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Picket fencing is slang for the chopping effect sometimes heard by cell phone users at the edge of a cell's coverage area, or (more likely) by the landline user to whom the cellphone is connected. "Picket fencing" refers to the way portions of speech are stripped from the conversation, as if the listener was walking by a picket fence, and hearing a conversation on the other side that changes audibily depending on the position of the pickets relative to the listener.
Originally from amateur radio, the phrase was used to describe the way an FM transmitter will cut in and out as it nears the capture threshold of a moving receiver or transmitter as it passes through fresnel zones, thus chopping the speech of the transmitting operator. It is not clear if the phrase was intended to describe the loss of the speech, or if it actually referred to the chopping sound itself, which imitates the noise produced by dragging a stiff object across a picket fence.
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