The Creation of the Largest Cellular Carrier in the US

On May 26th, 2011 René Obermann, Chief Executive Officer of Deutsche Telekom stood in front of a Senate Judiciary Subcommittee and delivered his introductory remarks concerning the sale of T-Mobile USA to AT&T. He announced: “I firmly believe that this transaction is the best possible outcome – not only for DT, T-Mobile USA and AT&T – but for our customers and for wireless competition and innovation in the United States” (T-Mobile Blog, 2011). According to the president and CEO of the Computer and Communications Industry Association (CCIA), Ed Black this announcement is “about the most brazen merger proposal in history,” and he is only one of many expressing concern (Gross, 2011). By looking back at the history of cellular networks and AT&T’s prominence in the US telecommunications market, this paper examines the acquisition from a historical perspective while also looking at the future of cellular technology in the US.

The New York Times article that broke on March 20 emphasized the fact that AT&T’s purchase of T-Mobile USA from Deutsche Telekom would create the largest carrier in the nation and that it “promised to reshape the industry” (Sorkin et al., 2011). T-Mobile is currently known as the “low-cost leader” and was the first carrier to promote the “open” Android mobile operating system (Gross, 2011) making it a unique player in the US market. In panel hearings for the House of Representatives subcommittee Representative Bob Goodlatte expressed his concern: “[t]here are legitimate questions about whether this merger could move this market past the anti-competitive tipping point” (Bartz, 2011). Because of the profound effects the FCC’s decisions is expected to have, it’s vital that we look back at the history of the cellular networks in the US to identify the potential opportunities of either outcome.

Car Phones and the Beginnings of a Cellular Market
In 1946 AT&T offered its first low frequency car phone service using primarily Motorola hardware. This was also when AT&T, along with Motorola, began lobbying the FCC for radio spectrum. Until the 1970s, the limited availability and cost of car phones was equally disconcerting (Wolpin, 2007). Car phones operated at a low frequency that produced a strong signal transmitted over a wide area at fairly low power (Wolpin, 2007). From a carrier standpoint, the drawback with car phones was that there were fewer channels available within the low frequency spectrum they operated on (Wolpin, 2007).

According to Richard Frenkiel (2010), the concept of a cellular phone network first emerged at Bell Labs in the late 1940s however limitations in radio design deterred engineers from creating a working prototype. “The attraction of cellular systems was their ability to reuse channels many times in a local area, and to provide service over very large areas with low-power radios, but a cost-effective cellular system required a large number of channels” (Frenkiel, 2010, p. 14). In the mid 1950s advances in radio design allowed for frequencies up to 1 GHz to be used in consumer applications which doubled the amount of available spectrum. This advancement in radio technology created a land-rush and it was up to the FCC to determine what the new spectrum would be used for. Unfortunately for AT&T, the television was becoming increasingly more popular and had a more viable market than cellular or even car phones (Frenkiel, 2010).

In 1968, the FCC decided that the appropriation of channels for television use wasn’t working as planned and opened an inquiry into the reassignment of 14 UHF TV channels near 900MHz for mobile telephones and mobile radio channels (Frenkiel, 2010). Little was known about this frequency and so in 1968 a large team was assembled at Bell Labs to prepare a feasibility study and system plan for the FCC (Frenkiel, 2010). The resulting cellular plan was delivered to the FCC in 1971. AT&T had anticipated FCC approval and had invested in a full-scale development project, estimating that cellular service could be offered within about five years (Frenkiel, 2010).

Motorola, a company that had previously made car radio parts, was also enthusiastic about cellular service, but not about a monopoly. Stewart Wolpin (2007) writes:

“A cellular network would be a whole new equipment business, one that AT&T could easily dominate. (Regulations had prevented AT&T from dominating the existing market for car-phone equipment.) So Motorola joined with General Electric, GTE, RCA, and the Electronic Industries Association to persuade the FCC not to give away the store to AT&T.”

Over time car phones became smaller, but in 1971 they weighed approximately 40 pounds and the transceiver, called portable only because it could be mounted in a car’s trunk, was the size of a coffee table (Wolpin, 2007).

By mid-1972 both AT&T and Motorola had working cell-system test sites up and running, AT&T running on the 800 MHz frequency and Motorola on 900MHz (Wolpin, 2007). Motorola believed it arguably had a better technology however Marty Cooper and John Mitchell (engineers from Motorola’s communications division) knew they needed more than a slight advantage in order for the FCC to open up the market to multiple carriers.

