rketing expenditures to replace the subscribers lost to "churn," that is, the customers disconnecting from their service. Since carriers cur- rently experience a churn rate of about 30 percent a year, the present value of the cost of churn over the next five years, at a 20 percent cost of capital, is another 0.95 times $350, or $330. The total cost of acquiring and keep- ing a subscriber is, therefore, about $680. Market Values versus Total Costs per Subscriber At the end of 2003, the two largest independent wireless carriers, AT&T Wireless and Nextel, had a market value-equity plus (book value of) long-term debt-of $2,000 and $2,800 per subscriber, respectively.42 Six months earlier, before Sprint eliminated its Sprint PCS tracking stock, Sprint PCS had a value of $1,400 per subscriber (see table 7-3). My esti- mate of the reproduction cost of the assets to serve that customer is $375 for spectrum, $800 for capital facilities, and $680 for customer acquisition, for a total of $1,855. This estimate is slightly less than the market value per subscriber of AT&T Wireless and substantially lower than the value per subscriber for Nextel, but it is greater than the value of Sprint PCS. Nextel is an innova- tive carrier whose market value may reflect the financial market's belief that it has substantially more growth potential than the other carriers, and The Rapid Growth of Wireless Telecommunications Sprint's lower value is likely due to its problems in obtaining as good geo- graphical coverage as that of its major competitors. Thus it appears that at spectrum values of $1.50 per megahertz POP, the value of U.S. wireless carriers is fairly close to the cost of building a system and attracting subscribers. This should not be surprising, for the market signals that drive the recent spectrum market transactions should be con- sistent with those affecting stock market values. A Comparison with Other Countries It is frequently alleged that the United States lags behind other countries developing an enlightened wireless pol