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The true value of 4G spectrum is quality, not coverage: Vodafone

ITEM: 4G coverage doesn't mean a thing if the signal quality sucks – and both cellcos and regulators need to keep that benchmark in mind when making decisions about spectrum.

So says Caroline Gabriel, research director of Rethink Research, in a blog post about comments made by Vodafone UK CEO Jeroen Hoencamp that QoS – not ubiquitous coverage or the fastest data speed – is the most important metric to customers.

In an interview posted on Vodafone’s corporate blog site, Hoencamp said that speed will only get you so far in the mobile broadband business, because “the reality is that you don’t currently need anything beyond 20Mbps on a mobile device. Even for streaming video you only need a couple of megabits per second.”

Moreover, he added, the most important aspect of 4G rollouts isn’t coverage, but signal quality, which is why Vodafone is in no hurry to blanket the country with 4G, despite being criticized for its sluggish progress in coverage:

"We’d love to expand the network faster, but it’s about doing it right first time; I’d rather do it at the pace we’re doing and get it right, than try to go faster and build a thin and flimsy network. You can have a few sites here and there, but that would give you really patchy signal. We only turn 4G on when we have built or updated enough sites.”

“So instead of just having 4G in the centre of a town and saying that the whole town has 4G, we don’t say it’s there until it’s there. It’s about us being able to prove that people are happy with it.”

According to Rethink’s Gabriel, Hoencamp’s comments highlight a common problem with 4G spectrum policies – regulators typically hand out licenses that come with stringent coverage requirements. And cellcos typically meet those obligations at the expense of signal quality, she writes:

In reality, even many areas which are officially 'covered' receive patchy and unreliable 4G service – just enough to tick the regulatory box, but without the investment in capacity, innovative services, and network optimization which would deliver the LTE benefits users actually want.

[…] If more attention were paid to a really distinctive, high quality experience, some users might be more prepared to pay a premium for LTE.

Such a shift in focus from geographical coverage to QoS also carries potentially significant implications for spectrum valuation.

As more markets prepare to reallocate sub-1GHz frequency bands for 4G, regulators tend to focus on the fact that lower bands mean greater (and cheaper) geographical coverage – and price them accordingly. But the real value in sub-1GHz bands, argues Gabriel, is the stronger, higher-quality indoor coverage:

To add significant value and differentiation on top of the basic high coverage network means changing the prevailing view of what constitutes 'beachfront spectrum'. Yet the sub-1GHz coverage bands still attract feeding frenzies at auction, while many capacity bands, including unpaired spectrum, are undervalued.

The full post is worth reading. You can find it here. While it focuses mainly on the EU and US markets, I think many of the core observations apply to APAC markets as well.