oversight

Telecommunications: FCC Should Include Call Quality in Its Annual Report on Competition in Mobile Phone Services

Published by the Government Accountability Office on 2003-04-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States General Accounting Office

GAO          Report to the Honorable
             Anthony D. Weiner, House of
             Representatives


April 2003
             TELECOMMUNICATIONS
             FCC Should Include Call
             Quality in Its Annual
             Report on Competition in
             Mobile Phone Services




GAO-03-501
             a
                                               April 2003

                                               TELECOMMUNICATIONS

                                               FCC Should Include Call Quality in its
Highlights of GAO-03-501, a report to the
Honorable Anthony D. Weiner, House of
                                               Annual Report on Competition in Mobile
Representatives
                                               Phone Services


Over the past decade, Americans                In establishing a regulatory framework for mobile phone services, the
have come to rely increasingly on              Congress directed the Federal Communications Commission (FCC) to
mobile phones to meet their                    encourage competition among carriers. FCC believes that competition
business and personal needs.                   enables consumers to choose carriers that offer a desired level of call
However, because of the nature of              quality and that regulatory action establishing a minimum level of call
radio transmission and other                   quality would not be beneficial in a competitive environment. The
constraints, consumers are not
                                               Congress requires FCC to report annually on whether or not there is
always able to complete calls or to
hear their calls clearly. As reliance          effective competition in mobile phone services. While call quality has
on mobile phones has increased,                been identified as a factor that affects consumers’ choices of a carrier,
state officials, consumer groups,              FCC does not discuss call quality in this report.
the media, and others have raised
concerns about the extent of call              Common Call Quality Problems Associated with Mobile Phones
quality problems. With regard to
call quality, GAO agreed to
describe the regulatory framework;
determine the extent to which
consumers are experiencing
problems; and discuss actions for
improving call quality suggested by
interested parties.


                                                          Blocked calls           Insufficient capacity            Dead spots          Lack of coverage
GAO recommends that FCC                           (hills, tunnels, buildings,   (no vacant frequencies,       (cell within service      (calls outside of
                                                  or temporary conditions        adjacent cell full, etc.)   area but lacking base   carrier's service area)
include call quality in its mandated                   such as weather)                                        station coverage)
annual report analyzing whether
                                               Source: GAO.
there is effective competition in the
market for mobile phone services.
Including call quality in this                 To assess the extent to which consumers are experiencing call quality
analysis would provide an ongoing              problems—such as blocked or dropped calls, insufficient capacity, dead
record to help FCC and the                     spots, or lack of coverage—we included questions on a national survey
Congress determine whether                     of adult consumers, conducted in November 2002. Our survey indicated
market competition is sufficient to            that about four-fifths of adult mobile phone users were satisfied with
ensure that carriers are meeting               their service, about one-tenth were dissatisfied, and the remainder
consumers’ expectations and                    indifferent. However, we also found that consumers are experiencing
desires regarding call quality or              some call quality problems. For example, we estimate that about one-
whether further regulatory action is           fifth of users were unable to successfully complete 10 percent or more of
needed. In response, FCC stated
that to, the extent possible, it plans         their calls, because their mobile phone network dropped the calls. Only
to include information related to              limited information on call quality problems is available to the public or
call quality in its future annual              FCC.
reports on competition in mobile
phone services.                                Interested parties have proposed actions that could provide consumers
                                               with better information to help them choose a carrier that matches their
                                               needs or would set industrywide call quality standards for all consumers.
www.gao.gov/cgi-bin/getrpt?GAO-03-501.
                                               However, some of the suggested actions could drive up the price of
To view the full report, including the scope   service, limit the entry of new carriers, or lead to a reduction of service
and methodology, click on the link above.      in regions that are technically difficult or costly to serve. The carriers
For more information, contact William B.
Shear at (202) 512-4325 or shearw@gao.gov.
                                               themselves say that they are taking actions to improve call quality and
                                               further regulation is not needed.
Contents



Letter                                                                                                   1
                             Results in Brief                                                            2
                             Background                                                                  5
                             Under the Regulatory Framework for the Mobile Phone Industry,
                                FCC Relies on Competitive Market Forces to Determine Call
                                Quality and Has Not Set Specific Quality Standards                      11
                             Concerns Have Been Raised, but Available Data Are Inconclusive on
                                Extent of Call Quality Problems                                         20
                             Interested Parties Have Suggested Actions for Improving Call
                                Quality                                                                 30
                             Conclusions                                                                35
                             Recommendation for Executive Action                                        36
                             Agency Comments                                                            36


Appendixes
              Appendix I:    Scope and Methodology                                                      38
             Appendix II:    Results of Consumer Survey on Mobile Phone Service                         42
             Appendix III:   FCC Fact Sheet on Mobile Phone Service                                     47
             Appendix IV:    Comments from the Federal Communications Commission                        56
              Appendix V:    Key Contacts and Major Contributors                                        59
                             GAO Contacts                                                               59
                             Staff Acknowledgments                                                      59


Tables                       Table 1: Consumer Complaints about Mobile Phone Service Filed
                                      with the California Public Utilities Commission,
                                      1999-2002                                                         26
                             Table 2: Mobile Phone Call Quality Problems Based on November
                                      2002 Consumer Survey                                              29


Figures                      Figure 1: Key Components of a Mobile Phone System                           6
                             Figure 2: Estimated Average Number of Minutes of Mobile Phone
                                       Service Used Per Month in the United States, 1997-2002            9
                             Figure 3: Common Call Quality Problems Associated with Mobile
                                       Phones                                                           11
                             Figure 4: U. S. Market Shares and Annualized Turnover Rates for
                                       Mobile Phone Service Carriers, Third Quarter, 2002               16
                             Figure 5: FCC Mobile Phone Consumer Complaints by Category,
                                       2002                                                             25



                             Page i                                    GAO-03-501 Mobile Phone Call Quality
Contents




Figure 6: Overall Customer Satisfaction with Call Quality,
          November 2002 Consumer Survey                                                    28




Abbreviations

CDMA         code division multiple access
CTIA         Cellular Telecommunications & Internet Association
FCC          Federal Communications Commission
FTC          Federal Trade Commission
GSM          global system for mobile communications
MHz          megahertz
NARUC        National Association of Regulatory Utility Commissioners
OFTEL        Office of Telecommunications
TDMA         time division multiple access


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Page ii                                             GAO-03-501 Mobile Phone Call Quality
A
United States General Accounting Office
Washington, D.C. 20548



                                    April 28, 2003                                                                                 Leter




                                    The Honorable Anthony D. Weiner
                                    House of Representatives

                                    Dear Mr. Weiner:

                                    Over the past decade, mobile phone service has gone from being a luxury
                                    item to an everyday part of life.1 In 2002, over 140 million Americans had
                                    mobile phone service, and these customers used about 55.5 billion minutes
                                    of mobile phone service a month.2 As the public has come to rely more on
                                    mobile phones for its business and personal needs, concerns have been
                                    raised by state officials, consumer groups, the media, and others about call
                                    quality—the ability to make and complete calls with good sound quality.

                                    You asked us to examine several issues related to the regulation and
                                    assessment of mobile phone call quality. We agreed to (1) describe the
                                    regulatory framework that exists regarding mobile phone call quality, (2)
                                    determine the extent to which consumers are experiencing call quality
                                    problems, and (3) discuss actions for improving call quality suggested by
                                    interested parties.

                                    To meet these objectives, we reviewed laws and regulations governing the
                                    mobile phone industry. At the federal level, we spoke to officials at the
                                    Federal Communications Commission (FCC)—the agency that oversees
                                    the mobile phone industry—regarding their views on the regulatory
                                    framework; the extent of problems with call quality, including consumer
                                    complaints; and potential actions to improve call quality. We contacted
                                    state public utility commissions to determine how they regulate mobile
                                    phone service in their states. Thirty-three states provided information. We
                                    also spoke to officials in attorney general offices and/or public utility
                                    commissions in California, New York, Illinois, Massachusetts, Nebraska,
                                    New Jersey, and Texas. To obtain data on call quality and other
                                    information, we contacted officials at the six largest national mobile phone
                                    service carriers: AT&T Wireless Services, Inc. (AT&T Wireless); Cingular


                                    1
                                     For purposes of this report, the term mobile phone service includes the provision of mobile
                                    phone services by cellular, broadband personal communications service, and digital
                                    specialized mobile radio carriers.
                                    2
                                     Data provided by the Cellular Telecommunications & Internet Association (CTIA), an
                                    industry trade association.




                                    Page 1                                               GAO-03-501 Mobile Phone Call Quality
                   Wireless, LLC (Cingular); Nextel Communications, Inc. (Nextel); Sprint
                   PCS; T-Mobile USA, Inc. (T-Mobile USA, formerly VoiceStream); and
                   Verizon Wireless, LLC (Verizon Wireless). We also contacted officials at
                   other firms—Telephia, Inc.; LCC International, Inc.; and Scoreboard—that
                   collect network data. In addition, we spoke to an official at the Federal
                   Trade Commission (FTC) concerning consumer complaints they have
                   received about mobile phone service. We also spoke to consumer
                   advocates, financial analysts, and attorneys engaged in class-action
                   lawsuits against carriers about various aspects of the mobile phone
                   industry.

                   We contracted with a market research firm to administer 26 questions as
                   part of a national telephone survey conducted in November 2002. Our
                   questions addressed issues such as experiences with certain call quality
                   problems, satisfaction with the quality of mobile phone service, complaint-
                   making practices, and factors involved in decisions to change companies.
                   We projected the results of the survey to the population of adult mobile
                   phone users. However, we are concerned about the potential for those who
                   did not respond to the survey to differ from those who did respond in some
                   way that could affect the results. We have no explicit reason for suspecting
                   that the survey suffers from this shortcoming. Instead, our concern arises
                   out of the large sample of telephone numbers (about 19,000) dialed to
                   produce about 1,000 survey respondents, about 550 of whom use mobile
                   phones.

                   In addition, we contacted a number of experts who are knowledgeable
                   about mobile phone issues to give us their opinions about potential actions
                   the federal government might take to improve call quality. This report also
                   draws on information collected for our recent report on spectrum
                   management issues.3 We conducted our work from March 2002 through
                   March 2003 in accordance with generally accepted government auditing
                   standards. For a more detailed discussion of our scope and methodology,
                   see appendix I.



Results in Brief   Under the regulatory framework for mobile phone service, FCC generally
                   relies on competitive market forces to determine mobile phone call quality.


                   3
                    See U.S. General Accounting Office, Telecommunications: Comprehensive Review of U.S.
                   Spectrum Management with Broad Stakeholder Involvement Is Needed, GAO-03-277 (Washington,
                   D.C.: January 2003).




                   Page 2                                              GAO-03-501 Mobile Phone Call Quality
The Omnibus Budget Reconciliation Act of 1993 provided a regulatory
framework that directed FCC to encourage the promotion of competitive
market conditions for mobile phone service and limited the ability of the
states to regulate it. In the 1993 Act and other legislation, the Congress
granted FCC flexibility in regulating mobile phone services. In
implementing this legislation, FCC has taken actions to encourage the
growth of competitive markets that have resulted in most parts of the
country having several competing carriers. FCC believes that this
competitive market will provide consumers with the level of call quality
they desire and that adopting federal regulations that require a certain
minimum level of call quality are not necessary. At the direction of the
Congress, FCC reports annually on whether or not there is effective
competition in the market for mobile phone services. Over the last 7 years,
these reports have included key aspects of mobile phone service—such as
the number of competitors in the marketplace, trends in subscribership
and the prices of service, deployment in rural areas, and features provided
by carriers—but have not included information on call quality.

