The Verizon Wireless- cable company spectrum deal, approved by the FCC last week, may go down in history as the deal that first brought public attention to an impending spectrum shortage. And although opponents of the deal tried to argue that Verizon had plenty of spectrum and indeed was actually hoarding it, regulators seem to have accepted the opposing view – that there is indeed a spectrum shortage.
This debate is not likely to fade out any time soon, as carriers undoubtedly will continue to propose more deals to optimize their spectrum holdings. AT&T, for example, still has a number of deals pending.
A couple of recent reports – one from Rysavy Research and another from Jeffrey A. Eisenach for Navigant Economics – approach the topic of spectrum shortage from two different angles.
Rysavy defends carrier deployment patterns
Rysavy Research argues that the time between the initial launch of a wireless technology and its peak adoption averages 18 to 20 years. The good news is that each successive generation of wireless technology is more efficient than the previous generation, notes Rysavy in its research, titled “Mobile Network Design and Deployment: How Incumbent Operators Plan for Technology Upgrades and Related Spectrum Needs.” The bad news is that operators can’t just turn off previous-generation networks.
“They not only have to support subscribers with older handsets, they also have to support incoming roamers and machine-to-machine applications that have much longer life cycles than consumer devices,” observes Rysavy.
“GSM operators will have to allocate separate spectrum for 2G, 3G and 4G, a strain on their spectrum holdings beyond the pressure from escalating mobile broadband demand,” Rysavy writes.
In the report, the Rysavy researchers attempt to debunk allegations that certain network operators are hoarding spectrum. They note, for example, that each wireless technology uses two radio channels of a particular size. “For example, HSPA uses 5 MHz radio channels for both the downlink and uplink, while LTE, in most current deployments, uses 5 MHz or 10 MHz radio channels,” the researchers write. They add that, “There is an incremental investment at every cell site for using additional radio channels. With tens of thousands of cell sites in a national network, operators simply cannot simultaneously deploy every single MHz in their inventory across every site and market in the country. Rather, carriers must deploy based on what the demand portfolio is in a given market, the availabilitly of infrastructure into which the spectrum can be added and the utility of the spectrum in question to current versus future network technology deployments, among other items. . . Balancing the flow of traffic with the pace of spectrum deployment is key if carriers want to avoid artificially inflating service prices to recoup investments made to support little traffic.”
Rysavy also offers a useful summary of the various ways carriers are attempting to leverage technology advancements to improve spectrum efficiency, including:
- Adding macro sites
- Adding small cells
- Using distributed antenna systems
- Using smart antennas and heterogeneous networks
- Using Wi-Fi offload
Navigant critiques approval process
Navigant compiled data from a variety of recent spectrum transactions to support its assertion that the time required for regulators to approve major spectrum deals has increased. While the average number of days from application to approval for major transactions was 126 days in 2007 and 169 days in 2008, that number exceeded 340 days for 2009, 2010 and 2011.
The research, presented in a slide show titled “The Need for Further Liberalization of Secondary Spectrum Markets,” also estimates the cost to service providers of delays in excess of 88 days, which ranged as high as $3.9 million for the AT&T- BellSouth deal several years ago.
Navigant suggested several possible reforms that could shorten approval times, including:
- Broadening the criteria for “fast track” approval of secondary market transactions
- Replacing the “person of interest” requirement for petitions to deny
- Enforcing prohibitions on consideration of alternative uses in secondary market transactions
- Forbearing from changing criteria such as the spectrum screen during the course of transaction reviews
The final bullet touches on another theme we may hear more about in coming months and years. Some stakeholders have suggested that simply measuring the amount of spectrum a carrier holds does not reflect the fact that some spectrum is more valuable than others. 700 MHz spectrum, for example, has excellent propagation characteristics and in some circumstances requires fewer cell towers than other spectrum bands.