Cellular telephony provides communications service to automobiles and hand-held portable phones and interconnects with the Public Switched Telephone Network (PSTN) using radio transmissions based on a system of cells and base station antennas. AT&T’s Bell Laboratories developed the cellular concept in 1947, but it was not until 1974 that the FCC set aside radio spectrum between 800 and 900 MHz for cellular radio systems.

The first cellular demonstration system was installed in Chicago in 1978, and 3 years later the FCC formally authorized 666 channels for cellular radio signals and established cellular geographic servicing areas (CGSAs) to cover the nation’s major metropolitan centers. At the same time, the FCC created a regulatory scheme for cellular service that specified that two competing cellular companies would be licensed in each market.

For each city, one license would be reserved for the local telephone company (a wireline company), and the other license would be granted to another qualified applicant. When the number of applicants became prohibitively large, the FCC amended its licensing rule and specified the use of lotteries to select applicants for all but the top 30 markets.

Cellular service—whether analog or digital—is now available virtually everywhere in the United States and from many more service providers in each market. According the FCC, 259 million people, or almost 91 percent of the total U.S. population, have access to three or more different operators [cellular, broadband personal communications services (PCS), and/or digital specialized mobile radio (SMR) providers] offering mobile telephone service in the counties in which they live.

Over 214 million people, or 75 percent of the U.S. population, live in areas with five or more mobile telephone operators competing to offer service. And 133 million people, or 47 percent of the population, can choose from at least six different mobile telephone operators. If a subscriber uses the cell phone outside the home service area, this is traveling, and an extra charge is applied to the call.

When the cell phone is used outside the service provider’s network, this is roaming. In this case, if the service provider has agreements with other carriers, the traveling rate is applied to each call. Where digital service is not available and the service provider has agreements with conventional analog service providers, subscribers can use their cell phones in analog mode, in which case airtime and longdistance charges are applied to each call.

Applications

Cellular telephones were targeted originally at mobile professionals, allowing them to optimize their schedules by turning nonproductive driving and out-of-the-office time into productive and often profitable work time. Cellular solutions not only facilitate routine telephone communications, they also increase revenue potential for people in professions that have high-return opportunities as a direct result of being able to respond promptly to important calls.

Today, cellular service is also targeted at consumers, giving them the convenience of anytime, anywhere calling plus the security of instant access to service in times of emergency. As of mid-2001, more than half of U.S. households subscribed to wireless phone service, and a majority of them had two or more mobile phones. Over 15 percent of cellular subscribers use the service for more than half of their long-distance calls, while about 10 percent use it for more than half their local calls.

Developing countries that do not have an advanced communications infrastructure are increasingly turning to cellular technology so that they can take part in the global economy without having to go through the resource-intensive step of installing copper wire or optical fiber. Explosive growth is occurring in India and China. Even among industrialized countries, there is continued high growth in cellular usage. In Japan, the number of cell phones now exceeds the number of analog fixed-line phones.

Network Optimization

Network optimization is a high priority for wireless carriers. A single cell site, including electronics and tower, can cost as much as $600,000 to build. With skyrocketing growth for wireless voice and data access in recent years, wireless service providers want to get the most efficient use out of their current networks and target upgrades appropriately to meet customer demand.

The use of network-optimization tools translates into lower wireless service costs and better coverage. Such tools measure cell site footprints, service areas within those footprints, and frequency assignments—all with the purpose of identifying the disruptive interference that cell sites receive from adjoining sites.

By taking steps to limit interference between cells, wireless providers can maximize the bandwidth devoted to moving traffic. In addition to monitoring the cell sites, these network-optimization tools monitor the strength of radio frequency (RF) signals emanating from cell sites as well as how calls are handed off among cell sites.

Regulation

The FCC sets rules, regulations, and policies to, among other things:

• Grant licenses for frequencies and license renewals.
• Rule on assignments and transfers of control of licenses.
• Govern the interconnection of cellular networks with other wireless and wireline carriers.
• Establish access and universal service funding provisions.
• Impose fines and forfeitures for violations of any of the FCC rules.
• Regulate the technical standards of cellular networks.

In addition, the FCC and many states have established universal service programs to ensure affordable, quality telecommunications services for all Americans. Contributions to these programs by cellular/PCS service providers are typically a percentage of end-user revenues.

The FCC currently prohibits a single entity from having a combined attributable interest (20 percent or greater interest in any license) in broadband PCS, cellular, and specialized mobile radio licenses totaling more than 45 MHz in any geographic area, except that in rural service areas no licensee may have an attributable interest in more than 55 MHz of Commercial Mobile Radio Service (CMRS) spectrum.

The FCC must approve any substantial changes in ownership or control of a cellular/PCS license. Noncontrolling interests in an entity that holds a license or operates cellular/PCS networks generally may be bought or sold without prior FCC approval. In addition, the FCC now requires only postconsummation notification of certain pro forma assignments or transfers of control.

All licenses are granted for 10-year terms. Licenses may be revoked if any FCC rules are violated. Licenses may be renewed for additional 10-year terms. Renewal applications are not subject to spectrum auctions. Third parties, however, may oppose renewal applications.

No other technology has taken the world by storm quite like cellular except, perhaps, the Internet. Cellular systems have expanded beyond providing voice communication to supporting more sophisticated applications, such as Internet access for electronic mail and accessing Web content.

New Internetenabled cellular phones feature larger displays that help make them all-purpose communications appliances. It has reached the point where cellular service is as necessary for the average consumer as for mobile professionals.