Original URL: http://www.theregister.co.uk/2006/06/29/ngmf_setup/
Cellcos ally to keep their hands on beach front spectrum for 4G
Lobbying regulators to avoid paying huge license fees
Comment Six of the world's largest mobile operators have formed the Next Generation Mobile Network (NGMN) Forum, aiming to use their collective lobbying might to ensure they can run fourth generation mobile broadband networks in their existing spectrum without significant additional licensing fees.
Vodafone, T-Mobile, Orange, KPN, NTT DoCoMo and China Mobile are the founder members of the forum, which was initiated at an invitation-only meeting in Germany in April and is now to be incorporated in London.
Its favoured approach – which would be closer to that already in place in the US – would not only save the cellcos from potentially having to pay out multibillion dollar sums as they did, in Europe at least, for 3G licenses, but even more significantly, would keep the most attractive areas of the spectrum out of the hands of new challengers.
The forum wants regulators to be prepared to renegotiate the cellcos' current GSM and 3G licenses so that, as technologies become obsolete, the spectrum owners can implement new advanced networks in the same bands.
Many countries, apart from North America, have followed the European norm in banning implementation of new networks in existing spectrum. Instead, when a network is phased out or a license expires, the spectrum is reallocated under new terms and conditions, and may be acquired by entirely different players.
This is happening in some countries as the 450MHz analog cellphone service dies and the licenses are reallocated – and this has foreshadowed the 4G debate in that some regulators have veered towards technology neutrality for these frequencies.
In general, the system of returning old licenses to the central pool, rather than renegotiating them with existing holders, places intense pressure on the cellcos, since they have to achieve healthy return on their investment in the spectrum, and its associated network, within the period of the franchise, usually 10 or 15 years. After that, they may have to spend another massive sum to retain the frequencies to support a future network, or may even see those frequencies fall into the hands of others.
And even while the license is still alive, their hands are tied in terms of implementing new technologies within the band to enhance performance and ROI (although the GSM community has been creative in the number of software upgrades it has rolled out to enhance its operators' case, from GPRS to EDGE).
The cellcos’ predicament
This was not a serious situation until this decade. Operators generally paid next to nothing for their GSM licenses, as governments sought to kickstart the nascent mobile market, and their competitive landscape was simple – other GSM voice operators.
Then mobile broadband – the ability to deliver high speed data, video and full IP services over the wireless network – emerged as the great hope for expanding the cellcos' ARPU and their share of the total communications market. This caused them to invest huge sums, in western Europe at least, in 3G licenses, only to see their cosy world invaded by wireline and alternative operators, using new technologies from Wi-Fi to broadband wireless to fixed-mobile convergence to eat into the "mobilised triple play".
An operator with only a 3G and no wireline network was suddenly in position of an expensive asset that might never generate real value. Now the cellcos have been moving aggressively to ensure they too can play in fixed-mobile broadband, initially by partnering with, or buying, fixed providers (as O2 did last week with its Be purchase), and also by looking forward to a time, around the turn of the decade, when they hope next generation wireless networks will match wireline in performance, thus allowing for a mobile triple play based entirely on one technology – whether this will be WiMAX, the HSxPA/LTE extensions to UMTS, Qualcomm platforms, or a convergence of all these elements to create the mythical "4G".
T-Mobile chief technology officer, Hamid Akhavan, said last week that wireless broadband will reach "parity" with its fixed line counterpart in terms of speed by the end of the decade.
But the dream of creating a wireless-only quad play, and making the wireless operators once again the highest valued providers, depends on continuing access to significant swathes of spectrum in appropriate bands for the next generation network.
And just as other technologies, outside the 3G-plus field – such as 802.16e – may take their place in the 4G mobile broadband picture, so a new breed of operators will use them to try to eat away at the cellcos' market share.
The best defensive weapon the mobile operators have, especially in Europe, is their control of the beach front spectrum, leaving WiMAX confined to less desirable bands, such as 3.5GHz, whose propagation qualities make a fully mobile business model hard to support in many areas.
