Sprint Needs Lower Frequeny Spectrum More than a Modest Amount of 1900 MHz Spectrum

Spectrum to support mobile services has generally become more valuable since the advent of the mobile Internet era. So it is somewhat surprising when any U.S. mobile service provider decides not to bid on spectrum that can be used for Long Term Evolution services.

But that is what Sprint has decided to do about 10 MHz of 1900 MHz “H Block” spectrum adjacent to existing Sprint holdings.

Sprint had widely been expected to be the sole serious bidder, but the move seems linked to broader interest in the upcoming 600 MHz auctions of reclaimed TV broadcast spectrum.

"Sprint is focused on gaining access to more low band spectrum to add to the company's spectrum portfolio, so we have opted not to participate in the upcoming H Block auction,” Sprint said.

Compared to AT&T and Verizon Wireless, Sprint owns relatively small allocations of lower-frequency spectrum. That matters for rural coverage, since lower frequency signals travel further than higher spectrum signals.

AT&T and Verizon own most of the 700 MHz and 850 MHz spectrum in the U.S. mobile market,  while the Sprint's and T-Mobile US networks primarily use the 1700 MHz, 1900 MHz, and 2100 MHz frequencies.

The basic implication is that AT&T and Verizon will tend to have better coverage, while Sprint and T-Mobile US will tend to have higher bandwidth, all other things being equal.

Amazon Web Services Bigger than All the Rest of Amazon?

Amazon Web Services Senior Vice President Andy Jassy said that CEO and Founder Jeff Bezos believes AWS could be the company’s largest business. That revenues from selling cloud computing infrastructure could be bigger than Amazon’s original e-commerce business is a startling notion.

If Amazon has total revenue in the $61 billion range, that gives you some idea of the potential revenue magnitude Amazon CEO Jeff Bezos believes is possible.

While a ringing endorsement of industry potential, that belief also indicates how tough it might be for other suppliers of cloud computing infrastructure to compete with Amazon.

According to the Yankee Group, cloud computing services might not be a $5 billion U.S. business, at the moment. assuming AWS mostly sells infrastructure as a service.

Forecasts by Forrester Research are comparable.

Separately, AWS also announced availability of Amazon WorkSpaces is a fully managed desktop computing service in the cloud, allowing customers to easily provision cloud-based desktops. That is significant because it moves Amazon into the software as a service segment of the cloud computing business, clearly the biggest revenue contributor.

Amazon Web Services argues that it can supply virtual desktop services at lower costs than competing solutions or traditional desktops.

SoftBank, Bell Mobility Join Global M2M Association

Selling mobile services to operators of sensor networks, services and applications widely is seen as among the best prospects for the next wave of revenue growth in the mobile business.

That is one reason why some have argued that mobile penetration eventually will reach 400 percent: “subscriptions” will be purchased for people to use, as well as by enterprises supplying services and apps that use mobile networks for communications.

Often seen as underpinning the “Internet of Things,” machine-to-machine services are viewed as an opportunity that will support users in multiple verticals and industries, ranging from health care, transportation and utilities to connected cars.

One sign of interest is that SoftBank Mobile and Bell Mobility have joined the Global M2M Association (GMA), which counts Deutsche Telekom, Orange, Telecom Italia and TeliaSonera among its initial members.

The collaboration of six leading operators in Europe, Asia and North America within the framework of the GMA enables the seamless delivery of advanced M2M services, allowing customers to deploy and effectively manage M2M solutions and innovations across the globe, the Global M2M Association says.

Established in February 2011, the Global M2M Association is based on a service cooperation agreement between Deutsche Telekom, Orange, Telecom Italia and TeliaSonera, “to deliver best-in-class, enhanced and seamless M2M services globally and to maximize the business benefits of customers,” the association says.

The participating parties expect the participating carriers will be able to offer customers enhanced quality of service, M2M roaming services and interoperability across a global footprint.  

"No Killer App" is a Key Service Provider Challenge for the Next Decade

The notion that "there is no killer app" has become a commonplace observation in much of the Internet access business, though some might argue that streamed video entertainment, in driving the bulk of data consumption, arguably has become the driver of access service revenue. 

But that lack of a killer app, in terms of revenue generation, is a problem for access providers facing the likelihood that the next wave of revenue will move way past voice, messaging and simple Internet access, to applications and value added services of various types.

Some would say that prospects are brightest in the mobile realm, in part because application use is migrating to mobile or at least untethered modes.

