withdrawn IPO
52. On January 29, 2003, Verizon announced that Verizon Wireless had withdrawn its
registration for an initial public offering (“IPO”).   Verizon Wireless filed the
initial registration statement on August 24, 2000.   Verizon said that the IPO was
no longer needed because of strong cash flow at Verizon Wireless and its lack of
significant funding requirements.

(e) Affiliations
53. Three of the nationwide operators also have extended their coverage through
contractual affiliations with smaller carriers.  These affiliations create a
“family” of operating companies with much closer relationships than those formed
by traditional roaming agreements.   All of these affiliations were established to
accelerate the build-out of the larger companies’ networks by granting smaller
affiliates the exclusive right to offer mobile services for those companies, in
some cases under the larger companies’ brand names, in selected mid-sized and
smaller markets.

54. AT&T Wireless – The AT&T Wireless family consists of AT&T Wireless, as well as
its affiliations with two companies: Triton PCS and Edge Wireless, LLC (“Edge”).
In the case of Triton PCS, AT&T Wireless sold portions of some of its broadband
PCS licenses to the company in exchange for a minority ownership interest.   While
Triton PCS is marketed under the brand name SunCom  and Edge is marketed under its
own name, both companies provide service as a “Member of the AT&T Wireless
Network.”  These affiliates, like AT&T Wireless, have committed to upgrading their
TDMA networks to GSM/GPRS.

55. Nextel – The Nextel family consists of Nextel and Nextel Partners, Inc.
(“Nextel Partners”).  In an arrangement similar to that of AT&T Wireless with its
affiliates,  in 1999, Nextel sold some of its SMR licenses to Nextel Partners in
exchange for a minority ownership interest in the company.   Nextel Partners is
building out an iDEN network compatible with Nextel’s, and Nextel assists Nextel
Partners in obtaining terms similar to those Nextel receives from vendors for
equipment and services.   Both Nextel and Nextel Partners market their services
under the Nextel brand name.

56. Sprint PCS – The Sprint PCS family consists of Sprint PCS and 10 affiliates.
Each of the affiliates has an agreement with Sprint PCS to use the latter’s PCS
licenses to deploy CDMA technology and Sprint PCS-branded service in specific
areas of the country.   In return, Sprint PCS receives 8 percent of the
affiliates’ local service revenue.   In addition, Sprint PCS performs back-office
tasks at cost for most of its affiliates, giving them the benefits of economies of
scale for billing and customer service.   Sprint PCS affiliates now provide
service to more than 2.5 million subscribers.

b. Market Performance
57. Using the various information sources described in the introduction – the
publicly-available sources used in several previous reports, the NRUF database, as
well as the data and statements provided at the Public Forum and in the NOI
comments – we have been able to examine in this report several structural and
performance measures of competition in the CMRS industry.  Some of the key metrics
reported by mobile telephone operators, such as subscriber growth, average monthly
usage per subscriber, and average revenue per subscriber, while not individually
indicative of competition per se, demonstrate the increased demand for and
reliance placed on mobile telephony services over the past year.  Moreover, it is
the totality of the circumstances – including prices, the number of competitors,
investment levels, and churn rates, as well as the other metrics listed above –
that shows the extent of competition in the growing CMRS industry.  Continued
downward price trends, the continued expansion of mobile networks into new and
existing markets, high rates of investment, and churn rates of about 30 percent,
when considered together with the other metrics, demonstrate a high level of
competition for mobile telephone consumers.  We examine these different metrics
because each one highlights a different aspect of the industry, and collectively
provide a fuller picture of the state of competition.

(i) Subscriber Growth
58. In the Seventh Report, in an effort to improve the accuracy of its estimate of
U.S. mobile telephone subscribership, the Commission began analyzing information
filed directly with the FCC.  This information, the NRUF data,  tracks phone
number usage information for the United States.   All mobile wireless carriers
must report to the FCC which of their phone numbers have been assigned to
end-users, thereby permitting the Commission to make more accurate estimates
regarding subscribership.   In previous years, for purposes of this report, the
Commission had relied on national subscribership data from a highly-respected
survey conducted by CTIA.    While the Commission, for purposes of this report,
now uses NRUF data as the basis for its estimate of mobile telephone
subscribership, we continue to report the CTIA data as well for comparison.

59. As of December 2002, we estimate that there were 141.8 million mobile
telephone subscribers,  which translates into a nationwide penetration rate of
roughly 49 percent.   While this increase of 13.3 million subscribers  from the
estimate of 128.5 million in 2001 is significant, it is only a 10 percent increase
from the previous year and continues the leveling off of wireless growth the
Commission noted in the Seventh Report.

60. CTIA’s estimate for year-end 2002 was 140.8 million subscribers, a 10 percent
increase over its estimate of 128.4 million subscribers as of year-end 2001.
CTIA’s absolute increase of 12.4 million subscribers represents the smallest
12-month increase in subscribership in the last five years, and the 10 percent
increase was the smallest growth rate in subscribership since the survey began.
The large absolute number of new subscribers indicates the continued demand for
mobile wireless service.  Analysts believe that one reason for the slowdown in
subscriber additions may be the industry’s current focus on profitability rather
than expansion of its subscriber base or revenue growth.

61. Digital subscribers made up approximately 88 percent of all wireless
subscribers at the end of 2002, up from 80 percent at the end of 2001.   During
2002, the number of customers subscribing to digital services climbed 21 percent,
from approximately 102 million to 125 million.   Approximately 17 million mobile
telephony subscribers are analog only, a drop of 34 percent from 2001.

(ii) Regional Penetration Rates
62. NRUF data is collected on a small area basis and thus allows the Commission to
compare the spread of mobile telephone subscribership across different areas
within the United States.   EAs, which are defined by the Department of Commerce’s
Bureau of Economic Analysis, are particularly well-suited for comparing regional
mobile telephony penetration rates for two reasons.   First, the defining aspect
of mobile telephony is, of course, mobility.  Each EA is made up of one or more
economic nodes and the surrounding areas that are economically related to the
node.  The main factor used in determining the economic relationship between the
two areas is commuting patterns, so that each EA includes, as far as possible, the
place of work and the place of residence of its labor force.   Thus, an EA would
seem to capture the market where the average person would use his or her mobile
phone most of the time – around work, around home, and all of the places in
between.  Second, wireless carriers have considerable discretion in how they
assign telephone numbers across the rate centers in their operating areas.   In
other words, a mobile telephone subscriber can be assigned a phone number
associated with a rate center that is a significant distance away from the
subscriber’s place of residence (but generally still in the same EA).

63. Regional penetration rates for the 172 EAs covering the 50 United States,
sorted by EA population density, can be seen in Appendix D, Table 3.   The rates
range from a high of 62 percent in the Atlanta, GA-AL-NC (EA 40) and the Fort
Myers-Cape Coral, FL (EA 32) EAs, to a low of 11 percent in the Northern Michigan,
MI EA (EA 58).  Forty EAs, with a combined population of over 170 million, have
penetration rates of over 50 percent.  The Anchorage, AK EA (EA 171), with the
lowest population density, had a penetration rate of 46 percent, while the
Tampa-St. Petersburg-Clearwater, FL EA (EA 34), with the highest density, had a
penetration rate of 56 percent.  As previously stated based on an analysis of NRUF
data, the national penetration rate is 49 percent.

(iii) Minutes-of-Use
64. Wireless subscribers continue to increase the amount of time they communicate
using their wireless phones.  Average minutes-of-use per subscriber per month
(“MOUs”) continued a rapid rise in 2002, to 492 minutes, or more than 8 hours for
the average subscriber of a nationwide operator in the last quarter of the year.
Increasing MOUs most likely are a result of the decreasing prices and the wider
acceptance of and reliance upon wireless service.

65. According to CTIA, MOUs averaged 427 between June and December 2002, an
increase of 12 percent from 380 average MOUs during the same period in 2001, and
an increase of 67 percent from an average of 255 MOUs from the same period in
2000.   Other analysts also report higher MOUs in 2002.  Paul Kagan and Associates
estimated MOUs of 509 in mid-2002, an increase of 21 percent from 422 in
mid-2001.   J.D. Power and Associates estimated 541 MOUs, an increase of 28
percent from 422 a year earlier.

66. Operators with all-digital networks tended to have the highest MOUs, while
regional operators, Verizon Wireless, and Cingular, which provide service to
relatively large numbers of analog subscribers, had relatively lower levels.   One
analyst claims that this trend is due to averaging of much lower-usage analog
subscribers in the latters’ subscriber bases.

(iv) Average Revenue Per Unit
67. One financial metric widely used in analyzing the mobile telephone sector is
average monthly revenue per subscriber (often referred to as average revenue per
unit, or “ARPU”).  CTIA’s estimate of ARPU decreased almost continuously between
December 1988 and December 1998, when it reached a low of $39.43.   However, since
1999, ARPU has been increasing, rising to $48.40 in December 2002, a 23 percent
increase during the last four years, but only a rise of 2 percent from $47.37 in
December 2001.  This trend is evident even though per-minute prices declined
throughout this period.   The recent ARPU increases might be due to a variety of
factors, including increased usage offsetting per-minute price declines, as well
as the adoption by wireless consumers of higher-priced calling plans.

(v) Churn
68. Churn refers to the number of customers an operator loses over a given period
of time.  Mobile telephone operators usually express churn in terms of an average
percent churn per month.  For example, an operator might report an average monthly
churn of 2 percent in a given fiscal quarter.  In other words, on average, the
operator lost 2 percent of its customers in each of the quarter’s three months.
At this rate, the operator would lose approximately 24 percent of its customers in
a single year.   Most carriers report churn rates between 1.5 percent and 3
percent per month.   At current rates, more than 30 percent of subscribers change
service providers each year.   Average monthly churn rates for mobile telephone
service have remained fairly constant over the past three years.

69. Consistent with findings in previous reports, customers indicated cost and
network quality as the main reasons for changing providers.   A survey conducted
in 2002 by the Yankee Group research firm found that 26 percent of wireless
subscribers claimed pricing played the largest role in whether they would switch
carriers, while 20 percent felt improved coverage was the most important issue.
Phone upgrade programs came in third with 14 percent, and loyalty programs came in
fourth with 13 percent of survey respondents.   One Yankee Group analyst claimed
that it only took a 10 to 15 percent price difference to lure wireless subscribers
to another carrier.

(vi) Capital Expenditures
70. Capital expenditures, alternatively called “capital spending” or abbreviated
to “capex,” is the amount of money spent during a particular period to acquire or
improve long-term assets such as property, plant, or equipment.   In the mobile
telephone industry, capex consists primarily of spending to expand and improve the
geographic coverage of networks, increase the capacity of existing networks so
they can serve more customers, and improve the capabilities of networks (by
allowing higher data transmission speeds, for example).   One analyst estimated
that the wireless industry spent roughly $25 billion on capex in 2002, a decline
of 7 percent from the $27 billion spent in 2001, but still 14 percent more than
the $22.3 billion spent in 2000, and almost twice as much, $10 billion more, than
was spent in 1999.   In fact, in 2002, carriers spent more on capex than in any
other year with the exception of 2001.   As one analyst noted, “carriers are still
investing heavily in their networks.”   The analyst attributed the recent slowdown
in capex spending to smaller subscriber growth, near completion of network
expansions and upgrades, and lower network equipment prices.   Another analyst
attributed the carriers’ recent focus on profitability as contributing to the
decline in capital spending.

(vii) Technology Deployment
71. Of the six nationwide mobile telephone operators, Cingular, T-Mobile, and AT&T
Wireless use TDMA/GSM as their 2G digital technology, Sprint PCS and Verizon
Wireless use CDMA, and Nextel uses iDEN.

72. U.S. mobile carriers have continued to deploy next generation network
technologies over the past year.   At the writing of the Seventh Report, T-Mobile
had deployed GPRS across its entire network, AT&T Wireless and Cingular had
deployed GPRS in portions of their respective networks, and Verizon Wireless had
built out 1xRTT across portions of its network.   During the past year, AT&T
Wireless, Cingular, and Verizon Wireless have expanded their next-generation
network deployments into additional markets.  Furthermore, Sprint PCS, Monet
Mobile Networks (“Monet Mobile”),  Western Wireless, US Cellular, and Dobson
initiated service over upgraded next-generation networks during 2002.

73. During 2002, AT&T Wireless expanded its GSM/GPRS network from 16 cities
covering 73 million POPs, or 26 percent of the U.S. population, to areas covering
181 million POPs, or 63 percent of the U.S. population.   AT&T Wireless expects to
expand its GSM/GPRS network to areas covering 74 percent of the U.S. population by
the end of 2003.   The company has also been installing EDGE equipment and expects
to launch service using EDGE technology across its entire GSM/GPRS footprint by
the end of 2003.   Furthermore, AT&T Wireless announced in December 2002 that it
plans to launch WCDMA in four U.S. markets – San Francisco, San Diego, Seattle,
and Dallas – covering approximately 8 million POPs by the end of 2004.

74. During 2002, Cingular Wireless expanded its GSM/GPRS coverage to portions of
California, Connecticut, New York, and New Jersey, and, as of the end of 2002, its
GSM/GPRS network was available to 50 percent of the company’s covered POPs.   The
company plans to deploy GSM/GPRS to 90 percent of its POPs during 2003 and to the
remaining 10 percent during 2004.   Cingular expects to launch service over EDGE
networks in selected markets during the third quarter of 2003 and to continue
deploying EDGE during 2004.

75. At the writing of the Seventh Report, Verizon Wireless had upgraded
approximately 20 percent of its network coverage area to 1xRTT  but has since
completed 1xRTT upgrades in a total of 900 towns and cities.   Verizon Wireless
also announced in March 2003 that it expects to launch service over 1xEV-DO
networks in Washington, D.C. and San Diego during the third quarter of 2003.

76. In August 2002, Sprint PCS began offering service using 1xRTT technology,
which the carrier deployed across its entire network footprint.   Sprint PCS
reportedly does not expect to build out 1xEV-DO technology but instead plans to
wait until 1xEV-DV is available for commercial deployment, possibly in 2005.   On
the other hand, one of Sprint PCS’s affiliates, UbiquiTel, is running a trial of
1xEV-DO in Boise, ID and is expected to offer service over the network
commercially in the future.

77. Western Wireless, which has used TDMA as its 2G technology, chose to upgrade
its network to 1xRTT, and has launched service using 1xRTT technology in Terry,
MT  and is running trials of 1xRTT service in Billings, MT and Midland, TX.   In
the fourth quarter of 2002, US Cellular upgraded its Chicago-area network to CDMA
1xRTT.   Dobson is in the process of overlaying its TDMA network and that of its
50 percent owned subsidiary, American Cellular, with GSM/GPRS technology.  During
the first quarter of 2003, American Cellular began offering GSM/GPRS roaming
service to Cingular customers over its New York network, and Dobson expects to
begin offering GSM/GPRS service on a roaming basis and for its own subscribers in
select markets by the end of 2003.   Dobson expects to complete these upgrades
across its entire network during 2004.

(viii) Coverage by Technology Type
78. To date, 278 million people, or 97 percent of the total U.S. population, live
in counties where operators offer digital mobile telephone service, using CDMA,
TDMA/GSM,  or iDEN (including their respective next generation technologies), or
some combination of the three.   These counties make up 71 percent of the total
land area of the United States.  To estimate the current levels of deployment of
the three main digital mobile telephone technologies individually, we have
prepared maps of each technology, which combine the network coverage of all of the
relevant operators.   We have also prepared maps showing the extent of next
generation network technology deployment.

79. CDMA has been launched in at least some portion of counties containing 260
million people, or roughly 91 percent of the U.S. population, while TDMA/GSM has
been launched in at least some portion of counties containing 265 million people,
or almost 93 percent of the U.S. population.   To date, digital SMR operators have
launched iDEN-based service in at least some portion of counties containing over
248 million people, or approximately 97 percent of the U.S. population.

80. CDMA 1xRTT/1xEVDO has been launched in at least some portion of counties
containing 260 million people, or roughly 91 percent of the U.S. population, while
GPRS has been launched in at least some portion of counties containing 227 million
people, or almost 80 percent of the U.S. population.

(ix) Market Entry
81. To track the level of competition in the mobile telephone sector, the
Commission compiles a list of counties with some level of coverage by mobile
telephone providers.  This data is based on publicly-available sources of
information released by the operators such as news releases, filings with the SEC,
coverage maps available on operators’ Internet sites, and information filed with
the Commission in proceedings or with applications.

82. As previously discussed, there are several important caveats to note when
considering these data.  First, to be considered as “covering” a county, an
operator need only be offering any service in a portion of that county.  Second,
multiple operators shown as covering the same county are not necessarily providing
service to the same portion of that county.  Consequently, some of the counties
included in this analysis may have only a small amount of coverage from a
particular provider.  Third, the figures for POPs and land area in this analysis
include all of the POPs and every square mile in a county considered to have
coverage.   Therefore, this analysis overstates the total coverage in terms of
both geographic areas and populations covered.

83. On the other hand, this county-by-county analysis reflects a significant
improvement in accuracy.  In past editions of this report, the Commission provided
summaries of estimated coverage by BTAs.  Starting with the Fifth Report, the
Commission decided to re-estimate and enhance these coverage maps using county
boundaries in an attempt to provide a more precise picture of network
deployments.  Moreover, while the newer broadband PCS and digital SMR entrants
have less complete networks, the original cellular licenses have extensive
networks that provide almost complete coverage of the entire land mass of the
continental United States.   Cellular licensees were originally awarded a
geographical area (CMA) as a license area, but they only retained that portion of
the CMA where they had built out and expanded their wireless networks.

84. To date, 270 million people, or 95 percent of the total U.S. population, have
three or more different operators (cellular, PCS, and/or digital SMR) offering
mobile telephone service in the counties in which they live.   However, these
counties make up only 52 percent of the total land area of the United States,
reflecting the nation’s uneven population distribution.   Over 236 million people,
or 83 percent of the U.S. population, live in counties with five or more mobile
telephone operators competing to offer service, while 72 million people, or about
25 percent of the population, live in counties with seven or more mobile telephone
operators competing to offer service.  While the growth in the percentage of U.S.
population living in counties with three or more, four or more, five or more, and
seven or more providers has slowed, the percentage of the population living in
counties with six or more providers has grown 34 percent over the last year, up
from a 14 percent growth rate between the Sixth and Seventh Reports.   More than
200 million people, or 71 percent of the population, can now choose from among six
or more different mobile telephone operators providing service somewhere in their
counties.

(x) Quality of Service
85. Another variable that we examine as part of our assessment of the level of
CMRS competition is the quality of service that customers experience.   In
addition to competing on price, in a competitive market, firms also compete on the
basis of service quality.  Evidence from the CMRS marketplace shows that carriers
compete in terms of services quality.   As discussed below, market forces have
also created an incentive for numerous third parties to provide information to
consumers seeking information on the quality of individual carriers’ services.

86. Sections II.C.1.b(vii), Technology Deployment and II.C.1.b(ix), Market Entry,
supra, as well as similar sections in previous reports, discuss upgrades that
carriers have made to their networks that have improved service quality.   For
instance, carriers’ aggressive rollout of digital technology has enabled better
voice quality and additional calling features for consumers, as well as higher
capacity for operators, thereby allowing more customers to access the network and
use their phones at the same time.    Industry analysts emphasize that carriers
are still working to upgrade their networks and that their future capital
expenditures will be “largely related to capacity increases and network quality
improvements.”   Another analyst stated that “carriers are still spending heavily
in improving the quality of their networks.”   In a report released in April 2003,
the General Accounting Office (“GAO”) reported that many mobile telephone carriers
strive for a 98 percent call-completion rate, meaning dialed calls would go
through and not be dropped before they were completed at least 98 percent of the
time on average.

87. In addition to the digital and next generation network upgrades that carriers
are making in order to improve call quality and network capacity, some carriers
have focused their marketing campaigns on distinguishing their products on the
basis of quality, instead of on other factors such as price or the availability of
advanced features.  Verizon Wireless’s “Can You Hear Me Now?” advertising
campaign, for example, has attempted to emphasize the carrier’s network
availability and reliability.  Analysts indicate that these types of efforts have
been beneficial for carriers, as those who have emphasized service quality have at
times been more successful in gaining subscribers than those with a negative
quality perception.  For example, one analyst reported that Verizon Wireless “has
been able to post strong subscriber figures largely as a result of the popularity
of its America’s Choice pricing plans … and its ‘Can You Hear Me Now?’ advertising
campaign, which highlighted the quality of the company’s national network.”
Another analyst stated in February 2003 that it believed the company would
“continue to invest in its network so as to continue to leverage customer
perception of a quality and coverage advantage.”   This analyst also forecast that
T-Mobile would see successful sales during the 2002 holiday season due to a
variety of factors, including “improved network quality in selected markets.”   On
the other hand, analysts have noted that a negative impression of a carrier’s
service quality can be detrimental to its market share.

88. In addition to the information presented above on carriers’ network upgrades
and quality-focused marketing efforts, other data suggests that most consumers are
content with the level of mobile telephone service quality that they currently
receive.  Based on a survey it conducted in November 2002, GAO estimated that
“about 83 percent of mobile telephone consumers were satisfied with their call
quality.”   GAO also estimated 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.”   GAO also reported that “[d]espite 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.”   For example, “about one-third of customers could not
complete 10 percent or more of their calls because they were in a cell where the
carrier did not provide service.”   About 12 percent reported that such a problem
occurred at least one-third of the time.   In addition, just over 20 percent of
respondents reported problems “getting a call through because [of a] fast busy
signal or a message that says the call failed” or problems “with a call being cut
off or dropped” at least 10 percent of the time.   When examining consumer
opinions, it is important to keep in mind that consumer perceptions of service
quality can change independently of actual changes in network performance, as
consumers’ expectations evolve.

