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The wireless service provider market in the United States is \extremely competitive. The wireless market for individuals and/or families (nonenterprise market) is the most competitive segment. In this segment, there are a few big wireless service providers (wireless carriers), four of which can be categorized as having substantia1,market share. There has been some consolidation. Although these acquisitions have somewhat changed the dynamics of the market, there are still many players. An oligopoly market is considered to have three to four players, and such markets are typically stable in terms of growth, technical innovation, and pricing policies. It seems that the wireless carrier market will require a few more years before it becomes an oligopoly. Also, the rate of innovation in wirelcss technologies is frantic. A pathbreaking technical innovation by one of the big players has the potential to change the industry dynamic. The major players and thc number of subscribcrs that they have are as follows:

3. Sprint Nextel (53.8 million subscribers). 4. T-Mobile (28 million subscribers). 5. AllTel Inc. (12 million subscribers). In 2007,Alltel completed its merger with an affiliate of TPG Capital and GS Capital Partners and ceased trading on the New York Stock Exchange. 6. US Cellular(6,1 million subscriben).

1. AT&T (70.1 million subscribers). In 2004, Cingular Wireless acquired AT&T Wireless. That acquisition gave Cingular nationwide coverage. Then the BellSouth acquisipercent ownershipof cingular. tion in 2006 gave AT&T 2 Verizon Wireless (65.7 million subscribers),formed by the . union of Bell Atlantic Mobile, AirTouch Cellular, PrimeCo, and GTE Wireless. European wireless giant Vodafone has a 45 percent stake in Verizon Wireless.

The growth in the number of subscribers and in revenucs (which does not include roaming charges, etc.) over the last decade and a half bas been nothing short of meteoric. In the earlier years of this industry, pricing pressurc and consolidation caused thc smaller service providers to be acquired or 10 exit the market. This has somewhat easel1 the prcssurc 011the larger players. Currently, it's unusual to find carriers competing aggressively on price alone. Instead, the bigger players seem to be trying to retain their lllost covctcd cuvtomcrs undcr cxtcndad two-ycar contracl renewals. Although carriers are offering more "anytime" minutes and monthly rollover minutes in their rate plans, as well as handset subsidies, larger carriers are expcricncing growth in higher average fevenue per user (ARPU), n key industry metric. In addition to voice, new data scrviccs such as WiFi, photo, video, and multimedia applicutiolls are fueling this ARPU growth. Industry analysts look tbr n growing subscriber base. However, even with incrcasud ARPU, the net subscriber addition in this industry hns bccri

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somewhat low. Therefore, industry analysts are concerned whether the carriers can maintain high ARPU for long. Upgrades to enhance data networks and third-generation handsets with Web-based capability can potentially boost growth, but not at the same magnitude at which increased net new subscriber additions can drive higher revenue growth, The current trend is for people to prefer using their wireless phone rather than their wireline phones at home. In the long term, this trend is considered a positive for the wireless industry. As a result, nationally, wireless carriers report higher minutes of use attributed to long-distance traffic. For instance, AT&T recently stated that wireless data usage is quadrupling every year. They have reported an increase in the same from 840MBPS in 2006 to 3800MBPS (megabit per second) in 2007. A closely watched event in the industry was the acquisition of BellSouth by AT&T for $86 billion in 2006. It was widely expected that, following this merger, AT&T would slow its marketing and network capital expense in the short tenn to ensure that it would realize the synergies of this acquisition.Analysts watched to see whether AT&T would continue to grow even with this pricey acquisition, especially when compared to the growth they expected for its closest competitor, Verizon Wireless. Given the myriad interfaces of the technologies, networks, and government licenses, the wireless carriers are competing and allied at the same time. Sprint PCS, which was not really considered a high-growth-potential carrier until recently, experienced 6.5 percent growth in 2004. Sprint accomplished this improvement by focusing on improved wireless services and by leasing its networks to other carriers. For example, currently, Virgin Mobile buys wholesale wireless service from Sprint and has been targeting the youth market to become the fastest-growing wireless company in the United States. Qwest buys wireless service from Sprint and resells it in different markets. On August 12,2005, Sprint and Nextel completed their merger. The new company, called Sprint Nextel, is the third largest wireless carrier in the United States. To increase market share, wireless service providers are trying hard to poach their competitors' customers by

providing superior quality of services, appealing cirllir~p plans, and great customer support. In order to Iii~vcit predictable stream of revenues, wireless service providcirk entice their new customers into signing moderate to ion#. term service commitments. Once these service concrttc[t, expire, customers can continue with their current wirclc~k provider, move to a different provider, or stop using wim less service entirely. With the current changes m laws hy the Federal Communications Commission (FCC), wirclr:~lr customers can keep their existing phone numbers eve11 It' they are moving to a different provider. This has matlc 11 harder for wireless service providers to keep their currc~ll customers, who become enticed into moving to competi~ol-N because of appealing calling plans, superior customar service, free or subsidized upgrades to advanced ccllul,~~ handsets, and so on. Wireless carriers often use subscriber surveys to study strategies that can be implemented to maintain their cur~cnt subscribers while attracting those from other carricss, Recently, Consumer Reports conducted a survey of molt than 31,000 cell phone subscribers. One of the major findings was that fewer than 50 percent of respondents werc highly satisfied with their cell phone service, and a significant number of them said they had no service or experienced a dropped call or poor connection at least once in thc week before the survey was conducted. Another key finrliiig was that "chum," the industry term for the number of subscribers who change carriers,remains high. On average, nearly 37 percent of cell phone users switch carriers each year, seeking better service or a better calling plan. A leading reason consumers used to be hesitant to do so was that they couldn't take their old numbers with them. With thc afolcllleu~ioned FCC ruling, subscribers are now aware that they have more choices and more freedom. Overall, 10 pelcent of subscribers had filed a billing problem with their carriers. Only 40 percent of those reporting problems said the company's response to a complaint was very helpful. These findings suggest that wireless carriers should focus on improving service quality so as to reduce dropped calls and should improve billing and customer service in order to increase subscriber satisfaction. The acquisition of BellSouth in 2006 aided AT&T in becoming the biggest player in the industry. Like other