700 Mhz Wireless Spectrum Business Opportunities and Beyond
700 Mhz Wireless Spectrum: Business Opportunities and Beyond Savinay Berry
Why the hype around 700 Mhz? • Explosive growth in wireless communications – Approx 1. 2 B handsets shipped in 2007 • – Almost 1 in every 6 th person has a wireless handset in the world Wireless handset market expected to reach $250 B in 2011 • To put this in perspective, if wireless handsets were a sovereign country, it would be the 53 rd largest economy, right behind Ireland, but growing more than twice as fast as China. (source: In. Stat research) – – Wireless minutes usage has increased 18 fold (from 1997 to 2004) – Wireless data revenues have gone from $100 M to over $4 B today (source: Aloha networks FCC filing) Number of customers has increased over 400% (from 1997 to 2004) • Limited spectrum to fulfill this growth. • Does 700 Mhz solve this scalability problem?
700 MHz Auction Update • Congress accelerated the DTV transition to February 17, 2009 making spectrum available for auction • The 700 MHz band is divided into two categories – the lower 700 MHz band the upper 700 MHz band. The lower band is 48 MHz while upper band is 60 MHz. • FCC Auction 73 started January 16, 2008. Coming to a close now. – – 62 MHz to be auctioned – 30 MHz in Lower-700 band, 32 MHz in Upper-700 band – C-band channels 60, 61, 65, 66 to be sold via auction by June 2008 (for a total of 2*11 Mhz bands). – AT&T bought Aloha Partner’s 12 Mhz C-band spectrum (channels 54 and 59) for $2. 5 B in channels. (Smart move? ) Block of specific interest: C-Block (channels Last bid for C-block $4. 7 B. Met the reserve price of $4. 6 B to allow open access and devices. • – Covers 196 M pops, most of the major metro areas, 72 of the top 100 markets and all the top 10 US markets QQQ holds channel 55 in the spectrum for Media. Flo deployment (in partnership with AT&T) • For the C Block licenses, winners must provide coverage to at least 40 percent of the population by 2013 and 75 percent by 2019 • C Block spectrum winner is required to have open access and open devices on their network
Who are the bidders? • Wireless Carriers – AT&T (GSM, UMTS) • • • – Not spectrum-constrained Current spectrum position: Has the Aloha Partners spectrum in 700 Mhz Technology: Will likely migrate entire network to HSPA/LTE Verizon Wireless (CDMA) • • Not spectrum-constrained • • 700 MHz Strategy: Will bid on A, B, and C blocks Current spectrum position: Has large blocks of cellular spectrum at 850 MHz, PCS spectrum at 1900 MHz and AWS spectrum at 2500 MHz Technology: 850 MHz and 1900 MHz could follow LTE or UMB upgrade path as company has said it is assessing LTE for 4 G; 2100 MHz spectrum would likely follow whatever technology is chosen.
Other Bidders – – – Google • • Has no spectrum; not an operator • Technology: Could end up using Wi. MAX, if successful 700 MHz Strategy: Has publicly stated interest in bidding on C Block — but wanted “wholesale” mandated and didn’t get it. Do not believe Google wants to become a wireless operator, but could partner with one (like Sprint). Cable Company Consortium • Have some spectrum but haven’t done any deployment; have a JV with Sprint to resell wireless service • • Current spectrum position: Have block of spectrum at 2100 MHz • Technology: Uncertain 700 MHz Strategy: Uncertain; could seek to add some spectrum but may simply participate to bid up value of licenses DBS Operators • • Have no mobile services spectrum; do not expect active bidding Current spectrum position: Have no mobile services spectrum
Advantages of 700 Mhz Spectrum • Advantages of 700 MHz spectrum – – – Higher penetration of foliage and buildings – Higher penetration and coverage reduces capex Travels farther (lower frequency, higher wavelength) More efficient: Higher bit rate (higher bits for each hertz of frequency band) • A 700 Mhz tower can cover 2 x the area covered by a similar 1900 Mhz tower. • Rule of thumb: A network at 700 MHz would require 60 percent fewer cell sites than 1. 9 GHz or 2. 1 GHz cellular bands for equivalent coverage (source: Gartner) – Cost to build nationwide network in the 700 Mhz spectrum is $2 -$4 billion ($20/person). (much lower than the cost to build a 1800 or 1900 Mhz spectrum) – Open Access and Open Devices clause
Challenges of 700 Mhz Spectrum • Spectral re-use is an issue – which may limit the applications to rural areas. – Potential area of innovation and investment opportunity: Companies working to design better spectral re-use characteristics for 700 Mhz spectrum. • Some believe 700 MHz is not the ideal spectrum for a high traffic dense urban demand set. • Since the C-bands are right next to the public safety bands, the potential to bleed over and cause interference is high (case in point: Nextel’s push to talk service at 800 Mhz). Both spectral and geographical bleeding may be an issue if multiple parties hold licenses for different bands in the spectrum.