89. It is also apparent that wireless consumers are demanding more information
about mobile carriers’ individual service quality levels, and that numerous third
parties have been responding to this demand by compiling and reporting such
information.   There are considerable sources of information available to
consumers, including publications such as Consumer Reports, trade associations,
marketing and consulting firms, and several web sites dedicated to giving
consumers an overview and comparison of the mobile telephone services available in
their area.

c. Pricing Data and Trends
90. As for the last few years, equity analysts and other industry observers
continue to describe wireless price competition in the United States as “intense,”
“fierce,” and “ultra-competitive.”   While it is difficult to identify sources of
information that track mobile telephone prices in a comprehensive manner,  these
claims are supported by a number of reports and other available data indicating
that the cost of mobile telephony service continues to fall.  One journalist
opined in October 2002 that “there has never been a cheaper time to sign up for
cellphone service.”

91. According to one economic research and consulting firm, Econ One, mobile
telephone prices in the 25 largest U.S. cities declined roughly 2.9 percent in
2002.   The average cost of monthly service  – which was calculated across four
typical usage plans (50, 200, 500 and 800 minutes) – dropped from $36.77 in
December 2001 to $35.70 in December 2002.   Costs dropped the most in Tampa (-7.0
percent), Chicago (-6.0 percent), St. Louis (-5.4 percent), Detroit (-4.6 percent)
and Pittsburgh (-4.4 percent), while prices increased 1.6 percent in Portland and
0.6 percent in Denver.   As mentioned in the Seventh Report, Econ One compared
usage plans of 30, 150, 300, and 600 minutes during 2001 and found the greatest
price decline was for 600 minutes of airtime; furthermore, usage levels of 150 and
300 minutes saw more modest reductions, while the monthly cost of 30 minutes of
airtime increased 5.9 percent.

92. Another source of price information is the cellular telephone services
component of the Consumer Price Index (“Cellular CPI”) produced by the United
States Department of Labor’s Bureau of Labor Statistics (“BLS”).   Cellular CPI
data is published on a national basis only.   From 2001 to 2002, the annual
Cellular CPI decreased by 1.0 percent while the overall CPI increased by 1.6
percent.    The Cellular CPI has declined almost 33 percent since 1997 when BLS
began tracking it.

93. As a third pricing indicator, some analysts believe average revenue per minute
(“RPM”) is a good proxy for mobile pricing.   This is calculated by dividing a
carrier’s estimate of ARPU by its estimate of MOUs, yielding the revenue per
minute that the carrier is receiving.   Using its estimates of industry-wide ARPU
and MOUs, CTIA’s survey indicates that RPM fell 9 percent between December 2001
and December 2002.  Since 1994, RPM has fallen from $0.47 in December 1994 to
$0.11 in December 2002, a decline of 76 percent.

(i) Developments in Pricing Plans
94. The continued rollout of differentiated pricing plans also indicates a
competitive marketplace.  In the mobile telephone sector, we observe independent
pricing behavior, in the form of continued experimentation with varying pricing
levels and structures, for varying service packages, with various available
handsets and policies on handset pricing.  AT&T Wireless’s Digital One Rate
(“DOR”) plan, introduced in May 1998, is one notable example of an independent
pricing action that altered the market and benefited consumers.   Today all of the
nationwide operators offer some version of DOR pricing plan which customers can
purchase a bucket of MOUs to use on a nationwide or nearly nationwide network
without incurring roaming or long distance charges.

95. Another trend in mobile telephone pricing has been the introduction of
on-network, or “on-net,” national pricing plans.  These plans are similar to DOR
plans, with the exception that subscribers incur roaming charges when they use
their phones off the carrier’s network (“off-net”).  Such plans are usually
cheaper, or include more minutes, than the initial type of DOR plans.   The
advantage of the on-net plan to the carrier, of course, is that it allows a
carrier to recover the cost of its subscribers roaming onto other carriers’
networks, an expense which the carrier would otherwise bear with a DOR pricing
plan.     Sprint PCS, which permits off-net roaming, has allowed free on-net
national roaming with its pricing plans for many years.  In January 2002, Verizon
Wireless began to offer its own on-net national plans, under the name “America’s
Choice.”   Verizon Wireless was soon followed by AT&T Wireless’s “National
Network” plans in April,  and then Cingular’s “Preferred Nation” plans in
September.   We believe that such pricing plans, broadly similar across operators,
are the results of competitive market forces and competitive conduct.

(ii) Roaming
96. All mobile calling plans specify a calling area – such as a particular
metropolitan area, a state, a region, the carrier’s entire network, or the entire
United States – within which the subscriber can make a call without incurring
additional charges.  When a subscriber exits this area, or “roams,” he or she
incurs additional charges for each minute of use.  Sometimes these roaming charges
go directly to the subscriber’s carrier, and sometimes the charges are used to pay
a carrier other than the subscriber’s, on whose network the subscriber was
roaming.   This source of revenue is particularly important to many rural and
smaller carriers.

97. CTIA reported that roaming revenues for the mobile telephony industry were
virtually unchanged over the past year, from $3.94 billion in 2001 to $3.90
billion in 2002.   Roaming revenues as a percentage of total service revenue
continued to decline, however, from 6.1 percent reported in 2001 to 5.1 percent in
2002.   CTIA attributes this decline to the growth of DOR plans and the extended
calling areas established by many of the larger carriers.   It may also be the
result of declining per-minute roaming rates.

(iii) Prepaid Service
98. In the United States, most mobile telephony subscribers pay their phone bills
after they have incurred charges (known as postpaid service).  Prepaid service, in
contrast, requires customers to pay for a fixed amount of minutes prior to making
calls.  Although prepaid plans are considered a good way to increase penetration
rates,  they typically produce lower ARPUs and higher churn rates in comparison to
postpaid subscribers.   One provider of “prepaid platform services” states that
prepaid subscribers use an average of 97 minutes a month, compared to almost 500
for the average subscriber of a nationwide carrier.

99. Analysts estimate that 5 to 7 percent of U.S. wireless phone users subscribed
to prepaid plans in 2002, a slight drop from what the Commission found in the
Seventh Report.    At the end of 2002, Verizon Wireless’s subscriber base was
approximately 6 percent prepaid, AT&T Wireless’s was 6.5 percent, and Cingular
Wireless’s was 6 percent.  T-Mobile had the highest percentage of prepaid
subscribers of the major carriers, 14 percent, but that was half its rate from a
year earlier.

100. In addition to or in place of traditional prepaid offerings, a number of
carriers have introduced prepaid plans that maintain financial ties to the prepaid
customer to help reduce churn, including Sprint PCS’s ClearPay,  T-Mobile’s
SmartAccess, and AT&T’s GoPhone programs.   Moreover, Sprint PCS and Nextel have
partnered with third-party resellers to market prepaid offerings aimed at the
youth portion of the population.

d. Wireless/Wireline Competition
101. Once solely a business tool, wireless phones are now a mass-market consumer
device.   The overall wireless penetration rate (defined as the number of wireless
subscribers divided by the total U.S. population) in the United States is now at
49 percent.   Industry survey firm Telephia estimated that 53 percent of the total
population in 44 major metropolitan areas subscribed to wireless service at the
end of 2002, with some areas much higher, including Greenville, SC (71 percent),
St. Louis (69 percent), Raleigh, NC (65 percent), Orlando (65 percent), Atlanta
(64 percent), Washington DC (64 percent) and Boston (63 percent).   In addition,
one study found that 56 percent of households in the 27 largest U.S. markets use
wireless phone service.   Merrill Lynch estimated that, as of June 2002, more than
55 percent of Americans between the ages of 15 and 59 had wireless phones,
including 71 percent between the ages of 20 and 34, 69 percent between 35 and 39,
68 percent between 40 and 44, and 65 percent between 45 and 49.

(i) Wireless Substitution
102. While specific data is largely unavailable, it appears that only a small
percent of wireless customers use their wireless phones as their only phone, and
that relatively few wireless customers have “cut the cord” in the sense of
canceling their subscription to wireline telephone service.   There is much
evidence, however, that consumers are substituting wireless service for
traditional wireline communications.  At a recent Congressional hearing on the
health of the telecommunications industry, for example, Blake Bath, managing
director of Lehman Brothers, pointed out that while in 1996 wireless made up 5
percent of the sector’s revenues, it now accounts for 30 percent.   Robert
Crandall of the Brookings Institute, also speaking at the hearing, claimed that
wireless “has siphoned enormous amounts of traffic from the wireline network.”
One analyst estimates that wireless has now displaced about 30 percent of total
wireline minutes.   For the average household, wireless represents 27 percent of
total telecommunications expenditures.

103. The long distance, local, and the payphone segments of wireline
telecommunications have all been losing business to wireless substitution.  Long
distance volumes and revenues are down at AT&T, MCI, and Sprint as customers shift
to wireless services to make their calls.   Verizon, SBC, and BellSouth saw
business and consumer access lines fall 3.6, 4.1, and 3.2 percent, respectively,
in 2002, for a total decrease of 5.5 million lines, with wireless substitution
being a significant factor.   Similarly, the number of payphones has declined from
2.7 million in the mid-1990s to about 1.9 million today, in large part due to
wireless phones.   Even the prepaid calling card business is suffering, as
consumers are now “utilizing their wireless phones for the same reasons they once
used prepaid phone cards.”

104. Certainly, this is due to the declining cost and widespread use of wireless
service.  In fact, a number of analysts argue that wireless service is cheaper
than wireline.  According to Blake Bath, “[w]ireless pricing is currently below
that of wireline.”   Merrill Lynch claims that, for many wireless customers making
a long distance call in the evening “using a wireless phone would actually be
cheaper than using the fixed line phone in most cases.”   UBS Warburg agrees:

Why use a pay phone, a calling card, or a hotel phone when prices are generally
higher on a per-minute basis relative to wireless?  Also, given that a large
number of night and weekend minutes are now regularly included in wireless pricing
schemes . . ., it is often cheaper to use your wireless phone while in your home.

(ii) Wireless Alternatives
105. An increasing number of mobile wireless carriers offer service plans designed
to compete directly with wireline local telephone service.  The largest of such
providers, Leap, under its “Cricket” brand, offers mobile telephone service in 40
markets in 20 states.   At the end of the third quarter of 2002, Leap had roughly
1.5 million customers.   Leap’s service allows subscribers to make unlimited local
calls and receive calls from anywhere for about $30 per month.   Leap claims that
26 percent of its customers do not have a wireline phone at home.   As discussed
above, Leap states that its bankruptcy filing will not interrupt its operations or
result in employee layoffs.

106. Other companies offering unlimited local calling plans include: Triton PCS in
Virginia, North Carolina, South Carolina, Georgia, and Tennessee (with more than
200,000 subscribers to its unlimited calling plan);  Qwest in Arizona, Colorado,
Idaho, Minnesota, Montana, Nebraska, New Mexico, Utah, and Wyoming;  ALLTEL in
Arizona, New Mexico, North Carolina, Nebraska, and Arkansas;  MetroPCS in
California, Florida, and Georgia;  Northcoast PCS in Ohio;  First Cellular of
Southern Illinois in Illinois;  Kiwi PCS in North Carolina;  Rural Cellular in
Vermont, New Hampshire, New York, Kansas, Minnesota, Maine, North Dakota, and
South Dakota;  and Ntelos in Virginia.   In addition, for around $40-$60 per
month, many carriers offer regional or national calling plans with 500 or more
“anytime” minutes and over 3000 night and weekend minutes.

e. Geographical Comparisons: Urban vs. Rural
107. Since the release of the Sixth Report, the Commission has attempted to obtain
a better understanding of the state of competition below the national level, in
particular in rural areas.  The primary difficulty for the Commission in this task
is the lack of data specific to rural markets.  At its Public Forum held in
February 2002, the Wireless Telecommunications Bureau asked participants to
address this issue.   The Commission continued this inquiry in its NOI, where the
Commission invited comments on a range of rural issues.  In our analysis below, we
have attempted to incorporate commenters’ suggestions.

(i) Definition of Rural
108. As the Department of Education stated in 1994, “few issues bedevil analysts
and planners . . . more than the question of what actually constitutes ‘rural.’”
The difficulties that this question brings are evidenced by the fact that within
the federal government, the term rural has been defined in many different ways.
The variety of definitions reflects the numerous purposes for which the
definitions are used throughout the federal government.

109. The Commission does not have a statutory definition of what constitutes a
rural area.  The Commission has used RSAs as a proxy for rural areas for certain
purposes, such as the current cellular cross-interest rule and the former CMRS
spectrum cap, stating that “other market designations used by the Commission for
CMRS, such as [EAs], combine urbanized and rural areas, while MSAs and RSAs are
defined expressly to distinguish between rural and urban areas.”   In its NOI, the
Commission asked the public to comment on how it should define rural for purposes
of this report.

110. A number of commenters advocated the continued use of population density to
define rural.  Fred Williamson and Associates (“FWA”), representing a consortium
of small wireline telcos in Oklahoma and Kansas, stated that “[p]opulation density
is usually utilized to define ruralness.”   The South Dakota Telecommunications
Association (“SDTA”) agreed that population density is the best way to define
ruralness, but advocated 25 persons per square mile as the proper breakpoint,
rather than the 100 persons per square mile the Commission used in the Seventh
Report.   The Rural Telecommunications Group (“RTG”) said that the Commission
should continue to use population density as its “predominant factor,” although it
supported the Commission’s current use of a range of measures.   Moreover, RTG
said that it was “premature” for the Commission to develop a comprehensive
definition of rural due to the lack of sub-national data.   NTCA advocated the use
of RSAs, for “consistency and practicality.”  As in the Public Forum, some NOI
commenters questioned whether the urban/rural distinction is currently meaningful
in the context of mobile telephony.

(ii) Rural Rollout
111. In consideration of commenters’ suggestions and given our existing data, we
continue to believe that our analysis of market entry data using a variety of
criteria – EA nodal versus EA non-nodal counties,  CMAs, and population density –
is, at the moment, the best way to gain some insight into the competitive
differences within the different geographic areas of the United States.   However,
we also continue to explore additional methods for analyzing rural rollout.  For
example, in this report we have examined an alternative population density
breakpoint for the rural versus urban split at the suggestion of commenters.

EA Nodal vs. Non-Nodal Counties

112. Each EA consists of one or more counties that are “Economic Nodes” and the
surrounding counties that are economically related to it.   An EA may have more
than one economic node.  The counties that are economic nodes are metropolitan
areas or similar areas that serve as the EA’s center(s) of economic activity.   As
a proxy for urban and rural geographic areas, we have looked at counties that make
up economic nodes, i.e. nodal counties, versus those counties that do not make up
economic nodes, i.e. non-nodal counties.  In comparing those two sets of counties,
we find the non-nodal counties have an average of 3.2 mobile competitors, while
the nodal counties have an average of 5.7 competitors.

MSAs vs. RSAs

113. In comparing competitive entry in counties that make up RSAs compared to
counties that make up MSAs, we find that RSA counties have an average of 3.3
mobile competitors, while MSAs have an average of 5.7 competitors.

Population Density

114. In comparing competitive entry in counties with population densities of 100
persons per square mile or less to those with densities greater than 100, we find
that the less densely populated counties have an average of 3.3 mobile
competitors, while the more densely populated counties have an average of 5.6
competitors.

115. If, as one commenter suggested, we use 25 persons per square mile as the
breakpoint, we find that the less densely populated counties have an average of
2.7 mobile competitors, while the more densely populated counties have an average
of 4.5 competitors.  However, we note that only 14 million people live in counties
with 25 persons per square mile or less, while 61 million people live in counties
with 100 persons per square mile or less.   The 2000 Census found that 59 million
persons were “rural.”   Thus, counties with population densities of 25 persons per
square mile appear to contain only a small subset of the rural population.

116. Consistent with the Commission’s findings in the Seventh Report, these three
exercises of defining urban versus rural (EA Nodal vs. Non-Nodal Counties / MSAs
vs. RSAs / Population Density) continue to provide remarkably similar estimates of
the average number of competitors in urban versus rural markets.   On average,
rural markets have slightly more than three providers, while urban markets have
between five and six providers.  Even using a narrow definition of rural markets,
we find that customers have access to between 2 and 3 competitors.

117. Some participants and commenters have argued that the total number of
carriers serving an area is not the best measure of the level of competition in
that area because only one or two carriers may be economically sustainable in that
area.   For example, RTG stated, “the Commission must … seriously consider the
possibility that there may be areas that are so remote and the cost to provide
coverage so high that only one service provider may be economically viable.”

118. Furthermore, FWA claimed that “there is sufficient competition among wireless
providers in ILEC service areas.”   Dobson said that “[r]ural CMRS carriers face
significant competitive pressures,”  and argued that the best measure of
competition is not the number of competitors in a market, but rather the pressure
carriers feel to offer services and products at competitive prices to customers.
NTCA said that “many rural customers have access to the same state-of-the-art
wireless technologies available to their urban counterparts.”  The most recently
released data provided by Econ One, which was also included in the Seventh Report,
showed that the average price of mobile telephone service in rural areas appears
to be very similar to the average price in urban areas.   Indeed, at least one NOI
commenter noted that nationwide and urban price trends have acted to constrain
prices in rural areas, even where the total number of operators may be lower.

119. Moreover, some commenters claim that rural areas are experiencing a
significant level of wireless substitution for wireline service.  In a survey of
its wireless subscribers within its RSAs, Western Wireless found that 23 percent
of respondents considered their wireless phone to be their primary phone.   FWA
reports that the telcos it represents are experiencing access line declines, in
part due to customers utilizing wireless service as the primary residential
service.   FWA also reports that the toll revenues of its clients are declining,
in some cases as much as 30 percent, due to customers’ use of wireless instead of
wireline toll services.

Conclusion

120. Based on our rollout analysis and information provided by commenters and
participants at the Public Forum, we conclude that CMRS providers are competing
effectively in rural areas.  While it appears that, on average, a smaller number
of operators are serving rural areas than urban areas, this difference does not
necessarily indicate that effective CMRS competition does not exist in rural
areas. On the contrary, data and statements presented by Public Forum participants
and NOI commenters provide evidence that, despite the differing structure of rural
markets, effective CMRS competition does exist in rural areas.

121. We note, however, that in 2001, the Commission retained the cellular
cross-interest rule in RSAs to ensure that mergers and acquisitions do not
diminish competition, concluding that “it appears that a combination of interests
in cellular licensees in rural areas would more likely result in a significant
reduction in competition.”   Nevertheless, the Commission recognized that there
may be RSAs in which such cross interests would not create a significant
likelihood of substantial competitive harm, and created a waiver process.

2. Resellers
122. Resellers offer service to consumers by purchasing airtime at wholesale rates
from facilities-based providers and reselling it at retail prices.   According to
information provided to the FCC in its ongoing local competition and broadband
data gathering program, the resale sector accounts for approximately 5 percent of
all mobile telephone subscribers.   With the exception of Tracfone Wireless Inc.,
which serves more than 2 million customers with prepaid offerings,  there appear
to be few large resellers of wireless service.   As reported in the Seventh
Report, WorldCom, which at one time claimed to be the largest reseller of postpaid
wireless services in the United States with nearly 2 million customers,  exited
the resale business in 2002.

123. Two nationwide operators have partnered with third party resellers to market
prepaid offerings aimed at the youth portion of the population.  Virgin Mobile USA
(“Virgin Mobile”), a joint venture between Sprint PCS and Richard Branson’s Virgin
Group, LLC, was launched in July 2002, targeting its prepaid offerings at the
youth market.   The venture has gained more than 350,000 subscribers through
January 31, 2003.   Similarly, Nextel, in conjunction with an Australia-based
company, is offering a prepaid service targeted at the teenage market.   The
service, under the “Boost Mobile” brand name, is available in California and
Nevada.

3. Mobile Data
a. Introduction
124. For purposes of this report, mobile data service is considered to be the
delivery of non-voice information to a mobile device.  Two-way mobile data
services include not only the ability to receive non-voice information on an
end-user device but to send it from an end-user device to another mobile or
landline device using wireless technology.  While mobile data constituted only 1.7
percent of mobile telephone carriers’ total ARPU and revenue during 2002, the
consumer adoption of various data products is growing.   One analyst estimates
there were 11.9 million mobile telephone users who subscribed to some type of
mobile data service at the end of 2002, up from 7.6 million at the end of 2001.
The estimated number of data-only mobile users grew from 1.1 million at the end
2001 to 2.3 million at the end of 2002.   Another analyst estimates that 20
percent of all mobile telephone subscribers used text messaging services during
the fourth quarter of 2002.

125. As discussed above, carriers have continued to upgrade their networks over
the past year with next generation technologies that allow for faster mobile
Internet access at speeds ranging from 30 to 70 kbps.  As of March 2003, 265
million people, or 93 percent of the U.S. population lived in counties where GPRS,
1xRTT, and or 1xEV-DO networks had been deployed.

126. While the sections above discuss the spectrum bands, networks, trends, and
metrics related to mobile telephone carriers,  this section focuses solely on
mobile data services.  Sections II.C.3.b and II.C.3.c, infra, first provide an
overview of the spectrum bands and networks that are used to provide data-only
commercial mobile services.   Section II.C.3.d then describes each of the
individual non-voice CMRS services, including details on what each service
entails, pricing information, and available data on usage, subscribership, and
ARPU.   This is followed by a discussion of the major types of mobile data devices
and device features.   The mobile data section concludes with an overview of Wi-Fi
technology and deployment, and significant developments related to the telemetry
and telematics sectors.

