Radiotelephone Communications

SIC 4812

Industry report:

Establishments included in this category are primarily engaged in providing two-way radiotelephone communications services, such as cellular telephone services. This industry also includes establishments primarily engaged in providing telephone paging and beeper services and those engaged in leasing telephone lines or other methods of telephone transmission, such as optical fiber lines and microwave or satellite facilities, and reselling the use of such methods to others. Establishments primarily engaged in furnishing telephone answering services are classified in SIC 7389: Business Services, Not Elsewhere Classified.

Industry Snapshot

The first wireless telecommunication services, apart from radio, were developed in the 1960s, and the first experimental cellular systems were installed in 1979. By 1985, only a few hundred thousand Americans were using cellular telephones. Rapid growth during the 1980s and 1990s, however, catapulted the wireless telecommunication industry to prominence. The wireless telecommunication services industry in the early 2010s was comprised primarily of cellular telephones and other handheld devices, (e.g., tablets, iPods, eReaders). These various services allowed customers with mobile telephones to send and receive calls or texts to and from people with landline phones, pagers, or handheld wireless phones.

As digital wireless technology became more pervasive, data of various types including short messages, news reports, and Internet content were also transmitted over digital wireless systems. Cellular service subscribers typically pay a monthly subscription fee plus an additional per-minute usage charge. According to the Cellular Telecommunications and Internet Association (CTIA), in June of 2011, there were an estimated 322.9 million mobile wireless subscribers, generating about $164.6 billion a year. An estimated 30 percent of U.S. households in 2011 carried wireless-only phone service.

As the market for wireless services became increasingly saturated, competition for new subscribers became fierce, and the 2000s had an explosion of wireless carriers and mergers.

Organization and Structure

The general consolidation of the telecommunications industry blurred the distinction between the traditional landline telephone companies and wireless in the early 2010s. Companies that aspired to be dominant players in the industry moved to establish themselves in all types of communication delivery. Moreover, success in the fiercely competitive mobile market appeared to depend to a great extent on national coverage. However, the huge capital investment required to build the networks necessary to be a big winner created the need for mergers, joint ventures, and other forms of strategic alliances.

How a Cellular System Functions.
A cellular telephone system consists of three main components: the cellular site or station, the mobile telephone switching office (MTSO), and the mobile telephone unit or pager. The mobile telephone unit is simply a low-powered portable transceiver. A pager is a wireless receiving device.

The term "cellular" refers to the network of cells or transceivers that support a company's service area. Each service area is broken down into several communication cells that have a radius of 2 to 20 miles. Each cell is equipped with a low-power transceiver and antenna, known as a base station, which sends and receives wireless telephone transmissions. Ideally, the cells should be arranged so they efficiently canvass an entire service area, but cells often overlap or miss certain areas.

When a mobile phone user makes a telephone call, the transceiver in the cell receives the call and immediately routes it to the regional MTSO that oversees all the cells in its service area. The MTSO, which acts as a central nervous system, is connected to each cell by a landline or a microwave link. The MTSO analyzes the telephone call to determine whether the caller is a "roamer," operating outside of the home service area, or a subscriber. Once it determines how to bill the call, the MTSO connects the call to a landline, or "trunk." Depending on the number dialed, the call is routed to a long-distance or local carrier. Among other tasks, the MTSO monitors the caller's signal strength within other cells. If the caller passes from one cell to another, the MTSO will "hand off" the call to the next cell without interruption.

When a caller on a landline telephone calls a cellular phone user, the call is received by the MTSO, which sends an individualized "page" message to its cell sites to locate the mobile phone. The cellular phone responds to the page by sending a signal to the cell, after which the MTSO causes the mobile phone to ring. If the user elects to answer the call, the MTSO establishes contact between the communicators. The entire process requires only milliseconds. The MTSO works similarly for cellular callers who are contacting other mobile phones and for callers who are trying to reach a person's paging device.

Advantages.
The advantage of using a cellular system is "frequency reuse." Because the Federal Communications Commission (FCC) grants a limited number of channels, or frequencies, to the cellular telephone service industry, it would be impossible to have only one or a few transceivers in each service area. Multiple cells allow the same channel, or frequency, to be used by many callers in the same service area. Furthermore, each cell can be subdivided into sectors, usually three, using directional antennas. As a result, a single service area can have thousands of callers communicating on several hundred designated channels.

