The Mobile Market
Competition has benefited customers by triggering price decreases and wider availability of service. The Cellular Telecommunications Industry Association statistics in Table 9.3 indicate that the number of cellular subscribers grew by 24 million users from 86 million in 1999 to 110 million in 2000 in the United States.
Annual revenue in 2000 was close to $52.5 billion. For the past two years, average monthly bills have increased. From 1988 when the statistics were first published to 1998 they decreased each year from a high of $98.02 in 1988 to a low of $39.43 in 1997. The penetration of cellular telephones is lower in the U.S., 39% according to the FCC, than in Europe. In Finland, more people have mobile phones than landline phones. The fact that more people don't have cellular phones, and the ones who do have low monthly usage, can be attributed to the following factors:
| Date | Subscribers | Revenues ($) | Monthly Bill |
|---|---|---|---|
| December 1988 | 2,069,441 | 1,959,548 | $98.02 |
| December 1989 | 3,508,944 | 3,340,595 | $83.94 |
| December 1990 | 5,283,055 | 4,548,882 | $80.90 |
| December 1991 | 7,557,148 | 5,708,522 | $72.74 |
| December 1992 | 11,032,753 | 7,822,726 | $68.68 |
| December 1993 | 16,009,461 | 10,892,165 | $61.48 |
| December 1994 | 24,134,421 | 14,229,920 | $56.21 |
| December 1995 | 33,785,661 | 19,071,966 | $51.00 |
| December 1996 | 44,042,992 | 23,634,971 | $47.70 |
| December 1997 | 48,705,553 | 25,575,276 | $43.86 |
| December 1998 | 69,209,321 | 33,133,175 | $39.43 |
| December 1999 | 86,047,003 | 40,018,489 | $41.24 |
| December 2000 | 110,040,541 | 52,466,020 | $45.27 |
| Source: The CTIA Semi-annual Data Survey. Used with permission of CTIA. | |||
In the United States, as opposed to other parts of the world, callers pay for calls they receive as well as those they make. Thus people are reluctant to give out their cell phone numbers.
Many consumers are cost-conscious and purchase the telephones more for safety reasons than the need to make daily calls.
Most residential users have landline service that allows them an unlimited number of local phone calls. In other parts of the world, consumers pay by the minute for each local call.
Pricing structures and elimination of roaming fees have resulted in increased usage. Complicated roaming fees are being eliminated for customers who use digital cellular service. Most providers offer calling plans where subscribers can purchase “buckets” of, for example, 200 minutes for $30. Because more carriers have networks across the country, they can offer fixed-price national plans that include an allotted number of minutes. Nextel was the first provider to drop its roaming fees in January of 1997. Roaming services allow customers to use their cellular telephones in other than their home regions. Vendors such as Sprint PCS and AT&T Wireless followed suit. Another way that cellular providers promote usage is “family” plans that offer discounts to members of the same family that purchase cellular service.
Efforts to Improve Service—Antenna Improvements
Caller dissatisfaction with quality of service leads to churn—customers discontinuing service or changing carriers. Major challenges facing cellular providers are the lack of a uniform national cellular network and uneven quality in service particularly in rural areas and large cities. The sparse nature of population densities in areas such as western states and far northern regions make it difficult to economically deploy service. In addition to gaps in coverage, congestion in large urban areas such as San Francisco and New York is a problem. Many customers complain about choppy calls and locations where their telephones do not work. Tower spacing, capacity and interference in the form of tunnels and low-lying areas are challenges. Cellular providers are faced with the challenge of fine-tuning their transmitters to eliminate dead zones and holes in coverage.
John Catlin, Manager of Wireless Information Services for Agilent, maintains that the biggest challenge is being able to balance capacity for voice with that for data services while maintaining signal strength in data calls, which need a much better signal. For example, if voice is compressed to leave more capacity for data, how will this impact voice quality? The challenge on data is especially acute inside buildings where coverage is often uneven. Agilent offers a service where automatic dialers inside vans are driven through various regions while they make continuous test calls on as many as eight networks simultaneously. In 2.5 generation GSM networks, data traffic uses capacity previously allotted for voice traffic. Mr. Catlin, who has been conducting studies since 1998, has noticed the growth of the footprint of networks, particularly in smaller and mid-sized cities.
New “smart” antenna systems are being implemented that increase spectrum capacity by providing multiple beams of energy into from three to six sectors (sections) of a cell. Antennas transmit radio frequencies in cell sites in 360-degree circles. With new antennas, sectors can be adjusted through software so that higher percentages of spectrum are beamed to busy sectors. This is one way carriers transmit greater amounts of traffic with a limited amount of spectrum. Smart antennas increase capacity by 35% to 50%.