Concerns about mobile phone call quality have been raised by state
officials, consumer groups, the media, and others. Based on the results of
our consumer survey, conducted in November 2002, we estimate that
nearly 83 percent of mobile phone users were satisfied with their service at
that time, about 9 percent were dissatisfied, and the remainder were
indifferent.4 In addition, we estimate that about 47 percent of adult mobile
phone users believed their call quality was improving, while about 5
percent believed that their call quality was getting worse. We also found
that users were experiencing some call quality problems, including a lack
of coverage, limited network capacity at times, dropped calls, and poor
sound quality. For example, we estimate that 22 percent of users were
unable to successfully complete 10 percent or more of their calls, because
the calls were dropped by the network. Data sources other than consumer
surveys would be useful in assessing the extent of mobile phone call quality
problems; however, these data were either not available or were of limited
usefulness because they were not collected systematically. The major
carriers are not required to report data on the performance of their mobile
phone networks (such as the number of dropped calls or detailed coverage
information) to FCC, and they declined to provide us with those data as
well. The carriers said that this information was proprietary and would be


4
 All percentage estimates from the survey have sampling errors of plus or minus 8
percentage points or less, unless otherwise noted. For details, see appendix I.




Page 3                                              GAO-03-501 Mobile Phone Call Quality
difficult to interpret, even if made available. Carriers also declined to
provide us with their data on customer complaints. Complaint data from
other sources, such as state public utility commissions, were not useful in
determining the extent of call quality problems for a number of reasons,
including inconsistencies in the method of collecting and classifying
complaints.

Interested parties, such as state officials and consumer advocates, have
suggested possible actions to address call quality concerns. These actions
would have varying potential benefits and drawbacks. For example, some
of the possible actions that have been proposed would give consumers
more information on carriers’ coverage areas, their rates of dropped and
blocked calls, or complaints against them prior to consumers choosing a
carrier. Some interested parties have also suggested that carriers give
consumers longer trial periods before they commit to a long-term contract
with a carrier. These actions could better enable consumers to choose the
carrier that best meets their needs regarding call quality. Some parties
would also like to see minimum industrywide call quality standards set for
the carriers. Others have noted, however, that some of the suggested
actions have drawbacks that could potentially drive up the price of mobile
phone service, limit the entry of new carriers and thus affect competition in
the marketplace, or lead to a reduction of service in regions that are
technically difficult or costly to serve, such as mountainous or sparsely
populated rural areas. The carriers say that they are taking actions to
improve call quality and further regulation is not needed. However, they
maintain that their ability to improve call quality is hampered by financial
and regulatory constraints, such as local government land use and zoning
restrictions on the siting of new base stations for transmitting and receiving
mobile phone signals.

To assist FCC in determining whether further action concerning mobile
phone call quality is necessary, we are recommending that FCC include call
quality in its mandated annual report analyzing whether there is effective
competition in the market for mobile phone services. In commenting on a
draft of this report, FCC generally agreed with our recommendation stating
that, to the extent possible, it would include information related to call
quality in its future reports on competition in mobile phone services.
However, FCC noted some difficulties in implementing the
recommendation, such as data not being readily available, the lack of
objective performance standards, and difficulties in measuring call quality
against consumer expectations.




Page 4                                       GAO-03-501 Mobile Phone Call Quality
Background   Carriers deliver mobile phone service by subdividing large geographic
             areas into smaller overlapping sections called cells.5 Each cell has a base
             station equipped with an antenna to receive and transmit radio signals to
             the mobile phones within its coverage area. This area can vary in size from
             under a mile to 20 miles from the base station. Mobile phones are low-
             powered radio transceivers (a combination radio transmitter and receiver)
             that use radio waves to communicate with the base stations. A mobile
             phone’s communications are generally associated with the base station of
             the cell in which it is presently located. When a call is initiated, the base
             station assigns a radiofrequency to the mobile phone from among the group
             of frequencies that the station controls. The number of frequencies
             available at a base station will depend primarily on the amount of
             radiofrequency spectrum assigned to the carrier by FCC, the number of
             base stations in the carrier’s service area, and the carrier’s signaling
             standard.6 Each base station is linked to a mobile phone switching office,
             which is also connected to the local wireline telephone network. The
             mobile phone switching office directs calls to the desired locations,
             whether to another mobile phone or a traditional wireline telephone. This
             office is also responsible for handing off calls from one cell to another in a
             smooth and seamless manner as a customer changes locations during a
             call. Figure 1 provides a simplified picture of the key components of a
             mobile phone system.




             5
              Mobile phone service carriers offer three types of service—cellular, personal
             communications service, and digital specialized mobile radio—each with specific system
             characteristics that are not apparent to users.
             6
              The radiofrequency spectrum is the medium that enables wireless communications of all
             kinds, such as mobile phone and paging services, radio and television broadcasting, radar,
             and satellite-based services.




             Page 5                                               GAO-03-501 Mobile Phone Call Quality
Figure 1: Key Components of a Mobile Phone System

                                                                                        Local wireline
                                                                                       phone company




                                                     Mobile phone
                                                    switching office




        Mobile phone



                                                                                       Mobile phone



       Cell

       Base station with antenna


Source: GAO.



                                       FCC is the federal agency that oversees interstate telecommunications in
                                       the United States, including mobile phone service. The mobile phone
                                       industry began to develop in the mid-1980s when FCC awarded
                                       radiofrequencies to two cellular carriers in each geographic market. FCC
                                       awarded one cellular license to the incumbent wireline telephone company


                                       Page 6                                    GAO-03-501 Mobile Phone Call Quality
and a second license to an independent carrier. If there was only one
applicant for the second license, that applicant received the license. When
more than one applicant applied, FCC used comparative hearings, which
give competing applicants a quasi-judicial forum in which to argue why
they should be awarded a license instead of other applicants. Later, at the
direction of the Congress, FCC held lotteries to award licenses. In
establishing the rules under which the cellular phone industry would
operate, FCC made several key decisions:

• All carriers would use the same analog technology to provide service.

• Within 3 years of receiving a construction permit, carriers would have to
  build networks that could theoretically serve the areas for which they
  obtained a license. At the end of the 3 years, licenses for those areas that
  could not theoretically be served might be made available to some other
  carrier.

• Carriers would have to inform customers of the area in which reliable
  service could be expected.

• No other call quality standards would be required. That is, no minimum
  requirements concerning the probability that calls would be completed
  with good sound quality were established. FCC considered establishing
  such standards, but decided to let the marketplace determine the level
  of call quality.

• Carriers would have to notify FCC if they turned away a customer
  because of a lack of capacity and state how they intended to remedy this
  lack of capacity.7

Since it was first launched, the industry has migrated from using only
analog technologies to primarily using digital technologies. Originally
carriers used an analog technology that is similar to that used for the
transmission of FM radio broadcasts. While analog technologies are still
being used, most service is now provided with digital technologies, which
have several advantages over analog technologies: they provide for better
security, allow for services such as caller identification, allow noise to be




7
As other mobile phone services began to develop, FCC granted carriers greater flexibility.




Page 7                                               GAO-03-501 Mobile Phone Call Quality
reduced on calls, and conserve on the use of scarce spectrum resources.8
FCC did not specify a single digital technology. Instead, carriers were free
to adopt one of several signaling standards: code division multiple access
(CDMA), time division multiple access (TDMA), and global system for
mobile communications (GSM). In addition, Nextel Communications uses a
technology called integrated Digital Enhanced Network, a derivative of
TDMA.9

The industry has grown dramatically over time. In terms of annual
revenues, the industry has mushroomed: from about $482 million in 1985 to
over $27 billion in 1997 and then to over $76 billion in 2002. In recent years,
from 1997 through 2002, average monthly minutes of use of mobile phone
use grew almost 900 percent, from about 5.6 billion minutes per month in
1997 to about 55.5 billion in 2002 (see fig. 2). This growth resulted not only
from an increase in subscribership but also from a marked increase in the
average number of minutes used by each subscriber.




8
 In 1988, FCC permitted cellular carriers to use digital technology but required carriers to
continue to offer analog service as well. In 2002, FCC provided a 5-year period to sunset the
rules governing the provision of analog service by cellular carriers.
9
 With CDMA, a spread spectrum approach to digital transmission, each conversation is
digitized and then tagged with a code. The mobile phone is than instructed to decipher only
a particular code to pluck the right conversation off the air. TDMA allows a large number of
users to access (in sequence) a single radio frequency channel without interference by
allocating unique time slots to each user within each channel. GSM, a standard that was
developed in Europe, uses a TDMA scheme, under which separate time slots are used to
send and receive calls.




Page 8                                                GAO-03-501 Mobile Phone Call Quality
Figure 2: Estimated Average Number of Minutes of Mobile Phone Service Used Per
Month in the United States, 1997-2002
60 Minutes of use in billions



50



40



30



20



10



 0
         1997        1998         1999        2000            2001   2002
     Years
Source: Cellular Telecommunications & Internet Association.

Note: GAO analysis of CTIA data.


To subscribe to mobile phone service, a customer must sign-up with a
mobile phone service carrier, either by signing a contract and choosing a
plan, or by purchasing prepaid minutes of airtime and buying a phone that
works with the prepaid service. Most customers sign contracts that specify
a geographically based rate plan and the size of the block of minutes the
customer is buying for a flat monthly fee. New customers sometimes pay
up-front fees for “network activation” of their phones and usually agree to
pay an “early termination fee” if they should quit a carrier’s network before
the date specified on the contract. In return for signing the contract,
customers often receive mobile phones, suitable for their carrier’s network,
at a price lower than that which they would have to pay without a service
contract.

Because of the nature of radio transmission, the amount of radiofrequency
spectrum allocated by FCC for mobile phone service, and the challenge of
building the infrastructure to meet a rapidly growing consumer base,
consumers are not always able to complete their phone calls or to hear
them clearly. The following, some of which are illustrated in figure 3, are
examples of such call quality concerns.



Page 9                                                                  GAO-03-501 Mobile Phone Call Quality
• Consumers may not be able to complete calls because the
  radiofrequencies used for mobile phone service can be blocked by
  terrain, such as hills, or by man-made structures. The structural features
  of some buildings can block signals from reaching the interior of the
  buildings. Similarly, signals may not be able to penetrate into subways
  or tunnels.

• Consumers’ calls may be disrupted by temporary conditions, such as
  weather or interference from other wireless devices.

• A consumer may be unable to initiate a call because the local base
  station’s available radiofrequencies are all in use by other consumers.
  The consumer may receive a fast busy signal instead of a dial tone or
  some other indication that frequencies are not available.

• Consumers’ calls may be dropped when moving from a cell that has
  capacity to an adjacent cell that cannot handle additional calls because
  it is already at capacity.

• A consumer’s call may not be connected because of a “dead spot” within
  a carrier’s service area where there is no base station coverage. This
  may be due to decisions made by carriers concerning the building of
  base stations, or difficulties in finding a suitable location or obtaining
  zoning approval to construct additional base stations.

• Consumers may be unable to initiate calls because their service carrier
  does not cover the area from which the call is being made and the
  carrier does not have an agreement with a competitor to serve its
  subscribers under a “roaming” agreement.




Page 10                                     GAO-03-501 Mobile Phone Call Quality
                            Figure 3: Common Call Quality Problems Associated with Mobile Phones




                                       Blocked calls           Insufficient capacity            Dead spots          Lack of coverage
                               (hills, tunnels, buildings,   (no vacant frequencies,       (cell within service      (calls outside of
                               or temporary conditions        adjacent cell full, etc.)   area but lacking base   carrier's service area)
                                    such as weather)                                        station coverage)

                            Source: GAO.




