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3 XX` ` A. Overview ` p>"(# 3 XX` ` B. Status of Competition ` p>"(# 4 XX` ` C. Industry Development ` p>"(# 5 XcII. THE CMRS INDUSTRY p>"(# 7 XX` ` A. Mobile Telephony ` p>"(# 7 XX` ` X ` ` 1. Mobile Telephone Overview and Analysis p>"(# 8 XX` ` X ` ` 2. Cellular Sector Analysis p"(# 28 XX` ` X ` ` 3. Broadband PCS Sector Analysis p"(# 30  X"4XX` ` X ` ` 4. Other Competitors: Nextel Communications, Other Specialized Mobile Radio Operators, Resellers, and Satellite Operators p"(# 32 XX` ` B. Paging and Messaging ` p"(# 36 XX` ` C. Traditional Dispatch ` p"(# 47 XX` ` D. Mobile Wireless Data ` p"(# 52"Z&0*''88$"ԌXcIII. CONCLUSION p"(# 62 XcIV. ADMINISTRATIVE MATTERS p"(# 64 APPENDIX A: Spectrum Auctions Tables APPENDIX B: Mobile Telephony Tables APPENDIX C: Paging/Messaging Tables APPENDIX D: Traditional Dispatch Service Tables APPENDIX E: Mobile Wireless Data Tables APPENDIX F: Fixed Wireless Voice and Data Services APPENDIX G: Fixed Telemetry Services APPENDIX H: Additional Maps APPENDIX I: Cellular License Ownership" 0*%%88\ "  X' I. INTRODUCTION A. Overview  X4In 1993 Congress created the statutory classification of Commercial Mobile Services3 yO'ԍCommercial Mobile Services came to be known of by the Commission as the Commercial Mobile Radio Services, or "CMRS". to  X4promote the consistent regulation of mobile radio services that are similar in nature.9\ 3 yO^ 'ԍThe Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 10366, Title VI,  6002(b), amending  {O& 'the Communications Act of 1934 ("Communications Act") and codified at 47 U.S.C.  332(c) ("1993 Budget  {O 'Act").9 At the same time, Congress established the promotion of competition as a fundamental goal for CMRS policy formation and regulation. To measure progress toward this goal, Congress required the Federal Communications Commission ("Commission") to submit annual reports  X14that analyze competitive conditions in the industry.1D3 yO&'ԍ"The Commission shall review competitive market conditions with respect to commercial mobile services and shall include in its annual report an analysis of those conditions. Such analysis shall include an identification of the number of competitors in various commercial mobile services, an analysis of whether or not there is effective competition, an analysis of whether any such competitors have dominant share of the market for such services, and a statement of whether additional providers of classes or providers in those services would be  {O'likely to enhance competition." 1993 Budget Act codified at 47 U.S.C.  332(c)(1)(C). This report is the fourth of the Commission's annual reports on the state of CMRS competition.  X 4This report follows the same general structure as the Third Report.L 3 yO['ԍImplementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report  {O#'and Analysis of Competitive Market Conditions with Respect to Commercial Mobile Services, Third Report,  {O'13FCC Rcd 19746 (1998) ("Third Report"). The appendixes to the Third Report are not published in the FCC  {O'Record (See Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual  {O'Report and Analysis of Competitive Market Conditions with Respect to Commercial Mobile Services, Third  {OK'Report, FCC 9891 (rel. Jun. 11, 1998) ("Third Report Appendixes")). A combined copy of the Third Report and  {O'the Third Report Appendixes may be found on the Commission's Internet site: . Since operators of different Commissiondefined services are competing for customers against the providers of other types of services with increasing frequency, this report bases its analysis on a consumeroriented view of wireless services by focusing on specific product categories, regardless of their regulatory classification. In some cases, this includes an analysis of offerings outside  X{4the umbrella of "services" specifically designated by the Commission as CMRS.{3 yO#'ԍFor example, a number of companies provide mobile telephone, paging, and mobile data services using  {O$'satellitebased networks. See e.g., Section IRIDIUMII.A.4.d. However,"{,0*%%88I" because licensees of these other spectrumbased services often compete with CMRS providers, as well as with other providers of telecommunications services, the Commission believes that it is important to consider them in the analysis. This report focuses on the three established wireless services that are most often associated  X4with CMRS: mobile telephony,3 yO'ԍThis report defines the mobile telephone segment to include cellular, broadband Personal Communications Service ("broadband PCS"), and digital Specialized Mobile Radio ("SMR") operators. paging/messaging, 3 yO^ 'ԍThis report defines the paging/messaging segment to include paging and narrowband Personal Communications Services ("narrowband PCS") operators. and dispatch.xx3 yO 'ԍThis report uses the term "dispatch" as a term of convenience to refer to a wide variety of services. Operators provide commercial dispatch services using a number of Commission defined services. However, due to the lack of available information, this report limits most of its discussion of the dispatch sector to operators using 800 MHz SMR, 900 MHz SMR, and 220 MHz services. It should also be noted that this report's use of the term "dispatch" includes both CMRS providers (who offer customers interconnected service) and Private Mobile Radio Service ("PMRS") providers (who do not offer customers interconnected service, but do offer noninterconnected services). As a fourth topic, the  Xv4report also discusses the growing area of mobile data services.9 v 3 yO'ԍThe mobile wireless data industry encompasses a wide array of services ranging from data transmitted over oneway pagers to vehicle tracking from satellites to wireless Internet connections via portable computers or PDAs. Participants include both CMRS and nonCMRS providers, many of whom also offer services in the mobile telephone, paging/messaging, and dispatch sectors. However, because the sector is still evolving, the Commission believes it is appropriate to address mobile data services as a separate section.9 These four services are not as clearly delineated as their names imply. For example, some dispatch operators also offer mobile telephone services. In addition, many of the services discussed in the mobile data services section are actually provided by mobile telephone, paging/messaging, or dispatch operators who are leveraging those assets to enter the growing market for wireless data services. Therefore, while these product categories are used to provide structure for this wireless report, the Commission's view of operators is not limited by the categories in which this report places them. B. Status of Competition Several sectors of the CMRS industry have seen increased competition since the release of the  Xb4Third Report. In the mobile telephony sector, broadband PCS and digital SMR operators have continued to aggressively deploy their networks. While these efforts have not resulted"Mh 0*%%88"  X4in bringing competition to as many new markets as last year, $3 yOy'ԍWhenever possible, this report uses the most up to date information available to the Commission. Consequently, not all of the report's information is as of the same date. Whenever the report makes a  {O 'comparison to figures from "last year" or the Third Report, it is referring to whatever comparable information  {O'was available at the time of the release of the Third Report. they have resulted in improved coverage and increased competition in areas where some level of competition had previously existed. The paging/messaging market continues to be highly competitive and paging carriers continue to face competition from an increasing number of operators in other wireless sectors.  X4As stated in the Third Report, the completion of the 800 MHz SMR and 220 MHz spectrum auctions and the deployment of digital technology have led to a restructuring of the dispatch sector. Consequently, at this time, performing a meaningful competitive assessment would be difficult at best. Similarly, the mobile data sector remains in a developmental stage, making competitive assessments difficult. However, in the past year, the mobile data sector has seen no shortage of companies announcing plans to offer a wide variety of new products and services in the coming months and years. C. Industry Development During the 1990s, one of the dominant transformations in the telecommunications industry and in society in general has been the rise of wireless communications, bringing the benefits of mobility to an everincreasing segment of the country. The information available in the  X{4year since the release of the Third Report shows that this trend is not abating. For example, the mobile share of the telecommunications industry continues to rise, with mobile services  XO4accounting for 14.3 percent O3 yO'ԍAll of the data in this report are taken from publicly available sources. These sources include: trade associations, securities analysts, company releases, filings with the Securities and Exchange Commission, newspaper and periodical articles, and certain materials made available to the Commission that were prepared by research companies and consultants that study various aspects of the wireless industry. The accuracy of the data from these materials, however, was not independently verified by the Commission. The inclusion of these data in this report does not constitute a representation or warranty by the Commission of their accuracy or completeness. of the industry's 1997 revenues, $O, 3 yO,'ԍFederal Communications Commission, Common Carrier Bureau, Industry Analysis Division,  {O'Telecommunications Industry Revenue: 1997, Tbl. 2 (Telecommunications Industry Revenue by Service) ( Nov.  {O'1998). The figures of 1996 have changed from those reported in the Third Report due to changes in the reporting methodology used by the Common Carrier Bureau. an increase over the 1996 figure of 12.2 percent of industry revenues. This increase is the result of steadily increasing subscriber penetration by mobile services. By the end of 1998, the combined domestic subscribership of the three established CMRS products mentioned above had grown to over"  0*%%88L"  X4126 million units, 3 yOy'ԍIt is likely that there is some amount of overlap in subscribership between these three services. This figure is the sum of the subscribership figures for mobile telephony (taken from Appendix B), paging/messaging (equaling the average of the subscribership figures cited in the Paging/Messaging section), and dispatch (taken from Appendix D). a 17 percent increase over domestic subscribership in 1997. In 1998, the  X4CMRS industry added over 18 million new subscribers for the fourth consecutive year.x3 {OJ'ԍAs compared with the figures from Third Report, FCC Rcd at 19750.x  X4Mobile Telephony. Since the release of the Third Report, the mobile telephony sector of CMRS experienced another year of strong growth and competitive development. In the twelve months ending December 1998, the mobile telephony sector generated over $33 billion  Xx4in revenues,WxB3 {Ok 'ԍSee Appendix B, Table 1, p. B2.W increased subscribership from 55 million to 69.2 million,:x3 {O'ԍId.: and produced a  Xa4national penetration rate of nearly 26 percent.&af 3 yOx'ԍThe penetration rate is calculated by dividing total subscribers by the country's total population. The 26  {O@'percent figure is based on a 1998 United States population estimate of 269.3 million. See Dennis Leibowitz et  {O 'al, The Wireless Communications Industry, Donaldson, Lufkin & Jenrette, Winter 1998/1999, at 18. ("DLJ  {O'Report") In addition, new entrant wireless providers;XaT 3 yOf'ԍFor the purposes of this analysis, the new entrants in each mobile telephone market are defined as being either operators using broadband PCS spectrum, or Nextel Communications, Inc. ("Nextel") in the areas where it has launched its digital mobile telephone service.; have continued to deploy their networks. While the new entrant network buildout and coverage has not caught up to that of cellular, there are now at least five mobile telephone  X 4operators in each of the 35 largest Basic Trading Areasx t3 yOA'ԍBasic Trading Areas ("BTAs") are Material Copyright (c) 1992 Rand McNally & Company. Rights granted pursuant to a license from Rand McNally & Company through an arrangement with the Personal Communications Industry Association. BTAs are geographic areas drawn based on the counties in which residents of a given BTA make the bulk of their shopping goods purchases. Rand McNally's BTA specification contains 487 geographic areas covering the 50 states and the District of Columbia. For its spectrum auctions, the Commission added additional BTAlike areas for: American Samoa; Guam; Northern Mariana Islands; San Juan, Puerto Rico; MayagGez/Aguadilla-Ponce, Puerto Rico; and the United States Virgin Islands. ("BTAs") and at least three mobile  X 4telephone providers in 97 of the 100 largest BTAs in the continental United States.$ 3 {Oj"'ԍSee Appendix H, Map 1, at H2. These figures assume that both cellular telephone operators have coverage in some part of all of these BTAs. This assumption is based on a Commission analysis of its cellular telephone tower database. However, this does not mean that the cellular operators necessarily have complete  {O$'geographic coverage in BTAs. See Third Report Appendixes, at H2. Finally," 0*%%88B " because of growing competition in the marketplace, it appears that the average price of  X4mobile telephone service has fallen substantially during the year since the Third Report,  X4continuing the trend of the last several years.v3 {OM'ԍSee Section PRICESII.A.1.d for a detailed discussion.v  X4Paging/Messaging. While the paging/messaging sector has continued to grow since the  X4release of the Third Report, the industry is in the process of restructuring by moving away from a "subscriber growth at any cost" strategy and toward improved financial performance. In 1998, several analysts estimated that the number of pagers in service range from 50.5 to  XN454.2 million units, as compared to 48.2 million in 1997.UNZ3 {OY 'ԍSee Section  S&PII.B .U Some of the effects of this focus on improving operating results can be seen by comparing subscriber growth with revenue growth. One analyst estimates that total 1998 paging revenues will increase by nearly 20  X 4percent compared to 1997, almost double the growth rate of subscribers.N 3 yO'ԍAppendix C, Table 1, p. C2. N Paging carriers are attempting to enhance their operating results by offering advanced messaging services with narrowband PCS spectrum, as well as by offering valueadded services over traditional oneway pagers.  X4Dispatch. The past year has seen a continuation of the trends discussed in the Third Report. Once again, dispatch subscribership grew by half, and Nextel Communications, Inc. ("Nextel") converted systems used for analog dispatch services to higher priced digital mobile telephony services. In addition, the Commission completed auctions of 220 MHz and the upper bands of the 800 MHz SMR spectrum which may provide new competition in the traditional dispatch market.  X4Mobile Data. The mobile data sector remains in a developmental stage, making competitive assessments difficult. However, in the past year, the mobile data sector has seen numerous companies announcing plans to offer a wide variety of new products and services in the coming months and years.  X' II. THE CMRS INDUSTRY A. Mobile Telephony For the purposes of this report, the mobile telephone sector includes all operators that offer commercially available interconnected mobile phone services. These operators provide access to the public switched telephone network ("PSTN") via mobile communication devices"|0*%%88" employing radiowave technology to transmit calls. Currently, this sector is dominated by providers using three types of FCC licenses: cellular radiotelephone, broadband PCS, and  X4SMR.3 yOK'ԍAs codified at 47 C.F.R.  22.900, 47 C.F.R.  24.200, and 47 C.F.R.  90.601, respectively. While all three of these FCC services were created at different times and for different purposes, they now are used to offer mobile telephone services that may be interchangeable for many users. Furthermore, while providers use different marketing techniques and different technologies to differentiate themselves to the public, they are offering essentially the same product mobile telephone services. The discussion below begins with an overview of the mobile telephone market, which is divided into sections for cellular operators, broadband PCS operators, the digital SMR provider Nextel Communications, other SMR operators, resellers, and satellite providers. ` ` 1. Mobile Telephone Overview and Analysis ` `  a. Mobile Telephone Sector Structure and Performance In 1998, subscriber growth in the mobile telephone sector continued the trend of the past  Xy4several years. As of December 1998, the market had over 69.2 million subscribers,WyX3 {O'ԍSee Appendix B, Table 1, p. B2.W an  Xb4increase of 25 percent over the 55.3 million subscribers reported in the Third Report for December 1997. In numerical terms, this is the largest 12month increase in the history of the mobile telephone sector. This level of subscribership translates into nearly 26 percent of the country's population. It is also interesting to note that the growth rate of the sector's netnew subscribers increased significantly. In 1996 and 1997, the number of new subscribers increased by less than ten percent each year. However, the 13.9 million new subscribers added in 1998 was 23 percent more than the 11.3 million subscribers added in 1997. In fact, 1998 was the first year new subscribers increased by more than 20 percent since 1994. The financial performance of the mobile telephone sector continued to be strong. In 1998,  XP4the mobile telephone sector's annual total service revenue was over $33 billion,:P3 {O 'ԍId.: an increase of 20.5 percent over the twelve months ending December 1997. It is also the first time in the history of the mobile telephone sector that annual service revenues exceeded $30 billion.  X4As the Commission found in the Third Report, the average monthly wireless telephone bill"|0*%%88" has continued to decline, reflecting increasing penetration in market sectors with lower  X4average usage and, consequently, lower monthly bills.Y3 {Ob'ԍThird Report, 13 FCC Rcd at 19765.Y While the price plans aimed at these market segments have higher per minute rates than plans aimed at high usage customers, their lower monthly flatrate charges do serve to expand the number of consumers who can afford to subscribe to mobile services. The average monthly bill (often referred to as average revenue per unit, or "ARPU") declined from $42.78 in December 1997 to $39.43 in  Xv4December 1998.WvZ3 {O 'ԍSee Appendix B, Table 1, p. B2.W However, as was reported in the Third Report,Yv3 {O 'ԍThird Report, 13 FCC Rcd at 19765.Y monthly bills associated  Xa4with digital mobile telephone services are higher than the market average.OZa~3 yO 'ԍFor example, Bell Atlantic Corp. has reported that its digital cellular subscribers are generating ARPUs  {OX'of over $80 per month. Bell Atlantic Corp., DigitalChoice/SingleRate, (visited Mar. 30, 1999) .O In terms of licenses and potential coverage, the structure of the mobile telephone industry has  X 4not changed significantly since the release of the Third Report. Except for movement by SBC Communications, Inc. ("SBC") and ALLTEL, Corp. ("ALLTEL"), the nation's current  X 4list of top mobile telephone operatorsW 3 {OA'ԍSee Appendix B, Table 3, p. B4.W by population coverage looks similar to the list  X 4completed last year.[ 2 3 {O'ԍSee Third Report Appendixes, at B5.[ At the top are three carriers with national footprints,! 