To put matters in the simplest terms, assume the global industry has to replace about half its current legacy revenue in a decade. That implies something on the order of $500 billion worth of new revenues must be created. 

Consider the connected car market, which might represent something like Eur5 billion in global access revenue in about five years. That's useful, but doesn't make much of a dent in a need of $500 billion. 

That implies access providers will have to either acquire a more significant role in the "services other than access" parts of the business, or will have to rely on many other sources to reach the grand total of $500 billion. 

Will Fourth Wave Telco Services Be Big Enough to Offset Legacy Revenue Decline?

Sometimes market share can change for "not so good" reasons, such as the collapse of a former robust revenue model. That is the case for the U.S, newspaper and magazine industry, which has seen its revenue collapse from perhaps $70 billion in 2004 to about $40 billion in 2013.

Google has grown, to be sure, but its market share has grown principally because the other suppliers have shrunk so much. 

U.S. fixed network telcos faced revenue problems at least that great over the same period. The difference was that new revenue sources  (mobile services, broadband access, video entertainment) were available. 

All of that points out the crucial need for telcos to find the next waves of revenue, beyond mobile subscriptions (developing markets) and mobile broadband, the current growth driver in developed markets. 

And those new markets and services will have to be very big, on the collective order of hundreds of billions of dollars, on a global business, to offset what some expect will be a decline of about 50 percent in legacy telecom revenue over a decade.


Already, for example, Orange revenue growth is lead by Internet and business customer sources.

The issue is the degree to which the next wave of services can compensate for the core revenue sources at present. The industry has done so before, particularly as mobile revenues more than compensated for the loss of long distance and then access line revenues. 

But that points to the magnitude of the challenge. Something as big as mobile telephony is needed. 

Orange 2011 Revenue Growth Contributors

U.S. Telcos Have Lost 62% of Voice Lines

From 2000 to year-end 2013, telcos will have lost nearly 62 percent of all traditional phone lines and 70 percent of traditional residential voice lines, USTelecom says.

For the twelve-month period from mid-2011 through mid-2012, residential and business consumers dropped 10.1 million ILEC switched voice lines, a twelve-month decline of 10.7 percent, according to Federal Communications Commission data..

From 2000 to mid-2012, the number of ILEC switched lines fell from 186 million to 84 million, or a decline of 55 percent. Straight-line trends suggest ILECs will have lost approximately 62 percent of these lines by the end of this year, according to the USTelecom.

Telco switched line losses have been greatest in the residential market, where the annual rate of decline from mid-2011 to mid-2012 was 13.6 percent, USTelecom says.

In 2000, some 120 million consumer voice lines were in service. As of mid-2012, there were approximately 45 million consumer telco lines being purchased, a decline of 63 percent.

And though it sometimes escapes attention, U.S. cable TV providers now have about 53 percent share of the video market.

Telcos will have lost around 70 percent of their former customers by the end of 2013, USTelecom notes, when about 25 percent of U.S. households will buy fixed network voice service from telcos.

Total Subscribers Reported (Millions)

Fixed Broadband	90.0
Wireline	38.4
Wireline NonFiber	32.1
Fiber to the Premises	6.3
Cable Modem	49.7
Satellite & Fixed Wireless	1.9
Mobile Broadband	153.4
Total Mobile + Fixed	243.4

Residential Subscribers Reported (Millions)

Fixed Broadband	82.2
Wireline	33.6
Wireline NonFiber	27.7
Fiber to the Premises	5.9
Cable Modem	47.0
Satellite & Fixed Wireless	1.6
Mobile Broadband	114.5
Total Mobile + Fixed	196.7

T-Mobile US to Sell $2 Billion in New Shares to Buy Spectrum

T-Mobile US hopes to sellas many as 72.8 million shares shares of common stock, expected to raise about $2 billion, which T Mobile US then wants to use to acquire additional spectrum.

Sprint has just over 200 MHz of spectrum across the United States. Verizon Wireless has about 128 MHz, AT&T has about 107 MHz and T-Mobile US has about 76 MHz, depending on how one counts.

Not the maximum amount of spectrum owned by each carrier actually is available in every market, for example. That means the actual amount of capacity in a major market can vary. 

Table 2: Population-Weighted Average Spectrum Holdings of National U.S. Mobile Operators, MHz
Licensee	Average Spectrum Holdings, MHz
Verizon Wireless	107.3
AT&T Mobility	128.3
Sprint Nextel	53
T-Mobile	57 (66.2)
Sprint/SoftBank with Clearwire	184.5
Sprint/Dish with Clearwire	224.5