How Will CBRS Market Develop?

Will new access capacity (Citizens Broadband Radio Service; use of unlicensed and shared spectrum) allow new entities to compete with mobile operators in the access services business? Some think so.

Rethink Technology, for example, has argued that shared spectrum will trigger new “challengers” to mobile operator revenue models.

Others might point to decades-ago arguments about Wi-Fi replacing mobile networks and conclude that new shared and unlicensed spectrum likely will create new use cases and marginally affect wide area network access providers.

But the development of Wi-Fi, if a valid indicator of what could happen, suggests complementary use cases more than substitution.

source: Rethink Technology Research

Caroline Gabriel, director of research at Rethink Technology Research, believes that “enterprise small cells, particularly those operating in unlicensed spectrum, could be the undoing of mobile network operators, relegating them to ‘utility’ commoditization, and falling revenues, as both license free spectrum and shared spectrum ideas, are taken up aggressively by newcomers.”

“Small cells were conceived as a way to improve the mobile operator business model, but they may now become weapons for challengers to MNOs, particularly broadband players with established backhaul such as cable operators,” she says.

Without question, use of unlicensed or shared spectrum to create connectivity services can affect the business model of some access service providers.

Service providers with a huge network footprint (cable TV operators being the best example), can use Wi-Fi access to reduce the amount of capacity they buy from their wholesale providers, when operating as mobile service providers. So, without question, unlicensed and shared spectrum will have business consequences for some competitors.

Independent wireless ISPs might also be able to leverage new shared and unlicensed spectrum.

In that sense, yes, new shared spectrum and unlicensed spectrum can--and will--be used by telco competitors, as well as by telcos themselves.

A related question is whether use of unlicensed or shared spectrum by large enterprises actually displaces access that otherwise would have been purchased from a mobile service provider.

That could be relevant in terms of internet of things deployments, where an enterprise might build its own local network to collect data from sensors, rather than using services from a mobile service provider, instead.

Rethink estimates that, by 2022, enterprises will account for almost half of all small cell deployments, up from seven percent in 2014. The installed base will reach 14.8 million in 2022, up from 185,000 in 2014.

The issue is why enterprises will be deploying, what the use cases are, and how such deployments could affect service provider revenue.

Here one must look to history.

Substitution of this type (private networks for public networks) has been talked about for decades. Wi-Fi provides the example. Back in the late 1990s and early 2000s, one could hear some talk of the theory that Wi-Fi eventually would emerge as a full access substitute for mobile network access.

That mostly happened in the early 3G era.

Conversely, perhaps some might argue that new mobile networks will obviate the need for Wi-Fi. That almost assuredly goes too far, but even Cisco’s forecasts waffle on this matter.

A 2015 forecast by Cisco suggested use of Wi-Fi would not decrease, as a percentage of total access. Later forecasts suggest 5G will increase the amount of access on the mobile network, reversing a trend in place since 2G.

source: Cisco

One potentially useful analogy is the traditional use cases for private, indoor networks (local area networks and Wi-Fi) and outdoor mobile and fixed networks. One can argue that the traditional bifurcation between public “access” networks and private enterprise networks still provides a likely model.

Wi-Fi essentially is the platform that replaced cabled private premises networks. Public carriers earned their revenue bringing connectivity to the premises, but enterprises and organizations and built their own internal distribution networks.

Rethink believes CBRS will therefore enable replacement of mobile services by enterprise owners building private networks. That could happen, in the sense of enterprises substituting private network access for public network sensor access.

But that would limit new public network IoT connections, not displace existing mobile connections. There would be a revenue impact, but of an indirect sort: eliminating one potential source of new mobile network connectivity revenues.

The analogy is not perfect, but the bifurcation between private local area networks and wide area public networks is germane. That is not to deny the emergence of “neutral host” providers selling wholesale premises access to all mobile service providers.

But, in such cases, the neutral host providers essentially are mobile infrastructure providers working in partnership with their mobile clients, as do tower companies.

We will wait to see how the business models develop, but LANs and tower company precedents, as well as services such as Boingo, provide some prior examples of how the new CBRS and related markets could develop.