PCS.
PCS systems and cellular services operate similarly, but PCS systems use comparatively low-powered phones that operate at a higher radio frequency. As a result, the systems use smaller cells that allow a greater concentration of users. In addition, PCS systems utilize digital technology that transmits a caller's voice as a numerical code. Most standard cellular systems, in contrast, used analog technology that mimicked sound waves. Many systems were converted to digital in the second half of the 1990s, and all wireless subscriptions were digital by the mid-2000s. Digital transmission delivers greater sound quality and makes more efficient use of limited frequencies.

The net result of PCS differences is a cellular network with as much as 20 times the capacity of a standard cellular service area. This increased capacity allows PCS to spread costs over a potentially larger subscriber base. In addition, PCS phones require less power, weigh less, and are less expensive to manufacture. PCS has the potential to allow a cellular user to utilize the same phone number for his or her landline and wireless communication devices, so other callers would not have to know his or her location before calling.

Besides increasing the efficiency and sound quality of wireless telecommunication systems, advancing digital technology also opened an entirely new market to the cellular service industry--data transmission. Data transmissions rose rapidly in the 2010s, as users of new electronic devices began transferring digitized data over telephone lines and wireless systems. As a result, carriers began offering tiered pricing data packages based on the amount of data consumers used during a billing cycle. Some also offered a pricing package for unlimited data usage. By the early 2010s, data transmission was a dynamic segment of the industry.

Regulation.
Under regulations enacted in 1981, two operating licenses were granted for each Cellular Graphic Service Area (CGSA). One license was given to the local landline carrier or phone company, and the other was awarded to a wireless carrier through a lottery. Each carrier received half of the available frequencies. In addition, each of 428 designated Rural Service Areas (RSAs) was served by one or two carriers. In 1993, the FCC initiated a set of rules aimed at governing PCS. The commission allocated significant bandwidth for PCS licenses and divided the United States into 51 major trading areas (MTAs). The MTAs contained 492 basic trading areas (BTAs), each of which corresponded to a metropolitan area. The FCC auctioned off the licenses for these markets in six blocks between December 1994 and January 1997. Some blocks, called the "entrepreneur blocks," were set aside for bidding by businesses with gross revenues of less than $125 million and total assets under $500 million. Provisions were also made for companies owned by women and minorities.

The Telecommunications Act of 1996, which was signed into law February 8, 1996, ended 62 years of regulation of the telecommunications industry. The legislation was intended to promote competition across the industry, develop new technology, create new businesses and new jobs, and ultimately lower prices. Local telephone companies (telcos), long-distance providers, wireless companies, and cable television operators would be free to offer any and all telecommunications services. Because all the major landline entities were already cellular providers, this did not have an immediate effect on the wireless industry, but the long-range goal of the major industry players was to provide "one-stop shopping" for consumers' telecommunications needs, leading to a general consolidation of the industry.

An e-mail urban legend claimed that all cell phone numbers would be listed in a national directory in 2006. It also erroneously claimed that telemarketers would have access to the directory. Telemarketers using autodialers are prohibited by law from calling wireless phones. Pierz Group Research found that, of 1,503 subscribers, 53 percent would be willing to list their numbers in a new wireless 411 service if the carrier's privacy protections were in place.

Many subscribers were upset that an average 14.5 percent of the typical monthly wireless bill goes to taxes and fees, a figure more than twice the tax rate for general goods and services. From January 2003 through July 2005, CTIA claimed the tax rate on wireless service had increased nine times faster than the rate of other goods and services.

Background and Development

The Detroit Police Department used the first mobile radio system on April 7, 1928. The spectrum for radio transmission was broadened seven years later to include FM, or frequency modulation, signals. FM transmission technology paved the way for the mobile radio systems that were widely used during World War II. After the war, American Telephone and Telegraph (AT&T), which at the time held a virtual monopoly over phone service in the United States, introduced the Improved Mobile Telephone Service (IMTS), which made extremely limited cellular communication systems possible. The service was so restrictive that in 1970, the Bell system in New York City could simultaneously sustain only 12 mobile phone conversations. Bell Laboratories developed the cellular telecommunication concept during the 1960s. In the early 1970s, using a relatively small amount of bandwidth allocated by the FCC for mobile telephone communication, several crude wireless phone services began. A total of 44 channels were available. Only a few channels were allocated to each major metropolitan area because of the risk of interference from high-powered mobile transmitters.

