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Bridging the Digital Divide: Wireless in Rural America
April 2006

Wireless in Rural America: The Facts

• More than 180 companies provide wireless service across the United States, including four national carriers, 12 regional companies (serving more than 500,000 customers each), and more than 160 companies serving anywhere from 300 customers to just under 500,000 customers each.
• In many markets, rural consumers can choose between 30 to more than 100 service plans, offering rural consumers a host of features and different pricing options, from prepaid to big bucket plans. Smaller rural and regional companies offer both regional and nationwide calling plans. More >
• The Federal Communications Commission’s Tenth Report on competition in the wireless industry reported that an average of 3.7 competitors provide wireless service in rural counties with 100 people or less per square mile, and concluded that wireless providers “are competing effectively in rural areas.”1
• In 2004, the Bureau of Labor and Statistics found that 50.5% of rural households have wireless service, versus 53.5% of urban households. CTIA’s analysis of FCC data shows that 51.13% of consumers living in rural areas had wireless phones in 2004, versus 53.9% of all Americans nationwide.
• The National Telecommunications Cooperative Association’s NTCA 2005 Wireless Survey recently noted that among its members providing wireless services, “survey respondents are facing considerable competition from other carriers – the average respondent indicated that their company competes with between two and five other carriers.”2
• In 2004, the Rural Cellular Association reported to the FCC that an average of 5.1 competitors provide service in rural markets.  More >
• Regional and nationwide carriers like ALLTEL, U.S. Cellular, Cingular, Sprint    Nextel, T-Mobile USA, and Verizon Wireless have been deploying new, faster wireless technologies to provide their customers Internet access, mobile TV, multi-media messaging services and more.3
  

• The FCC has confirmed that 98% of Americans live in counties where next    generation wireless services have been introduced and the availability of those services is expanding.
• According to the 2005 Pew Internet & American Life Project, 6% of all rural 
  broadband subscribers use wireless technology for Internet access. More >
• Companies like ACS Wireless of Alaska, Cellular South (which provides service from Mississippi to coastal Alabama and the Florida Panhandle), Dobson Communications (which provides service in 16 states, from Oklahoma to Alaska), First Cellular of Southern Illinois, Midwest Wireless, and U.S. Cellular (providing service in 25 states) have deployed digital technologies (from CDMA 1XRTT and CDMA EV-DO to GSM/GPRS) in rural markets to support a range of services, from e-mail and text messaging, to Internet access, photo and data messaging, and access to a wide variety of information sources and services.4
• Wireless companies serving rural markets are deploying new cell sites to both expand coverage and support the delivery of new applications. For example, in March 2006, Cingular Wireless announced it would invest more than $85 million in its Kentucky and Southern Indiana networks on top of the $65 million it spent a year ago, to expand and enhance coverage.5 Cellular South has added more than 100 cell sites to its network since September 2003, and has converted its entire network to CDMA 1XRTT.6

