How long can the mobile operator continue to rely upon exclusive access to spectrum?

by Terry Norman

Mobile network operators (MNOs) have enjoyed the exclusive use of a block of spectrum for many years.  Spectrum is costly and often acquired at great expense during an auction process. This expense can lead to a questionable business case over the expected return. Many MNOs rightly believe that the risks of expensive spectrum can outweigh the benefits.

MNOs who did invest in spectrum have begun to reap the upside benefits of the spectrum allocation with improvements in the design of access technologies. They have succeeded in squeezing more and more of their customers into their available bandwidth. Increased profitability from exclusively allocated spectrum has allowed MNOs to justify the asset value of spectrum quoted in their financial reports.

Wireless Explorers does not believe that exclusive access to spectrum will last forever. Ironically, it is the evolution of access technology that will lead to the demise of licensed spectrum and remove the need for spectrum auctions.

So why do regulators persist with a policy of spectrum licensing as a method of managing spectrum?

Allocating specific blocks of spectrum to specific MNOs and limiting the transmission power was introduced as a way of managing interference between MNOs. Selling off the rights or licences to these spectrum blocks is a fairly recent innovation - the FCC in the USA began auctioning spectrum in 1993. Auctions may represent a valid means for the effective management of interference. Looking ahead, we anticipate that evolution of technology is set to make the requirement for interference management redundant.

Spectrum waves.jpg

New technologies for MNOs, including white space data bases and cognitive radio will enable networks to self-manage interference in a more effective way. These technologies will remove the need to manage spectrum by licensing MNOs Most countries anticipate needing between 300MHz and 500MHz of extra bandwidth in the next five to ten years and this requirement will create a more pressing need for the  development of cognitive radio and white space spectrum.

We also need to consider the implications of the technology evolution and changes in spectrum licensing practices.

Over the course of a typical licence period, technologies will evolve that will render a licence unnecessary. Regulatory authorities are currently issuing licences for between 10 and 25 years. Twenty five years ago neither mobile networks nor the world wide web existed. So is it realistic to imagine that in twenty five years we will need a licence-to-transmit to manage spectrum?

Regulators are leaving themselves room for movement by placing caveats in  contracts, including clauses that imply that exclusive access for the period of the licence may be restricted. As the length of the licence is no longer guaranteed, the obvious question is that is it reasonable, or even legal for MNOs to report the asset value of spectrum -  as they have done historically? MNOs are more than aware that the rights to exclusivity of spectrum may be revoked within the specific timeframe of the licence.

Wireless Explores believes that the period of exclusive access will be much shorter.  The reasons behind the loss of exclusivity will be the pressure of traffic and advancing technology. The main drivers behind loss of guaranteed owned spectrum are the moves and pressures of non-owned spectrum. As an example, 50% of iPhone and 90% of iPad activity is carried over licence exempt spectrum.  This leaves us with a broader question of how to balance the needs of users and the economic benefits of exclusive access to spectrum for MNOs in the future.