Wireless(based on latest FCC report, 2010)

• In the year ending December 2008– Mobile telephony subscribership was 277.6

million (90% penetration rate)– Average minutes of use was 708 per month– Text messaging 1 trillion messages for 2008,

revenue per message $0.01 – Revenue per minute was $0.07 during 2008,

average monthly bill of $50.07

Wireless Services

• How regulated?– FCC has authority to issue licenses– Communication Act expressly prohibits private

ownership of radio spectrum—government to maintain control—gives FCC close to absolute authority over the structure of the industry, geographic markets to be served, and the services to be provided

– Traditionally classified under two categories• Private land mobile and public mobile service

– Private land mobile did not interconnect with the PSTN and so was not common carriage; public mobile service did connect and so is common carriage

CMRS

• New Categories in 1993: Congress (in Omnibus Budget Reconciliation Act) created two newly defined categories: Commercial mobile radio service (CMRS) and private mobile radio service (PMRS)—to promote consistent regulation of mobile services.– 47 CFR Section 20.3: Commercial mobile radio service is a

mobile service that is (1) provided for profit, (2) an interconnected service, and (3) available to the public

– Congress allowed FCC to forbear from provisions of Title II of the Communication Act—FCC has practiced forbearance on tariff obligations and on any market entry or exit restrictions

• Mobile Telephony includes cellular, PCS, Specialized Mobile Radio (SMR)—and now data and Internet access services as well

Price regulation

• Till 1993 states had authority to regulate intrastate wireless services (mostly cellular at that time)– 26 states regulated cellular services (average price for regulated

MSA’s was $98.10 per month in 1994)– 25 states did not regulate cellular services (average price of

unregulated MSA’s was $70.59 per month in 1994)

• 1993 Congress:– Preempted the states from regulating entry of CMRS or PMRS

providers– Preempted the states from regulating rates, though did allow

states to petition FCC to regulate or continue regulating rates.• Eight states petitioned unsuccessfully ( Connecticut, Ohio,

Louisiana, Arizona, Hawaii, New York, California). By 1995 all regulation of wireless prices ended

Remaining state authority

• Placement of towers, cell sites and other facilities– Can’t discriminate among providers, or prohibit

provision of service, and all decisions subject to appeal

• Telecom Act does provide that a state may once again regulate CMRS to ensure provision of universal service if it is a substitute for landline service for a substantial portion of the communications within the state (hasn’t happened yet)

Licensing

• Under section 301, licensees are granted spectrum rights for a fixed period of time with no vested interest in renewal.– Before 1993, common carrier licenses were 10 year,

and private licenses were 5 year; in 1993 Congress made it uniform so licenses are now all 10 year

– De facto property rights have been established—FCC and courts have found a “renewal expectancy”—pro forma process of renewal

• “Build out” requirements—five years for cellular and broadband PCS

Zoning and Dezoning

• Zoning– FCC has broad authority to zone wireless

licenses for specific uses– FCC has traditionally restricted use of

spectrum to specific services and has prohibited radio licensees from slicing up spectrum into either geographic or frequency sub-bands

• Movement toward dezoning

Dezoning and spectrum allocation

• FCC initially authorized up to 8 mobile licenses (2 cellular and 6 PCS) plus SMR licenses

• Many licensees hold more than one license in a particular market• Spectrum cap: entities could not control more than 45 MHz of

cellular, PCS, and SMR spectrum in an MSA or more than 55 MHz in an RSA; in November of 2001 FCC raised the cap to 55 MHz in all markets and eliminated the cap effective January 2003.

• FCC forbids an entity to have cross-interests in cellular licenses on both cellular block A and cellular block B within an RSA.

