A number of recent regulatory and market changes have opened up several possible options for third parties to gain access to useful cellular spectrum. These include leasing from cellular operators, sharing in a controlled environment or best effort unlicensed operation. We review possible options and consider the consequences.
The high value of spectrum is under pressure
Spectrum for mobile operators has always been a scarce commodity, with auctions raising hundreds of billions for governments. It’s effectively an indirect tax, paid for by higher cellular service fees. While network operators may complain about high costs, a side-effect is that it makes it much more expensive and difficult for new entrants to compete.
There have been examples where operators have quickly snapped up newly released spectrum without much intention of using it, primarily to block the chance of a newcomer.
More recently though, we’ve seen the astronomic prices being rejected at auction. Specific examples include:
- the US 600MHz bands, where a target $87 Billion set by broadcasters currently using it was left unsold. Bidding topped out at $23 Billion after which FCC has dropped the target to $55 Billion. It remains to be seen what will eventually be sold.
- The recent Indian auction, which raised $10 Billion of the $85 Billion target. There were no takers for the 700MHz or 900MHz bands on offer.
This isn’t entirely new. France struggled to sell off a fourth chunk of 3G spectrum, taking five years to introduce a new operator Illiad/Free in 2009.
Australia failed to sell its 700MHz LTE spectrum in 2013, after asking too high a price. Conversely, the Czech regulator halted its auction in the same year because it felt the bidding was escalating too far beyond their reserve price.
The trend we are starting to see is that the high value of sub 1GHz bands, which had been sold for 10x the price of higher frequencies, is no longer justified. It seems that once operators have enough to provide basic coverage, they are looking towards higher bands for capacity.
This is particularly the case in high density urban areas, where higher frequencies can be reused more often.
US operator Sprint has been in financial difficulties for some time. Many operators have sold and leased back capital equipment in order to improve their financial position. Sprint has an enormous allocation of spectrum, particularly at 2.6 GHz. They (and Clearwire) had paid up to $100 Billion for rights to use it.
In an unusual move, they plan to sell those rights and leaseback access to them. Up to 14% of their spectrum will be packed up into three deals. Sprint claims a third party valuation of $16.4 Billion, and seeks to raise up to $7 Billion using the technique. It puts a price on the asset on the basis that it could be leased elsewhere, if Sprint were unable to pay or didn’t want to use it.
You may think that few operators would have enough spectrum to lease for use by others, but I could certainly see that being true for less populated, rural areas.
There is also a fair bit of dormant, unused spectrum (e.g. 2.6GHz TDD) sitting unused at this stage. This would be ideal for in-building use, especially since man of today’s smartphones are already compatible with it.
But up to now, we’ve seen few if any commercial arrangements where operators have allowed others to install and deploy equipment using their spectrum.
The FCC’s proposed plans to share 3.5GHz CBRS spectrum will introduce a new half-way house between fully dedicated spectrum for cellular operators, and the free-for-all of unlicensed bands.
This scheme is co-ordinated by centralised Shared Access Spectrum database servers, which assign chunks of spectrum and specify RF power levels in real-time on request. Priority access schemes give additional privileges for a fee.
The commercial model is an interesting one, and should ensure greater usage of this precious resource. We can see other regulators taking a strong interest, and may follow suit. The concept is often mentioned for efficient allocation of 5G spectrum too.
The huge success of Wi-Fi, Bluetooth and many other commodity wireless products has largely been down to unfettered access to unlicensed bands. In most countries, there remains clear regulatory requirements to “play fair”, with techniques such as Listen Before Talk essential to avoid abuse. This does have an impact in more congested environments, but has been shown to be very effective in less busy residential and office environments.
Operators are looking to increase capacity by opportunistically taking advantage of that open spectrum, using LAA to augment/boost their normal service. MulteFire takes that one step further by operating independently of licensed spectrum, opening the possibility of completely standalone 3rd party LTE networks.
Each of these alternatives have their own advantages, but a critical factor will be how quickly smartphones will evolve to support them. Using existing cellular bands would be the quickest, 3.5GHz CBRS bands would be next easiest (it’s a frequency band change) with MulteFire being more radical (physical layer changes to introduce Listen-Before-Talk and co-exist with Wi-Fi).
Perhaps the most technically efficient solution would be for existing operators to pool their dormant spectrum and make it available to third parties through a Shared Spectrum server, in a similar way to the methods proposed for 3.5GHz. It would also benefit by not requiring new handsets. But for commercial reasons, I don’t see that happening anytime soon. I’d like to be proved wrong.
MulteFire at 5GHz offers a service with global reach and huge potential. It remains to be seen if everyone will be convinced of the high quality and performance it promises to deliver. Timescales are a little longer than other bands because of the need to make significant physical layer changes to handsets.
Shared spectrum at 3.5GHz is a promising new initiative – avoiding conflicts with both licensed and unlicensed bands, and not requiring too much technical evolution. Prototypes have already been proven and demonstrated, and we’ll see field trials early next year. It would gain momentum if other markets outside the US decide to adopt the scheme, even at a different frequency.