The end of mobile spectrum ownership as we know it?
US incentive auction limps to a close as MulteFire Alliance promotes a new democratic approach to LTE
Are we finally nearing the end of spectrum allocation as we know it? One of the most anticipated US auctions ever has flopped, while the guardian of licensed spectrum technology, Qualcomm, has spawned a technology, MulteFire, which could allow organizations with no spectrum of their own at all to build cellular networks. Yet, as the call for 5G to rely on dynamically shared spectrum grows louder, regulators in Europe and elsewhere are still preparing ‘5G’ auctions in the same old way. If 5G is to fulfil its objectives, something has to give.
The US incentive auction for 600 MHz broadcast spectrum has highlighted, more than anything else, that the traditional processes and valuations for licensed airwaves are broken. The world needs more wireless capacity, and needs it affordably – hence the rise of WiFi and of organizations like Google which are very able to bypass traditional operators and regulators, in the interests of enabling large numbers of new customers.
The US auction seems to be finally and painfully coming to an end, and looks set to generate just over $10bn, a far cry from the $60bn or more that was being predicted last year. This has raised serious questions over the value of spectrum, and how far this will be a diminishing asset for operators round the world, both in terms of its tradeable value and its central role in a wireless services strategy.
Stage 4 of the auction ended on Friday, with broadcasters establishing a clearing cost of just over $10bn for up to 84 MHz of spectrum.
Most observers are assuming Stage 4 will be the last, though the auction could drag on into another round. Stage 3 ended in early December after a single round that generated less than half of the $40.3bn required to end the process. The FCC then had to go back to the broadcasters yet again to renegotiate the amount of spectrum to be offered for mobile broadband, taking 24 MHz off the table, and the reserve price for that.
Once the process is over, carriers will be able to trade the airwaves they have secured, and many analysts expect a rush of deals, while others are speculating about the damage that may be done to the valuations of some operators, particularly Dish, which has significant spectrum holdings but has so far not built any networks.
In a research note, MoffettNathanson analysts posed the question which is concerning many investors in mobile operators round the globe – is spectrum an asset of real value any more? They wrote: “First, what do lower spectrum prices mean for valuations of spectrum plays like Dish Network, Globalstar, and even Sprint? And second, why might spectrum prices have fallen so sharply?”
There are many answers to the latter question, some specific to the US, but some more general. Notably, operators in countries with well-developed LTE networks are shifting their priorities from broad coverage to higher capacity and densification, which means a shift in focus from low frequency spectrum like 600 MHz to capacity bands, well suited to small cells, such as Sprint’s 2.5 GHz.
Also, in a trend which will be central to how 5G evolves, it is increasingly possible for service providers to build robust public wireless networks without licensed spectrum. Carrier-grade WiFi technologies are an important weapon for cablecos, web giants and other companies which want to accelerate the process of opening up wireless access to everybody, and to reduce the grip of the mobile operators in the process.
And MulteFire, whose industry alliance published its first official specifications this week, opens up another option, to run LTE in unlicensed spectrum, mainly 5 GHz, without the need for an anchor network in a licensed band (as other 5 GHz LTE approaches, like LTE-Unlicensed and LTE-LAA, do). This could put new weapons in the hands of the non-MNOs, making the competitive landscape more crowded and squeezing the margins and valuations of the established operators.
MulteFire Release 1.0 claims it provides better capacity, security and mobile hand-off in many scenarios, compared to WiFi, but in the same unlicensed spectrum. Of course, those claims still need to be tested in real world situations, and will no doubt be subject to the same angry rebuttals from the WiFi community as LTE-Unlicensed and LAA.
However, MulteFire – a technology originally conceived by Qualcomm and now seeking to be a de facto standard – cannot be accused of being a Trojan Horse for the cellular operators to colonize the 5 GHz ‘WiFi spectrum’. Like WiFi, MulteFire should be deployable by any provider, not just an MNO with licensed spectrum, and so there is the prospect of a genuine choice of technologies in the band, which can be chosen by each service provider on its merits for a particular use case.