3 yON'ԍ"Footprint" is an industry term of art referring to the total geographic area in which a wireless provider can offer services. followed by carriers with larger regional footprints, then carriers with smaller service areas or local footprints. However, a list of the mobile telephone industry's top 25 operators by subscribership  Xf4demonstrates the rising importance of noncellular mobile telephone operators.W"f3 {O3 'ԍSee Appendix B, Table 4, p. B6.W At the end of 1997, approximately seven percent of the subscribers on the top 25 list were on broadband PCS or digital SMR networks. By the end of 1998, this figure had doubled to 14 percent. In addition, at the end of 1997, there were only three pure broadband PCS or digital SMR operators in the top 25. At the end of 1998, there were six, including two in the top 10. " "0*%%88"ԌWhile the noncellular mobile telephone operators have made significant inroads into the mobile telephone sector, they are still a relatively small portion of the whole sector. According to one estimate, at the end of 1998, cellular operators had approximately 86 percent of mobile telephone subscribers, while broadband PCS had nearly ten percent and  X4digital SMR had more than four percent.M#3 {O'ԍSee DLJ Report, at 18.M However, it is important to note that there are specific geographic markets in which the noncellular operators have achieved market share greater than the national average. For example, according to one analyst, there are more than half a dozen markets in which broadband PCS and digital SMR operators have combined  XH4market share of more than 25 percent.$zHZ3 {OS 'ԍSee The Personal Communications Industry Association's Reply Comments, at Attachment A, p. 4, 1998 Biennial Regulatory ReviewSpectrum Aggregation Limits for Wireless Telecommunications Carriers, WT Docket No. 98205; Cellular Telecommunications Industry Association's Petition for Forbearance From the 45 MHz CMRS Spectrum Cap; Amendment of Parts 20 and 24 of the Commission's Rules Broadband PCS Competitive Bidding and the Commercial Mobile Radio Service Spectrum Cap, WT Docket No. 9659; Implementation of Sections 3(n) and 332 of the Communications Act Regulatory Treatment of Mobile Services, GN Docket No. 93252.  X14 ` `  b.3G Major Operational Trends  X 4Rise of Digital. It is possible that 1998 will become known in the mobile telephone industry as the year that digital technology began to take precedence over analog systems. During 1998, the number of customers subscribing to digital services increased by 160 percent from  X 4approximately 7.7 million to 20 million.W% 3 {O'ԍSee Appendix B, Table 5, p. B7.W At the same time, there was only a 3.4 percent increase in the number of analog subscribers. At the end of 1998, digital subscribers made up 29 percent of the industry total, up from 14 percent at the end of 1997.  XM4During the year, all four of the competing digital technologies&M. 3 yO,'ԍThe four technologies are: Code Division Multiple Access ("CDMA"), Global System Mobile Communications ("GSM"), integrated Digital Enhanced Network ("iDEN"), and Time Division Multiple Access ("TDMA"). There is also a fifth technology called Personal Access Communications System ("PACS"). 21st Century Telesis, Inc. is planning to use PACS with its C, D, and F block broadband PCS licenses. PACS is a lowpower microcell technology which its proponents believe can be installed at a lower cost than the other,  {O!'highpower, broadband PCS technologies. See 21st Century Telesis II Inc., Form 10K, Sep. 30, 1998. at least doubled their subscribership. At the end of 1998, TDMA was the most used technology, with  X4approximately eight million subscribers.W'3 {Ox$'ԍSee Appendix B, Table 5, p. B7.W Next largest was CDMA with over six million" :'0*%%88" subscribers, followed by iDEN and GSM with 2.9 million and 2.7 million subscribers respectively. It is also worth noting that CDMA subscribership increased almost 360 percent during the year, compared to the 111 percent increase in TDMA subscribership. The broadband PCS operator Sprint PCS added 836,000 CDMA customers in the fourth quarter of  X41998 alone.(3 {O'ԍSprint Announces Record Fourth Quarter, Yearly Results, News Release, Sprint Corp., Feb. 2, 1999.  Xv4DigitalOneRate. The most dramatic change in the mobile telephone industry since the  Xa4release of the Third Report has been the widespread adoption of what are often referred to as "digitalonerate" ("DOR") price plans, named after the first such plan marketed by AT&T Corp. ("AT&T"). While the details of various operators' plans differ, they generally include some combination of the following: bundles of large quantities of minutes for a fixed monthly rate that translated into at a low perminute price; no long distance charges when used on the  X 4operator's network; no roaming charges when used on the operator's network;) Z3 yO'ԍIn other words, the user's home area for phone use is expanded to include the operator's entire network. reduced roaming charges when off the operator's network; and, in some cases, no extra roaming charges anywhere.  X4The first prominent DOR plan was introduced by AT&T in May 1998.*3 {O/'ԍSee AT&T Launches First National One-Rate Wireless Service Plan, News Release, AT&T Corp., May7, 1998. Under AT&T's plan, customers purchase one of three large bundles of minutes: 600 minutes for $89.99; 1,000  Xf4minutes for $119.99; or 1,400 minutes for $149.99.:+fD3 {O['ԍId.: For these prices, customers do not have long distance or roaming charges anywhere in the country, regardless of whether the calls are placed on or off AT&T's network. All calls would cost between $0.10 and $0.15 per minute, depending on the plan, regardless of where they were placed (users must pay a higher rate for any additional minutes beyond those provided with the plan). Since most roaming agreements cost operators more than $0.10 per minute, AT&T would absorb any roaming charges above  X4that point.,3 {Oc'ԍCynthia M. Motz and Robert J. Hordon, Wireless Update: AT&T's New Digital One Rate, Equity Research Americas, Credit Suisse First Boston, May 11, 1998, at 1. Since AT&T's announcement, a large number of the major mobile telephone operators, such as Sprint PCS, Bell Atlantic Corp. ("Bell Atlantic"), and AirTouch Communications, Inc. ("AirTouch"), have initiated plans of their own that are all variations on AT&T's original" 0 ,0*%%88"  X4concept, either on a nationwide or regional basis.-3 {Oy'ԍThe Yankee Group, YearEnd 1998 Wireless Industry Update: The Impact of AllInclusive Rates,  yOC'Wireless/Mobile Communications Global, Report, Vol. 2, No. 46, Dec. 1998, at 8. During the second half of 1998, consumer response to DOR plans appears to have been strong. For example, AT&T reported that it added 850,000 DOR subscribers by the end of  X4the yearT."3 {Ow'ԍAT&T's Fourth Quarter Operational Profits Were $1.00 Per Share, an Increase of 45 Percent, News Release, AT&T Corp., Jan. 25, 1999. At the end of the third quarter of 1998, AT&T reported that over two {O 'thirds of customers signing up for the DOR plan were new subscribers to AT&T mobile telephone services. See  {O 'AT&T Corp., AT&T Earnings Commentary, Third Quarter Operational Earnings Were $1.00 Per Share, Up  {O '67%, Jan. 25, 1999, at 6. ("AT&T Third Quarter")T and continues to add 100,000 new DOR subscribers per month.P/3 {O/ 'ԍAT&T Third Quarter, at 6.P AT&T also reported that during the 1998, minutesofuse by customers in its cellular license areas had  Xv4increased by 29.5 percent over 1997.c0vl 3 yO'ԍAT&T Corp, 1998 Annual Report (1999), at 40.c In addition, Bell Atlantic added nearly 400,000 digital subscribers during the fourth quarter of 1998 and attributed its growth to these DORtype  XH4plans.1H 3 {O'ԍStrong Telecom and Wireless Volumes Drive DoubleDigit Bell Atlantic Earnings Growth, News Release, Bell Atlantic Corp., Jan. 27, 1999.  X 4Wireless/Wireline Competition: Wireless Attacking the Second Line. In the past year, mobile telephone carriers, and most often broadband PCS operators, have begun to use a variety of methods to target homes with wirelinebased second telephone lines. This strategy is especially prevalent among broadband PCS operators with licenses in rural or smaller urban areas. Since broadband PCS spectrum does not propagate as far as cellular spectrum, broadband PCS operators must spend more capital than cellular operators to cover the same  X4area.2V 3 yO'ԍMultiMedia Telecommunications Association, 1998 MultiMedia Telecommunications Market Review  yOa'and Forecast (1998), at 135. To contain costs, some broadband PCS operators in rural areas limit their coverage to urban centers and the roads connecting them, and impose roaming fees on users who travel outside of these areas. This coverage differential has pushed broadband PCS operators in these markets to find additional ways to promote their wireless services. Because the digital technology used by broadband PCS systems can replicate many of the features of wireline phones and analog cellular networks cannot, many broadband PCS operators in these areas are promoting their services as replacements for second telephone lines in homes or businesses. " 20*%%88"ԌOne of the first broadband PCS operators to attempt this strategy was WirelessNorth, an operator with licenses in North Dakota, South Dakota, and Minnesota. According to press reports, WirelessNorth felt that the low number of POPs in its mostly rural areas meant that it  X4could not compete with analog cellular as a strictly mobile service.33 {O4'ԍKarissa Todd, The Road to Local Competition, Wireless Review, Nov. 30, 1998, available at 1998 WL 8999406. Instead, it introduced a  X4price plan]4"3 {Ow'ԍSee Third Report, 13 FCC Rcd at 19777.] designed to compete with wireline providers for residential second telephone  X4lines.53 {O 'ԍKarissa Todd, The Road to Local Competition, Wireless Review, Nov. 30, 1998, available at 1998 WL 8999406. As of November 1998, 40 percent of WirelessNorth's customers used this plan.:63 {OL 'ԍId.: Other rural broadband PCS operators base their marketing on a similar theme. For example, Panhandle Telecommunications Systems, Inc., in Liberal, Kansas, describes its service as enhancing convenience near town, as well as providing a second line when a user is online  X14with a computer.713 {O'ԍPanhandle Telecommunications Systems, Inc. , What Is genuine PCS? (visited Jan. 24, 1999) . In Montana, Blackfoot Communications promotes its service as "the new  X 4cordless, goanywhere Digital PCS service."8 3 {O'ԍBlackfoot Communications, Digital PCS Service (visited Jan. 24, 1999) . There are also examples of operators starting to combine special pricing plans with marketing plans to further appeal to the second line market. These pricing plans are similar to the DOR plans discussed above in that they have large, or unlimited bundles of minutes, but they do not have the reduced roaming and large home area features. AT&T has been running a trial  X4for such a plan in Plano, Texas with approximately 100 participants.9T 3 {O'ԍLinda J. Mutschler and Paul Wuh, The Next Generation III, Comment United States Telecommunications/Cellular, Merrill Lynch & Co., Mar. 11, 1999, at 3. In this trial, customers can place and receive an unlimited number of calls in Plano and Dallas for only $39.99 per  Xb4month.::b3 {O!'ԍId.: For this price, customers also receive 30 free minutes for usage outside of Plano.;b@3 {OS#'ԍId. There is also a plan which includes 300 minutes outside of Plano for $59.99 per month. One operator, Chase Telecommunications Holdings, Inc. ("Chase"), has taken this concept out of the trial stage and into active use. Chase has started offering unlimited local calls in"4 ;0*%%88U"  X4Chattanooga, Tennessee for $29.99 per month.<3 {Oy'ԍLeap Wireless International Launches Cricket Service Introducing 'Comfortable Wireless' for all  {OC'Users, News Release, Leap Wireless International, Inc., Mar. 17, 1999. Customers using this plan cannot roam outside of Chattanooga and must use a prepaid calling card for long distance calls. Some larger broadband PCS licensees have gone a step further by acquiring broadband PCS licenses in addition to their cellular holdings, specifically to create services that would act as an addon to existing landline services. For example, Century Telephone Enterprises, Inc. ("Century") acquired D and E block broadband PCS licenses in areas where it already had cellular licenses. This overlap allowed it to offer two types of wireless services. Century  XH4uses the traditional cellular network for its high mobility customers.=H$3 {O 'ԍNancy Gohring, The Zone Hits Home: CenturyTel Seeks to Untether Residential Users, Telephony,  {O 'Aug.24, 1998, available in 1998 WL 6611643. For residential customers, it is using broadband PCS licenses to create a service called "The Zone Phone,"  X 4which it describes as "the perfect second line."> 3 {OK'ԍCentury Telephone Enterprises, Inc. , What is the Zone Phone? (visited Feb. 23, 1999) . To date, Century has launched this service  X 4in Grand Rapids, Kalamazoo, and Lansing, Michigan.? 3 {O'ԍCentury Telephone Enterprises, Inc., Where Can I Buy the Zone Phone? (visited Jun. 15, 1999) . The coverage is limited to areas around each of these cities and allows customers to use the phone in their homes, neighborhoods, and around town. For a price of $39.99 per month this plan offers users  X 41,000 minutes of use while in these urban areas.@ 4 3 {O'ԍCentury Telephone Enterprises, Inc., What is the Zone Phone? (visited Feb. 23, 1999) . The handsets have the ability to roam on the cellular network, at a higher price, when outside of the designated Zone Phone areas. US WEST, Inc. ("US WEST") is implementing a similar strategy. However, its new service is designed to enhance its own wireline service, while Century's is trying to compete with the wireline services of other companies. While it was selling its cellularbased operations to AirTouch, USWEST was deploying a broadband PCSbased mobile telephone service called  X4Advanced PCS./A\ 3 {O\!'ԍUS WEST first launched Advanced PCS in Denver in September of 1997. See U S WEST Delivers  {O&"'First-In-The-Nation Service Giving Customers The Convenience Of Home Or Office Phone "To-Go," News Release, US WEST, Inc., Sep. 23, 1997./ US WEST designed its network so that its wireline customers could"A0*%%88"  X4integrate wireless service into a single package, marketing it as a "home phone to go."B3 {Oy'ԍJoanna Bean, Sprint PCS Dials Into Colorado Springs, Colo., Wireless Market, KnightRidder Tribune  {OC'Business News: The Gazette, Colorado Springs, Colo., Nov. 20, 1998, available in 1998 WL 16349555. Advanced PCS allows customers to have the same telephone number and voice mail box for  X4both a residence and a mobile handset, and have the usage of both charged on the same bill.C$3 {O'ԍUS WEST, Inc., Life's Better When You're in Control (visited Jan. 24, 1999) .  X4Consolidation. 1998 saw a continuation of the process of license consolidation in the mobile  X4telephone sector discussed in the Third Report.ZD~3 {O 'ԍSee Third Report, FCC Rcd at 19766.Z In 1998, three of 1997's top 25 operators in  Xz4subscribership consolidated with other carriers.Ez3 {O;'ԍAirTouch's merger with US West Media Group's domestic cellular interests (See Airtouch and  {O'MediaOne Group Complete $6 Billion Merger, News Release, AirTouch Communications Inc., Apr. 6, 1998);  {O'ALLTEL merger with 360 Communications Co. (See ALLTEL, 360 Complete $6 Billion Merger, News Release, ALLTEL Corp., Jul. 1, 1998); SBC's acquisition of Southern New England Telecommunications Corp.  {Oa'(See SBC Communications Completes Southern New England Telecommunications Merger, News Release, SBC Communications Inc., Oct. 26, 1998). Furthermore, if deals announced since the  Xc4release of the Third Report are completed, five additional operators that were in the top 25 at  XN4the end of 1998 will be consolidated into other carriers.FNN 3 {O'ԍALLTEL merger with Aliant Communications, Inc. (See ALLTEL Announces Merger Agreement With  {OY'Aliant Communications Inc., News Release, ALLTEL Corp., Dec. 18, 1998); SBC's merger with Ameritech Corp.  {O#'and acquisition of Comcast Corp.'s cellular operations (See SBC Communications and Ameritech to Merge, News  {O'Release, SBC Communications, Inc., May 11, 1998 and SBC Communications Announces Plans To Acquire  {O'Comcast Cellular Corporation, News Release, SBC Communications, Inc., Jan. 20, 1999); Bell Atlantic Corp.'s  {O'merger with GTE Corp. (See Bell Atlantic and GTE Agree To Merge, News Release, Bell Atlantic Corp., Jul. 28,  {OK'1998); AT&T's merger with Vanguard Cellular Systems, Inc. (See AT&T acquires Vanguard Cellular Systems, News Release, AT&T Corp., May, 3, 1999). One of the driving forces behind many of these consolidations has been the desire of large regional carriers to enhance their ability to compete effectively with national operators like  X 4AT&T, Sprint PCS, and Nextel. As was discussed in the Third Report, operators with larger footprints can achieve economies of scale and increased efficiencies compared to operators  X 4with smaller footprints.]G 3 {O"'ԍSee Third Report, 13 FCC Rcd at 19766.] The need for this increased size was exacerbated in the past year by the introduction and success of AT&T's DOR plan and, in particular, its lowcost roaming feature. According to analysts, it can be significantly more expensive for regional operators"8G0*%%88"  X4to provide customers with this feature than for national operators.H3 {Oy'ԍLinda Runyon Mutschler and Paul Wuh, The Impact of Digital One Rate, Equity Research, Merrill Lynch & Co., Nov. 12, 1998, at 17. One obvious way for an operator to reduce roaming costs is by acquiring licenses covering as much of the country as possible.  X4In addition to the domestic consolidation activity, the year since the release of the Third  X4Report has seen an increased interest by foreign companies in domestic mobile telephone carriers. This interest has taken the form of investments, mergers, and potential joint ventures. The most prominent of these actions has been Vodafone Group Plc's proposed merger with AirTouch, that, if completed, will create a company covering nearly one billion  X54people in 23 countries.I5"3 {O 'ԍSee Vodafone and Airtouch to Merge, News Release, Airtouch Communications, Inc., Jan. 15, 1999. Aerial Communications, Inc. was the recipient of a $200 million  X 4investment by the Finnish telecommunications company, Sonera Ltd.J 3 {O'ԍSee Sonera Ltd., Completes $200 Million Investment in Aerial Communications Inc., News Release, Aerial Communications, Inc., Sep. 8, 1998.  X 4Prepaid. The use of prepaid billing plans has been on the rise in the mobile telephone sector. Under these plans, customers purchase a handset and a specific number of minutes. When those minutes have been used, the phone will no longer function until the customer purchases  X 4additional minutes. As was discussed in the Third Report, operators hope to use these plans to gain access to a whole new group of potential customers who lack the proper credit  X4rating.]K3 {O@'ԍSee Third Report, 13 FCC Rcd at 19775.] Operators also can use prepaid service to market to other groups like the budget conscious business and residential users and others who want to limit mobile telephone  XS4spending (e.g., parents who are purchasing mobile phones for their children). Without the need for credit checks, operators can also greatly expand their distribution channels beyond their retail storefronts. The use of prepaid plans has yet to have the dramatic effect in the overall United States  X4market that it appears to have had in Europe.L3 {O3 'ԍLinda J. Mutschler and Paul Wuh, The Next Generation III, Comment United States Telecommunications/Cellular, Merrill Lynch & Co., Mar. 11, 1999, at 3. However, a number of the regional broadband PCS operators have reported that prepaid users are having an increasing impact on their operations. For example, Powertel, Inc. ("Powertel") reported that at the end of 1998, almost 14 percent of its broadband PCS subscribers were using prepaid plans. Moreover, Powertel subsequently reported that at the end of the first quarter of 1999 27,000 of its 43,000 net new" L0*%%88"  X4subscribers were on prepaid plans,M3 {Oy'ԍPowertel, Inc. Announces First Quarter 1999 Financial Results, News Release, Powertel, Inc., Apr. 29, 1999. raising its percentage of prepaid customers to 20 percent. Similarly, Aerial Communications, Inc. reported that 21 percent of its customers at the end of  X4the first quarter of 1999 were on prepaid plansN"3 {O'ԍAerial Communications Reports Strong First Quarter Operational Improvements, Record Customer  {Oo'Ratings and Lower Costs, News Release, Aerial Communications, Inc., Apr. 15, 1999.  