Industry Volatility is High, Getting Higher

There are periods when communications policy is fairly static, and other times when major change erupts. The same holds for spectrum policy. And it might be fair to say a new period of heightened change is coming.

That holds the potential for huge changes in market structure, contestants and changes in retail offers and rates, across fixed and mobile segments.

Consider what is happening, or could happen, in the mobile services arena, regarding spectrum access. Some have noted that auctions for licensed mobile spectrum are sort of at an end, after the incentive auction for 600-MHz spectrum.

So scarcity could become a bigger issue. That might be why mobile service providers are working so strenuously on integrating LTE with Wi-Fi for access, for example.

If providers think licensed spectrum really will be hard to come by in the future, then ways to maximize what they mostly already have could take on new importance.

So what does that mean? Clearly, the value of using unlicensed spectrum becomes even more valuable to a firm fundamentally based on use of licensed spectrum. As many would note, Wi-Fi already represents more bandwidth than all mobile spectrum put together.

Ironically, it is not clear what greater availability of license-exempt spectrum will mean for the strategies of various contestants.

On one hand, much more license-exempt spectrum reduces the scarcity value of licensed spectrum. That should have positive implications for app, device and service providers who can expect they can get to market at lower costs, where access is concerned.

That likewise suggests licensed spectrum could, in some ways, become less valuable, or at least less a barrier to market entry by new providers.

On the other hand, as the need to support more mobile video becomes a fundamental requirement, access to much more unlicensed spectrum will be essential. So the release of more license-exempt spectrum will help mobile service providers. Indeed, it likely is essential.

Also, ironically, more license-exempt spectrum, available only “best effort,” could reinforce the quality advantage traditionally claimed for licensed spectrum.

Strategically, ownership of fixed network assets, or access to them, also becomes more valuable to any mobile Internet access provider, if the capital and operating costs are be “right sized.”

It is getting harder and harder to wring profits out of triple-play fixed network assets, as valuable as fixed network capacity is as the essential precursor to Wi-Fi abundance.

According to the International Telecommunications Union, the business case for fiber to the home or fiber to the curb is feasible in less than half of all locations globally.

The point is that all the activity you now are hearing about in the spectrum area, plus conflicts over Internet app and access policy, plus potential emergence of new access providers, is a reflection of the tumult that now is breaking out globally.

It is not simply regulatory activity that is at a high level, but also business models and technology that are changing very rapidly.

There are times when volatility in the broader telecom industry is low. This is not one of those times.
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