Under the Regulatory        Beginning in 1993, the Congress enacted legislation aimed at developing a
                            regulatory framework that would treat commercial carriers in a consistent
Framework for the           manner and encourage the growth of competitive markets for mobile
Mobile Phone Industry,      phone services. FCC has acted to implement this regulatory framework and
                            is relying on consumer choice in a competitive marketplace to determine
FCC Relies on               the level of call quality, rather than setting a minimum standard for the
Competitive Market          industry to meet. At the direction of the Congress, FCC analyzes and
Forces to Determine         reports on competitive market conditions in the mobile phone industry
                            annually. To date, these reports have included issues such as the number of
Call Quality and Has        carriers, prices, and subscribership but not call quality.
Not Set Specific
Quality Standards

The Congress Has Promoted   In the early 1990s, types of mobile phone services other than cellular had
Development of              been or were about to be developed. These new services were
                            demonstrating that greater competition could exist in this marketplace;
Competitive Mobile Phone
                            however, two different regulatory regimes had developed: one for the
Markets                     original cellular service and another for newer mobile phone services that
                            used other technologies or portions of the radiofrequency spectrum. In
                            1993, the Congress enacted legislation—the Omnibus Budget
                            Reconciliation Act (1993 Act)—that promoted consistent regulation of
                            commercial mobile phone service carriers and established the promotion
                            of competition as a fundamental goal for the development of mobile phone



                            Page 11                                                           GAO-03-501 Mobile Phone Call Quality
policies and regulation. The 1993 Act included several provisions to
achieve these goals:

• All commercial mobile phone services were to be regulated similarly,
  without regard to the specific technology or radiofrequency spectrum
  used by a carrier.10

• FCC was to auction spectrum licenses when more than one user wanted
  to use certain frequencies for the transmission of mobile phone calls.
  This method of assigning licenses requires mobile phone service
  carriers to pay for the right to use the spectrum and awards the
  spectrum to the carrier willing to pay the highest price for it under
  certain conditions.

• Numerous licenses were to be auctioned in each mobile phone market
  so that a wide variety of bidders could participate.

• FCC was given the authority to refrain from applying certain provisions
  of the Communications Act of 1934 that FCC found to be unnecessary
  under specific statutory criteria. For example, FCC did not apply
  provisions that restricted market entry or exit.11

• FCC was required to report annually on competitive market conditions
  in the industry. The report was to include an identification of the
  number of competitors in various commercial mobile services, an
  analysis of whether or not there is effective competition, an analysis of
  whether any competitors have a dominant share of the market, and a
  statement of whether additional providers or classes of providers would
  be likely to enhance competition.

In addition, the 1993 Act preempted states and local governments from
regulating the entry of or the rate charged by any mobile service carrier.
However, states could petition FCC for authority to regulate commercial

10
 Commercial mobile phone service carriers were to be treated as common carriers and
regulated under Title II of the 1934 Communications Act.
11
 FCC was authorized to refrain from applying certain provisions of Title II that they found
to be unnecessary under specific statutory criteria. However, FCC was required to apply
sections 201, 202, and 208 of the Communications Act of 1934. Respectively, these
provisions provide for service and interconnection upon reasonable request and terms; no
unjust or unreasonable discrimination; and complaint procedures. 47 U.S.C. §§ 201, 202, and
208.




Page 12                                              GAO-03-501 Mobile Phone Call Quality
rates under certain conditions. Shortly after the 1993 Act was enacted,
eight states12 sought the right to continue regulating wireless rates. FCC
denied all of the petitions. One state appealed the denial of its petition, and
the court affirmed FCC’s decision.13 However, the 1993 Act expressly
reserved to the states the right to regulate other “terms and conditions” of
commercial mobile phone service, and FCC has provided guidance over
time on the scope of these rights. For example, FCC has concluded that
billing information, practices, and disputes fall within other terms and
conditions and may be regulated under state contract or consumer law.
Similarly, FCC has found that state contract or consumer fraud laws
governing disclosure or rates are generally not preempted and that as a
general matter, state courts are not preempted from awarding damages to
customers of commercial mobile phone carriers, based on violations of
state contract or consumer fraud laws. Several lawsuits are now before
state courts making claims against carriers under state fraud or consumer
protection laws.

In the 1996 Telecommunications Act (1996 Act), a law that deregulated
various aspects of the telecommunications industry, the Congress provided
FCC with additional tools that could be used to promote competition in the
mobile phone service industry. The 1996 Act requires FCC to refrain from
imposing unnecessary regulation on telecommunications carriers,
including mobile phone carriers.14 The 1996 Act also requires that every 2
years FCC engage in a review (the biennial review) of its rules, including
those related to mobile phone service, to determine whether any of them
are no longer necessary as a result of meaningful competition among the
carriers. In addition, the 1996 Act requires FCC to take actions that would
allow consumers to keep their phone number when changing among
wireline telephone companies, referred to as local number portability.
Further, the 1996 Act preserved the rights of states and localities to use
land-use and zoning laws to regulate the placement of carriers’ base station




12
 The states were Arizona, California, Connecticut, Hawaii, Louisiana, New York, Ohio, and
Wyoming.
13
     Connecticut Dept. for Pub. Util. Control v. FCC, 78 F.3d 842 (2nd Cir 1996).
14
 The 1996 forbearance standard is similar to the standard included in the 1993 Act. See 47
U.S.C. §160, 47 U.S.C. §332(c).




Page 13                                                  GAO-03-501 Mobile Phone Call Quality
                              antennas.15 This has enabled states and localities to affect both the level of
                              competition and the quality of mobile phone calls.



FCC Has Promoted              In implementing the 1993 and 1996 Acts, FCC has taken several actions to
Competitive Markets to        promote competition in the mobile phone market. These actions included
                              auctions, spectrum caps, and local number portability.
Determine the Level of Call
Quality                       Auctions: From 1994 through 2002, FCC conducted 42 auctions for
                              spectrum dedicated to various kinds of wireless phone services. In accord
                              with the 1993 Act, FCC’s licensing scheme has also helped to ensure that
                              many carriers were available in each geographic market. In every region,
                              FCC authorized up to eight different mobile phone licenses.

                              Spectrum cap: Until recently, FCC limited the number of radiofrequencies
                              any one carrier could have rights to in any one market. By limiting any one
                              carrier to 45 megahertz (MHz) of spectrum in any metropolitan market or
                              55 MHz in any one rural market, FCC aimed to prevent any one mobile
                              phone service carrier from dominating a market. As a result of the 2000
                              biennial review, FCC phased out the cap, fully eliminating it on January 1,
                              2003. In doing so, FCC asserted that competition in mobile phone markets
                              was robust enough that it was no longer appropriate to impose caps on
                              spectrum rights.

                              Local number portability: FCC extended the 1996 requirement that local
                              number portability be implemented for wireline telephone customers to
                              include mobile customers as well. FCC concluded that while the 1996 Act
                              did not specifically require local number portability for mobile phone
                              service carriers, making it a requirement would serve the public interest by
                              promoting competition among the various types of telephone services and
                              facilitating consumer choice. Because of certain implementation issues,
                              FCC has extended the deadline for mobile phone service carriers that
                              operate within the 100 largest metropolitan areas to offer local number
                              portability from the original deadline of June 30, 1999, until November 24,
                              2003.

                              As a result of these actions, industry developments, and consumer interest,
                              FCC, in its most recent annual report on competitive conditions in the

                              15
                               Certain limitations were placed on this authority. For example, states or local governments
                              must not unreasonably discriminate among carriers of functionally equivalent services.




                              Page 14                                              GAO-03-501 Mobile Phone Call Quality
mobile phone industry,16 noted that the industry has experienced increased
numbers of competitors in various markets, innovation, lower prices for
consumers, and increased diversity of service offerings. Regarding the
number of competitors, for example, FCC reported that 94 percent of the
U.S. population lives in counties with access to three or more mobile phone
carriers, and 80 percent lives in counties with at least five carriers. FCC
reported further that there are six national carriers: AT&T Wireless,
Cingular, Nextel, Sprint PCS, T-Mobile USA, and Verizon Wireless. Other
large regional carriers, including ALLTEL Corp., Western Wireless Corp.,
United States Cellular Corp., and Dobson Communications Corp., are also
active in the market.

Data we obtained from Yankee Group, Inc. (a market research firm
specializing in telecommunications issues) for the third quarter of 2002 are
consistent with the competitive picture of the industry provided by FCC’s
annual report. These data, presented in figure 4, show that none of the six
national carriers dominates the national market. Their market shares range
from T-Mobile USA’s 7 percent to Verizon Wireless’s 24 percent. This figure
also shows that each of the carriers was experiencing a substantial level of
customer turnover during 2002, ranging on an annualized basis from
Nextel’s 24 percent to T-Mobile USA’s 50 percent. The percentage of mobile
phone customers who change carriers in a given year suggests that carriers
are actively competing.




16
 See Federal Communications Commission, Annual Report and Analysis of Competitive
Market Conditions With Respect to Commercial Mobile Services, FCC 02-179 (Washington,
D.C.: July 3, 2002).




Page 15                                          GAO-03-501 Mobile Phone Call Quality
Figure 4: U. S. Market Shares and Annualized Turnover Rates for Mobile Phone Service Carriers, Third Quarter, 2002
                Market shares                                                               Annualized turnover rates

                                           Verizon Wireless                50 Percent
                                                                                                                           50
                                           T-Mobile USA
                                                                                                                 46

                                                                           40
                         7%                Nextel
                              8%                                                     35
                                                                                              36
            24%                                                            30

                                13%        Sprint PCS                                                                                28

                                                                                                        24
                                                                           20
        17%
                                14%        Other
                                                                           10
                        17%

                                                                            0
                                           AT&T Wireless                          AT&T      Cingular   Nextel   Sprint   T-Mobile Verizon
                                                                                 Wireless                        PCS       USA    Wireless
                                           Cingular
Source: Yankee Group.
                                          Note: GAO analysis of Yankee Group data.

                                          FCC has concluded that competition is sufficient to provide incentives for
                                          carriers to meet consumers’ expectations and desires for call quality. For
                                          example, in its 2000 biennial review to determine whether any of its rules
                                          were no longer necessary as a result of the development of meaningful
                                          competition among mobile phone service carriers, FCC removed
                                          requirements that carriers provide consumers with information showing
                                          their reliable coverage areas. These requirements had been placed on the
                                          original cellular services, but had not been placed on newer mobile phone
                                          services. FCC found that although carriers providing newer mobile phone
                                          services were not required to supply consumers of these services with
                                          coverage information, they nevertheless provided these consumers with
                                          the same types of information that they provided to consumers of the
                                          original cellular services. As a result, FCC concluded that competitive
                                          pressures were strong enough to ensure that carriers would continue to
                                          supply consumers with information on coverage, even after FCC removed




                                          Page 16                                                  GAO-03-501 Mobile Phone Call Quality
the requirement.17 However, some consumer advocates have questioned
whether competitive pressures are strong enough to ensure that carriers
will provide consumers with adequate information on coverage. Recently,
in February 2003, the Chairman of FCC stated that competition provides
incentives for carriers to improve call quality.18 Specifically, he noted that to
attract and keep customers, carriers are having to offer better packages of
rates, coverage, and service quality than their competitors.

Although FCC relies primarily on the marketplace to determine the level of
call quality, it has also acted to provide consumers with additional
information on the nature of mobile phone service and the types of
problems that consumers may encounter. FCC now provides the public
with information on the quantity and types of complaints and inquiries it
receives concerning mobile phone service. This information is updated
quarterly. FCC provides additional information to consumers through its
brochure on mobile phone service, which is posted on FCC’s Web site19 and
appears in appendix III of this report. This brochure explains the nature of
mobile phone service, including coverage, other call quality issues, pricing,
and handset features. FCC has also suggested questions that consumers
should ask carriers when purchasing service and recommended that
consumers obtain information from neighbors and coworkers concerning
the call quality they receive from various carriers. In addition, FCC has
taken action to promote the public interest in the area of implementing
enhanced 911 service (E-911) for mobile phones. This service will allow
emergency responders to determine the location of a mobile phone caller
within some specified area.




