The looming spectrum specter

01 Jul 2013

As featured on TM Forum's the Insider blog

The subject of spectrum continues to infatuate me, and with good cause. I, like many others, wonder how something so intangible could be so valuable. Like gold, there is only a certain amount to go around, but unlike gold you can’t trade it on the open market. At least not yet.

Authorities that control the distribution of spectrum have long realised its value and tend to auction it off to the highest bidder either when it becomes available or when they need to top up the coffers.
Mobile operators, in particular, seem to have no qualms at paying whatever is asked to acquire that most valuable resource, for without it, they have no business. But is spectrum acquisition just another business cost or is it a capital investment? Presumably this depends on the conditions under which it is acquired and how creative their accountants can get.

However, a report from the GSMA might mean that spectrum is treated with a even more ‘respect.’ It should be no surprise that the economic value of spectrum for mobile services is set to dramatically increase over the next ten years, mainly because mobile services already generate the greatest economic value of the eight major applications of spectrum.

In Europe alone, mobile spectrum contributes €269 billion ($350.21 billion) to the economies of the EU's 27 member states, and that value could reach €477 billion across Europe by 2023.

The projection that it could reach this level is based on the assumption that sufficient spectrum is made available for mobile over the next decade. That may well come from other spectrum bands currently dedicated to less ‘profitable’ media such as radio and broadcast TV that are showing declines in growth.

This reallocation of spectrum is known as the ‘digital dividend’ but unless the European Commission can achieve its upcoming single market telecom proposals, a continuation of the current uncoordinated management of spectrum could have a negative impact on its optimization.

But what happens if that spectrum does become available and nobody wants it? What if the reserve price being set is so high it doesn’t make economic sense for someone to buy it? You only have to look to India and Australia to find out because recent auctions there were not fully subscribed.

For India, it was a mixture of high reserve prices for spectrum likely mixed with concerns over the way it clawed back spectrum allegedly allocated illegally in the past without offering compensation. Perhaps that could that happen again? In Australia’s case, the 700 MHz digital dividend was not fully sold at auction with operators complaining that the reserve price for the spectrum of AU$1.36 per MHz per head of population was too high.

Instead of this continuing obsession with spectrum and speed, maybe its time to look at alternatives to the spectrum squeeze massive data growth is bringing on. Subscribers seem more than happy with the download speeds offered by 3G and LTE networks in particular and an article inComputerworld even suggests that they may even shun the speed doubling of LTE Advanced.

Surely some of that money being spent on network upgrades and spectrum purchases could be reallocated to research on how to get the most out of the spectrum we already have.

We are not talking about increasing bandwidth capacity per MHz by five or ten times, we need to jump in multiples of a hundred or greater. Forget Moore’s Law, Butler’s Law and any other inhibiting historical factor, including backward compatibility, what we need is new standard for higher system spectral efficiency in bit/second/Hertz/site.

If the mobile industry had the courage to really join together, fund the innovation and then own the technology in its own right, it would go a long way in securing a future for itself. Reminds me of the glory days of Bell Labs - come back, all is forgiven!

The Insider is written by Tony Poulos, Market Strategist at the TM Forum

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