X43G. International Mobile Telecommunications-2000 ("IMT-2000") is an initiative of the International Telecommunication Union ("ITU") seeking to integrate the various satellite and terrestrial wireless systems, both fixed and mobile, currently being deployed and developed under a family of standards to promote global service capabilities and interoperability after  XJ4the year 2000. These systems are known as third generation or 3G systems.4OXJ~3 yOy'ԍThe first generation of this technology was the original analog cellular networks first deployed in the early 1980's. The second generation came in the form of the digital cellular and broadband PCS networks that operator's began to deploy in the mid1990's.4 In addition to  X34providing the capability for higher wireless data rates by 3G systems,P&33 yO'ԍThe proposed standard calls for 144 kilobits per second at mobile speeds, 384 kilobits per second at  {OJ'pedestrian speeds, and 2 megabits per second in fixed locations. See The Personal Communications Industry  {O'Association, Market Demand Forecast for Terrestrial Third Generation (IMT-2000) Services for the Personal  {O'Communications Industry Association (visited Apr. 28, 1999) . IMT2000 also articulates several key goals and objectives upon which potential 3G standards will be evaluated. Some of the key service objectives include: enhanced voice quality, ubiquitous coverage, service provision at a reasonable prices, increased network efficiency, new voice and data capabilities, and an orderly evolution path from second generation to 3G systems to  X 4protect investments in second generation system investments.:Q 3 {O'ԍId.: In 1998, proposals for IMT2000 air interfaces were submitted to the ITU. The ten terrestrial proposals were primarily based on existing TDMA and CDMA technologies, thereby facilitating evolution of second generation systems. In early 1999, based on input from the global wireless community, the ITU recommended that IMT2000 should be developed to encompass both TDMA and CDMA. The ITU also recommended that multiple operating modes of TDMA and CDMA should be supported to allow easy evolution of second generation systems, including the three systems used in the U.S. for PCS and cellular, and to meet varying marketplace needs. One of the important IMT2000 issues requiring resolution was negotiations to harmonize two"Q0*%%88X" of the more prominent proposed CDMA standards, widebandCDMA and cdma2000. In March 1999, the two primary supporters behind these two proposals reached an agreement settling a dispute over intellectual property rights, making it more likely the two standards  X4could be combined into a single, multimode standard.R3 {O4'ԍSee Ericsson and Qualcomm Reach Global CDMA Resolution, News Release, LM Ericsson and  yO'Qualcomm Inc., Mar. 25, 1999. In June 1999, an Operators Harmonization Group ("OHG"), consisting of major service providers from the U.S., Europe, China, Japan, Korea, Canada, and elsewhere, developed a technical framework for combining  Xv4these proposals.Sv"3 {OI 'ԍWireless Operators Announce Agreement on Globally Harmonized Third- Generation (G3G) Code  {O 'Division Multiple Access Standard, News Release, Operators Harmonization Group, June 8, 1999. The OHG framework outlines further standards work that must be completed to enable terminals to operate in different CDMA modes efficiently. This technical work and international spectrum planning are important elements in having 3G systems provide global roaming and reduce the cost for multimode handsets. The ITU has endorsed this framework, and encouraged standards developers throughout the world to develop the necessary standards by the end of 1999. The ITU also intends to adopt its final recommendations on the radio aspects of IMT2000 by the end of 1999. While there are currently no 3G networks in commercial deployment, hardware manufacturers and service providers have been engaged in several trials of various 3G technologies. For example, Sprint Corp. and Northern Telecom recently performed a demonstration of  Xy4cdma2000 technologyTy~3 {O'ԍSee Sprint, Nortel Networks Demonstrate High-Speed Wireless Internet, News Release, Northern Telecom Limited, Apr. 28, 1999. and LM Ericsson has reportedly been building demo systems using  Xb4wideband CDMA.Ub3 {O'ԍJennifer B. Malapitan, Pace-Setting 3G Wireless, Here Sooner With W-CDMA, Metropolitan Computer  {O'Times, Nov. 5, 1998, available in 1998 WL 20718488. ` `  c. Market Entry by New Competitors To track the progress of new operators entering mobile telephone markets, the Commission has compiled a list of Basic Trading Areas ("BTAs") with some level of coverage by new  X4mobile telephone providers.FV4 3 yO!'ԍFor the purposes of this analysis, the new entrants are defined as being either operators using broadband  {O"'PCS spectrum or Nextel in the areas where it has launched its digital SMR product. As with the Third Report, Nextel's digital product is included as the sole SMR competitor because the Commission does not possess any  {O$'information on where other SMR operators are competing with cellular and broadband PCS operators. See Third  {O$'Report, 13 FCC Rcd at 19768.F This list is based on publiclyavailable sources of information"V0*%%88T" released by the operators such as news releases, filings made with the Securities and Exchange Commission, and coverage maps available on operators' Internet sites. Data from these sources were used because the Commission's rules do not require new entrant licensees to file buildout information with the Commission. There are several important caveats to note when using these data. First, to be considered as having "coverage," only a portion of a BTA needs to be covered. Second, multiple operators shown in the same BTA are not necessarily providing service to the same areas. Consequently, some of the BTAs included in this analysis have only a small amount of coverage from a particular provider, possibly resulting from the buildout of a neighboring  X 4market.>W 3 yO 'ԍThe Commission's buildout rules for geographic area licenses do not require operators to deploy networks such that the entire geographic area of a specific license receives coverage. For example, the construction requirements for 30 MHz broadband PCS licenses (blocks A, B, and C) state that an operator's network must serve an area containing at least one-third of the license area's population within five years of the  {O'license being granted and two-thirds of the population within ten years. See 47 C.F.R.  24.203(a). Similarly, the construction requirements for 10 MHz broadband PCS licenses (blocks D, E, and F) state that an operator must cover one-quarter of a license area's population, or provide "substantial service," within five years of being  {O 'licensed. See 47 C.F.R.  24.203(b). The details concerning exactly which geographic areas or portions of the population should be covered to meet these requirements are left to the operators. In addition, decisions about whether to increase coverage above these requirements are left to the operators. For information on the buildout  {Og'requirements for cellular licenses, see 47 C.F.R.  22.946,  22.947,  22.949, and  22.951.> Third, the POPs figures in this analysis include all of the POPs in a BTA with coverage. Fourth, because of the third point, this analysis overstates the total coverage in terms of both geographic areas and populations covered. Fifth, all population figures are based on the 1990 census.  X 4Since the Third Report, new entrants have made significant progress in building out their networks. To date, over 335 BTAs, containing over 241 million POPs, have at least one new  X{4entrant offering service in some portion of the BTA.XX{. 3 {OZ'ԍSee Appendix B, Table 2A, p. B3.X This coverage represents more than 95percent of the nation's total POPs. In gross terms, this increase is not a tremendous  XM4change from the level of deployment described in the Third Report.[YM 3 {O'ԍSee Third Report Appendixes, at B4.[ The total number of BTAs increased by 23 percent, but most of these BTAs have smaller populations. Hence, the total POPs in the covered BTAs increased by only ten percent. However, operators have added significantly to the levels of competition in BTAs where other new entrants already were in service. Last year, there were no BTAs with five new entrants"R Y0*%%88-"  X4in service. This year, there are eight BTAs with five new entrants.Z3 yOy'ԍThe eight BTAs are Phoenix and Tucson, Arizona; Gainesville, Jacksonville, Tampa, and Lakeland, Florida; and Seattle and Bremerton, Washington. When the existing  X4incumbent cellular operators are taken into account,[ 3 yO'ԍAs was mentioned in the Introduction, this analysis assumes that both cellular operators have at least some coverage in all BTAs. the ten million people in these BTAs may have up to seven mobile telephone operators from which they can choose, assuming all  X4of the operators have full geographic coverage in each BTA. In addition, the number of areas with four new entrants increased from 13 BTAs, containing 25 million POPs, to 45 BTAs, containing 82 million POPs. Currently, BTAs containing approximately 74 percent of the population have at least five mobile telephone operators providing coverage in some portion  X_4of their area, up from 54 percent at the time of the Third Report.\H_x3 yO 'ԍIt important to reiterate that the actual total population served by these systems is certainly lower than these totalBTA figures imply. According to one recent estimate, 57 percent of the population was covered by  {O'two or more broadband PCS operators (which is roughly equivalent to five mobile telephone operators). See  {O'Paul Kagan Associates, Inc., PCS Markets and POPs, Wireless Market States, Oct. 31, 1998, at 14. It is also important to note that estimates of actual coverage vary considerably. For example, the above referenced study placed the broadband PCSbased Code Division Multiple Access coverage at 179 million people. However, a  {O<'more recent study by another analyst placed the same figure a much lower level, 97 million people. See CDMA  {O'Leads PCS Availability, News Release, The Strategis Group, Mar. 30, 1999. Driven by the desire to maximize the market of potential customers as quickly as possible, the new entrants have been concentrating their deployment efforts on the more populous geographic markets. To show this, the Commission has divided the 493 BTAs into four  X 4quartiles (groups of equal size) by their total populations.X] 3 {O''ԍSee Appendix B, Table 2B, p. B3.X Of the BTAs in the top quartile (the 123 most populated BTAs), 120 have one or more new entrants providing service (including 99 of the top 100). The second quartile (the next 123 most populated BTAs) has 101 BTAs with some coverage, and the bottom two quartiles have only 65 and 50 BTAs, respectively, with coverage. Thus, the most rural BTAs are the least likely to be experiencing competition from new entrants. ` `  d. PRICES  Price Competition(#  X4As the Commission observed in the Third Report, it is difficult to identify sources of  X 4information that track mobile telephone prices in a comprehensive manner.c^ 3 {O#'ԍSee Third Report, 13 FCC Rcd at 1976919770.c However, there are a number of reports and other data available indicating that the entrance of new"^0*%%88"  X4competitors into this market is continuing to reduce prices.c_3 {Oy'ԍSee Third Report, 13 FCC Rcd at 1976919770.c Because these studies use different methodologies and market samples, their findings vary and are only comparable in the broadest terms. Nevertheless, the available evidence, taken together, makes it clear that  X4the average price for mobile telephony has continued to fall substantially since the Third  X4Report in the last year, continuing the trend of the last several years. For example, according to one study comparing mobile telephone prices in the second quarter of 1998 with the second quarter of 1997, the average price per minute decreased by 18  XL4percent.`LZ3 {OW 'ԍYankee Group's Mobile Report Predicts Increased Usage, ARPU Stabilization, and Landline  {O! 'Displacement, News Release, The Yankee Group, Oct. 5, 1998. Included in this average were analog cellular price declines of 12 percent, digital  X54cellular price declines of 23 percent and broadband PCS price declines of 18 percent.:a53 {O'ԍId.: A subsequent study by the same analyst tracking price changes in the 25 largest markets between the second and third quarters of 1998 indicated that prices generally continued to  X 4decline over that period.b H3 {O'ԍSee The Yankee Group, YearEnd 1998 Wireless Industry Update: The Impact of AllInclusive Rates,  yO'Wireless/Mobile Communications Global, Report, Vol. 2, No. 46, Dec. 1998, at 5. The average price per minute of digital cellular plans declined by between 2.0 percent and 8.3 percent, depending on the number of minutes included with the  X 4plans.:c 3 {O'ԍId.: Likewise, broadband PCS prices declined by between 2.9 percent and 6.9 percent.:d 4 3 {O'ԍId.: At the same time, analog cellular prices were essentially unchanged, except for plans with  X4large bundles of minutes, which increased by 5.0 percent.:e 3 {O 'ԍId.: A report by another analyst that compared price changes between 1997 and 1998 had a slightly different view. According to this analyst, prices at lower usage levels (240 MOUs  X84and 430 MOUs) did not change significantly between 1997 and 1998.f\8X 3 {OA!'ԍDavid A. Freedman and Gregory H. Lundberg, Wireless Telephony: Untethered Stories & Stats 1998  {O "'Price Declines Less Jarring than 1997's, Equity Research Telecommunications, Bear, Sterns & Co., Feb. 1999, at 4. However, at the 600 MOU level, the median average price per minute declined by over 20 percent between 1997"!|f0*%%882"  X4and 1998, which reflects strong competition for highend customers.:g3 {Oy'ԍId.: While the most aggressive price competition has been occurring at the higher levels of usage, the past year has also seen continued price declines for customers with lower levels of monthly usage. For example, according to one analyst, at the usage level of 60 MOUs per month prices for digital cellular and broadband PCS decreased by two and three percent  Xv4between the second and third quarters of 1998.hvZ3 {O 'ԍSee The Yankee Group, YearEnd 1998 Wireless Industry Update: The Impact of AllInclusive Rates,  yOK 'Wireless/Mobile Communications Global, Report, Vol. 2, No. 46, Dec. 1998, at 3. Another analyst estimated that between 1997 and 1998, the average price at the 60 MOU usage level decreased by 11 to 15  XH4percent.&i\H3 {O 'ԍDavid A. Freedman and Gregory H. Lundberg, Wireless Telephony: Untethered Stories & Stats 1998  {Ow'Price Declines Less Jarring than 1997's, Equity Research Telecommunications, Bear, Sterns & Co., Feb. 1999, at 7 and 19.& One of the most visible signs of this competition is that the price per month of the entry level packages has dropped over the past few years, giving a wider segment of the population access to mobile telephone service. It is important to remember, the customers at this low usage level are still paying significantly more per minute than users at higher levels. For example, according to the first analyst mentioned in this paragraph, as of the third quarter of 1998, users at the 60 MOU level were paying two to three times more per minute than  X 4users at the 500 MOU level.j 3 {OG'ԍSee The Yankee Group, YearEnd 1998 Wireless Industry Update: The Impact of AllInclusive Rates,  yO'Wireless/Mobile Communications Global, Report, Vol. 2, No. 46, Dec. 1998, at 3. A new source of price information is the cellular telephone services component of the  Xy4Consumer Price Indexky2 3 yO\'ԍThe Consumer Price Index ("CPI") is a measure of the average change over time in the prices paid by urban consumers for a fixed market basket of consumer goods and services. The basket of goods includes over 200 categories including items such as food and beverages, housing, apparel, transportation, medical care, recreation, education, and communications. The CPI provides a way for consumers to compare what the market basket of goods and services costs this month with what the same market basket cost a month or a year ago. Starting in December of 1998, this basket of goods included a category for cellular telephone services. ("Cellular CPI") produced by the United States Department of  Xb4Labor's Bureau of Labor Statistics ("BLS").lb3 yO!'ԍAll CPI figures discussed in this paragraph were taken from U.S. Department of Labor, Bureau of Labor Statistics databases found on the Bureau of Labor Statistics' Internet site . In the 13 months between the end of December 1997 and the end of January 1999, the Cellular CPI decreased by 9.1 percent, which equates to an annualized rate of 8.4 percent. In comparison, during the same period of"4l0*%%88." time, the local telephone services charges component increased by 2.2 percent, and the long distance telephone services charges component decreased by 0.1 percent. The overall consumer price index increased by 1.9 percent. Another indication of the competitive pressures being exerted on mobile telephone prices can be seen in roaming charges. Traditionally, roaming was a very lucrative part of operators'  Xv4businesses, with prices typically ranging between $0.50 and $1.00 per minute.mv3 yO'ԍCynthia M. Motz, Don't Hang Up on Wireless, Equity Research Americas, Credit Suisse First Boston Corp., Sep. 16, 1997, at 44. Moreover, there usually were significant roaming administration charges and fees that were assessed in addition to the per minute usage charges. However, a number of carriers are reporting that DOR plans are beginning to exert downward price pressure on their roaming rates. During 1998, carriers have reported that even though DOR plans have encouraged increased roaming,  X 4they have also led to reductions in the negotiated roaming rate charged to customers.Un\ 3 {O'ԍSee, e.g, Vanguard Cellular Corp., Form 10K, Dec. 31, 1998, at 22; United States Cellular Corp., Form  {O'10K, Dec. 31, 1998, at 1617; AirTouch Communications, Inc. Form 10K, Dec. 31, 1998, at 13; and Dobson Communications Corp., Form S4, Feb. 2, 1999, at 56.U In order to remain competitive, carriers expect that they will continue to proactively renegotiate  X 4their reciprocal roaming rates between operators to reduce rates even further.yo D3 {O'ԍSee Airtouch Communications, Inc. Form 10K, Dec. 31, 1998, at 13.y ` `  e. Consumer Response(# Some of the statistics reported by mobile telephone operators, such as net new subscriber growth, churn, and minutesofuse ("MOUs"), show the effectiveness with which the new entrants are providing competition in the mobile telephone market.  