17
   At the same time, FCC removed the requirement that cellular service carriers notify FCC if
they lacked the capacity to service certain customers.
18
 Letter from FCC Chairman Michael Powell to Senator Charles E. Schumer, dated February
5, 2003.
19
     See www.fcc.gov/cgb/wirelessphone.pdf.




Page 17                                               GAO-03-501 Mobile Phone Call Quality
FCC Reports Annually on      At the direction of the Congress, FCC has issued seven annual reports and
Competitive Market           analyses of competitive market conditions in mobile phone services. The
                             Congress stated that the report should include an identification of the
Conditions in the Mobile     number of competitors in various commercial mobile services, an analysis
Phone Industry but Does      of whether or not there is effective competition, an analysis of whether any
Not Include Information on   competitors have a dominant share of the market, and a statement of
Call Quality                 whether additional providers or classes of providers would be likely to
                             enhance competition. FCC’s reports have concentrated on a discussion of
                             the structure of the industry, especially the number of competitors in the
                             marketplace and their location. In addition, the reports include a
                             discussion of the number of subscribers, the prices charged for services,
                             deployment in rural areas, and information on features provided by
                             carriers.

                             Call quality is an important aspect of mobile phone service, and FCC said
                             that carriers appear to be competing for customers in this area. However,
                             FCC has not included call quality, beyond a discussion of the number of
                             carriers providing service, in its annual analysis of whether or not there is
                             effective competition in mobile phone services. By way of contrast, the
                             Office of Telecommunications (OFTEL) in the United Kingdom, the
                             regulatory body that monitors competition in telecommunications markets
                             in that country, includes call quality in its reports on competition in the
                             mobile phone industry.20 As part of its ongoing monitoring of competition,
                             OFTEL conducts quarterly surveys of mobile phone users. From these
                             surveys OFTEL has reported that reception quality and geographic
                             coverage are among the most important reasons for consumers in that
                             country to choose a carrier. In addition, OFTEL has used the information it
                             collects on network performance and other factors to determine that there
                             is effective competition among carriers regarding those aspects of service
                             that we have identified as call quality.

                             Although, at the time of our review, FCC had not indicated that it planned
                             to include call quality in its annual report on competitive market conditions
                             in the mobile phone service industry in the future, it was attempting to
                             improve the overall quality of the data used in that report. For example,
                             FCC held hearings in February 2002 in order to improve the quality of the
                             data that would be used in its seventh annual report, which was released in

                             20
                              See for example United Kingdom Office of Telecommunications, Effective competition
                             review: mobile–-A Statement issued by the Director General of Telecommunications,
                             (London, U.K.: Sept. 26, 2001).




                             Page 18                                           GAO-03-501 Mobile Phone Call Quality
July 2002. Participants at those hearings noted several shortcomings in the
data used for the report and analysis of competitive market conditions,
including FCC’s almost sole reliance on unaudited data from industry trade
associations and financial analysts, the failure to include consumer input,
and the lack of credible data on prices and profits. Hearing participants
also noted a marked contrast between the data regularly collected in other
industries such as the airline and electricity industries. In those industries,
oversight agencies have access to data on operations and the actual prices
paid by consumers. With regard to measuring the extent of competition,
FCC has noted some limitations in the data they collect for their
congressionally mandated annual report. Specifically, in the seventh report,
FCC noted that—as a result of treating carriers that serve any part of a
county as if they served the entire county—the report likely overstates the
number of carriers serving consumers in various locations. Thus, both the
amount of coverage and the extent of competition are likely to be
overstated.

In recognition of these continuing data limitations, FCC issued a Notice of
Inquiry in December 2002 seeking comment on how it could gain more
detailed, comprehensive, and independent data to use in its 2003 report on
competitive market conditions.21 According to the notice, FCC was looking
for data that would allow it to evaluate the extent to which consumers can
choose among mobile phone service carriers as well as services and
technologies. Specifically, FCC was looking for information on a broad
range of items related to the structure and performance of the industry.
And, for the first time, FCC included quality of service as an area that might
be explored in the report. The 13 organizations that responded to the
inquiry either did not comment on service quality or asserted that data on
service quality were not needed. The consumer advocates who have raised
concerns about call quality did not respond to this notice. Two of the
consumer advocates said that they support efforts for FCC to collect and
report more information on call quality, but they did not respond to the
notice because of more pressing priorities at that time.

In some other countries, such as Australia, France, and the United
Kingdom, regulators collect network performance information or survey
consumers to determine their level of satisfaction or the extent to which


21
 See Federal Communications Commission, Annual Report and Analysis of Competitive
Market Conditions with Respect to Commercial Mobile Services, Notice of Inquiry, FCC
02-327 (Washington, D.C.: Dec. 13, 2002).




Page 19                                          GAO-03-501 Mobile Phone Call Quality
                            they are knowledgeable about certain aspects of mobile phone service. For
                            example, in France, the French regulatory authority for
                            telecommunications conducts its own tests of call quality to determine if
                            certain carriers are meeting the call quality requirements specified in their
                            licenses. These tests have generally been conducted in cities with 50,000 or
                            more inhabitants. As noted above, in the United Kingdom, OFTEL conducts
                            quarterly surveys of business and residential phone users. These surveys
                            allow the agency to track consumer satisfaction rates as well as measure
                            consumer knowledge about mobile phone service, including the availability
                            of a range of price plans. In addition, OFTEL collects network performance
                            and capital investment data from mobile phone service carriers. In
                            Australia, the Australian Communications Authority also collects and
                            publishes information on various aspects of consumer satisfaction and
                            quality in its annual report on telecommunications performance.



Concerns Have Been          Interested parties, such as state officials and consumer advocates, have
                            raised concerns about mobile phone call quality. Fully assessing the extent
Raised, but Available       of call quality problems would likely require network performance data
Data Are Inconclusive       from the carriers as well as information on the extent to which consumers
                            are satisfied or dissatisfied with the call quality of their mobile phone
on Extent of Call           service. Carrier network performance data are not available to the public
Quality Problems            and are not reported to FCC. Carrier data on complaints are also not
                            available and customer complaint data from other sources, such as FCC,
                            FTC, states, and consumer organizations, do not provide reliable measures
                            of the extent to which customers are dissatisfied with their call quality.
                            Consequently, we have only the results of our survey of mobile phone
                            customers on which to base our assessment of the extent of call quality
                            problems. We estimate from the results of this survey that, while mobile
                            phone customers are experiencing call quality problems, a fairly high
                            percentage are satisfied with their current overall level of call quality.



Concerns Have Been Raised   Some state utility commissioners have been expressing concerns about
about Mobile Phone Call     what they say are an increasing number of consumer complaints about
                            mobile phone service. Their trade association, the National Association of
Quality                     Regulatory Utility Commissioners (NARUC), sponsored panels on mobile
                            phone service issues at their quarterly meetings held in July and November
                            2002. The topics covered by the panels included local number portability,
                            service quality, cost, and best practices for carriers to better serve their
                            customers. However, NARUC’s Consumer Affairs Committee defeated a



                            Page 20                                      GAO-03-501 Mobile Phone Call Quality
                            proposed resolution to have mobile phone carriers provide consumers with
                            adequate service area coverage information when making purchase
                            decisions and to have FCC monitor this information. As a result of the
                            panel discussion held in July and carriers’ desires to talk to state
                            commissioners about the issues raised there, in October 2002 NARUC and
                            FCC facilitated an informal discussion of these issues between concerned
                            state officials and mobile phone service carriers. Following this meeting,
                            NARUC began developing a list of suggestions for FCC and mobile phone
                            service carriers. These suggestions included FCC reporting on complaints
                            by carrier and carriers giving consumers a 15- to 30-day period during
                            which they could opt out of new service contracts.

                            At least two states are investigating whether carriers’ advertising claims
                            about call quality are being met. An official with the New York Attorney
                            General’s office told us that the office is concerned that two major carriers
                            advertise coverage areas that appear more extensive than they, in fact, are.
                            Meanwhile, the California Public Utilities Commission is investigating
                            whether another major carrier has adequate coverage in customers’ area of
                            use and sufficient system capacity to meet the claims it makes about its
                            service. A number of lawsuits raising questions involving coverage claims
                            have also been filed in state courts.

                            The press and consumer advocates have raised concerns about call quality
                            as well. For example, over the last couple of years, articles on these issues
                            have appeared in several well-known, widely read publications, including
                            Forbes Magazine, the Wall Street Journal, the Washington Post, and the
                            New York Times. In addition, several consumer advocacy groups—
                            including the Wireless Consumers Alliance, AARP (formerly known as the
                            American Association of Retired Persons), and Consumers Union—have
                            raised concerns about the coverage and price information consumers
                            receive when buying mobile phone service, consumers’ ability to complete
                            calls, and the cost of terminating contracts if call quality is not adequate.



Carriers Provided Limited   Carriers said that information on blocked and dropped calls is collected at
Information on Extent of    each base station in their networks. However, none of this network
                            performance data is publicly available nor are the carriers required to
Call Quality Problems
                            report this information to FCC. As part of our effort to determine the extent
                            to which calls cannot be completed or lack clarity, we asked the six largest
                            carriers if they would be willing to provide us such data. All of the carriers
                            declined. The reasons given for not providing the data include the
                            following:



                            Page 21                                      GAO-03-501 Mobile Phone Call Quality
• The information is business sensitive and proprietary. Revealing it could
  damage a carrier’s competitiveness by alerting its competitors to the
  strengths and weaknesses of its network.

• The information would not be useful to consumers trying to compare
  one carrier’s performance with that of another carrier. Data would not
  be suitable for comparisons because carriers do not measure
  performance using a single set of standards. Also, systems using
  different transmission technologies respond differently to overcrowding
  on the network.

• The information might not be completely accurate. For example, if
  callers turn off the power on their phones to end a call instead of
  pressing the “end” button, the network might record that as a dropped
  call.

• Because their networks are changing rapidly, network performance data
  would be out-of-date before it could be used.

• Performance is affected by various transient factors, such as time of
  year, weather, and unusual periods of demand that tax network capacity.

While carriers did not provide us with detailed information on blocked and
dropped calls, network officials at two carriers said that their goal was to
have a 98 percent call-completion rate. That is, the calls would go through
and not be dropped before they were completed at least 98 percent of the
time on average. These officials and those at other carriers said that 98
percent is generally the industry standard; however, they noted further that
this standard for completed calls is a network average. Thus, even if
carriers were meeting that standard, performance at various geographic
locations or times of day could differ substantially from the network
average. Because consumers use their phones at specific locations and
times of day, these network averages may not be useful in helping them
compare one carrier with another.

Network information can also be collected through “drive tests,” which are
generally performed along major road arteries at various times of the day.
These tests are done in moving vehicles that use computers to
simultaneously place calls on the networks of various carriers. The
computer then records whether calls went through and whether they were
dropped within some specified call time, such as 2 minutes. These tests are
performed by the carriers themselves and by contractors such as Telephia.



Page 22                                     GAO-03-501 Mobile Phone Call Quality
                               Data from drive test contractors are also proprietary; however, Telephia
                               has performed tests for CTIA—an industry trade association—and
                               Consumers Union, and these entities have shared that information with the
                               public.