Repeaters are used in rural areas with lower densities of traffic. They extend, “repeat” the signal, making it stronger, so that it can be sent longer distances before fading. This obviates the need for adding more cell sites. It does not increase the amount of traffic that a given amount of spectrum can handle. It makes sense in low-traffic areas where carriers want to cover large areas.
In-building Antenna Systems—Adding Coverage to Skyscrapers
Large buildings in cities are particularly hard places in which to provide cellular service. It's extremely difficult to penetrate walls without turning up power too high. The height of buildings also is a problem. Putting antennas in top stories gives coverage there but the signal is too weak for street-level traffic. One solution is to install a cell site within buildings with small antennas on every floor. A base unit is connected by fiber strung through the building's riser to antennas on each floor. The base station in the basement or outside a building is either connected to the cellular provider's network via cabling or is outside to receive the signal over the air. The same system in a building can support many air access methods simultaneously (e.g., TDMA, GSM, Nextel, paging and CDMA). Carriers pay for the in-building cell site and may share a percentage of the cellular revenue with the landlord. These systems are used to provide service in subway tunnels, convention centers and skyscrapers.
Health Concerns
The increasing proliferation of cellular telephones worldwide is prompting concerns about their impact on health. According to Needham, Massachusetts research firm, Tower Group, there were 585 million mobile phone users worldwide in 2000—115 million of them in the U.S., where 3 million more are being added each month. The U.S. General Accounting Office (GAO) reported in May 2001 that:
“Current research doesn't show that energy emitted by cellular phones has adverse health effects, but there is not yet enough information to conclude that they pose no risk.”
Cell phones emit radio waves, which produce low levels of radiation, mostly from the antenna. In 1996, the Federal Communications Commission (FCC) established a level of 1.6 watts per kilogram of human tissue as the highest amount of radio waves a device can safely emit when held against the body. The measurement of the amount of radio frequency energy absorbed by the body is called specific absorption rate (SAR). The GAO has urged the FCC to standardize testing procedures since there are many testing variables that can affect results. Manufacturers include SAR rates and safety information in booklets included with new cellular devices. The information is not included on the cell phone's packaging. Thus consumers must ask an employee to open multiple boxes if they want to compare radio frequency absorption levels.
In an attempt to determine their health impact, in June 2000 the Food and Drug Administration (FDA) entered into a partnership with the cellular industry in which new research will be funded by the industry but the FDA retains the right to choose the researchers and the subjects investigated. Some experts outside the industry are critical of the fact that studies are being financed by industry.
In the UK where more than half the population uses mobile phones, the government commissioned a group of independent experts to study safety issues. The Independent Expert Group on Mobile Phones issued their report in May 2000. The group chaired by Sir William Stewart concluded that:
The balance of evidence to date does not suggest that emissions from mobile phones put the health of the UK population at risk.
There is now some preliminary scientific evidence that exposures to radio frequency radiation may cause subtle effects on biological functions, including those of the brain.
A precautionary approach to the use of mobile telephone technologies should be adopted.
The use of mobile phones while driving can have a detrimental effect on the quality of driving.
The widespread use of mobile phones by children should be discouraged.
Committee members called on the industry not to target children under 16 in their marketing campaigns. Panel member Colin Blakemore, an Oxford brain development expert said,
“We can't say that there is any risk for children—but if it later emerges that cellular phones cause harm, children may be more vulnerable because their nervous systems are still developing. They have thinner skulls and smaller heads and would have a longer life time exposure to the radiation.”
The preceding quote appeared in the AP article, “UK Panel Eyes Risk of Cellular Phones,” published in The Boston Globe, 12 May 2000, page A20, by Emma Ross.
Safety on the Road
In addition to health impacts, there is a concern that driving while talking on a cellular telephone may be dangerous. Limiting cellular telephone use by drivers has gained worldwide support. At least 23 countries, including Japan, Italy, Spain and Israel, have adopted various bans. In the United States, the National Highway Traffic Safety Administration estimates that 85% of cellular telephone owners use them while driving. New York is the only state that currently bans talking on handheld cellular phones while driving. In May 2001 bills were introduced in the U.S. House and Senate to ban or limit cellular telephone use while driving.
