AFTER nine months of wrangling, Verizon Wireless—America’s largest mobile-phone company—has been given the go-ahead by the Federal Communications Commission (FCC) to buy a swathe of unused frequencies from a consortium of cable-television companies that includes Comcast, Time Warner and Bright House Networks. Apart from receiving a large sum of money, the deal allows these cable companies to repackage Verizon’s mobile-phone service under their own brands. Verizon has also struck a similar deal to acquire spectrum from Cox Communications, another cable and wireless provider.
Overall, Verizon will pay around $4 billion for 20 megahertz of spectrum in the valuable Advanced Wireless Services (AWS) band—popularly known as “the last greenfield” in the wireless world. Verizon already has one of the best 20 megahertz chunks of AWS spectrum. So that the present acquisition would pass muster with the antitrust authorities, it agreed to sell seven megahertz of its existing AWS spectrum to T-Mobile, a much smaller rival.
Verizon reckons it needs the additional spectrum to add capacity to its 4G Long-Term Evolution (LTE) network. This network, the deepest (ie, touches more people) in America by far, was rolled out two years ago using frequencies in the 700 megahertz Ultra High Frequency (UHF) band. Verizon paid $4.7 billion for the latter when they were auctioned off by the FCC in preparation for television’s switch from analogue to digital broadcasting.
The AWS band uses frequencies in two segments, each 45 megahertz wide. One (1,710 to 1,755 megahertz) is employed by mobile phones to talk to the nearest cell tower. The other (2,110 to 2,155 megahertz) is used by phones to listen to signals from the tower. These frequencies are prized because they are ideal for densely populated areas.
Unlike waves in the 700 megahertz band, which travel long distances and penetrate all the nooks and crannies within buildings (that is why they were chosen for television in the first place), higher-frequency AWS signals have a much shorter range. But they can carry far more data or simultaneous conversations than UHF. That allows carriers to provide services to a greater number of customers within a given area. Having both UHF and AWS spectrum means Verizon is able to offer services competitively in rural and urban areas alike.
Verizon has certainly played its cards better than AT&T, its chief rival. Last December, AT&T had to abandon a $39 billion bid to acquire T-Mobile, America’s fourth largest wireless carrier. It was ready to pay such a large sum mainly to get it hands on the AWS spectrum T-Mobile had acquired, plus its customer-base and compatible network (both AT&T and T-Mobile use the popular GSM technology favoured by cariers abroad).
The takeover was scuttled, however, when it became clear that anti-trust officials were preparing to block it. Between them, Verizon and AT&T control more than 70% of the American mobile market. Allowing AT&T to acquire T-Mobile, the trust-busters argued, would reduce competition to even more of a duopoly than it already was. With a presidential election looming, the fear of further job losses, along with the possibility of a noisy consumer backlash, quickly eroded support for the deal in the White House and elsewhere.
What seems clear, though, is that the carriers' current land grab is a panic response to projections made by the FCC for future traffic growth. Media-friendly devices like smartphones and tablet computers—plus the trend to watch video, often in high-definition, via the internet instead of on television—are driving a huge increase in mobile data traffic. People with smartphones typically download 24 times more data (ie, movies, television shows, photographs and music tracks) than those with ordinary mobiles. The average tablet owner hogs over 120 times more bandwidth than a traditional mobile user.
In its National Broadcast Plan, released a couple of years ago, the FCC reckoned it would need to auction off at least 500 megahertz of additional spectrum by 2020 to meet this surging demand. More recently, the commission has warned that, if no new sources of spectrum can be found, carriers will face a “spectrum deficit” of 275 megahertz by as soon as 2014. But will they?
Spectrum is go
The way spectrum has been licensed by the FCC and other wireless regulators is a relic of the early days of broadcasting. At the time, licensing was done by dividing the radio spectrum up into bands, which, in turn, were sliced into channels that were then licensed to various broadcasters around the country.
To ensure that a broadcast could be received clearly, it was allocated a channel between two vacant ones. That is why the tuning dial on old VHF television sets had (apart from channel two) only the odd channels from three to 13. When UHF broadcasting came along, empty guard bands were similarly added to each channel, to prevent signals on adjacent frequencies causing interference (see “Bigger than Wi-Fi”, September 23rd 2010).
