Why 4G Spectrum is the government’s most coveted networking asset

The UK government is looking to end its airwave auction mess by commencing its 4G spectrum auction. Can UK network operators avoid the pitfalls faced in the US?

Britain’s networking giants are jostling for position as they await the release of the 4G spectrum auction by Ofcom. But after years of delays and arguments over liberalisation and ownership caps, it stands to be seen whether British operators can enter the 4G arena without the hindrances that have stalled uptake in the US.

Once extra spectrum for 4G is available, mobile providers will be able to offer faster access to wireless services, easing congestion in existing networks and serving new rural customers at about the rate of today’s ADSL home broadband speeds.

Operators are desperate for this new spectrum since currently mobile telephony occupies only 4% of the spectrum suitable for radio transmissions. The proposed auction of 4G-supporting frequencies in the 800 MHz and 2.6 GHz bands, now expected to start in Q2 2012, will open an extra 250 MHz to mobile telephony. This will add almost 75% more capacity to the networks, which is 80% more space than was available in the 3G auction in 2000 that netted the Government £22.5bn.

Initially slated to take place in 2009, the sale will now happen later this year. Some of the delay has been caused by certain mobile operators clinging to the airwaves they already have the right to use and others calling for a level playing field that would use caps that limit how much spectrum each player could obtain. The arguments are still rumbling on in the background, but after much scrutiny, attention has now returned to the auction itself as it finally looks set to commence.

Who will cash in on the 4G spectrum auction?

The Culture, Media and Sport parliamentary select committee (CMS), insists that liberalisation has not permanently distorted the market in favour of certain licence holders, but it has conceded concern that the sale by Everything Everywhere of some of its spectrum will result in the company making a substantial profit from a public asset that it had been granted for free. Research from IHS Screen Digest suggested the sale could net Everything Everywhere an estimated £425m.

A committee spokesperson said, “We recommend that the Government and Ofcom look into mechanisms by which at least a significant proportion of the proceeds could be used to benefit consumers. Spectrum caps and floors at the auction are the best viable option to ensure a competitive tension in the spectrum marketplace.”

Sources from various telcos close to the negotiations have hinted to SNUK that the government will get less than it did for the 3G auction due to the economic turbulence hitting values. Indeed, Ofcom CEO Ed Richards told MPs (Members of Parliament) recently that the Treasury had not given him a revenue target for the 4G auction. He said the auction was about the efficient allocation of spectrum, not raising money for the government, much to the relief of operators concerned about cost.

The Government presently gets £63.4m per year in licence fees from operators for their respective holdings of 900 MHz and 1800 MHz or 2G spectrum. This is split into £33.3m a year for two Everything Everywhere licences, and £15m each from O2 and Vodafone. None of the operators paid upfront for their initial 2G licences.

Will a British 4G spectrum auction spawn US-style problems?

Whilet the desire to own spectrum remains uncontested among all operators, international events from high profile companies have opened a chest of challenges that need to be resolved before 4G and Long Term Evolution (LTE) can really become a reality in the UK

In the US, AT&T has abandoned its bid to buy T-Mobile, accusing the U.S. government of harming customers and halting much needed investment in 4G, while rival Verizon Wireless was hit by three outages of its 4G network last month. The company claims it transfers data at faster speeds, but customers complained they were getting only 3G signals or no signal at all. Verizon said the disruption was due to “growing pains.”

The hope in the UK is that operators will get as much 800 MHz spectrum as possible because radio signals in this band carry further for the same energy input, helping them avoid problems that AT&T, Verizon and others have faced. In addition, Ofcom has proposed saving some 800 MHz spectrum for an operator that will commit to providing national roaming coverage in quick order. Analysts are divided on whether this measure, unpopular with all the operators, will be in the auction. Full details will not be disclosed until the auction finally begins later this year, but the operators are insistent that they should not be held to ransom.

More 4G spectrum will mean more cell traffic on enterprise wireless networks

The release of 4G spectrum could have fall out on the enterprise since it will result in even more mobile data traffic – much of which will land on Wi-Fi LANs.

According to Gartner, through 2013, 35% of smartphone wireless data traffic will go through private and public Wi-Fi networks. By 2016, the investment in 4G will mean network infrastructure must be poised to support a shift in capacity from voice to data traffic that stems from cellular offload. This shift will introduce new traffic balancing and security challenges.

Phillip Redman, research vice president in Gartner Research, cautions that the changes will test network engineers and the ways they control traffic within their enterprise systems.

“Since mobile networks are based on contention, the more users that share the bandwidth, the slower the speeds. Diverting traffic to non-cellular network technology should improve system throughput. Security provisions will need to be in place to protect corporate data because most public Wi-Fi hot spots do not offer encryption technology, but will support corporate encryption methods, such as VPNs,” said Redman.

More 4G spectrum could mean opportunities for VARs and systems integrators

As enterprises and even individuals look to support cellular offload on their Wi-Fi networks, systems integrators and VARS could find opportunity in offering related services.

Redman adds: “Communications service providers should plan, partner and build for supporting public and private Wi-Fi systems. Those that offer home broadband should bundle in Wi-Fi access points and provide Wi-Fi roaming software on mobile devices, if it isn't already present.” 

As Roman Friedrich, a partner at Booz & Company puts it: “The 4G spectrum will open up a new era of business enablers – those who look to monetise their assets by opening up their infrastructures and extending their strategy from providing services directly to businesses and consumers to helping businesses serve their own business and retail customers more effectively.

“To that end, with 4G spectrum, they will provide open and reliable virtual networking and cloud services to host and support an increasing number of specialised service and application providers, and offer them access to targeted customer segments.”

Indeed, next week’s CES show in Las Vegas is showing a renewed interest in the spectrum marketplace. Wilson Electronics has unveiled what it claims to be the world's first 4G mobile signal booster, the Sleek 4G-V, while handset manufacturers are all rushing to show off their latest 4G handsets.

In the meantime, in the UK, however, all eyes will remain on how the auction will unfold. As for 4G, well disappointingly Ofcom says roll-out of 4G mobile services will now begin in 2013/14 and that "wide availability" will be achieved in 2015. Better late than never, say the networking community with bated breath.

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