Mobility and mobile phones will continue to be the growth drivers for the telecom industry. Additionally, with the expansion of smartphone and other mobile devices, operators will face continuously rising demand for mobile broadband services, both in terms of coverage and bandwidth. With spectrum being a scarce resource and a shortage potentially affecting the development of the industry, refarming spectrum and the efficient usage of the Digital Dividend (DD)--that is, the spectrum rescued from TV digitalization and reallocated for mobile broadband services--will become key to the mobile industry.
However, this dividend will not come without some costs. First, TV digitalization processes still need to be completed in many countries around the world. Independently of the decisions regulators take regarding the auctioning or reallocation of this spectrum, there are implications that operators and policy makers should take into account in order to maximize the benefits from this process. That means the digital dividend and refarming processes will pose both opportunities and threats to regulators and industry players alike. A thorough understanding of these implications and an assessment of their effects is crucial for the industry as a whole.
Maradevis has identified the main opportunities and challenges in the digital dividend and refarming processes. Additional spectrum can signify more services, more competition and better prices and quality of service for users. However, ill-designed refarming or spectrum allocation processes can increase spectrum prices and reduce availability, impacting investments and further service deployment and development. According to Maravedis, poor or delayed allocation of the new DD spectrum for mobile broadband service could reduce investments in 4G networks by 10.7 percent over the next few years.
The importance of the DD and refarming decisions stems from the fact that the spectrum processes can shape market conditions, and ill-designed policies will affect these conditions both for operators and users. Additionally, a global view of the priorities and the need for further mobile broadband development will not necessarily fit every country or region alike. There are different views among countries on how to allocate and how to use this resource.
In that sense, it seems regional and domestic priorities will continue to dominate spectrum policy design and management. Although harmonization of spectrum conditions among states is important for efficiency and interoperability, the differences between developed and developing countries and their stages in the digitalization processes can affect technical coordination and availability of additional spectrum for mobile broadband services.
For instance, only the United States and some European countries (notably France, Germany and Spain) have already auctioned and allocated DD spectrum. The U.S. has designed its own channelization schemes which apply to its own market needs. Neighboring Canada will apply the U.S. scheme to allow for coordination. However, its other neighbor, Mexico, will most likely apply the Asia Pacific Telecommunity (APT) scheme, as it is considered to make a more efficient use of spectrum, especially for countries needing increased penetration in mobile broadband services. Other Latin America countries like Colombia will also apply the APT scheme. There is less availability at this time of equipment that will work with this channelization, however, most Latin American countries have not completed their digitalization processes, and will not do for another couple of years. This leaves enough time for vendors to develop equipment for these markets and be ready for network deployments.
Europe (which together with Africa and Middle East is part of ITU´s spectrum management Region 1), has mostly finished digitalization processes and started auctioning the DD. But African and Middle East countries requested at the World Radio Conference 2012 that the 694-790 MHz spectrum be allocated for mobile broadband services instead of the current Region 1 allocation of 790-862 MHz. These countries gave different reasons, among them the difficulty of a rapid transition to digital TV and the usage of 800 MHz for government applications.
These differences are no surprise as they only reflect the different level of service penetration and telecom development among these countries. According to ITU data, Latin America has an average mobile broadband penetration of 5.83 percent while North America accounts for 31.2 percent. Europe presents a mobile broadband penetration of 54.1 percent, while Africa and the Middle East are still at 3.8 percent and 13.2 percent respectively.
However, the Digital Dividend is not the final answer to the spectrum shortage that the mobile industry is currently facing. There are other bands subject to refarming: 800 and 1900 MHz in Europe, 1900 MHz in Asia and 2.5 GHz in Latin America. Between the DD and other spectrum refarming, countries could obtain an average of 300 MHz of additional spectrum for mobile broadband usage.
Similar implications to those of the DD can expected if other refarming processes are not designed with market development, competition promotion and spectrum efficiency in mind. A spectrum management policy oriented towards these goals should be implemented in order to make the better use possible of this scarce resource. The role of the industry--operators and vendors--is very significant for the construction of the appropriate market conditions as a function of the right regulatory and policy decisions.
Lester Garcia is the senior regulatory advisor at research firm Maravedis Rethink. Previously he was the chief of regulatory policy at COFETEL, the Mexican telecom regulator. For more information on his report, see this summary.