In a stroke of luck, Cooper found out that AT&T was planning to win over the FCC by creating “a long range project looking at personal [i.e., portable] telephone” (Wolpin, 2007). Cooper and Mitchell immediately devised a plan by which they would co-opt AT&T’s plan and create a hand-held portable phone. Unfortunately they didn’t have much time. AT&T had scheduled hearings with the FCC in May 1973 giving Cooper and his team only three months to design, assemble, test and demonstrate a prototype hand-held phone (Wolpin, 2007).

Several technological breakthroughs that were in various stages of development were suddenly yanked into production within these three months. According to Cooper, “[Motorola] had a religion about making personal communications products smaller and lighter,” (Wolpin, 2007) but this was not a simple task. In Motorola’s car phones, the full-duplex filter was a block as big as a two-pound brick (Wolpin, 2007). Motorola’s plan to work on the 900 MHz frequency provided some inherent benefits in terms of shrinking the size of the full-duplex filter however the hand-held phone would not have been possible without additional technologies such as the direct filter-to-antenna connection created by filter specialist Maynard McGhay. Another newfound technique that reduced the size of the hand-held phone was coating the air-filled chambers of the full-duplex filter with Teflon (Wolpin, 2007).

On April 3rd, 1973 Cooper and Mitchell preformed a “technological buck-and-wing for the FCC, which seemed ready to hand AT&T yet another in a long series of telephone monopolies” (Wolpin, 2007). Motorola introduced the first hand-held portable cell phone at a press conference in order to show the FCC that AT&T wasn’t the only company that could operate and build a cellular network. While the press raved and predicted “a miraculous future of untethered communication” (Wolpin, 2007), in truth, neither Cooper, Mitchell, AT&T or even the FCC ever expected there would be a market for personal cellular phones. Still putting on a show, Mitchell took this first “wireless” phone outside of the press conference and posed for pictures “in front of some suddenly old-fashioned pay phones” (Wolpin, 2007).

Following the principles of the traditional telecom monopoly system, commercial cellular services were first offered on October 13, 1983 by AT&T’s Chicago Service Trial (Frenkiel, 2010). The FCC decided to license just one operator but later reversed this decision reasoning “licensing two rivals in each service area would still allow for economies of scale to be realized by each” (Hazlett, 2003, p. 161). Motorola along with Cooper and Mitchell achieved their goal of making a big splash in terms of PR and may even be able to take credit for the FCC’s rejection of AT&T’s request for a monopoly in 1974 (Wolpin, 2007). Seven years later the FCC made its final ruling allocating two 20 MHz spectrum bands in the 800-900MHz range for cellular phone service (Wolpin, 2007). “By 1980, it was clear that the system proposed [by AT&T and Motorola] would work as promised, but the FCC demanded agreement on a single nationwide “compatibility standard” that would allow any cell phone to operate in any system” (Frenkiel, 2010, p. 24).

In the 1980s the US mobile market and the mobile market in Europe became significantly different. In the US, the FCC created a market in which cooperative initiatives were exposed to competition leading to incompatible standards. In Europe, national telecom monopolies created standards by which they would mutually benefit from interoperable systems that allowed for high service and roaming charges. In the US, widespread interconnectivity was a key reason for government ownership and regulation (Noam, 2010). According to Information Technology professors Zhang Xiaoni and Victor Prybutok (2005), “US government regulation is often unpopular, and large companies set their own standards. As a result, several different standards are being used concurrently, resulting in incompatible networks” (Xiaoni and Prybutok, 2005, p. 4).

While AT&T and the FCC were arguing over cellular, AT&T was fighting a much larger battle with the Justice Department for abusing its privileged power over America’s telephony system. Tim Wu, author of The Master Switch (2010) explains that throughout the 1970s AT&T had come up with schemes that nullified the effect of FCC orders and had destroyed competitors. “The United States had tolerated and even encouraged, a monopoly of its most important industry for nearly seventy years. But it would no longer” (Wu, 2010, Chapter 14, To the Breakup, para. 11).

Figure 1 - Wu, 2010, Chapter 14, To the Breakup, The Empire, Divided

Figure 1 - Wu, 2010, Chapter 14, To the Breakup, The Empire, Divided

AT&T retained its long distance services, Bell Labs and Western Electric, its equipment manufacturer, but nearly everything else was stripped away (Wu, 2010). The remainder of AT&T was split into a group of twenty-two Regional Bell Operating Companies, known as RBOCs or Baby Bells (Christensen, 2004). In 1984, Charlie Brown, the last chairman of the united AT&T announced the breakup: “Today signals the end of an institution … the 107-year-old Bell System and the start of a new era in telecommunications in this nation” (Wu, 2010, Chapter 14, To the Breakup, para. 12). Brown’s optimism at this time of defeat seems to be a sign of AT&T’s confidence in cellular to allow them to continue to lead the country in telecommunications.

