The Future Of Wireless: The Case For Spectrum Sharing

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The explosive growth in high-speed wireless Internet is spurring a new technology wave. However, the question of whether it will lead to greater affordability, competition and innovation depends on what choices regulators make today. The key ingredient in wireless networks is “spectrum,” the frequencies and airwaves the wireless signals get transmitted over. Simply put, without spectrum, and enough of it, providers cannot offer wireless services. The more spectrum they have, the more capacity they have at their disposal to move information and offer additional services.

The need for spectrum on the part of wireless carriers has been driven by the dramatic demand for mobile broadband, which has been fueled by the increased use of smart devices. Smart phones consume 24 times more data than conventional phones, and tablets can use up to 120 times more bandwidth.

The FCC has felt pressure to make more spectrum available – and quickly. Recent announcements of spectrum-driven partnerships on the part of carriers illustrate this. A deal between Comcast and Verizon received government approval in August; it allowed Verizon to buy an unused swath of bandwidth for $3.6 billion. AT&T received approval to operate in Sirius XM’s spectrum in October.

Spectrum also played a role in the pending investment  in Sprint by Softbank, and in Sprint’s plan to take full control of Clearwire.

Unfortunately, such deals are leading to a consolidation of airwaves by a few dominant wireless providers. This so-called “spectrum hoarding” makes the market significantly less accessible to new entrants and decreases rivalry among telecommunications providers.

Consumers in the United States already pay up to 38 times as much as Japanese consumers per bit of information to access the Internet. More spectrum concentration could mean even less customer choice and an increase in the cost of data plans. We have already seen Verizon and AT&T raise data prices to manage increases in demand as they scramble to acquire more spectrum. This threatens the ability of Internet startups, and even more mature businesses such as Netflix or Google, to deliver new services.

Content providers like Google, Yahoo and eBay and other IP-centric companies depend heavily on existing carrier networks as delivery vehicles for their service offerings – and thus are at risk of having their services preempted or interrupted by the carrier. With uncertainty surrounding the Net Neutrality issue, it is easy to see how content and over-the-top service providers could benefit from deploying their own networks as an alternative to conventional telco and mobile carrier networks.

The traditional policy of the FCC to make more wireless spectrum available has been to auction it off to the highest bidder. This remains a key part of FCC strategy. They will be augmenting this with a plan to use incentive auctions to repurpose spectrum that is currently in use by television broadcasters in favor of next-generation wireless services. To that end, the FCC is moving forward with a plan to incentivize broadcasters to give up rights to some of their spectrum in exchange for payment.

Recent actions suggest that the FCC is rethinking its traditional spectrum policy approaches. The concept of “spectrum sharing” is beginning to gain traction as a more optimal solution for every stakeholder involved, from carriers to consumers. The FCC announced in September that it would begin implementing recommendations from the President’s Council of Advisors on Science and Technology (PCAST). The PCAST report concluded that the best way to increase capacity is to use new technologies that will enable large blocks of spectrum to be shared. This represents the first time that spectrum sharing has been officially encouraged.

The report states that spectrum sharing could multiply the effective capacity of spectrum by a factor of 1,000. This would transform our national spectrum scarcity position into one of abundance. The report’s proposals also assert that recent technological innovations, including dynamic spectrum access and cognitive radios make this new approach achievable.

Sharing spectrum removes a major barrier to entry for new wireless applications and services, with the potential for opening the market to non-traditional providers that have a vested interest in ensuring access to their services.  A good example would be the aforementioned content providers. To date they have been in a disadvantaged position due to their lack of spectrum. If Apple, Amazon or Netflix had direct distribution channels for wireless alternatives to cable television the new business model would be disruptive and benefit consumers by introducing the possibility of à la carte pricing. Cellular data plans are increasingly expensive, so bypassing the carrier could be much more economical for the consumer.

The promotion of shared unlicensed spectrum use is receiving increased attention from the FCC. Unlicensed spectrum has already proven to be a key policy innovation, and has spawned a range of now-commonplace technologies including cordless phones and Wi-Fi.

Incumbent carriers would also benefit from sharing licensed spectrum by being able to offload some of their network traffic, in much the same way that Wi-Fi made it possible for carriers to support the iPhone on networks that were more optimized for voice than data. Spectrum sharing makes more efficient use of scarce spectrum resources, ensuring that consumer expectations are being met and that prices aren’t dictated by an artificial shortage of bandwidth caused by spectrum hoarding.

Innovations in spectrum policy, including access to shared or unlicensed spectrum through spectrum sharing or other means, will end the exclusion of companies from the wireless arena and encourage further innovations in mobile technology. Carriers will face increased competition, and as a result the consumer will win.

The rise of mobile broadband has been a transformative development. As FCC Chairman Julius Genachowski told the press, “Over the last few years, the U.S. has regained global leadership in mobile innovation – and we must not let up now.” Flexible and forward-thinking spectrum policies on the part of the FCC will go a long way to continuing that leadership.