There has been a growing grassroots movement for legislative action led in large part by families of victims of cellular telephone–related accidents. Eleven municipalities including Marlboro, New Jersey and Brookline, Massachusetts have enacted legislation limiting driver use of mobile phones. Illinois and Connecticut are seriously considering legislation and bills have been introduced in several states throughout the country.
A 1997 study published in the New England Journal of Medicine concluded that cellular telephone use by drivers was a major distraction that quadrupled the risk of an accident. In the U.S., there are no reliable statistics as to how many accidents are related to talking on the phones. In the article, “First You Dial, Then You Crash,” published in Salon.com, 7 December 2000, by Dawn Mackeen, Tom Dingus, Director of the Virginia Tech Transportation Institute, estimates between 600 to 1000 people die each year in cellular telephone–related crashes in the United States.
On February 7, 2001 the University of Montreal's Transportation Safety Laboratory, in its official report, “Using Mobile Phones Increases Risk of Accidents on the Road” concluded that cellular telephone users had a 38% higher risk of accidents than non-users, and the risk increased with the frequency of calls. This study by Dr. Claire Laberge-Nadeau, compared questionnaires to telephone and accident records of 36,000 subjects. One male out of three and one female out of two said that cellular telephone use significantly interfered with their driving.
Deputy Administrator of the National Highway Traffic Safety Administration (NHTSA), Rosalyn G. Millman, on July 18, 2000, announced that the NHTSA's consumer information would include the following advice:
“Growing evidence suggests using a wireless phone or other electronic device while driving can be distracting and drivers should not talk on the phone or use other devices while their vehicles are in motion…. NHTSA's preliminary review and assessment suggest that existing laws are not necessarily adequate to limit distractions from wireless phones or other electronics.”
Deputy Administrator Millman's statement also cast doubt about the safety of using hands-free devices while driving, “Hands-free, depending upon the equipment, may reduce both manual and visual distraction—but it will not affect or reduce cognitive distraction.”
The industry has taken the discussion of safety issues seriously. Verizon Wireless, the largest wireless provider in the United States, has indicated that it will support laws requiring the use of hands-free devices such as headphones when talking on cellular telephones while driving. Until Verizon's announcement, most carriers had stressed the “education not legislation approach.” Indeed, in the article, “Verizon Breaks Ranks, Backs Ban of Cell-Phone Use While Driving,” published in The Wall Street Journal WSJ.com, 26 September 2000, by Nicole Harris and Jeffrey Ball, lobbyists from the cell phone industry have helped defeat legislative initiatives across the country. Safety advocates, while applauding Verizon's announcement as a start, remain concerned because studies have indicated that talking on a cellular telephone even with a hands-free device remains a dangerous distraction.
Liability concerns are becoming a front and center issue at commercial organizations. The article, “Workers Told to Stay off Cell Phones,” published in USAToday.com, 26 September 2000, by Stephanie Armour, discussed the growing awareness of employers that they could be held liable for a crash. Employment lawyers are urging companies to have a cell phone policy and to discourage employees from using the phones while driving.
Privacy and Advertising Intrusions on Mobile E911
Databases located in carriers' networks track location information about users when their cellular phones are turned on. Privacy experts are concerned that if carriers share tracking information, marketing organizations will know people's shopping habits and driving routes and collect this information in a database. These worries are not limited to information gathered from cellular telephones. They cover tracking habits of people that use Blackberry email pagers, in-car navigation systems such as GM OnStar, personal digital assistant devices and laptops equipped with radio modems or Bluetooth chips.
Carriers have expressed an interest in linking information in their databases to services. These services could be notices of specials, yellow pages, weather information and automobile navigation systems. This could make cellular phones liable to receive unsolicited advertisements such as coupons for stores located near the subscriber. Carriers are making large investments in tracking systems and no provision is in the ruling to compensate them for the cost of buying, installing and maintaining them.
Congress, in the Wireless Communications and Public Safety Act of 1999, Section 222, required that cellular providers not give out information from E911 service to any other concern without a user's express prior permission by use of “opt-in” features. It also required providers to let users know when information about them was to be collected and the intended purpose of that information. The Center for Democracy and Technology (CDT) in their April 6, 2001 “Comments of the Center for Democracy and Technology” by James X. Dempsey made the following statement before the Federal Communications Commission. (The Technology and Public Policy Clinic of the University of California Berkeley School of Law co-wrote the report.)
“The portability of mobile devices and the ubiquity of their applications coupled with their ability to pinpoint the location of individuals and reveal it to others could, in the absence of clear privacy rules, produce a system where the everyday activities and movements of individual consumers are tracked and recorded. Wireless location technology has the potential to take data collection to new heights, allowing records to be compiled not just about discrete transactions but about individual's whereabouts.”