In 2010, Professor Eli Noam from the Columbia Institute for Tele-Communication published an article describing three distinct generations in telecommunications and government regulations. This framework has been used throughout my research to help identify the technological and regulatory changes that have taken place since the beginning of cellular. Noam describes Telecom 1.0 as the traditional monopoly system based on copper analog networks and highly regulated (Noam, 2010, p. 5). The creation of cellular was not a key component of Telecom 1.0 however it could be argued that the creation of cellular networks increased the need for changes in regulation that restructured the telecommunications market in the 1990s.

Since their inception in the 1940s, US commercial cellular services were delayed several decades by technical limitations and government bureaucracy. As we’ll learn in the next section, government ownership and regulation became a target for lobbyist and others interested in free market ideals. In the world of Telecom 2.0 that comes next, the emphasis for government regulation shifts to choice and further efforts are made to promote competition in the cellular market. Interestingly enough there is another shift after Telecom 2.0 that leaves us wondering; will we return to Telecom 1.0? Perhaps with a different, but similar technology?

The Emergence of the “Free-Market” in the 1990s
Phones were based on analog standards in the 1980s and in the US, the Advanced Mobile Phone Systems (AMPS) was primarily used within the 800 MHz frequency band. Cellular Digital Packet Data (CDPD) was also used to transmit digital data packets at a practical operating rate of 10 kbps (Jaloun and Guennoud, 2010, p. 310). These early technologies are categorized as the first generation of networks or 1G networks. The Global System for Mobile communication (GSM), first established in Europe in the 1980s, and Code Division Multiple Access (CDMA), created by Qualcomm in 1990, marked the second generation of cellular networks (2G). GSM and CDMA technologies use different frequency bands for the downlink and uplink allowing users to simultaneously send and receive voice signals (Jaloun & Guennoud, 2010).

According to Noam (2010), “after the 1980s this first-generation system was transformed into a more open structure with liberalized entry, especially in wireless, privatized incumbents, and accelerating innovation, Telecom 2.0” (Noam, 2010, p. 5). Regulation 2.0 was in order and clearly it was based on the concept of competition and choice for consumers. In the 1990s wireless communication rapidly evolved from a niche business to one the largest sectors of telecommunications industry. In 1990 there were only 10 million cell phone subscribers worldwide mostly using first-generation technologies (Rappaport, et al., 2002, p. 148).

CDMA is a great example of a breakthrough technology in the wireless industry. Simple, low-cost signal processing circuits based on the CDMA technology increased channel bandwidth and network capacity. There were also several early cellular technologies that ended in bankruptcy. Metricom attempted the first nationwide service using Internet Protocol (IP) and operating on unlicensed spectrum (the equivalent of a VOIP wireless phone). Iridium, another company ahead of its time attempted a satellite-based cellular telephone but this required a several billion-dollar investment and there were relatively few early adopters to help pay back the debt of such an endeavor. At the time, Iridium was planning to charge around $3 per minute for its satellite phone, a price too high for mass consumption (Rappaport, et al., 2002, p. 148).

The late 1980s and early 1990s weren’t the best time for AT&T and the Baby Bells. Because of their mischief in the 1970s, Baby Bells operated under the supervision of the FCC and Judge Harold Greene who enforced the former monopoly’s consent decree with Justice Department (Wu, 2010). The Bells were required to provide local callers access to competing long distance carriers such as Sprint and MCI and barred them from specific markets including “online services” (Wu, 2010).

Edward Whitacre Jr. changed all this. Inspired by the economics of Milton Friedman and George Stigler, perceptions of government control and regulation began to shift in the 1970s and were intensifying the early 1990s. As CEO of Southwestern Bell in the early 1990s, Whitacre had good working relationships with both parties of the Texan political class and knew that politicians in Washington were preaching competition and deregulation (Wu, 2010). Whitacre and some of Bell’s best lawyers soon realized that these increasingly popular ideals could actually be used to reverse the regulations imposed on AT&T in their 1980s antitrust case. Those paid to lobby the FCC pushed the free-market agenda to achieve the social goals of communications policy. Chairman Reed Hundt explained “competition in the communications markets will yield lower prices and more choices for consumers, rapid technological innovation and a stronger economy” (Wu, 2010, Chapter 18, Against All, para. 1).