127. As mentioned above, in the NOI the Commission requested information from
commenters on mobile data, including details on the nature of individual mobile
data services, on mobile data service availability and pricing, and on Wi-Fi
deployment.   The mobile data-related information received in the comments
consisted of information on next generation networks that various providers use
and plan to use to offer mobile data services at higher data transfer speeds.
While many of the other issues raised in the NOI were not directly addressed in
the comments, we have been able to gather information on mobile data services,
deployment, and pricing from several publicly-available sources, including
providers’ web sites and news releases, company SEC filings, newspaper and
periodical articles, NRUF data, and reports by securities analysts and other
research and consulting firms.  Given the various sources we have used to examine
this segment of the CMRS industry, we believe the multitude of mobile data
services, service providers, pricing plans, and devices available to consumers
provides evidence that competition for the provision of mobile data products is
developing successfully.  The numerous, new mobile data products also represent
service innovations that CMRS providers are offering in order to compete with each
other; hence, the existence of these service offerings provides further evidence
that the CMRS industry is competitive.

b. CMRS Spectrum: Data-Only
128. Section II.A above discussed the spectrum that mobile telephone carriers use
to offer both voice and data CMRS services.   Two additional spectrum bands –
paging and narrowband PCS – are used by licensees to offer CMRS services that
consist only of data communications, yet are still interconnected.

129. Spectrum designated for commercial paging is spread across several
non-contiguous bands: 35-36 MHz, 43-44 MHz, 152-159 MHz, 454-460 MHz, and 929-931
MHz.   Each license consists of between 20 and 50 kilohertz  and is designed for
one-way communications that alert users and provide them the phone number of the
person trying to reach them.   The Commission first allocated paging spectrum in
1949 and licensed the spectrum on a site-by-site basis through the mid-1990s.   It
began auctioning additional paging licenses on a geographic area basis using EAs
and MEAs in 2000.   The Commission completed its third paging auction, in which 96
bidders purchased 2,832 of 10,202 available licenses, on May 28, 2003.

130. Narrowband PCS spectrum is located in the 901-902 MHz, 930-931 MHz, and
940-941 MHz bands and allows licensees to offer a limited array of two-way data
services such as text messaging.   The Commission first auctioned narrowband PCS
spectrum in 1994.   Licenses consisted of between 50 and 100 kilohertz each and
were offered on both a nationwide and regional basis.   The Commission is
scheduled to begin two auctions of additional narrowband PCS spectrum on September
24, 2003.   The first auction will consist of licenses covering 48 MTAs and
ranging in size from 50 to 200 kilohertz.   The second auction will include six,
62.5 kilohertz regional narrowband PCS licenses that will be auctioned in a
combinatorial bidding format.

c. CMRS Networks: Data-Only
131. In addition to the networks discussed in Section II.B, supra, which mobile
telephone carriers use to offer both voice and data services, mobile carriers
operate a number of other types of networks in order to provide data-only
commercial mobile services.  First, carriers use paging spectrum to operate
networks in order to offer traditional one-way paging services.   Some paging
carriers also operate data networks using narrowband PCS spectrum, which allow
them to offer two-way messaging services.  Narrowband PCS networks use the ReFLEX
technology protocol, which can transmit data at speeds ranging from 3.2 to 25
kbps.   ReFLEX networks have been deployed in areas covering over 90 percent of
the U.S. population.

132. In addition, several mobile telephone carriers, including AT&T Wireless and
Verizon Wireless, operate Cellular Digital Packet Data (“CDPD”) networks on top of
their existing mobile telephone networks, which they use to provide mobile
Internet access services at speeds of around 19.2 kbps.   These carriers are in
the process of upgrading their networks with next generation technologies and
migrating many of their CDPD customers to these next generation networks.

133. One U.S. carrier, Monet Mobile, currently offers data-only service using its
CDMA1xEV-DO network and broadband PCS spectrum.  In October 2002, the carrier
began providing mobile Internet access service at speeds ranging from 300 to 700
kbps in Duluth, MN.   It has since launched the service in six additional markets:
Sioux Falls, SD; Fargo and Grand Forks, ND; Moorhead and Cloquet, MN; and Eau
Claire, WI.

134. Two other carriers, Cingular Wireless and Motient Corp. (“Motient”), operate
two-way data networks using the 900 MHz SMR and 800 MHz SMR spectrum bands,
respectively.  These networks have provided a variety of mobile data services to
personal digital assistants (“PDAs”) and laptops at speeds ranging from 8.6 to
14.4 kbps.   Cingular Wireless’s network, known as the Mobitex network, is
available in 99 of the 100 largest U.S. metropolitan areas and covers 200 million
people, or 90 percent of the U.S. metropolitan population.   Motient’s ARDIS
two-way data network provides coverage in 520 U.S. towns and cities containing 220
million people.

d. Services, Content, and Applications
135. Non-voice services are beginning to play an increasingly important role in
the CMRS industry.  Providers have created and have begun offering a variety of
specific mobile data services, some of which are focused on entertainment, while
others are aimed at maintaining a constant yet remote connection to work and
office life.   The mobile data services currently available include paging, text
messaging, information alerts, ring tones, games, exchanging digital photos, web
browsing, e-mail, and access to files stored on corporate servers.  The following
sections discuss these individual mobile data services and include details on what
each service entails, service-specific pricing information, and available data on
usage and subscribership levels.

136. Pricing for mobile data services varies by service, by provider, and, in some
cases, by device and by network technology.  Some mobile telephone carriers offer
certain mobile data services on an a la carte basis in addition to monthly voice
service.  For example, most carriers allow customers to use and pay for text
messaging without purchasing other mobile data services.  Verizon Wireless also
sells a selection of mobile data applications a la carte through its “Get It Now”
collection of data services, which includes ring tones, e-mail, games, and digital
photo sharing.   These services are sold on a per-use or monthly basis, thereby
allowing mobile voice customers to purchase them individually without paying for a
monthly mobile Internet access service plan.   Other carriers have taken a
different approach to mobile data pricing.  For example, AT&T Wireless, T-Mobile,
and Cingular Wireless mobile voice customers who wish to add certain mobile data
capabilities, such as e-mail, photo sharing, and games, must first subscribe to a
monthly, megabyte (“MB”)-based mobile Internet access package.   With these plans,
customers pay a monthly fee for a certain number of MB to use each month to
download the applications of their choice.  Prices for carriers’ entry level
MB-based data plans run between $7 and $10 per month.   Finally, Sprint PCS
charges $15 per month, in addition to monthly voice service, for unlimited use of
a variety of mobile data services discussed in detail below.

137. The mobile data pricing options discussed above are generally marketed to
customers wishing to use mobile data services on their mobile handsets as add-ons
to voice service.  Many providers also offer monthly mobile Internet access
service packages designed for customers who wish to connect to wireless networks
primarily or exclusively for data, not voice, use.  These customers typically
access the Internet through a laptop computer with a wireless modem card or mobile
phone attached, through a PDA with a built-in wireless modem or a wireless modem
card attached, or via a smartphone.   Data-centered pricing plans give subscribers
a set number of MB to use each month for mobile Internet access.  The plans range
from one MB for approximately $7 per month, to 20 MB for $34.99 to $55 per month,
to unlimited MB for around $100 per month.   With these plans, customers connect
to carriers’ next generation GPRS or 1xRTT networks, which offer data transfer
speeds of 30 to 70 kbps.

138. Some providers, including Cingular and AT&T Wireless, do not make a
distinction on their MB-based pricing plans between accessing the mobile Internet
from a mobile phone and accessing it from a laptop attached to a mobile phone;
they offer one set of MB-based pricing plans and customers can choose which device
to use to consume their MB.  Cingular’s highest level MB-based pricing plan
consists of 13 MB for $49.99 per month, while AT&T Wireless’s includes 8 MB for
$19.99 per month.   T-Mobile, on the other hand, offers one MB-based plan for
Internet access via a mobile phone; another set of MB-based plans for access via a
smartphone, a PDA, or a mobile phone attached to a laptop; and a third set for
access via a wireless modem card attached to a laptop or PDA.

139. In addition to mobile telephone carriers, other mobile data providers offer
mobile Internet access plans for use on PDAs and laptop computers. Companies such
as Earthlink, Inc. (“Earthlink”), GoAmerica, Inc. (“GoAmerica”), Research In
Motion, Inc. (“RIM”), and Monet Mobile offer enterprise-focused data services –
such as e-mail, web, and corporate server access – using either unlimited use or
MB-based monthly pricing plans.

140. We discuss the various ways in which providers price mobile data services in
order to offer insight into the nature of this segment of the CMRS industry and to
illustrate the numerous options available to consumers from competing firms.  The
service packages described above, as well as most of the individual mobile data
services described below, have developed so recently, many just in the past year,
that it is difficult to make historical comparisons about them, and there is
limited information on the trends related to the pricing or packaging of these
services.

(i) Paging
141. Traditional paging service consists of one-way data communications sent to a
mobile device that alerts the user when it arrives.  The communication typically
consists of a phone number for the user to call, and can also contain other
text-based information.  Paging services are offered by paging carriers as well as
by mobile telephone carriers.  Paging carriers sell paging and messaging, but not
voice, services using paging and narrowband PCS networks and spectrum, and
paging/messaging devices or units.  Using NRUF data, we estimate there were 14.1
million paging units in service at of the end of 2002, down 22 percent from 18
million units at the end of 2001.   Arch Wireless Communications, Inc. (“Arch
Wireless”) and Metrocall, Inc. (“Metrocall”) are the largest paging carriers.
Other major paging carriers include SkyTel Communications, Inc. and WebLink
Wireless, Inc (“WebLink”).

142. Mobile telephone carriers also offer paging services using cellular and
broadband PCS spectrum, as most digital mobile telephone handsets include a paging
component and/or Caller ID feature that allows users to view the phone number of
the person who has called them.  While paging carriers have faced competition from
these types of features offered by mobile telephone carriers, traditional paging
devices are generally less expensive, and paging networks have a more powerful
signal strength which allows them to provide better underground and in-building
coverage.   Arch Wireless stated in July 2002 that, because of these advantages,
the company expects paging to remain a viable service in the future, but one that
will serve a smaller market sector consisting mainly of commercial customers such
as medical and emergency personnel and large industrial companies.   Metrocall
commented in October 2002 that it planned to focus on serving the same type of
customers.

(ii) Text Messaging
143. Text messaging, also called Short Messaging Service (“SMS”), provides the
ability for mobile telephone users to exchange short text messages with other
mobile handsets and with e-mail addresses.   Text messages are limited to a
maximum message length ranging from 120 to 500 characters.

144. Two-way text messaging was introduced in the United States by T-Mobile in May
2000.   By the end of 2001, the six nationwide mobile telephone carriers, as well
as other mobile data providers, were offering the service.   During December 2001
and the first quarter of 2002, mobile telephone carriers introduced inter-carrier
interoperability of SMS, allowing subscribers to exchange text messages with other
carriers’ customers.

145. SMS traffic increased dramatically during 2002.  An estimated one billion
text messages were sent in the United States during June 2002, up from 30,000 sent
during June 2001.   One analyst estimates that 20 percent of all U.S. mobile
telephone subscribers either sent or received a text message during the fourth
quarter of 2002, up from 12 percent during the fourth quarter of 2001.   An
estimated 28 percent of SMS users were “frequent users,” meaning they sent or
received a message at least once a day.   Among adults aged 12 and older, another
analyst estimated 19 percent had used text messaging services as of February 2003,
and 72 percent of this group both sent and received messages.   Among young adults
aged 18 to 24, approximately 45 percent used text messaging during the fourth
quarter of 2002, up from 22 percent during the fourth quarter of 2001.   Many
carriers and analysts have attributed the growth in text messaging in large part
to the introduction of inter-carrier interoperability.

146. Pricing plans for text messaging vary by carrier.  However, most carriers
offer subscribers the option of paying for text messages on a per-message basis,
or purchasing a package of text messages for a monthly fee.   Per-message fees
range from 5 to 10 cents to send, and zero to 10 cents to receive.    Monthly
packages of between 100 and unlimited text messages range from approximately $3 to
$8 per month.

147. In addition to text messaging, many carriers offer instant messaging (“IM”)
services for mobile users.  Instant messaging services, such as America Online
(“AOL”) Instant Messenger (“AIM”), MSN Messenger, and Yahoo! Messenger, enable
users to exchange messages with multiple users in a chat-style atmosphere.  IM
users are identified by their IM screen name instead of their phone number or
e-mail address, and are able to tell whether people from their “buddy list” – a
list of other IM users with whom the initial user communicates – are also online.
With IM services, mobile users can exchange messages with other IM users
regardless of whether they are on a personal computer (“PC”) or a mobile phone.
However, the various IM services are not interoperable; therefore, AIM users can
communicate only with other AIM users and not with MSN or Yahoo! Messenger users.

148. Many of the major mobile telephone carriers, including Nextel, Verizon
Wireless, T-Mobile, and AT&T Wireless, offer access to AIM.   Some carriers also
offer access to Yahoo! or MSN Messenger.   IM exchanges are often included in
carriers’ text messaging pricing plans, where one IM message is counted as one
text message.  Nextel offers AIM separately from text messaging and charges $5 per
month for unlimited AIM use.

(iii) Ring Tones and Personalized Graphics
149. Over the past year, mobile telephone carriers began offering their customers
a number of new, entertainment-oriented applications and services to download and
use on their mobile handsets.  These include ring tones, personalized graphics,
games, and the ability to take and exchange digital photos.   Ring tone services
offer users the ability to download pieces of music, ranging from popular songs to
simple jingles to classical music, which play when the phone rings.  Some
downloadable ring tones are polyphonic, meaning they can play up to 16 different
sounds, instead of only one, simultaneously.  Users can also associate specific
songs with specific incoming calls.  With the personalized graphics services,
subscribers can download wallpaper and screen savers for their handset screens, as
well as images that can be set to correspond to particular incoming calls.

150. There is evidence that ring tones have gained in popularity over the past
year.  One leading U.S. ring tone provider,  Moviso LLC (“Moviso”), reported it
had 1.5 million downloads during December 2002, up from 79,000 during January
2002.   Ring tone sales generated an estimated $1 billion in global revenue during
2002, and royalties paid to artists or music rights holders totaled $71 million,
up 58 percent from the previous year.   Verizon Wireless reports that ring tones
are the company’s most frequently downloaded application, and that most of its
ring tone customers download its most expensive package, a package of 10 songs for
$9.99.

151. Pricing for ring tones and graphics varies by carrier.  Some carriers require
that users subscribe to a monthly mobile Internet or text messaging package before
the carriers will enable them to download these applications.  For example, Sprint
PCS includes access to ring tones and graphics in its $15 per month mobile
Internet service plan, Vision, but users must pay additional fees to download
certain songs and images.   Cingular customers who subscribe to a text messaging
or mobile Internet package, and T-Mobile customers who subscribe to the company’s
monthly “T-Zones” mobile Internet and content package, receive access to
downloadable songs and graphics, but must also pay a per-song fee for each ring
tone or image.   Individual ring tone prices range from $0.99 with Cingular, AT&T
Wireless, and T-Mobile, to $1.49 with Verizon Wireless.   Sprint PCS’s Vision ring
tones range from $1.00 for polyphonic tones to $3.99 for samples of new and
pre-released music.   In some cases, carriers may include the ability to download
a set number of ring tones at no additional cost beyond the monthly cost for voice
service.

(iv) Games
152. In addition to text messaging, music, and graphics, another entertainment
application that all of the six nationwide carriers and some smaller operators
began offering over the past year was mobile gaming.  One analyst estimates that 7
million U.S. mobile telephone subscribers used mobile phones to play games during
2002.

153. Various card, casino, sports, action, adventure, trivia, and puzzle games are
available for users to download and play locally on their handsets or, in some
cases, against other players connected to the network.  Some are based on movies
and television shows, such as the Lord of the Rings and Top Gun interactive
adventure games.  However, different carriers offer a different selection of
games.  Some games are available from more than one carrier.  For example, both
Nextel and Verizon Wireless offer, among other games, Bowling by JAMDAT and ESPN’s
2 Minute Drill.   T-Mobile and AT&T Wireless both offer Top Gun.   As with many of
the other applications described above, the ability to download and play games is
limited to specific handset models; furthermore, certain game features may be
available only on certain models.

154. Most carriers offer a per-use, per-month, or unlimited use fee for each
game.  In the example given above, Verizon Wireless and Nextel both charge $5.99
for unlimited lifetime use of Bowling by JAMDAT, and Verizon Wireless also offers
it for $2.49 per month.   All of the games offered by Nextel are for permanent,
unlimited use, and per-game costs range from $4.00 to $14.00.   Cingular charges a
$0.99 per use fee for all of its games.   Other carriers, such as T-Mobile and
AT&T Wireless, do not charge an additional fee for games but require that users
subscribe to a monthly, MB-based mobile Internet access plan in order to access
games, and the kilobytes (“kB”) used to download games are then deducted from the
monthly allotment.   If customers choose to play a networked game, they must
remain online and will continue to consume kB as they are playing.

(v) Multimedia Messaging Services
155. Over the past year, carriers introduced the ability to exchange photo, video,
animation, and audio files using a mobile phone.  These services are often
collectively called multimedia messaging services (“MMS”) because customers are
using another medium instead of, or in addition to, text to communicate or convey
a message.

156. With mobile photo services, users can take, send, download, and view digital
images using their mobile handsets.  They are able to send photos to other
handsets with image-viewing capabilities or to any landline e-mail address.  Some
carriers also offer the option of posting images on a photo sharing web site such
as Snapfish.   Users can save photos to use as backgrounds on their handset
screens or for Picture Caller ID.   At least one carrier has begun offering its
customers the ability to download and view video clips sent by friends or family
or to view live video from cameras at various public locations.   Some carriers
also enable customers to send selected songs and animation clips to other mobile
users to convey a message.

157. MMS services are generally available only on certain mobile handset models.
Services involving taking and sending photos, for instance, require handsets with
built-in or attachable digital cameras.  As of April 2003, at least six major
carriers, including five of the six nationwide carriers and ALLTEL, and their
affiliates were offering MMS.

158. In order to access MMS services, many carriers – including Cingular, AT&T
Wireless, and T-Mobile – require that users first subscribe to a monthly mobile
Internet access plan in addition to voice service, and the kB used to upload and
download digital photo and video files are deducted from the subscriber’s monthly
allotment of MB.   Verizon Wireless, on the other hand, allows its customers to
access individual MMS services without a monthly MB-based mobile Internet access
subscription.  Its customers can instead pay for unlimited monthly use of one of
its individual MMS applications, such as Snapfish, exego, or Logitech, at prices
ranging from $2.99 to $5.99 per month.   Sprint PCS includes the ability to take
and send digital photos in its $15 per-month Vision package.

(vi) Information Alerts
159. Many mobile data providers offer their text messaging users the ability to
receive short, text-based, customized information alerts, including news updates,
weather forecasts, sports scores, stock quotes, horoscopes, and traffic
information, on their mobile devices.  Users specify on their carrier’s web site
which content they would like to receive and must own a text messaging-capable
handset.  The range of available content is based on the number and type of
content providers with whom the carrier has an agreement.  For example, Verizon
Wireless offers information alerts from Forbes.com, ABC News, Astrology.com, Fox
Sports, the Weather Channel, USA Today, and TV Guide.   Pricing for information
alerts is generally the same as for text messaging.   Some carriers require the
purchase of a monthly text messaging package in order to register to receive
information updates, and one information update is then counted as one text
message.

(vii) Web Browsing
160. In contrast to information alerts, which push content to mobile users,
wireless web services enable users to pull web-based information and applications
from the Internet to their mobile devices.  Subscribers who connect to the
Internet via a wireless modem card attached to a laptop can surf the entire web
using common PC browsers, such as Internet Explorer or Netscape.  Users connecting
via PDAs or some smartphone models are typically able to access most web sites,
although some web pages may be difficult to view given the smaller screen size and
other constraints of such devices.

161. With mobile telephone handsets, web browsing is generally limited to the web
sites offered by the content providers with whom a carrier has a content
agreement.  Therefore, most mobile telephone carriers allow wireless web users to
access a variety of popular web sites and applications on their mobile handsets
but do not allow access to the entire web.  While the specific sites available to
users vary by carrier, most carriers offer at least one version of the following:
news and traffic updates; weather reports; sports scores; stock quotes and
financial data; movie, flight, and restaurant information; and horoscopes.  Other
applications available to wireless web users include shopping on sites such as
Amazon.com, search engines and portals, and downloadable recipes.  The content is
typically text-based. One analyst estimates that, as of February 2003, 21 percent
of web-enabled mobile phone users, or 7.5 percent of all mobile telephone
subscribers, were using their phones to browse the Internet.

162. The ways in which carriers charge for wireless web browsing parallels the
ways in which they charge for many of the other mobile data services they offer.
For example, the carriers who use per-MB pricing plans to offer a selection of
mobile data services to their mobile telephone customers generally include web
browsing in that selection, and then deduct the kB used for web browsing from
their subscribers’ monthly allotment of MB.   Sprint PCS includes web browsing in
its package of services available through its $15 per month Vision mobile data
plan.   In addition to offering MB-based pricing plans, some carriers also sell
web browsing for a flat monthly fee, and the minutes used for web access are
deducted from a subscriber’s monthly bucket of voice minutes.   Finally, some
carriers, such as Verizon Wireless with its Get It Now service, sell individual
web applications on an a la carte basis.

(viii) E-mail
163. Most mobile data providers currently offer users the ability to access e-mail
messages while mobile.  E-mail is distinguishable from text messaging in that
e-mail services do not have the maximum character limits that text messaging
services do.   Moreover, mobile e-mail services allow users to access or to
receive automatically messages sent to their pre-existing work or personal e-mail
accounts.  Some mobile e-mail services allow users to access existing, web-based
or POP3  e-mail accounts provided by web portals such as Yahoo! or MSN or by ISPs
such as Earthlink.  Other mobile e-mail services give users direct access to their
corporate or office-based e-mail accounts.  Some mobile e-mail services are
“pushed” or always-on, meaning users will receive their messages whenever their
device is turned on, while other e-mail services are “pulled” and require users to
dial-up periodically in order to receive their messages.