                               • CTIA’s July 2001 study measured various aspects of mobile phone call
                                 quality in core urban and suburban areas. The study found that between
                                 November 1999 and April 2001 there was no change in overall call
                                 quality as measured by the percentage of time a call goes through with
                                 adequate sound quality. During this period, the percentage of blocked
                                 calls went down in both the core urban and suburban areas, while
                                 dropped calls rose in suburban areas. Telephia concluded that, at the
                                 time of their study, on average, consumers could place, hold, and
                                 complete calls of acceptable audio quality 96 to 99 percent of the time.

                               • In the February 2002 issue of Consumer Reports, Consumers Union
                                 published averages of call quality data that Telephia had collected in 9
                                 major metropolitan areas—New York, Boston, Philadelphia, the District
                                 of Columbia, Los Angeles, Dallas, Houston, Chicago, and Detroit—in
                                 October 2001. These data show that on Telephia’s 5-point scale—with 1
                                 being the worst service and 5 the best—call quality ranged from a low of
                                 3.3 in Houston to a high of 4.7 for Philadelphia. Consumers Union notes
                                 that these are averages of individual carrier data. In its February 2003
                                 issue of Consumer Reports, Consumers Union used a survey of its
                                 subscribers to rank carriers for the first time in six major cities.

                               Some carriers also said that they have detailed coverage and service maps
                               that are based on engineering models that predict service rather than on
                               actual service data. Again, carriers did not share these maps with us for
                               several reasons similar to those for not providing actual network
                               performance data. The reasons included competitiveness, accuracy, and
                               timeliness of data.



Consumer Complaint Data        Consumer complaint data are a potential source of information on
Provide a Limited Indication   customer dissatisfaction with their mobile phone service, but these data
                               are either not publicly available or suffer from methodological limitations.
of Call Quality Concerns
                               The carriers were unwilling to share information on the quantity and kinds
                               of complaints they receive. Some complaint data are available from other
                               sources, including federal and state government agencies, consumer
                               advocates, and Web sites. However, these complaint databases are not
                               adequate to determine the extent of call quality problems because they do



                               Page 23                                     GAO-03-501 Mobile Phone Call Quality
not employ a scientific method in collecting the data. Instead, they depend
on individual, dissatisfied consumers to know where to call or write, and to
take the time to do so. In addition, many of the groups collecting
complaints said that the categorization of complaints was difficult and, as a
result, complaints were probably not being categorized in a consistent
manner.

Federal government: FCC takes complaints about mobile phone service
that it receives from consumers and others and refers them to consumers’
carriers for resolution. FCC defines a complaint as a communication
received from or on behalf of an individual that alleges harm or injury and
seeks relief. It accepts complaints from consumers by phone, by facsimile,
through the Internet, or by electronic or regular mail.22 FCC has been
receiving consumer complaints about mobile phone services and referring
them to consumers’ carriers since the mid-1980s. In the spring of 2001, FCC
began categorizing complaints and, in fall 2001, began publishing
complaints by category. However, officials cautioned that their complaint
numbers could include requests for information as well as complaints, and
that the existence of a complaint against a carrier does not necessarily
indicate wrongdoing by that carrier. FCC also said that it tracks complaints
to identify trends in types of complaints or to determine if a carrier has
received excessive numbers of complaints. In either instance, FCC said
that it contacts carriers and asks them to provide an explanation. Based on
feedback from carriers and consumers, FCC estimated that as a result of
this process, consumer complaints are resolved to the satisfaction of the
consumer close to 80 percent of the time. Should complaints go unresolved
or should a carrier receive excessive numbers of complaints without an
acceptable justification, a carrier could be subject to an FCC enforcement
action. FCC officials noted that they have not been categorizing complaints
for a long enough time to show any trends. In 2002, FCC logged about
14,000 consumer complaints about mobile phone service. As figure 5
shows, over 60 percent of the complaints concerned billing and rate issues.
The next largest categories were service quality (a category that includes
call quality issues), contract-early termination fee, and marketing and
advertising.



22
 Complaints can be filed by phone at 1-888-Call-FCC (1-888-225-5322) voice, 1-888-Tell-FCC
(1-888-835-5322) TTY; by facsimile at 202-418-0232; through the Internet at
www.fcc.gov/cgb/complaints.html; by e-mail at fccinfo@fcc.gov; or by mail to Federal
Communications Commission, Consumer & Governmental Affairs Bureau, Consumer
Complaints, 445 12th Street, SW, Washington, D.C. 20554.




Page 24                                             GAO-03-501 Mobile Phone Call Quality
Figure 5: FCC Mobile Phone Consumer Complaints by Category, 2002
                                                        Equipment

                       4%
                                                        Marketing and advertising
                              11%


                                   11%                  Contract–early termination fee


           62%
                                 12%                    Service qualitya




                                                        Billing and rates
Source: FCC.

Note: GAO analysis of FCC data.
a
 FCC includes those items that we have identified as call quality, such as dropped calls and dead
spots, in its service quality category; however, it also includes complaints about not being able to use a
mobile phone because the carrier had ceased to do business in the consumer’s area or ceased to do
business altogether.


FTC also receives complaints about mobile phone service and forwards
them to FCC.23 FTC compiled their mobile phone complaint data by the
complaining consumer’s state and by the carrier’s state, but could not
categorize the data by type of complaint. According to an FTC official, in
2000, 2001, and the first half of 2002, FTC’s mobile phone complaints were
equal to or less than one-half of 1 percent of all of the complaints FTC
received about all products.

State public utility commissions: State public utility commissions vary on
whether they collect complaints about mobile phone service. Thirty-three
state commissions responded voluntarily to our request for information on
how they regulate mobile phone service or categorize complaints. Of these


23
  FTC has broad law enforcement responsibilities under the Federal Trade Commission Act,
15 U.S.C. § 41 et seq. With certain exceptions, the statute provides the agency with
jurisdiction over nearly every economic sector. Certain entities, such as depository
institutions and common carriers (e.g., telephone companies), as well as the business of
insurance, are wholly or partly exempt from FTC jurisdiction.




Page 25                                                      GAO-03-501 Mobile Phone Call Quality
state commissions, 23 said that they direct consumers with complaints to
their state attorneys general, FCC, or the mobile phone service carrier
identified in the complaint. Six state commissions reported that they
collect and categorize complaint data from mobile users. While most of the
commissions who collect data categorize some complaints as billing
complaints, they use a variety of categories for the other complaints they
receive. For example, one state categorizes its other complaints as tower
issues, while another state uses many categories, including dead zones and
dropped calls, company practices, service quality, and contracts. Of the
state commissions we heard from, California was the only one that
provided us with specific data on call quality complaints gathered over a
number of years. As table 1 shows, complaints about call quality were
about 8 percent of total mobile phone complaints for 2002.



Table 1: Consumer Complaints about Mobile Phone Service Filed with the California
Public Utilities Commission, 1999-2002

                    Company             Disputed         Call     Contract
Year                practices               bills     quality a    issues    Miscellaneousb    Totals
1999                            47            1,135       205           9              518      1,914
2000                          112             1,550       231          13              363      2,269
2001                          232             3,379       459          37              901      5,008
2002                          117             1,386       186          13              585      2,287
Source: California Public Utilities Commission.

Note: GAO analysis of California Public Utilities Commission data.
a
 Includes dead zones, dropped calls, and static.
b
 Miscellaneous includes a variety of issues such as billing format and back billing issues, cramming,
advertising and marketing issues, rate design, and taxes and surcharges.


Consumer advocates: Two consumer groups—the Better Business Bureau
and the Wireless Consumer Alliance—said that they receive and collect
complaints about mobile phone service. However, both groups said that
they do not collect complaints in a systematic way and use broad, general
categories to classify complaints. The Better Business Bureau collects
complaints on mobile phone equipment, supplies, and services. The Bureau
said that, between 1998 and 2002, complaints in this category rose from 615




Page 26                                                           GAO-03-501 Mobile Phone Call Quality
                             complaints to 21,534 complaints.24 The Bureau was unable to identify
                             whether the increase in complaints was attributable to call quality issues or
                             to other issues in the mobile phone industry. Some consumer advocates,
                             such as the Utility Consumer’s Action Network in San Diego, California,
                             have Web sites where consumers can post information about carriers’ dead
                             spots—locations within carriers’ coverage areas where service is not
                             available. Generally, these data are not verified nor are they regularly
                             updated if service becomes available.



Our Survey on Call Quality   To obtain information about the extent to which consumers are concerned
Yielded Mixed Results        about various aspects of mobile phone call quality, we included questions
                             on call quality in a national telephone survey of adults conducted in
                             November 2002. We projected the results of the survey to the population of
                             adult mobile phone users. However, we are concerned about the potential
                             for those who did not respond to the survey to differ from those who did
                             respond in some way that could affect the results. We have no explicit
                             reason for suspecting that the survey suffers from this shortcoming.
                             Instead, our concern arises out of the large sample of phone numbers
                             dialed to produce about 1,000 survey respondents. Some users may not
                             have answered the call because they could not identify the caller on their
                             caller identification system. Others may not have been available during the
                             calling time, and still others may have been unwilling to participate in the
                             survey when they were contacted. (Appendix I includes a discussion of the
                             survey methodology and its limitations; appendix II includes the survey
                             instrument and the responses.) The results of the survey provided mixed
                             evidence on the extent to which consumers are troubled by call quality
                             problems.

                             Based on the survey responses, we found that a fairly high percentage of
                             consumers were satisfied with the overall call quality of their mobile phone
                             service. Using the results of our survey of mobile phone users, we estimate
                             that about 83 percent of consumers were satisfied with their call quality
                             and about 9 percent were dissatisfied. The sampling error for our survey
                             was plus or minus 8 percentage points or less unless otherwise noted. The
                             other users were neither satisfied nor dissatisfied (see fig. 6). In addition,
                             we estimate that about 47 percent of adult mobile phone users believed
                             their call quality was improving, while about 5 percent believed that their

                             24
                              According to CTIA, mobile phone subscribership grew by over 103 percent between
                             December 1998 and December 2002.




                             Page 27                                           GAO-03-501 Mobile Phone Call Quality
call quality was getting worse. The other users believed that call quality had
not changed since they acquired their phones. Finally, we estimate that 83
percent of adult mobile phone users would not be willing to pay more for
better quality calls, while 12 percent would be willing to pay more and
another 5 percent would be willing to pay more under certain conditions.



Figure 6: Overall Customer Satisfaction with Call Quality, November 2002 Consumer
Survey
                                      Neither satisfied
                     8%               nor dissatisfied
                          9%          Dissatisfied




               83%                    Satisfied



Source: GAO.



Despite the many mobile phone customers who appeared to be satisfied
with their overall call quality, a number of survey respondents reported that
they were experiencing specific problems. Using the results of our survey,
we found that although some mobile phone users never had problems
placing calls, some had problems occasionally, and others experienced call
quality problems on 10 percent or more of their calls (see table 2). As
shown in the last column of table 2, we estimate that about one-fifth of
customers were not able to get through on 10 percent or more of their calls
because the cell from which they were calling was at capacity, and about
one-third of customers could not complete 10 percent or more of their calls
because they were in a cell where their carrier did not provide service.




Page 28                                           GAO-03-501 Mobile Phone Call Quality
Table 2: Mobile Phone Call Quality Problems Based on November 2002 Consumer
Survey

                                          Percent of users who Percent of users who
                     Percent of users who      had problem on    had problem on 10
Type of                did not experience        fewer than 10   percent or more of
problema                      the problem percent of their calls          their calls
No coverage                                 22                         44                        34
Fast busy                                   32                        47                         21
Dropped calls                               39                         39                        22
Poor sound                                  32                         38                        30
Source: GAO.

