Cellular telephones services, a component of the telephone services index, is included in the
education and communication group of the Consumer Price
Index (CPI). Both the telephone services index and the
Telephone services, local charges index are published
monthly at the U.S. level. The education and communication
index is published in all publication areas on each
area's publication cycle.
The telephone services index includes the three
components shown below with the relative importance of
each index. These data are for the U.S. city average of the
CPI for all Urban Consumers (CPI-U) as of December 1999.
Item |
Relative Importance |
Telephone services, local charges |
1.082 |
Long distance telephone services |
1.142 |
Cellular telephone services |
.050 |
The base period weight for each CPI item group is
the average annual out-of-pocket expenditures that
households had incurred for that item in 1993-95. The
weight for cellular telephone services reflects monthly
consumer expenditures for local cellular services received from
telephone companies. The CPI sample of telephone
companies that are priced was selected using geographical
data supplied by Federal Communications Commission.
All telephone companies that supply cellular
telephone services are eligible for pricing. Telephone
companies that participate are priced on a monthly basis. The
entry level item definition includes charges for domestic
personal consumer phone services where the telephone
instrument is portable and it sends/receives signals for
calls by wireless transmission. Services for business calls,
telephone equipment rental, portable radios and pagers
are not eligible for pricing. Services for residential local
telephone calling, long distance calling, and
coin-operated pay phones are covered elsewhere in the CPI sample.
Purchases of telephone instruments are also covered
elsewhere in the CPI sample (with the exception of cellular phones that are included in some priced cellular packages).
Most of the initiation and repricing of cellular
telephone services are handled by CPI staff in Washington, DC.
Washington obtains most data either directly from the
cellular providers or from their Internet home pages.
The Producer Price Index (PPI) is also establishing a
cellular telephone index, so initiation and repricing data for
some cellular providers are shared between the PPI and CPI.
Selection of characteristics to be priced
Each selected cellular provider is contacted by the
CPI Washington office. Whether each provider participates
in the CPI, and how each company participates is
determined by agreements established with appropriate
respondents at each organization.
Data supplied by some cellular providers to the CPI
(as well as the data shared by the PPI) are types of
average revenue figures from the company's internal computer
system. Some cellular companies feel average revenue is
a good pricing measure since it encompasses many
different customers, and a wide array of cellular calling
characteristics. These data may be supplied as average
revenue per minute, per customer, per bill, or per account.
Generally the figures are supplied separately for each
sampling area, local calling area, state, or region. After the data
for each quote has been initiated, respondents are asked
to supply subsequent average revenue figures on a
regular basis for repricing.
Most of the data supplied by cellular providers to
the CPI price characteristics of cellular calling plans
offered by the companies. For initiation, the respondent is
asked to either supply data for the most popular consumer
cellular plan in each area, or data for a number of popular
consumer cellular plans in each area that Washington
office can narrow to one plan per quote using probability
sampling techniques. Characteristics captured for the
selected cellular plans may include service charges, free calling minutes, charges per calling minute, plan options,
activation, and sometimes cellular phone instruments. Since
most plans involve contracts, the respondents are also asked
to supply contract requirements as well. The following is
an example of characteristic information that could be
identified:
Service priced cellular plan
Plan name Cellular 100
Type of service regular
Included in plan limited free peak/off-peak minutes
Number of free minutes included 100 (peak or
off-peak)
Options included in plan call waiting, call forwarding
Phone instrument not included in plan; $50 extra
Activation not included in plan; $25 extra
Cost per extra peak calling minute $.30
Cost per extra off-peak calling minute $.20
Contract required for minimum of one year
Promotional free weekends until end of year
For quote repricing, the respondents are asked to
supply data for the selected plans on a regular basis,
including plan changes or promotional offerings, if any exist.
The CPI attempts to price the same plans in each
collection period. If there are changes in the priced
characteristics, the CPI attempts to identify what specific aspects
have changed. When the selected plans lose significant
market share, the respondents are asked to substitute to new
comparable cellular plans.
Issues associated with cellular telephone service
(1) For cellular services, in many cases it is
possible to quantify changes in quality so that these
quality changes may be factored out of the
service's price movements. Many cellular providers
substitute newer plans that have either a
different amount of free calling minutes or free
options while holding the cost constant, or the same
package is offered for a different amount of money.
Adjustment factors have been developed to adjust for many of the quality or quantity
differences between these plans.
However, some price changes for substitute
cellular plans may not be accompanied by adequate information that may be used for quality adjustment.
When no causes accompany
telephone company changes, and the characteristics for
the identified telephone service items remain
unchanged, the price changes are reflected in the cellular telephone index.
Some quality improvements may not qualify
to be factored out of the item's price movements. Some quality improvements, such as fiber
optic cable, may make operations more efficient
for the telephone company, while the company's customers may see little change.
(2) Another problem encountered pricing
telephone companies in the CPI is the issue of
proprietary data. Due to the extremely competitive nature
of the telephone industry, many telephone companies do not wish to supply various
characteristic or pricing data due to proprietary concerns.
CPI staff must then negotiate with the affected
telephone companies to determine if there are any usable alternative data that may be obtained.
Additional information
Additional information on the Consumer Price Index
can be found in the BLS Handbook of Methods,
chapter 17, "The Consumer Price Index," Bulletin 2490 (1997).
This chapter is also available on the BLS Internet site
(http://www.bls.gov) under the topic "Publications," or you
may call the Information and Analysis Section of the CPI
at (202) 691-7000.
Last Modified Date: October 16, 2001