Chairman Hundt may have been right in theory but in practice the existence of competition did not remove all need for regulation, particularly regulation designed to prevent anticompetitive behavior. (Wu 2010). The main theme of the Telecommunications Act of 1996 was “competition everywhere” meaning that barriers to entry in all segments of the industry would be removed. The law was celebrated as a victory over the Bell monopoly but in effect, it was hopelessly naïve (Wu, 2010). The telecommunications act of 1996 was designed to encourage cable companies to enter the phone business, phone companies to offer TV service and long distance firms to build local networks; basically creating a market of all against all. (Wu, 2010) The act also allowed more companies to offer cellular services (Christensen, 2004).

The early results of the 1996 Act looked somewhat promising. “Hundreds of companies entered the market as venture capitalist poured close to $10 billion into start-ups between 1998-2000(Christensen, 2004). Technological challenges related to integrating networks became much larger than expected though and profits became tough to come by (Christensen, 2004). During the mid-1990s per-minute charges for cellular were more than $.50 per minute however by 2003 they had dropped to just above $.10. Two distinct, reinforcing trends caused this shift: competitive entry and national network consolidation (Hazlett, 2003, p. 221).

Bell company’s “hundred-year track record of annihilating or assimilating dependent competitors” was quickly forgotten as the 1996 law superseded the consent decree imposed by the Department of Justice (Wu, 2010). This wasn’t the first time the government had tried and failed to tame the Bell system for the public good. The 1913 Kingsbury Commitment was a similar effort to make corporate interest work for the public good (Wu, 2010). The major difference was that the old AT&T had pledged to operate as a public trust, and was good to its word. The new AT&T had no such aspiration. Once again competitors would get tied up in years of complex and expensive federal litigation, which in turn would kill their business (Wu, 2010).

In 1997 still acting on behalf of Southwestern Bell, Whitacre bought the Pacific Telesis group (operating in CA, NV, and midwest). In 1999 a new FCC under the Bush administration officially gutted the sharing rules of the 1996 Act (Wu, 2010). With the sharing rules gone, most of the companies that hadn’t yet entered bankruptcy went under. Eli Noam describes the market in the 1990s (Telecom 2.0) as a more open structure with liberalized entry, privatized incumbents, and accelerating innovation. (Noam, 2010, p. 5)

Figure 2 - Wu, 2010, Chapter 18, The Campaign

Figure 2 - Wu, 2010, Chapter 18, The Campaign

Barriers but Possibilities
Christensen describes the wireless industry as an extreme example of a government-controlled industry. Technological innovation in the wireless industry is ultimately dependent on FCC approval. There are several great examples of this including Cricket Wireless which just happens to be my first cell phone carrier. In 2000, Leap Wireless (a spin-off of QUALCOMM) introduced its own spin-off, Cricket Wireless which “targeted overshot customers who tended to spend the majority of their time in and around their homes and did not need buckets of long-distance minutes” (Christensen, 2004, Chapter 4, Looking for a Target, para. 4). In Spokane, Washington Cricket was the first to offer an “unlimited” local cellular phone plan and it was affordable enough that many teenagers including myself could pay for it with their weekly allowance, or in my case, lawn mowing money.

Cricket was designed to serve the lower tiers of the market but became one of the nations fastest-growing wireless providers. Unfortunately it only took three years before Leap was filing for bankruptcy because it had avoided the top-tier markets, a strategy encouraged to handle channel asymmetries (Christensen, 2004). The problem for Leap was a lack of available spectrum needed to expand and meet it financial obligations. While spectrum may seem like an unlimited resource, in this specific case, the government had already portioned off the available spectrum that worked with Leap’s existing equipment (Christensen, 2004).

Engineers began developing third-generation technologies in the 1980s to better utilize the scarce spectrum that was allocated for wireless voice services (Christensen, 2004). An added benefit was the potential to offer higher data transmission speeds however consumer interest in data application was unknown and the additional bandwidth wasn’t enough to support technologies such as wireless video conferencing, which appeared to have a large market (Christensen, 2004). Now that cellular companies have the ability to offer these types of services and there is consumer interest, new regulations are needed to address indecency, technological speed ratings, government and local access, children’s programming and political access (Chapman, 2007). Much like the arguments made by Eli Noam for the appropriate Regulation 3.0 to match Telecom 3.0, Chapman believes that regulators should look back at prior technologies when developing the proper means to regulate 3G (Chapman, 2007, p.84).