Note: Row percentages may not add to 100 due to rounding. Individual respondents may have
reported having several problems. Therefore, the column percentages cannot be added to determine
the total percentage with or without problems.
a
 No coverage – consumers cannot complete calls because their carrier does not provide service in the
cell where they are placing the call and does not have a roaming agreement with another carrier that
provides service in that cell.
Fast busy – consumers cannot complete calls because the cell from which they are calling is at
capacity. Dropped calls – consumers lose connections during a call because they have moved into a
cell where their carrier either does not have service or the cell is at capacity.
Poor sound – consumers cannot hear their calls clearly because of static or feedback


Our survey also indicates that call quality problems vary, depending on
where consumers are when they are making or receiving calls. For
example, we estimate that about 45 percent of users experienced problems
when they are in buildings, 37 percent when they were in a vehicle, and 18
percent when they were outside. Carriers and other experts note that
reception inside buildings may not reflect the call quality being provided in
the area. As mentioned earlier, buildings may be constructed of materials
that do not allow mobile phone radio waves to pass easily into their
interiors. We found that some businesses have added devices, such as
antennas and signal repeaters, inside their buildings to facilitate better in-
building coverage. In buildings where multiple carriers serve customers or
residents, such as shopping centers, office buildings with multiple tenants,
or apartment buildings, improving call quality may be the responsibility of
the building owner rather than any one service carrier.

Our survey also sheds some light on why consumers change carriers. We
estimate from our survey that about 73 percent of consumers made carrier
decisions for themselves, while the remaining 27 percent had someone
else, such as an employer or family member, choose their carrier. For
consumers who made carrier decisions for themselves, we estimate that 35



Page 29                                                   GAO-03-501 Mobile Phone Call Quality
                          percent had changed carriers since they first acquired mobile phones and
                          that better call quality was an important incentive for those changes. Yet,
                          call quality may have been a less important incentive than getting a better
                          price. That is, we estimate that for about 55 percent of the consumers who
                          had changed carriers, obtaining better call quality was a very or somewhat
                          important reason for the change. However, we estimate that for a larger
                          proportion of consumers who had changed carriers—about 83 percent of
                          them—price was very or somewhat important. Because only a small
                          number of survey respondents had changed carriers—about 145, the
                          sampling error for these estimates is plus or minus 13 percentage points or
                          less.

                          The ability of consumers to take advantage of the range of choices in the
                          marketplace, which provides incentives for carriers to respond to customer
                          demands for call quality, depends to some degree on customers being able
                          to switch from lower-quality carriers to higher-quality carriers. We estimate
                          that while about 35 percent of those who made carrier decisions for
                          themselves had changed carriers since they first started using their phones,
                          about another 28 percent wanted to change carriers, but did not. We asked
                          customers who wanted to change carriers, but didn’t, whether certain
                          factors were important to their decision. These factors included having to
                          pay a fee to terminate a contract before the contract period ended and not
                          being able to keep their current mobile phone number—the local number
                          portability issue—or their handsets when they change carriers.
                          Respondents could cite more than one reason as being important. We
                          estimate that for about two-thirds of adult mobile phone users who wanted
                          to change carriers but did not, the termination fee was a very or somewhat
                          important factor. Further, we estimate that for about 41 percent of adult
                          mobile phone users, the lack of local number portability was very or
                          somewhat important; and for a similar proportion, not being able to keep
                          their handset was a very or somewhat important factor. Because only a
                          small number of survey respondents—about 115—had considered, but not
                          changed carriers, the sampling error for these estimates is plus or minus 15
                          percentage points or less.



Interested Parties Have   Interested parties, such as state officials and consumer advocates, who
                          have raised concerns about mobile phone call quality have also suggested
Suggested Actions for     actions—such as local number portability or mandating that certain
Improving Call Quality    information be provided to consumers—that might lead indirectly to
                          changes in call quality by making the market more competitive or providing
                          consumers with better information. Some interested parties have also



                          Page 30                                      GAO-03-501 Mobile Phone Call Quality
                            suggested actions, such as establishing minimum call quality standards, by
                            which call quality might be improved more directly. All of the suggestions
                            have various benefits and drawbacks.



Local Number Portability    Several interested parties have supported adoption of local number
Could Increase the          portability, which will make the market for mobile phone service more
                            competitive by reducing the costs to consumers of changing carriers. This
Competitiveness of Mobile
                            may affect the level of call quality because customers who are dissatisfied
Phone Markets               with their current carrier will be more likely to change to a carrier with
                            better call quality if they do not have to experience the costs and
                            inconvenience associated with changing their mobile phone numbers. As a
                            result, carriers would have a greater incentive to upgrade their call quality
                            to keep their customers. The costs and inconvenience associated with
                            changing a mobile phone number are likely to grow for consumers as
                            mobile phone service becomes an ever more important part of everyday
                            life. Carriers are now scheduled to implement local number portability in
                            November 2003.25

                            Other countries have had varying experiences with number portability and
                            support for it varies among U.S. carriers. Officials of Hong Kong, China said
                            that local number portability has increased the competitiveness of their
                            mobile phone market and has led to a dramatic fall in the price of that
                            service. Australian officials have reported, however, that not many
                            consumers are changing carriers and taking their numbers with them. They
                            report that termination fees may still be discouraging customers from
                            changing carriers prior to the expiration of their contracts. Some U.S.
                            carriers have said that implementing local number portability is difficult
                            and expensive and will thus offset the savings consumers experience from
                            not having to change their phone numbers. These carriers have been
                            successful in getting FCC to extend the deadline for implementing local


                            25
                               Under FCC’s rules promulgated in its Memorandum Opinion and Order, FCC-02-215
                            (Washington, D.C.: July 2002) a commercial mobile phone carrier located in one of the
                            largest 100 metropolitan statistical areas that receives a request by February 24, 2003, from
                            another carrier must be capable of providing local number portability by November 24,
                            2003. For requests received after February 24, 2003, carriers must be capable of providing
                            local number portability, depending on the upgrades needed, within 30 to 180 days after
                            November 24, 2003, or 30 to 180 days after receiving the request, whichever is later. Outside
                            of the largest metropolitan statistical areas, the other carriers must be able to provide local
                            number portability within 6 months of the request or within 6 months of November 24, 2003,
                            whichever is later.




                            Page 31                                                GAO-03-501 Mobile Phone Call Quality
                             number portability from the original June 1999 to the new November 2003
                             deadline.26



Many Proposals that Center   Many of the actions that have been proposed to give consumers more
on Giving Consumers More     information about call quality—more detailed coverage information,
                             information on dropped and blocked calls by carrier, or data on complaints
Detailed Information Are     against various carriers—could be meaningful to consumers choosing
Difficult to Implement       among carriers if they were measured consistently across carriers. This
                             issue was evident in Australia where the Australian Communications
                             Authority requires that carriers report regularly on a set of key
                             performance indicators defined by the Authority. In its 2001 to 2002
                             Telecommunications Performance Report, however, the Authority did not
                             publish these data because, while all of the carriers were in compliance
                             with the requirements, they were not reporting these data to the Authority
                             in a consistent, comparable manner.27

                             We have already noted several issues that make it difficult to measure call
                             quality or complaints. For example, we have described how blocked or
                             dropped call rates and coverage might change over relatively short periods
                             of time because of changes in carriers’ networks or other transient factors
                             such as weather. In addition, we have described how collecting and
                             reporting complaints is difficult because of the need to classify them
                             consistently and to determine if they are valid. Officials at FCC, the
                             carriers, and state officials we spoke with mentioned several other
                             limitations to finding consistent measurements of call quality:

                             • Carriers might have to start measuring things that they had not
                               previously been measuring. This would likely raise costs for these
                               carriers. A representative of smaller carriers said that providing any
                               additional information to FCC would be especially burdensome for



                             26
                              CTIA and a major carrier have challenged how FCC applied the forbearance standard
                             when requiring mobile phone service carriers to offer local number portability. In
                             FCC-02-205, FCC denied a petition to permanently refrain from enforcing local number
                             portability requirements for mobile phone service carriers; instead, FCC granted a 1-year
                             extension in the implementation of this requirement to November 2003. These parties have
                             continued to contest the implementation of local number portability in the courts.
                             27
                              See Australian Communications Authority, Telecommunications Performance Report
                             2001-2002 (Melbourne, Australia: November 2002).




                             Page 32                                             GAO-03-501 Mobile Phone Call Quality
   them because these carriers do not have staff to collect and report the
   data.

• An official at one carrier explained that measurements could be created
  that give carriers using one technology an advantage over those using a
  different technology. That is, because TDMA technologies have a fixed
  capacity while CDMA technologies can trade off increased capacity for
  poorer sound quality, certain measures, such as number of times callers
  find the network overloaded, could benefit carriers that use CDMA over
  those who use TDMA.

• An FCC official noted that carriers might manage their businesses to
  improve their scores on whatever is being measured and reported rather
  than to better satisfy customers. For example, if the percent of dropped
  calls has to be reported, carriers may let sound quality deteriorate rather
  than drop the call.

• If the information comes directly from the carriers, someone—FCC or
  state officials—would need to monitor the measurements to ensure that
  all carriers were complying with the regulations, and this could add to
  the cost of government oversight.

As a result of these potential drawbacks, FCC and industry participants and
representatives note that efforts to require FCC or carriers to report more
detailed call quality information or complaints could drive up the price of
mobile phone service, limit entry of new carriers, create an uneven playing
field in terms of carriers using various technologies, provide the
marketplace with measurements that may not reflect better service, and
drive up the costs of government oversight of the industry.

According to some parties, giving customers longer trial periods before
they have to commit to a 1- or 2-year contract—an option that provides
customers with a first-hand opportunity to ascertain whether a carrier’s call
quality meets their needs—could avoid some of these potential drawbacks.
The Consumer & Governmental Affairs Bureau at FCC recommends that
consumers read contracts thoroughly and insist on being given a period of
time to test the phone and service before being tied to a long-term contract.
FCC officials noted that no information from carriers is going to be tailored
to the specific usage patterns of individual consumers. For example,
because some building materials block radio signals in areas where carrier
information shows that service is available, service may not be available
inside some buildings where customers want to use mobile phones. The



Page 33                                      GAO-03-501 Mobile Phone Call Quality
                            largest carriers have been extending their trial periods and now generally
                            allow 14 to 30 days. Some interested parties have suggested that longer
                            periods of up to 2 months would be more effective. However, giving longer
                            trial periods may raise the cost of signing up customers and could lead to
                            an increase in the price of service.

                            FCC, industry representatives, and the press have also noted that
                            consumers have access to various sources of information other than the
                            carriers. For example, some have pointed to the brochure on the FCC Web
                            site, which is included as appendix III in this report. In addition, they noted
                            that information is available from news and magazine stories and from
                            various Internet sites. Finally, they noted that one of the best sources of
                            information on call quality may be neighbors and coworkers who are using
                            their phones in ways that are similar to a new customer’s potential use.



Suggestions Included        To more directly affect call quality, some interested parties suggested that
Setting Minimum Call        carriers should be required to meet certain minimum quality standards,
                            such as a minimum percentage of calls that must be successfully
Quality Standards
                            completed. As a result, consumers could expect that all calls would meet
                            these minimum standards. This proposal would require establishing and
                            measuring a common set of network performance standards. In addition,
                            some entity would need to oversee compliance with the standard. FCC
                            officials said that requiring a specific level of service quality, such as a
                            percentage of calls that must be completed, might actually reduce the
                            amount of competition and service in the mobile phone market. Officials
                            said, for example, that if a certain level of service had to be provided, some
                            carriers now offering service might have to leave a particular market. If
                            fewer carriers provide service in these markets, prices would likely rise,
                            and consumers would likely have fewer choices. Moreover, in rural,
                            mountainous, and other hard-to-serve areas where some service is now
                            available, requiring minimal levels of service might discourage carriers
                            from serving these areas at all.



