The 700MHz Impact
The interplay of these three factors is examined in the latest Unstrung Insider, 700MHz Technology Options: Reshaping the U.S. Wireless Market, a 35-page research report that examines the FCC's 700MHz band plan and service rules, combined with an evaluation of the technology and commercial choices available to potential bidders.
A key finding of the report is that the U.S. wireless industry will seize the opportunity to establish global leadership in next-generation mobile network deployments. But should carriers deploy today's 3G technologies in this spectrum, or should they move directly to next-generation orthogonal frequency divsion multiple access (OFDMA) systems?
We can gain some insight into how the 700MHz battle will play out through analysis of how the three major technology tracks available to carriers – 3G Long-Term Evolution (LTE), Ultra Mobile Broadband (UMB), and WiMax – align with the FCC's band plan, and how both fit with commercial and technology strategies.
Due to superior propagation, the 700MHz band is suited to the deployment of new wireless network technologies, which always suffer from limited coverage at launch. As a rule of thumb, a network deployed at 700 MHz would require 60 percent fewer cell sites than the classic 1.9GHz or 2.1GHz cellular bands to provide equivalent coverage.
With a starting date of February 2009, the FCC's rollout deadlines for the regional A, B, and E Blocks are to provide 35 percent geographic coverage by 2013 and 70 percent by 2019. For the larger C Block licenses, winners must provide signal coverage and offer service to at least 40 percent of the population by 2013 and 75 percent by the end of the ten-year term. For the D Block linked to the public safety band, the requirement is for nothing less than nationwide deployment.
This schedule aligns well with the anticipated availability of next-gen OFDMA systems. WiMax time-division duplex (TDD) is already available, and profiles for WiMax frequency-division duplex (FDD) systems are scheduled for the end of 2008. The UMB specifications from the 3rd Generation Partnership Project 2 (3GPP2) have been completed in record time and should be deployable from 2010 onwards. And the LTE standard from the 3rd Generation Partnership Project (3GPP) is expected to be complete by the end of 2007, for deployment from 2010 or 2011.
The 700MHz band plan itself, while not prohibitive, does present challenges for OFDMA. With blocks of 2x5 MHz and 2x11 MHz, operators will need advanced frequency reuse techniques to match the spectral efficiency of today's 3G technologies – and to have any hope of getting close to the user performance and system capacity that spectrum-rich Sprint Corp. (NYSE: S), with 90 MHz of spectrum, is expected to be able to offer on its 2.5GHz WiMax network.
Vendors, of course, say they'll be able to offer performance approaching frequency reuse of 1 (the benchmark established by 3G, where all sectors are deployed in the same frequency) in time for commercial deployment using new soft frequency reuse techniques being developed for all the major OFDMA technologies. Yet, while the simulations indicate that this is achievable, initial deployments may have to use less-efficient fractional reuse techniques, with a software upgrade to full soft reuse in the future. This implies risk for the operator.
So is it too soon to write off 3G as a player in 700 MHz, just as this much hyped technology is catching its stride? Not necessarily. 3G is a great fit with the band plan and both main technologies, CDMA EV-DO and Wideband CDMA, have many years of productive service ahead. For Verizon Wireless and AT&T Inc. (NYSE: T), which have already deployed 3G at 850 MHz, a 700MHz deployment would be a great fit, and terminals would be relatively easy to source for all carriers.
The 3GPP2 CDMA technology is closer to running out of road. U.S. carriers already offer the most advanced mobile networks in the world using the Rev A variant, but its 1.25MHz channel width really restricts it as a broadband technology of the future. The Rev B variant that concatenates multiple 1.25MHz channels via a software upgrade is seeing some renewed interest of late, but it is more likely to be used for incremental improvements, rather than as than as a basis for strategic, next-generation services.
The 3GPP Wideband CDMA track has more legs, with its upgrade to Evolved High Speed Packet Access (HSPA). Many vendors and operators see this as the most cost-competitive way to deliver mobile broadband for at least the next five years. What has arguably held back 3G in Western Europe is the poor coverage at 2.1 GHz; the chance to deploy at 850 MHz, and now 700 MHz, is widely welcomed in the U.S.
Mindful of the dilemma faced by mobile operators, 2G and 3G system vendors are pitching equipment that claims to offer the best of both worlds: Deploy 3G today and then upgrade to "whatever comes next" with a line-card replacement, they say. How practical this really is, however, remains to be seen.
What is clear is that pre-auction technology analysis will have a significant impact on operator bidding strategies and, ultimately, the value of the 700MHz spectrum.
— Gabriel Brown, Chief Analyst, Unstrung Insider
The report, 700MHz Technology Options: Reshaping the U.S. Wireless Market, is available as part of an annual subscription (12 monthly issues) to Unstrung Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.unstrung.com/insider.