By 2003, up to 7.5 million people had “cut the cord” on their home telephone and were using their cellular phone as their primary means of communication (Christensen 2004). According to Senator Herb Kohl, “[t]he explosion of cellphone usage — especially smartphones — makes competition in this market more important than ever as a check on prices, consumer choice and service” (Sorkin et al., 2011). In 2005, the Yankee Group reported that 82% of mobile users did not use wireless Internet services because of the cost, slow speed and lack of mobile Internet in their service area (Xiaoni & Prybutok, 2005). Several of these limiting factors have been mitigated since this survey. AT&T and Verizon both won a major auction for radio spectrum in 2008 when the 700 MHz radio and television broadcast bands were repurposed by the FCC (Developments—telecommunications, 2008). According to an article by the Berkeley Technology Law Journal: “one tower broadcasting on the 700 MHz spectrum could cover an area ten times wider than the municipal Wi-Fi and WiMax networks now being built by Google” (Developments—telecommunications, 2008). Google also was able to secure a small amount of spectrum to achieve its primary goal of creating an “open access” provision in the US (Developments—telecommunications, 2008).

In his final chapter, Christensen (2004) discusses low-cost voice and data services and their ability to disrupt the current market. He talks specifically about wireless companies like T-Mobile and Nextel that didn’t have wired line assets at the time and would lead the charge to attract more and more customers away from wired connections (Christensen, 2004). He wasn’t far off. Before Wi-Fi was available at nearly every coffee shop, T-Mobile USA used Wi-Fi “HotSpots” to reach undershot customers who frequently needed wireless data connections.

Deutsche Telekom purchased VoiceStream (now T-Mobile USA) in 2001 and has faced intense competition in the wireless sector. One of the most alarming facts that Obermann revealed was that T-Mobile doesn’t have a clear path for deploying Long-term Evolution or LTE networks due to not having access to the needed spectrum in key cities (T-Mobile Blog, 2011). Leading up to the announcement Deutsche Telekom had been looking for options and had held talks with Sprint (Sorkin, et al., 2011) however this was likely not a good fit due to incompatible technologies.

If approved, the deal would leave just three major cellular companies in the US: AT&T, Verizon and the much smaller Sprint Nextel (Sorkin, et al., 2011). AT&T has defended the deal by urging the DOJ and FCC to look at the mobile industry at the local market level, instead of the national level, because of competition from regional carriers (Gross, 2011). AT&T has also committed to a significant expansion of their 4G LTE to 95% percent of the US which they claim helps achieve the FCC and President Obama’s goals to connect “every part of America to the digital age” (White, 2011).

Figure 3 - Christensen, 2004, Chapter 4, The Hotbed: Innovation Abounds

Figure 3 - Christensen, 2004, Chapter 4, The Hotbed: Innovation Abounds

Some analyst believe that if approved, high-speed mobile broadband service would improve in quality and coverage and would eventually reach rural communities that don’t have access to broadband (White, 2011). The bad news is that AT&T and Verizon Wireless combined would own nearly three out of every four wireless subscriptions in the US (White, 2011). With any outcome, cable operators will also suffer because AT&T & Verizon are beginning to offer services that are disruptive to their cable broadband services (White, 2011).

One of the lessons we can learn from AT&T’s acquisition proposal is that when legacy companies have spectrum tied up in current/old technologies it becomes hard to repurpose that spectrum for new technologies. New companies can undercut legacy technology companies by entering the market with the latest technologies. Christensen’s motivation and ability framework can be used to assess the challenges caused by government regulation (Christensen, 2004). Within this framework, innovators in the cellular market likely fall into the “Looking for a Target” category because the resources needed to run a cellular network such as spectrum are constrained and because of the competitiveness of the market.

Will AT&T Receive Government Approval?
While its had its up and downs, AT&T has been a dominant player in the cellular market since its inception. With the rise of CEOs such Ed Whitacre who consistently use anticompetitive tactics such as acquiring competitors or putting them through years of litigation we likely won’t see any leaps in innovation anytime soon. Instead we will likely see history repeat it self in one-way or another. It appears that AT&T has invested a great deal of resources into determining whether not they will get approval and have made a well-educated decision before committing the to the terms established by Deutsche Telekom. Also important is the fact that Deutsche Telekom is highly motivated to sell due to limited market opportunities in the US and their need to focus on markets in European countries.

The high price and limited availability of radio spectrum makes it is very difficult to enter and even more difficult to disrupt the cellular market. Although several companies like Cricket Wireless have been able to enter the market by leasing the incumbent’s networks and have had some success, AT&T is boldly eliminating market competitors and quickly buying up limited spectrum. The positive side to all of this is that even with consolation, mobile broadband will soon reach more American’s with faster Internet speeds.

