Carriers Win Spectrum, But It's Still Not Enough

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NEW YORK – It will take two to three years before the Advanced Wireless Service 3 (AWS3) spectrum won by carriers at a recent government auction goes online, and by then, the carriers — especially AT&T and Verizon —- will need more just to keep up with growing data usage, analysts said.

As a result, depending on their financial constraints, carriers will likely be eager bidders for 600MHz TVband spectrum planned for auction in 2016, particularly because 600MHz signals propagate farther than signals in the higher AWS 3 band. The 600MHz spectrum therefore makes it possible to build or upgrade fewer base stations to cover a geographic market. The lower band spectrum also delivers better in-building penetration, which could accommodate carriers’ future voice-call handoffs from cellular to VoWi-Fi (voice over Wi-Fi technology).

During the AWS 3 auction, Verizon, AT&T, T-Mobile and Dish collectively spent $41.3 billion for spectrum near the currently deployed AWS 1.7/2.1GHz spectrum. The new spectrum consists of the 1695- 1710MHz uplink band and the paired 1755-1780MHz (uplink) and 2155-2180MHz (downlink) bands.

Sprint didn’t bid on AWS3 spectrum, and T-Mobile spent only $1.8 billion compared with AT&T’s $18.2 billion, Verizon’s $10.4 billion, and Dish’s $13.3 billion. Analysts think the two money-losing carriers are husbanding their resources to participate in the 600MHz auctions.

Carriers will need the extra 600MHz-band spectrum just to keep up with growing capacity demands in the U.S., analysts said. In 2013, CTIA reported that U.S. mobile-data traffic grew 120 percent, and Cisco forecasts that cellular data usage in North America will grow 6.8-fold between 2014 through 2019 to 3.8EB (exabytes) per month. One exabyte equals a billion gigabytes. The average data user will use 11GB per month in 2019 compared with 1.89GB in 2014.

Cisco cites the continuing shift from feature phones to smartphones, the growth of cellular-connected tablets and computers, more machine-to-machine and Internet of Things connections, and growing mobile video streaming. Video as a percent of North America mobile data traffic will jump to 75 percent in 2019 from 2014’s 60 percent, Cisco forecasts. Livestreaming a GoPro video camera on a cellular network generates about 5MB of data traffic per minute, the company noted.

For its part, AT&T said data traffic on its wireless network grew 100,000 percent from January 2007 through December 2014.

Mobile apps, particularly mobile video apps, are the key driver of data growth on a global scale, said Gartner analyst Jessica Ekholm. “It is really apps and content that are driving traffic volumes as people increasingly chat to friends and family, watch videos on the move, and listen to streamed music,” she said.

Perversely, the growth of affordable 4G LTE handsets has encouraged increased data usage because 4G speeds deliver smoother video streams and faster Internet access. In 2018, she said, half of North American cellular connections will use 4G networks.

While data-usage grows, it will take two to three years before carriers can put their new AWS 3 spectrum into operation. “AT&T announced its intentions to use this spectrum in 2017-18 timeframe,” said IDC analyst Sathya Atreyam. “That is a typical two- to three-year timeframe to upgrade existing radio infrastructure across all markets and on similar lines. Devices would take the same amount of time to incorporate these new bands.”

Even when the spectrum is deployed, however, the two largest carriers by subscriber base — AT&T and Verizon — will still need more, said independent analyst Mark Lowenstein. As a result, the two carriers “will do more spectrum deals and will invest aggressively in small cells, DAS [distributed antenna systems], carrier aggregation and every other trick they can find to meet capacity demand,” he said.

The two smaller, financially troubled carriers, Sprint and T-Mobile, are less capacity constrained for now because they have far fewer subscribers. But T-Mobile “will still need more spectrum,” said Frost and Sullivan analyst Ronald Gruia, because it’s “in a weaker position below 1GHz” compared with the other carriers and doesn’t have much 700MHz spectrum, which also transmits signals over a longer range.

Although T-Mobile won much less spectrum than AT&T or Verizon, it has been purchasing 700MHz spectrum on the secondary market, and it’s biding its time until the 600MHz auctions, Jeffries analysts said.

Despite the AWS 3 auctions and planned 600MHz auctions, “you never have enough spectrum,” said Frost and Sullivan analyst Ronald Gruia. The International Telecommunications Union recommends a minimum amount of spectrum in reserve to support data-usage growth, and major countries aren’t close, he said.

During the auction, Dish acquired around 25MHz of spectrum to supplement its 2GHz and 700MHz spectrum, but the company hasn’t yet launched cellular service. Some analysts believe Dish might try to lease capacity to Verizon.

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