New Licensed, Unlicensed, Shared Spectrum Proposals Have Business Implications

Unlicensed spectrum for Internet access contributes to perhaps $50 billion to $100 billion in economic value in the U.S. economy, some argue. For Internet service providers, the more immediate issue is precisely how and when unlicensed access to spectrum for Internet access helps or harms the ISP’s business, since that directly affects willingness to promote and rely upon such access.

Those attitudes furthermore will condition and shape ISP attitudes towards deployment of additional spectrum that can be used on an unlicensed basis. As you might guess, many argue that bandwidth exhaustion of the current Wi-Fi resources will occur as soon as 2014.

As you also might guess, there are other potential uses for new Wi-Fi spectrum, so a policy debate is inevitable. Automotive communications, for example, is one rival use of spectrum that might otherwise be deployed to support end user access, service provider backhaul or access operations.

Nobody doubts that as phones become Internet access devices, traffic demand will shift. Already, perhaps 66 percent to 80 percent of all smart phone data consumption occurs on Wi-Fi networks, for example.

And that means Wi-Fi is both a competitor to, and complement to, carrier access networks, both fixed and mobile. To be sure, fully mobile access remains important for voice and messaging, as well as for some Internet applications. But most content consumption, especially of video, seems to happen in fixed locations where Wi-Fi works well as an access medium.

In addition, some advocates of additional unlicensed spectrum licensing argue that licensed spectrum useful for traditional “macrocell-based” communications is quite limited in availability, and will not keep up with demand growth.

To be sure, spectrum is but one element determining the amount of useful communications spectrum. Network design, signal compression and air interface efficiency are other relevant inputs.

And reasonable observers argue that a mix of all those approaches will help maximize raw spectrum resources by improving the effective use of any amount of physical spectrum. Frequency reuse is among the more important approaches for any network approach.

Some might argue the proponents of additional Wi-Fi spectrum have solid business reasons for making such arguments” spectrum is the foundation for business models, and licensed models of course favor the licensees, while unlicensed spectrum supports the business models of competitors.

In other words, Wi-Fi is a primary revenue driver for some providers, and a helpful indirect revenue driver for many others.

To use the most obvious example, unlicensed Wi-Fi spectrum allows offload of most mobile traffic to fixed networks, potentially creating a new role for fixed networks in the untethered communications business, and possibly a new role as well in the mobile business.

Some might argue that the licensing mode primarily dictates the Wi-Fi use mode (unlicensed inherently is better for small cells and coverage areas). In part, that is true because of power limitations imposed on unlicensed spectrum devices. Lower power means a smaller coverage area.

In principle, that is a technology choice not determined directly by the mode of licensing, with the exception of the low-power requirements to limit interference.

Business models also can take any number of forms. For some time, providing public Wi-Fi access has been an amenity to increase the value of a fixed network ISP. Such access likewise is an amenity intended to similarly enhance the value of a particular mobile ISP service.

More recently, fixed network Wi-Fi access has become a “capital investment reducing” way of supporting growing mobile Internet access demand.

That is driving the “small cell” and “heterogenous network” trends, whereby a mobile “macrocell” transmission infrastructure is reinforced by use of small cells using mobile frequencies or actual Wi-Fi spectrum.

But there still will be contention over the proper licensing model, and furthermore over the mix of licensing modes (how much spectrum is licensed, how much unlicensed).

At the same time, there will be some degree of contention over the use of shared spectrum, where licensed non-commercial users share access with new commercial users. As with all other spectrum policies, it is possible to conceive of a mix of licensing modes.

In the U.S. regulatory setting, policymakers are looking at a mix of increased licensed spectrum (fallow former broadcast TV spectrum), new Wi-Fi spectrum in the 5-GHz band and shared spectrum  (3550-to-3700 MHz) in some cases.

As always, there will be advantages for specific providers and business models as each of the spectrum decisions are made. Cable TV operators see a chance to create new revenue models based on providing public Wi-Fi services. Mobile service providers see an opportunity to both increase their control of licensed spectrum, and provide "quality assured" services.

Other contestants, including application providers and independent ISPs, might see new opportunities for access or backhaul applications, especially for new machine-to-machine services. 

But some other interests (automobile industry) might see the foundation for new services as well, requiring that some spectrum not be released for licensed or unlicensed general purpose communications.