164. Many providers offer both the ability to send and receive messages from a
POP3 account as well as the ability to access corporate e-mail accounts.  Mobile
telephone carriers frequently include POP3 e-mail access as one of many available
applications in a mobile Internet access package.  For example, subscribers to any
of T-Mobile’s standard, MB-based T-Zones mobile Internet packages can access POP3
email accounts from their handsets.   Subscribers to one of Verizon Wireless’ web
browsing service plans can access an MSN Hotmail email account.

165. Carriers typically charge an additional fee to enable users to access
messages from a corporate email account on a mobile handset.  For example,
subscribers to Cingular Wireless’s Xpress Mail Network Edition can have messages
from a Microsoft Exchange or Lotus Notes corporate email account forwarded to a
GPRS mobile handset or Handspring, Inc. (“Handspring”) Treo for an additional $10
per month beyond the price of mobile Internet access.    AT&T Wireless’s mMode
mobile Internet access subscribers can also have Microsoft Exchange or Lotus Notes
e-mail messages forwarded to a mobile device for an additional $2.99 per month
beyond the price of mobile Internet access.

166. BlackBerry e-mail service, which was created by RIM, allows users to receive
pushed e-mail messages automatically from an existing corporate e-mail account on
one of RIM’s mobile devices.   Users can also send, forward, and delete messages,
and view attachments.  BlackBerry service is sold directly by RIM as well as by
some mobile telephone carriers, such as T-Mobile and Cingular, and by other mobile
data providers, including GoAmerica and Earthlink.   The basic BlackBerry e-mail
service typically costs $39.99 per month for unlimited access.  Additional
applications for RIM devices, such as web browsing, corporate server access, and
in some cases voice, can be purchased for an additional monthly fee.   As of March
1, 2003, there were 534,000 total BlackBerry users, and approximately 10,000
organizations had integrated BlackBerry into their corporate e-mail systems.

(ix) Corporate Server Access
167. Several mobile data providers offer – either directly to individual consumers
or to enterprise customers to implement for their employees – the ability to
access on a mobile device company intranets and files stored on corporate
servers.  For example, Cingular customers who purchase the operator’s Data Connect
service in addition to a basic mobile Internet access plan can establish a Virtual
Private Network (“VPN”) connection to their office server to retrieve files and
intranet applications from a laptop or PDA with a data-capable handset attached.
In addition, RIM offers its BlackBerry Enterprise Server customers an add-on
product, called Mobile Data Service (“RIM MDS”), which allows these customers’
employees to access, on their RIM devices, files and intranet applications stored
on corporate servers.  RIM MDS also enables these users to automatically receive
files and information on a “pushed” basis instead of having to first dial in to
the corporate server.   As mentioned in the Seventh Report, Microsoft Corp.
(“Microsoft”) became a leading facilitator of mobile corporate server access with
its releases of the Pocket PC 2002 PDA operating system and the Pocket PC 2002
Phone Edition smartphone operating system in late 2001 and early 2002.  Both
operating system editions allow users of Pocket PC 2002 devices to establish a
secure VPN connection over the wireless Internet to retrieve e-mail messages and
files that are stored on corporate servers.

(x) Location-Based Services
168. The Commission’s Enhanced 911 rules (“E911”) provide that starting on October
1, 2001, wireless carriers were required to begin the process of providing
automatic location identification (“ALI”) for 911 calls, upon request by public
safety answering points (“PSAPs”).   Carriers have begun deploying the technology
for ALI, called E911 Phase II.   The Commission has granted limited waivers
allowing delays in initial deployment of Phase II by the major national wireless
carriers, based on compliance with specific, detailed deployment benchmarks.
Similarly, somewhat later initial deployment schedules were also set for smaller
carriers.   In addition, proceedings to enforce the Phase II rules and compliance
plans have been undertaken by the FCC’s Enforcement Bureau, in some cases leading
to consent decrees that established revised Phase II deployment schedules.

169. Wireless carriers may comply with the Phase II requirements using any of
several location technologies or combinations of technologies.   For example,
carriers may employ network-based technologies, which require upgrades to carrier
networks, or handset-based technologies, which require upgrades to both handsets
and carrier networks.  Currently, wireless carriers are primarily deploying one of
two location technologies, depending upon the carrier’s air interface technology.
Nationwide CDMA carriers Sprint PCS and Verizon Wireless, and iDEN carrier Nextel
are using Assisted GPS (“A-GPS”), a technology that requires handsets upgraded to
include Global Positioning System (“GPS”) location capability in addition to
network components.    GSM carrier T-Mobile, as well as AT&T Wireless and Cingular
Wireless, which operate with TDMA/GSM networks, are deploying or planning to
deploy a network-based technology called Time Difference of Arrival (“TDOA”),
which triangulates the location of handsets based on the arrival times of signals
from the handset at three or more network cell sites equipped with location
measurement equipment.  TDOA does not require changes to handsets.

170. Phase II E911 deployment began in the fall of 2001 in the state of Rhode
Island and in individual counties in Illinois and Indiana.  Sprint PCS began
distributing location-capable handsets, with A-GPS technology, in October 2001,
Verizon in December 2001, and Nextel in October 2002.  By the end of 2002, Sprint
PCS reported selling a total of 5.8 million A-GPS-enabled handsets (including 50
percent of all handsets sold in the fourth quarter of 2002) and 12 different
handset models.  Verizon Wireless reported offering 10 different A-GPS-enabled
handset models, and Nextel said it was selling two such handsets.   Each carrier
had also deployed network equipment and upgrades needed to provide A-GPS. Carriers
employing the network-based TDOA technology also report substantial Phase II
deployments. AT&T Wireless had deployed TDOA equipment at 3,292 cell sites by the
end of 2002 and Cingular Wireless at more than 2,400 sites.

171. As a result of these individual carrier deployments, the overall deployment
of Phase II expanded substantially in 2002.   While deployment of Phase II
capability by wireless carriers is now well underway, actual implementation has
been slowed by a variety of issues, including carrier delays that have resulted in
enforcement actions against three of top six wireless carriers, interconnection
and pricing of necessary wireline carrier facilities and services, and delays in
upgrades to PSAP facilities and equipment necessary for the PSAP to receive and
use location information (in some cases related to funding issues).

172. In addition to E911, ALI can be used for a variety of other commercial
location-based services such as driving directions, mobile yellow pages, and the
location of retailers, restaurants, or movie theaters.

173. Carriers’ abilities to obtain and transmit precise location information in
fulfillment of the Commission’s E911 rules may trigger privacy considerations.  In
1999, Congress adopted the Wireless Communications and Public Safety Act (“911
Act”) to encourage the use of wireless services and to promote public safety by
providing protection to users’ location information and specifying the conditions
for the release of such information.  Specifically, Section 5 of the 911 Act
amended Section 222 of the Communications Act that governs carriers’ use or
disclosure of customer proprietary network information (“CPNI”).  Under the 911
Act, the disclosure or use of wireless location information without the express
prior authorization of the customer is restricted, except in specified emergency
situations to respond to a wireless user’s emergency call or in the transmission
of automatic crash data.

e. Devices
174. Mobile users can access data services through a variety of devices, including
those that also have voice capabilities, such as mobile telephone handsets and
smartphones, as well as devices that only offer data capabilities, such as pagers,
two-way messaging devices, PDAs, and wireless modem cards.   Some PDAs can
establish a mobile Internet connection with a built-in wireless modem while others
require the attachment of a wireless modem card or a mobile phone.  Laptop users
can access the Internet while mobile by attaching a wireless modem card or mobile
telephone to their computers.  One analyst estimates that, as of the end of 2002,
84 percent of all mobile data devices were mobile telephone handsets or
smartphones, and 16 percent were other, non-voice devices.   This is a change from
the end of 2001 when an estimated 87 percent of all mobile data devices were
telephone-based, and 13 percent were non-voice devices.

175. During 2002, equipment manufacturers released a number of new wireless modem
cards and smartphones that connect to mobile telephone carriers’ higher speed,
next generation GPRS and 1xRTT networks.  For example, the major wireless modem
card manufacturers, Novatel Wireless, Inc. (“Novatel Wireless”) and Sierra
Wireless, Inc. (“Sierra Wireless”), have released tri-band GSM/GPRS modem cards
that can be used with PCs and some Pocket PC models and which connect to GSM/GPRS
networks operating in the 900 MHz, 1800 MHz, and 1900 MHz bands.   These companies
have also released wireless modem cards that work with CDMA 1xRTT networks.   Most
wireless modem cards made prior to 2002 connected to the Internet via CDPD
networks.

176. Equipment providers and mobile operators also launched several new smartphone
devices during 2002 that work on next generation networks.  For example, RIM
released a new model, the BlackBerry 6710, that works on GSM/GPRS networks and is
available from T-Mobile.   The 6710 allows users to access RIM’s BlackBerry e-mail
service as well as make voice calls.  RIM has released a CDMA 1xRTT BlackBerry
model as well, the 6750, which Verizon Wireless began selling in April 2003.
Since the publication of the Seventh Report, Sprint PCS, T-Mobile, and AT&T
Wireless have begun selling next-generation smartphones that run Microsoft’s
Pocket PC Phone Edition operating system and are made by manufacturers such as
Toshiba and Siemens.   In addition, Handspring unveiled both GPRS and 1xRTT
versions of its Treo smartphone, which runs the Palm operating system.   T-Mobile
and Cingular sell the GPRS version of the Treo, while Sprint PCS sells the 1xRTT
version.   Palm has also developed its own smartphone device, the Tungsten W,
which allows users to make voice calls using a hands-free earpiece and runs on
AT&T Wireless’s GSM/GPRS network.   T-Mobile also began offering a new smartphone,
the Sidekick, which is marketed to mainstream consumers rather than enterprise
customers and features a rotatable screen, a thumb QWERTY keypad, and an
attachable camera.   T-Mobile offers Sidekick-specific service plans that include
1000 text or AIM messages per month as well as unlimited access for one year to
the following mobile services: web browsing, POP3 e-mail access, and digital photo
sharing.

177. The CMRS industry has witnessed a convergence of mobile voice and mobile data
devices, and many of the same mobile data services are currently available on many
different types of devices.  Nevertheless, device categories are limited in the
data services they are capable of offering, and not all services are available on
all types of devices.  For example, wireless modem cards cannot provide voice
functionality. Mobile phone handsets and pagers do not allow corporate server
access.  Furthermore, within the general categories of devices, specific device
models vary in the types of services they can provide.  As mentioned above,
customers must first own a phone or other device capable of accessing a specific
service or set of services before they can purchase and use such service(s).  For
example, most of the mobile phone handsets sold today are capable of text
messaging, but only a limited number are capable of newer, more advanced services
such as interactive games.  It is estimated that 35 percent of all mobile phones
in use as of February 2003 were capable of web browsing, up from 21 percent in
November 2002.   And, in order to take and send digital photos, users must have
devices with built-in or attachable digital cameras.

178. Even in the cases where multiple device models offer the same service, a
range of factors specific to individual device models influences how users
experience that service, including the size and resolution of the device’s screen
and whether it is color or black and white, the type of keypad, the operating
system, the battery life, and the storage and processing power.

179. One feature that equipment manufacturers have begun to add to many new models
of mobile devices is Bluetooth connectivity.  Bluetooth is a technology used to
establish wireless connectivity between electronic devices that are up to 10
meters apart.   It eliminates the need for cables to connect various devices, such
as mobile phones, PDAs, computers, printers, and digital cameras, to one another.
One analyst estimates that 35 million Bluetooth chipsets had been shipped
worldwide as of the end of 2002, up from 10 million at the end of 2001.   In
addition, the Bluetooth Special Interest Group (“SIG”) estimates that mobile
telephones constitute two-thirds of all Bluetooth-enabled products.

f. Wi-Fi
180. Wi-Fi or Wireless Fidelity, also known as the Institute of Electrical and
Electronics Engineers’ (“IEEE”) family of 802.11x standards, is a technology used
to create wireless local area networks (“WLANs”) with a range of 150 to 250
feet.   Wi-Fi operates on an unlicensed basis and allows data transfer speeds of
up to 11 Mbps for 802.11b and up to 54 Mbps for 802.11a and 802.11g.  Users of
mobile devices with Wi-Fi capabilities can establish high-speed wireless Internet
connections within buildings or spaces, commonly called “hot spots,” where Wi-Fi
technology has been deployed.  Hot spots typically rely on high-speed landline
technologies, such as T-1 lines, DSL, or cable modems, to connect to the PSTN and
Internet.  Public hot spots include restaurants, coffee shops, hotels, airports,
convention centers, and city parks, streets, and squares.   The industry estimates
there were between 3,000 and 4,000 Wi-Fi hot spots at the end of 2002.   Over the
past year, several major hotel and restaurant chains, including McDonalds,
Schlotzsky’s Deli, Hilton Hotels & Resorts, Starwood Hotels, Marriott
International, InterContinental Hotels, and Omni Hotels, have announced that they
plan to make Wi-Fi access available to their customers in some or all of their
locations.

181. While Wi-Fi itself is not a CMRS service,  it has begun to play an
increasingly important role in the CMRS industry, and many CMRS providers, as
discussed below, have recently entered the Wi-Fi business.  Because the technology
allows consumers to obtain high-speed wireless Internet connections within certain
locations, it has the potential to act as both a substitute and a complement to
data services offered over mobile telephone networks.  However, several obstacles
currently prevent Wi-Fi from competing directly with CMRS-based mobile data
services.  First, roaming among Wi-Fi hotspots that are not part of the same
network or are maintained by different providers can be problematic. Second,
frequent handoffs are required in order for Wi-Fi users to roam beyond the
relatively short service radii of individual hotspots.  Technical obstacles also
currently prevent Wi-Fi from connecting seamlessly with wide area CMRS networks
and therefore acting as a more effective complement to such networks.  However,
carriers and equipment providers are working to overcome these obstacles.

182. There are several emerging business models for Wi-Fi hot spots.  These
include: individuals or companies who install Wi-Fi equipment in commercial
locations; wholesale aggregators who combine local installations to provide a
national footprint; major CMRS providers; grass roots individuals who offer free
or low-cost access; and providers of other products, such as McDonald’s, that
offer Wi-Fi in order to sell their primary product.   When a Wi-Fi network
operator chooses to install hot spot equipment in partnership with another
commercial entity, the resulting Wi-Fi offering typically combines and builds on
the special expertise derived from each member of the partnership.   Generally
speaking, hot spot operators are companies that set up and maintain Wi-Fi networks
in public locations and sell Wi-Fi access to end users.  In return, hot spot
operators share the revenue derived from the Wi-Fi access with the hosting
business.

183. Over the past year, several mobile telephone carriers have entered the hot
spot operation business through acquisitions, partnerships, or independent
deployments.  In November 2001, T-Mobile acquired hot spot operator, MobileStar,
and has since expanded Wi-Fi access to 1,800 Starbucks coffee shops and 100
American, United, and Delta Airlines’ airport lounges.   T-Mobile expects to begin
offering integrated pricing and billing of its Wi-Fi high-speed Internet access
and GPRS voice and data services during the second half of 2003.   During the
first quarter of 2003, AT&T Wireless and Verizon Wireless announced that they had
signed roaming agreements with hot spot operator, Wayport.   Wayport operates
Wi-Fi access points in 10 airports and more than 525 hotels.   AT&T Wireless has
begun reselling Wayport’s Wi-Fi access service under the brand name GoPort.   AT&T
Wireless has also independently deployed Wi-Fi access in the Denver International
Airport and plans to deploy the service at the Philadelphia International Airport;
these locations have become or will become part of Wayport’s hot spot network.
Verizon Wireless plans to begin reselling Wayport service and to offer
complementary access between Wi-Fi networks and its wide area CDMA network in the
third quarter of 2003.   Furthermore, Sprint PCS has announced that it is pursuing
Wi-Fi/mobile network integration and has invested in hot spot aggregator,
Boingo.   Hot spot aggregators do not deploy Wi-Fi infrastructure but instead
aggregate disparate hot spots in order to allow their subscribers to roam to all
of the hot spots under its umbrella.  As of March 2003, Boingo offered Wi-Fi
access in over 1,100 hot spots.

184. In addition to Wi-Fi involvement by mobile telephone carriers, Intel, IBM,
and AT&T announced in December 2002 that they had created a new company, Cometa
Networks, which plans to begin deploying Wi-Fi access points throughout the top 50
U.S. cities during 2003.   The founding companies expect Cometa to equip 20,000
locations with Wi-Fi access by 2005.   And, in May 2003, Verizon began offering
Wi-Fi access at 150 pay phones in New York City.   The company plans to eventually
expand the service to 1,000 pay phones throughout New York City.

g. Telemetry and Telematics
185. Telemetry and telematics both involve the use of wireless technology to
transfer data between systems and devices.  Wireless telemetry is the monitoring
of mobile or fixed equipment in a remote location.  The most common example of
wireless telemetry is the remote monitoring of utility meters by utility and
energy companies, called automatic meter reading (“AMR”).  With telematics
systems, a person in a remote location can access information using various
wireless technologies.  Telematics is most often used to describe vehicle
navigation systems, such as OnStar, where drivers and passengers employ GPS
technology to obtain directions, track their location, and obtain assistance when
a vehicle is in an accident.

186. Location-based services first appeared in vehicles as navigational devices
using GPS technology to determine the vehicle’s location.   However, OnStar, a
wholly owned subsidiary of General Motors, Inc. (“GM”) formed in 1996, employs
both GPS technology and terrestrial wireless networks.  The basic, original OnStar
service connects drivers to a live OnStar operator who pinpoints the location of
the vehicle and provides verbal driving directions.   OnStar also offers a variety
of other in-vehicle communication and location-based, telematics services,
including remote access to a vehicle’s horn, door locks, and headlights; automatic
alerting of public safety officials if an airbag is deployed; roadside assistance;
mobile telephone service; and e-mail and Internet access.   As of February 2003,
OnStar had more than 2 million subscribers and was available in 60 vehicle models.

187. As mentioned above, wireless telemetry systems are used mainly for AMR, but
can also be used to monitor a variety of other fixed and mobile machines,
including health care equipment, HVAC systems, gas and oil pipelines, vending
machines, alarm systems, parking meters, streetlights, smoke/fire detectors,
factory process systems, and photocopiers.  Businesses and consumers can also
employ wireless telemetry systems to remotely monitor the location and status of
vehicles.  A few examples of this include LoJack, corporate fleet tracking, and
remote engine diagnostic systems.  LoJack is a system used to recover stolen
vehicles.  Consumers can purchase the LoJack VHF transponder unit for their
vehicles, and the LoJack Corporation and law enforcement agencies maintain the
system used to track the location of vehicles in the case that they are stolen.
Over 40,000 stolen vehicles equipped with LoJack have been recovered by U.S. law
enforcement agencies.

188. The largest AMR telemetry provider is Itron, Inc. (“Itron”).   As of the end
of 2002, 1,100 utility companies used Itron’s wireless telemetry technology to
collect and analyze meter data at 24 million gas, electric, and water meters.
Many mobile data providers, including WebLink, Arch Wireless, and Cingular
Wireless, offer a variety of telemetry services, either directly to end users or
through other telemetry providers who create and maintain telemetry systems for
end users but rely on the networks of mobile data providers.   At least one paging
company has stated that telemetry services represent a future business opportunity
for paging carriers, but that greater demand from utility companies for wireless
technologies must exist in order to generate higher equipment volume and lower
per-unit equipment costs.   In addition, Aeris.net (“Aeris”) and NumereX Corp.
lease capacity on mobile telephone networks to offer telemetry products.  Aeris
sells the use of its network to other telemetry service providers.

4. Satellite Operators
189. As of year-end 2002, a number of carriers were providing mobile satellite
services (“MSS”) in the United States.   For example, both Globalstar
Telecommunications LTD. (“Globalstar”) and Iridium Satellite LLC. (“Iridium
Satellite”) are using Big LEO  MSS licenses to offer mobile voice services.
Inmarsat Ltd. (“Inmarsat”) and Mobile Satellite Ventures (“MSV”), the successor to
Motient Services Inc. which had previously entered into a joint venture with
Mobile Satellite Ventures (Canada) Inc. and the Canadian licensee of the L-band
MSS satellite MSAT-1 (TMI Corporation), were also providing voice and data
communications via satellite at year-end 2002.  The companies offer voice and data
services in fixed and mobile environments.  The mobile environment consists of a
laptop-sized or larger terminal that can be transported from one location to
another.  Another company, ICO, launched one satellite to operate in the 2 GHz MSS
band in 2001, but has not launched commercial service.

190. In 2001, two MSS licensees made proposals to the FCC to integrate terrestrial
components with their networks using assigned MSS frequencies to augment signals
in areas where the satellite signal is blocked, particularly in urban areas and
inside buildings.   In response to those filings, the Commission released an NPRM
seeking comment on different proposals for authorizing the provision of
terrestrial service on MSS frequencies.   On February 10, 2003, the Commission
released a Report and Order and Notice of Proposed Rulemaking permitting MSS
providers in three frequency bands, 2 GHz,  Big LEO, and L-Band,  to provide an
ancillary terrestrial component (“ATC”) to their satellite systems.   An MSS
licensee will be permitted to provide service using an ATC provided that the MSS
licensee: (1) has launched and operates its own satellite facilities; (2) provides
substantial satellite service to the public; (3) provides integrated ATC; (4)
observes existing satellite geographic coverage requirements; and (5) limits ATC
operations only to the authorized satellite footprint.   The Commission concluded
that permitting MSS ATCs in this manner should: (1) increase the efficiency of
spectrum use through MSS network integration and terrestrial reuse and permit
better coverage in areas that MSS providers could not otherwise serve; (2) reduce
costs, eliminate inefficiencies and enhance operational ability in MSS systems;
(3) provide additional communications that may enhance public protection; and (4)
strengthen competition in the markets served by MSS.