Unfortunately, the need to avoid interference continues to influence the way spectrum is allocated. This was as much a myth in Marconi's day as it is now. The whistling noises heard on a radio and the echo of adjacent stations are not the result of some phenomenon of physics. They are caused simply by the failure of the receiving equipment to process the signal properly. Try moving the antenna, or replacing it with a better one, to prove that it is the processing, not some law of nature, that affects reception.
Better radios are the answer. Modern agile transmitters and receivers avoid interference by hopping to different frequencies if they encounter another signal. Such frequency-hopping was first used during the second world war. So separating different broadcasters—whether they happen to be mobile phones or television stations—by putting them on different frequency bands is not actually necessary.
In truth, the companies know this. They are already finding ways to get more out of the spectrum they already have. One method has been to divide their networks into smaller cells, to get closer to individual customers. Doing so allows them to re-use the same frequencies elsewhere in the area. Another is to equip cell towers with smart aerials that can point their beams at individual customers and activate them only when required, rather than simply broadcasting continuously to all and sundry. A third way is to offload some of the data traffic onto Wi-Fi’s publicly owned channels. AT&T has built 30,000 Wi-Fi hotspots around the country to do precisely that.
Even then, it is not as though all the spectrum that has been licensed to carriers and network operators is actually being used. A study done last year by Citigroup, a financial conglomerate, reckoned that only 192 megahertz out of the 538 megahertz of licensed spectrum had actually been deployed. And 90% of that was being used by "legacy" 2G, 3G and 3.5G services. If this spectrum were repurposed, the carriers would have more than enough to build their 4G networks.
Unfortunately, there is little incentive to do so. For a start, it would mean investing heavily in advanced technologies like VoLTE (Voice over LTE) as well as new frequency-hopping transmitters, ultra-wideband equipment, software-defined radios and intelligent antennas. If they did, the voice traffic that is normally carried on legacy networks could travel along with data on LTE. And more subscribers in a given area could be served using the same set of frequencies.
But why bother when the FCC is squeezing the armed forces, NASA and other government agencies, as well as the television companies, to release more of their underutilised spectrum, so mobile-phone companies may prosper? It is easier to increase network capacity by adding spectrum than by developing costly new technology.
Because spectrum is seen as a finite resource, with allocation a zero-sum game, the rule has been grab it while you can. The more one carrier can amass for its exclusive use, the less there is for the others—who are then at a competitive disadvantage. In essence, then, the scarcity of wireless spectrum is an artificial one, exacerbated by the way it is allocated.
As explained by David Reed, one of the architects of the internet and a former professor of computer science at the Massachusetts Institute of Technology, photons—whether they are in the visible, radio or gamma-ray part of the electromagnetic spectrum—simply pass through one another when they cross paths. As they do not occupy the same space, they cannot cause interference.
The only thing that distinguishes one type of photon from another is its frequency—ie, its energy level. Thus, to all intents and purposes, radio and light are the same thing and follow the same laws of physics. Therefore, in licensing frequencies to broadcasters, the FCC is essentially trying to regulate colour, jokes Dr Reed. His point, though, is that there is no more scarcity of wireless spectrum than there is a shortage of, say, the colour purple.
On a more serious note, Dr Reed believes the hoary metaphor of spectrum as real estate that needs to be subdivided to avoid interference is misleading. The rise of “co-operative” wireless networks—where the network architecture organises users in a way that allows them to help one another transmit and receive messages—makes a mockery of ideas about spectrum being as finite as land. Experiments show that as the number of users in a co-operative network increases, its capacity actually rises. So much for a precious and diminishing commodity.
All this has been known for a decade or more. Yet spectrum continues to be allocated as if it were a finite resource which, like common land, needs to be carefully managed so as to avoid some “tragedy of the commons” caused by over-exploitation and interference. “When the capacity of the commons can increase with the number of users,” notes Dr Reed, “we clearly need a different regime to allocate capacity among users.”
via Babbage http://www.economist.com/blogs/babbage/2012/09/spectrum-licences?fsrc=gn_ep
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