Latest FCC auction shatters spectrum myths

The FCC’s Advanced Wireless Services-3 (AWS-3) auction, which is in its final rounds, has harvested close to $45 billion for the U.S. Treasury, more than twice the amount of any previous auction. It’s also shattered prevailing myths about the value of mid-band and high-band spectrum.

First, the record sums that are being paid for relatively high-band spectrum at 1.7 and 2.1 GHz obliterate the notion that low-band spectrum below 1 GHz is the holy grail. Second, the mountain of dollars carriers are willing to spend to obtain more of the precious asset proves that more infrastructure or more efficient technology cannot be the sole solution for adding capacity to wireless networks.

In a piece I wrote for Gigaom in 2013, “Learn how technology will turn less desirable airwaves into ‘beachfront’ spectrum,” I argued that the benefits of lower frequencies are overstated and that higher frequency bands will provide the most capacity. The AWS-3 auction confirms the capacity benefit, as this spectrum is the capacity play, a critical component for many carriers to bolster their networks, at a time that the industry needs capacity like a person dying of thirst needs water. For example, Cisco predicted in its oft-cited “Global Mobile Data Traffic Forecast Update” a compound annual growth rate of 61 percent through 2018 for global mobile data traffic.

I’m not denying that lower frequencies are important and valuable. They absolutely reduce a company’s cost to deploy since the low-band frequencies penetrate better and propagate further, dropping the number of sites a company has to deploy to provide good coverage, particularly in rural areas. But most data is consumed in denser population areas, where cell sites are more packed so operators don’t need lower frequencies for propagation and can use higher frequencies that are actually better for capacity. For instance, higher frequencies permit denser antenna arrays, enabling higher spectral efficiency.

Beyond AWS, the next high-frequency band creeping toward auction is the 3.5 GHz small-cell band, followed by bands above 10 GHz for 5G, an area that the FCC is actively pursuing. The march to higher frequencies will continue inexorably, as radio does extend to 300 GHz before electromagnetic radiation becomes infrared. Although I anticipate that most development in the next decade will be sub–100 GHz,scientists are simulating systems that can transmit a terabit per second in optical bands. For now, AWS-3 spectrum represents a sweet spot that combines a large amount of spectrum (90 MHz previously in AWS-1 plus 65 MHz added in this auction), readily available technology on which the spectrum can be deployed, and international harmonization. So much for low band being all that matters.

The second myth is that operators don’t need spectrum and only need to invest more in their infrastructure. A corollary to this myth is that by using more efficient technology, such as smarter antennas, operators could extract much greater capacity from existing spectrum, as high as 100 times greater than the current system — a nonsensical pipe dream. In an auction, operators are driven by economics to bid for spectrum up to the amount that matches an equivalent capacity gain by investing the same amount in infrastructure or technology.

$45 billion proves that no silver bullets exist to boost capacity. Small cells are promising and will eventually become prevalent, but logistical issues such as backhaul, site access, lack of neutral-host solutions, are currently creating a lot of friction. As for smart antennas, both LTE and preliminary 5G roadmaps have no shortage of planned smart-antenna approaches, including massive MIMO, but none of these are smart enough to easily attach themselves to today’s network and produce huge gains. The industry is in the midst of transitioning from 2X2 MIMO to 4X2 MIMO on LTE downlinks, but even this investment only produces a 20 percent capacity gain (see page 71 of the linked report).

In a multi-decade analysis I recently completed, capacity has doubled every three years for the last two decades and is likely to continue to do so, using a combination of better technology, more sites, and more spectrum. The AWS-3 auction has shown us how important the spectrum component remains.

Peter Rysavy, president of Rysavy Research, has specialized in wireless technology for over twenty years.