Communications Industry Value Chain Trends Players Chipsets / Platforms / Infrastructure Intel Cisco Microsoft Symbian • Wi-Fi/Wi Max Chips • Building next generation technologies Handse ts/ Devices Nokia RIM Motorola • Integration of Cellular & Wi-Fi • Integration of devices • Smarter devices Applications Content Providers Operators Google Yahoo! Skype Time. Warner Sony AT&T Cingular • Video / Voice apps • Location based apps • Gaming • Commerce • Partnerships for delivering content via Wireless / Wireline / Cable Channels • Building IP Backbone • Bundling Wireless & Wireline • Delivering Apps on Tap • Network Management Source: From “Communications Industry Landscape” – 2006 KTV Mobility Primer by Mohan Sawhney
Technology Evolution GSM Evolution GPRS EDGE WCDMA HSDPA HSUPA Wide Area (UMTS) LTE (Rel 6) cdma 2000® IS 95 1 x. RTT EV-DO (Rev A) (Rev B) Wi. Max 802. 16 -2004 802. 16 e 802. 20 Past • Challenges – – – Country and carrier expansion Regulatory Cost 2005 2006 2007 2008+
Potential Technologies for 700 Mhz • Wi. Max – Currently only TDD exists • – Cheaper, uses less bandwidth, and asymmetric data FDD profile is needed for 700 Mhz • LTE: 4 G UMTS standard. Potential deployment in 2010. • Media. FLo: – – Pros • Already launched with VCAST (Verizon) and will be launched shortly with AT&T (AT&T Mobility) – proof of concept. • Already used in the 700 Mhz spectrum (channel 55) 716 -722 Mhz. Cons: • Controlled by QQQ – licensed technology.
Business Implications of New Spectrum • New PHY technology innovation – Mostly established players • • Wi. Max FDD (Aperto, Beceem, Marvell, Next. Wave, TI etc. ) LTE (Qualcomm, NTT etc. ) • Implications of spectral efficiency – Potential for startups
Business Implications of Open Access • Current situation. Walled garden approach blocks apps. – – – – – Wi. Fi/Vo. IP Bluetooth technology GPS Services Advanced SMS services Internet Browsers Payment services Easy Photo file transfer capabilities Easy Sound file transfer capabilities Email clients M-commerce • Potential for the PC based “open download” model for any and all apps to transition to mobile handsets. (eg. www. download. com for handsets)
Companies Positioned to Leverage This Change • Established players – – Google (Android) Paypal (payment services) • Startups – – – Loopt (spatial mobile messaging) Juice Wireless (data sharing for mobile photos) Numobiq (software based smart phone converter) Skyfire, Bytemobile (Mobile Browser: Firefox for mobile) Acuity Mobile (LBS) Bluepulse (mobile social messenger) • Key business model change: Don’t have to sell to carriers anymore. Can sell directly to end customer.
Business Implications of Open Devices • One device capable of traversing different networks (EVDO, HSPDA, 700 Mhz etc. ). – – Will need multiple radios in the system OR One radio with the capability to calibrate to different frequency bands simultaneously in software (Software Defined Radio) • • Vanu Inc Bit. Wave Semiconductor • Negative fallout: Handsets may not subsidized any more.
Key Take-aways • 700 Mhz will shift the paradigm for mobile business model. • Ad-based revenues from mobile applications will increase. • Carriers will need to refine their business model of subsidizing handsets in order to capture two-year service contracts. Will need to win on innovative products, not captive sales and marketing. • Open markets will prevail with the consumer benefiting the most from innovation in applications and devices.
Q&A?
Appendix
700 MHz Band Plan
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