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November 2006, Volume 9/ Number 11

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You’ve Got Spectrum...Now What?

News Analysis By Robert Liu
TMCnet Wireless and Technology Columnist

 


Now that the FCC (News - Alert) has concluded its Advanced Wireless Services (AWS) spectrum auction (see www.tmcnet.com/371.1), what will those new license holders do with those invaluable frequencies? In the short-term, analysts believe not much. . . but in the long-term, the auction may lead to some pretty strange bedfellows.


While the top winner T-Mobile (News - Alert) bid nearly twice as much as its closest competitors, it did garner the critical mass necessary to ensure the successful rollout of its future network roadmap. To that end, T-Mobile will likely roll out Next-Generation Network (NGN) services that enable customers to operate in dual-mode, seamlessly handing over signals between cellular and fixed networks such as WiFi (News - Alert). The division of Deutsche Telekom won over 30 MHz in the New York metropolitan region and 20 MHz in California — two markets that were critical to clearing up its spectrum bottleneck.

“They have no 3G network. It’s been a big disadvantage for T-Mobile because they haven’t been able to offer businesses 3G data services apart from WiFi,” explained Phil Solis, senior analyst, ABI Research.






T-Mobile was one of the first operators to harness the power of WiFi. Since the service launch in 2002, TMobile HotSpot has become a crucial part of the company’s wireless broadband strategy. But the spotty nature of WiFi service as well as intense competition from the likes of Wayport and AT&T has lessened its impact. At the same time, competing mobile operators have been deploying advanced cellular technologies like EV-DO and HSDPA — a move that T-Mobile was reluctant to make without the adequate spectrum space to ensure smooth service.

“They will almost certainly use this for HSDPA,” Solis told TMCnet.

Enabling the dual-mode handover is technology developed by Kineto Wireless known as Unlicensed Mobile Access (UMA), which is now an accepted part of the 3GPP’s industry standards. Along with T-Mobile, UMA will also serve as the basis for new service offerings from Orange, Telecom Italia (News - Alert) and, most recently, TeliaSonera of Norway (see www.tmcnet.com/372.1), according to Steve Shaw, Kineto’s marketing director.

However, it remains unclear if TMobile’s deployment plans will be solely based on dual-mode handsets or if they also call for the use of a new technology known as Femtocells. For example, ip.access of the U.K. has demonstrated that operators don’t need dual-mode handsets and instead can rely on Femtocell-enabled residential access points (APs) to enable fixed/mobile convergence. Femtocell technology, much like its larger micro- and pico-cell sister technologies, enables more comprehensive coverage at the far edge of the network.

ip.access, which recently partnered with picoChip (see www.tmcnet.com/373.1), has an OEM relationship with Siemens (News - Alert) and customer relationships with several carriers including T-Mobile, according to Rupert Baines, PicoChip spokesman. While the APs are more expensive than Wi-Fi APs, they are still cheaper than the new UMA-enabled handsets.

“They are the market leader for GSM small cells deploying in high volume for T-Mobile,” Baines told Internet Telephony magazine.

According to ABI Research (News - Alert), shipments of dual-mode wireless handsets will exceed 300 million worldwide by 2011. Principal analyst Stuart Carlaw believes 102 million Femtocell-enabled units will be deployed into networks by that time.

Conversely, the next two highest bidders are expected to simply sit tight on their newly acquired spectrum. Verizon (News - Alert) Wireless probably bid on spectrum that was only of key strategic value, paying the second-highest dollar amount for only 13 licenses. And Comcast (News - Alert), Time Warner Cable, Cox Communications, and Bright House Networks — collectively operating as SpectrumCo LLC — also won a considerable amount of spectrum (137 licenses), but analysts believe the cable multi-system operators (MSOs) can piggyback on their wireless partner Sprint (News - Alert) Nextel for some time to come.

“Based on our conversation with wireless executives, we do not believe that the new spectrum owned by the cable consortium will be built out any time soon,” wrote Doug Mitchelson, an analyst at Deutsche Bank.

Last November, the MSOs already partnered with Sprint (see www.tmcnet.com/374.1), which is also a minor shareholder in the SpectrumCo consortium. In addition, Sprint is the only U.S. carrier so far to announce its 4G wireless broadband strategy (see www.tmcnet.com/375.1), choosing to deploy WiMAX in its 2.5 GHz spectrum back in August. That makes it logical for the cable consortium to embrace WiMAX and create a seamless roaming partner. But that would also require some lobbying to get equipment vendors on board to create an ecosystem to support them.

“It’s possible they would roll out WiMAX on that. Most of the chipsets that are out right now don’t support those frequencies but they could,” Solis said.

The AWS spectrum is located in the 1710-1755 MHz and 2110-2155 MHz bands.

“The cable sector has given themselves breathing room by pursuing a joint venture with Sprint to offer wireless service,” Mitchelson said.

The DB analyst believes the muchpublicized joint venture gives the cable operators: 1) a reasonable wireless service offering; 2) the ability to gain experience marketing and servicing a quadruple- play of services for customers (voice, data, TV and wireless); and 3) the ability to test and launch cross-product services, allowing the technology learning curve to begin.

But ABI’s Solis said it is too early to write off the direct broadcast satellite (DBS) providers. DirecTV (News - Alert) and EchoStar Communications — operating collectively as Wireless DBS — initially went into the auction with high hopes, but subsequently withdrew bids once prices skyrocketed. At a recent investors’ conference, DirecTV CFO Mike Palkovic said the FCC auction had played out much to the way management had anticipated. They went into it looking for an opportunity, but weren’t surprised by the outcome. Palkovic said the company remains bullish on the wireless broadband market, but declined to offer any details on a broadband plan.

Solis believes that opens the door for DBS companies to partner up with Clearwire, which will operate the nation’s second-largest WiMAX network after Sprint (see www.tmcnet.com/376.1) thanks largely to Intel (News - Alert)’s backing.

“I think the way they are going to play out is the DBS guys are going to be more closely aligned with Clearwire,” he said.

As of press time, company officials from all the respective auction bidders declined to comment for this story, citing the ongoing FCC-mandated quiet period. Winning bidders had until October 4, to come up with their down payments. Final payments were due October 19. IT

Robert Liu is Executive Editor at TMCnet. Previously, he was Executive Editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg. For more articles, please visit Robert Liu’s columnist page at http://www.tmcnet.com/tmcnet/columnists/.

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