Many of the E9111 systems do have the ability to allow users to opt-out of having their location records transmitted without the user's consent. The Snaptrack (owned by Qualcomm), gps1 hybrid (satellite and network) handset-based system, lets users program their telephones so that only 911 calls transmit location information. To date, the carriers have not made public statements about how they will ensure privacy. The Cellular Telecommunications Industry Association has asked the FCC for a rulemaking that will clarify the privacy requirements related to E911.
Called Party Pays—An Impediment to Mobile Usage
In most of the world, cellular users do not pay to receive cellular telephone calls. Fees for incoming calls prevent cellular service from being a viable alternative for local telephone service. It keeps cellular costs high and is a factor in slowing cellular growth. Table 9.3 shows that while cellular service is growing, the average bill is low. Many consumers have cellular phones for safety and emergency use but are reluctant to give out their telephone number because of usage charges for receiving cellular calls. The FCC has stated that it will study the issues involved in caller pays services.
If calling party pays is implemented, consumers need to be alerted that they are about to make a toll call. The charge covers the cost of carrying traffic from the landline network to the wireless network. Possible options for uniformly alerting callers to the fact that they are about to be charged for a call when they call a wireless phone are:
Using special prefixes or area codes such as 500 set aside for cellular calls. (Canada has set aside the 600 area code for cellular service.) The wireless industry in the United States does not support this option because it doesn't want to disadvantage cellular service by giving it separate blocks of numbers.
The use of intercept announcements telling people they are calling a cellular number for which toll charges apply.
Audible tones to alert callers that the call is non-standard.
If calling party pays is implemented, billing settlements between the wireline providers and wireless providers will be another open question. For example, should the wireline or wireless carrier bill the person who makes the call? If the wireline carrier bills the call, how much will the wireless carrier pay for the billing service? The organization that bills for calling party pays would have to deal with irate consumers who are not used to paying usage on local calls.
Fraud on Cellular NetworksAccording to Kate Strong, Product Marketing Manager for Lightbridge, Inc.'s fraud products, there is $12 to $14 billion of cellular fraud worldwide. This is an enormous problem and represents 4% to 10% of carriers' revenue that they write off as bad debt. The three main types of cellular fraud are customer acquisition fraud, technical fraud on cell phones while they're in use and internal fraud. The largest amount of fraud, customer acquisition fraud, occurs when people sign up for cellular service using false information such as stolen credit cards and false addresses. If they're approved for service, they might then call the cellular provider and falsely claim that they moved during the first 30 days of service and thus did not receive a bill. They want to prevent the provider from cutting off their service when the person from whom they stole identification receives the bill and notifies the carrier that the service was obtained fraudulently. To prevent subscription fraud, carriers use databases from companies such as Lightbridge and IDT Wireless to verify identity. They ask callers questions about information not usually found in people's stolen wallets. These questions include date of birth, home and telephone phone numbers, social security number, mother's maiden name and whom they have their mortgage with. Technical fraud occurs when thieves use equipment to copy mobile identification numbers (electronic serial numbers) transmitted when people make cellular calls. The thieves clone these numbers onto their own handsets and make calls until the carriers notice unusually high usage and cut them off. Carriers also track these thefts by noting when the same mobile identification number is used in two different parts of the country a few minutes apart. This type of fraud is declining because digital networks scramble signals so that it is more difficult to steal identification numbers. Technical fraud occurs most frequently when users roam on analog networks. The area of fraud growing most quickly is internal fraud. With internal fraud, crime rings infiltrate billing, operations and customer service departments. In all of these departments, the criminal sets up service for unapproved users. Carriers are tightening their internal controls so that the credit department, customer care and implementation staff share information on the customer acquisition process. For example, ongoing checks need to be made such that credit checks and subscriber verifications were actually completed for all new service. |
Another problem is leakage. Leakage is defined as calls that cannot be billed. These might include calls from pay phones, hotels, prisons and college campuses or calls originating out of the local area. One consideration is to require that these calls be billed to credit cards. All of these issues point to the importance of a clear and uniform way for handling calling party pays. Countries such as Israel that have calling party pays have a higher penetration of cellular service than the United States.
The FCC is considering national rules on standard ways to alert callers to calling party pays and whether there should be rules to protect consumers from excessive calling party pay rates. In an attempt to fashion a uniform nationwide policy, it has declared that states cannot promulgate rules about calling party pays.