As technology improved during the 1970s, the federal government began to reconsider cellular potential. Around 1980, under the guidance of AT&T, the first practical framework for mobile service in the United States, advanced mobile phone service (AMPS), was born. The FCC allocated space for AMPS in the Washington, D.C., test market, but it was not until 1983, in the Chicago and Baltimore markets, that companies provided relatively inexpensive, efficient, consumer cellular service in the United States. In 1982, the FCC allocated the equivalent of 622 additional channels to the cellular mobile phone industry, resulting in a flurry of activity and capital investment in high-tech cellular networks. An additional 166 channels were assigned in 1986, bringing the total to 832. In addition, frequency reuse strategies exponentially expanded the capacity of pre-1980s systems.

Foreseeing a bright cellular future, phone companies and well-heeled private start-ups began investing heavily in the development of cellular networks. Besides the local telephone operating companies, major players included communication giants such as AT&T and McCaw Cellular Communications. Industry investment grew from $354 million in 1984 to $1.43 billion in 1986. A still insignificant subscriber base resulted in a capital investment per subscriber of nearly $4,000 in 1984 and about $2,300 in 1986.

As cellular systems gained public acceptance and service and phone prices began to fall during the mid-1980s, the industry started to gain momentum. Cellular service revenue climbed from around $1 billion a year in 1985 and 1986 to about $4 billion in 1989. During the same period, the aggregate U.S. subscriber base rocketed from several hundred thousand to nearly 4 million. Encouraged by booming sales, cellular service providers continued to sacrifice short-term profits as they fueled massive capital investment programs. As cumulative industry outlays ballooned from $1.74 billion in 1987 to a staggering $5.21 billion by 1990, increased usage reduced the investment per subscriber to $1,189.

Lower prices and new high-tech phones and accessories contributed to increased cellular service during the early 1990s, despite a lingering U.S. and global recession. The number of cellular users soared to about 10 million in 1992, reflecting an annual growth rate of about 20 percent. Only a few years earlier, analysts had predicted that the industry would achieve the 10 million mark around the turn of the century. Likewise, industry revenues almost doubled 1989 levels when they rose to more than $7 billion. The industry passed a major milestone in June 1992, when service was established in the last of the 305 MSAs, paving the way for a seamless national cellular network.

The most significant trend in the wireless communications industry in the later 1990s was the shift toward PCS. Some industry participants viewed it as an expansion of local telephone networks, while others saw it as a way to bypass landline communications. Many companies saw PCS as an extension of the existing cellular network, and others thought of it as a replacement. The FCC envisioned PCS as including a wide variety of services, such as mobile telephone, paging, cordless telephones, and other related wireless communication technologies. The FCC granted some experimental licenses in 1990, and the first commercially available network began in the Washington-Baltimore area in late 1995.

The first PCS licenses, for the 51 major trading areas (MTAs) in the United States, were auctioned off between December 1994 and March 1995. Eighteen bidders won 99 licenses, paying $7.7 billion to the U.S. Treasury. The number of licenses purchased for each market put tremendous competitive pressure on everyone. Financial pressure was also significant because of the cost of building the networks along with the cost of the licenses. Moreover, many communities opposed the construction of the many transmitting towers necessary for the low-power networks. The FCC, however, along with most industry observers, expected the investment to pay off bountifully within 10 years.

In the face of PCS expansion, cellular companies tended to reduce investment in new cells and turned to other strategies to head off new competition. Some directed funds into stronger marketing efforts while others, like AT&T Wireless, switched more networks over to digital systems, advertising the first nationwide digital wireless service.

As the 1990s drew to a close, the wireless communications industry continued its explosive growth. Service continued to improve as well, as more systems were converted to digital transmission and as carriers extended geographic reach. AT&T Wireless announced a new rate plan called Digital One that eliminated roaming and long distance charges. Other companies that served wide geographic areas followed with similar plans, which eventually became the industry norm.