New bands will open up, such as the 700MHz and 450MHz frequencies, but despite excellent propagation these are limited in quantity for full service offerings. The available frequencies between 1Ghz and 2.5GHz are rightly prized and the mobile operators will want to ensure they do not fall into the hands of a possible challenger such as a wireline-only carrier, cable or satellite broadcaster, or well funded start-up – or another cellco coming in from abroad, such as Egypt's rapidly expanding Orascom.
The argument has started in Europe around the 2.5GHz band, which is due to be auctioned in 2007-8 and which was earmarked for 3G expansion, meaning that UMTS/HSxPA would remain the technology of choice and the existing operators would be in the strongest position to buy the spectrum to add to their existing UMTS networks.
But the European Commission favours a shift to technology neutrality, which would allow other technologies such as WiMAX to be used, and some regulators, at least, will support this, notably the UK's Ofcom (which is under pressure from a clear candidate to bid for a licence, wireline-only British Telecom).
Such a shift would entice a wide range of bidders to some auctions, pushing up the prices and potentially depriving major cellcos of additional 3G spectrum in some regions. While it may be too late to lobby all the EU nation regulators into submission on this issue, the 2.5GHz is just the start of the issue. Cellcos dread that a new wave of frequencies and auctions will be devised for "4G" at the end of the decade, creating a new level playing field before most of them have achieved ROI on their 3G roll-outs.
Hence the call to be allowed to use their GSM and 3G frequencies – and to renegotiate the licenses as they approach expiry, rather than returning them to the pot – for new technologies.
This is an argument that is already being played out, with characteristic complexity and political tension, in India, where cellcos are challenging regulator plans to allow 3G services in 2G spectrum. And Japanese operators such as DoCoMo are feeling under intense pressure as new 3G licenses are about to be awarded, and so are keen to improve the long term value of their own spectrum. And the inclusion of China Mobile is also significant, partly because of its increasing focus on international activities, but also because it will be eager for protective clauses to be included in the 3G licenses when they are finally awarded at home.
The problem with the argument of the cellcos is that it seeks to preserve a closed market that is entirely at odds with evolving concepts of deregulation, open competition and new wireless business models. It is certainly important that operators should be able to deploy whatever they deem to be the most appropriate technology in their spectrum, as US players largely do.
The days when regulators decided on which technology was best, and the timescales for its replacement, should have died long ago. Cellcos are starting to maximize the value generated by their licenses by using multiple technologies – T-Mobile and Orange deploying broadband wireless networks in the TDD portion of their UMTS bands, for instance, and the interest of the mobile providers in separate television licenses. But this flexibility remains highly constrained by the regulators.
However, the move towards operator choice and a back seat role for the regulator does not necessarily benefit the cellcos. Indeed, the extreme view is that the fourth generation will be built in spectrum that is largely license-exempt or lightly licensed, as 5GHz bands currently are, allowing any party to compete, differentiating purely on the basis of the appeal and quality of the offering.
This picture would save the cellcos spending large sums on spectrum, but would not suit their needs as it would open them up to vast new competition, dwarfing what they already face from the low cost, flat rate wireless data services provided in Wi-Fi and broadband wireless systems.
Instead, they want the freedom to be able to make any decisions they wish in their own spectrum – quite reasonably – but also want full protection of their markets from possible new spectrum holders, by seeking a virtual guarantee that they can, subject to some performance criteria, hold on to their GSM and 3G spectrum indefinitely (even though the former cost very little, and so does not support the argument that, having raised so much money from auctions, governments have an obligation to allow the operators time and the right conditions to cash in).
In other words, spectrum should be cheaper and even free, and come with fewer conditions attached. But in order to support not just the technologies of 4G but its vision – open, universal access at low end user cost and high service level, with innovative multimedia services enabled – the market needs to be open to any operator with a creative business model and an attractive service.
Copyright © 2006, Wireless Watch
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