Subject: [NEXTEL-1] FCC’s Muleta: wireless reflections

From: [email-masked]
Date: Fri, 03 Oct 2003 14:59:59 -0400

FCC’s Muleta: wireless reflections
By John Muleta
October 03 13:06:00, 2003

It is difficult to believe that October marks the 20-year anniversary of when the
first commercial cellular service was
launched in Chicago. Who could have accurately predicted how quickly and
drastically wireless would change our lives?

Look around or listen at any public place and you will likely witness the impact
that cellular technology is having on the
lives of most Americans—maybe it’s even your phone that’s ringing. Such casual
observations on the growth of cell
phones and other mobile gadgets have recently been quantified in the FCC’s eighth
report on the status of the U.S.
wireless industry. The industry’s numbers are impressive, especially considering
the turmoil that other telecom sectors
have experienced during the past few years. The total number of U.S. cell-phone
subscribers climbed to 142 million at
the end of 2002, producing a nationwide penetration rate of 49 percent.

And it’s not just your imagination—people are talking on their cell phones more
than ever before. The average subscriber
uses her phone about 427 minutes, or more than seven hours, each month. While this
is only a 12-percent increase from
2001, it represents a nearly fourfold increase from 1997. This growth in usage has
largely been driven by—as Economics
101 would tell us—lower prices. The average per-minute price of wireless service
dropped 70 percent between 1997 and
2002 to around 11 cents.

While greater usage has resulted from lower prices, lower prices have been a
direct effect of increased competition
among wireless carriers. Currently, 95 percent of the U.S. population lives in
areas where at least three carriers provide
service, and 83 percent lives in areas with at least five carriers. The percentage
of the U.S. population served by six or
more carriers jumped from 53 percent to 71 percent during the past year.

As I reflect on these statistics, I believe they are a perfect example of the good
that can come from the government
putting its trust in market forces. The consumer benefits we currently see in the
wireless industry are the by-product of
pro-competitive, deregulatory policies the Federal Communications Commission and
Congress began implementing 10
years ago.

During the 1990s, the FCC helped transform the wireless industry from a stagnant
cellular duopoly to an environment of
meaningful and flourishing competition. Yet the commission did not accomplish this
by forcing or mandating additional
wireless competitors. It did not distort market forces to inject artificial
competition. It instead laid the groundwork for
competition to develop on its own by eliminating a significant barrier to entry
and freeing a key resource for mobility:
spectrum.

Beginning in 1995, the commission auctioned 120 megahertz of spectrum—the A though
F broadband PCS licenses in the
1850-1950 MHz band—that could be used to offer mobile telephone service. By
auctioning the spectrum, the FCC
allowed the market to determine its worth and enabled the spectrum to end up in
the hands of the entity that valued it
most. More importantly, wireless licensees had, and still have, the freedom to
decide which services to offer using the
spectrum, which technologies to deploy, and what prices to charge. The commission
also gave licensees the option to
sell all or portions of their spectrum bands or geographic license areas to other
entities post-auction with FCC approval.

The results of these policy choices are evident. There are now six competing
nationwide wireless carriers. The price of
cellular minutes has plunged to the point where wireless service is now an
alternative to landline phone service. Over
the years, mobile carriers have introduced innovative services such as national
calling plans with no roaming or long
distance fees. More recently, they have been upgrading their networks to sell data
and multimedia features, such as
text messaging, ring tones and digital photo capabilities.

Several providers also offer niche wireless services such as always-on email
access and push-to-talk voice capabilities.
These developments have added a new layer of freedom to our everyday lives and
have made it cheaper and easier to
keep in touch with friends and family.

Yet there is still room for more regulatory growth. Just as the industry is
evolving its business plans and experimenting
with new technologies, the FCC is continuing to implement innovative policies and
building on the “wireless way.” We
recently decided to allow greater flexibility in secondary markets for spectrum by
permitting licensees to lease their
spectrum to other parties. In addition, the commission’s Spectrum Policy Task
Force has recommended the greater use of
both the property rights and commons models of spectrum allocation, and less use
of command-and-control systems.
These developments show we are committed to putting an even greater level of trust
in market forces.

The FCC must also determine how to apply the “wireless way” of introducing
competition to the other sectors of the
telecom industry that we regulate. After all, isn’t the American public entitled
to the same benefits of wireless
competition—lower prices and greater innovation—with their broadband, wireline and
media services as well?

John Muleta is the chief of the FCC’s Wireless Telecommunications Bureau.
http://rcrnews.com/cgi-bin/news.pl?newsId=15336

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