By 2006, the average wireless customer's monthly bill was still under $50. In addition, in the mid-2000s, the FCC reported that U.S. users continued to lead the world in average number of minutes used per subscriber.

Satellite-Based PCS.
Piggybacking off the PCS concept were several proposals for massive global satellite communication networks that would vastly expand the reach of terrestrial PCS. Ideally, the systems would allow phone users to communicate with anyone in the world through their mobile phone, while bypassing long-distance landline carriers. Although the service would not initially compete with land-based cellular services because of price differences, economies of scale and decreasing fees could eventually allow satellite systems to dominate global telecommunications.

The first such network to go into service was the Motorola-inspired Iridium Inc. Iridium established a global satellite network that allowed customers to call or be called anywhere on earth, any time, using hand-held wireless telephones. According to the plan, 66 low-orbit satellites were interconnected with earth stations and public telephone networks. Iridium, with the financial backing of investors on almost every continent, launched its first satellite in 1996 and began offering commercial service in 1998. Marketing efforts were not as successful as expected, however, and in August 1999, the company filed for bankruptcy protection. ICO Global Communications, a similar satellite venture, followed suit later that month. A third enterprise, called Globalstar, began rolling out its service to selected customers and partners around the world in October 1999.

High-tech entrepreneurs Craig O. McCaw and Bill Gates proposed the most ambitious satellite plan in 1994. McCaw sold his McCaw Cellular Communications to AT&T Wireless in 1994 for $11.5 billion, and subsequently introduced Teledesic Corporation. Gates, the founder of Microsoft, invested $4 billion of his own money in the venture largely on the basis of McCaw's track record in growing McCaw Cellular. Dismissed by critics, the Gates/McCaw venture called for a $9 billion network of 840 low-orbiting satellites. McCaw's vision differed from others in that instead of creating a globe-girdling telephone network, his aim was to span the world with a satellite-based Internet. Teledesic was scheduled to begin offering service by 2001, but the project was scrapped a year later. In the meantime, McCaw and others involved with Teledesic announced plans to invest in ICO Global Communications, hoping to salvage that effort and protect the satellite communication vision. The company expected to launch their GEO satellite before 2010.

One technological issue faced by the industry during the late 1990s was competing standards for digital transmission. Some major carriers rolled out systems using code division multiple access (CDMA) technology, while others were based on time division multiple access (TDMA). The European industry adopted Global System for Mobile (GSM). Various industry groups and regulatory bodies, such as the International Telecommunication Union (ITU), were working on the thorny issue of the next generation of wireless technology, loosely referred to as 3G. ITU-200 is a standard that specifies a minimum set of capabilities for 3G services, including high-bandwidth communication anywhere in the world, global roaming, and a single system for residential, office, and mobile use. The primary decision yet to be made was the choice of a CDMA or TDMA air interface.

By the early 2000s, wireless telecommunication providers were troubled by the large network infrastructure investments they made during the boom years of the late 1990s as well as dealing with a weak economic climate. Saddled with debt, industry players operated in a climate characterized by cutthroat competition for a dwindling supply of new subscribers. With the majority of corporate, middle- and high-income users already subscribing to wireless services, providers sought to grow their subscription bases by going after younger consumers, as well as those with lower income levels. However, the latter strategy did not come without consequences. For example, Sprint's attempt to profit from this demographic led to additional debt from unpaid bills, as well as high cancellation rates.

New products and services that complemented existing wireless and PCS systems were emerging. In fact, as early as late 1999, handheld wireless devices with the capability to send and receive e-mail, browse the Internet, and even trade in the stock market were available for purchase. Although most wireless phones were Internet-ready by the early 2000s, U.S. consumers were slow to adopt wireless Internet services. However, industry analysts expected "third-generation" (3G) data services, which companies began adopting in 2003, to inject new life into the wireless telecommunications industry. 3G served to converge wireless networks that carry voice, video, and data, and improve quality in the process.

According to the FCC, "3G systems provide access by means of one or more radio links to a wide range of telecommunication services supported by the fixed telecommunication networks and to other services that are specific to mobile users. A range of mobile terminal types will be encompassed, linking to terrestrial and/or satellite-based networks, and the terminals may be designed for mobile or fixed use. Key features of 3G systems are a high degree of commonality of design worldwide, compatibility of services, use of small pocket terminals with worldwide roaming capability, Internet and other multimedia applications, and a wide range of services and terminals."