191. Mobile Satellite Ventures (“MSV”) filed comments in response to the NOI,
indicating that its current service offerings are not competitive with
terrestrial-based mobile voice and data services because of the inability of MSS
carriers to provide service in urban environments.  MSV stated that the inability
of MSS providers to serve urban environments by offering a terrestrial component
has prevented them from developing a critical mass of customers.   Nevertheless,
in our Report and Order released on February 10, 2003, providing for the
authorization of MSS ATC, we noted that terrestrial CMRS and MSS ATC are expected
to have different prices, coverage, product acceptance and distribution.
Therefore, the two services appear, at best, to be imperfect substitutes for one
another that would be operating in predominately different market segments.   We
will continue to monitor this sector as it develops.

5. International Comparisons
a. Performance
192. The Seventh Report and previous reports compared mobile market performance in
the United States, Western Europe and parts of the Asia-Pacific region with regard
to mobile penetration, usage, and pricing.   These comparisons have shown three
consistent differences in performance between the U.S. mobile market and mobile
markets abroad.  First, mobile penetration is significantly higher in Western
Europe and parts of the Asia-Pacific region than in the United States.  Second,
average minutes of use per subscriber are significantly higher in the United
States than in Western Europe and parts of the Asia-Pacific region.  Third,
revenue per minute, a commonly used proxy for pricing, is significantly lower in
the United States than in Western Europe and parts of the Asia-Pacific region.

193. Based on more recent data, it is clear that these three differences continued
into the year 2002.   Mobile penetration remains significantly higher in Western
Europe and parts of the Asia-Pacific region than in the United States.  Mobile
penetration averaged an estimated 80 percent in Western Europe at the end of 2002,
and ranged from highs of more than 90 percent in Italy and Portugal to a low of
approximately 63 percent in France.   Thus, as in previous years, U.S. mobile
penetration at the end of 2002, at approximately 49 percent, was lower than the
lowest mobile penetration rate in Western Europe.  Japan finished the year with a
mobile penetration level of 62 percent,  only slightly below the low end of the
range in Western Europe and significantly higher than the U.S. level.  South
Korea’s year-end penetration level was within the range of European levels at 68
percent.

194. Average minutes of use per subscriber continue to be significantly higher in
the United States than in Western Europe and parts of the Asia-Pacific region.
In particular, average MOUs were estimated to be approximately 458 per month in
the United States in the fourth quarter of 2002.    This compares with an average
across Western Europe of just 116, and with figures in individual European
countries that ranged from a high of 200 in Ireland to a low of 72 in Germany.
MOUs in Japan and South Korea were considerably higher than the Western European
average, but still well below the U.S. figure, at 170 and 296, respectively.
MOUs in South Korea are high by global standards.

195. Revenue per minute  in Western Europe averaged nearly $0.24 in the fourth
quarter of 2002, and ranged from a high of $0.29 in Germany to lows of $0.19-$0.20
in France, Italy, Portugal, and Ireland.  Average revenue per minute in the United
States during the same period, at $0.12, was about half the European average and
well below the low end of the European range.

196. The Seventh Report  noted that revenue per minute in Japan was nearly double
the U.S. level in 2001 and was also the highest in the group of European and
Asian-Pacific countries being compared.  This pattern persisted in 2002.  At
$0.30, revenue per minute in Japan was more than double the U.S. figure in 2002,
and it continued to be higher than revenue per minute in Western European mobile
markets.   In contrast, revenue per minute in South Korea, at $0.10, was even
lower than the U.S. figure.

b. Market Environment
197. As discussed in the Seventh Report,  the explanations offered by analysts for
the foregoing international differences in mobile market performance generally
focus on two fundamental differences between the mobile market environment in the
United States and the mobile market environment abroad.  The first difference
relates to the competitive environment in which carriers operate, and the second
to the use of mobile party pays (“MPP”) rather than calling party pays (“CPP”) for
billing mobile calls.

198. A competitive market environment stimulates mobile subscriber growth and
thereby drives up mobile penetration by exerting downward pressure on the pricing
of services paid for by subscribers.  Paradoxically, however, the relatively high
levels of mobile penetration in Western Europe have not been achieved as the
result of a more competitive market environment.  On the contrary, analysts agree
that mobile markets in Western Europe are both structurally and behaviorally less
competitive than the U.S. mobile market, and that this is one of the principal
reasons that revenue per minute is significantly lower, and average mobile usage
significantly higher, in the United States than in Western Europe.

199. One dimension of market structure is the number of competitors per market.
European countries have achieved significantly higher mobile penetration rates
than the U.S. with typically just three to four operators per market.   This
compares with six national operators in the United States and from five to seven
or more operators in a large percentage of U.S. regional markets.   Only 21
percent of the population in Western Europe can choose from five mobile operators,
whereas 80 percent of the U.S. population can choose from five mobile operators
and approximately 21 percent of the U.S. population can choose from seven or more
operators.

200. A second dimension of market structure is the size distribution of market
shares among competitors.  In addition to having a smaller number of competitors,
European mobile markets are characterized by significantly greater inequality of
market shares among competitors than the U.S. market.  In particular, mobile
markets in Western Europe are typically dominated by the top two mobile
operators.  The two mobile operators with the largest market shares control more
than 70 percent of all mobile subscribers in virtually all Western European mobile
markets except the UK, and in the majority of these markets they control more than
80 percent of all mobile subscribers.   In the United States, by contrast, less
than 40 percent of mobile users subscribe to the services of the number one and
number two mobile competitors.

201. The difference in the size distribution of market shares and the level of
dominance in European mobile markets are important because they may affect the
competitive interactions among the market participants, particularly with regard
to pricing behavior.   One analysis posits that pricing behavior in some European
mobile markets is consistent with an “umbrella pricing” model.   Since the number
one and number two operators in European mobile markets that are dominated by the
top two competitors have an incentive to keep prices high, the pressure to reduce
prices depends on how the weakest competitors behave.  Pricing pressure will come,
if at all, from the third or fourth largest competitor.  However, the weaker
players are typically unwilling to disturb the pricing framework established by
the dominant duopoly, preferring instead to operate peacefully under the duopoly’s
“pricing umbrella.”

202. As they have in the past, some analysts continue to use the word “benign” to
characterize the pricing of wireless services in European mobile markets.   In
contrast, the past pricing promotions of some U.S. carriers are characterized as
aggressive, and the U.S. mobile market is described as having experienced a “price
war” among the six national competitors.

203. One analysis highlights the difference between U.S. and European mobile
pricing by focusing on the comparison with the UK.   The UK is widely regarded as
the most competitive large mobile market in Western Europe.  With all four British
GSM operators having a relatively equal share of total subscribers, the UK is the
only large European market that is not dominated by the number one and number two
competitors.  Nevertheless, a comparison of selected contemporary rate plans
offered by Verizon Wireless in the United States and Vodafone in the UK finds that
the pricing differential between the United States and the UK is significant, even
allowing for the fact that the service bundle offered by Verizon Wireless applies
to incoming as well as outgoing minutes.

204. The more aggressive pricing behavior of U.S. mobile operators also partly
explains why U.S. mobile subscribers use their phones so much more than European
mobile subscribers.  In the United States, competitive pressure has induced mobile
operators to offer progressively larger and larger buckets of minutes, and to
include virtually unlimited night and weekend minutes and also long-distance in
their service offerings.   In contrast, the bucket plans offered by European
mobile operators are not priced as attractively as U.S. offerings of comparable
size, they generally do not include unlimited off-peak minutes, and they are not
offered by all mobile operators in all Western European markets.    Using the
Verizon-Vodafone comparison again, one analysis concludes that a U.S. mobile
subscriber who opts for a large bundle of minutes with virtually unlimited night
and weekend minutes perceives that the incremental price of using a wireless
minute is virtually free, whereas a mobile subscriber in the U.K. does not have
the same perception.   Moreover, the incremental price of making a wireless call
generally compares more favorably to the incremental price of making an equivalent
landline call in the United States than in the U.K.  This analysis indicates that
the attractive pricing of bucket plans by U.S. mobile operators stimulates
wireless usage per subscriber, and does so in part by encouraging greater
substitution of wireless calls for landline calls in the United States than is the
case in European markets.

205. As noted earlier, the ability of Western European countries to achieve
significantly higher mobile penetration rates than the United States with far
higher levels of market concentration and far less competitive pressure on pricing
may at first glance appear paradoxical from the perspective of economic theory.
One possible explanation for this paradox is that, other things equal, CPP may
stimulate greater subscriber demand for mobile phone service than MPP.  With CPP,
the subscriber only incurs airtime charges for outgoing calls, while receiving
unlimited incoming calls free of charge.  From the subscriber’s point of view, use
of CPP makes mobile phone service cheaper and more affordable, particularly in the
case of low-income and low-usage customers.   For this reason, CPP is widely
regarded as being more conducive to the successful promotion of prepaid offerings
than MPP.   As noted in the Sixth Report and Seventh Report  the rapid growth of
prepaid subscribership has been a major driver of mobile subscriber growth in most
European and some Asian-Pacific markets, with prepaid subscribers accounting for a
considerably larger share of the total mobile subscriber base in many CPP markets
than in the United States.

206. In addition to stimulating subscriber growth on the demand side, use of CPP
may stimulate the supply of mobile phone service by strengthening the mobile
operator’s financial interest in acquiring subscribers, particularly prepaid and
other low-usage customers who don’t want to spend much on mobile phone service.
The supply-side stimulation effect of CPP is the result of the impact of CPP on
mobile termination rates.

207. Termination rates are the prices that fixed and mobile operators charge the
operator of the network on which a call originates to terminate traffic on their
own networks.  Despite recent declines induced by pressure from European
regulators to bring these rates more closely into line with costs, mobile
termination rates in Western Europe remain high, as do the profit margins on
mobile termination.  Recently, fixed-to-mobile termination rates in Western Europe
have averaged about €0.16 (slightly more than $0.16) per minute, while
mobile-to-fixed termination rates are comparatively low.   By contrast, mobile
termination rates in the United States are comparatively negligible at $0.005 per
minute,  about the same as the average rates for terminating traffic on fixed
networks.  Mobile termination rates in South Korea are much lower than European
levels, though still somewhat higher than the U.S. average, at about €0.039 per
minute.

208. As explained in the Seventh Report,  a widely accepted explanation of why
mobile termination rates are high in Europe and other CPP markets is that CPP
confers a form of market power on mobile operators with regard to the setting of
mobile termination charges.  Since European mobile subscribers only pay for the
calls they make, competition among mobile operators to attract and retain
customers exerts downward pressure on the price of outgoing mobile calls but not
on mobile termination charges, which are absorbed by callers who have little
choice but to terminate their calls on the mobile network chosen by the mobile
subscriber.  In contrast, U.S. regulatory rules on inter-carrier compensation have
kept mobile termination charges low, and because U.S. mobile subscribers pay to
make and receive calls, competition among mobile operators acts to constrain the
prices of both incoming and outgoing calls.

209. Depending on the operator and the market, termination charges can amount to
as much as 15 to 35 percent of a European mobile operator’s revenues.   As
discussed in the Seventh Report,  high mobile termination revenues are another
reason, apart from differences in the competitive environment, that revenue per
minute is significantly higher in Western Europe and most other CPP markets than
in the United States.   Mobile termination revenues may stimulate mobile
subscriber growth from the supply side by helping mobile carriers recover the
costs of customer acquisition and billing over the lower volumes of sales
generated by small users.  Even if subscribers rarely use their mobile phones to
make calls, the termination revenues carriers receive on incoming calls under CPP
may offset acquisition and billing expenses by enough to make it worthwhile for
mobile carriers to compete for the business of such low-volume users.

210. In effect, high termination rates on fixed-to-mobile calls have served to
promote the development of the mobile telephone industry in Europe by directing
subsidies from established fixed-line services to mobile services.

211. By stimulating mobile subscriber growth and driving up mobile penetration,
use of CPP can also affect average mobile usage.  For example, low MOUs in Europe
and other CPP markets are partly attributable to the impact of CPP in enabling
operators to tap into the prepaid market.  As noted in the Sixth Report,  the
relatively large share of prepaid subscribers in the European mobile subscriber
base pulls down measures of MOUs because on average European prepaid subscribers
use their phones much less than postpaid customers.  Moreover, because use of CPP
also makes postpaid offerings more affordable to low-usage customers, even the
postpaid market in CPP countries appears to be characterized by lower average
usage than the U.S. market.  In Japan and South Korea, for example, prepaid
subscribers are a tiny fraction of the total mobile subscriber base.
Nevertheless, while MOUs in Japan and South Korea are higher than the European
average, they are still lower than the U.S. figure.

212. There is another, more direct way that use of CPP or MPP can influence MOUs,
and that is through their impact on incentives to use mobile phones.   In theory,
MPP creates an incentive for wireless subscribers to switch off their mobile
phones when not placing calls to avoid being charged for incoming calls, and for
the same reason it also discourages them from giving out their mobile phone
number.  In contrast, CPP theoretically has the potential to stimulate mobile
usage by increasing the accessibility of mobile subscribers to incoming calls, and
also by allowing mobile subscribers to devote their entire wireless budget to
outgoing calls.

213. In practice, U.S. mobile operators have managed to counter the potentially
adverse incentive effects of MPP by introducing bucket plans to stimulate usage.
As noted above, progressive increases in the size of mobile buckets have been a
major driver of average mobile usage in the United States.  Bucket plans may
increase the accessibility of mobile subscribers to their friends and family in an
environment in which they pay for both incoming and outgoing calls.   At the same
time, high mobile termination rates in Europe and other CPP environments may
discourage people from calling mobile subscribers by increasing the cost of
placing calls to mobile phones.

c. Mobile Data Developments
214. Mobile telephone carriers in other countries continued to offer mobile data
services over next generation networks during the past year.  As mentioned in the
Seventh Report, NTT DoCoMo launched service, which the company calls FOMA (Freedom
of Multimedia Access), over its WCDMA network in Japan in October 2001 and had
approximately 105,000 FOMA subscribers as of April 2002.   As of March 2003, the
number of FOMA subscribers had jumped to 330,000.   On the other hand, the CDMA
carrier in Japan, KDDI, had 5.3 million subscribers to its 1xRTT-based services as
of February 2003.    Data services offered over next generation CDMA networks
continue to be popular with consumers in South Korea.  An estimated 47 percent of
South Korea’s mobile telephone subscriber base used services offered over 1xRTT or
1xEV-DO networks as of the end of 2002, up from 12 percent at the end of 2001.

215. In Europe, Hutchison 3G began offering WCDMA service in Italy and the UK
during the past year, and the company reported it had 50,000 subscribers in Italy
and 10,000 in the UK as of March 2003.   During 2002, many European operators
delayed or suspended their planned WCDMA deployments; as of February 2003, many
were not planning to launch WCDMA service until the second half of 2003 or 2004.
Compared to the United States, mobile data ARPU is significantly higher in
Europe.  An estimated 10 to 20 percent of European mobile carriers’ total ARPU is
derived from data services, versus just under one percent in the United States.
This development may be the result of a variety of factors, such as differences in
consumer demand for mobile data products, in wireline Internet penetration rates,
in the number of competing carriers, and in network technology standards.  SMS
continues to be the most frequently used mobile data service in Europe and
constitutes the bulk of data ARPU; however, other data services are gaining in
popularity.   According to one estimate, mobile users in the UK downloaded 524
million web pages to their handsets in January 2003, up 25 percent from December
2002.   Recent figures also show that, for several European carriers, sales of
camera phones, which enable customers to use MMS, were strong during the fourth
quarter of 2002.

III. CONCLUSION
216. During 2002, the CMRS industry experienced another year of growth,
demonstrating the continuing demand for and reliance upon mobile services.  As of
December 2002, we estimate there were approximately 141.8 million mobile telephone
subscribers, which translates into a nationwide penetration rate of roughly 49
percent.   During 2002, MOUs increased an estimated 12 percent, while the average
cost of monthly service in 25 major markets fell 2.9 percent and the Cellular CPI
declined 1.0 percent.

217. Several metrics included in the report support our conclusion that the CMRS
marketplace is effectively competitive. Mobile telephony providers continued to
build out their networks and expand service availability during 2002.   To date,
270 million people, or 95 percent of the total U.S. population, have three or more
different operators offering mobile telephone service in the counties in which
they live.  Over 236 million people, or 83 percent of the U.S. population, live in
counties with five or more mobile telephone operators competing to offer service.
The average price of mobile telephone service continued to decline during 2002,
and more than 30 percent of wireless customers switched providers.   Moreover,
evidence from industry analysts and marketing campaigns indicates that carriers
have responded to consumer demands for improved service quality and that the
majority of consumers are satisfied with their mobile telephone service.

218. In addition, while relatively few wireless customers have “cut the cord” in
the sense of canceling their subscription to wireline telephone service, there is
growing evidence that consumers are substituting wireless service for traditional
wireline communications.   One analyst estimates that wireless has now displaced
about 30 percent of total wireline minutes.

219. The multitude of mobile data services, service providers, pricing plans, and
devices available to consumers provides evidence that competition for the
provision of mobile data products is developing successfully.  One analyst
estimates there were 11.9 million mobile telephone subscribers who used some type
of mobile data service at the end of 2002, up from 7.6 million at the end of
2001.  The estimated number of data-only mobile users grew from 1.1 million at the
end 2001 to 2.3 million at the end of 2002.   Furthermore, several mobile
telephone operators have deployed GPRS, 1xRTT, or 1xEV-DO networks that allow them
to offer mobile Internet access services for mobile telephone handsets, PDAs,
and/or laptops at speeds generally ranging from 30 to 70 kbps.   As of March 2003,
these networks were available in at least some portion of U.S. counties covering
approximately 265 million people.   Furthermore, mobile data providers offer their
customers a variety of services, both those focused on consumer entertainment and
others aimed at maintaining a constant yet remote connection to work and office
life.   One of the most popular mobile data services has been text messaging,
which approximately 20 percent of all mobile telephone subscribers used during the
fourth quarter of 2002.

220. Using the various data sources and metrics discussed above, we have met our
statutory requirement to analyze the competitive market conditions with respect to
commercial mobile services  and conclude that effective competition exists in the
CMRS marketplace.   As mentioned above, the Commission will be issuing another
Notice of Inquiry seeking additional and updated data from the public on the state
of CMRS competition, particularly in rural areas and on a sub-national level, in
preparation for its ninth annual report.  With this next Notice, we hope to build
on the information employed in this year’s report and to obtain a wider range of
facts and opinions from the public comments in order to assist in our analysis.
We also plan to explore other avenues for data collection, such as contract
research, for the next report.   In addition, for the next report, we will
continue efforts to improve our approaches to collecting and evaluating the
various types of data and information that are available in order to assess the
status of competition in the CMRS industry.  In particular, we plan to seek
comment on the interrelationship among dimensions of industry structure,
indicators of operator conduct, and other relevant measures of market conditions.

IV. ADMINISTRATIVE MATTERS
221. This Eighth Report is issued pursuant to authority contained in Section 332
(c)(1)(C) of the Communications Act of 1934, as amended, 47 U.S.C. § 322
(c)(1)(C).

222. It is ORDERED that the Secretary shall send copies of this Report to the
appropriate committees and subcommittees of the United States House of
Representatives and the United States Senate.

223. It is FURTHER ORDERED that the proceeding in the WT Docket No. 02-379 IS
TERMINATED.

   FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch
Secretary

APPENDIX A:
FIXED WIRELESS VOICE AND DATA SERVICES

I. INTRODUCTION AND OVERVIEW

In this section, the Commission reviews the current state of the fixed wireless
industry.   The first part of Appendix A provides an overview of fixed wireless
systems.  The second part discusses recent developments in the industry, including
the current level of service deployment and significant policy changes related to
spectrum bands used for fixed wireless service.

Fixed wireless operators have used several spectrum bands, including Multipoint
Distribution Service (“MDS”),  Wireless Communications Service (“WCS”),
unlicensed spectrum bands, 24 GHz, Local Multipoint Distribution Service (“LMDS”),
and 39 GHz, to offer point-to-point, high-speed data services.  In addition, some
licensees of spectrum bands traditionally used for CMRS have also used that
spectrum to provide fixed wireless services.

This report groups fixed wireless operators into two major categories: lowerband
providers (800 MHz to 5.8 GHz) and upperband providers (24 GHz to 39 GHz) due to
the similar technical characteristics of the bands within each category.

Operators using lowerband spectrum are able to serve a wider geographic area with
a single transmitter than operators using upperband spectrum (see Figure 1).
Lowerband systems generally have a service radius of five to 35 miles from a
central hub, depending on the particular spectrum band, the power of the
transmitter, and the terrain.  Upperband systems, on the other hand, face
significant losses of signal strength due to atmospheric conditions, most notably
precipitation (i.e., rain, snow, and fog).   Therefore, the range of individual
transmitters in the upperbands is approximately two to five miles.

II. RECENT DEVELOPMENTS

A. Upperband Operations
As discussed in the Sixth and Seventh Reports, all of the major upperband fixed
wireless providers – Winstar Communications, Inc. (“Winstar”), Teligent, Inc.
(“Teligent”), Advanced Radio Telecom (“ART”), and XO Communications, Inc. (“XO”) –
filed for bankruptcy during 2001 and 2002.   In recent months, many have emerged
from bankruptcy with plans to continue providing fixed wireless services but on a
more limited basis.  Teligent, which filed for bankruptcy in May 2001, completed
its reorganization and exited bankruptcy in September 2002 with a business plan
focused on selling transport capacity to other telecommunications companies
wholesale and to multi-location businesses as well as offering dedicated Internet
access to large business customers.   Teligent has retained its 24 GHz licenses in
74 markets.