References:
Chapman, J. (2007). Content on the fly: The growing need for regulation of video content delivered via cellular telephony. Texas Review of Entertainment & Sports Law, 9(1), 67-84. Retrieved from http://offcampus.lib.washington.edu/login?url=http://search.ebscohost.com.offcampus.lib.washington.edu/login.aspx?direct=true&db=a9h&AN=28441361&site=ehost-live

Included in this article are several arguments related to cellular regulations in the US. According to Chapman, regulation is expected to become more complicated as the cellular industry transitions to faster broadband speed that allows for richer content. This compliments several of the other research articles I’ve used by looking at regulation from the standpoint of content. It also backs up my argument that emerging cell phone technologies have the potential to disrupt traditional wired Internet providers. The article focuses on the third generation of cellular technologies (3G) and the shifts that have led to a need for changes in regulation.

Christensen, C. M., Anthony, S. D., & Roth, E. A. (2004). Seeing what’s next: using the theories of innovation to predict industry change [Kindle iPad version]. Boston, MA: Harvard Business School Press.

There are several aspects of Christensen’s work that tie directly into my research. Christensen provides a rich framework by which we can analyze competition in the current US cellular market and also provides in-depth details about the history AT&T, US cellular and FCC regulation. Central to my arguments about AT&T’s proposed acquisition of T-Mobile, Christensen discusses how established incumbents do a better job of serving the existing needs of mainstream customers and are often able to leverage sustaining technologies. My research into some of the disruptive opportunities that exist in the cellular market was also highly influenced by Christensen’s work. Most importantly, Christensen discusses how government regulations and other nonmarket forces can have a very important influence on the overall structure of a market and innovators motivation and ability to make changes happen. Christensen’s motivation and ability framework is used to show the difficulties and challenges of deploying an innovation in the US cellular market.

Developments–telecommunications. (2008). Berkeley Technology Law Journal, 23(1), 651-652. Retrieved from http://offcampus.lib.washington.edu/login?url=http://search.ebscohost.com.offcampus.lib.washington.edu/login.aspx?direct=true&db=a9h&AN=34157371&site=ehost-live

This article describes the auction of the 700 MHz radio and television broadcast band (no longer in use after the mandated switch to digital television), “which has the potential to provide competition for the major wireless carriers.” Telecommunications titans AT&T and Verizon emerged as the big winners in the electromagnetic land rush yet Google was able to achieve its primary goal of creating an “open access” provision. This article will be used to show how changes in regulation and legacy technologies can open up new markets.

Frenkiel, R. H. (2010). Creating cellular: A history of the AMPS project (1971-1983) [History of Communications]. IEEE Communications Magazine, 48(9), 14-24. doi:10.1109/MCOM.2010.5560579. Retrieved from http://offcampus.lib.washington.edu/login?url=http://search.ebscohost.com.offcampus.lib.washington.edu/login.aspx?direct=true&db=a9h&AN=53430788&site=ehost-live

Creating Cellular was written by a lead project engineer at Bell Labs and covers the developments that led to the first cellar telephone system (AMPS) created by a “vast number” of engineers at Bell Labs between 1971 and 1983. This article provides a look at some of the first “upsets” and challenges faced by pioneers in the cellular market. There is also a considerable amount of background information and historical perspective on the FCC’s regulation of cellar networks. Frenkiel’s story begins in the 1940s and highlights the fact that people at AT&T really didn’t expect there to be a market for cellular. Nearly all of the major advancements in the 1970s are also covered along with information about the antitrust case and breakup of AT&T. This piece compliments some of the other research I’ve found on the history of the cellular market because it primarily looks at AT&T’s involvement in creating cellular networks.

Gross, G. (2011, May 24) Groups ask US agencies to reject AT&T, T-Mobile deal. PC World Business Center. Retrieved from http://www.pcworld.com/businesscenter/article/228563/groups_ask_us_agencies_to_reject_atandt_tmobile_deal.html

This article provides statements and perspectives regarding AT&T’s proposed acquisition of T-Mobile USA. It highlights the fact that experts have criticized it because it’s anticompetitive and may be harmful for consumers. Quotes from the Communications Industry Association and the American Antitrust Institute provide several reasons why the deal is “presumptively anticompetitive,” and skepticism as to AT&T’s intentions. One expert directly contradicts AT&T’s claims by saying that “AT&T has other options to address its spectrum needs.” Another fascinating fact included in this article is that Microsoft supports the merger because they believe it will help build out broadband capabilities in the US. Several of the quotes included in this article are used within my research to provide readers with some of the conflicting viewpoints held by experts in the field.

