Ofcom’s proposals for 700 MHz leave scope for much more gain and much less pain
Ofcom are consulting on their proposal for re-allocating the 700 MHz band exclusively for mobile services. They claim it could save the mobile operators £480m-£770m’s worth of new base stations. A much better outcome could be achieved by using the 700 MHz band auction to incentivise the mobile industry towards more base stations not less. Site diversity can deliver up to a 2000% increase in consumer cell edge data speeds. There is also a case to leave current DTT and PMSE services running in dense urban areas to the extent possible. These two propositions would significantly increase the gain and reduce the pain of the proposed spectrum change of use.
The unique characteristic of the 700 MHz band is that the signals travel great distances and large areas can be covered by a smaller investment in base stations. The greatest benefit from this unique characteristic is in rural areas. The least benefit is in dense urban areas. This is because the rural alternatives are few and the urban alternatives are many. The 65 MHz of FDD spectrum that has been recently released at 2.6 GHz and the 190 MHz of MOD spectrum (shortly be released) will be deployed almost exclusively in dense urban areas. It will be accompanied by a lot of new base small cells which will have a large multiplier effect. So the impact of only 30 MHz of FDD spectrum at 700 MHz (using existing urban sites) will be a relative small drop in the ocean in dense urban areas.
On the other side of the coin it is largely in dense urban areas where the most disruption will occur to PMSE services (eg wireless microphones, camera controls etc). The same can be said of potential interference from mobile use of 700 MHz to DTT…the greatest probability is in dense urban areas. It is in dense urban areas where the greatest economic opportunities exist for local DTT services.
If the greatest benefit of 700 MHz for mobile is outside of dense urban areas and the maximum pain for DTT and PSME is clearing out from inside dense urban areas – this suggests scope for a frequency sharing split, even if it is time limited. Dense urban areas comprise roughly 40% of the UK population but only 6% of the UK’s geographic area. Even if DTT and PSME were to be eventually cleared out of 700 MHz entirely, the approach Germany adopted for its 800 MHz spectrum of requiring an outside-in rollout of mobile coverage could allow much earlier access to the 700 MHz spectrum for mobile services in areas where it is needed most. Delaying the DTT and PSME clearance in dense urban areas could also lead to lower costs for the mobile operators as they are likely to be required to pick-up the lion’s share of the spectrum clearance costs…so why pay for more than is really useful or before it is really needed?
It is the gain to the mobile networks where the consultation document is falling well short of the 700 MHz spectrum potential. Ofcom need to drill down to find out where the most acute mobile capacity crunch will actually occur. It is very geographically specific and very predictable. It will be at the LTE (and HSPA) cell edges of fully loaded cells. Under these conditions the data speeds dramatically crash for millions of consumers. It is not possible for the data demand to grow by a factor of 45 without these huge data capacity valleys opening up where congestion will become intolerable. Where there is competition between site sharing groups (site diversity) spectrum sharing offers a solution. But there is a growing number of sites where all four mobile operators are sharing the same site (from local site duopoly to local site monopoly), so consumers suffering acute congestion will have no competitive alternative place to go. The longer the delay in addressing this the more expensive it will become to resolve later. For this reason to countenance overlaying 700 MHz on existing sites is a mistake. It only briefly delays the time when this severe pain will hit millions of consumers. The right solution is for Ofcom to incentivise new sites on the new spectrum (700 MHz) to be built in the data capacity valley floors between the most congested existing sites. This site diversity can generate a massive 2000% capacity lift at the “old” cell edges and a 300% average capacity gain over the new adjacent cell’s coverage areas. It is the only solution that will come anywhere near denting the factor of 45 Ofcom see as the growth in demand by 2030 from the millions of consumers who do not happen to be situated close to cell towers. But how will these extra sites be paid for?
An understandable omission in the Ofcom Com Doc analysis is what the mobile operators would be expected to pay for the 700 MHz spectrum at an auction. This is likely to have a big impact on the cost benefit analysis. The 800 MHz spectrum fetched around £1.5 billion. A reasonable assumption is that a a similar amount would be raised for the 700 MHz spectrum if Ofcom set out to maximise auction revenues. But such a sum would wipe out the entire £480m-£770m savings Ofcom claim the mobile industry can make from releasing the 700 MHz for mobile use. The mobile industry investment capacity is getting more and more stretched and what limited money they have would be far better spent on new base stations than on spectrum auction fees.
This could be accomplished by Ofcom linking the release of 700 MHz to a carefully calibrated coverage obligation of capacity filling of the data capacity valley floors where we know the spectrum crunch will be most acute. The areas are readily defined as it is where there is no existing site diversity and is most likely to be in semi-urban/semi-rural areas. Such a coverage obligation would inevitably be reflected in lower bids for spectrum. In this way the mobile industry would be investing in base station diversity and not in spectrum auction fees.
The “clean spectrum” approach with no obligations looks good in an auction prospectus but is likely to fall well short on delivering the greatest economic value for the 700 MHz spectrum. A more pragmatic approach offers considerable scope for much more gain and much less pain. Higher performing mobile broadband networks demands more spectrum sharing and less site sharing (more site diversity). Current regulatory policy and economic pressures are driving the UK mobile industry in the reverse direction. It could prove hugely expensive to reverse out of this cul-de-sac a decade from now. All the long term planners in the mobile industry know this. The 700 MHz spectrum release offers the country the opportunity for a radical and timely change of policy direction for the benefit of all.