Winstar filed for bankruptcy protection in April 2001 and was acquired by IDT
Corportation (“IDT”) in December 2001.  IDT holds the former Winstar’s 28 GHz and
39 GHz licenses and has continued to offer many of the fixed wireless services
that Winstar offered before it entered bankruptcy, including local and long
distance telephone service, high-speed Internet and data services, and Frame Relay
Services.   IDT’s Winstar subsidiary currently operates in 22 markets and
generated $79.6 million in revenue between December 2001 and July 2002.   IDT
changed the name of its Winstar subsidiary to IDT Solutions in March 2003.

XO entered bankruptcy in June 2002 and completed its reorganization in January
2003.   The company is primarily a wireline CLEC but also holds LMDS and 39 GHz
licenses covering 95 percent of the population of the 30 largest U.S. cities, and
was able to continue funding its operations during its bankruptcy proceedings.
XO uses its spectrum to deploy fixed wireless connections for business customers
to whom it is not cost-efficient to construct a fiber optic connection.

First Avenue Networks, which purchased Advanced Radio Telecom’s (“ART”) 39 GHz
licenses during ART’s 2001 bankruptcy proceedings, now offers fixed wireless
access on a wholesale basis to other carriers.

B. Lowerband Operations
As discussed in the Seventh Report, AT&T Wireless and Sprint both announced in the
fall of 2001 that they were terminating their fixed wireless operations.   And in
July 2002, just prior to its bankruptcy filing, WorldCom Inc. (“WorldCom”),
announced that it planned to discontinue or divest its fixed wireless
operations.   The company announced in May 2003 that BellSouth plans to purchase
WorldCom’s fixed wireless assets, including its licenses, for $65 million.
WorldCom had been offering high-speed, fixed wireless Internet access service to
business customers in 13 U.S. markets using both MDS and WCS spectrum.

Despite the reorganizations and service terminations by all of the major fixed
wireless providers,
several smaller fixed wireless operators, including hundreds of operators using
unlicensed spectrum,  continue to provide high-speed Internet access service,
generally in less densely populated markets across the country and often in a only
a few markets apiece.  Most of the companies that use unlicensed spectrum to offer
Internet access are local and regional Internet service providers, also referred
to as wireless ISPs, that offer the service in an average of three markets
apiece.   Many of these carriers are targeting business customers, while others
serve both businesses and residences.  Many fixed wireless operators use lowerband
spectrum to offer high-speed Internet access in rural and underserved areas.  For
example, Canyon Country Communications offers Internet access in Page, AZ; Planet
Connect offers fixed wireless service in Bristol, Seymour, Newport, and
Greeneville, TN; and DATACentric sells the service in Lufkin, Conroe, and
Bryan-College Station, TX.

As mentioned in the Sixth Report, the Commission tracks the rollout of fixed
wireless services by providers using lowerband spectrum on a county-by-county
basis.  Based on its analysis, the Commission estimates that there are at least
212 different lowerband operators providing fixed wireless services in 457
different counties.   These counties contain 106 million people, or 37.3 percent
of the U.S. population.   This analysis is based on publicly-available
information, such as news articles and operators’ press releases, SEC filings, and
web sites.  There are several caveats to note when considering this data.  First,
in order to be considered as “covering” a county, an operator need only be
offering service in a portion of that county.  Second, the POPs and square mile
figures in this analysis include all of the POPs and all of the square miles in a
county considered to have coverage.  Third, all population figures are based on
the 2000 Census.  Fourth, because some lowerband carriers serve small and remote
locations and because unlicensed operators provide service without a license from
the Commission, it is difficult to assess precisely who is operating where.
Therefore, the analysis may not include certain companies that do not make the
information on their fixed wireless offerings easily obtainable or publicly
available.

C. Spectrum Allocation Proceedings
As mentioned in the Seventh Report, the Commission decided to permit mobile use of
the 2500-2690 MHz band by MDS licensees in September 2001.   In March 2003, the
Commission initiated a proceeding to facilitate the provision of fixed and mobile
broadband access, as well as educational services, in the 2500-2690 MHz bands.
With this action, the Commission began a comprehensive examination of the rules
and policies governing these bands in order to provide greater opportunities for
increased access to the spectrum and encourage efficient use of the spectrum.

In addition, in November 2002, the Commission announced the reallocation of
2150-2155 MHz portion of the 2150-2160/62 MDS band for fixed and mobile services,
including new, advanced wireless services that will be offered over next
generation networks.   MDS licensees currently use this band primarily for the
upstream links in two-way, fixed wireless broadband services.

APPENDIX B:
U.S. INVESTMENT IN FOREIGN MOBILE OPERATORS

The divestiture of stakes in foreign mobile telephone companies by U.S. mobile
operators, a trend identified in the Sixth Report  and the Seventh Report,
continued in the second half of 2002 and in 2003.

SBC Communications shed two of its foreign mobile holdings in the past year.  In
November 2002, Canadian telecom conglomerate BCE, Inc. notified SBC Communications
of its intention to exercise its right to buy SBC’s remaining 20 percent stake in
BCE mobile subsidiary Bell Canada for $3.2 billion.   SBC completed the sale of
its interest in Bell Canada to BCE in December 2002.   The following January, SBC
finalized the sale of its 15 percent equity stake in France’s Cegetel Groupe SA to
London-based wireless carrier Vodafone Group plc for approximately $2.3 billion in
cash.   Cegetel is a joint venture that owns 80 percent of Societe Francaise de
Radiotelephone, the second-largest wireless provider in France.  SBC
Communications subsequently reported that it realized a gain of $1.6 billion from
the Cegetel sale.

Western Wireless International Corporation (“WWI”), a subsidiary of Western
Wireless, also divested two of its foreign mobile holdings in the past year.  WWI
announced the closing of the sale of its 57.3 percent interest in Icelandic
wireless operator Tal hf to Islandssimi hf in November 2002.   WWI’s net proceeds
from the transaction were expected to total approximately $28.9 million.  In June
2003, WWI announced its agreement to sell its 19 percent interest in Croation
wireless operator VIPnet d.o.o. to Mobilcom Austria Aktiengesellschaft & CO KG,
the majority owner of VIPnet.   WWI expected that proceeds from the sale of its
interest and related shareholder debt would be $70 million.

In June 2003, Atlantic West, a 50/50 joint venture between Verizon Communications
and AT&T Wireless, succeeded in its longstanding effort to sell the U.S.
operators’ combined 49 percent stake in Czech mobile operator Eurotel Praha to
Czech telephone operator Cesky Telecom, the owner of the remaining 51 percent
stake in Eurotel.  As detailed in the Seventh Report,  Atlantic West had reached a
preliminary agreement on the sale with Cesky Telecom for a price of $1.5 billion
in July 2001, but Cesky Telecom subsequently cut the offered price to $1.1 billion
and negotiations were ultimately abandoned in November 2001 after the parties
failed to agree on the purchase price and Atlantic West rejected Cesky Telecom’s
latest offer.  Negotiations later resumed and the parties finally reached an
agreement this past year.  On June 5, 2003, the Board of Directors of Cesky
Telecom approved the terms of a preliminary agreement with Atlantic West to
purchase the remaining 49 percent stake that it does not already own in its mobile
telephony unit Eurotel Praha.   The parties agreed on a price of $1.05 billion to
be paid in cash.  In a related move, Eurotel owners declared that a dividend of
$415 million will be paid prior to the closing of the transaction.  The dividend
payment raises the value of the sale to an estimated $1.25 billion.

Verizon announced on June 13, 2003 that it plans to sell its 39.4 percent equity
stake in Mexican wireless carrier Grupo Iusacell to Movil Access, a Mexican
company and wireless telecom investor, following approval of the latter’s offer by
the Mexican securities commission.   Movil Access offered to acquire 100 percent
of Grupo Iusacell’s stock for $10 million, plus the assumption of $814 million in
Iusacell debt.   Vodafone Americas, which owns another 35 percent equity stake in
Grupo Iusacell, is also reported to be planning to accept the offer.  Bell
Atlantic Corporation, which later merged with GTE Corporation to form Verizon,
paid $1 billion for its Iusacell stake in 1993, while Vodafone bought its share in
Iusacell for $973.4 million in 2001

 APPENDIX C:
LOWER 700 MHz AUCTION #44 RESULTS

Bidder Name Total High Bids Net High Bids (1) POPs
Aloha Partners, L.P. 77 $28,793,380 117,383,349
Vulcan Spectrum LLC 24 $15,075,000 7,236,558
Cavalier Group, LLC 7 $6,472,050 24,617,122
Union Telephone Company 16 $4,452,000 2,670,974
LIN Television Corporation 18 $4,293,000 7,475,819
DataCom Wireless, L.L.C. 3 $3,303,950 11,053,041
Harbor Wireless, LLC 14 $2,836,600 8,487,727
MilkyWay Broadband, LLC 48 $2,757,105 10,405,189
Redwood County Telephone Company 17 $1,984,500 6,552,179
David M. Gates 7 $1,742,000 3,871,000
Whidbey Telephone Company 3 $1,212,100 675,464
Lynch 3G Communications Corporation 8 $1,118,000 1,722,987
Capitol Broadcasting Company, Inc. 12 $888,000 2,963,816
Corr Wireless Communications, LLC 9 $762,000 2,643,203
PGTV, Inc. 1 $740,350 2,097,447
East Kentucky Network, LLC 9 $643,000 1,856,852
Bluegrass Cellular, Inc. 9 $639,000 1,886,924
Ronan Telephone Company 3 $618,000 374,399
KanOkla Telephone Association, Inc. 4 $475,150 479,533
Lexcom Telephone Company 1 $453,000 914,232
First Cellular of Southern Illinois 7 $423,000 1,405,713
Chariton Valley Communication Corporation, Inc. 6 $397,800 605,695
Cameron Communications Corporation 6 $340,000 1,076,431
Banks Broadcasting, Inc. 2 $326,400 468,783
Agri-Valley Communications, Inc. 7 $320,450 1,253,761
Blue Valley Tele-Communications, Inc. 2 $293,250 190,348
Kennebec Telephone Company, Inc. 11 $283,400 696,004
Public Service Wireless Services, Inc. 4 $250,000 832,638
SJI, Inc. 4 $249,000 828,045
Lackawaxen Long Distance Company, Inc. 4 $247,000 826,262
Citizens Telephone Cooperative 4 $246,000 723,276
Nemont Communications, Inc. 2 $243,950 136,385
CT Communications, Inc. 3 $238,000 789,808
PVT Networks, Inc. 1 $231,000 226,366
Peoples Telephone Cooperative, Inc. 3 $230,350 904,559
The Ponderosa Telephone Co. 1 $219,300 303,190
Mobius Communications Company 4 $197,250 282,744
Grand River Communications, Inc. 8 $184,000 501,900
Kaplan Telephone Company, Inc. 2 $181,500 581,272
Craw-Kan Telephone Cooperative, Inc. 5 $172,550 650,983
Central Wisconsin Communications, Inc. 2 $167,450 384,203
Plateau Telecommunications, Inc. 2 $166,000 370,422
XIT Telecommunications & Technology, Ltd. 4 $159,800 555,697
Dickey Rural Services, Inc. 3 $143,650 351,093
Eastern Colorado Wireless Partnership 4 $143,100 259,898
Star Wireless LLC 4 $137,150 600,171
Waller, Inc. 3 $121,500 518,389
McElroy Electronics Corporation 2 $118,300 604,893
The Tri-county Telephone Association, Inc. 2 $117,750 184,012
3G COMM, LLC 1 $116,350 315,121
Glenwood Telephone Membership, Corporation 3 $115,500 253,961
Missouri RSA No. 7 L.P. dba Mid-Missouri Cellular 1 $107,000 157,047
McBride Spectrum Partners I, LLC 4 $102,505 526,323
Triangle Communication System, Inc. 3 $102,000 126,308
ComSouth Tellular, Inc. 2 $96,750 432,349
San Carlos Apache Telecommunications Utility, Inc. 2 $96,000 318,457
Allcom Communications, Inc. 1 $90,000 210,908
FTC Management Group, Inc. 2 $90,000 300,683
Rainbow Telephone Cooperative Association, Inc. 3 $87,750 386,017
Scott Reiter 1 $84,500 433,785
MTC North, Inc. 1 $84,000 374,182
Northeast Nebraska Telephone Company 2 $84,000 256,395
GTC Wireless, Inc. 2 $82,500 367,183
Holland Wireless, L.L.C. 1 $80,750 316,633
Poka Lambro Telecommunications, Ltd. 3 $76,500 256,348
Swayzee Telephone Company 2 $73,500 324,177
Cable & Communications Corporation 4 $73,015 189,871
Chequamegon Telephone Cooperative, Inc. 2 $72,000 321,299
WSS, L.L.C. 2 $69,000 305,276
North Dakota Network Co. 1 $67,000 61,933
Kingdom Telephone Company 1 $66,000 92,590
CTC Telcom, Inc. 2 $61,500 239,922
Guadalupe Valley Communications Systems, L.P. 2 $61,000 204,342
Star Telephone Company, Inc. 1 $61,000 180,185
Webster-Calhoun Cooperative Telephone Association 2 $54,750 244,541
BPS Telephone Company 1 $50,150 197,439
BEK Communications Cooperative 2 $41,250 136,048
Beulahland Communications, Inc. 1 $38,350 123,051
Tri-County Communications, Inc. 1 $36,000 110,131
Guam Cellular and Paging 1 $34,000 133,152
Advantage Cellular Systems, Inc. 1 $33,750 150,599
McDonald County Telephone Company 1 $33,000 93,482
Farmers Cellular Telephone, Inc. 1 $31,450 121,990
DYCOM Holding, Inc. 1 $29,750 115,644
Alpine Communications, L.C. 1 $28,900 114,478
Northern New Mexico Telecom, Inc. 1 $27,300 22,300
Arctic Slope Telecommunications and Cellular, Inc. 1 $26,250 118,282
Mark Twain Communications Company 1 $24,000 55,897
United Telephone Association, Inc. 3 $23,850 104,466
Yell County Telephone Company, Inc. 1 $23,250 104,770
C&W Enterprises, Inc. 1 $22,500 98,458
City of Ketchikan dba Ketchikan Public Utilities 1 $21,000 68,989
Pioneer Telephone Association, Inc. 1 $20,400 80,134
West Wisconsin Telcom Cooperative, Inc. 1 $20,250 89,365
Montana Spectrum Alliance 1 $19,550 77,691
H&B Communications, Inc. 1 $18,750 82,345
Farmers Telephone Company, Inc. 1 $18,000 59,620
Nortex Communications Company 1 $18,000 80,087
S&T Communications Inc 2 $17,775 49,224
Great Plains Communications, Inc 1 $17,000 35,875
Panhandle Telecommunication Systems, Inc. 1 $7,700 25,743
Blanca Telephone Company 1 $7,500 27,520
Source: Federal Communications Commission
Notes: (1) As of the close of the auction.

LOWER 700 MHz AUCTION #49 RESULTS

Bidder Name Total High Bids Net High Bids (1) POPs
QUALCOMM Incorporated 5 $38,036,000 237,029,635
Aloha Partners II, L.P. 89 $5,816,590 22,873,669
Cavalier Group, LLC 44 $2,143,050 11,379,618
LIN Television Corporation 13 $1,980,000 3,374,467
Vermont Telephone Company, Inc. 5 $1,628,600 1,577,173
D&E Investments, Inc. 5 $828,000 1,229,242
Whidbey Telephone Company 7 $652,800 1,244,671
Lynch 3G Comminications Corporation 4 $620,000 1,053,479
Lima Directional Paging Co., Inc. 3 $513,750 587,652
Banks Broadcasting, Inc. 4 $513,000 709,789
Valley Telephone Cooperative, Inc. 3 $451,350 656,014
Viacel Corporation 2 $403,910 760,069
AGRI-VALLEY COMMUNICATIONS, INC. 2 $341,700 678,656
United Telephone 10 $341,250 NA
BPS Telephone Company 5 $300,050 675,436
Peoples Telephone Cooperative, Inc. 3 $294,100 491,572
KM Communications, Inc. 3 $237,150 286,664
Adams Telcom, Inc. 2 $201,750 415,537
Westelcom Network, Inc. 2 $192,000 480,944
Corr Wireless Communications, LLC 3 $189,550 640,315
Delta Media Corporation 4 $161,200 448,811
DataCom Wireless, L.L.C. 4 $139,100 876,163
WCTA Wireless Inc. 1 $133,450 106,046
David M. Gates 7 $123,760 1,240,017
Pioneer Telephone Cooperative, Inc. 3 $122,000 281,107
CAPITOL BROADCASTING COMPANY, INC. 4 $101,000 663,594
Grand River Communications, Inc. 4 $86,700 532,659
Wireless Network Management 2 $85,500 187,384
Kennebec Telephone Company 2 $57,200 185,826
Red River Rural Telephone Association, Inc. 1 $43,350 214,745
McBride Spectrum Partners II, LLC 1 $25,350 103,833
Bluegrass Cellular, Inc. 1 $25,000 91,545
Acumen Technologies, Inc. 1 $11,050 142,982
RED LAKE BAND OF CHIPPEWA INDIANS 1 $9,800 65,227
American Samoa Telecommunications Authority 1 $6,900 57,291
Source: Federal Communications Commission
Notes: (1) As of the close of the auction.

APPENDIX D:
MOBILE TELEPHONY

 Table of Contents

Table 1: CTIA’s Semi-Annual Mobile Telephone Industry Survey   D-2

Table 2: FCC’s Semi-Annual Local Telephone Competition Survey D-3

Table 3: Economic Area Penetration Rates D-4

Table 4: Top 25 Mobile Telephone Operators by Subscribers  D-8

Table 5: Estimated Mobile Telephone Rollouts by Number of Launches by County D-9

Table 6: County Quartiles with Estimated Rollout by at least 3 Mobile Telephone
Providers D-9

Table 7: Mobile Telephone Digital Coverage D-10

Table 8: Change in CPI  D-10

Table 9: Average Revenue Per Minute D-11

Table 10: Market Entry Over Time D-11

Table 11: Foreign Holdings of U.S. Mobile Telephone Operators D-12

Table 12: Mobile Performance in Selected Countries D-14

Table 1: CTIA’s Semi-Annual Mobile Telephone Industry Survey

Date Estimated Subscribers Year End over Year End Subscriber Increase Total
Six-Month Service Revenues (000s) Roamer Services Revenues Cell Sites Employees
Cumulative Capital Investment (000s) Average Local Monthly Bill
Jan 85 91,600  $178,085   346 1,404 $354,760
June 85 203,600  $176,231   599 1,697 $588,751
Dec 85 340,213 248,613 $306,197   913 2,727 $911,167
June 86 500,000  $360,585   1,194 3,556 $1,140,163
Dec 86 681,825 341,612 $462,467   1,531 4,334 $1,436,753
June 87 883,778  $479,514   1,732 5,656 $1,724,348
Dec 87 1,230,855 549,030 $672,005   2,305 7,147 $2,234,635  $96.83
June 88 1,608,697  $886,075   2,789 9,154 $2,589,589  $95.00
Dec 88 2,069,441 838,586 $1,073,473  $89,331 3,209 11,400 $3,274,105  $98.02
June 89 2,691,793  $1,406,463  $121,368 3,577 13,719 $3,675,473  $85.52
Dec 89 3,508,944 1,439,503 $1,934,132  $173,199 4,169 15,927 $4,480,141  $83.94
June 90 4,368,686  $2,126,362  $192,350 4,768 18,973 $5,211,765  $83.94
Dec 90 5,283,055 1,774,111 $2,422,458  $263,660 5,616 21,382 $6,281,596  $80.90
June 91 6,380,053  $2,653,505  $302,329 6,685 25,545 $7,429,739  $74.56
Dec 91 7,557,148 2,274,093 $3,055,017  $401,325 7,847 26,327 $8,671,544  $72.74
June 92 8,892,535  $3,633,285  $436,725 8,901 30,595 $9,276,139  $68.51
Dec 92 11,032,753 3,475,605 $4,189,441  $537,146 10,307 34,348 $11,262,070  $68.68

June 93 13,067,318  $4,819,259  $587,347 11,551 36,501 $12,775,967  $67.31
Dec 93 16,009,461 4,976,708 $6,072,906  $774,266 12,805 39,775 $13,946,406  $61.48

June 94 19,283,306  $6,519,030  $778,116 14,740 45,606 $16,107,920  $58.65
Dec 94 24,134,421 8,124,960 $7,710,890  $1,052,666 17,920 53,902 $18,938,677
$56.21
June 95 28,154,415  $8,740,352  $1,120,337 19,833 60,624 $21,709,286  $52.45
Dec 95 33,785,661 9,651,240 $10,331,614  $1,422,233 22,663 68,165 $24,080,466
$51.00
June 96 38,195,466  $11,194,247  $1,314,943 24,802 73,365 $26,707,046  $48.84
Dec 96 44,042,992 10,257,331 $12,440,724  $1,465,992 30,045 84,161 $32,573,522
$47.70
June 97 48,705,553  $13,134,551  $1,392,440 38,650 97,039 $37,454,294  $43.86
Dec 97 55,312,293 11,269,301 $14,351,082  $1,581,765 51,600 109,387 $46,057,911
$42.78
June 98 60,831,431  $15,286,660 $1,584,891 57,674 113,111 $50,178,812 $39.88
Dec 98 69,209,321 13,897,028 $17,846,515 $1,915,578 65,887 134,754 $60,542,774
$39.43
June 99 76,284,753  $19,368,304 $1,922,416 74,157 141,929 $66,782,827 $40.24
Dec 99 86,047,003 16,837,682 $20,650,185 $2,163,001 81,698 155,817 $71,264,865
$41.24
June 00 97,035,925  $24,645,365  $1,971,625  95,733 159,645 $76,652,358  $45.15
Dec 00 109,478,031  23,431,028 $27,820,655  $1,911,356  104,288 184,449
$89,624,387  $45.27
June 01 118,397,734  $30,905,721  $1,727,058  114,059 186,317 $99,728,965  $45.56
Dec 01 128,374,512 18,896,481 $34,110,163 $2,209,387 127,540 203,580 $105,030,101
$47.37
June 02 134,561,370  $36,707,086 $1,846,267 131,350 186,956 $118,418,677 $47.42
Dec 02 140,766,842 12,392,330 $39,801,101 $2,049,245 139,338 192,410 $126,922,347
$48.40