Hazlett, T. W. (2003). Is federal preemption efficient in cellular phone regulation?. Federal Communications Law Journal, 56(1), 155-238. Retrieved from http://offcampus.lib.washington.edu/login?url=http://search.ebscohost.com.offcampus.lib.washington.edu/login.aspx?direct=true&db=a9h&AN=12248730&site=ehost-live

This article is one of the main research papers behind my project. The premise for this article is that cellular phone service fundamentally depends on spectrum policies enacted by the US Federal Government. It provides context for how telecommunication regulations are enacted and discusses whether they should be created on a state-by-state basis or imposed using Federal regulatory standards. While this article primarily covers regulation and jurisdiction, there are also some key market insights (i.e. “One particularly important rationale for government regulation arises under the externality rubric in the context of fly-by-night operations.”)

Jaloun, M., & Guennoun, Z. (2010). Wireless mobile evolution to 4G network. Engineering, 2(4), 309-317. doi:10.4236/wsn.2010.24042. Retrieved from http://offcampus.lib.washington.edu/login?url=http://search.ebscohost.com.offcampus.lib.washington.edu/login.aspx?direct=true&db=a9h&AN=50465916&site=ehost-live

Several of the technical specifications provided in my research were taken from this article. Nearly all of the cellular technologies used in the past three decades are covered in this article therefore it was used in conjunction with several other technical overviews to provide a more complete history of how the technologies currently in use evolved. Also provided is some background on each technology including where it started, how it is used, and whether or not it evolved into a new technology or if newer technologies are based on it. Future technologies including WIMAX and 4G are covered along with how the International Telecommunications Union (ITU) groups and classifies these technologies. This article is helpful as a broad overview of the technologies used to create mobile networks and the spectrum challenges associated with each technology. Many of the general technological principles developed in the last half century can be learned from this article although some of the technologies have more in-depth descriptions than others.

Noam, E. M. (2010). Regulation 3.0 for telecom 3.0. Telecommunications Policy, 34(1/2), 4-10. doi:10.1016/j.telpol.2009.11.004. Retrieved from http://offcampus.lib.washington.edu/login?url=http://search.ebscohost.com.offcampus.lib.washington.edu/login.aspx?direct=true&db=a9h&AN=47957650&site=ehost-live

Regulation 3.0 for Telecom 3.0 will likely be one of the primary reference within my project because it describes how “telecommunications infrastructure goes through technology-induced phases, and the regulatory regime follows.” It begins with Telecom 1.0, based on copper wires and monopolistic in market structure. This led to Regulation 1.0 with government ownership or control. After describing the evolution of wireless long-distance, and the regulation that followed, the article goes on to predict the “return for a larger role for the state in a Regulation 3.0 which incorporates many elements of the traditional regulatory system— universal service, common carriage, cross-subsidies, structural restrictions, industrial policy, even price and profit controls.” This article was used to help structure my research into three distinct sections.

Pelkmans, J. (2001). The GSM standard: explaining a success story. Journal of European Public Policy, 8(3), 432-453. doi:10.1080/13501760110056059. Retrieved from http://offcampus.lib.washington.edu/login?url=http://search.ebscohost.com.offcampus.lib.washington.edu/login.aspx?direct=true&db=a9h&AN=5180643&site=ehost-live

The GSM Standard will be used to show the importance of mobile networks and what they are used for. There is also a well written section titled “The Non-Cooperative Emergence of Digital Mobile in the US” that provides a comparison of US and EU mobile markets. This will provide some history of mobile standards and technical protocol used the US however the article focuses on Europe’s mobile networks. One of the other notable resources found in this article was difference between the European market that promotes technological standards and the US market that is non-cooperative. This key difference is important when analyzing the US market from nearly any perspective.

Rappaport T. S., et al., (2002). Wireless communications: past events and a future perspective. IEEE Commun. Mag., vol. 40, May 2002, p. 148–61. Retrieved from http://web.cecs.pdx.edu/~mperkows/CAPSTONES/DSP1/01006984.pdf

Although somewhat outdated, this article provides a wealth of information about the stages of wireless communication during the 1990s. Several statistics used in my research were pulled from this article including the number cell phone subscribers in 1990 and the cost of the proposed satellite phone. There is a wealth of technical data included however some of it does not directly relate to the research at hand. Most of the content related to my research is included in the introduction, the section titled “What Lies Ahead In Technological Advances” and the conclusion. In-depth information is provided regarding the growth of the wireless market in the US and the factors that may be responsible.

