Transportation Deployment Casebook/Mobile Cellular Phone & Landline Telephone

Introduction

Broadcasters and telecom, cable, satellite, Voice over Internet Protocol (VoIP) and wireless companies are all providing communication service to consumers. This case study analyzed the developing process of Mobile Cellular Phone and Landline Phone.

Life Cycle of Mobile Cellular Phone: 1973~1984

The feasible technology of mobile phone was invented from early 1970 but offered as public trails until late 1983. From 1973 through 1984, it is a decade of intense legal and regulatory activity by FCC. The FCC's mission, specified in Section One of the Communications Act of 1934 and amended by the Telecommunications Act of 1996 (amendment to 47 U.S.C. §151) is to "make available so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, rapid, efficient, Nation-wide, and world-wide wire and radio communication services with adequate facilities at reasonable charges."

So many people criticize it is the delaying decade of mobile phone development. In this part, I tried to use the life cycle analysis of landline telephone to examine whether the first decade of mobile cellular phone development was delayed by intense legal and regulatory activity.

The concept of cellular phones was born in 1947 by researchers who observed and improved crude mobile car phones through using small cell and increasing the traffic capacity of mobile phones.( selling the cell phone part !: History of cellular phones, Mary Bellis)

In 1947, Bell Laboratories introduced the idea of cellular communications incorporated with police car technology. But Motorola was viewed as the first people who embodied cellular technology into portable device which can be used outside of mobile cars.

AT&T developed a prototype cellular system in 1977. The first public trails of the new system were lunched one year later in Chicago including 2000 trail customers. In 1981, the second cellular radio-telephone system was tested in the Washington/Baltimore area by Motorola. Until 1982, FCC (Federal Communication Commission) awarded commercial cellular domestic service for the USA. At the same time, FCC still reserved authorization to make decisions including but not being limited to : (1) whether one or more cellular systems would be allowed in each area; whether telephone company are able to operate them; (3) the manufacturing license and who would sell them; (4) the quantity of frequencies and channel spacing. (http://transition.fcc.gov/Bureaus/OGC/Reports/cellr.txt)

The Comparison of Mobile Cellular Telephone and Landline Telephone

Through the following comparison table (table1), the landline telephone industry is undergoing radical transformation as cellular telephony is becoming more popular.

The convergence period of radical transformation is defined as “the threat intensifies as activities under the new approach become organized more efficiently” (McGahan,2004)) It is the period faced by current commercial landline telephone industry in the U.S. Because a super number of buyers who would order wireless products instead of landline service, at the same time, cellular phone company lead effort to do research market specification, consumer behaviors and supplier competition and efficiency. The costs of delivering service will be dropped dramatically as cellular phone companies get paid off based on their accumulation on R&D. At present, the threat of obsolescence has become intense in the traditional landline industry (McGahan,2004)

In the 1980s, wireless service was usually rejected by many corporate clients as inferior to landline service. The reasons include unreliable dial tone, narrow geographic range and dropped calls. The buyers and suppliers of wireless services are out of main stream at that time. So the real information and potential of wireless services were excluded from leaders of landline companies. Like figure1 shows, by the late 1990s, wireless technology had improved a lot to the point where signals were clear and calls were reliable. Then some corporate clients opted to wireless handsets to new employees. Although there were groups of clients loyal to regional telephone companies, wireless technology started to influence the landline industries’ short-term and long-term profits.

Life Cycle of Regulations on Cellular Phone

1. Before 1974:

Communication Act of 1934: “Hog Tight, Horse High, and Bull Strong.” - Leonard J. Kennedy and Heather A

2. Initial Stage: 1975-1986

The initial stage of mobile cellular was between 1984 and 1986, 306 Metropolitan Service Areas (MSA) license and 428 Rural Service Areas (RSA) licenses were authorized by lottery. This was the delayed result initiated by FCC in 1968. Based on assumption analogues to landline telephone, FCC originally thought mobile cellular industry was natural monopoly. So they decided that licensing only two rivals in each service area. The market result for this regulation was the prices for traded cellular licenses increased almost monotonically (2003). These large market capitalizations were resulted huge customer demand for wireless phone service, enhanced network coverage and rapidly falling costs.

3. Deregulation 1990~2010

In later 1983 and 1984, although Planning Boards and Zoning Boards didn’t welcome the many radio towers that cellular service required, but cellular service still began in large cities based on enough approvals. [FN39] The relationship between Telephone Company and wireless service was like following: in each city, a telephone company’s separate subsidiary offered service on one system, and then a wireless service served on the other system. If FCC, legislature and other regulatory commissions had decided to stop at the frequency-allocation in the initial age of cellular technology, for example, if the FCC had stopped the 40 HZ frequencies limits in 1975, how would the mobile cellular industries develop? The developing pace of cellular industry might be sooner but the quality development of wireless service might decrease and the price of mobile phone should be higher.

The original plan of FCC was that cellular service should be a part of local telephone company and operated by local telephone company, too. At the same time, it should be regulated by state regulatory commission. Another assumption is: if the cellular industry was viewed and regulated as common landline telephone industry, what would they develop? Then policies like price control and maximize contribution to basic service might happen and it’s hard for cellular service to expand and develop in such a high speed.

The mobile cellular phone overtook landline telephone manufacturing radically through developing efficiencies by replacing fixed assets with variable activities. Federal jurisdiction and state law share the responsibility to regulate cellular mobile service rules. The Omnibus Budegt Reconciliation Act of 1993 established that “no State or Local government shall have any authority to regulate the entry of the rates charged by any commercial mobile service or any private mobile service.”