Source: Cellular Telecommunications and Internet Association, Semi-Annual Wireless
Industry Survey <http://www.wow-com.com/industry/stats/surveys/>.
 Table 2: FCC’s Semi-Annual Local Telephone Competition Survey

NA – Not Applicable
 * Data withheld to maintain firm confidentiality.
1/ Carriers with under 10,000 subscribers in a state were not required to report
for that state.
2/ Percentage of mobile wireless subscribers receiving their service from a mobile
wireless reseller.
3/ Subscribers counts for the District of Columbia, Maryland, and Virginia have
been revised for previous periods other than June 2000.
Source: Local Telephone Competition: Status as of December 31, 2002, Federal
Communications Commission, June 2003 (Table 13: Mobile Wireless Telephone
Subscribers).
 Table 3: Economic Area Penetration Rates

EA EA Name Subscribers 2000 Census EA penetration rate EA density
34 Tampa-St. Petersburg-Clearwater, FL 1,335,363 2,395,997 55.73% 891.0
10 New York-No. New Jer.-Long Island, NY-NJ-CT-PA-MA-VT 13,607,067 25,712,577
52.92% 890.6
12 Philadelphia-Wilmington-Atl. City, PA-NJ-DE-MD 3,857,780 7,309,792 52.78% 778.8

161 San Diego, CA 1,628,114 2,813,833 57.86% 660.5
64 Chicago-Gary-Kenosha, IL-IN-WI 5,455,054 10,328,854 52.81% 556.5
55 Cleveland-Akron, OH-PA 1,983,225 4,692,460 42.26% 427.8
3 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH-RI-VT 4,263,353 7,954,554
53.60% 421.8
31 Miami-Fort Lauderdale, FL 3,311,130 5,602,222 59.10% 413.8
13 Washington-Baltimore, DC-MD-VA-WV-PA 5,003,728 8,403,130 59.55% 402.8
63 Milwaukee-Racine, WI 1,056,619 2,255,183 46.85% 366.9
57 Detroit-Ann Arbor-Flint, MI 3,794,344 6,963,637 54.49% 364.1
50 Dayton-Springfield, OH 451,137 1,133,004 39.82% 318.5
49 Cincinnati-Hamilton, OH-KY-IN 1,075,343 2,184,860 49.22% 294.1
11 Harrisburg-Lebanon-Carlisle, PA 498,960 1,125,265 44.34% 292.4
20 Norfolk-Virginia Beach-Newport News, VA-NC 924,504 1,722,764 53.66% 289.9
160 Los Angeles-Riverside-Orange County, CA-AZ 9,485,741 18,003,420 52.69% 286.1
53 Pittsburgh, PA-WV 1,364,699 2,971,829 45.92% 284.8
33 Sarasota-Bradenton, FL 389,839 763,795 51.04% 273.6
163 San Francisco-Oakland-San Jose, CA 5,126,825 9,111,806 56.27% 271.1
30 Orlando, FL 1,943,099 3,642,540 53.34% 265.8
40 Atlanta, GA-AL-NC 3,397,545 5,471,412 62.10% 246.0
23 Charlotte-Gastonia-Rock Hill, NC-SC 1,071,319 2,031,519 52.73% 240.5
32 Fort Myers-Cape Coral, FL 429,957 692,265 62.11% 234.3
133 McAllen-Edinburg-Mission, TX 478,031 978,369 48.86% 222.0
8 Buffalo-Niagara Falls, NY-PA 583,482 1,507,759 38.70% 212.9
62 Grand Rapids-Muskegon-Holland, MI 657,141 1,881,991 34.92% 206.8
170 Seattle-Tacoma-Bremerton, WA 2,286,128 4,135,291 55.28% 190.4
51 Columbus, OH 974,843 2,349,060 41.50% 190.4
18 Greensboro-Winston-Salem-High Point, NC-VA 877,273 1,854,853 47.30% 189.1
19 Raleigh-Durham-Chapel Hill, NC 1,008,819 1,831,510 55.08% 188.4
164 Sacramento-Yolo, CA 1,258,188 2,311,567 54.43% 188.1
172 Honolulu, HI 706,712 1,211,537 58.33% 187.2
65 Elkhart-Goshen, IN-MI 315,244 936,245 33.67% 185.7
41 Greenville-Spartanburg-Anderson, SC-NC 631,558 1,248,824 50.57% 183.6
70 Louisville, KY-IN 671,230 1,416,914 47.37% 180.9
83 New Orleans, LA-MS 881,511 1,725,338 51.09% 171.9
67 Indianapolis, IN-IL 1,364,398 3,066,469 44.49% 171.4
131 Houston-Galveston-Brazoria, TX 3,184,408 5,632,853 56.53% 169.2
7 Rochester, NY-PA 466,524 1,493,518 31.24% 167.2
44 Knoxville, TN 467,294 983,329 47.52% 165.6
22 Fayetteville, NC 258,032 528,224 48.85% 164.6
56 Toledo, OH 575,990 1,294,395 44.50% 163.9
66 Fort Wayne, IN 270,422 725,847 37.26% 158.5
130 Austin-San Marcos, TX 806,102 1,349,267 59.74% 156.1
81 Pensacola, FL 321,837 623,252 51.64% 154.1
26 Charleston-North Charleston, SC 337,688 587,297 57.50% 149.8
43 Chattanooga, TN-GA 320,302 720,375 44.46% 145.3
45 Johnson City-Kingsport-Bristol, TN-VA 258,641 576,081 44.90% 144.5
60 Appleton-Oshkosh-Neenah, WI 163,720 433,250 37.79% 143.6
82 Biloxi-Gulfport-Pascagoula, MS 181,074 396,754 45.64% 143.5
84 Baton Rouge, LA-MS 360,788 739,673 48.78% 140.3
78 Birmingham, AL 840,055 1,578,903 53.20% 137.1
5 Albany-Schenectady-Troy, NY 477,695 1,171,669 40.77% 134.7
46 Hickory-Morganton, NC-TN 199,887 519,208 38.50% 131.9
42 Asheville, NC 217,924 444,594 49.02% 128.6
96 St. Louis, MO-IL 1,713,867 3,558,651 48.16% 127.0
24 Columbia, SC 470,366 932,115 50.46% 126.0
52 Wheeling, WV-OH 98,045 327,645 29.92% 124.5
15 Richmond-Petersburg, VA 773,113 1,446,123 53.46% 124.0
74 Huntsville, AL-TN 489,343 997,824 49.04% 119.1
127 Dallas-Fort Worth, TX-AR-OK 3,939,831 7,645,530 51.53% 119.0
54 Erie, PA 168,550 519,348 32.45% 116.4
29 Jacksonville, FL-GA 1,008,013 1,885,190 53.47% 112.5
14 Salisbury, MD-DE-VA 133,529 363,970 36.69% 111.2
102 Davenport-Moline-Rock Island, IA-IL 249,327 558,913 44.61% 108.3
25 Wilmington, NC-SC 437,363 878,267 49.80% 107.4
71 Nashville, TN-KY 1,173,096 2,444,643 47.99% 105.1
6 Syracuse, NY-PA 685,817 1,902,640 36.05% 104.7
73 Memphis, TN-AR-MS-KY 869,480 1,882,332 46.19% 103.0
103 Cedar Rapids, IA 220,243 384,577 57.27% 101.3
85 Lafayette, LA 281,290 601,654 46.75% 100.0
162 Fresno, CA 592,579 1,419,998 41.73% 98.6
2 Portland, ME 318,218 748,817 42.50% 98.6
17 Roanoke, VA-NC-WV 372,178 826,284 45.04% 97.8
158 Phoenix-Mesa, AZ-NM 1,834,796 3,407,197 53.85% 93.9
9 State College, PA 280,918 809,979 34.68% 92.4
28 Savannah, GA-SC 321,449 668,214 48.11% 91.9
101 Peoria-Pekin, IL 232,899 528,671 44.05% 91.0
27 Augusta-Aiken, GA-SC 256,061 604,799 42.34% 89.8
87 Beaumont-Port Arthur, TX 213,655 456,637 46.79% 89.2
99 Kansas City, MO-KS 1,261,851 2,469,340 51.10% 88.7
92 Fayetteville-Springdale-Rogers, AR-MO-OK 177,573 405,160 43.83% 88.4
21 Greenville, NC 382,332 823,517 46.43% 87.7
48 Charleston, WV-KY-OH 404,431 1,199,373 33.72% 85.4
39 Columbus, GA-AL 254,726 496,538 51.30% 84.1
134 San Antonio, TX 1,013,681 2,141,060 47.34% 83.0
107 Minneapolis-St. Paul, MN-WI-IA 2,262,258 4,498,286 50.29% 83.0
47 Lexington, KY-TN-VA-WV 654,494 1,851,367 35.35% 80.4
167 Portland-Salem, OR-WA 1,438,644 2,883,737 49.89% 76.0
69 Evansville-Henderson, IN-KY-IL 367,147 854,714 42.96% 75.3
80 Mobile, AL 289,482 676,258 42.81% 74.8
93 Joplin, MO-KS-OK 102,316 263,904 38.77% 74.7
68 Champaign-Urbana, IL 253,397 630,898 40.16% 73.5
124 Tulsa, OK-KS 650,809 1,384,426 47.01% 72.4
104 Madison, WI-IL-IA 402,418 933,823 43.09% 71.3
72 Paducah, KY-IL 56,042 226,586 24.73% 70.0
79 Montgomery, AL 239,775 481,137 49.84% 66.9
125 Oklahoma City, OK 774,495 1,698,197 45.61% 65.0
35 Tallahassee, FL-GA 334,360 720,434 46.41% 63.5
38 Macon, GA 313,486 768,701 40.78% 62.9
37 Albany, GA 151,812 468,178 32.43% 62.7
118 Omaha, NE-IA-MO 492,197 1,044,156 47.14% 62.4
159 Tucson, AZ 495,573 999,882 49.56% 60.0
97 Springfield, IL-MO 245,684 517,462 47.48% 58.2
98 Columbia, MO 157,350 369,014 42.64% 58.0
88 Shreveport-Bossier City, LA-AR 233,657 573,616 40.73% 58.0
4 Burlington, VT-NY 186,248 605,393 30.76% 57.6
89 Monroe, LA 149,561 333,519 44.84% 56.1
106 Rochester, MN-IA-WI 157,011 318,374 49.32% 55.6
36 Dothan, AL-FL-GA 120,426 332,409 36.23% 53.7
105 La Crosse, WI-MN 54,764 241,903 22.64% 53.7
86 Lake Charles, LA 215,364 536,758 40.12% 52.4
141 Denver-Boulder-Greeley, CO-KS-NE 2,335,988 3,984,105 58.63% 52.0
95 Jonesboro, AR-MO 107,880 303,852 35.50% 51.3
16 Staunton, VA-WV 171,964 334,087 51.47% 51.0
61 Traverse City, MI 70,091 286,745 24.44% 50.7
119 Lincoln, NE 178,073 379,321 46.95% 50.2
75 Tupelo, MS-AL-TN 230,214 625,002 36.83% 49.8
77 Jackson, MS-AL-LA 593,570 1,432,518 41.44% 49.7
94 Springfield, MO 321,087 859,559 37.35% 48.1
100 Des Moines, IA-IL-MO 748,786 1,683,257 44.48% 47.3
91 Fort Smith, AR-OK 114,606 329,136 34.82% 46.5
132 Corpus Christi, TX 235,222 549,012 42.84% 46.5
90 Little Rock-North Little Rock, AR 700,992 1,614,850 43.41% 46.1
166 Eugene-Springfield, OR-CA 329,133 791,776 41.57% 43.1
76 Greenville, MS 97,365 252,280 38.59% 41.0
117 Sioux City, IA-NE-SD 91,763 252,656 36.32% 39.5
152 Salt Lake City-Ogden, UT-ID 1,009,595 2,088,974 48.33% 35.7
123 Topeka, KS 179,799 454,539 39.56% 35.6
59 Green Bay, WI-MI 289,283 671,225 43.10% 34.2
108 Wausau, WI 192,046 487,723 39.38% 34.1
157 El Paso, TX-NM 309,851 955,602 32.42% 33.0
58 Northern Michigan, MI 30,911 269,986 11.45% 28.5
169 Richland-Kennewick-Pasco, WA 275,354 677,674 40.63% 27.7
137 Lubbock, TX 177,227 374,626 47.31% 27.2
153 Las Vegas, NV-AZ-UT 898,876 1,709,797 52.57% 23.7
147 Spokane, WA-ID 352,752 829,735 42.51% 23.6
1 Bangor, ME * 526,106 * 20.9
156 Albuquerque, NM-AZ 454,076 921,086 49.30% 20.9
122 Wichita, KS-OK 416,387 1,175,577 35.42% 20.5
128 Abilene, TX 80,260 222,147 36.13% 20.3
109 Duluth-Superior, MN-WI 145,751 350,059 41.64% 18.5
113 Fargo-Moorhead, ND-MN 161,626 371,691 43.48% 16.4
155 Farmington, NM-CO 86,362 193,872 44.55% 16.0
116 Sioux Falls, SD-IA-MN-NE 241,324 519,143 46.49% 15.1
165 Redding, CA-OR 138,134 336,820 41.01% 14.4
149 Twin Falls, ID 71,395 162,397 43.96% 14.1
150 Boise City, ID-OR 273,879 574,876 47.64% 13.7
139 Santa Fe, NM 114,412 258,790 44.21% 13.1
126 Western Oklahoma, OK 58,060 139,761 41.54% 12.0
138 Amarillo, TX-NM 216,278 481,633 44.91% 11.8
120 Grand Island, NE 101,188 288,047 35.13% 11.6
136 Hobbs, NM-TX 65,699 190,340 34.52% 11.2
148 Idaho Falls, ID-WY 139,264 306,120 45.49% 10.9
146 Missoula, MT 154,364 399,183 38.67% 10.8
110 Grand Forks, ND-MN 88,977 230,253 38.64% 10.2
135 Odessa-Midland, TX 164,993 388,007 42.52% 10.1
129 San Angelo, TX 79,794 202,679 39.37% 10.1
140 Pueblo, CO-NM 100,157 279,600 35.82% 8.7
168 Pendleton, OR-WA 61,713 200,681 30.75% 8.7
154 Flagstaff, AZ-UT 164,921 401,766 41.05% 8.2
142 Scottsbluff, NE-WY 24,854 92,360 26.91% 7.8
151 Reno, NV-CA 313,218 670,013 46.75% 7.6
111 Minot, ND * 111,195 * 7.0
112 Bismarck, ND-MT-SD 73,115 175,427 41.68% 6.3
114 Aberdeen, SD * 82,608 * 5.4
143 Casper, WY-ID-UT 166,979 408,708 40.86% 5.2
115 Rapid City, SD-MT-NE-ND 81,387 213,696 38.09% 5.0
121 North Platte, NE-CO * 61,758 * 5.0
144 Billings, MT-WY 161,907 404,902 39.99% 4.9
145 Great Falls, MT 55,629 166,564 33.40% 4.2
171 Anchorage, AK 285,300 626,932 45.51% 1.0

* Data withheld to maintain firm confidentiality.
Source:  Federal Communications Commission internal analysis based on preliminary
year-end 2002 filings for Numbering Resource Utilization in the United States.
Density is persons per square mile.

Table 4: Top 25 Mobile Telephone Operators by Subscribers
(in thousands)

 Year-End 2001 Year-End 2002
 Operator Total Operator Total
1 Verizon Wireless 29,398 Verizon Wireless 32,491
2 Cingular Wireless 21,596 Cingular Wireless 21,900
3 AT&T Wireless 18,047 AT&T Wireless  20,900
4 Sprint PCS 13,555 Sprint PCS 14,760
5 Nextel 8,667 Nextel 10,612
6 VoiceStream 6,993 T-Mobile 9,913
7 ALLTEL 6,683 ALLTEL 7,600
8 US Cellular 3,461 US Cellular 4,103
9 Western Wireless 1,177 Leap Wireless 1,512
10 Leap Wireless 1,119 Western Wireless 1,197
11 Qwest 1,114 Qwest 1,034
12 Telecorp  1,018 Centennial (1) 897
13 Centennial 827 Nextel Partners 877
14 CenturyTel 797 Triton PCS 830
15 Dobson Comm. 700 Dobson Comm. 768
16 Triton PCS 686 Rural Cellular 722
17 American Cellular 657 American Cellular 690
18 Rural Cellular 647 Alamosa PCS 622
19 Price Wireless 570 AirGate 589
20 Nextel Partners 516 US Unwired 561
21 Alamosa PCS 503 Broadwing 470
22 Broadwing 462 Midwest Wireless 300
23 AirGate 453 Horizon PCS 271
24 PrimeCo 385 Ntelos 267
25 PR. Tel. Co. 327 Southern LINC 260

Sources:  For 2001, see Seventh Report, at 13094.  For 2002, publicly available
company documents such as operators’ news releases and filings made with the
Securities and Exchange Commission.  Southern LINC, Frequently Asked Questions
(visited May 29, 2003) <http://www.southernlinc.com/faqs.asp>.  Midwest Wireless,
Midwest Wireless and DTN Market Access Team Up to Deliver Commodity Quotes to
Wireless Phones, News Release, May  27, 2003.

Notes
(1)  As of Nov. 30, 2002.

Table 5: Estimated Mobile Telephone Rollouts
by Number of Launches by County

Total Number of Providers in a County Number of Counties POPs Contained in Those
Counties (1) % of Total US POPs Square Miles Contained in Those Counties % of
Total US Square Miles
3 or More 2232 270,233,931 94.7%  1,861,820  51.6%
4 or More 1674 254,738,264 89.3%  1,301,067  36.1%
5 or More 1211 235,569,285 82.6%  940,523  26.1%
6 or More 789 202,753,811 71.1%  642,426  17.8%
7 or More 259 72,474,947 25.4%  230,073  6.4%

Table 6: County Quartiles with Estimated Rollout by at least 3 Mobile Telephone
Providers

County Quartile Based on Population Total Number of Counties (2) Number of
Counties with at least 3 Providers Percent of Counties in Quartile with at least 3
Providers Total POPs in Quartile Counties (1) POPs in Counties with at least 3
Providers Percent of Quartile POPs with at least 3 Providers
1st Quartile 805 781 97.0% 234,640,253 232,508,956 99.1%
2nd Quartile 805 659 81.9% 31,425,466 26,141,620 83.2%
3rd Quartile 804 527 65.6% 14,135,298 9,490,930 67.1%
4th Quartile 805 263 32.7% 5,029,499 1,988,010 39.5%

Source: Federal Communications Commission estimates based on publicly available
information.

Notes:
(1) POPs from the 2000 Census.
(2) United States and Puerto Rico

Table 7: Mobile Telephone Digital Coverage

Technology POPs in Those Areas (1) % of Total POPs (2) Square Miles Contained in
Those Counties % of Total Square Miles
CDMA  259,854,520  91.1%  1,849,933.6  51.3%
TDMA / GSM  265,342,450  93.0%  1,928,473.1  53.5%
iDEN  248,006,454  86.9%  1,295,614.2  35.9%
Total Digital  277,586,564  97.3%  2,573,948.1  71.4%

Source: Federal Communications Commission estimates based on publicly available
information.

Notes:
Broadband PCS and digital SMR licensees are analyzed by county; cellular licensees
are analyzed by cellular market areas (“CMAs”).
POPs from the 2000 Census.

 Table 8: Change in CPI

 CPI Cellular CPI All Telephone CPI Local Telephone CPI Long Distance Telephone
CPI
 Index Value Annual Change Index Value Annual Change Index Value Annual Change
Index Value Annual Change Index Value Annual Change
1997 100   100   100   100   100
1998 101.6 1.6% 95.1 -4.9% 100.7 0.7% 101.6 1.6% 100.5 0.5%
1999 103.8 2.2% 84.9 -10.7% 100.1 -0.6% 103.4 1.8% 98.2 -2.3%
2000 107.3 3.4% 76 -10.5% 98.5 -1.6% 107.7 4.1% 91.8 -6.5%
2001 110.3 2.8% 68.1 -10.4% 99.3 0.8% 113.3 5.2% 88.8 -3.3%
2002 112.1 1.6% 67.4 -1.0% 99.7 0.4% 118.5 4.5% 84.9 -4.4%

1997 to 2002  12.1%  -32.6%  -0.3%  18.5%  -15.1%

Source: Bureau of Labor Statistics.

Table 9: Average Revenue Per Minute

 Average Local Monthly Bill Minutes of Use Per Month Average Revenue Per Minute
Annual Change
1993 $61.49  140 $0.44
1994 $56.21  119 $0.47  8%
1995 $51.00  119 $0.43  -9%
1996 $47.70  125 $0.38  -11%
1997 $42.78  117 $0.37  -4%
1998 $39.43  136 $0.29  -21%
1999 $41.24  185 $0.22  -23%
2000 $45.27  255 $0.18  -20%
2001 $47.37 380 $0.12  -30%
2002 $48.40 427 $0.11 -9%

Source: See Appendix D, Table 1, at D-2 (ARPU); Dec 2002 CTIA Survey, at 208
(minutes of use).

