In a nutshell, the consensus seems to be that the bars (properly known as the “signal quality estimate”) don’t really mean much of anything. There is no industry standard. Each manufacturer uses their own algorithm to determine the bars displayed. This varies not only between phone makers, but also between models, and between firmware versions of the same model. The number of bars displayed does not necessarily equal signal level. instead, it would be more accurate to say that the bars are “correlated” with signal level.
In addition, several other factors explained below determine the customer experience.
Bars, BTS and Congestion
Bars only indicate the strength of the base transceiver station (BTS) radio signal and do not necessarily mean the network is actually free and uncongested. The packet data protocol (PDP) context is a data structure. When a mobile device wants to use data, it must first attach and then activate a PDP context. Every BTS is limited in the number of packet data protocol (PDP) contexts it can have at any moment. Without prioritization, the first comer is the first served. So a group of phones may very well congest the entire BTS. Bandwidth will be unlimited for those initial users, but no new user will be able to connect even though signal strength is maximal. In urban areas you always have alternative BT stations to connect, but in rural areas you might only have one. Consequently, you could be standing right next to the BTS, have 5 bars and still not able to connect.
The biggest reason why the signal strength isn’t very helpful for GSM is what’s known as “multipath”. The signal reaching you from the cell can arrive by different routes which are of slightly different lengths, meaning that they’re offset in time. Multipath is a form of interference that can cause errors and affect the quality of communications. The “signal strength” tells you how strong the primary signal is, but doesn’t tell you anything about how much multipath interference you’re getting. Multipath by its nature is highly variable from one location to another. In some places, moving just a few feet can affect reception.
A cell tower signal can be reflected by any sort of material that is partially reflective to electromagnetic radiation (e.g. stone, metal, glass, or water.) So even though an urban area will have more base transceiver stations, multipath interference is more common in urban areas than in rural. Sometimes, a certain material can absorb a small part of a signal and reflect the rest of it off in another direction; this reflection means that all these signals are bouncing around and taking different physical paths to your cell phone’s antenna. Different signals taking different paths means that some take longer paths than others. Since they all are traveling at the speed of light, multiple signal paths mean that some signals will arrive at your cell phone’s antenna at different times. These signals interact with each other, canceling some parts of the signal out and amplifying others. The typical result is that the power density of signals in these environments will fade in and out.
CDMA typically performs better than GSM in urban areas where there’s a lot of local signal echo because it can actually use the multipath signals to make a call clearer.
Another factor which comes into play with UMTS and CDMA is the Ec/Io (pronounced “ee-see over eye-not”) ratio. This is basically a measure of how well a phone can hear the tower over all the other traffic on the channel. It refers to the portion of the RF signal which is usable and is the difference between the signal strength and the noise floor. A reading near 0.0 is very good. You can find low readings late at night on weekdays when traffic is low. When the reading is high (-12.0 to -15.0), quality will drop. Because of noise, you can have strong signal and la bad Ec/Io ratio and have issues. The carriers can’t display Ec/Io because it fluctuates widely.