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Filling The Looming Cellular Spectrum Gap

4/23/2012 10:34:00 AM

In offering to auction off some of its own 700MHz spectrum if it’s allowed to buy Advanced Wireless Services (AWS) spectrum from cable companies, Verizon Wireless seemingly undercut arguments that the wireless industry faces a spectrum crunch.

In announcing its plans, Verizon effectively admits that it has all the spectrum it needs, at least for some time into the foreseeable future.

Well, perhaps Verizon doesn’t need that spectrum, but plenty of other carriers would like to get their hands on it because of the spectrum crunches that they face. T-Mobile, for instance, said that with the AWS-band spectrum that it got from AT&T as part of a break-up fee, it will have only enough spectrum to deploy 4G LTE in “the vast majority” of the top 50 markets. To expand beyond that, the carrier would need to acquire additional spectrum or buy other carrier’s LTE spectrum on a wholesale basis for resale, analysts said.

For its part, Sprint plans to launch LTE service over 1.9GHz spectrum that it owns but hasn’t used, then “re-harvest” some of its 1.9GHz spectrum already in use for LTE use. Sprint, however, can support 4G growth on its own spectrum only through 2014, when it would have to turn to other sources for more spectrum. That source could turn out to be Clearwire, which plans to convert from Mobile WiMAX to LTE — if Clearwire doesn’t collapse under its own financial problems by then.

Regional carriers could also use more spectrum if they hope to match the data speeds of some of their larger rivals.

As for why Verizon is willing to sell 700MHz spectrum if it gets AWS spectrum, Verizon Communications CFO/EVP Fran Shammo explained in an investors’ conference call that using the AWS spectrum in conjunction with other Verizon-owned AWS spectrum “is the most efficient [way] for us to utilize and build out our LTE platform.”

The availability of Verizon spectrum would be good news for spectrum-strapped carriers, given the explosion of wireless data usage cited by CTIA-The Wireless Association.

CTIA surveyed member carriers and found that in 2011:

  • the number of wireless connections grew 7 percent to 331.6 million for a 104.6 percent penetration rate;

  • wireless network data traffic grew 123 percent to 866.7 billion megabytes;

  • the number of active smartphones and wireless-enabled PDAs grew 43 percent to 111.5 million;

  • the number of active data-capable devices grew 9 percent to 295.1 million; and

  • the number of wireless-enabled tablets, laptops and modems grew 49 percent to 20.2 million.

  • Another source of spectrum that carriers could use in the future could come from planned broadcast-inventive auctions in which TV stations would be compensated for putting up some or all of their spectrum for auction. It could take years, however, for much of that spectrum to be put into use by wireless carriers.

    Participating TV stations could offer up all of their spectrum and shut down permanently, and some could give up spectrum they might have used for standard-definition multicasting but keep enough spectrum to continue broadcasting their main HD channel. Two TV stations could also decide to give up some spectrum and share just enough so each could deliver one SD signal.

    Informed observers believe the auctions won’t take place until sometime in 2013 or, more likely, in 2014, and that it could be anywhere from three to seven years from today before the spectrum is actually put into service. Many observers also believe the auctions will open up only about 80MHz of spectrum, not the 120MHz that the Federal Communications Commission (FCC) hopes will help alleviate a 90MHz “spectrum gap” forecast in 2013 and growing to 275MHz in 2014.

    The FCC has also freed up, or is in the process of freeing up, other spectrum to fill the gap, but much of that spectrum also might not be available in time for the day of reckoning in 2014.

    As analyst Jeff Kagan told me, “Wireless data growth is out of control. We’re going to run out of spectrum, and we’ll all have the same problems that AT&T has had for years [due to the popularity of AT&T’s iPhone].”

    As a result, we could see download speeds slow to a crawl and perhaps some carriers go out of business if they don’t have enough spectrum to offer competitive data services, Kagan said.

    The alternative could be that carriers raise the price of monthly data plans to encourage people to use data networks more sparingly, analysts said. More carriers might also join AT&T and Verizon Wireless in eliminating unlimited data plans, replacing them with a series of “tiered” plans.

    Alternately, more carriers could follow T-Mobile in retaining unlimited data plans but discourage their overuse by “throttling,” or slowing, data speeds to 2G rates after a data-usage threshold is exceeded. T-Mobile reduces speeds to 50Kbps for smartphones (similar to what household dial-up service delivers). For USB modems and tablets, T-Mobile slows speeds to 100Kbps.

    Other measures that carriers might adopt include guaranteeing a minimum throughput speed if you pay a premium or offering lower off-peak rates to encourage use when networks are less congested. Carriers might also prioritize data traffic by type of data, guaranteeing a certain level of service quality to some types of traffic but slowing video streams when necessary.

    Whatever happens, things aren’t looking pretty.

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