Sunday, February 12, 2017

Would We Issue Spectrum Licenses, If We Had to Do it All Over Again?

With the caveat that national communication regulators will have their own ideas, it certainly is possible to argue that if communications spectrum is beachfront property, then lots more beachfront is coming. That should significantly affect spectrum valuations; capital allocation for spectrum; new decisions on network investments; new roles for unlicensed spectrum and shared spectrum and therefore new implications for business models.

Some idea of the changes can be suggested by asking a question: if we had to do it all over again, and allow use of communications spectrum (with no legacy impediments), while we would certainly regulate such use (to protect consumers and avoid interference), would we actually rely on licenses at all?

There are corollaries. Would we restrict use of spectrum on technology grounds? Would we restrict use based on business models?

With the obvious objection in some quarters that avoiding licenses would also likely mean an end to the use of spectrum licensing as a way to raise government revenue, would we actually choose to allow exclusive use of any spectrum?

That such a question actually can be asked is testament to the vast revolutions happening in untethered and mobile network technology, especially the ability to create networks and devices that avoid interference by sensing, and avoiding, potential interference; the ability to bond unlicensed and licensed spectrum; and the ability to create quality of service mechanisms using unlicensed spectrum.

At the same time, a dramatic increase in total available spectrum also helps, even if unhelpful for goverrnment regulators seeking to maximize the value of spectrum licenses.

The end of a penultimate stage of the 600-MHz spectrum auction will release 70 MHz of high-value, completely clear low-band spectrum for mobile broadband on a nationwide basis, plus 14 MHz of new unlicensed spectrum. Still to be decided are which specific frequency blocks are assigned to each of the winning bidders.

After that, the spectrum has to be vacated by TV broadcasters, before mobile operators can begin to use the spectrum. Some estimate it will be 2020 before the spectrum actually is ready for commercial use.

Before that happens, it is highly likely that much more spectrum than 84 MHz will have changed hands, as an expected wave of telecom industry consolidation shifts assets and therefore spectrum license rights.

A reasonable person might predict that all spectrum held by Sprint, T-Mobile US and Dish Network will be in different hands by 2020. Not counting the new 600-MHz holdings T-Mobile US is likely to win, some 359 MHz worth of licensed spectrum should trade over the next couple to few years.

Add to that the 11 GHz of brand new spectrum the FCC plans to allocate, and some will argue the reason spectrum bids  in the 600-MHz auction was far less robust than originally expected is that so many more ways will be available to satisfy commercial needs. Small cell architectures, better radios, bonding of licensed and unlicensed spectrum and vast new amounts of unlicensed spectrum will play a role in expanding spectrum supply.  

Eventually, as much as 29 GHz of new spectrum for communications purposes will be made available in the U.S. market. That is 29 GHz of new capacity, now capacity at 29 GHz frequencies, between an order of magnitude (10 times) and two orders of magnitude (100 times) more capacity than presently is available in the mobile market.  

To be sure, potential bidders in the 600-MHz auction also had other places to spend money, including existing and possible acquisitions. So spectrum bidding might also have been muted for those relatively-tactical reasons.

Still, it is hard to escape the conclusion that, although communications spectrum is likened to  beachfront property, there is a lot more beachfront property coming.

source: Allnet Insights

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