The recent UK radio spectrum auctions raised less money for the Treasury than anticipated. Some commentators have put this down to the structure of the auction; bidders were able to somehow beat the system and pay less than anticipated for valuable spectrum. Another possibility is that mobile operators have looked into the future and realise that there are spectrum sharing initiatives around the corner that could permanently devalue exclusive licences.
The three ages of mobile
In the beginning was the mobile operator. And the mobile operator was good because it spent a lot of money investing in infrastructure and building the backbone of today's network. The mobile operator provided both the network and the necessary systems to facilitate communications. In this, the first age of mobile, the MNO was king.
Then in 2007 Apple introduced the iPhone and a smartphone revolution began. This took power away from the mobile operator who started to look increasingly like a pure connectivity player or "dumb pipe". The smartphone ushered in the world we know today where consumer mobile devices "do not start up on a carrier-owned device screen". However, in this, the second age of mobile, the operator maintains control over the network and the spectrum and thereby still controls the heart of the mobile ecosystem.
Today there are signs that we are moving towards the third age of mobile. In the third age there is disruption of the network. This disruption could undermine traditional MNO dominance and allow new players to establish their own networks and non-network players to expand their mobile remit. One catalyst for this revolution is the introduction of shared spectrum.
Over the last couple of years, new initiatives have been spearheaded by regulators and equipment manufacturers that challenge the notion of exclusive mobile spectrum. The first, but so far unsuccessful, challenger is TV white space. White space refers to radio frequencies in the TV spectrum band that are not being used locally. Some national regulators, such as Ofcom in the UK, have proposed that white space be made available for unlicensed use, meaning that the spectrum is shared and free for use by any compliant operator.
But the success of white space on a grand scale seems challenging. The reason for this is twofold. Firstly, urban areas have very few white space channels available for new operators to use. Secondly, there is only a limited business case for new entrants as white space players are competing with mobile operators who can guarantee a quality of service. There is no guarantee that the white space spectrum available for use today will be available tomorrow, meaning that companies are unwilling to invest in new networks. It would be like building a boat with the risk that by the time it is built the river will have dried up.
Licensed shared access
The newer and much more interesting development in shared spectrum frameworks is licensed shared access (LSA). LSA is similar to white space in that it makes use of spectrum that is licensed (mainly to government bodies), but is not being used at a certain time or in a certain location. The key difference between LSA and white space is that spectrum being shared in LSA is licensed to an exclusive second party and the sharing arrangements provide a guaranteed quality of service. This means that companies can now build their boats with the knowledge of safe river passage, and the likelihood of a rising tide as increasing amounts of spectrum will be released as the LSA framework matures.
The impact of LSA and spectrum sharing could be monumental. With several hundred megahertz of spectrum becoming available, the short term impact will be the loosening of capacity constraints on operators, leading to lower data prices for consumers. More importantly, it could provide a cheap alternative to buying exclusive spectrum for new entrants in the mobile operator market.
There could also be substantial long term impacts of LSA, based around the precedent for spectrum sharing. With increasing numbers of players accessing spectrum, there is likely to be technical innovation facilitating more active sharing. The cognitive radio vision is for a device to be able to determine its location at any point in time and then use any spectrum that a database has deemed suitable. This may result in shorter term spectrum licences being awarded and eventually the loss of exclusive access to spectrum.
Winners and losers
The clear winners in a world of spectrum sharing are mobile equipment manufacturers and chip sellers (Nokia, Qualcomm and Broadcom). They get to update their devices and sell new chips that can deal with cognitive radio. Microsoft and Google are two more interesting challengers that have expressed an interest in shared spectrum and for whom LSA could become an essential building block for their network aspirations. One can imagine a range of devices being sold "with connectivity included", and LSA would provide a far cheaper way to do that than buying large blocks of exclusive spectrum.
But it's not just tech giants that could enter the network game. As we've seen with Raspberry Pi experiments, it's becoming cheaper and cheaper to install a network, and there's nothing to stop small players jumping in themselves. In fact, it is spectral efficiency that is the ultimate winner, pushing us closer to perfect competition and many small competing companies.
The obvious losers in a spectrum sharing world will be mobile operators. There seems to be a tipping point for MNOs with respect to the optimal supply of spectrum in the market, and we are about to hit it. Operators will arrive at a position where they hold enough spectrum to cover capacity constraints, and where any additional spectrum becomes a new entry point for a mobile competitor. Urban Wi-Fi networks are already reaching a scale that is worrying for MNOs, and the release of additional spectrum will exacerbate this. The other loser from the rise of shared spectrum is likely to be governments, who will not be able to extract huge auction revenues, to ensure monopolies are maintained.
The third age
When people (and publications) talk of the disruption of mobile, networks and infrastructure tend not to come up. The assumption seems to be that lone developers are capable of building software and occasionally hardware, but that infrastructure is beyond them. In the third age of mobile, with the ability to share the public resource of spectrum, start-up network players will emerge and true disruption at the heart of mobile will commence.Suggest a correction