X4Net New Subscriber Growth. Since the launch of the first broadband PCS system in November 1995, broadband PCS operators and Nextel Communications have combined to  X4take steadily increasing portions of the industry's subscriber growth.Wp3 {Ox'ԍSee Appendix B, Table 6, p. B8.W In fact, this portion has now grown to the point where the share of growth for these new entrants far exceeds their share of the industry's total population of subscribers. During their first year of operations, the new entrants acquired between four and six percent of each quarter's new  X4mobile telephone subscribers.:qh 3 {O#'ԍId.: By the third and fourth quarters of 1998, the new entrants were taking more than 45 percent of net new subscribers. Many analysts project that this"~ q0*%%88" trend will continue into 1999, and that the new entrants will start taking half of the industry's  X4net new subscribers.Sr3 {Ob'ԍSee DLJ Report, at 18.S  X4Churn. Churn refers to the number of customers an operator loses over a given period of time. Mobile telephone operators usually express churn in terms of average percent churn per month. For example, an operator might report churn of two percent for a given quarter. In other words, on average, the operator lost two percent of its customers in each of the quarter's three months. Thus, in this example, the operator would lose 24 percent of its customers in a  XJ4single year and would turn over its entire customer base in approximately four years.sJZ3 yOU 'ԍThis assumes that each churned customer is a unique individual and that the same customers do not churn multiple times. Given that churn measures the frequency with which subscribers switch operators, it is often used as an indicator of increasing competition. The currently available data indicate that the recent entry into mobile telephone markets by broadband PCS and digital SMR operators has been accompanied by an increase in operators' churn levels. See Table 7 of Appendix B, which contains annual churn statistics for the four main publicly owned broadband PCS operators, a sample of cellular operators, and Nextel, the  X4principal digital SMR operator.Wt3 {O'ԍSee Appendix B, Table 7, p. B9.W In 1998, broadband PCS operators had churn averaging approximately 4.2 percent, which was an increase from the 3.2 percent experienced in 1997. Some operators even experienced quarters with churn as high as 5.5 percent. While cellular  XM4operators have lower churn, usually at or below 2 percent,u~MD3 yOB'ԍA lower level of geographic coverage and a higher reliance on prepaid subscribers are reasons most  {O 'often given for the higher levels of churn experienced by the broadband PCS operators. See John M. Bensche  {O'and Briar Mewbourne, The PCS Report Coverage Initiated on the Personal Communications Services Industry, Wireless Services, Lehman Brothers, Nov. 11, 1997, at 38. For example, for the fourth quarter of 1998, Omnipoint reported that its churn rate, 3.2 percent, was reduced to 2.5 percent if prepaid customers were  {O.'excluded from the calculations. Omnipoint Adds Over 100,000 Subscribers in Fourth Quarter, News Release, Omnipoint Corp., Feb. 17, 1999. their churn levels have grown from 1.9 percent in 1996 to 2.0 percent in 1998. Historically, Nextel has kept its churn  X4around 1.0 percent. However, its churn has risen from 1.0 percent in 1996nv 3 yOZ!'ԍNextel Communications, Inc., Form 10K, Dec. 31, 1996, at 42.n to 1.3 percent in  X41997nw3 yO#'ԍNextel Communications, Inc., Form 10K, Dec. 31, 1997, at 38.n to 1.8 percent in 1998.x$3 yO'ԍNextel Communications, Inc., Form 10K, Dec. 31, 1998, at 40. Nextel's low churn has usually been attributed to its businessoriented customer base which uses the SMRtype services Nextel includes with  {O 'traditional interconnected telephone service. David A. Freedman and Gregory H. Lundberg, Nextel  {O'Communications, Inc. Initiation of Coverage, Equity Research, Bear Sterns, Jul. 30, 1997, at 10."x0*%%88"Ԍ X4ԙMinutesofUse. One of the goals operators hoped to achieve by offering customers price plans with large bundles of lowprice MOUs was to encourage increased overall usage of  X4wireless services.y3 {O9'ԍSee e.g., AT&T Launches First National One-rate Wireless Service Plan, News Release, AT&T Corp., May 7, 1998. Since, as mentioned above, much of the most active price competition has been occurring in digital services, both cellular and broadband PCS, it has been  X4anticipated that MOUs would increase on digital services.z3 yOe 'ԍIt is also likely that some portion of the higher MOUs seen on digital plans is a result of existing high volume customers shifting over from their older, analog plans. As was reported in the Third  X4Report,]{f 3 {O'ԍSee Third Report, 13 FCC Rcd at 19771.] the average number of minutes used each month by customers subscribing to digital services have in fact been at higher levels than MOUs of analog subscribers, which traditionally use about 100 minutes per month. Almost all of the broadband PCS operators  XN4are reported to have usage between 300 and 375 MOUs per month.|N 3 {O'ԍThe Yankee Group, Wireless/Mobile Communications Global, YearEnd 1998 Wireless Industry Update:  {O'The Impact of AllInclusive Rates, Report, Vol. 2, No. 46, Dec. 1998, at 8. One cellular operator, Bell Atlantic, reported that in the fourth quarter of 1998 its digital cellular subscribers  X 4averaged 325 MOUs, which was three times the MOUs of its analog customers.} T 3 {O%'ԍBell Atlantic Mobile's Growth Fueled by Popularity of Single Rate Plans, News Release, Bell Atlantic Corp., Jan. 27, 1999. Nextel reported that in the fourth quarter of 1998 its digital SMR subscribers averaged approximately  X 4400 MOUs.~ 3 {OQ'ԍNextel Reports 1998 Results, News Release, Nextel Communications, Inc., Feb. 23, 1999. Partly due to overall price decreases as well as the increased adoption of digital services, average MOUs for the industry as a whole are increasing. According to one analyst, average MOUs reached 143 per month per subscriber in 1998, an increase of 43  X 4percent from 1996. @3 {O 'ԍGood News for Mobile Phone Industry Minutes of Use Are On the Uptick The Bad News So is  {Oh!'Churn, News Release, The Strategis Group, Inc., Nov. 10, 1998.  X4 "0*%%88" ` `  f. Factors Affecting Growth and Competitive Development(# ` `  ` ,(1) Coverage by Technology Type(# As described above, digital technologies are quickly emerging as a driving force within the mobile telephone industry. Further, for many mobile telephone operators improving their digital footprint is a high priority. Cellular operators still have license areas that need the improved capacity and increased service offerings brought by digital technology. In addition,  XH4as was discussed in the Third Report, broadband PCS and digital SMR operators need to  X34expand their footprints to increase their competitiveness with analog cellular services.g33 {O 'ЍSee Third Report, 13 FCC Rcd at 19784.g Consequently, one of the key factors affecting the mobile telephone industry in the coming years will continue to be the deployment of the various types of digital technologies. To estimate the current deployment status of the four main digital mobile telephone technologies in use today (CDMA, TDMA, GSM, and iDEN), the Commission has made maps of each technology combining the coverage by all of the different mobile telephone  X4operators.mZ3 {O'ԍSee Appendix H, Maps 2, 3, 4, and 5, at p. H3 to H6.m  Xd4CDMA. Both cellular and broadband PCS operators use CDMA technology in their  XO4networks.yO3 yO'ԍThe broadband PCSbased coverage is estimated using BTAs and the cellularbased coverage is estimated using Metropolitan Statistical Areas ("MSAs") and Rural Service Areas ("RSAs"). There are several important caveats to note when using these data. First, to be considered as having "coverage," only a portion of a license area needs to be covered. Consequently, some of the license areas included in this analysis have only a small amount of coverage from a particular provider, possibly resulting from the buildout of a neighboring market. Second, the POPs figures in this analysis include all of the POPs in a license area with coverage. Third, because of the second points, this analysis overstates the total coverage in terms of both geographic areas and populations covered. Fourth, because BTAs usually cover larger geographic areas than MSAs and RSAs, digital coverage on broadband PCS systems can appear to be greater than digital cellular coverage, when that is  yO'not necessarily the case. Fifth, all population figures are based on the 1990 census.y To date, CDMA has been launched in at least some portion of license areasUO 3 {O'ԍSee Appendix H, Map 2, p. H3.U with approximately 208 million people, which is approximately 82 percent of the U.S.  X!4population.X!3 {O"'ԍSee Appendix B, Table 8, p. B10.X Included in these areas is broadband PCS coverage in 210 BTAs containing 200 million people and cellular coverage in 148 MSAs and RSAs containing 145 million people."0*%%88w"Ԍ X4ԙTDMA. Cellular and broadband PCS operators also both use TDMA technology.3 yOy'ԍThe caveats associated with the CDMA estimates are applicable to TDMA as well. To date,  X4TDMA has been launched in at least some portion of license areasUX3 {O'ԍSee Appendix H, Map 3, p. H4.U containing  X4approximately 191 million people, which is 76 percent of the U.S. population.X3 {Oo'ԍSee Appendix B, Table 8, p. B10.X Included in these areas is broadband PCS coverage in 48 BTAs containing 68 million people and cellular coverage in 293 MSAs and RSAs containing over 163 million people.  Xx4GSM. In the United States, only broadband PCS operators are deploying GSM. To date, GSM has been launched in at least some portion of 231 BTAs containing 174 million people,  XL4or approximately 69 percent of the U.S. population.|L|3 {Oy'ԍSee Appendix B, Table 8, p. B10 and Appendix H, Map 4, p. H5.|  X 4iDEN. The analysis of iDEN coverage is limited to the largest digital SMR provider, Nextel.  X 4While Nextel is not the only provider using iDEN, 3 {O'ԍSee Traditional Dispatch Services section below, Sec. DISPATCHII.C. it is the only one for which detailed coverage information is available. To date, Nextel has launched iDENbased service in at least some portion of 187 BTAs, containing over 191 million people, or approximately 76  X 4percent of the U.S. population.| 3 {O'ԍSee Appendix B, Table 8, p. B10 and Appendix H, Map 5, p. H6.|  X4` `  ` ,(2) MultiMode Handsets(#  Xh4As was discussed in the Third Report, handsets that are capable of using multiple technologies and multiple spectrum bands are used by digital operators to increase coverage  X<4for their customers.]<2 3 {O'ԍSee Third Report, 13 FCC Rcd at 19785.] Such handsets are most often used to allow digital customers to roam on analog cellular networks when outside their digital coverage areas. One major  X4development since the Third Report is the announcements by some equipment manufacturers that they will soon start shipping a "trimode" CDMA handset. Similar to a TDMAbased handset used by AT&T, these CDMA handsets will allow users to access CDMA networks in broadband PCS spectrum bands, plus both analog and CDMA networks in cellular spectrum  X4bands. 3 {O)%'ԍSee Nokia Presents New Products at CTIA Wireless '99, News Release, Nokia Corp., Feb. 8, 1999. This handset will allow broadband PCS and cellular customers to access the"V 0*%%88" features of digital handsets when in areas covered by the other spectrum block. This handset will also allow cellular carriers that use CDMA technology to expand their network capacity  X4by combining 10 MHz broadband PCS licenses with their existing cellular licenses.Q3 yOK'ԍFor example, last year AirTouch acquired broadband PCS E block licenses in Bakersfield, Los Angeles,  {O'and San Diego, California and Las Vegas and Reno, Nevada from Rivgam Communicators, L.L.C. See  {O'"Wireless Telecommunications Bureau Commercial Wireless Service Information," Public Notice, Report No. LB-98-44, (rel. May 29, 1998). All of these are areas where AirTouch has at least some level of ownership in  {Oo'one of the existing cellular licenses. See Appendix I.Q On the other hand, an integrated handset allowing broadband PCS GSM customers to roam on analog  X4cellular networks is still not available.~3 yO 'ԍThere are examples of GSM operators who use an extra adapter that permits roaming using GSM  {O 'handsets. See Powertel Launches Dual-Mode Wireless Service, News Release, Powertel, Inc., Dec. 14, 1998. ` ` 2. Cellular Sector Analysis During the 1970s, the Commission licensed 50 MHz of spectrum in the 800 MHz frequency band for two competing cellular systems in each market (25 MHz for each system). These licenses are divided into 305 MSAs and 428 RSAs, plus a market for service in the Gulf of Mexico, for a total of 734 geographic license areas. ` `  a. Cellular Sector Structure and Performance  X 4The structure of the cellular sector has not changed significantly since the release of the Third  X4ReportT3 {O'ԍSee id., 13 FCC Rcd at 19779.T in that the largest operators are mostly Bell Operating Companies ("BOCs"), interexchange carriers, or entities that have been spun off from one of those two (e.g.,  Xf4AirTouch).Yfj 3 {O'ԍSee Appendix B, Table 9A, p. B11.Y At the end of 1998, there were two cellular carriers with more than seven million subscribers and two more with more than six million subscribers. At the end of 1997, only the two largest carriers had more than six million subscribers. One notable trend in the performance of cellular operators is the effect broadband PCS operators have had on cellular subscriber growth. This impact is most noticeable when analyzing the growth of penetration rates of the cellular operators. In the years preceding the launch of broadband PCS and digital SMR, cellular operators usually increased their  X4penetration rates by between one and two percentage points each year.Y 3 {O[$'ԍSee Appendix B, Table 9B, p. B12.Y For example," 0*%%88" cellular operators increased their penetration rates on average by 1.55 percent and 1.68 percent in 1995 and 1996 respectively. However, in 1997, the increase in cellular operators' average penetration rates dropped by 12 percent, down to 1.48 percent. In 1998, their increase in average penetration decreased again, down to 1.23 percent. ` `  b. Response to Competition  X_4The efforts of cellular operators, discussed in the Third Report,]_3 {O'ԍSee Third Report, 13 FCC Rcd at 19780.] to increase their capacity and expand their service offerings by deploying digital technologies has continued during the past year. To track these digital rollouts, the Commission has compiled a list of MSAs and RSAs with some level of digital coverage by the incumbent cellular operators. These data are based on information from operators, as well as on publicly available information released by the operators such as news releases, filings made with the Securities and Exchange Commission, and coverage maps available on operators' Internet sites. This analysis found that digital cellular services are available in over 375 MSAs and RSAs, which have a combined coverage of more than 202 million POPs, or approximately 80 percent of the  X4nation's total population.|Z3 {O'ԍSee Appendix B, Table 8, p. B10 and Appendix H, Map 6, p. H7.| Recent reports by cellular carriers indicate that at least some of them have been successful both in gaining consumer acceptance of their digital services and in migrating a significant percentage of network usage to the digital portions of their networks, thereby relieving some of the pressures on the analog portion. For example, during 1998, AT&T, the nation's largest digital cellular operator, increased its digital subscriber total to approximately 4.35 million, an  X4increase of 150 percent from 1.75 million at the end of 1997.$3 yO'ԍAT&T increased its digital penetration rate from 29.3 percent (of 5,964,000 consolidated subscribers) to 60.5 percent (of 7,198,000 million consolidated subscribers). Both of these figures include subscribers on  {O'broadband PCS systems. See AT&T Corp., AT&T Earnings Commentary, AT&T's Fourth Quarter Operational  {O'Profits Were $1.00 Per Share, an Increase of 45 Percent, Jan. 25, 1999, at 7. During 1998, SBC increased its TDMA subscribership from almost nothing to 660,000 and migrated 30 percent of the  X4wireless minutes in its top markets to digital.3 {OL 'ԍSBC Communications Inc., Investor Briefing, SBC Delivers 19.3 Percent Earnings Growth in 1998;  {O!'Grows FourthQuarter Earnings 20 Percent, No. 206, Jan. 21, 1999, at 6. Bell Atlantic increased its digital subscribership six fold to 950,000 during 1998, and migrated 40 percent of busyhour calls to"4 0*%%88"  X4digital.#3 {Oy'ԍStrong Telecom and Wireless Volumes Drive DoubleDigit Bell Atlantic Earnings Growth, News  {OC'Release, Bell Atlantic Corp., Jan. 27, 1999 and Bell Atlantic Corp., Investor's Reference Guide 97 (1998), at 55.# ` ` 3. Broadband PCS Sector Analysis Broadband PCS is similar to cellular service, except that broadband PCS systems are designed to use a digital format. The Commission set aside 120 MHz between 1850 MHz and 1990  Xv4MHz for broadband PCS."Xv$3 yOK 'ԍThe remaining 20 MHz of spectrum for unlicensed broadband PCS is allocated for shortrange communications such as a local area networks in offices. These systems operate with very low power and have a limit on the duration of transmissions." This spectrum was divided into three blocks of 30 MHz each and three blocks of 10 MHz each. Two of the 30 MHz blocks are divided into 51 Major  XH4Trading AreasxHD3 yO='ԍMajor Trading Areas are Material Copyright (c) 1992 Rand McNally & Company. Rights granted pursuant to a license from Rand McNally & Company through an arrangement with the Personal Communications Industry Association. MTAs are combinations of two or more Basic Trading areas. Rand McNally's MTA specification contains 47 geographic areas covering the 50 states and the District of Columbia. For its spectrum auctions, the Commission added the following MTA-like areas: 1) Guam and the Northern Mariana Islands, 2) Puerto Rico and the United States Virgin Islands, and 3) American Samoa. In addition, Alaska was separated from the Seattle MTA into its own MTA-like area. ("MTAs"). One of the 30 MHz blocks and all of the 10 MHz blocks are  X14divided into 493 BTAs.H1 3 yOf'ԍIn June 1998, as a result of WT Docket No. 9782, broadband PCS C block licensees could elect to disaggregate their licenses and return 15 MHz of C block spectrum to the Commission. As a result, a number of licensees elected to disaggregate some or all of their licenses, creating new C block BTAs with seven spectrum  {O'licenses. See Amendment of the Commission's Rules Regarding Installment Payment Financing for Personal  {O'Communications Services (PCS) Licensees, WT Docket No. 97-82, Second Report and Order and Further Notice  {OR'of Proposed Rule Making, 12 FCC Rcd 16436 (1997) and Amendment of the Commission's Rules Regarding Installment Payment Financing for Personal Communications Services (PCS) Licensees, WT Docket No. 97-82,  {O'Order on Reconsideration of the Second Report and Order, 13 FCC Rcd 8345 (1998). ` `  a. Broadband PCS Sector Structure and Performance The broadband PCS sector is made up of one nationwide carrier, a number of other carriers that are constructing large regional networks of varying sizes, and carriers that are constructing networks more statewide or local in size. A number of these carriers are creating wireless systems based solely on their broadband PCS licenses. For example, Sprint PCS is creating a nationwide network, and Omnipoint Corp., Aerial Communications Inc., and Powertel, Inc. are building large regional systems. There are also operators, such as AT&T, SBC, and BellSouth Corp., for which broadband PCS networks are complements to their"K0*%%88" existing cellular holdings.  