Of course, before that choice is really an equal one, MulteFire will have to win the industry acceptance to drive a broad, low cost equipment and device ecosystem, not to mention going through numerous regulatory, certification and testing loops. But the opening up of unlicensed – and in future, dynamic and shared – spectrum to multiple technologies will spur innovation. And while a single technology would drive better economies of scale, in reality LTE and public WiFi have been coexisting, and driving one another forward, for years. They have done it in separate bands so far, but MulteFire allows those lines to blur too.
Mazen Chmaytelli, president of the MulteFire Alliance, offered some examples of use cases where he believes the LTE-based technology will have advantages, including highly predictable networks for time-sensitive industrial applications, underground systems in mines or subways, stadium connectivity and even home networking (harking back to Qualcomm’s pet concept of ‘inside-out’ cellular capacity, which mirrors the homespots of WiFi).
Members of the Alliance span cellular and WiFi worlds and include Intel, Nokia, Ericsson, Cisco, Huawei and Ruckus (whose future ownership may have interesting implications for how MulteFire evolves).
The Alliance expects to have a certification framework ready in the middle of this year, with initial trials and product testing in the second half of 2017. The technology itself is inherently based on small cells, because of the relatively high frequencies it targets – 5 GHz as well as the US 3.5 GHz CBRS band. It uses elements of the 3GPP’s standardized LTE-LAA specifications for downlink and uplink, which will be important to make it easy for vendors and device makers to support the technology. However, it does not need a licensed anchor network. It is unclear whether MulteFire will be submitted to 3GPP itself, but keeping close to those specs is crucial. Stephan Litjens, board chair of the Alliance and a Nokia executive, told Mobile Europe: “We could only have done this if we had leveraged the 3GPP path” because it allows chipset makers to support MulteFire with only “a software effort”.
In a white paper released in conjunction with the specifications, the Alliance points to several areas of opportunity which could be stimulated by MulteFire, notably several areas of the Industrial IoT, and the accelerated adoption of neutral host small cell platforms.
“MulteFire creates new business opportunities that allow new market verticals to benefit from the LTE technology and ecosystem,” the paper states. “These verticals include large enterprises, sports & entertainment, healthcare, identity management, public venues (malls, airports), hospitality, transportation applications, M2M, IoT, seaport management, gas detection, manufacturing, logistics, and the public sector (first responders, smart grids, military bases and barracks, universities, hospitals, education authorities). Each of these verticals can create customized applications and Quality of Experience (QoE) for its users.”
All these are potential new areas of wireless deployment and investment, where a wider set of options in unlicensed spectrum could allow others, not MNOs, to reap the benefits.
The traditional system of auctions and licences will not disappear quickly. Austria became the latest country, this week, to announce plans for ‘5G’ auctions, with ideas that sound remarkably similar to those behind the 3G and 4G processes.
And of course, if those traditional licences get cheaper, as seen in the US, that will stimulate change in its own right. Even for large MNOs, acquiring new airwaves becomes more affordable, while the barriers are lowered for smaller ones. In the incentive auction, 30 MHz was set aside for companies which currently have little sub-1 GHz spectrum, for instance. Dan Hays, a consultant at PWC, commented: “The dramatic reduction in the targeted net proceeds of the reverse auction shows just how effective the auction mechanics have been in bringing together supply and demand. At just over $10bn we are confident that the auction is well within striking range of the budgets of mobile network operators.”
But tweaking the processes and lowering the costs will not save the licensed spectrum frameworks which have shaped the mobile industry for so long. Perhaps the real deathknell is tolled not by the 600 MHz auction’s unimpressive results, but the news that Amazon has applied to the FCC for permission to test its own devices in several spectrum bands – not in futuristic millimeter wave spectrum or shared bands, but in heartland cellular airwaves in 700 MHz, 800 MHz and 1.9 GHz. Like Google and Facebook, Amazon wants to rework the economics of the mobile industry in its own Internet-defined image. Once these companies can access the same ‘beachfront’ spectrum as the incumbent MNOs, the traditional boundaries really will break down.