We have operated under the assumption for many years that spectrum is a scarce resource, sort of like high-priced housing markets where demand outstrips supply of 'buildable land'. Carriers pay billions of dollars for a precious few megahertz of additional capacity. Pricing of data services, still hovering at $8 per GB, sends a "use the network but not too much" type of message. The projected growth in video usage has us running to Wi-Fi. Fifty percent of the valuation of Sprint and Dish Network is attributed to their spectrum assets, while conversely, Wall Street analysts are bearish on AT&T and Verizon because their share of subscribers far outweighs their share of aggregate network capacity.
It no longer has to be this way. There are a number of developments that could radically change the spectrum framework for the second half of this decade, to the enormous benefit of users and the entire mobile ecosystem. It will take a combination of forward-thinking policy, innovative hardware and software, and some amount of inter- and intra-industry cooperation. This will also require Dish and Sprint, which have been amassing and hoarding their spectrum, to actually put it to work.
The catch? The available spectrum is not in all the historically cozy 700 MHz, 800 MHz 1700 MHz and 1900 MHz bands. It's a combination of licensed and unlicensed. Some of it is occupied by entities that no longer need it, and/or are sitting on it to run up the value. In other words, it's messy. So where is all this spectrum waiting to be unlocked?
LTE Unlicensed (LTE-U). Progress is being made to allow wireless carriers to use channels in the 5 GHz band to add capacity to their LTE networks. Verizon and T-Mobile are pushing hardest on this. Vendor heavyweights such as Qualcomm and Ericsson are testing and permitting limited deployments of a non-standardized version of LTE-U in their silicon and small cell software, while a standardized version of LTE-U is working through the 3GPP. The FCC is supportive. Naturally, the Wi-Fi community is battling this, claiming concerns about interference. But since the Wi-Fi crowd received a whole bunch of new channels at 5 GHz in an FCC ruling earlier this year, they might be required by the FCC to find a way to make it work.
TV White Space (TVWS). These are the un- or under-utilized channels in the 600 MHz television broadcast bands. We have been talking about this for years, mainly for rural deployments for broadband services, freer of interference. But there is a renewed push to use TVWS in urban areas too, employing spectrum sharing techniques using databases that have been developed by Google, Microsoft, and others. Similar to the LTE-U argument, there are some concerns about interference, and questions about how quickly incumbents will move. But with a date now set for the 600 MHz auction, and new rules or for TVWS set by the FCC last month, this opportunity is gaining momentum.
3.5 GHz spectrum. In April 2015, the FCC voted to adopt spectrum-sharing rules for 150 MHz (3550-3700 MHz) in the 3.5 GHz band for both licensed and unlicensed services. Described as an 'innovation band,' the FCC is recommending a 3-tier sharing structure consisting of a combination of generally permitted use, short-term targeted licenses acquired by auction, and some of the band reserved for incumbent users and certain other entities.
TLPS. This is Globalstar's petition to open up Channel 14 in the 2.4 GHz band, (public Wi-Fi currently uses channels 1, 6, and 11), for use as 'private Wi-Fi,' sort of a hybrid between a licensed and unlicensed service. This would add significant capacity in that band, and enable unique and innovative business models.
FirstNet. FirstNet, which has $7 billion in the bank, will issue an RFP by the end of the year, with first contract awards in 2016. This could be a significant macro cellular LTE build, with some excess spectrum being made available to commercial entities other than first responders. The likely impact here is not before 2018.
Sprint and Dish. Dish has been amassing spectrum for years, most recently spending heavily in the AWS-3 auction to add to its portfolio. It is time for Ergen to put this spectrum to work. I believe the pressure to do a deal with a wireless carrier will intensify as the 600 MHz spectrum auction approaches. There are also buildout requirements associated with Dish's spectrum, which start becoming due in 2016.
And Sprint, as we know, has a treasure trove of spectrum in the 2.5 GHz band. I believe properly leveraging this spectrum represents Sprint's best chances for achieving meaningful differentiation and survival as a standalone wireless carrier. Either the 2.5 GHz buildout will get financed by Tokyo, or Sprint will sell off some of this spectrum or do a deal with another carrier. Either way, it is time to put this spectrum to work.
Now, not all spectrum is created equal, and there is certainly messiness here. But my back of the envelope calculation is that if we do an adequate job of harvesting this available spectrum, available capacity per wireless subscriber could at least double. And that's before the 600 MHz auction.
It will take a unique combination of factors to make this all happen. First, the FCC will have to get even more aggressive with what has already been a forward-thinking policy. This is a unique opportunity for Tom Wheeler to leave a legacy, namely the U.S. adopting innovative spectrum sharing and dynamic spectrum allocation capabilities, rather than just another expensive auction that benefits mainly the "haves" and the Dept. of the Treasury.
Second, this is a unique opportunity for innovation in software and hardware. Building chipsets and equipment that works across these spectrum bands, actually pulling off spectrum sharing, and developing capabilities to deal with interference between licensed and unlicensed services and devices all represent fantastic challenges for the vendor ecosystem.
Finally, we will need some level of inter- and intra – industry cooperation, in pursuit of the greater good. The licensed and unlicensed crowd, for example, will have to work together to make some of these services happen. Incumbents who are sitting on and underutilizing spectrum must make some moves or realize that there are techniques to make coexistence possible. The public sector can also play a role here in developing the proper incentives.
The seeds are there for a radical shift in framework. This might be a bit of speechifying, but aren't we all getting a little tired of the U.S. continuing to fall behind the rest of the developed world in infrastructure, from roads to public transportation, renewable energy, and broadband? Wireless is one area where we lead: four national LTE networks, many of the world's leading companies across the hardware, software, device, content, media, and Internet value chains, and consumers who use more wireless data, per capita, than just about anywhere in the world. Finding a way to leverage all of the available spectrum, perhaps using unconventional and novel techniques and business arrangements, could provide a model for the rest of the world.
Wouldn't it be nice to lead in some category of infrastructure?
Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem. Click here to subscribe to his free Lens on Wireless monthly newsletter, or follow him on Twitter at @marklowenstein.