• PCS, cellular, and SMR licensees may with FCC approval disaggregate (divide spectrum) or partition (divide into smaller geographical areas) their licenses and lease them to other carriers

• “Private commons” arrangements

Licensing methods

• Comparative hearings (beauty contests)– First used to allocate A block cellular licenses

• Very time consuming—2 years to do 30 licenses

• Lottery– Used for most of the cellular licenses

• Auctions– Used for PCS, SMR, and 3G licenses– Currently preferred method by the FCC

Interconnection

• Local landline networks– Major issue has always been no discrimination in

favor of affiliated wireless companies– Early connections were based on idea of wireless

company being a customer of LEC rather than a co-carrier—Type 1 rather than Type 2 connections

– FCC had to step in with a policy statement resolving disputes—greatly contentious issue

– Series of disputes regarding “mutual compensation,” cleared up by the Telecom Act of 1996

Interconnection

• With Long Distance networks– Between 1984-1996, Greene court kept requiring

equal access by Bell affiliated wireless carriers; and Greene court kept dealing with the difference in wireless license boundaries and LATA boundaries

– Telecom Act provides that CMRS providers are not required to provide equal access for toll services

• Wireless to wireless– FCC has not set up explicit requirements– Under Telecom Act, CMRS are telecommunications

carriers so subject to basic interconnection requirements; not defined as LECs so not held to those standards

Mobile Telephone Services

• Cellular telephone service– Began in Chicago in late 1983 and in Los Angeles

during 1984 Olympics– Question about whether license would go to RBOCs

or to AT&T at Divestiture– FCC licensing took from 1982 till 1991– 734 cellular market areas, including 305 Metropolitan

Statistical Areas (MSA’s), 428 Rural Service Areas (RSA’s) and a market for the Gulf of Mexico

– Began as analog service, now virtually all digital

Cellular continued

• Service duopoly:– FCC allocated 50 megahertz of spectrum in the 800

MHz frequency band; two competing systems in each market each got 25 MHz

– B block for the wireline telephone company; A block competitively awarded

– First 30 MSA’s awarded through a beauty contest—took two years

– Rest of MSA’s and the RSA’s awarded through a lottery by 1991; in 1997 FCC auctioned cellular spectrum in areas unbuilt by original licensees; in 2002 FCC auctioned three RSA licenses where initial lottery winner had been disqualified.

PCS (auctioned 1995-2001)

• Narrow band– Three megahertz in the 900 MHz band

• Advanced voice paging, two-way acknowledgement paging, data messaging, electronic mail and fax—services that require no more than 50 kilohertz per licensee

• Broadband– 120 megahertz in the 1850-1990 MHz band

• Three bands of 30 MHz (blocks A, B, and C) and three bands of 10 MHz (blocks D, E, and F)

• Unlicensed– 30 megahertz – used for terminal devices, very low

power so spectrum could be reused many times

Geographic coverage of PCS

• Narrowband– 11 channels nationwide, 6 channels for each of 5

large regional subdivisions, 7 channels each for 51 MTA’s (Major Trading Areas), 2 channels each for 492 local BTA’s (Basic Trading Areas)

• Broadband (auctions raised $20 billion)– Two 30 MHz blocks (A & B) in each of the 51 MTA’s,

the third block (C) and the three 10 MHz blocks (D, E, & F) in each of the 493 BTA’s.

SMR

• Began as dispatch services—expanding to include paging, mobile voice, mobile data, fax, etc. So interconnects in some cases, does not in others.– Initially allocated 14 MHz of spectrum, divided into

280 channels of 50 kHz each) in the 800 MHz band; in 1986 added 200 channel pairs in the 900 MHz band; 1990 added 150 more channels in the 800 MHz band

– Relicensing through auction • 900 MHz band, 20 ten-channel blocks (five MHz) at the MTA

level; 800 MHz blocks also relicensed at the EA (Economic Area) level—created 200 channel blocks—Nextel dominated the 800 MHz auction process

Providers

• Four nationwide providers (2008)– AT&T—77 million subscribers – Verizon Wireless—70 million– Sprint—40 million – T-Mobile (wholly owned subsidiary of Deutsche