Limited Mobility Wireless for Local Telephone Service
For large groups of the world's population, cellular service has the possibility of being the first type of telephone service they obtain. Fixed wireless service is the use of wireless technology for local telephone service. Traditional wireless local loop service, discussed in Chapter 4, consists of a base station (antenna and base staton subsystem) in a neighborhood that beams service to small dishes on people's homes and businesses. The neighborhood base station is connected to the central office by fiber optic cabling. Telephone service via fixed wireless local loops is different than cellular service because it only works at the customer's site. Fixed wireless service also is connected to a public switched network central office rather than a mobile central office.
It was thought that fixed wireless service would be adopted in developing countries and by CLECs in the rest of the world as a low-cost alternative to digging up streets and laying new cabling to every customer. It was also a way to avoid obtaining rights of way to use public streets for fiber cabling. To date, because of high startup costs, wireless local loop technology is being implemented at a slow pace.
A new service called limited mobility cellular service is a way to provide local service using cellular base stations and low cost mobile phones. Like wireless local loop service, digging up streets and procuring rights of way are eliminated. Limited mobility cellular service as offered on CDMA networks can limit mobility to a subscriber's town or neighborhood. For an extra fee, service can be purchased to include a larger geographic region. It is based on the location-tracking technology described for E911 service. Chips in users' handsets transmit subscriber identification to the base station where the ID is matched to a database (home location register) with information about the mobile telephone's allowed calling area and services to which they subscribe.
Wireless Number Portability—Keeping the Same Number When Changing Carriers
Wireless local number portability enables subscribers to keep their cellular telephone number when they change from one wireless provider to another. This is significant for users that want to keep their cellular phone number when they change carriers. According to the Cellular Telecommunications Industry Association (CTIA), 4 million customers—28% of subscribers—disconnect service annually. It's not known how many of them change to another carrier. The largest impact of cellular number portability will be on business customers who often give out their number to customers and vendors. Many business users are reluctant to change cellular carriers because of the current requirement to change their cellular telephone number.
The Telecommunications Act of 1996 required wireless number portability in the United States by June 30, 1999. The cellular industry requested and received a delay until November 24, 2002 to work out the technical details. The way portability will work is that the mobile identification number (MIN) that now is the same as users' 10-digit mobile directory number will no longer necessarily be the same. Under wireless number portability, when someone calls the mobile directory number, the wireless carrier will perform a “data dip” at a national database. The national database will correlate the 10-digit directory number to a 10-digit mobile subscriber identification number, which will identify the mobile carrier assigned to the directory number.
Wireless number portability will be significant if more people start using their cellular service as a replacement for wireline service. It will provide truly geographic number portability in the same manner as toll-free service.
Limitations of Circuit-Switched Cellular for Data Communications
The analog cellular network was designed in the 1970s by AT&T for voice services. The major impediment to sending data over existing second generation cellular services is the change in signals and the errors introduced during the handoffs between base stations and when the signal is transmitted between the mobile portion of the network and the landline-based portion of the network.
Because of the delays and constant retransmissions due to errors, circuit switched cellular modems rarely transmit at their top speed of 14.4 Kbps. The most common speed tends to be 9600 bps, far lower than speeds generally achieved over wire lines.
CDPD—Cellular Digital Packet Data, IP Wireless
Cellular digital packet data (CDPD), also called IP wireless, was developed by IBM as a way to transmit wireless data over spare capacity in cellular providers' analog networks. It was first offered in 1995. It is a way to transmit short, bursty messages such as electronic mail, credit card verification, alarm monitoring and dispatch communications. Because it uses spare voice channels in cellular networks, it was planned as a low-cost solution for people who need to transmit short messages from multiple locations. AT&T Wireless, Cingular, Verizon Wireless and Alltel are among the carriers who offer CDPD.
Cellular Digital Packet Data (CDPD) is not widely used. The speeds are slow. The top speed is 19,200 bits per second. However, throughput, the number of actual user bits sent, is 14,400 bps. Overhead bits used for addressing, billing, source address, error correction and encryption cut down on the number of user bits sent per second. Another factor holding back broad acceptance of cellular digital packet data is the lack of universal coverage.
The CDPD network is an overlay network. It works “over” the standard cellular networks using spare voice channels. Providers reserve channels, often from one to three, in each cell site for IP wireless traffic. If no capacity is available, they “channel hop” to spare channels in adjacent cells. CDPD modems encrypt the data before it is sent. CDPD modems are available for certain Palm and Compaq Pocket PC devices. Cellular data is subject to the variations in coverage and quality that affect voice service.