Carriers Say They Are       The national carriers we spoke with said that they recognize that call
Taking Actions to Improve   quality is important to consumers and that they are taking actions to
                            improve call quality. However, carriers noted that they face financial and
Call Quality
                            regulatory constraints when they attempt to add base stations to either
                            provide service where none previously existed or increase network
                            capacity. These constraints include the following:




                            Page 34                                       GAO-03-501 Mobile Phone Call Quality
              • Adding base stations involves capital expenditures. While carriers had
                easy access to capital markets in the 1990s, the downturn in the
                telecommunications industry made it more difficult for carriers to
                access these markets. In addition, carriers and financial analysts noted
                that carriers are facing a number of regulatory requirements—such as
                local number portability and E-911 service—and that, to meet these
                requirements, they must use scarce capital resources that could be used
                to build out their networks.

              • Adding base stations also involves securing suitable locations and
                zoning approvals. According to industry data, almost 36,000 antennas
                were installed between June 2000 and June 2002. Officials at all six of
                the national carriers we spoke with said that local zoning provisions
                limit their ability to site antennas in the most desirable locations. Some
                of these carriers said that it often takes many months to obtain
                permission to construct antennas.

              Carriers noted that they could offset some of the need to build more base
              stations if the federal government would allocate additional radiofrequency
              spectrum for commercial mobile phone service. However, other
              commercial and government users are already using other parts of the
              spectrum that are suitable for mobile phone service. Thus, providing more
              spectrum has proved to be a difficult and contentious issue.28



Conclusions   As Americans have come to rely more on mobile phones to meet their
              business and personal needs, it is important that FCC evaluate whether
              competition is adequate to ensure that mobile phone consumers are
              receiving the level of call quality they desire and expect. However, FCC has
              not yet undertaken such an evaluation in its annual report on competitive
              market conditions in the mobile phone service industry. Collecting and
              analyzing information on call quality would provide an ongoing record to
              help determine whether the current regulatory framework for call quality is
              adequate or whether certain actions—such as establishing call quality



              28
               See U.S. General Accounting Office, Defense Spectrum Management: More Analysis
              Needed to Support Spectrum Use Decisions for the 1755-1850 MHz Band, GAO-01-795
              (Washington, D.C.: August 2001); Telecommunications: Better Coordination and Enhanced
              Accountability Needed to Improve Spectrum Management, GAO-02-906 (Washington, D.C.:
              September 2002); and GAO-03-277.




              Page 35                                          GAO-03-501 Mobile Phone Call Quality
                     standards, mandating additional consumer information, or reducing local
                     government control over the siting of new base stations—are needed.



Recommendation for   To assist FCC in determining whether further regulatory action concerning
                     mobile phone call quality is necessary, FCC should include call quality in its
Executive Action     congressionally mandated annual report on competitive market conditions
                     in the mobile phone industry. This report should incorporate an analysis of
                     whether market competition is effective in ensuring that carriers are
                     meeting consumers’ expectations and desires regarding call quality.



Agency Comments      We provided a draft of this report to FCC for review and comment. In its
                     comments, which are reprinted in appendix IV, FCC said that it believes
                     that the ability of consumers to make informed choices in the marketplace
                     is critical to the growth of mobile phone services. FCC noted that
                     competition and deregulation in the mobile phone industry have benefited
                     consumers in several ways, including lower prices and an increased
                     diversity of service offerings. FCC also noted that for carriers to attract and
                     maintain customers, they must continue to offer better packages of rates,
                     network coverage, and call quality than their competitors. FCC believes
                     that these competitive forces will continue to compel carriers to monitor
                     and improve the quality and performance of their networks. Regarding our
                     recommendation, FCC agreed, to the extent possible, to include
                     information related to call quality in its future reports on competition in
                     mobile phone services. However, FCC noted some difficulties in
                     implementing the recommendation, such as data not being readily
                     available, the lack of objective performance standards, and difficulties in
                     measuring call quality against consumer expectations.


                     As agreed with your office, unless you publicly announce its contents
                     earlier, we plan no further distribution of this report until 5 days after the
                     date of this letter. At that time, we will send copies of this report to the
                     appropriate congressional committees; the Chairman, FCC; and other
                     interested parties. We will make copies available to others upon request as
                     well. In addition, the report will be available at no charge on the GAO Web
                     site at www.gao.gov. If you have any questions about this report,




                     Page 36                                       GAO-03-501 Mobile Phone Call Quality
please contact me at 202-512-4325 or shearw@gao.gov. Key contacts and
major contributors to this report are listed in appendix V.

Sincerely yours,




William B. Shear
Acting Director, Physical Infrastructure Issues




Page 37                                     GAO-03-501 Mobile Phone Call Quality
Appendix I

Scope and Methodology                                     Append
                                                               x
                                                               Ii                           Appendx
                                                                                                  ies




             To respond to the objectives of this report, we gathered information from a
             variety of sources. First, we reviewed the relevant literature on mobile
             phone networks, the relevant laws and regulations governing the delivery
             of mobile phone service, and studies of competition and consumer
             satisfaction in the mobile phone industry in the United States and selected
             foreign countries. Second, we obtained the views of a variety of experts on
             various aspects of mobile phone call quality. These experts included
             government officials from the Wireless Telecommunications Bureau and
             Consumer & Governmental Affairs Bureau at FCC, FTC, and the offices of
             attorneys general or public utility commissions in California, New York,
             Illinois, Massachusetts, Nebraska, New Jersey, and Texas. We also
             contacted representatives of the six nationwide U.S. mobile phone service
             carriers—AT&T Wireless, Cingular, Nextel, Sprint PCS, T-Mobile USA, and
             Verizon Wireless. Representatives of all of the carriers except AT&T
             Wireless answered our questions in person or over the phone; AT&T
             Wireless responded to questions in writing. In addition, we interviewed
             representatives of the mobile phone industry’s primary trade group, the
             Cellular Telecommunications & Internet Association; consumer advocates;
             lawyers representing various interested parties; financial analysts;
             consulting firms; companies that install equipment to improve call quality;
             and companies that conduct drive tests of the networks. Third, we
             provided questions on call quality for a nationwide phone survey of adult
             consumers that included questions on multiple topics submitted by various
             organizations. Finally, we reviewed Web sites to determine the types and
             quality of information on call quality available to consumers on the
             Internet.

             To better understand the regulatory framework we reviewed the FCC
             rulemakings and notices that set up the original cellular rules, and other
             relevant rulemakings, hearings, and notices that relate to setting rules of
             the operation of mobile phone markets. We also examined the
             Communications Act of 1934, Omnibus Budget Reconciliation Act of 1993,
             and Telecommunications Act of 1996, the three major pieces of legislation
             that set the statutory framework for mobile phone markets. In addition, we
             reviewed several recent cases and court rulings, including several focusing
             upon the jurisdictions of the state and federal government over this sector.
             Furthermore, we examined FCC’s recent annual reports on competitive
             market conditions in the mobile phone service industry. Finally, we spoke
             with mobile phone industry representatives and financial analysts to learn
             their views on the extent of competition.




             Page 38                                     GAO-03-501 Mobile Phone Call Quality
Appendix I
Scope and Methodology




To determine the extent to which consumers are experiencing call quality
problems, we sought data regarding call quality problems through several
means.

Carriers and other firms: We asked the six nationwide carriers for their
data on the extent of call quality problems and other aspects of their
services, including billing, contracts, marketing, and customer service. We
also asked the carriers about factors they see affecting call quality. While all
of the carriers provided us with some information about their networks,
they did not provide us with geographic specific call quality data that we
would need to help determine the extent of call quality problems. The
carriers also provided us with information about factors that affect call
quality, and we obtained further information on these factors by speaking
with companies in investment banking, antenna leasing, and the
development and manufacturing of mobile phone equipment. Finally, we
contacted several companies that collect network performance data,
including Telephia Inc., LCC International Inc., and Scoreboard. Some of
these companies conduct “drive tests”1 for the carriers. During these tests,
computers are used to simultaneously place calls on the networks of
various carriers. The computers then record whether calls went through
and whether they were dropped within some specified call time, such as 2
minutes.

Consumer complaints: We attempted to determine the extent of call
quality problems, as experienced by consumers. The six nationwide
carriers were unwilling to share information on customer surveys or
complaint data. We contacted the state public utility commissions to learn
whether they collect complaint data on mobile phone service or otherwise
regulate mobile phone service. Thirty-three state commissions responded
voluntarily to our request for information on whether they regulate mobile
phone service or categorize complaints. Of the six states that collect
complaints, California and Texas provided us with their data. We collected
consumer complaint data from FCC and FTC. We turned to consumer
groups that collect such complaints—including the Wireless Consumer
Alliance and Better Business Bureau—as well. Because none of these
sources adhere to a common standard for categorizing complaints or a
system to ensure that several sources are not collecting complaints from
the same consumer, we were not able to use these data to reach overall
conclusions about the extent to which consumers are experiencing call


1
Drive tests are generally performed in vehicles traveling along major road arteries.




Page 39                                              GAO-03-501 Mobile Phone Call Quality
Appendix I
Scope and Methodology




quality problems. Finally, we reviewed sources of information on the
Internet. Several sites allow consumers to report their experiences with
their mobile phone service; however, none of the sites we visited said that
they verify the information or delete it when it is no longer timely.

Consumer surveys: We collected data from consumer surveys. We spoke to
officials at Yankee Group, J.D. Power & Associates, and AARP about the
surveys they have conducted. Because these surveys did not provide all of
the information about call quality in which we were interested, we also
contracted with an international market research firm to administer 26
questions as part of a nationwide, multipurpose, Random Digit Dialing
telephone survey of adults conducted between November 8 and 10, 2002.
Our questions addressed issues such as call quality, satisfaction with the
quality of mobile phone service, complaint-making practices, and factors
involved in decisions to change companies. Five hundred fifty-two of the
1,027 survey respondents had mobile phones and answered at least some of
the 25 questions in addition to the preliminary screener question. The
survey results were weighted by various demographic characteristics—
gender, age, race, and education level.

The survey results are derived from a sample of the population. This
sample was one of a large number of samples that might have been drawn
from that population. The results from the sample that was actually
selected are subject to sampling error; that is, the extent to which they
differ from what would have been obtained if information had been
gathered from the entire population. We express confidence in the
precision of survey results as 95-percent confidence intervals, for example,
plus or minus 8 percentage points. For this survey, we estimate that for the
survey questions that applied to all of the respondents who used mobile
phones (417 or more) the 95-percent confidence intervals are plus or minus
8 percentage points, or less. Because fewer respondents answered the
questions relating to changing carriers (between 112 and 144), the
confidence intervals for these estimates are generally larger—plus or
minus 15 percentage points, or less.

Practical difficulties encountered in conducting this survey may introduce
nonsampling errors as well. As in any survey, differences in the wording of
questions, the sources of information available to respondents, and the
types of people who do not respond may have led to errors that we could
not assess. We took several steps to minimize some of these nonsampling
errors. For example, we developed our survey questions with the aid of a
survey specialist and pretested the questions. However, we are concerned



Page 40                                     GAO-03-501 Mobile Phone Call Quality
Appendix I
Scope and Methodology




about the potential for those who did not respond to the survey to differ
from those who did respond in some way that could affect the results. We
have no explicit reason for suspecting that the survey suffers from this
shortcoming. Instead, our concern arises out of the large sample of phone
numbers dialed to produce about 1,000 survey respondents—a response
rate of about 13 percent of the estimated eligible population.2 The survey
results were weighted so that the overall demographic characteristics of
our sample match the gender, age, race, and educational characteristics of
the national population as measured in the Census Bureau’s March 2001
Current Population Survey. We have no basis for determining to what
extent this weighting adjusted for the views of the 87 percent of the sample
who were not interviewed.