Telekom)—32.7 million• Several regional players—Alltel (12.8 million), Leap

Wireless (3.8 million), US Cellular (5.7 million)

Building footprints

• FCC, and departments responsible for anti-trust, allowed more and more mergers– Combinations

• For example, Alltel purchased wireless properties of Century Telephone

– Joint Ventures• AT&T and Verizon share networks in California, Nevada and

New York– Affiliations—large network providers affiliate with

smaller carriers –forming families of companies for roaming purposes

Reclaimed licenses

• FCC’s designated entities plan – The C and F blocks in each market—only companies

with revenues less than $125 million and less than $500 million in assets could bid

– Licensees began to default—FCC re-auctioned some of the licenses and gave other licensees four options

• Resume payments in full; give back half of spectrum and get a credit for them; surrender all of licenses; prepay selected licenses and give rest back

NextWave case• In 1996 NextWave won 63 C-block licenses for $4.7 billion• NextWave declared bankruptcy in June 1998; bankruptcy court said it would

only have to pay $1 billion; district court affirmed this decision• On appeal, U.S. Circuit Court of appeals reversed saying bankruptcy court

could not interfere with FCC’s spectrum allocation; FCC cancelled NextWave’s licenses and reauctioned them

• NextWave went to court and the D.C. Circuit reversed the FCC; in January 2003, Supreme Court upheld the D.C. Circuit, saying that the FCC could not interfere with bankruptcy court—NextWave gets to keep the licenses, instead of the three winning bidders at the reauction (Alaska Native Wireless, Verizon Wireless, and VoiceStream)

• Now questions were—NextWave’s status, NextWave’s ability to pay for the licenses, etc.

– NextWave has transferred some spectrum to Cingular, returned some spectrum to the FCC, is keeping some and has recently sold some to Verizon.

3G

• Third generation mobile services– Circuit and packet data at 144 kilobits/second for vehicular

traffic; 384 kilobits/second for pedestrian traffic; 2 Megabits/second or higher for indoor traffic

– Spectrum for advanced mobile wireless services started with the World Administrative Radio Conference of the ITU in 1992; further delineated at the World Radiocommunication Conference of the ITU in 2000.

3G in the US• The problem was the quest for bandwidth

– US used the bandwidth recommended by the ITU for other purposes, including military

– FCC estimated a need for 300 to 420 MHz of spectrum • FCC deals with domestic use of spectrum; NTIA deals with government use

– The NTIA examined 1710-1755 MHz band for possibility of freeing up bandwidth used by government without harming defense

– The FCC examined 2110-2170 MHz band for possibility of freeing up bandwidth used by private entities

• Issues—what happens to the users that are displaced? Who pays to move them

• Seventh Report and Order (ET Docket No. 00-258 and WT Docket No. 02-8), October 14, 2004: cleared spectrum in the 1.7GHz band by relocating Federal operations to 2025-2110 MHz and 2360-2395 MHz bands

3G auction in the US

• Auction of Advanced Wireless Services– August 9, 2006—September 18, 2006– 104 bidders won 1087 licenses– Bids totaled $13.7 Billion– T-Mobile won 120 licenses ($4.2B)– Comcast, Time Warner, and Cox, plus Sprint

won 137 licenses ($2.4B)– Cingular won 48 licenses ($1.3B)– Verizon won 13 licenses ($2.8B)

700 MHz• Spectrum freed up by HDTV conversion• January-March 2008

– 101 bidders won 1090 licenses that amounted to $19 Billion for A, B, C, and E blocks

• Verizon spent $9.6 Billion; AT&T spent $6.6 Billion• Open network requirements

– D block (public safety network) didn’t meet the reserve price of $1.3 billion

• FCC wants a public/private partnership

– September 2008 FCC adopted a NPRM to determine whether to have one nationwide licensee or several regional licensees

CPP versus RPP

• In most countries it is Calling Party Pays

• In the U.S. it is Receiving Party Pays

• Does it make a difference?