X4The past year has been one of strong growth for broadband PCS operators. Since the Third  X4Report, a dozen new operators have launched systems, including the BOC Ameritech Corp., two of AT&T's joint ventures (Triton PCS, Inc. and Telecorp PCS, Inc.), and a number of  X4smaller carriers.3 {O 'ԍSee Appendix B, Table 10, p. B16 and Third Report Appendixes, at B16. For information about  {O'broadband PCS operators' financial statistics, see Appendix, B, Tables 11 and 12, p. B17 and B18. During 1998, operators for whom there is publicly available information increased their subscribership by 255 percent to over six million. ` `  b. Competitive Development Given that the broadband PCS sector remains in its early stages of development, the most important variable affecting its ability to compete in the mobile telephone market is coverage. As discussed above, the primary shortterm advantage held by the incumbent cellular sector is its extensive coverage. Many potential customers, especially business users, may have been hesitant to sign up for service until broadband PCS has adequate coverage. Thus, broadband PCS operators have made expansion of their footprints a primary focus. To date, broadband PCS service has been launched in at least some portion of 320 BTAs  Xf4containing nearly 229 million POPs.~f$3 {O;'ԍSee Appendix B, Table 13A, p. B19 and Appendix H, Map 7, p. H8.~ While 46 percent of these 320 BTAs have only one broadband PCS operator, 111 BTAs have two PCS operators, 54 BTAs have three operators, and eight BTAs now have four operators. These 173 BTAs include 75 percent of the nation's POPs. A view of the rollout of broadband PCS by license blocks shows that most of the activity has  X4been in the A and B blocks, with 164 and 214 BTAs launched respectively.Z3 {OC'ԍSee Appendix B, Table 13B, p. B19.Z C block operators have coverage in at least some portion of 35 BTAs with over 17 million POPs. To show where the broadband PCS operators have been concentrating their deployment  X4efforts, this report has divided the BTAs into quartiles by their total populations.ZH3 {Oy!'ԍSee Appendix B, Table 13D, p. B20.Z Of the BTAs in the top quartile (the 123 most populated BTAs), 119 have at least one broadband PCS operator providing some coverage. The second quartile (the next 123 most populated BTAs) has 94 BTAs with some coverage, and the bottom two quartiles have only 61 and 46 BTAs, respectively, with some coverage."$0*%%88<"Ԍ X4ԙX` hp x (#%'0*,.8135@8:3 {OS#'ԍSee Third Report, 13 FCC Rcd at 19788.] In an effort to accelerate the expansion of its iDEN coverage, Nextel recently proposed an"M!0*%%88"  X4affiliation agreement with Nextel Partners, Inc.83 yOy'ԍNextel Partners, Inc., is a company created specifically to enter the mobile telephone industry by entering this affiliation agreement with Nextel. Its largest equity investors include: Nextel WIP Corp. (a wholly owned Nextel subsidiary), DLJ Merchant Banking Partners II, L.P., Eagle River Investments, L.L.C., Motorola,  {O'Inc. and Madison Dearborn Capital Partners II, L.P. See Nextel Finalizes Agreements with Nextel Partners, Inc., News Release, Nextel Communications, Inc., Feb. 1, 1999.8 Under this agreement, Nextel Partners, Inc.  X4agreed to build and operate iDENbased SMR systems for Nextel.z3 {O'ԍNextel Finalizes Agreements with Nextel Partners, Inc., News Release, Nextel Communications, Inc., Feb. 1, 1999. This final completion of this agreement is pending approval of the license transfers.  ` `  b. Other Specialized Mobile Radio Operators Traditionally, urban SMR operators had only a limited ability to offer mobile telephone services. This limitation has been due to a number of factors, including limited spectrum availability and the preclusion of spectrum reuse by traditional, analog highpower, single site  X14transmitter systems employed by SMR operators.m13 yO'ԍNextel Communications, Inc., Form 10K, Dec. 31, 1996, at 5.m In contrast, SMR operators in less spectrumscarce, rural areas have faced fewer capacity difficulties and, consequently, have a  X 4greater ability to offer mobile telephone services.s d 3 yO'ԍPittencrieff Communications, Inc., Form 10K, Dec. 31, 1996, at 4.s For example, prior to its 1997 merger with Nextel, Pittencrieff Communications, Inc. focused on rural areas and presented its  X 4service as an alternative to cellular service.: 3 {Oz'ԍId.: As recently as 1996, SMR operators other than  X 4Nextel had several hundred thousand customers using interconnected service. 3 {O'ԍSee RCR Top 20 SMRs, RCR Radio Communications, Feb. 10, 1997, at 14. This is the most recent Top 20 SMRs list published by RCR Radio Communications. ` `  c. Resellers Resellers offer service to consumers by purchasing air time at wholesale rates from facilities XK4based providers and reselling it at retail prices.K3 {O!'ԍInterconnection and Resale Obligations Pertaining to Commercial Mobile Radio Services, CC Docket  {O"'No. 9454, First Report and Order, FCC 96263, 61 Fed. Reg. 38399 (Jul. 24, 1996), at paras. 1011. According to a survey performed by the National Wireless Resellers Association in 1997, the resale sector had between 100 and 120"4"<0*%%88U"  X4providers with a total of approximately two million mobile telephone subscribers.3 {Oy'ԍAnthony Bruno, Resale Industry Rises to Meet Challenges of New Environment, RCR Radio  yOC'Communications Report, Aug. 4, 1997, at 11. In 1998, the top 20 resale providers had over 1.1 million subscribers, which was almost unchanged  X4from 1997.Y"3 {O'ԍSee Appendix B, Table 15, p. B22.Y MCI Worldcom, Inc. is by far the largest reseller with over half of all the subscribers of the 20 largest resellers. In addition, MCI Worldcom, Inc.'s 1998 total of 565,000 customers is a slight decrease from MCI Communications Inc. and Worldcom Corp.'s combined, premerger total of 580,000. The remainder of the 20 largest resellers combined grew by only 4.2 percent between 1997 and 1998, well below the 24 percent growth rate for the mobile telephone industry as a whole. ` `  d. IRIDIUM  Satellite Operators On November 1, 1998, Iridium LLC ("Iridium") launched the first satellitebased hand-held,  X 4global satellite telephone system. 3 {OQ'ԍThe World's First Global Satellite Telephone and Paging Company Starts Service Today, News Release, Iridium LLC, Nov. 1, 1998. Iridium uses a constellation of 66 low earth-orbit  X 4satellites; 3 yO'ԍLow earth orbit satellites (often referred to as "LEOs") are satellites placed into orbits only a few hundred miles above the surface of the earth (compared to traditional geostationary satellites that orbit approximately 22,300 miles above the earth). For example, Iridium's satellites are at an altitude of approximately  {O'780 kilometers (approximately 484 miles) and circle the Earth approximately once every 100 minutes. See Iridium World Communications Ltd., Form 10K, Dec. 31, 1997, at 12.; to provide mobile telephone service from virtually any point on the globe. In urban areas, the system also offers users a cellular roaming service based on dual-mode phones that can be switched to operate with terrestrial wireless networks. Currently, Iridium's  X4handsets can cost between $3,000 and $4,500, 3 {O'ԍCommunications Daily, Anemic Iridium Reports Only 10,294 Customers In Quarter, Apr. 27, 1998. and satellitebased calls typically cost  Xy4between $3 and $6 per minute.yR 3 {O|'ԍCharles Bickers, Wired Skies: Satellite Phones Will Reach Places Cellphones Can't, Far Eastern  {OF'Economic Review, Apr. 1, 1999, available in 1999 WL-FEER 8674730. To date, it has been reported that Iridium has experienced difficulties gaining the initial  X44operational results for which it had planned.43 {O#'ԍCommunications Daily, Iridium Seen Likely to Break FirstQuarter Debt Covenants, Feb. 25, 1999. As a result of these difficulties, Iridium"4#@0*%%88."  X4sought, and was granted, a 60-day extension,3 {Oy'ԍChristopher Price, Iridium Wins 60-Day Extension From Lenders, Financial Times, Mar. 30, 1999,  {OC'available at 1999 WL 3450672. plus a subsequent 30day extension,$3 {O'ԍIridium Receives 30-Day Extension From Lenders, News Release, Iridium LLC, May 28, 1999. on covenants from creditors who hold $800 million in Iridium's debt. These covenants originally called for the company to meet specific subscriber and revenue targets by the end of March  X41999.3 {O" 'ԍChristopher Price, Iridium Wins 60-Day Extension From Lenders, Financial Times, Mar. 30, 1999,  {O 'available at 1999 WL 3450672. Several other satellitebased mobile telephone systems have announced plans to launch service during 1999 and 2000 to compete with Iridium. For example, Globalstar Telecommunications, Ltd. is currently planning to commence service in the third quarter of  XH41999,vH3 yO 'ԍGlobalstar Telecommunications, Ltd., Form 10Q, Sep. 30, 1998, at 10.v and ICO Global Communications expects to launch service in 2000.H3 {O'ԍICO Reports 1998 Results, News Release, ICO Global Communications, Feb. 17, 1999. B. PAGING  Paging and Messaging  X 4The paging/messaging industry continued to evolve during the year since the Third Report. As noted last year, many paging carriers have begun to refer to their products as "messaging  X 4services."Y 4 3 {O'ԍThird Report, 13 FCC Rcd at 19790.Y As used herein, messaging refers broadly to both traditional oneway paging  X 4services, as well as advanced services provided over narrowband PCS spectrum.\ 3 yO 'ԍThe Commission auctioned regional and nationwide narrowband PCS licenses in 1994. The Commission noted that narrowband PCS can be used to provide services such as voice message paging, twoway  {O'acknowledgement paging and other data services. FCC, FCC Auction Regional Narrowband PCS Fact Sheet  yOz'(visited Mar. 5, 1999) . Carriers often refer to such services as "advanced messaging services." SkyTel Communications Inc., Form 10K, Dec. 31, 1998, at 1.\ Historically, paging has been a oneway wireless radiotransmission using coded radio signals to activate a device that provides an audio, visual, or tactile indicator. Over time, oneway  XM4paging services have become fairly homogeneous,YMx3 {Ov#'ԍThird Report, 13 FCC Rcd at 19808.Y and competition for the service is now  &zL "M$ 0*%%88*"  X4 &zL generally centered on price.Z3 {Oy'ԍAnalysts argue that paging is a commoditybased business. See Dennis Leibowitz, et. al., The Wireless  yOC'Communications Industry, Donaldson, Lufkin & Jenrette, Spring 1998, at 30. A commodity is a product or service that is not highly differentiated and competition for the product or service is based on price. However, this view of the market is beginning to change. One analyst believes that the key drivers to future growth in the industry will include those service features that offer product differentiation such as advanced messaging and information services (transmitted over oneway and advanced messaging networks), as well as telemetry  X4services.\3 {O? 'ԍJeanine Oburchay, Wall Street Perspective: Is Paging a Lasting Application?, pagingNOW, Dec. 10,  {O '1998 ; See also Wireless Messaging: A $6.6 Billion Revenue Business in 1999,  yO 'Wireless Data & Messaging, Jan. 31, 1999, at 4. Telemetry services are discussed in Appendix G. The industry has also recognized this marketing shift. For example, 60 percent of the industry recently reached agreement on a set of service standards for transmitting Internet Xv4based information to pagers.J\v3 {O5'ԍWireless Messaging Industry Prepares for Information Explosion, News Release, Paging Network, Inc., Nov. 19, 1998. Eleven companies, serving more than 60 percent of the nation's approximately 50 million paging  {O'customers approved the standards. Id.J The standards will permit customized information to be downloaded to customers and will allow paging providers to charge a premium for the  XH4service.TH2 3 {O+'ԍId.; DLJ Report, at 38.T Carriers have also announced restructuring efforts that focus on improving  X14financial performance rather than on increasing subscribers.1 3 {O'ԍSee Gains Too Modest To Assess Paging Industry's Shift In Marketing, Communications Today, Nov. 9,  {Op'1998, available in 1998 WL 17661712. This report's discussion of the paging/messaging industry begins with an analysis of the industry as a whole followed by information about specific service providers and, similar to  X 4the Third Report, includes information about consolidations and restructurings. The report also discusses innovative services that may contribute to the continued growth in the paging/messaging industry. The section concludes with industry projections and an assessment of competition. ` ` S&P1. Paging Industry Structure and Performance In 1998, the paging industry experienced growth in both total subscribers and annual  X4revenues.Z 3 yO"'ԍAppendix C, Table 1, p. C2, displays the total subscribers, annual revenues, and ARPU for the paging industry for the years 1995 through 1998. Appendix C also includes lists of public paging companies' revenues,  {O$'EBITDA/operating cash flow, and EBITDA/operating cash flow margin. See Tables 2, 3, 4, and 5, pp. C3"$0*%%$" through C6 respectively.  Based on an analyst's 1998 estimate, 5 million new paging units (including one"%X0*%%88"ԫway and advanced messaging units) were to be added for a total of 53.3 million paging units,  X4an increase of more than 10 percent over 1997.vX3 {O'ЍThe Strategis Group, The State of the US Paging Industry: 1998 (1998), at 14. ("Strategis Paging  {O'Report") Paul Kagan Associates, Inc. estimates 52.3 million paging units in service at yearend 1998. Paul  {O'Kagan Associates, Inc., Wireless Messaging: A $6.6 Billion Revenue Business in 1999, Wireless Data &  yOP'Messaging, Jan. 31, 1999, at 4. The Yankee Group estimates 54.2 million paging units in service at yearend  {O'1998. PCIA Forecast, at 5.v In contrast, another analyst forecasts 50.5 million units in service at yearend 1998, due in part to announcements by PageMart Wireless, Inc. ("PageMart") and Paging Network, Inc. ("PageNet") that they planned to report  X4customer losses in the fourth quarter of 1998, totalling almost one percent of the industry.W3 {Oe 'ԍSee DLJ Report, at 33, 39.W In fact, while PageNet previously announced it would lose 275,000 to 325,000 units in  Xv4service, it actually lost 388,000 units.^v3 {O'ԍPageNet Reports Quarterly and Annual Results; Company Reports Year Over Year Improvement Despite  {O'Restructuring, News Release, Paging Network, Inc., Feb. 16, 1999; Major Paging Carriers' Financials Take the  {O]'Street by Surprise, pagingNow, Feb. 17, 1999 . PageNet maintains its place as the largest U.S. paging carrier with almost 10 million subscribers. However, due to two large mergers, the second and third place carriers are much  X 4closer to PageNet's share of total subscribers.W 3 {O'ԍSee Appendix C, Table 2, p. C3.W Based on 53.3 million subscribers, PageNet has 18.5 percent of total industry subscribers, Arch has 13.8 percent, and Metrocall, Inc.  X 4("Metrocall") has 10.6 percent.> Z 3 {O'ԍSee id.> A detailed discussion of consolidation activity is presented below. Some of the effects of restructuring efforts can be seen by comparing the growth in total subscribers to the growth in industry revenues. Last year, one analyst forecast total 1998 paging revenues would be $6.2 billion, an increase of nearly 20 percent over 1997, almost  Xb4double the growth rate of subscribers.c\b3 {O 'ԍStrategis Paging Report, at 30. Paul Kagan Associates, Inc. also estimates $6.2 billion in revenues in  {O!'1998. Paul Kagan Associates, Inc., Wireless Messaging: A $6.6 Billion Revenue Business in 1999, Wireless Data  yO"'& Messaging, Jan. 31, 1999, at 4.c As a result of the difference in growth rates,  &zL "b&0*%%88M"  X4 &zL estimated 1998 ARPU is $10.17 per month, up $0.60 from 1997.@3 {Oy'ЍStrategis Paging Report, at 28. In the Third Report, the ARPU was reported at $9.11 and was taken  {OC'from estimates made by Strategis. Strategis has since revised the 1997 ARPU estimate to $9.57. Id.@ A detailed discussion of revenueenhancing innovative services is provided in Section MSSII.B.3 below. ` ` 2. Operational Trends ` `  a. Industry Consolidations  X_4As noted above, two major consolidations have been completed since the release of the Third  XJ4Report, along with a number of smaller mergers. Analysts argue that such consolidation is  X54necessary and will continue5$3 {O 'ԍJeanine Oburchay, Wall Street Perspective: Is Paging a Lasting Application?, PagingNow, Dec. 10, 1998. if paging is to survive, particularly in light of the large capital costs associated with building a narrowband PCS network. Some analysts have estimated that these capital costs are in the range of $250 to $400 million per nationwide network and have  X 4in total already exceeded $1.8 billion for narrowband networks built to date.U\ ~3 {O'ԍBill Menezes, Paging Begins To Mature: Industry Moves To New Phase, Wireless Week, Aug. 24,  {O'1998, at 23; Paul Kagan Associates, Inc., Narrowband PCS: Betting Heavily on the Future, Wireless Data &  yO'Messaging, Dec. 31, 1998, at 4.U  X 4Metrocall/AMD. In October, Metrocall acquired AT&T's Advanced Messaging Division ("AMD") and, in the process, also obtained one nationwide 50/50 KHz narrowband PCS  X4license.(3 {O'ԍSee Grant Butler, Metrocall Completes Purchase of AT&T Advanced Messaging, Newsbytes News  {O'Network, Oct. 5, 1998, available in 1998 WL 20717068. AMD's other nationwide narrowband PCS license was  {O}'sold to TSR Wireless, Inc. in an unrelated transaction. See TSR Wireless Signals Plan for Major Presence in  {OG'NPCS Market, Land Mobile Radio News, Aug. 28, 1998, available in 1998 WL 6631792. Including the merger with ProNet, discussed in the Third Report,Y 3 {O'ԍThird Report, 13 FCC Rcd at 19703.Y Metrocall is  X4now the third largest paging carrier in the U.S. and serves more than 5.6 million customers.Y$3 {OV'ԍSee Appendix C, Table 2, page C3.Y In addition, as part of the agreement, AT&T will offer Metrocall's messaging services in all  XS4of its wireless stores for the next five years.*(S3 {O"'ԍSee Grant Butler, Metrocall Completes Purchase of AT&T Advanced Messaging, Newsbytes news  {O#'Network, Oct. 5, 1998, available in 1998 WL 20717068. Further, in January 1999, Metrocall announced that it  {ON$'will offer AT&T's Digital PCS and Digital One Rate offerings via its direct sales force. See Paul Kagan  {O%'Associates, Inc., Wireless Marketing Mentionables, Wireless Data & Messaging, Jan. 31, 1999, at 6.*"S'0*%%88*"Ԍ X4ԙArch/MobileMedia. In August 1998, Arch entered negotiations to acquire MobileMedia, the fourth largest publiclytraded carrier, which would make Arch the second largest U.S. paging  X4company with over seven million customers.3 {OM'ԍSee Arch Communications and MobileMedia in Negotiations for Merger, Business Wire, Aug. 19, 1998. In the midst of the merger, MobileMedia announced plans to launch advanced messaging services by midyear 1999, using its  X4narrowband PCS licenses.^Z3 {O'ԍSee MobileComm Readies for NPCS Promotion, pagingNow, Feb. 25, 1999  {O{'. MobileComm is a whollyowned subsidiary of MobileMedia Corporation. See  {OE 'id. The Commission approved the merger in February 1999.3 yO 'ԍIn the Matter of MOBILEMEDIA CORPORATION, et. al. Applicant for Authorizations and Licenses of  {O 'Certain Stations in Various Services, WT Dkt. No. 97115, Memorandum Opinion and Order, Rel. Feb. 5, 1999. In April 1999, the U.S. Bankruptcy Court for the District of Delaware confirmed MobileMedia's  Xx4proposed merger with Arch under its Chapter 11 bankruptcy plan of reorganization.x3 {O'ԍSee Court Confirms MobileMedia's Plan of Reorganization Clearing Way for Acquisition by Arch  {O'Communications Group, News Release, Arch Communications Group, Inc., Apr. 12, 1999. In  Xa4June 1999, the acquisition was completed.a6 3 {OH'ԍArch Merges With MobileMedia, News Release, Arch Communications Group, Inc., Jun. 4, 1999.  