Year-End Recap

It now appears as though Congress will adjourn for the year without passing any spectrum bills. This means that the spectrum the FCC has now that could be auctioned quickly won’t be. It also means that, once again, the Public Safety community is not receiving the spectrum it needs.

First and foremost, Happy Holidays to all of our subscribers! I hope this past year has been good for you and that 2012 will be even better! It is almost a requirement when writing articles and blogs that at the end of the year the author must sit down and recap the year just ending. Of course, come January we’ll all be sitting down to write about what is coming in 2012. It is fun to look both back and forward, realizing that importance in this case is according to the author. Some things will be missed and some others we might not think were important will be called out. Writing the year ahead piece is like trying to gaze into a crystal ball and the success rate for those observations is difficult to predict. Further, as always when looking ahead, some things no one has thought of will pop up during the year ahead surprising all of us.

This year that was the AT&T/T-Mobile merger agreement. Unfortunately, AT&T has now thrown in the towel on this merger. Both the FCC and the DOJ claim that this merger would cause wireless pricing to go up and would stifle innovation. Nothing could be further from the truth. Meanwhile, it is rumored that Dish Network has expressed an interest in T-Mobile if the AT&T deal falls apart. It is clear that in today’s wireless environment T-Mobile is at a disadvantage not only as the fourth nationwide network operator but also because of its lack of sufficient spectrum to compete in the LTE space. Spectrum is the currency of wireless, and is the driving force behind mergers and acquisitions.

Meanwhile, AT&T still has to obtain approval for its purchase of the Qualcomm 700-MHz spectrum and is busy rolling out its own LTE network to compete with the Verizon network, which is being deployed quickly. While Verizon has a nationwide license for 22 MHz of spectrum in the 700-MHz band, it is buying more spectrum as it builds out its system. Recently Verizon acquired the spectrum holdings of a number of cable companies. This is important for several reasons. First, it gives Verizon more spectrum for LTE services in large portions of the nation. Second, part of the deal is a resale agreement with the cable companies so they will be able to resell wireless voice and data services on the Verizon network.

These spectrum/reselling deals also affect Clearwire and Sprint going forward. Over the years, Sprint has partnered with cable providers time and time again, and many of them have resale agreements in place with Sprint and/or Clearwire. As the cable providers move over to Verizon to provide services, this wholesale income will be lost to Sprint and Clearwire, and it takes the cable companies off the table for LightSquared (see below), which is busy signing wholesale agreements with more than thirty companies when in fact LightSquared does not even have a network in place and may not receive FCC approval to build out a terrestrial network on its satellite spectrum.

LightSquared is playing Washington just as Nextel did a number of years ago. LightSquared is busy signing up resellers of its proposed LTE spectrum so it can show those in DC that there is a demand for smaller companies that normally cannot step up and bid in the spectrum auctions and, in my view, they are making grandiose claims about the number of new jobs that will be created and the amount of money that will flow back into the economy. LightSquared is doing all of this because it is not faring well on the technology front. The latest test results show that LightSquared would still interfere with GPS receivers, and I believe that it is not possible to build a terrestrial system on its spectrum that would not have a negative impact on the GPS community—an impact that could cost lives and property loss. To me, even the chance of this interference is not tolerable.

The FCC has promised to find 500 MHz of new (reassigned) spectrum that can be auctioned for broadband services. It now appears as though Congress will adjourn for the year without passing any spectrum bills. This means that the spectrum the FCC has now that could be auctioned quickly won’t be. It also means that, once again, the Public Safety community is not receiving the spectrum it needs. It also means that new jobs that the construction of a nationwide Public Safety broadband network would bring will not be happening, and that the final recommendation of the 911 commission to provide Public Safety with interoperable communications systems will not be realized this year, more than ten years after 911.

On the LTE front, the fact that both Sprint and Clearwire have thrown in the WiMAX towel and are moving toward LTE is good not only for these two networks but for the industry as well. With more LTE networks being built, pricing for devices and services should fall over time, even though the Sprint and Clearwire systems will be on different portions of the spectrum than AT&T’s or Verizon’s systems. It is interesting to note here that while we finally have a worldwide standard for wireless broadband in the form of LTE, at the present time it will be deployed on 42 different portions of the spectrum. This means a worldwide standard technology but no worldwide devices. Over time it is hoped that LTE will relocate to spectrum that is common around the world but this will take years if not decades to accomplish. In the meantime, it appears as though HSPA+ will be the common data standard for world (or almost-world) capable devices.

Devices

Another great year for Apple to be sure. The introduction of the iPad 2 and the iPhone 4GS kept it growing and well in the black. Android is gaining ground, or by some accounts has passed Apple in the number of devices available, while RIM continues to slip and has put off its new operating system until late in 2012. Tablets are still hot, and some of them, including the Kindle Fire, are giving Apple a run for its money, and those competing directly with the iPad continue to make small gains. Companies such as Amazon that are not setting themselves up to be iPad killers but rather can present their products in terms of meeting the needs of customers are having better luck in the market. It will be interesting to see how Ultrabooks stack up and if they will take some of the steam out of the hot tablet marketplace. My view is that they won’t have much of an impact but they could continue to erode the laptop market.

