Saturday, September 29, 2012

U.S. Needs “More Mobile Spectrum,” But When?

If there is any one "rule" that has "always" been right in the mobile business, it is that, over time, more bandwidth is consumed, and therefore more spectrum is needed. That isn't to deny the other ways any existing amount of bandwidth can be employed. There have been clear advances in coding and modulation that wring more usable bandwidth out of any amount of spectrum.

Traffic offloading using Wi-Fi also has become important, and networks can be redesigned using smaller cells, to effectively increase the amount of bandwidth any given amount of spectrum can provide. But the costs of shrinking cells grows as the cell radii shrink. 

At some point, there arguably is a point where the cost of tweaking existing bandwidth is more expensive than can be supported by retail service rates, and when allocating additional spectrum is the more affordable choice, from a national perspective of supplying lots more bandwidth at reasonable cost.

Some argue that there is no spectrum shortage. That might be correct, for the moment. Where argument increases is whether there will be potential spectrum shortages in the future, and what needs to be done to avert a problem.

One should be skeptical at times about claims that a specific country is "falling behind" on some measure of communications intensity. And that applies to claims of spectrum deficiency. 

Sometimes the "adoption" issue is simply that the value of a particular innovation is not immediately grasped. Once the value proposition is clear, adoption seems to occur rapidly enough.

In recent years it has been argued that the United States is behind in broadband adoption, either  fixed or mobile.   In earlier years it has been argued that the United States is “behind” Europe, for example, in mobile phone adoption.

Similar concerns have been expressed about use of text messaging (short message service) or U..S. use of mobile multimedia or mobile payments, compared to Japan, for example.

That might apply, in some ways, to claims the United States "has quickly fallen behind the world" in  auctioning off spectrum that can be used to support wireless communications.

It is argued that Germany and Spain have auctioned about 50 percent more spectrum for broadband than the United States has. It is said that France has auctioned about 40 percent percent more spctrum, while Italy and Japan have auctioned 30 percent more spectrum.

"Specifically, the U.S. has auctioned about 410 MHz, Germany about 615 MHz, Spain about 600 MHz, France about 560 MHz, Italy roughly 510 MHz, Japan an estimated 500 MHz, and the United Kingdom preparing to auction about 600 MHz, Precursor principal Scott Cleland says.

Some skeptics will argue that one would expect Cleland to take that view, as one virtually always will find Cleland taking positions that are "against" Google and "for" telcos. And there is little doubt that mobile service providers virtually always seem to be looking for more spectrum as they add more customers.

The new reality is that each of those new customers are starting to consume network bandwidth at unprecedented rates, compared to past usage of narrowband voice and messaging apps.

That isn't to deny that more spectrum will be needed, in most countries, as mobile broadband adoption increases. Nor are U.S. regulators unmindful of the need to clear unused former TV broadcast spectrum for mobile use. So the "auction gap," like many other past "gaps," will close over time.

Also, what isn't immediately so obvious is what other spectrum assets already exist that can be "re-purposed," as U.S. mobile service providers are decommissioning older 2G or iDEN spectrum for new use by fourth generation networks.

And then there is spectrum Clearwire already has deemed surplus, the potential Dish Network, LightSquared and Nextwave spectrum, for example.

Long term, most service providers will need more physical spectrum. What isn't so clear is that there really is a spectrum auction gap that means anything terribly important at the moment.

That isn’t to deny a future issue, though. The growth rate in global mobile  data traffic is projected to grow 60 percent annually from 2011 to 2017, which will result in a 15-fold increase in traffic by 2017, mainly due to video traffic.

“Such an explosion in data traffic requires more spectrum,” the International Telecommunications Union says.  In this regard, policy-makers and regulators can help to create a supportive environment and encourage investment and ensure sufficient availability of quality spectrum, the ITU broadband report  says.

Analysts at Deloitte concur with that assessment, and in fact urge more rapid clearing of spectrum for 4G mobile network use in the U.S. market.

U.S. investment in 4G networks could fall in the range of $25 billion to $53 billion during 2012-2016; conservatively, these investments could account for $73 billion to $151 billion in GDP growth and 371,000 to 771,000 new jobs, Deloitte argues.

The lower levels of investment and economic benefits are consistent with a “baseline” or “business as usual” scenario in which U.S. 4G deployment proceeds at a moderate pace and the transition from 3G to 4G stretches into the middle of the decade, Deloitte argues.

Under these conditions, U.S. fi rms would be vulnerable to incursions by foreign competitors capitalizing on aggressive efforts in their home markets to deploy 4G networks and develop
4G-based devices and services, Deloitte also warns, however.

In fact, Deloitte analysts believe that even an additional 500 MHz of allocated 4G spectrum would be insufficient to keep up with demand. “The Federal Communications Commission and Commerce Department are working tomake 500 megahertz of spectrum available for wireless
broadband in the next 10 years, but even if that goal is achieved, it could be difficult to keep U.S. commercial wireless spectrum supply and demand in balance as interest in new 4G offerings grows, Deloitte argues.

Past experience with 3G networks suggests the value of allocating more spectrum, and easing rules about its use, Deloitte says. From 1994 to 2000, FCC auctions tripled the amount of spectrum available for commercial mobile services.

“However, spectrum caps limited U.S. carriers to 55 MHz per market, while abroad most European and Asian carriers were allowed to own 80 to 90 MHz,” Deloitte says.  In 2003, the
spectrum caps were removed, while U.S. carriers also were permitted to buy and sell spectrum.

Those moves prompted a 250 percent increase in investment and a 300 percent increase in jobs in the mobile market, Deloitte argues.


But some might argue current Federal Communications Commission plans to auction off 500 MHz or so of new spectrum for Long Term Evolution 4G networks by about 2014 will happen soon enough to avert potential spectrum problems for the market as a whole. That doesn't mean particular competitors cannot have local issues. But that's a different matter.

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