X34Other Mergers. Aquis Communications, Inc., ("Aquis") a privatelyheld company, was formed to acquire Bell Atlantic Paging and subsequently merged with Paging Partners  X 4Corporation.1 3 {O'ЍSee BAP Acquisition Corp. Announces New Company Name, PR Newswire, Dec. 28, 1998; See Paging  {OJ'Partners Officially Changes Name, pagingNOW, Apr. 6, 1999 .1 Following the acquisitions, Aquis was projected to have approximately  X 4431,000 customers. $3 {O'ԍSee AQUIS Completes Deal for Bell Atlantic Paging, News Release, Aquis Communications, Feb. 17, 1999. In August 1998, Vanguard acquired the operations and 70,000 customers of NationPage, which operated primarily in Pennsylvania and the upstate New  X 4York region.N\ ~3 {O'ԍVanguard Cellular Acquires NationPage, Business Wire, Aug. 5, 1998; The Third Report indicated that Vanguard acquired NationPage in December 1997. However, that was merely the announcement of a definitive  {O 'agreement. Third Report, at 19793.N  X4` `  b. Industry Restructurings  Xf4The Third Report indicated that carriers were beginning to shift from a subscriber growthat"f(0*%%88"ԫ X4anycost strategy to a focus on revenue growth.u3 {Oy'ЍThird Report, 13 FCC Rcd at 19803.u Both PageNet and Arch, for example, have announced restructuring initiatives with accompanying layoffs and service price  X4increases.Z3 {O'ԍSee Arch Joins the Restructuring Club, Inside Paging, Jun. 12, 1998. One of the most dramatic impacts of this strategy was PageNets announcement that it lost 388,000 subscribers during the fourth quarter of 1998 due to subscriber  X4terminations and inactive reseller accounts.^3 {OA 'ЍPageNet Reports Quarterly and Annual Results; Company Reports Year Over Year Improvement Despite  {O 'Restructuring, News Release, Paging Network, Inc., Feb. 16, 1999; Major Paging Carriers' Financials Take the  {O 'Street by Surprise, pagingNow, Feb. 17, 1999 . ` ` 3. MSSCompetitive Strategies As was noted earlier in this section, analysts argue that, for paging to continue to experience growth, carriers will need to provide narrowband PCS services and/or information services. These services are being added or expanded in response to competition from other paging companies and other wireless sectors. The digital technology employed by digital cellular, broadband PCS, and digital SMR providers allows twoway handsets to act as oneway pagers and advanced messaging  X 4devices.Y 3 {Oj'ԍThird Report, 13 FCC Rcd at 19801.Y Analysts believe that these carriers will continue to attract paging customers.M 3 {O'ԍSee DLJ Report, at 36.M For example, a recent study by the Strategis Group states that almost onefifth of potential turnover customers (based on a four percent churn level) are considering replacing their  Xb4pagers with mobile phones.b6 3 {OI'ԍCustomer Churn Stirs Up Paging Industry, News Release, The Strategis Group, Nov. 5, 1998. However, the same study showed an unwillingness among the  XK425 million users of both mobile phones and pagers to abandon their pagers.:K 3 {O'ԍId.: Analysts also are quick to delineate paging's advantages over mobile phones, such as size, price (monthly  X4paging bills are, on average, about onefourth of the average mobile telephone bill.ZZ 3 yO("'ԍAverage monthly revenue per paging unit was estimated to be $10.17 in 1998 while the average local  {O"'monthly bill for mobile telephones was estimated to be $39.43. See Appendix C, Table 1, p. C2 and Appendix B, Table 1, p. B2..), in &zL ")|0*%%88 "  X4 &zL building coverage, battery life, and unobtrusiveness.M3 {Oy'ԍSee DLJ Report, at 36.M Other analysts believe that as  X4broadband PCS matures, it will be able to meet paging's advantages.Z3 {O'ԍSee Bruce Felps, Geographic Signal Strength Helps Paging Keep Its Edge, Wireless Week, Aug. 24, 1998, at 20. Other carriers also provide advanced messaging services in competition with paging/messaging providers,  X4including ARDIS Company ("ARDIS"),3 yO 'ԍLast year, Motorola sold the ARDIS Company to American Mobile Satellite Corporation which combined ARDIS' terrestrial network with the company's satellitebased network. BellSouth Wireless Data ("BWD") 3 {Ox 'ԍFor a further discussion of these services, see Section DEDICATEDII.D.1.b.(1). and  X4ReadyCom, Inc.~3 yO 'ԍReadyCom Inc. ("ReadyCom") provides a twoway voice messaging service. ReadyCom's Responder  {O'service permits subscribers to reply, by voice, to incoming voice messages. See ReadyCom Launches Responder  {O'Services in Raleigh/Durham, N.C., News Release, ReadyCom, Inc., Feb. 9, 1999. ReadyCom also offers Responder Plus which incorporates the ability to make live cellular telephone calls to as many as ten preprogrammed telephone numbers. It is marketed as a service that controls costs by limiting calling to select  {O'numbers. See ReadyCom Develops Responder Plus Service for Cellular, News Release, ReadyCom, Inc., Feb. 9, 1999. In 1998, analysts noted that once the form factor (i.e., shape and size) and price of the messaging devices used by ARDIS and BWD decreases, and the distribution  Xx4channels improve, the companies could provide more competition in advanced messaging.x3 {O 'ԍSee Antony Bruno, Growth Rates Slowing As ARPU Starts Climbing, RCR Radio Communications  {O'Report, Aug. 3, 1998, available in 1998 WL 8226791.  Xa4Since that analysis, a device onehalf the size has been introduceda@3 {OR'ԍSee Research In Motion Unveils NextGeneration Inter@active Pager With Full Keyboard, Business  yO'Wire, Aug. 26, 1998. and published prices for  XJ4the messaging devices have fallen substantially.zJ3 {O'ԍAn August 1998 report indicated that the Research In Motion Inter@Active Pager cost $500. Strategis  {O_'Paging Report, at 317. However, ARDIS and BWD currently offer the device for between $249 and $325  {O)'depending on the length of contract. BellSouth Wireless Data, BellSouth Wireless Data Interactive Pager  {O'Service Promo 950 (visited Apr. 13, 1999) ; ARDIS, RIM  {O'Interactive Pager (visited Apr. 13, 1999) .z In addition, PageNet and BWD recently  X34announced that PageNet will market BWD's service.3T3 {O8"'ԍSee PageNet, BellSouth Wireless Data Enter Strategic Alliance to Expand Market for Interactive  {O#'Paging, Other TwoWay Services, News Release, BellSouth Wireless Data, Mar. 10, 1999. American Mobile Satellite Corporation (owner of ARDIS) and SkyTel Communications, Inc. ("SkyTel") have entered a" *0*%%88 "  X4similar arrangement to resell each other's products. 3 {Oy'ԍSee American Mobile and SkyTel Announce Strategic Alliance/Companies Agree to Pursue Joint  {OC'Opportunities in Wireless Data Market, News Release, American Mobile Satellite Corp., Apr. 7, 1999.  A number of satellite providers offer oneway paging and advanced messaging services. In addition to the mobile telephone services discussed above in Section IRIDIUMII.A.4.d, Iridium  X4launched its global paging and messaging service on November 17, 1998.$3 {Oy'ԍSteve Gold, Iridium SatelliteBased Paging/Messaging Service, Newsbytes News Network, available in  yOC '1998 WL 20719014. PageNet began  X4offering Iridium's World Page Service in January 1999.~3 {O 'ԍPageNet First to Offer Global Paging Coverage with New Service that Crosses Boundaries, Borders  {O 'and Oceans, News Release, PageNet, Jan. 27, 1999. World Page Service is a oneway alphanumeric and numeric offering and when initially launched was priced at $160 per month  X_4for a twelve month contract and $500 for the paging device._3 {O'ԍAntony Bruno, PageNet Turns on Iridium Satellite Paging Service, RCR Radio Communications Report, Feb. 1, 1999, at 3. At the end of the first quarter  XH4of 1999, Iridium reported 2,075 satellite paging customers.H4 3 {O-'ԍIridium Reports First Quarter Results, News Release, Iridium LLC, Apr. 26, 1999. American Mobile Satellite Corporation ("American Mobile") and QUALCOMM Inc. ("QUALCOMM") offer advanced  X 4messaging services for trucking companies using geostationary satellite ("GEO") systems. 3 {O'ԍSee Bishop Report, at 90. American Mobile provides guaranteed message delivery for trucking companies over its satellite network, twoway messaging to customers over its ARDIS terrestrial system, and  {O#'guaranteed messaging over a combination of its terrestrial and satellite networks. See id. GEO satellite systems  {O'operate at 22,300 miles above the earth. See Harry Newton, Newton's Telecom Dictionary (14th ed. 1998), at 322.  Finally, ORBCOMM Global, L.P., a little lowearth operating satellite system, also offers  X 4twoway messaging.-Z |3 {O'ԍORBCOMM Global, L.P., Form 10K, Dec. 31, 1998, at 4; See also Bishop Report, at 102. ORBCOMM's satellite constellation orbits between approximately 740 and 1000 kilometers above the Earth. ORBCOMM Global, L.P., Form 10K, Dec. 31, 1998, at 13.- ` `   NPCS1 a. Narrowband PCS  X4The Third Report noted that four carriers had launched advanced messaging services using  X{4narrowband PCS spectrum.\{3 {O$'ԍSee Third Report Appendixes, at C8. \ Many of these carriers continue to expand their footprints and"{+00*%%88"  X4launch new services."3 {Oy'ԍSee Appendix C, Table 6, page C7 for lists the services and associated number of subscribers for each of the four companies; Appendix C, Table 7, page C8, for the estimated narrowband PCS rollouts by number of launches; Appendix C, Table 8, page C9, for the current deployment status of narrowband PCS licensees; and, Appendix H, Map 8 for the current narrowband PCS coverage of the five carriers that have launched. For example, SkyTel recently added texttospeech capabilities over  X4its twoway network.3 {OL'ԍSee Bruce Felps, SkyTel Rolls Out TextToVoice Service, Wireless Week, Jan. 4, 1999, at 36. For a  {O'discussion of SkyTel's telemetry services, see Appendix G. The subscriber composes the message and SkyTel's network converts  X4it to digitized speech introduced by the sender's name.>3 {O 'ԍSee id.> This year, SkyTel also began reselling its advanced messaging service via a "Local Partners" program to expand coverage  X4and distribution to small and mediumsized markets.3 {O 'ԍSee SkyTel's "Local Partners" Program to Enhance Distribution: Company Signs First Agreement with  {O'ValuePage, News Release, SkyTel Communications Inc., Feb. 16, 1999. Under the agreement, ValuePage, Inc. will have the exclusive right to market SkyTel's advanced messaging services on a local  Xv4basis beginning with Jackson and Vicksburg, Mississippi.>v 3 {O#'ԍSee id.> In addition to accessing a new group of potential customers, the agreement provides SkyTel with capital infusion from the  XH4partner for buildout in local areas.>H 3 {O'ԍSee id.> In June 1999, MCI WorldCom, Inc. announced it would  X14acquire SkyTel.1 3 {O'ԍMCI WorldCom to Acquire SkyTel Communications, News Release, MCI WorldCom, Inc., May 28, 1999. CONXUS Communications, Inc. ("CONXUS") initially launched Pocketalk, its voice messaging service, in November 1997. In December 1998, CONXUS began providing Pocketext, a guaranteed messaging service, in its Pocketalk northeast markets, with the other  X 4Pocketalk markets to follow. z3 {O'ԍSee Brad Smith, Conxus Builds Out Data Networks, Wireless Network, Jan. 25, 1999, at 20. In addition to its voice messaging service launched in February 1997, PageNet launched its advanced text messaging service in the first quarter of  X41999. 3 yOM"'ԍTelephone Conversation with Hugh Fagan, Director, Investor Relations, Paging Network, Inc. (Apr. 9, 1999). PageMart is the newest entrant to provide services. It launched guaranteed messaging in June"b,d0*%%88"  X41998 and now provides services in many cities throughout the country.3 {Oy'ԍSee Antony Bruno, PageMart Starts TwoWay Service, RCR Radio Communications Report, Dec. 21, 1998, at 1. PageMart plans to  X4add canned message response and twoway text messaging sometime in 1999.>"3 {O'ԍSee id.> While several carriers have made significant advances in launching services using narrowband PCS spectrum, such services are still in the early stages of deployment. Analysts' projections for the total narrowband subscribers by 2002 ranges from a low of 8.4 million to a high of  Xv424.6 million customers.(v3 {O 'ԍForecast of the Yankee Group (24.6 million). PCIA Forecast, at 5. Forecast of The Strategis Group  {O '(8.4 million). Id. at 6. Forecast of Donaldson, Lufkin & Jenrette (13 million). DLJ Report, at 40. Forecast of  {Oo 'Paul Kagan Associates, Inc. (11 million). Paul Kagan Associates, Inc., Wireless Messaging: A $6.6 Bil. Revenue  {O9'Business in 1999, Wireless Data & Messaging, Jan. 31, 1999, at 4. ` `  b. Information Services Based on the belief that information services will provide the product differentiation necessary to compete with other paging carriers and other sectors of the wireless industry, paging companies have spent substantial time and resources developing such offerings. For example,  X 4PageNet offers weather updates and customized sports and TV listings to its customers.& 3 {O*'ԍSee PageNet, ESPN To Deliver Sports Info To Paging Customers, Wireless Today, Nov. 24, 1998,  {O'available in  1998 WL 9345527; See Bruce Felps, PageNet Subs Receive AccuWeather Forecasts, Wireless  {O'Week, Feb. 1, 1999, at 28; See Brad Smith, PageNet To Offer Custom TV Listings, Wireless Week, Jan. 11, 1999, at 14.  One of the more innovative information services that began in January 1999 was a smog alert notification service in Los Angeles provided jointly by the South Coast Air Quality Management District and several paging carriers. Depending on the outcome of the seven Xy4month trial, it may be offered for a monthly fee of approximately $7.95.y 3 {O'ԍSee Smog Alerts To Be Issued by Pagers in Test Program, Los Angeles Times, Nov. 18, 1998. In an effort to attract nontraditional paging users, Swatch, the wristwatch maker, introduced Swatch the Beep Box, a round pager that comes in three different colors. The pager sells for  X4$75 alone or as a $100 prepaid package of three months of service and 1,000 pages.~$3 {O"'ԍSee Pager Gets the Swatch Treatment, Business Wire, Nov. 2, 1998.~ SkyTel, the marketer of the prepaid package, notes that with its advanced messaging network gaining high ARPU customers, it is targeting oneway customers in a financiallysecure"-0*%%88"  X4manner (i.e., prepaid).3 {Oy'ԍSee Antony Bruno, Prepaid Services Come To Paging Industry, RCR Radio Communications Report,  {OC'Sep. 21, 1998, available in 1998 WL 8227302. SkyTel also offers its advanced messaging customers a variety of  X4information services, including custom news and Bloomberg financial information.$3 {O'ԍSee SkyTel Adds More Specialized Content to Information Services; Services from Datalink.net,  {O'INTERACTIVE SPORTS Enhance Level of Customization, News Release, SkyTel Communications, Inc., Jan. 20,  {OT'1999; See SkyTel Subscribers To Carry Bloomberg On Their Belts; Partnership Features Several Products To  {O'Get Key Financial Information To Customers on the Go, News Release, SkyTel Communications, Inc., Dec. 16, 1998. ` ` 4. Competitive Assessment  X4In the First, Second, and Third Reports, the Commission concluded that the paging segment  Xz4of the CMRS industry is highly competitive. z3 yO'ԍImplementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report  {O'and Analysis of Competitive Market Conditions with Respect to Commercial Mobile Services, First Report, 10  {O'FCC Rcd at 886768 (1995) ("First Report"); Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report and Analysis of Competitive Market Conditions with Respect to  {O+'Commercial Mobile Services, Second Report, 12 FCC Rcd at 11305 (1997); Third Report, 13 FCC Rcd at 19804. For a number of reasons, the Commission continues to believe that the paging/messaging industry is highly competitive. First, although concentration (based on subscriber share) has increased in the past year due to two large mergers, there are still an average of 29 paging licensees in each of the 25 largest cities in the U.S., not including resellers, and an average of 12 paging licensees in each of the 25 smallest  X 4MSAs.^  3 yOJ'ԍRCR, RCR's 1998 Paging Handbook (1998).^ Second, paging carriers continue to face competition from other sectors of the  X 4wireless industry. Third, customers can switch providers at low cost.`  "3 {O'ԍSee Strategis Paging Report, at 75.` Fourth, while some  X 4carriers are in the midst of restructuring and raising the prices of some paging services,  3 {O>'ԍSee Major Paging Carrier's Financials Take the Street by Surprise, pagingNOW, Feb. 17, 1999 .  X 4estimated industry churn is on the rise (4.0 percent compared to 3.0 percent in 1997),  3 {O 'ԍCustomer Churn Stirs Up Paging Industry, News Release, The Strategis Group, Nov. 5, 1998. and onethird of those planning to switch carriers cite rising prices. There is also some evidence  X4that at least for some classes of customers, demand is relatively more price sensitive (i.e., price elastic) as evidenced by customers moving to competitors with lower prices or dropping". 0*%%88"  X4off the network entirely.3 {Oy'ԍSee Gains Too Modest To Assess Paging Industry's Shift in Marketing, Communications Today, Nov. 9,  {OC'1998, available in 1998 WL 17661712. Finally, ARPU was at a low point last year and has increased in 1998, which is due in part, analysts believe, to the increased provision of valueadded  X4advanced messaging and information services.$3 {O'ԍ New Business Climate Envelopes U.S. Paging Industry, News Release, The Strategis Group, Aug. 5, 1998. Analysts note that such services are offered  X4by carriers in order to differentiate their services in an increasingly competitive market.L\~3 {O 'ԍSee Wireless Messaging Industry Prepares for Information Explosion, News Release, PageNet, Nov. 19,  {O '1998; See Jeanine Oburchay, Wall Street Perspective: Is Paging a Lasting Application?, pagingNow, Dec. 10, 1998 .L C. DISPATCH  Traditional Dispatch Dispatch services allow twoway, realtime, voice communications between two or more  XH4mobile units (e.g., between a car and a truck) or between mobile units and fixed units (e.g., between the end user's office and a truck). Typical users of dispatch services include service and delivery companies whose operations require their employees to communicate with each other on a private (onetoone) or group (onetomany) basis. As mentioned in the introduction, dispatch networks can also be designed to interconnect with the PSTN. Commercial dispatch carriers operate primarily in the 800 MHz, 900 MHz and 220 MHz  X 4bands.oZ 3 yO'ԍIn re Applications of Pittencrieff Communications, Inc. Transferor and Nextel Communications, Inc.  yO'Transferee For Consent to Transfer Control of Pittencrieff Communications, Inc. and its Subsidiaries,  {O'Memorandum Opinion and Order, 13 FCC Rcd 8935, 8949 (1997).o Commercial dispatch service offered in the 800 MHz and 900 MHz bands is  X 4referred to by the Commission as Specialized Mobile Radio ("SMR") service.J 3 {O'ԍSee 47 C.F.R. 90.7.J In addition to the dispatch services being provided by SMR and 220 MHz licensees, there are also many PMRS licensees using their licenses to meet their own needs for dispatch  XM4services.XMV 3 yOT 'ԍIt is also possible that potential customers of dispatch services who are seeking more a interconnected service may also choose to purchase mobile telephone service from a cellular, broadband PCS, or digital SMR operator. Some of these licensees also offer commercial dispatch services to other"M/v0*%%88*"  X4customers.Z\3 yOy'ԍCommercial dispatch services are offered by PMRS licensees who can provide dispatch service to others  {OA'on a forprofit basis and still be classified as PMRS as long as they are not connected to the PSTN. See First  {O 'Report, 10 FCC Rcd at 88618863.Z According to one analyst, there were approximately 15.8 million private mobile  X4radio users in the United States as of yearend 1998.3 yO'ԍThe Stategis Group, Inc., "Dispatch Service in a Competitive Market," Presentation at AMTEX'98 Conference & Exposition, Nov. 13, 1998. However, this report will limit most of its discussion of dispatch services to commercial SMR and 220 MHz licensees. In the following, "dispatchonly" refers to subscribers who use private or group service only, while "dispatch/interconnect" refers to subscribers who are also able to make calls to the  Xv4PSTN.vD3 yOk 'ԍIt is important to note that operators can offer both services to customers on the same network. For purposes of this report, "Dispatch" and "SMR" are used to refer to combined dispatchonly and dispatch/interconnect services in all bands.  