In 2002 Sprint rolled out PCS Vision, the first nationwide 3G service. In addition to traditional voice communications, subscribers were able to take and send digital photos with their phones, communicate via e-mail, access the World Wide Web, and more. According to the company, PCS Vision delivered graphics that rivaled desktop PCs in terms of quality. By the late 2000s, other leading wireless service providers also provided their customers with wireless data transmission capabilities. However, Sprint was the first to do so on a national basis.

According to CTIA figures, there were 270 million wireless subscribers nationwide in 2008, or 87 percent of the U.S. population. There were roughly 242,000 cell sites in 2008, compared to 22,663 in 1995. In that time, CTIA reported that wireless revenue increased from $21.8 billion in 1995 to $148 billion in 2008. Additionally, direct wireless carrier employment steadily increased,nearly tripling to 268,000 in 2008. Text messaging also grew in popularity and usage in the late 2000s, to the point where 1 trillion messages were sent in 2008, and 10 billion text messages per month was not uncommon. On the down side, studies have shown that "texting" while driving led to more accidents than drinking and driving.

Current Conditions

According to data from CTIA, wireless subscribers numbers rose to 322.9 million in June of 2011, up from 118.4 million in June of 2001 and 32.8 million in June of 1996. Wireless penetration (figured as the number of active units divided by the total U.S. and territorial population) rose from 14 percent and 41.9 percent in 1996 and 2001, respectively, to 102.4 percent in 2011. The number of wireless-only households, first tracked in 2006 at 10.7 percent in 2006, was 29.7 percent in 2011. Annualized total revenues skyrocketed from $21.5 billion, $58.7 billion, and $118.3 billion in 1996, 2001, and 2006, respectively, to $164.6 billion in 2011. Of that total, data transmission revenues showed the most explosive growth, jumping from just $280.8 million in 2001 to $55.4 billion in 2011.

Capital investment has run more than $22 billion since the mid-2000s. After jumping from $5 billion in 1996 to $23.1 billion in 2001, spending on capital investment fell to $22.7 billion in 2006 and then increased to $27.5 billion in 2011, according to CTIA data. Yet, Computer World,, citing a 2011 Credit Suisse Survey of the top 38 wireless carriers, reported that the North American mobile networks were filled to 80 percent capacity and that providers needed to invest more in infrastructure to keep up with the rapid expansion in cellular use. In fact, the number of annualized minutes passing over cellular networks increased from 344.9 billion in 2001 to 2.25 trillion in 2011, and the number of text messages sent every year shot up from 113.5 billion in 2006 to 2.25 trillion in 2011.

To compete in the marketplace that was increasingly saturated, the industry continued to look to mergers and acquisition as a means for growth and expansion. In 2011, second-place carrier (behind Verizon Wireless) AT&T proposed a $39 billion merger with T-Mobile but withdrew the offer when it became clear late in the year that the Federal Communications Commission (FCC) would not approve it. That left fourth-place T-Mobile with fewer customers (as many fled when they heard news of the proposed merger) and the only one of the four major U.S. carriers that was not licensed for the popular iPhone. Forbes reported, "Third-place carrier Sprint may prove a worthy partner for T-Mobile. Sprint held talks earlier this year, prior to AT&T's attempted takeover, and a merger would increase highly-coveted spectrum space for both and up the competition for Verizon and AT&T." For its part, although AT&T ended up without T-Mobile, the FCC did approve a deal that allowed AT&T to follow through on a $1.9 billion deal to buy spectrum from Qualcomm. AT&T was working hard to catch up with Verizon, the first-place carrier, which was expanding its 4G networks.

Industry Leaders

New York, New York-based Verizon Communications was the second largest telecommunications company in the United States (behind AT&T) but the nation's largest wireless provider. Verizon Wireless (which does business legally as Cellco Partnership), in a joint venture with Vodaphone, had an estimated 100 million customers in 2011. The company, which is headquartered in Basking Ridge, New Jersey, reported 2010 revenues of $63.4 billion. The company began in 2000, when Vodafone and Bell Atlantic combined their wireless interests in the United States. Verizon Wireless also claimed to have developed the "first national high-speed data network," and to have offered the "first downloadable applications over the air onto phones." Offerings featured a competitive array of service plans.