Table 10: Market Entry Over Time

  Percent of Total US POPs Covered
Total Number of Providers in a County Eighth Report Seventh Report Sixth Report
Fifth Report
3 or more 94.7% 94.1% 90.8% 87.8%
4 or more 89.3% 88.7% 84.4% 79.8%
5 or more 82.6% 80.4% 75.1% 68.5%
6 or more 71.1% 53.1% 46.7% 34.6%
7 or more 25.4% 21.2% 11.9% 4.4%

Source: FCC estimates

Table 11: U.S. Mobile Telephone Operators’
Holdings in Foreign Mobile Operators

Operator Country Subscribers
(Brand name) Venture Ownership (%)
SBC Denmark 1.975 million Tele Danmark 41.6
 Belgium 4.07 million
(Proximus) Belgacom 17.5 (controls 24.36% through investment in Tele Danmark,
which owns 16.5% of Belgacom)
 South Africa 6.395 million (Vodacom) Telkom SA(owns 50% of Vodacom) 18
 Mexico 20.067 million
 America Movil 8
BellSouth Uruguay 143,000
(Movicom) Abiatar 46
 Guatemala 193,000  BellSouth Guatemala 60
 Nicaragua 201,000 Nicacell 89
 Ecuador 632,000 Otecel 89.4
 Panama 335,000 BellSouth Panama 43.7
 Brazil (Sao Paulo) 1.669 million BCP 45.4
 Brazil (northeast) 1.005 million BCP 47.1
 Venezuela 3.107 million Telcel 78.2
 Argentina 1.32 million Movicom/
BellSouth 65
 Chile 1.032 million BellSouth Chile 100
 Columbia 1.349 million Celumovil 66
 Peru 530,000 Tele 2000 97.4
 Denmark 1.103 million Sonafon 46.5
 Israel 2.53 muillion Cellcom 34.7
AT&T Canada 3.356 million  Rogers Wireless 34.3
 Taiwan 4.341 million FarEasTone 22.7
 Slovakia 1.298 million EuroTel Bratislava 24.5
 India 1.204 million IDEA Cellular 33
 India 1 million
(BPL Mobile) BPL Cellular 49
 Antigua & Barbuda NA Antigua Wireless 85
 Bermuda NA Telecommunications Limited 60
 Dominica NA Wireless Ventures 100
 St. Lucia NA Wireless Ventures 69
 St. Vincent & Grenadines NA Wireless Ventures 100
Verizon Italy 19 million Omnitel Pronto Italia 23.1
 Slovakia 1.298 million EuroTel
Bratislava 24.5
 Greece 2.514 million STET Hellas 17.5
 Indonesia 1.823 million Excelcomindo 23.1
 Japan 3.849 million Tu-Ka 2.7-5
 New Zealand 1.229 million Telecom New Zealand 21.5
 Philippines NA
(Extelcom) BayanTel (owns 46.6% stake in wireless provider Extelcom) 19.4
 Argentina 1.006 million
(CTI Movil) CTI Holdings 65.3
 Canada 2.996 million TELUS Corporation 23.7
 Venezuela 2.561million CANTV 28.5
 Taiwan 6.24 million Taiwan Cellular Corporation 13
 Dominican Republic 550,000 CODETEL 100
Western Wireless International Ireland 145,000 Meteor  81
 Austria 318,000 tele.ring 99.5
 Slovenia NA Western Wireless 100
 Georgia NA MagtiCom 14.5
 Ghana NA Western Telesystems 56.7
 Cote d’Ivoire NA CORA de Comstar 40
 Bolivia NA NuevaTel 71.5
 Haiti NA COMCEL 51
Nextel International Canada NA NII Holdings 36
 Japan NA
 Argentina NA
 Brazil NA
 Mexico 517,000
 Peru NA
 Philippines NA

Sources:  Publicly available information such as operators’ news releases, web
sites and filings with the Securities and Exchange Commission.  Subscriber figures
for a number of foreign affiliates are from Linda Mutschler, Global Wireless
Matrix 4Q02, Merrill Lynch Global Securities Research, Apr. 2, 2003.

Table 12:  Mobile Performance in Selected Countries

Country CPP or
MPP Penetration (%) Share of Prepaid (%) MOUs Revenue per
Minute ($)
USA MPP 49 5 458 0.12
Canada MPP 37  270 0.11
UK CPP 85 69 132 0.22
Germany CPP 72 54 72 0.29
Italy CPP 93  121 0.20
France CPP 63  156 0.20
Finland CPP 85  146 0.24
Japan CPP 62 3 170 0.30
South Korea CPP 68 1 296 0.10
Australia CPP 68  173 0.16

Sources:  Linda Mutschler, Global Wireless Matrix 4Q02, Global Securities
Research, Merrill Lynch, Apr. 2, 2003; Linda Mutschler, The Next Generation VII,
Global Securities Research, Merrill Lynch, Feb. 21, 2003.

APPENDIX E:
MOBILE DATA

Table of Contents

Table 1: Text Messaging and IM Services  E-2

Table 2: Mobile Internet Access Services  E-3

Table 3: Mobile Data Service Availability by Device  E-5

Table 1: Text Messaging and IM Services

Provider Per-Message Monthly Price for Messaging Packages IM Service
(included unless otherwise noted)
 Send Receive
Verizon Wireless 10¢ 2¢ $2.99 for 100
$3.99 for 200
$7.99 for 600 AOL IM
MSN Messenger (offered through Mobile Web plan)
Cingular Wireless 10¢ 10¢ $2.99 for 100
$5.99 for 250
$9.99 for 500
T-Mobile 5¢ 5¢ $2.99 for 500 AOL IM
AT&T Wireless 10¢ Free $1.99 for 25
$4.99 for 100
received messages free AOL IM
Yahoo! Messenger
Nextel 10¢ 10¢ $5.00 for 300
$9.00 for 1000
$10.00 for unlimited text, AIM, and web use AOL IM ($5 per month for unlimited
use)
Sprint PCS NA NA $15 per month for all PCS Vision applications

Sources:
Text Messaging: Verizon Wireless, Mobile Messenger Service: Overview (visited Jan.
17, 2003) <http://www.verizonwireless.com/jsp/mobilemessenger/index.jsp>; Cingular
Wireless, Text Messaging Pricing (visited Jan. 23, 2003)
<http://www.cingular.com/beyond_voice/tm_pricing>; T-Mobile, 2-Way Text Messaging
(visited Jan. 24, 2003) <http://www.t-mobile.com/2waytxt/>; AT&T Wireless, Phone
Fun Messaging (visited Jan. 27, 2003)
<http://www.attws.com/personal/txt_msg/messaging/text>/; Sprint PCS Vision, How
Can I Use It? (visited Jan. 28, 2003) <http://www.pcsvision.com/howcan.html>;
Sprint PCS, PCS Service Plans: Select Your Plan (visited Jan. 28, 2003)
<http://www1.sprintpcs.com/explore/servicePlansOptionsV2/PlansOptions.jsp>;
Nextel, Nextel Mobile Messaging (visited Feb. 4, 2003)
<http://www.nextel.com/services/mobilemessaging/index.shtml>.
IM: Verizon Wireless, Mobile Messenger Service: Instant Messaging (visited Jan.
17, 2003)
<http://www.verizonwireless.com/jsp/mobilemessenger/instantmessaging.jsp>;
T-Mobile, 2-Way Text Messaging (visited Jan. 24, 2003)
<http://www.t-mobile.com/2waytxt/>; AT&T Wireless, Phone Fun Instant Messaging
(visited Jan. 27, 2003)
<http://www.attws.com/personal/txt_msg/messaging/instant/>; Nextel, Nextel Mobile
Messaging (visited Feb. 4, 2003)
<http://www.nextel.com/services/mobilemessaging/index.shtml>.

Table 2: Mobile Internet Access Services

Carrier/ Provider Plan Network Data, or Voice Add-On? Measure-ment Service
Specific? Device Specific?
Verizon Wireless Express Network Buckets 1xRTT Add-on Minutes  1xRTT phone, Thera
smartphone
 Express Network Per-MB 1xRTT Data MB Internet Access 1xRTT phone, Aircard 555
card, or Thera smartphone
 Express Network Unlimited 1xRTT Data Unlimited Internet Access
 Mobile IP 2G Data Unlimited Internet Access CDPD wireless modem card
 Mobile Web 2G Add-on Minutes Text, IM, Web, E-mail Web enabled phone
 Mobile Web Plus 2G Add-on Minutes Text, IM, Web, E-mail Kyocera smartphone
 Get It Now 2G with BREW Add-on Minutes Ring tones, Games, Web, MMS  Get It
Now-enabled phone
Cingular Wireless Wireless Internet 2G Add-on Minutes Info alerts, Web Web enabled
phone
 Wireless Internet Express GPRS Add-on or data MB Internet access GPRS phone or
Treo smartphone
Nextel Web  2G Add-on Unlimited or minutes Info alerts Web enabled phone
 Premium Web 2G Add-on Unlimited or minutes IM, Web, E-mail  Web enabled phone
 Full Service Package 2G Add-on Unlimited or minutes Text, IM, Web, E-mail (corp)
Web enabled phone
 Packetstream 2G Data MB Internet access Phone or iM1100 card
 Packetstream Gold 2G Data Unlimited Internet access Phone or iM1100 card
 Dial-Up Service 2G Add-on Minutes Web, E-mail, web, Corp server Phone connected
to PC or PDA
T-Mobile T-Zones GPRS Add-on MB Web, Ring tones, Games, MMS, E-mail (POP3) GPRS
phone
 T-Zones Pro GPRS Add-on MB Web, Ring tones, Games, MMS, E-mail (corp) GPRS phone
 T-Mobile Internet GPRS Data MB Internet Access GPRS phone or modem card attached
to PC or PDA
 Sidekick plans GPRS Add-on Voice minutes Unlimited data Text, IM, MMS, Web,
E-mail Sidekick smartphone
AT&T Wireless mMode GPRS Add-on or data MB Games, MMS, Ring tones, Web, E-mail
GPRS phone
Sprint PCS PCS Vision 1xRTT Add-on Unlimited Text, Ring tones, MMS, Web, E-mail
(corp) 1xRTT phone
 Vision for laptops and PDAs 1xRTT Data MB
Unlimited Internet access 1xRTT phone, smartphone, or wireless modem card
Go America Data – All RIM Mobitex/
GPRS Data Unlimited Web, BlackBerry email RIM 950, 857, 957
RIM 5810
 Data – RIM 5810 GPRS Data (must purchase sep voice plan)  MB: Unlimited: Web
BlackBerry email RIM 5810
 Data & Voice – RIM 5810 GPRS Data with voice Unlimited:
MB:
Minute: BlackBerry email
Web
Voice RIM 5810
 Data – GPRS  GPRS Data MB Internet access G100 GPRS card for laptops and Pocket
PCs
 Data – 1xRTT (offered by Earthlink) 1xRTT Data MB Internet access Aircard 555
card for laptops
Earthlink Internet access for PDAs 2G - CDPD Data Unlimited Internet access
Certain PDAs - Monthly prices vary by PDA
 Internet access for RIM Mobitex Data Unlimited BlackBerry email, web access is
extra RIM 950, 857, 957
 Data – 1xRTT   (same as above) 1xRTT Data MB Internet access Aircard 555 card for
laptops

Sources: The information in the table is a sample of mobile Internet access
services offered by selected mobile data providers in March 2003 and should not be
considered an exhaustive list.  The information was taken from company web sites,
news releases, and newspaper and periodical articles.

Table 3: Mobile Service Availability by Device*

Application/ Feature Type of Device
 Pager Mobile Phone Smartphone PDA Laptop
Voice  ? ?
Paging ? ? ?
Text Messaging ? ? ? ?
Information Alerts ? ? ?
Ring tones & Graphics  ? ?
Games  ? ?
Images & Video  ? ? ? ?
Web Browsing – Limited  ? ?
Web Browsing - Complete   ? ? ?
E-mail – POP3  ? ? ? ?
E-mail – corporate   ? ? ?
Corporate server access   ? ? ?

QWERTY Keypad   ? ? ?
Color  ? ? ? ?

* The above table provides an overview of the applications and features that are
available on at least one model of the device categories included in the table.
It is not meant to imply that the marked applications and features are available
on every model within the device category.

Sources:  The information was taken from company web sites, news releases, and
newspaper and periodical articles in February and March 2003.

APPENDIX F:
MAPS

Table of Contents

Map 1: Mobile Telephone Operator Coverage Estimated by County
.................................................................. F-2

Map 2: A-Side Cellular
Coverage.........................................................................................................................
F-3

Map 3: B-Side Cellular
Coverage.........................................................................................................................
F-4

Map 4: Mobile Telephony Penetration Estimated by Economic
Area.................................................................. F-5

Map 5: Estimated Rollout with Any Digital
Coverage..........................................................................................
F-6

Map 6: Estimated Rollout with CDMA-Based
Coverage.....................................................................................
F-7

Map 7: Estimated Rollout with TDMA/GSM-Based
Coverage............................................................................
F-8

Map 8: Estimated Rollout with iDEN-Based
Coverage........................................................................................
F-9

Map 9: Estimated Rollout of GPRS, CDMA2000 1xRTT, and 1xEV-DO
Networks........................................... F-10

Map 10: Lowerband Fixed Wireless Internet Access Rollout Estimated by
County............................................. F-11

Table 1: Geographic Licensing
Schemes...............................................................................................................
F-12

Map 11: Basic Trading
Areas.................................................................................................................................
F-13

Map 12: Major Trading
Areas................................................................................................................................
F-14

Map 13: Cellular Market
Areas..............................................................................................................................
F-15

Map 14: Economic
Areas.......................................................................................................................................
F-16

Map 1

 Map 2

 Map 3

 Map 4

Map 5

Map 6

Map 7

Map 8

Map 9

Map 10

Table 1: Geographic Licensing Schemes

Geographic Licensing Schemes Number of Market Areas Note
Basic Trading Areas (BTAs) 493 BTAs make up MTAs
Major Trading Areas (MTAs) 51
Cellular Market Areas (CMAs) 734 Also known as MSAs and RSAs
Economic Areas (EAs) 175

 Map11

 Map 12

 Map 13

 Map 14

APPENDIX G:
LIST OF COMMENTERS

Comments

3G Americas LLC
CDMA Development Group
Cellular Telecommunications & Internet Association
Dobson Communications Corporation
Fred Williamson & Associates, Inc.
John A. Ball
Mobile Satellite Ventures Subsidiary LLC
Montana Telecommunications Association
National Telecommunications Cooperative Association
Rural Telecommunications Group

Reply Comments

CDMA Development Group
Fred Williamson & Associates, Inc.
South Dakota Telecommunications Association
T-Mobile USA, Inc.
Virgin Mobile USA, LLC
Western Wireless Corporation

Ex Parte Filings

Rural Telecommunications Group
Consumers Union
 SEPARATE STATEMENT OF
CHAIRMAN MICHAEL K. POWELL

Re: Annual Report and Analysis of Competitive Market Conditions With Respect to
Commercial Mobile Services (Eighth Report)

The annual analysis of the CMRS market demonstrates how a lighter regulatory hand
has ushered in innovation and technological advancement, and the power of
facilities-based competition into the marketplace.  Today 95% of American
consumers now have three or more choices in wireless providers, and a stunning 71%
have six or more choices.  And with this wealth of choices have come lower per
minute prices and more innovative services.  The conclusion is inescapable: the
wireless industry is highly competitive.   The Report, however, notes that rural
areas have fewer competitors than urban areas.  I look forward to working with my
colleagues to develop policies that will enhance the effectiveness of competition
in rural areas by removing unnecessary regulatory barriers to facilitating the
deployment and delivery of spectrum-based services in these areas.  This is the
most comprehensive wireless competition report that the Commission has ever
produced and I applaud the efforts of the Wireless Bureau to update, verify, and
diversify our data to better capture the state of the marketplace.
 CONCURRING STATEMENT OF
COMMISSIONER MICHAEL J. COPPS

RE: 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.

 Congress requires the Commission annually to “review competitive market
conditions with respect to commercial mobile services” and “include in its annual
report an analysis of those conditions,” in order to perform an “analysis of
whether or not there is effective competition.”  I believe that the Commission
could do far better.  The Report’s contains insufficient data.  Much of the
limited data included are unverifiable and are derived from sources with a stake
in the outcome of our determination.  And the Commission does not establish any
standard for determining when “effective competition” exists or even to define
what “effective competition” is.  These problems leave the Report vulnerable to
the charge of being results-oriented, and mean that the hard and good work of the
Commission’s staff is underutilized.

 The limited data that we do have show that in urban areas wireless prices are
dropping and carriers are expanding their networks.  That’s great news, and I
believe that better data and a better standard for analyzing this data would yield
results that would show that in many areas the competition that characterizes the
wireless market is something to strive for as the FCC pursues wireline competition
policy.  But half of the country is still served by three or fewer competitors.
And one quarter of all US counties have two or fewer competitors.

 In this context, and because we need the ability to analyze competition changes
if wireless mergers occur, the nature and sources of our data trouble me,
especially in the Enron era, when the use of hard to verify corporate data and
Wall Street analysts’ reports is under close scrutiny.  The Report is largely
based on unverified corporate press releases and advertisements, surveys conducted
by industry lobbying organizations, unverified Wall Street analysts’ reports that
may be influenced by the stock holdings of those analysts’ firms, SEC filings that
are not designed for this purpose, and newspaper reports.

 I believe that the Commission must gather more independent, verified data to do
its job effectively.  But the Commission does not gather any of its own data for
this report.  To their credit, our staff recognized the natural limitations of its
data sources and generated some creative solutions to counteract a subset of the
inadequacies of the publicly available sources.  For instance, this year’s Report
was improved by data from the Number Resource Utilization/ Forecast (“NRUF”)
database and the ULS Database.  Using these new sources of information, aside from
strengthening the integrity of the Report, underscores the reliability and utility
of data directly collected by the FCC, as opposed to data generated by interested
parties.   But FCC-collected data is just not available for most of the critical
questions the Report addresses.

 This year the Commission staff also tried to gather more information through a
NOI that asked for more data from our licensees.  But as the Report states, the
Commission did not receive from licensees any new data on subscribership, ARPU,
usage, churn, or pricing, or maps of their coverage areas.  In other words, we
asked industry to help us with our effort and they said “no.”

 If industry will not assist us in this effort, I believe that the Commission has
a responsibility to contract with outside, independent researchers to gather the
following data.  First, we need independent data on wireless prices.  We currently
have no pricing data at all on smaller markets, and rely instead on pricing in the
most competitive, biggest markets as a proxy for the least competitive, smallest
markets.  This does not make sense.  Second, we need reliable data on the number
of competitors in various markets.  Today we treat an entire county as served by a
company if that company advertises that they serve any part of the county, even
just a highway skirting the edge of a county.  We say that consumers in a county
have two competitors to choose from even if the service areas of those competitors
don’t overlap at all in the county.  Again, this does not make sense.  Third, we
need independent, annual data on quality of service.  Quality of service, price
and investment are three critical indicia of competition, and we need to
understand all three.  Specifically, we need data on dropped calls, service
unavailability, and poor connections.  Without this basic information, the
Commission cannot make conclusions on competition that withstand scrutiny.

I am not alone in thinking that we must improve.  In April, the GAO released a
report that found that the Commission does not gather any data on call quality
despite its importance to consumers.  The GAO Survey states that the Commission
must begin to include quality of service analysis in it’s competition report and
that “[d]ata sources other than consumer surveys would be useful in assessing the
extent of mobile phone quality problems; however, these data were either not
available or were of limited usefulness because they were not collected
systematically.”  I share the GAO’s broad concern that our data collection is
inadequate and that we should make data on call quality available to this public.
If it is somehow too financially burdensome on the Commission to gather adequate
data, we should explain our plight to Congress and ask for the needed budget
resources.  But this is too important to ignore.

In considering the benefits of a more comprehensive and intensive data gathering
effort, I also want to note that the British regulatory agency gathers far more
information for the benefit of its wireless consumers than does the FCC.  While I
am not at this time suggesting that we should follow OFTEL’s practice of requiring
licensees to submit reports, as part of its ongoing monitoring of competition in
the British wireless industry, OFTEL conducts quarterly surveys of mobile phone
users.  OFTEL has used the information it collects on network performance and
other factors to determine whether there is effective competition among carriers.
We should find a way to gather similar data.  If this is somehow too financially
burdensome on the Commission, we should explain our plight to Congress and ask for
the needed budget resources.

 I also believe that we must establish a definition of “effective competition” and
a standard for determining when such competition exists.  How can we do the job
Congress gave us without doing so?  Admirably, the Report includes a long list of
possible indicia of competition, including price, expansion of networks,
investment levels, churn, quality of service, subscriber growth, usage rates, and
ARPU.  But merely listing possible relevant areas of inquiry is far different from
having a rigorous method of determining whether current market characteristics
mean that there is adequate competition.  We don’t say whether one factor is more
important than another, how they relate to each other, or whether regional
differences matter at all in the overall competitive determination.  Without more
rigor, without an articulated “effective competition” standard, the Report is of
limited use in providing an analytically solid foundation for Commission or
Congressional action.

 Without adequate data and without a clear explanation of how we determine
adequate competition, I cannot support the reasoning contained in this item, and
must only concur in the result.  I do want to thank the Wireless Bureau staff,
however, for another fine job this year.  They work hard, and do good work with
the resources they have.  The report is very important, and your work is very
important, which is why I focus so much on it every year.  Thank you.

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---

From: [email-masked]
Date: Tue, 15 Jul 2003 16:14:05 -0400

Sparkie,

Here is the report you have been waiting for.........
Please submit your comments after you digest it.

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