X14 ` ` 1. Commercial Dispatch Market Structure and Performance In 1998, the commercial dispatch industry's total subscribership increased by 48 percent from  X 43.1 million to 4.6 million.] 3 {Oq'ԍSee Appendix D, Table 2, p. D3.] Of the 1998 total, approximately 1.63 million were dispatch X 4only subscribers.AX f 3 yO'ԍThe Stategis Group, Inc., "Dispatch Service in a Competitive Market," Presentation at AMTEX'98 Conference & Exposition, Nov. 13, 1998. The Strategis Group estimates that 86 percent of analog subscribers and less than five percent of digital subscribers are dispatchonly.A  X 4The overall structure of SMR industry is more concentrated than other CMRS sectors.W 3 {O'ԍSee Appendix D, Table 1, p. D2.W The largest SMR operator is Nextel, with approximately 3.1 million U.S. subscribers, including  Xy4over 350,000 analogbased, dispatchonly subscribers.yZy3 yOB'ԍNextel Communications, Inc., Form 10K, Dec. 31, 1999, at 1. This figure had decreased from 583,000  {O 'at the end of 1997. See Third Report, at n. 277. Nextel's existing analog SMR operations focus primarily on two-way radio service. Nextel Communications, Inc., Form 10K405, Dec. 31, 1997, at 14.y Nextel served 21 percent of all dispatchonly subscribers; Nextel's total subscribership was 68 percent of all SMR subscribers. The next largest operator was Southern Company, with 100,000 subscribers. The third largest operator was Mobex with 50,000 subscribers. Other significant operators include the Chadmoore Wireless Group, Inc. with 27,000 subscribers and Intek Global with 11,400"0:0*%%882" subscribers. While revenue per subscriber for dispatch/interconnect users is much higher than dispatch X4only revenue, the differential has been shrinking.]3 {O4'ԍSee Appendix D, Table 3, p. D3.] Between 1996 and 1998, the ARPU for dispatchonly services rose slightly, from $16.10 to $16.40. In contrast, over the same time period, the ARPU for dispatch/interconnect services decreased 22 percent from $49.40 to $38.70. ` ` 2. Major Trends and Developments ` `  a. Analog Expansion  X 4Even as Nextel has been successfully deploying digital technology in its networks,eZ Z3 yO'ԍSouthern Company, which offers its Southern LINC service across 120,000 square miles in the Southeastern United States, is also using iDEN technology in the 800 MHz SMR band. Southern Company,  {O'Service Territory (visited Feb. 24, 1999) .e the  X 4number of analog subscribers (excluding those served by Nextel) continues to grow.W |3 {O'ԍSee Appendix D, Table 4, p. D3.W While total analog subscribers in the 800 MHz band declined 6 percent in 1998, nonNextel analog 800 MHz subscribers grew 8 percent. Other analog bands showed even more subscriber growth: analog 220 MHz grew 43 percent, and analog 450 MHz grew 273 percent. Subscriber growth in 1998 for all analog bands was 9 percent. This growth shows the continued demand for cheaper, dispatchonly service that is generally provided by analog  XK4operators.K3 {O 'ԍSee Lynette Luna, Analog Dispatch Still a Viable Growth Business, Say Operators, RCR, Oct. 19, 1998, at 1516. Chadmoore Wireless Group, Inc., for example, is building a nationwide analog SMR network. According to Chadmoore COO Jan Zwaik, "We want to remain analog . . . our vision is to provide costeffective  {Od'service." Lynette Luna, Analog Dispatch Still a Viable Growth Business, Say Operators, RCR, Oct. 19, 1998, at 15. The capital costs per subscriber associated with digital technology are substantially higher than those for analog systems. Chadmoore Wireless Group, Inc., Form 10QSB/A, filed Nov. 25, 1998. ` `  b. 220 MHz Auction  X4Due to a variety of factors,2\ 3 {O*#'ԍSee Amendment of Part 90 of the Commission's Rules To Provide for the Use of the 220222 MHz  {O#'Band by the Private Land Mobile Radio Service, Memorandum Opinion and Order on Reconsideration, 13 FCC Rcd 14569,1457514579 (1998).2 the 220 MHz band is significantly less encumbered than the"10*%%88w"  X4800 and 900 MHz SMR bands. 3 {Oy'ԍCaron Carlson, FCC Prepares 220 MHz Auction, WirelessWeek, Jan. 12, 1998, at 26; Intek Diversified Corp., Form 10K, Sep. 30, 1997, at 3. Phase I 220 MHz licensing was conducted by lotteries that awarded  {O 'approximately 3,800 licenses through random selection. Federal Communications Commission, 220 MHz Fact  {O'Sheet (last modified Jan.7, 1999) . According to Intek Global Corp., a holder of 220 MHz licenses, the number of currently commercially operational 220 MHz systems  yOg'is "very small." Intek Global Corp, Form 10K, Sept. 30, 1998, at 6.  Furthermore, the conversion of spectrum to digital services on the 800 and 900 MHz SMR bands, and their higher monthly prices, has led to an increased demand for the less expensive dispatch services both for analog 800 and 900 MHz  X4SMR operators, and 220 MHz operators. !F3 yO 'ԍIntek Global Corp., Form 10K, Sep. 30, 1998, at 7. "Over the last several years, however, many traditional SMR operators have been acquired by Nextel Communications, Inc. ("Nextel") and have been, or are being, converted to a national ESMR system utilizing digital technology which also provides cellular like service. That consolidation, the Company believes, has left a void in the U.S. market for those subscribers seeking traditional low cost two-way dispatch service."   X4On October 22, 1998, the Commission completed the Phase II 220 MHz auction," 3 {O4'ԍSee "Phase II 220 MHz Service Auction Closes: Winning Bidders in the Auction of 908 Phase II 220  {O'MHz Service Licenses," Public Notice, DA 982143 (rel. Oct. 23, 1998). raising  Xv4$21 million.#vR 3 {Oy'ԍSee Appendix A, Tables 1 and 2, p. 2, 3, 5 for a summary of the auction design and a list of high bidders. Licensees authorized in the Phase II 220 MHz Service are permitted to  X_4provide voice, data, paging and fixed communications.$_3 {O'ԍFederal Communications Commission, 220 MHz Fact Sheet (last modified Jan.7, 1999) . A reauction of retained (and  XH4defaulted) licenses began on June 8, 1999.<%H3 yO'ԍ"Phase II 220 MHz Service Spectrum Auction Scheduled for June 8, 1999; Application Filing Deadline Set for May 10, 1999; Comment Sought on Reserve Prices or Minimum Opening Bids and Other Auction  {O'Procedures," Public Notice, DA 98-2386 (rel. Nov. 24, 1998). See also "Phase II 220 MHz Service Spectrum Auction; Notice and Filing Requirements for Auction of Phase II 220 MHz Service Spectrum Scheduled for June  {O!'8, 1999," Public Notice, DA 99474 (rel. Mar. 8, 1999).< ` `  c. Upper 800 MHz Band On December 8, 1997, the Commission completed an auction for the upper 200 channels in  X 4the 800 MHz SMR band.& 3 yO@$'ԍ"800 MHz SMR Auction Closes, Winning Bidders In The Auction of 525 Specialized Mobile Radio  {O%'Licenses," Public Notice, DA 97-2583 (rel. Dec. 9, 1997). The license holders from that auction are permitted to relocate" 2&0*%%88# "  X4incumbent licensees to comparable spectrum.F'3 yOy'ԍ47 C.F.R. 90.699.F FCC rules allow a oneyear voluntary negotiation period, followed by a oneyear mandatory negotiation period between incumbent licensees and Economic Area (EA) licensees. Ultimately, the operators face forced relocation if the new licensee so desires. The voluntary negotiation period began on December 4,  X41998.s(ZX3 yO'ԍ"Wireless Telecommunications Bureau Announces the Commencement of the Voluntary Negotiation  {Ou'Period for the Relocation of Incumbent Licensees in the 800 MHz Band," Public Notice, DA 98-2434 (rel. Dec. 4, 1998). The license winner must contact the incumbents by March 4, 1999 to begin negotiations.s Some uncertainty regarding the 800 MHz licenses dissipated in early February 1999 when the U.S. Court of Appeals for the District of Columbia determined that the Commission was within its statutory authority to auction wireless spectrum to provide SMR services and to use  X14its plan to relocate incumbents.u)1z3 yO\'ԍFresno Mobile Radio, Inc. v. FCC, 165 F.3d 965 (D.C.Cir. 1999)u ` `  d. Geotek Bankruptcy and Nextel Geotek Communications, Inc. ("Geotek"), an SMR operator that used its own patented technology in the 900 MHz band to provide a range of telecommunications services to small and mediumsize businesses with mobile fleets of vehicles, filed for Chapter 11 bankruptcy  X4protection on June 29, 1998.*~ 3 yOK'ԍGeotek Communications, Inc., Form 10K, Dec. 31, 1996, at 2. In addition to traditional mobile telephone and onetomany dispatch services, Geotek also offered a range of mobile messaging, mobile data and  yO'vehicle location services. Geotek Communications, Inc., Form 10K, Dec. 31, 1996, at 3. As recently as January  {O'1998, Geotek was operating in 11 markets and had 15,151 subscribers.  Geotek Reports Year End Subscriber  {Om'Growth, News Release, Geotek Communications, Inc., Feb. 5, 1998. By June 1998, however, Geotek had  {O7'insufficient cash to fund operations.  Geotek to Cease Operations Later This Month, Wireless Today, Oct. 2, 1998. Although it originally planned to reorganize, Geotek  Xy4announced in October that it was shutting down its SMR operations.+yP 3 {Oz'ԍGeotek to Cease Operations Later This Month, Wireless Today, Oct. 2, 1998. On February 12, 1999, Nextel announced that it planned to buy all of Geotek's 191 900 MHz  X44licenses1, \43 yO"'ԍGeotek's licenses cover a potential market population of 200 million people and include a number of major metropolitan areas: Atlanta; Birmingham, Ala.; Boston; Charlotte, N.C.; Cincinnati, Ohio; Milwaukee, Wis.; New York City; Philadelphia; Portland, Ore.; Richmond, Va.; Washington, D.C.; Jacksonville and Miami, Fla.; San Antonio, Houston and Dallas, Texas; Spokane and Seattle, Wash.; and Tulsa and Oklahoma City, Okla. "%+0*%%*%"  {O'Nextel To Acquire Geotek's Licenses For $150 Million, Communications Today, Feb. 16, 1999; Federal  {OZ'Communications Commission, Final Results for All Markets (Excel Ver. 4) (Visited Mar. 22, 1999).1 for $150 million, pending regulatory approval.-$43 {O'ԍNextel Requests Lift of Consent Decree to Buy Geotek's 191 900 MHz Licenses for $150 Million, Land  yO~'Mobile Radio News, Feb. 19, 1999. Other bidders included Mobex Communications, Chadmoore Wireless Group, Industrial Communications & Electronics Inc., Southern Co., and FleetTalk Partners. Jeffrey Silva,  {O'Geotek Bankruptcy Sale Reset for Tuesday, RCR Radio Communications Report, Feb. 15, 1999. Four days later, Nextel and"43-0*%%88"  X4Geotek received permission for the transaction from the Delaware Bankruptcy Court..3 {O 'ԍNextel Requests Lift of Consent Decree to Buy Geotek's 191 900 MHz Licenses for $150 Million, Land  yOS 'Mobile Radio News, Feb. 19, 1999. The following day, Nextel filed suit in the U.S. District Court for the District of Columbia to lift  X4the consent decree limiting its holdings in the 900 MHz band./2 3 yO 'ԍIn 1995, Nextel and its supplier, Motorola Inc., signed a consent decree with the Department of Justice to obtain approval of 900 MHz license transfers from Motorola to Nextel. The consent decree limits the number of licenses each company can use in the top 14 U.S. markets. Several of the Geotek licenses fall in this category and Nextel's acquisition of the license would place it in violation of the decree. Nextel offered $100 million for Geotek licenses covering spectrum restricted by the consent decree, and $50 million for the remaining licenses.  {O'Caron Carlson, Mobex, Nextel Spar Over DOJ Decree, Wireless Week, Feb. 22, 1999. On June 14, 1999, Nextel  X4reached agreement with the Department of Justice for an out of court settlement.03 {O'ԍNextel to Be Freed to Utilize 900 MHz Spectrum to Expand iDEN Network, News Release, Nextel Communications, Inc., June 14, 1999. Nextel would also need Commission approval for the license transfers. Under the agreed terms of the settlement, which is subject to court approval, Nextel will be permitted to acquire ownership of or rights to use more than half (108 of the available 200) of the 900 MHz channels allocated for specialized mobile radio and other uses in the consent decree  X_4markets.1\_3 {O'ԍNextel to Be Freed to Utilize 900 MHz Spectrum to Expand iDEN Network, News Release, Nextel Communications, Inc., June 14, 1999. The entire consent decree, and any associated restrictions on Nextel's  {O'utilization of additional 900 MHz channels in these markets, will terminate on October 30, 2000. Id.ą D. Mobile Wireless Data Services Analysts estimate that more than 70 million Americans over age sixteen log onto the Internet  X 4every day and in 1998 spent $7.8 billion via the Internet.2 *3 {O!'ԍBrad Smith, Wireless Wakes up To ECommerce, Wireless Week, Feb. 1, 1999, at 66. Further, worldwide sales of" 420*%%88 "  X4handheld computing devices (sometimes referred to as personal digital assistants ("PDAs")),33\3 {Oy'ԍFor example, 3Com manufactures the PalmPilot Professional. See 3Com Corporation, 3Com/Palm  {OC'Computing PalmPilotTM Professional Edition Organizer (visited Feb. 19, 1999) .3 used by many mobile users to access the Internet, grew by over 61 percent between 1997 and  X41998.43 {Oo'ԍGartnerGroup's Dataquest Says Worldwide Handheld Market Grew 61 Percent in 1998, News Release, Dataquest Inc., Feb. 8, 1999. The wireless industry is attempting to capture a portion of the revenues generated by sales of telecommunications services used to access the Internet, email, and corporate  X4intranets through mobile wireless data services.5F3 {O 'ԍFor a discussion of fixed wireless data services, see Appendices F and G. Wireless carriers are entering mobile data markets by providing new services, and equipment  X_4manufacturers have responded with a plethora of new devices.6_3 {O'ԍSee, e.g., HP Introduces First Color PalmSize PC Running Microsoft Windows CE, News Release, HewlettPackard Company, Feb. 1, 1999. For example, digital handsets range from a simple keypad phone with limited data capabilities to newer products  X14such as QUALCOMM's pdQ "smart" phone with builtin PDA and access to the Internet.712 3 {O'ԍSee QUALCOMM Incorporated, 1998 Annual Report, at 14. The product is expected to be available in  {O'1999. See id. In addition, several joint ventures have been announced to develop and market bundled information services and establish Internet protocol ("IP") transmission standards to facilitate communication between various types of networks and technologies. These ventures are discussed below. This section begins with a description of mobile data providers, followed by joint ventures and industry trends and statistics. ` ` 1. Mobile Data Providers Due to different technologies and spectrum, the mobile wireless data industry encompasses a wide array of services ranging from data transmitted over oneway pagers to vehicle tracking from satellites to wireless Internet connections via portable computers or PDAs. Participants  X4include both CMRS and nonCMRS providers.8 3 {O.#'ԍSee The Bishop Company, Wireless Data Networks, A Guide to Mobile Computing (1998), at 18.  {O#'("Bishop Report") The Commission recognizes that many of the providers discussed below also offer services that were addressed in the preceding three"580*%%88" sections. However, because the industry is still evolving, the Commission believes it is appropriate to address mobile data services as a separate section. For discussion purposes, carriers providing mobile wireless data services can be grouped into four general network types: 1) paging/messaging networks, 2) voice/data networks, 3) dedicated data networks, and  X44) satellite networks.93 yO'ԍExamples of the types of services provided over these networks are summarized below. For a more  {O'complete delineation of the networks and services, see Appendix D, Table 1, p. D1.  Xv4As noted in the Third Report, the use of categories does not imply that the Commission's view of operators and services is limited by the category in which this discussion places them. Many networks are capable of providing similar services, and this report attempts to provide a broad overview of the types of services a given network may provide. As it is unlikely that consumers would be concerned about which network is used to provide mobile wireless data services, these categories have been established merely to facilitate the presentation. Furthermore, because these services are evolving in many different ways, it is not clear at this time into which market sector these services will be placed in the future. ` `  a. Paging/Messaging Networks As discussed in Section PAGINGII.B, oneway paging companies provide a variety of subscriber information services such as email, sports scores, and customized web site information. These services are ubiquitous in coverage and relatively less expensive for customers compared to some other wireless mobile data services discussed below. However, the volume and speed of the data sent are limited. Many paging carriers offer some form of information  X4services.r:"3 {O'ԍFor a further discussion, see Section PAGINGII.B.r In addition to receiving information on the screens of traditional pagers, paging subscribers can receive oneway data to download to a laptop or PDA. PageMart markets a  X4receiver that connects to the 3Com PalmPilot.S;3 {O?'ԍSee Bishop Report, at 4647.S Narrowband PCS services permit higher speed transmissions of data and also allow  X4subscribers to respond.<F3 {O 'ԍFor a discussion of services offered by narrowband PCS providers, see Section NPCS1II.B.3 and Appendix C, Table 8, p. C9. Narrowband PCS providers are also capable of providing wireless  X~4modem functions similar to packetswitching data services discussed below.V=~3 {O#'ԍSee Bishop Report, at 50.V "g62 =0*%%88"Ԍ` `  b. Voice/Data Networks In addition to voice services, mobile telephone carriers provide a variety of data services over analog cellular data networks, as well as digital cellular, broadband PCS, and digital SMR networks. ` `  ,(1) Analog Cellular Networks Analog cellular carriers offer circuitswitched cellular data ("CSCD") services. CSCD service requires two computers connected continuously throughout the session. The mobile telephone connects to a modem, that transmits data via an air link to a nearby cell and through the  X 4public switched network to the other computer.E> 3 {O| 'ԍSee id, at 22.E Providers include AirTouch, ALLTEL, and  X 4Comcast Cellular, among others.? Z3 {O'ԍSee RCR's Top 20 Mobile Data Carriers, RCR Radio Communications Report, Sep. 7, 1998, at 16. Cellular networks also provide a packetswitched data transmission service called Cellular Digital Packet Data ("CDPD") service over the existing analog network by installing certain  X4upgrades.@\3 yO-'ԍInstallation of CDPD requires a special signal processor in each cell site to detect and route packet data.  {O'Bishop Report, at 54. See also Harry Newton, Newton's Telecom Dictionary (14th ed. 1998), at 140. CDPD can  {O'also run over TDMA and CDMA networks. Id.  The main difference between CDPD and CSCD is that CDPD does not require a continuous connection. Therefore, certain types of transmissions can be more efficient since CDPD does not continuously tie up the transmission path. Circuitswitched CDPD ("CSCDPD") was developed to expand the coverage of CDPD by allowing users to access the data  X44network wherever analog cellular voice service is available.A43 {O' CDPD ׍See Shawn Steward, A circuitous route to CDPD expansion, Cellular Business, Sep. 1, 1996, available  {O'in 1996 WL 9781930. Most large cellular carriers  X4offer CDPD.Bl 3 {O:'ԍSee Wireless Data Forum, CDPD Report Card Third Quarter 1998 (visited Feb. 23, 1999)  {O'; Third Report, 13 FCC Rcd at 19811. While prices were originally based on the amount of data throughput, carriers  X4have begun offering CDPD service on a flat rate basis for under $60 per month.PC 3 {O!'