AT&T Mobility, headquartered in Atlanta, Georgia, the wireless carrier subsidiary of parent company AT&T, was the industry's second largest carrier in 2011with over 95 million subscribers and revenue of $53.6 billion or 40 percent of the parent company's $124.3 billion in 2011 total sales. Once the exclusive carrier for Apple's iPhone, it lost that prestigious position in the late 2000s. The company also provides its services of voice, data, and messaging to customers in 130 countries through partnership agreements.

The third-place carrier in 2011 was Sprint Nextel Corporation, headquartered in Overland Park, Kansas. Sprint had about 50 million customers and generated revenues of nearly $32.6 billion in 2010. In addition to traditional payment plans, Sprint also offered popular prepaid plans through its subsidiaries Virgin Mobile USA and Boost Mobile. In fourth place, T-Mobile USA Inc., headquartered in Bellevue, Washington, had roughly 33 million subscribers and revenues of $22.2 billion in 2010. The firm operated as a subsidiary of the German firm Deutsche Telekom. Plans to sell T-Mobile to AT&T in 2011 fell through when regulators balked at the merger.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

News and information about Radiotelephone Communications

Patent No. 7,664,460 Issued on Feb. 16, Assigned to ATC Technologies for Radiotelephone Communications System (North Carolina, Virginia Inventors)
US Fed News Service, Including US State News; February 17, 2010; 332 words
...have developed a radiotelephone communications system. The inventors...invention relates to radiotelephone communications systems and methods...satellite cellular radiotelephone communications systems and methods...
North Carolina Inventor Develops Multi-Band Satellite Radiotelephone Communications System
US Fed News Service, Including US State News; February 21, 2007; 487 words
...Feb. 21 -- Peter D. Karabinis of Cary, N.C., has developed multi-band/multi-mode satellite radiotelephone communications system and methods for the same. According to the U.S. Patent & Trademark Office: "Satellite radiotelephone...
Impact on M&A and Joint Ventures in Russia
Mondaq Business Briefing; November 13, 2017; 700+ words
...share may still be considered to be dominant generally are now restricted to special sectors, such as in radiotelephone communications. Buying Cartels: The 275 Law supplements the Competition Law by prohibiting cartels among purchasers of...
US Patent Issued to ATC Technologies on Sept. 2 for "Filters for Combined radiotelephone/GPS Terminals" (North Carolina Inventor)
US Fed News Service, Including US State News; September 4, 2014; 473 words
...component is configured to provide wireless radiotelephone communications using satellite radiotelephone frequencies...component antennas configured to provide wireless radiotelephone communications using at least one of the satellite radiotelephone...
US Patent Issued to Ericsson on Jan. 15 for "Radiotelephones Having Contact-Sensitive User Interfaces and Methods of Operating Same" (North Carolina Inventors)
US Fed News Service, Including US State News; January 16, 2013; 584 words
...includes a housing, and a radiotelephone communications transceiver and display...the display and the radiotelephone communications transceiver, and controls...the display and the radiotelephone communications transceiver according...
Attack on Pearl Harbor: Strategy, Combat, Myths, Deceptions
Air Power History; September 22, 2012; 700+ words
...effective command and control during the raid, in large measure because of their failure to develop effective radiotelephone communications among strike aircraft. He concludes that Japanese dive-bombing was ineffective. He asserts that the Japanese...
US Patent Issued to ATC Technologies on Sept. 21 for "Methods and Systems for Configuring Satellite Antenna Cell Patterns in Response to Terrestrial Use of Satellite Frequencies" (North Carolina Inventor)
US Fed News Service, Including US State News; September 22, 2010; 434 words
...According to the abstract released by the U. S. Patent & Trademark Office: "Space-based wireless radiotelephone communications are provided in a satellite footprint over a satellite radiotelephone frequency band. The satellite footprint...
Financial and Labor Productivity Benchmarks on Western Wireless Corporation Published.
Internet Wire; September 27, 2002; 700+ words
...same economic sector? Reports for over 25 Radiotelephone Communications companies are available now, including the...between Western Wireless Corporation and other Radiotelephone Communications companies. The Earnings Before Interest...

Search all articles about Radiotelephone Communications