The design objective of early mobile radio system was to achieve a large coverage area by using a single, high power transmitter with an antenna mounted on a tall tower. Although, it provided very good coverage, very limited number of subscribers(users) could be accommodated. For example, the Bell mobile system in New York City in the 1970s could only support a maximum of twelve simultaneous calls over a thousand square miles. The government regulatory agencies could not make spectrum allocations according to the increasing demand for mobile services. Hence the radio telephony system had to be restructured to achieve high user capacity with limited radio spectrum.

The cellular concept was a major breakthrough in solving the problem of spectral congestion and user capacity. It offered very high capacity in a limited spectrum allocation without any major technological changes.

Neighbouring Base Stations are assigned different groups of channels so that the interference between base stations (and the mobile users under their control) is minimized. The available channels are distributed throughout the geographic region and may be reused as many times as necessary. This fundamental principle is the foundation for all modern wireless communication systems, since it enables a fixed number of channels to serve an arbitrarily large number of subscribers by reusing the channels throughout the coverage region.