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Advanced Mobile Phone System (AMPS)

The Advanced Mobile Phone System is one of the earliest commercial cellular systems. AMPS technology is currently deployed throughout North America and AMPS-derivative systems are deployed in a majority of worldwide cellular markets.

AMPS was invented at Bell Labs and initially deployed in the U.S. in the early 1980's. Ownership of the local cellular service operations was transferred from AT& T to the regional Bell operating companies (RBOCs) at the time of AT& T's divestiture in January, 1984. Other landline telephone service providers, such as GTE, were unaffected by the divestiture and retained their own cellular operations.

To protect the consumer from potentially anti-competitive behavior by the local telephone service providers, government authorities mandated a duopoly structure for the fledgling cellular industry. This duopoly structure for cellular services has been largely imitated by other nations and has resulted in fierce competition between the service providers in many of the 734 markets defined by the FCC.

At the beginning of the cellular industry, local telephone companies (including the RBOCs) were automatically granted one of the two licenses in each market in which they provided wireline service. This is the so-called "B" license, which can be remembered by the initial of the word "Bell".

The second license for each market was initially drawn by lottery and later auctioned. Initially few investors perceived their value-after all, who could compete against the local telco? Some entrepreneurs quickly recognized the potential of these licenses and obtained as many as possible by buying out other license holders. The early days of cellular are reminiscent of the gold rush days, with pioneers rushing to buy controlling interests from lottery winners. Thus, the "A" side, which can be remembered as "A" for "Alternate," was born.

Early deployments and business deals in the cellular arena were based more on intuition than analysis. An early market analysis conducted at Bell Labs in the late 1960's concluded that the entire nationwide cellular market would peak at about 900 thousand users. Despite analyses of this nature, pioneers were willing to bet that cellular would prove to be popular.

Over time, as the value of cellular licenses were more widely recognized, prices were driven to extreme levels. It became the accepted custom to value licenses on the basis of (potential subscriber) population or "POPS." The price of a cellular market is now evaluated in terms of "dollars per POPS" normalized value, with high water marks in the neighborhood of $ 500 per POPS.

Cellular markets are defined by cellular geographic statistical areas or CGSAs. Of the 734 CGSAs comprising the U.S., 306 are in metropolitan areas and are called metropolitan statistical areas or MSAs. The remaining 428 are called rural statistical areas or RSAs. MSAs are valued more highly because of their greater density of potential subscribers.

The following subsections describe AMPS, the most widely used cellular technology.