Posted by: Joan Marsh on June 4, 2010 at 12:14 pm
One of the many things that caught my eye in the FCC’s most recent Wireless Competition Report is a detailed analysis of carrier spectrum holdings. Not surprising – spectrum has been called the lifeblood of the industry.
In the report, the Commission takes an in-depth look at who holds what and where. But they draw a line at 1 GHz, giving spectrum holdings below this level its own set of stats. As a wise man once said, “Statistics are like a bikini. What they reveal is suggestive, but what they conceal is vital.”
So let’s look first at what the 1 GHz analysis reveals. The Commission concludes that lower frequency bands, such as the 700 MHz and Cellular, “possess more favorable intrinsic spectrum propagation characteristics than spectrum in high bands.” True, but not particularly vital. From a historical perspective, the introduction of 120 MHz of PCS spectrum at 1.9 GHz revolutionized the industry, clearly demonstrating that higher-band spectrum can and has played a significant role in fostering competition.
Backing the notion of “favorable” low band propagation characteristics, the report cites a propagation model developed to estimate coverage requirements in different bands. The model concludes that lower frequency spectrum requires fewer sites. We agree. But while such models have abstract validity, they say little about the capacity-centric deployments that network providers are designing today to support 3G and 4G services.
Today, capacity and through-put are king. Just last year, we deployed more than 28,000 new and overlay sites to beef up capacity. Given the data demands being placed on networks today, relying on models that estimate coverage needs only doesn’t make sense. In other words, any advantage enjoyed by licensees of lower frequency bands is mooted by the mobile data demands of consumers.
The Commission’s report also says that the propagation characteristics of the low band spectrum “make it ideal for delivery of advanced wireless services to rural areas.”
This is another true statement but of limited relevance given the recent Commission roaming order.
Remember, in the roaming order, the FCC removed a key incentive for carriers to invest in, and build out, long-held spectrum licenses in less-populated, rural areas of the country by making roaming preferable to building out networks. The FCC order supplies a non-exhaustive list of factors that can be relied on to justify a no or limited in-market build, including the propagation characteristics of the spectrum. The FCC essentially is encouraging spectrum licensees in all bands to make “roam not build” decisions in rural areas. Thus, any disadvantage that may have existed here has all but been eliminated.
The report actually acknowledges some of the advantages of high frequency bands, such as achieving greater efficiencies with new technologies and being able to deploy high capacity networks in high-traffic urban areas. This is due primarily to more spectrum in larger contiguous blocks.
One need only look at the claims of our competitors to appreciate the competitive significance of this point.
For example, access to a large block of spectrum is exactly why T-Mobile invested $4.2 billion in AWS licenses and now claims that its HSPA+ network yields the “most capable 3G+ national Network” in 2010-2011. Clearwire, which holds spectrum only in the 2.5 GHz BRS/EBS bands, has repeatedly touted what it perceives as its “spectrum advantage.”
So, why would the FCC draw a line at 1 GHz? Is this line drawing suggesting conclusions, but concealing vital facts from the public?
More than one observer concluded that this analysis “could set the stage for the FCC excluding Verizon and AT&T from bidding in the D Block 700 MHz auction.” Although this conclusion is nowhere in the report, we are keeping a close watch on the Commission’s development of the D block auction rules to see if the fallacy of the 1 GHz line does indeed foreshadow a change in the open auction policies of the past toward a framework built on restrictions and exclusions.