The number of new smartphones being introduced into the market is astounding. It seems as though every day one network or another is announcing yet another smartphone, and we have not yet seen the Windows 8 entries. You have to wonder how all of these different devices can survive, and if the life of a smartphone is now so short that the quantities of any given product are a lot smaller than the companies would like to see. I don’t see any slowdown in new products and expect even more smartphones to be introduced during CES in early January. Perhaps with all of these new phones coming into the market we will see some price reductions, at least one can hope.

One thing this industry seems to like to do is to dub years as “the year of…” e.g., the year of LTE, the year of mobile payments, etc. In reality, there is a lot of work being done with mobile payments across the industry but there is still a long way to go. Diverse types of mobile payments are being rolled out and experimented with and partnerships are being formed. Near Field Communications (NFC) systems seem to be gaining steam as well as others. I am still concerned about the security issues with carrying a phone with NFC embedded in it. I don’t think we have a handle on how secure or unsecure these devices are, nor do we have a clue, at this point, about how vulnerable the Android OS is. At this point, caution should be the operative word for all these different types of mobile payment technologies as well as Android itself.

Network Capacity

During the past year I have written many articles about data demand and how network operators are dealing with it. Broadband service is spreading rapidly around the world and networks are becoming more congested. Reports out of both Europe and Korea during this past year have also pointed out that many software developers are making use of the broadband signaling channel for data updates and that this type of usage is placing a strain on the signaling channels. The signaling channel is vital to the success of wireless. If you are trying to make a voice call, receive a voice call, or start a data session, your device must be able to communicate with the network and this is accomplished via the signaling channel. If the signaling channel is being heavily used for data updates you may not be able to tell the network you want to access it.

The other thing about network capacity that seems to escape many people is the fact that it is not citywide capacity that matters to customers but rather the capacity within the cell sector where they are located when trying to use the network for voice and/or data services. There are several important points when it comes to cell sector capacity. First, of course, is the total capacity of the single cell sector, then how many customers are trying to access voice and data services within that sector at any one time, how many other cells provide overlapping coverage in some of the areas covered by the sector, and how much traffic is being sent over the signaling channels (see above).

If you are the only person within that cell sector then you have access to all of the bandwidth provided. However, if there are a number of users within the same cell sector, you will be sharing the total capacity of that sector with the others. If several users are watching streaming video feeds rather than simply making calls or surfing the Internet, the capacity will be lower for all of the other users since streaming video is continuous use of some of the capacity. If the sector becomes overloaded the result is dropped calls, very slow data rates, or the inability to connect to the network. Network operators are constantly monitoring their networks and making changes, sometimes on the fly, in order to increase capacity in a given area. They sometimes assign users to other cell sectors, sometimes change the tilt of the antennas, or by other means, but the bottom line is that each cell sector has a finite capacity. Also, the further you are away from the center of a cell sector the slower your data rate will be, and at the edge of the cell, even with LTE the data rates can be less than 500 Kbps.

Conclusions

2011 saw yet another increase in wireless broadband demand from tablets and from the increased number of smartphones being purchased and used on the networks. Streaming video has begun to really take a toll on network capacity and the network operators are doing the best they can to handle the demand and manage their networks in the most efficient way. Spectrum is a finite resource and each network operator has a limited amount of spectrum available. Although the FCC has pledged to “find” another 500 MHz of spectrum for broadband use, its ability to auction even the spectrum it has available (AWS-2 and 3 for example) was hampered by the in-action of Congress. There are several provisions both in standalone bills and as part of other bills that were introduced in both the House and the Senate this year but in each case in order to get the funding bills passed the spectrum portions of the bills were stripped out, sometimes at the last minute. This not only effects commercial operators but also the Public Safety community, which has been working to gain additional spectrum and funding from Congress to build its own nationwide interoperable broadband network(s).

As this is written there is little if any chance that the spectrum and the ability for the FCC to auction this spectrum will be settled by Congress. Even if auctions are once again authorized early next year, the timeline for building out the spectrum and putting it online to help meet some of the demand for broadband services will be 3-5 years—if everything goes well. So the increased demand for broadband access will continue to create problems for network operators both in the United States and around the world.

There were many more important happenings in 2011, but the bottom line for wireless in 2011 is that it is alive and well, companies are making money, and customers have better access to more different types of wireless connectivity in more parts of the United States and the world than ever before. There are some rough spots ahead on the road to ubiquitous wireless services but the technology and those who deploy and maintain it will continue to find ways to better optimize the spectrum we have. Hopefully, Congress will enable the FCC to auction more spectrum for commercial use, assign the 700-MHz D Block to Public Safety, and perhaps allocate some additional unlicensed spectrum for use in off-loading the wide-area networks as well.

Moving forward, the increasing demand for bandwidth and capacity will have to be met with more spectrum, off-loading wide-area network-only Wi-Fi or other local-area wireless systems, and by new, smarter technologies including cognitive and smart technologies. 2011 was a good year for wireless and I believe 2012 will be even better!

Again, Best Wishes for the Holidays from all of us to all of our readers.

Andrew M. Seybold