• Unfunded and Underfunded Mandates. Rural carriers face challenges in the form of unfunded and under-funded mandates, like E-9-1-1, which may force them to delay construction of new facilities (as was the case for SouthernLINC Wireless and Illinois Valley Cellular in 2004). As Terry Addington, CEO of First Cellular of Southern Illinois, pointed out in February 2005, “New government obligations that must be paid for, but are not funded, burden us all, especially small carriers like me . . .. mandates forced me to sacrifice projects that improve customer quality – delaying new cell sites and slowing the upgrades I planned for the delivery of higher-speed data solutions.”7 More >
• Inconsistent and/or Conflicting Regulation. Wireless broadband services operate without regard to geographic boundaries. A balkanized regulatory framework will impede the heretofore-rapid development and deployment of new and innovative technologies that have flourished under a predominately national federal regulatory framework. Competition in the wireless marketplace has a demonstrated 13-year track record. In the name of consumer protection, more and more states are attempting to micromanage the customer-carrier relationship, such as legislating type-font, bill format, advertising, and establishment of rate elements. Applying 51 different and conflicting sets of regulations on a service that is provided without regard to geographic boundaries will disassemble the very engine driving the nationwide roll-out of wireless broadband and will compromise the most effective means of promoting consumer welfare – a single, national policy that continues to rely on market forces to guide the development and deployment of services consumers demand at the prices they want to pay. 
• Universal Service. Regulators and legislators should rethink how universal service is best achieved in the emerging multi-dimensional communications marketplace characterized by inter-modal competition and convergence. The FCC’s universal service and intercarrier compensation regulations are premised on artificial regulatory distinctions between technologies that hinder efficient broadband deployment by favoring inefficient wireline networks. These systems encourage and reward inefficient investment by incumbent wireline carriers (particularly rate-of-return and rural incumbent LECs), which translates to less value, innovation, and choices for consumers – especially those located in rural, high-cost areas. To the extent the existing USF and intercarrier compensation systems subsidize wireline incumbent LECs, but not other carriers, it creates artificial   incentives for consumers to use wireline technologies and discourages market entry. 
• ETC Status. Wireless carriers have pushed to deliver service in rural areas, both competing with and complementing wireline service. The Telecommunications Act allows wireless companies to gain “Eligible Telecommunications Carrier” (ETC) status, and to become eligible for some support in delivering services – specially to unserved and under-served communities, but also in delivering competitive choices to consumers. Incumbent telephone companies have been receiving this support for years, and now wireless companies should be able to use it as    well.
• Antenna Siting. As Dennis Miller, President and CEO of Midwest Wireless, told the U.S. House of Representatives’ Rural Caucus in a 2005 hearing on telecommunications and rural America:  “The best thing the FCC and  Congress can do to protect the health and safety of rural Americans is to   ensure that critical infrastructure continues to be built out in rural communities . . ..”8 The ability to quickly and efficiently site antennas and towers directly impacts the ability of carriers to bring the most advanced wireless services to rural America. The federal government, along with States and localities could have a positive impact on the speed with which towers / antennas are placed by making siting and zoning as uncomplicated and efficient as possible.
• Discriminatory Taxation. The wireless industry is willing to pay its fair share to support government; however, it is a matter of grave concern that the wireless industry and its consumers are excessively burdened with higher taxes than other sectors of the economy and consumers. The effective rate of taxation on wireless service increased nine times faster than the rate on other taxable goods and services between January 2003 and April 2004, alone.  Moreover, the IRS’ outdated depreciation rules, which treat cell site equipment like telephone poles and wires, adversely impacts rural communities by effectively increasing the cost of deploying network infrastructure in already expensive environments.

1See Tenth 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 Commercial Mobile Services, WT Docket No. 05-71, released Sept. 30, 2005, at paragraphs 94, 95.

2See “NTCA 2005 Wireless Survey Report,” January 2006, on-line at  http://www.ntca.org/content_documents/2005WirelessSurveyReport.pdf.

3See e.g., “Sprint Boasts 3G Coverage in 141 Markets,” November 8, 2005. See also “BroadbandConnect Service Offers Ultra-Fast Connections,” Cingular Press Release, December 6, 2005 (announcing launch of High Speed Downlink Packet Access networks in communities with more than 35 million people in them).  See also http://www.alltel.com/axcess/ and http://www.alltel.com/business/enhanced/mobilelink.html about Alltel’s service options; and see Verizon Wireless press kit, available at     http://aboutus.vzw.com/aboutusoverview.html. 

4Companies have deployed a variety of technologies, from CDMA 1xRTT to   GPRS/EDGE, to support such offerings as U.S. Cellular’s easyedgeSM service, Cellular South’s unlimited wireless data offering, and Dobson Cellular’s Signalink™ wireless Internet service.  See, for example, information at http://easyedge.uscc.com/easyedge/Home.do; see also  https://prodsms.cellularsouth.com/estore/index.jsp?action=plans&page=List; see    “Dobson Cellular Introduces SignalinkTM, Customers Now Have More Unlimited Data   Services,” Dobson Press Release, September 13, 2005, and http://www.midwestwireless.com information about Midwest Wireless’ Mobile Wireless Internet.

5See “Cellphone Countryside,” Wayne Tompkins, The Courier Journal, March 22, 2006.

6See “Down Home in the Cellular South,” Rhonda Wickham, Wireless Week, March 22, 2004, at http://www.wirelessweek.com/article/CA404830.htmlspacedesc=Special+Section. 

7Remarks of Terry Addington, CEO of First Cellular of Southern Illinois, NARUC Winter Meeting, Sunday, February 13, 2005.

8Testimony of Dennis Miller, President & CEO, Midwest Wireless, U.S. House of Representatives’ Rural Caucus Telecommunications Task Force Briefing on The Future of Telecommunications and Universal Service Fund in Rural America, February 2, 2005, at: www.house.gov/johnpeterson/ruralcaucus/telecomtaskforce/millertest_020205.pdf