Sorkin, A., De La Merced, M.J., & Wortham, J. (2011, March 20). AT&T to buy T-Mobile USA for $39 billion. The New York Times. Retrieved from http://dealbook.nytimes.com/2011/03/20/att-to-buy-t-mobile-usa-for-39-billion/

The New York Times was one of the first news outlets to release detailed information on AT&T’s acquisition of T-Mobile USA. Although this is primarily a news piece, a fair amount of commentary on the deal is provided including quotes from several leading mobile market analysts. This article is used to help frame the acquisition and to show the importance of the Federal Government’s decision. Details about Deutsche Telekom’s interest in selling T-Mobile USA to AT&T and some of the challenges they are expected to face sheds a lot of light on the deal and possible outcomes. One of the most telling signs in this article comes at the end; the quote from Mr. Stephenson of AT&T regarding his expectation that the merger will be completed because many local markets have five or more competitors seems to signal that AT&T has done their homework and has determined that they can make things happen.

T-Mobile Issues & Insights Blog. (2011, May 26). Introductory remarks by René Obermann, CEO, Deutsche Telekom AG. Retrieved from http://blog.t-mobile.com/2011/05/26/introductory-remarks-by-rene-obermann-ceo-deutsche-telekom-ag/

René Obermann’s remarks provide a fascinating look into the circumstances that led to AT&Ts acquisition proposal. They also provide an insider perspective on the difficulties and challenges of staying competitive in the US cellular market. Obermann clearly explains the overarching problem of having resources tied up in existing spectrum that is quickly reaching capacity and becoming outdated while that same spectrum is needed for future technology. Several of Obermann’s quotes are used to provide insights into the acquisition proposal and current state of the US cellular market.

White, G. (2011). Breaking: AT&T buying T-Mobile for $39 billion. Business insider. March 20 Retrieved from http://www.businessinsider.com/att-buys-t-mobile-2011-3

This official AT&T press release from March 20, 2011 provides a detailed look at the agreement reached between AT&T and Deutsche Telekom. It explains the goals and commitments AT&T is willing to make should the deal be approved and outlines the benefits of a combined network. Several quotes from Randall Stephenson, AT&T Chairman and CEO, and René Obermann, Chairman and CEO of Deutsche Telekom, about the decision are included. This article also includes a great deal of financial information; most notably that the deal is expected to take approximately 12 months. The article says little about what is to happen to T-Mobile’s Seattle workforce, the reverse breakup fee and other conditions that may apply to the deal.

Wolpin, S. (2007). Hold the phone. American Heritage, 22(3). Retrieved from http://www.americanheritage.com.offcampus.lib.washington.edu/articles/magazine/it/2007/3/2007_3_20.shtml

Stewart Wolpin presents the history of the cellular phones from car phones to FCC’s final decision to provide licenses for cellular in the 1980s. This article compliments some of other articles referenced by focusing on Motorola’s effort to persuade the FCC not to give AT&T a monopoly on cellular. In-depth information is provided regarding Motorola’s first cellular phone project and how they were able to scale the car phone down to fit into a hand-held phone has been included in my research to show the complexity of creating a working, cellular phone. A large portion of the history of cellular phones and the facts about early regulatory measures are taken from this article. Wolpin, like Wu, describes AT&T as a ruthless market competitor and highlights AT&T’s ability to persuade government bureaucrats to favor their initiatives.

Wu, T. (2010). The master switch [Kindle iPad version]. New York: Alfred A. Knopf.

In chapter 18 “The Return of AT&T” I found a treasure trove of information regarding the proposed acquisition of T-Mobile USA by AT&T and the events that led up to it. The introduction also offers some historical perspective on the current market. While Wu doesn’t explicitly mention anything about T-Mobile, he clearly explains how Edward Whitacre, longtime CEO of AT&T, rebuilt the AT&T system into what it is today. I’ll use this framework to show the difficulty of competing within the U.S. cellular market. I’ll also reference Wu in my explanation of open and closed markets as well as to explain that if the acquisition T-Mobile by AT&T is approved, the centralizers (AT&T, Apple & Hollywood) have one less competitor to worry about and the government will have more concentrated power over information and communications.

Xiaoni, Z., & Prybutok, V. R. (2005). How the mobile communication markets differ in China, the U.S., and Europe. Communications of the ACM, 48(3), 111-114. Retrieved from http://offcampus.lib.washington.edu/login?url=http://search.ebscohost.com.offcampus.lib.washington.edu/login.aspx?direct=true&db=a9h&AN=16390545&site=ehost-live

Zhang Xiaoni and Victor Prybutok both work as information technology professors and have provided a multitude of insights into wireless development within these three regions. Xiaoni and Prybutok focus on market standards, pricing structures, government regulation, demographics, usage patterns, business potential, and technology adoption strategies. Several of these aspects fit nicely into my research however this article was primarily used to show how government regulation in the US market is unpopular and has led to conflicting technological standards and incompatible networks. This article is also used to identify how cellular phones are used in the US and the differences between consumers in these three regions.

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