ԍSee Bishop Report, at 56.P As of the end of the third quarter of 1998, CDPD was available to more than 55 percent of the"7Z C0*%%88"  X4population, up slightly from 53 percent coverage at the end of the third quarter of 1997.9D\3 {Oy'ԍWireless Data Forum, CDPD Report Card Third Quarter 1998 (visited Feb. 23, 1999)  {OC'; Third Report, 13 FCC Rcd at 19811. Appendix H, Map 9, p. H10 shows the estimated U.S. coverage of CDPD.9 ` `  ,(2) Digital Mobile Telephone Networks Digital cellular, broadband PCS, and digital SMR mobile telephone providers are capable of  X4providing short messaging services ("SMS"),{E3 yO* 'ԍFor example, AT&T Wireless, Sprint PCS, Omnipoint, and Nextel offer SMS. { as well as circuitswitched and packet Xv4switched data transmission.VFv|3 {O 'ԍSee footnote  CDPD321 .V SMS can be either one or twoway text messaging provided  X_4to the mobile handset and may include email as well as text Internet information.G_3 yO'ԍOne source indicates that some analog cellular networks have upgraded their systems to offer SMS. The  {O'networks use a digital control channel rather than an analog control channel. See Bishop Report, at 18.  XH4Currently, most digital providers' data offerings are limited to short messaging services.THHh 3 {Oa'ԍSee Bishop Report, at 18, 36.T Only GSM and iDENbased providers actively offer circuitswitched wireless data communications, permitting subscribers to send and receive email, faxes, and files from their  X 4mobile phones.OI 3 {O'ԍSee id, at 36, 83.O However, it is believed that once their voice networks are built out, mobile  X 4phone providers using CDMA and TDMA technologies will also provide these services.DJ 3 {O'ԍSee id.D The Nokia 9000 and 9110 "smart" phones combine a GSM handset and keyboard that will send and receive faxes and email using circuitswitched transmission, send and receive  X4messages using short messaging service, and browse text web sites.EK3 {O_'ԍSee id, at 38.E Ericsson recently launched the first GSMbased mobile telephone that combines a builtin modem with an  Xb4infrared eye that eliminates the need for cables.Lb3 {O!'ԍSee Gayle Bryant, The Future in the Palm of Your Hand, Business Review Weekly, Dec. 7, 1998,  {O"'available in 1998 WL 11773575. Omnipoint offers circuitswitched data  &zL "b8 L0*%%88"  X4transmission over its GSM network.eM\3 {Oy'ЍSee Brad Smith, Omnipoint Leads GSM Data Pack, Wireless Week, Mar. 22, 1999, at 19. Omnipoint announced it would begin offering highspeed circuitswitched data at a base rate of 14.4 kbps (versus the  {O 'previous 9.6 kbps) beginning April 1, 1999. See id.e In addition, Southern LINC, a digital SMR provider  X4using the iDEN network also provides circuitswitched data services.N3 {O'ЍSee Southern Company, Southern LINC Features (visited Feb. 11, 1999) . While QUALCOMM produces equipment permitting data transmission over CDMA networks, no domestic CDMA  X4providers yet offer such services.POF3 {O 'ԍSee Bishop Report, at 40.P Wireless digital data services that are in the testing or planning phase, such as packetswitched communications, are discussed below.  Xv4Finally, as discussed above in Section 3GII.A.1.b, the ITU is developing recommendations for the IMT2000 initiative which will include mobile wireless data services. It is anticipated that systems based on 3G technology will offer greatly enhanced data capabilities, and will begin to converge differing regional or national mobile systems into a radio infrastructure  X 4capable of providing those services on a global basis.:P 3 {O'ԍId.:   X 4` `  DEDICATEDc. Dedicated Data Networks A number of wireless networks provide only data services. ARDIS, BellSouth Wireless Data, Inc. ("BWD") and Metricom, Inc. ("Metricom") use packetswitched data networks to provide a variety of wireless data services. ARDIS provides twoway data communications primarily  Xy4to businesses in field services and transportation markets.Qyj 3 {O'ԍAmerican Mobile Satellite Corporation, Form 10K, Dec. 31, 1998, at 2. See Appendix H, Map 12, p. H13 for American Mobile Satellite Corporation's ARDIS coverage. BWD provides services such as field sales and service through its Mobitex network, and several thirdparty providers package Mobitex with other software and services to provide access to email, corporate intranets, and  X44the Internet.R&4 3 {O'ԍBellSouth, BellSouth Wireless Data Corporate Information (visited Mar. 24, 1999)  {Os '. See also BellSouth, BellSouth Wireless Data Messaging   {O=!'(visited Mar. 25, 1999) . See Appendix H, Map 11, p. H12 for BWD's coverage. BWD began providing Internet email service last year over its twoway  X4messaging network.S3 {O$'ԍSee Brad Smith, Data Finally Reaching Its Potential, Wireless Week, Feb. 8, 1999, at 40. The service permits messages up to 2700 words.TD3 {O'ԍSee The Best Is Yet To Come A Look Back at the Year in Wireless Data, Wireless Data News, Dec. 9,  {OZ'1998, available in 1998 WL 8015476. In addition, Palm"9$T0*%%88 " Computing has announced it will provide Internet services to its Palm VII PDA using BWD's  X4network.U$3 {O'ԍSee Brad Smith, Data Finally Reaching Its Potential, Wireless Week, Feb. 8, 1999, at 40. Metricom uses unlicensed spectrum. The company provides access to the Internet, email, LANs, online services, and private intranets through its Ricochet service. The company is in the process of testing its upgraded network permitting data transmission speeds up to 128  Xv4Kilobits per second ("Kbps") as compared to its current network speed of 28.8 Kbps.2V\v3 {O 'ԍMetricom Deploys Industry's First 128KB Mobile Data Network, News Release, Metricom, Inc., Mar.  {O '16, 1999; Metricom, Inc., Metricom Inc. Frequently Asked Questions (visited Mar. 17, 1999) .2 Ricochet coverage currently includes the San Francisco Bay Area; Seattle and Washington,  XH4D.C.; parts of Los Angeles and New York City; and several campuses and airports.WH3 {O'ԍMetricom, Inc., Form 10K, Dec. 31, 1998, at 2; New York City Goes Mobile with Metricom, News Release, Metricom, Inc., Apr. 6, 1999. As of  X14February 28, 1999, Metricom had 26,500 Ricochet customers.X14 3 {O'ԍMetricom, Inc., Form 10K, Dec. 31, 1998, at 2. See Appendix H, Map 12, p. H13 for Metricom's Ricochet coverage.  X 4Teletrac, Inc. ("Teletrac") also uses unlicensed spectrum to provide vehicle location3Y 3 yOB'ԍThe Commission recently completed its Location Monitoring Service ("LMS") Auction which permits license holders to utilize nonvoice radio techniques to determine the location and status of mobile radio units.  {O'See Amendment of Part 90 of the Commission's Rules to Adopt Regulations for Automatic Vehicle Monitoring  {O'Systems, Second Report and Order, PR Docket No. 9361, 13 FCC Rcd 15,182 (1998). LMS auction results are provided in Appendix A, Table 4, p. A6.3 and  X 4fleet management services in thirteen metropolitan areas.DZ\ B3 {O'ЍTeletrac, Inc., Corporate Information (visited Mar. 17, 1999) ; Teletrac, Inc., Availability (visited Mar. 17, 1999) .D Teletrac has over 2,400  X 4commercial customers and more than 80,000 commercial and consumer units in operation.:[ f3 {O!'ԍId.: " :[0*%%88"  X4` `  d. Satellite Services A number of satellite providers offer mobile data services. The paging/messaging offerings  X4of satellite providers were discussed above in Section MSSII.B.3. In addition, QUALCOMM and  X4American Mobile provide vehicle tracking services.\3 yO'ԍQUALCOMM Incorporated, Form 10K405, Sep. 28, 1997, at 9; American Mobile Satellite Corporation, Form 10K, Dec. 31, 1997, at 2. As of December 31, 1998, American  X4Mobile had approximately 92,700 terrestrial (i.e., ARDIS) and satellite data units.w] 3 yO^ 'ԍAmerican Mobile Satellite Corporation, Form 10K, Dec. 31, 1998, at 2.w ORBCOMM offers mobile asset tracking for trailers, containers, rail cars, heavy equipment,  Xa4fishing vessels, barges and government assets.f^a3 yO 'ԍORBCOMM Global, L.P., Form 10K, Dec. 31, 1998, at 3.f  X34` ` 2. Joint Ventures Some analysts believe that wireless data will serve only niches until the market addresses  X 4specific network and standards issues.H_\ @3 {O'ԍSee Brad Smith, Data Finally Reaching Its Potential, Wireless Week, Feb. 8, 1999, at 38; see also  {O'Gayle Bryant, The Future in the Palm of Your Hand, Business Review Weekly, Dec. 7, 1998, available in 1998 WL 11773575.H To begin to address issues related to proprietary networks and incompatible standards, mobile wireless data providers have announced a number of joint ventures to develop and market wireless data applications that are compatible with multiple networks and standards. Many of these joint ventures are competing against  X4one another.`d 3 {O'ԍSee The Best Is Yet To Come A Look Back at the Year in Wireless Data, Wireless Data News, Dec. 9,  {Oq'1998, available in 1998 WL 8015476. Three of the most prominent venturesa" 3 yO'ԍOther ventures include announcements by Motorola Inc. and Cisco Systems Inc. to partner to provide wireless Internet access and Nextel and Netscape announcing the planned development of an Internet browser for  {O'Nextel's digital network. See WirelessNow News Item: Recent Deals Foretell Wireless Data Success (visited Feb. 11, 1999) . include the Wireless Access Protocol  X{4("WAP") Forum,ib{3 yO 'ԍWAP includes over 75 percent of the handset manufacturers and carriers representing over 100 million  {O!'subscribers worldwide. WAP is developing a set of standards for wireless transmission over the Internet. See  {Oh"'Open Wireless Internet Standard Backed by 71 Companies Worldwide, News Release, WAP Forum, Nov. 11, 1998. The WAP Forum indicates that the specification will be vendorneutral and networkindependent and will  {O#'provide worldwide wireless Internet access from handheld devices. See id.i Wireless Knowledge, LLC,wc{`3 yO'ԍWirelessKnowledge LLC, a joint venture between Microsoft and QUALCOMM was formed to offer carriers secure wireless access to data and applications on any wireless device, network, or enterprise system  {O 'including CDMA, GSM, TDMA, and CDPD. See Brad Smith, BT Joins Data Venture, Wireless Week, Feb. 8,  {O'1999, at 1. The venture introduced its first product in January 1999. See Antony Bruno, WirelessKnowledge  {O'Debuts First Product, RCR Radio Communications Report, Jan. 25, 1999, at 7.w and Bluetooth.d${~3 yOF'ԍEricsson, IBM, Intel, Nokia, and Toshiba announced the formation of Bluetooth, a technology specification that will permit subscribers to transmit data from wireless network to wireless network and from  {O'any location without regard to wireless phone or other equipment standards. See Bluetooth, Welcome to  {O'Bluetooth Text Only_FAQ (visited Feb. 3, 1999) . While all of these"{;j d0*%%88p" initiatives have contributed to changes in the services and equipment offered by mobile wireless data providers, it is not clear, at this point, what impact these initiatives will have on  X4market growth.ej 3 {O 'ԍSee Erich Luening, Major Move Toward Wireless Standard, May 20, 1998 (visited Feb. 3, 1999) . ` ` 3. Industry Trends and Statistics ` `  a. Subscribers and Revenues One analyst estimates that there were almost three million business mobile data subscribers at  X14yearend 1998, an increase of more than 41 percent over yearend 1997.f$1 3 yO'ԍ The forecast by The Strategis Group (2.9 million) was completed in 1997 and there is no updated  yOn'Strategis forecast available. The Strategis Group, The U.S. Mobile Data Marketplace: 1997 (1997), at  {O6'353. ("Strategis Mobile Data Report") In addition, The Yankee Group forecasts 2.95 million subscribers at  {O'yearend 1998. PCIA Forecast, at 73.  Based on 1997 forecasts, revenues from business mobile data subscribers were estimated to be $535 million  X 4at yearend 1998, a 42 percent increase over yearend 1997.g 3 yOd'ԍThe forecast by The Strategis Group was completed in 1997 and there is no updated Strategis forecast  {O,'available. Strategis Mobile Data Report, at 353. In addition, based on a survey of ten wireless carriers, the Wireless Data Forum reports that wireless data revenues increased  X 463 percent in the twelve months ending June 30, 1998.h 3 {O'ԍWireless Data Forum, WDF: Wireless Data Market Index (visited Feb. 2, 1999) . ` `  b. Prices Mobile wireless data services are highly differentiated, in part due to the specific mobile wireless services offered based on the bandwidth or transmission capacity and the geographic"b<dh0*%%88&"  X4coverage of their networks.si3 {Oy'ԍFor additional information, see Appendix D, Table 1, p. D1.s Therefore, a direct comparison of prices is not particularly  X4useful. The Third Report contains a table showing prices of sample email and data  X4transmissions.\jZ3 {O'ԍThird Report, 13 FCC Rcd at 1981314.\ That information has not changed substantially and continues to show a  X4wide variation in prices depending on the technology employed,k&3 {OZ'ԍSee Bishop Report. The report indicates that there have been a couple of per transmission price changes. Geostationary prices have fallen from $10.50 to $7.15 for a sample data transfer and $3.00 to $1.20 for  {O 'a sample email. Id. at 92. Similarly, the Little Low Earth Orbiting satellite system price for a sample email  {O 'have fallen from $6.00 to $5.00. Id. at 103.  although several of the  X4technologies now offer flatrate services.bl3 {O1 'ԍSee e.g., Bishop Report, at 77.b ` `  c. Subscriber and Revenue Market Share by Network Subscriber and revenue market share breakdowns by carrier are not available. However, based on an analysis completed in 1997, one analyst estimates that as of yearend 1998 cellular and broadband PCS would have approximately 56 percent of the mobile data business subscribers, twoway messaging would have 17 percent, dedicated data networks and mobile  X 4satellite services would have 10 percent each, and SMR would have 7 percent.\m l 3 {O 'ԍStrategis Mobile Data Report, at 329.\ The respective share of revenues is quite different. Mobile satellite services would have 33 percent of mobile data business revenues, dedicated data networks would have 26 percent, cellular/broadband PCS would have 20 percent, twoway messaging would have 18 percent,  X4and SMR would have 3 percent.:n 3 {OA'ԍId.: ` `  d. Innovation Many carriers are attempting to enter the mobile wireless data market to provide valueadded services that would differentiate their products from competitors. Around the time of CTIA's Wireless '99 Conference a number of companies many product announcements for mobile wireless data services and equipment. For example, Sprint, Lucent, US WEST, and"= n0*%%88"  X4QUALCOMM all announced Internet offerings in the near future.o&3 {Oy'ԍSee Steve Rosenbush, Wireless Phones Tap into Web Sprint Introduces Faster Service, USA Today,  {OC'Feb. 16, 1999, available in 1999 WL 6834456. Sprint plans to offer Internet access at 14.4 kbps by June 1999. Lucent will test Internet access at 144 kbps later this year, and US WEST and QUALCOMM will run a similar  {O'test in April. See id. QUALCOMM has also announced the availability of the pdQ "smart" phone with personal scheduling software and  X4access to email and the Internet by mid1999.lp3 {O9'ԍSee QUALCOMM Incorporated, 1998 Annual Report, at 14.l In addition, Ericsson began field testing its TDMA digital data and fax software and infrastructure during the first quarter of 1999. The service permits TDMA subscribers to combine a laptop computer or PDA with a digital datacapable mobile phone to provide  X_4access to the Internet, email and intranets.q_H3 {OX'ԍSee Ericsson Announces Digital Data and Fax for TDMA Networks, Business Wire, Feb. 8, 1999. Finally, Pacific Bell Wireless is in the process of testing a "GSM on the Net" wireless IP X 4based multimedia service with Ericsson,r 3 {O'ԍSee Madeleine Acey, PacBell and Ericsson Test 'GSM On The Net,' CMP TechWeb, Feb. 17, 1999,  {Oo'available in 1999 WL 2493490. and Omnipoint is testing a packetswitched  X 4platform with Ericsson.s& 6 3 {O'ЍSee Sylvia Dennis, Ericsson & Omnipoint To Stage First GPRS Trial in US, Newsbytes News  {O'Network, Feb. 9, 1999, available in 1999 WL 5118856. Omnipoint indicates that it plans to launch packet {O~'based services by the end of 1999. See Brad Smith, Omnipoint Leads GSM Data Pack, Wireless Week, Mar. 22, 1999, at 19. In June 1999, Nextel began trialing a wireless Internet service in  X 4six cities.t $3 {O'ԍNextel Digital Wireless Internet Service, Zsigo NewZwire, Apr. 27, 1999. These announcements, along with the joint ventures indicate that the industry is attempting to expand. In addition, the IMT2000 initiative discussed above is expected to positively impact growth. However, at this early stage, it is not clear how quickly or in which direction the market will likely evolve.  XK' III. CONCLUSION  X4In the year since the release of the Third Report, the mobile telephone market has made steady competitive progress. There are now over two dozen broadband PCS and digital SMR operators providing competition in numerous cities across the country. As a result of these">t0*%%88" operators' activities, there are now three or more mobile telephone operators providing some service in over 230 BTAs, containing over 230 million people. Furthermore, there are a minimum of five operators providing some service in each of the 35 largest BTAs. These new entrants (and incumbents) are not subject to rate and entry regulation and are being provided ever increasing regulatory flexibility to allow them to compete effectively. While there is still considerable room for further competitive development, the effects of the progress to date are clear. For example, according to one study the average price per minute of mobile telephone service declined over 40 percent between the end of 1995 and the end of 1998. At the same time, usage of these new services remains high, with many digital customers using over 300 minutes, and as high as 400 minutes, each month. This is three times the average of analog cellular customers. While these are welcome developments, there is still much progress that remains to be made. Most operators have still been concentrating their deployment of new mobile telephone networks on more densely populated urban and suburban markets. While many of these operators are now starting to turn their attention toward smaller cities, many less populated areas are still awaiting the arrival of mobile telephone competition.  Xb4The year since the release of the Third Report has seen the paging/messaging sector remain a highly competitive business with numerous providers in each market. The continued competitive threats from other service providers, such as mobile telephone, mobile data and even satellite providers, have encouraged paging operators to continue to enhance and expand their product offerings with twoway messaging, voice messaging, and enhanced data services, such as email and stock quotes. Given that the dispatch sector is in the process of restructuring, caused by both Nextel's move into the mobile telephone market and the completion of the 800 MHz SMR and 220MHz spectrum auctions, a definitive statement as to its competitive status is difficult to make in this report. Similarly, the developmental stage of the mobile data sector makes it difficult to assess its competitive status. "P?t0*%%88"  X' IV. ADMINISTRATIVE MATTERS This Fourth Report is issued pursuant to authority contained in Section 332 (c)(1)(C) of the Communications Act of 1934, as amended, 47 U.S.C.  322 (c)(1)(C). It is ORDERED that the Secretary shall send copies of this Report to the appropriate committees and subcommittees of the United States House of Representatives and the United States Senate. ` `  FEDERAL COMMUNICATIONS COMMISSION ` `  Magalie Roman Salas ` `  Secretary