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UK auction delay would be major blow to WiMAX

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T-Mobile’s case

T-Mobile’s argument revolves around the new willingness of many European regulators to allow GSM spectrum in 900MHz to be ‘refarmed’ – turned over to 3G or 4G technologies as GSM usage declines. This would increase the capacity available to operators for data services, without the need to purchase new spectrum. It would also presumably avoid any danger of the licenses having to be returned once GSM was turned off, and potentially falling into the hands of rivals, and make it more cost effective to provide 3G and 4G services to sparsely populated areas, because of the longer range and better indoor penetration of low frequencies.

Additionally it would support a multi-frequency LTE roll-out, with high capacity hotzones in densely populated or high ARPU areas, combined with 3G or, in future, LTE offerings in 900MHz for rural areas. This multi-frequency approach is gaining increasing traction as multiband devices become commoditised, and the pressure to reduce network costs to support flat rate broadband becomes intense.

3G proved that it is commercially non-viable to build a high performance network in frequencies over 1GHz for an entire population, requiring huge numbers of cells, many of them covering very few active users. Not only would refarming allow desperate cellcos to fulfil their rural coverage obligations without a negative effect on the bottom line, but it would enable them to move more quickly towards 4G where demand is seen, since they already hold the licences.

The WiMAX vendors have been advanced in supporting multi-frequency deployments, and in making 802.16e available in different, often unofficial, bands. At the recent WiMAX World EMEA event in Munich, for instance, Telsima and its customer Mobilink Slovenia showed off a WiMAX deployment in 450MHz for rural and 3.5GHz for urban or high capacity areas. There is no reason to think the LTE community will not grasp the same opportunity and come up with 900MHz implementations for cellcos that are being allowed to refarm this spectrum – a trend that has taken off mainly in France and Scandinavia so far.

All this is clearly leading T-Mobile and others to question whether they need to pay large sums for 2.6GHz if they already have a store of spectrum that can be opened up for mobile broadband. The operator argues that it cannot accurately value the 2.6GHz licences until it knows how much 900MHz it can use for 3G.

Not that refarming will negate the need for 2.6GHz, since low frequencies are poor at supporting urban areas, because of interference and low capacity. But it would make some operators prefer to buy 2.6GHz only for high value urban zones, rather than nationwide – and so may put pressure on some regulators to offer regional licences, which would then attract higher values for urban zones (but risk very low prices in rural, especially in countries that have large rural spaces and poor rural populations, which is generally not true of the UK).

The broader issue that is highlighted by the T-Mobile argument, however self-serving that may be, is that traditional auction rules for wide area mobile spectrum are becoming irrelevant to mobile broadband. Operators are calling for more of the spectrum to be allocated for TDD operation, because this is better at supporting data and packet services (and LTE will have a TDD flavour soon); or at least for the regulator to allow the market to decide on the FDD/TDD split, as Ofcom will. And they want more flexibility on regional licences, so that the spectrum they purchase actually maps onto a roll-out plan that will focus initially on spot developments in high demand areas, with 900MHz or other bands filling in the gaps. In such a scenario, the national licence becomes an unwieldy burden.

Ofcom said last month that it would rethink its plan to support refarming because it had received far higher interest than it had expected in the 900MHz frequencies, hence the delay in the existing cellcos being able to make firm plans for using these airwaves for 3G.

Copyright © 2008, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

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