2
 Of the 19,194 numbers called, 4,572 numbers were ineligible for reasons such as the
respondent’s telephone was not working or the number was not a residential household
number. Of the remaining 14,622 numbers, for 1,027 of the numbers, an eligible respondent
completed the survey; for 2,055 of the numbers, the telephone was answered, but the
interview was not completed for reasons such as the appropriate respondent was not
available or refused to participate in the survey. For the other 11,540 numbers, no interview
was conducted for reasons such as there was no answer or the call was answered by an
answering machine. As a result, we were not able to determine if these numbers met the
eligibility requirements for our survey. Of these 11,540 telephone numbers, we estimate that
4,646 were eligible, for an overall estimated total of 7,728 numbers that met the eligibility
requirements for our survey.




Page 41                                               GAO-03-501 Mobile Phone Call Quality
Appendix II

Results of Consumer Survey on Mobile Phone
Service                                                                                                    Appendx
                                                                                                                 Ii




              The following results, which are based on responses to our national telephone
              survey of adults in the United States, were used in our analysis of the extent to
              which consumers are experiencing call quality problems. Not shown are some of
              the interviewer’s transitions between questions or explanations of the options for
              answering. After each question, the number of responses (n) that were included
              in our analysis is noted. For questions where the number of responses is greater
              than 400, the sampling error is plus or minus 8 percentage points or less. For the
              other questions the sampling error is plus or minus 15 percentage points, or less.
              Percentages may not add up to 100 percent due to rounding.

              Question 1: Do you have a cell phone? (n=1,026)
              Yes                                                     56%
              No                                                      44%

              Question 2: About how many times a week do you try to use your cellular phone
                  to either make or receive phone calls? (n=566)
              None                                                6%
              1 – 20 times                                        55%
              21- 50 times                                        20%
              Over 50 times                                       20%

              Question 3: How often do you have a problem making a call because you are in
                 an area where there is no service? (n=567)
              Never                                            22%
              Less than 10 percent of the time                 44%
              Between 10 percent and one-third of the time     21%
              More than one-third of the time                  12%

              Question 4: How often do you have a problem with getting a call through
                 because you get a fast busy signal or a message that says the call failed?
                 (n=566)
              Never                                                  32%
              Less than 10 percent of the time                       47%
              Between 10 percent and one-third of the time           16%
              More than one-third of the time                         5%

              Question 5: How often do you have a problem with a call being cut off or
                 dropped before you finish a call? (n=566)
              Never                                              39%
              Less than 10 percent of the time                   39%
              Between 10 percent and one-third of the time       16%
              More than one-third of the time                     6%




                 Page 42                                                GAO-03-501 Mobile Phone Call Quality
   Appendix II
   Results of Consumer Survey on Mobile Phone
   Service




Question 6: How often do you have a problem hearing or understanding what
   the other person on the phone is saying because of a bad connection or an
   echo? (n=569)
Never                                                 32%
Less than 10 percent of the time                      38%
Between 10 percent and one-third of the time          21%
More than one-third of the time                        9%

Question 7: Where do any of these problems with the quality of your calls most
    often occur? (n=519)
Inside a building                                  45%
Traveling in a car or other vehicle                37%
Somewhere else outside                             18%

Question 8: Now we would like to sum up your satisfaction with the overall
   quality of your cellular calls, including how often the calls go through, stay
   connected, and can be clearly heard. Are you satisfied, dissatisfied, or neither
   with the overall quality of your calls? (n=566)
Satisfied                                                83%
   Very satisfied                                                47%
   Somewhat satisfied                                            36%
Dissatisfied                                              9%
   Very dissatisfied                                              3%
   Somewhat dissatisfied                                          6%
Neither                                                   8%

Question 9: Since you first started using cellular phones, do you think that the
   general quality of your cellular calls, including how often the calls go through,
   stay connected, and can be clearly heard, has improved, gotten worse or
   stayed the same? (n=563)
Improved                                                 47%
   Somewhat improved                                            25%
   Greatly improved                                             22%
Gotten worse                                              5%
   Gotten somewhat worse                                         4%
   Gotten much worse                                             1%
Stayed the same                                          47%




   Page 43                                                 GAO-03-501 Mobile Phone Call Quality
    Appendix II
    Results of Consumer Survey on Mobile Phone
    Service




Question 10: Consider the accuracy of the bills you receive for your cellular
   phone service and think about whether you have been charged for calls or
   services you didn’t make or didn’t sign up for. Would you say that you are
   satisfied, dissatisfied, or neither with the accuracy of your bills? (n=543)
Satisfied                                                 81%
   Very satisfied                                                57%
   Somewhat satisfied                                            24%
Dissatisfied                                              11%
   Very dissatisfied                                              4%
   Somewhat dissatisfied                                          7%
Neither                                                    8%

Question 11: Considering what you pay for the package you get, the features you
   get on the phone, any problems you may have, and the quality of service you
   receive, are you satisfied, dissatisfied, or neither with the value you get for the
   money you pay? (n=548)
Satisfied                                                 78%
   Very satisfied                                                 45%
   Somewhat satisfied                                             33%
Dissatisfied                                              15%
   Very dissatisfied                                               5%
   Somewhat dissatisfied                                          10%
Neither                                                     8%

Question 12: Would you be willing to pay more than you are now paying to have
    higher overall call quality, including more completed calls, fewer dropped
    calls, and better connections? (n=565)
Yes                                                     12%
No                                                      83%
It depends                                               5%

Question 13: Have you been able to use your cell phone in all the areas and places
   you had expected when you purchased your service? (n=562)
Yes                                                  74%
No                                                   26%

Question 14: In the past year, did you ever complain about the quality of your
   calls to your cellular phone company? (n=571)
Yes                                                    19%
No                                                     81%

Question 15: In the past year, did you ever complain about the quality of your
   calls anywhere else, like the FCC, a state agency, the Better Business Bureau?
   (n=571)
Yes                                                      1%
No                                                      99%




    Page 44                                                 GAO-03-501 Mobile Phone Call Quality
   Appendix II
   Results of Consumer Survey on Mobile Phone
   Service




Question 16: Have you used your cellular phone for 2 years or less or for more
   than 2 years? (n=571)
2 years or less                                       37%
More than 2 years                                     63%

Question 17: Are you the person who decides which cellular phone company’s
    service you will use, or does someone else like another family member or
    employer make that decision for you? (n=569)
I decide                                                73%
Someone else decides                                    27%

Question 18: Since you first became a cellular service customer, have you
   changed your cellular phone company? (n=417)
Yes                                                    35%
No                                                     65%
Changed because original company quit                   0%
   providing service

Question 19: How important in your decision to change cellular companies were
   call quality problems such as calls not going through, calls not staying
   connected, or not being clearly heard? (n=142)
Very                                                   34%
Somewhat                                               21%
Not at all                                             45%

Question 20: How important in your decision to change cellular companies were
   billing problems such as incorrect charges or confusing billing? (n=144)
Very                                                  28%
Somewhat                                              19%
Not at all                                            53%

Question 21: How important was the cellular phone handset provided by your new
   cellular company in motivating you to change cellular companies? This
   includes things like available features, or phone style and appearance. Were
   the differences in handsets very, somewhat, or not at all important? (n=142)
Very                                                     15%
Somewhat                                                 27%
Not at all                                               58%

Question 22: How important was getting a lower price in your decision to change
   cellular companies? (n=144)
Very                                                  57%
Somewhat                                              26%
Not at all                                            17%




   Page 45                                              GAO-03-501 Mobile Phone Call Quality
   Appendix II
   Results of Consumer Survey on Mobile Phone
   Service




Question 23: Have you ever wanted to change your cellular phone company but
   did not change for some reason? (n=417)
Yes                                                  28%
No                                                   72%

Question 24: We would like to know why you may not have changed cellular
   companies, even though you wanted to. How important was a contract
   termination fee required by your current cellular company in keeping you from
   changing cellular companies? Was the contract termination fee very,
   somewhat, or not at all important? (n=112)
Very                                                   52%
Somewhat                                               18%
Not at all                                             25%
No termination fee applied                              6%

Question 25: How important was having to get a new telephone number in
   keeping you from changing cellular companies? Was having to change
   telephone numbers very, somewhat, or not at all important? (n=114)
Very                                                 23%
Somewhat                                             18%
Not at all                                           58%
Number not changed                                    1%

Question 26: How important was the inability to continue using your current
   cellular phone handset in keeping you from changing cellular companies? Was
   having to change handsets very, somewhat, or not at all important? (n=113)
Very                                                  21%
Somewhat                                              21%
Not at all                                            57%
Handset stayed same                                    1%




   Page 46                                             GAO-03-501 Mobile Phone Call Quality
Appendix III

FCC Fact Sheet on Mobile Phone Service                                                       Appendx
                                                                                                   iI




               Among its duties, FCC’s Consumer & Governmental Affairs Bureau
               educates and informs consumers about telecommunications services. To
               this end, the Bureau has produced a number of consumer alerts and fact
               sheets, six of them dealing with mobile phone service. Among these, is a
               new fact sheet called What You Should Know About Wireless Phone
               Service. Posted on FCC’s Web site at www.fcc.gov/cgb/wirelessphone.pdf,
               the new fact sheet has been accessed an average of 60,000 to 70,000 times
               per month, according to FCC officials. This fact sheet appears on the
               following page.




               Page 47                                    GAO-03-501 Mobile Phone Call Quality
Appendix III
FCC Fact Sheet on Mobile Phone Service




Page 48                                  GAO-03-501 Mobile Phone Call Quality
Appendix III
FCC Fact Sheet on Mobile Phone Service




Page 49                                  GAO-03-501 Mobile Phone Call Quality
Appendix III
FCC Fact Sheet on Mobile Phone Service




Page 50                                  GAO-03-501 Mobile Phone Call Quality
Appendix III
FCC Fact Sheet on Mobile Phone Service




Page 51                                  GAO-03-501 Mobile Phone Call Quality
Appendix III
FCC Fact Sheet on Mobile Phone Service




Page 52                                  GAO-03-501 Mobile Phone Call Quality
Appendix III
FCC Fact Sheet on Mobile Phone Service




Page 53                                  GAO-03-501 Mobile Phone Call Quality
Appendix III
FCC Fact Sheet on Mobile Phone Service




Page 54                                  GAO-03-501 Mobile Phone Call Quality
Appendix III
FCC Fact Sheet on Mobile Phone Service




Page 55                                  GAO-03-501 Mobile Phone Call Quality
Appendix IV

Comments from the Federal Communications
Commission                                                      Appendx
                                                                      iIV




              Page 56        GAO-03-501 Mobile Phone Call Quality
Appendix IV
Comments from the Federal Communications
Commission




Page 57                                    GAO-03-501 Mobile Phone Call Quality
Appendix IV
Comments from the Federal Communications
Commission




Page 58                                    GAO-03-501 Mobile Phone Call Quality
Appendix V

Key Contacts and Major Contributors                                                          Append
                                                                                                  x
                                                                                                  i
                                                                                                  V




GAO Contacts      John P. Finedore, (202) 512-6248
                  Nancy S. Barry, (617) 788-0550



Staff             In addition to those named above, David Dornisch, Christine Houle,
                  Sara Ann Moessbauer, Tom Taydus, Ed Warner, and Mindi Weisenbloom
Acknowledgments   made key contributions to this report.




(545014)          Page 59                                 GAO-03-501 Mobile Phone Call Quality
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