Tuesday, November 3, 2015

Unlicensed Spectrum Sustainability Model Still Will Be an Issue in a "Shared" Environment

Use of license-exempt spectrum always has posed--and continues to represent--business model challenges. Initially, Wi-Fi mostly had an indirect business model in the consumer segment of the business.

Access to public Wi-Fi hotspots was an amenity gained from using a specific high speed access provider.

These days, public Wi-Fi plays a role on the capital investment side of the infrastructure business. Mobile service providers offload half or more of their customers usage from the core networks, slowing the rate at which core network upgrades are required.

In a coming iteration, public Wi-Fi will play a role supporting upstart mobile service providers.

Some firms have created direct revenue models by using public and amenity Wi-Fi to support enterprise and business customers.

But most services using unlicensed spectrum tend to face key business model challenges. Shared access to 3.5-GHz spectrum in the U.S market will not be exempt.

As envisioned, a formal tripartite model would be applied. Licensees would continue to be protected for the purposes the spectrum originally was intended to support.

But where surplus exists, commercial users would be allowed to have subsidiary rights to use spectrum, and likely would pay for the privilege. Where even the primary and secondary users are accommodated, opportunistic access would be allowed (on the model of Wi-Fi spectrum use, with license-exempt access, but without guarantees of quality or availability).

One might argue there is no fundamental business model issue with either primary licensed access or secondary usage. Primary licensees already have a sustainable model of some sort.

Commercial users would have to create a sustainable model. But some potential users, including cable TV companies, mobile service providers or possibly some app providers, have existing models that benefit--indirectly or indirectly--to an existing revenue model.

The traditional issue has been the sustainability of business models based strictly on opportunistic access, though. As anybody familiar with the fixed wireless business understands, lenders have been cautious about any business models founded on use of license-exempt spectrum, because there is a not a defensible “moat.”

In other words, there is no enforceable scarcity that keeps competitors out. That does not mean there are no “moats.” Geography sometimes creates potential barriers to entry. Large sports stadiums and airliners provide examples, says Armand Musey, Summit Ridge Group founder.

The other obvious potential model is a wholesale infrastructure model, which U.S. cable TV companies have suggested is a possibility for them, at least as a business model for their access facilities, which might become an attractive backhaul platform for small cell deployments, for example.

The point is that shared spectrum, as such, does not pose major unknown issues, as far as business model, for some commercial entities, especially when spectrum is used as on sub-licensed basis.

On the other hand, some traditional issues faced by small wireless Internet service providers and amenity Wi-Fi providers will remain, when opportunistic access is the platform.

Some things do seem to change. 

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