NETWORK STRATEGIES
Headline
Economic balance: regulators impose obligations on LTE coverage
Regulators and governments increasingly are imposing LTE coverage obligations to prevent national digital divides emerging. Winners of spectrum in the 800-MHz spectrum auctions in Germany, for example, must roll out services in rural areas first and aim for nationwide coverage by 2013; and when Austria allocated 2.6-GHz spectrum in September 2010 the regulator ruled operators should provide 25% of the population with mobile broadband coverage by the end of 2013. Many other countries are planning to set out similar obligations, particularly in the lower frequency bands (800 MHz and 900 MHz) which are more suited to wider coverage: Wireless Intelligence says Denmark, France and the Czech Republic have already expressed their intentions to set coverage targets for rural and remote areas. In the UK the Communications Consumer Panel—an independent group formed to
provide advice to the regulator—in July called on Ofcom to enforce coverage obligations on operators taking part in next year’s LTE spectrum auction. “The forthcoming auction presents an opportunity to address the fact that GSM coverage has largely stood still since the arrival of 3G,” it said in response to Ofcom’s consultation on the auction. “Most coverage not-spots ten years ago are still not-spots today. For the first time in over 25 years significant spectrum is about to be released that is lower frequency than any that is currently deployed…800 MHz is a good solution for rural coverage and presents the opportunity…to correct the adverse coverage position.” Spectrum caps are also favoured by NRAs as a way to promote competition. UK regulator Ofcom favours “spectrum floors” for the auction of 800-MHz, 1800-MHz and 2.6-GHz spectrum next year. By setting minimum amounts of spectrum for bidders as well as imposing spectrum caps—and taking into account MNOs’ existing spectrum—Ofcom says it is aiming for at least four “credible” national providers capable of delivering “high-quality data services” in the UK. “One question regulators have to grapple with is whether or not it is socio-economically effective to hobble operators by forcing them to roll out networks into rural areas,” says Norman at Analysys. “It might be that the cost of rural rollout is passed on to the customer, which would have a negative socio-economic effect. Another unknown is how much of a positive socio-economic effect there is from rural broadband connectivity.”
spectrum they can acquire. It is a worrying prospect for Goldenits
at A1, which holds 2x17 MHz of 900-MHz spectrum. Austria plans to auction digital dividend spectrum in the first quarter of 2012, and Goldenits strongly opposes any links being made between 900 MHz and 800 MHz. “We serve more than five million subscribers on our network, so we need the capacity based on existing frequencies to provide good quality serv- ices with national coverage including 2G,” he says. “800 MHz is new spectrum and LTE is a new business. Everyone should have the same right to apply for 800-MHz frequencies.” The stakes are high for A1 and other
operators looking to develop their LTE business models. Goldenits suggests that if the operator does not acquire as much 800-MHz spectrum as it needs to provide a high-performing and nationwide mobile broadband network, it may be necessary to pool spectrum resources through network-sharing. In such an event, A1’s LTE strategy to differentiate on network performance could be compromised. Certainly, operators appear to be finding it hard to differentiate on tariffs
September 2011
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alone. “LTE provides operators with the opportunity to experiment with new and innovative pricing models, which allows them to find the best way of deriving revenues from the premium service. However, most operators have not grasped this opportunity,” says Nicole McCormick, Ovum senior analyst, in a new report LTE Tariff Comparison: Europe, Asia-Pacific and the US. The report also found that charg- ing high premiums for LTE is unsustainable in the long term due to competitive pressures in the industry. “Operators will need to be careful not to alienate high-end customers that have paid a premium for a fast, high-quality service by reducing LTE tariffs too quickly or drastically,” adds McCormick. As well as 800-MHz caps potentially
weakening the LTE business case, 900 MHz-owning MNOs argue that lumping together 900-MHz and 800-MHz spec- trum as sub-1GHz spectrum is a flawed notion. For one thing, 2G services will have to be maintained for some time at 900 MHz, so that spectrum will not be immediately available for LTE. Neither is 900-MHz spectrum necessarily split into contiguous 5-MHz blocks, the minimum
that LTE services require, they argue. There have been similar ructions in the
UK. Nick Blades, head of regulatory affairs at O2 UK, argues that Ofcom’s conclu- sions about the true worth of 900-MHz spectrum for the delivery of LTE services has led to an unfair set of proposals for auctions set for next year. Ofcom is treat- ing 800 MHz and 900 MHz the same, with each bidder required to have a minimum amount of sub-1GHz spectrum to provide high-quality data services. “According to Ofcom, we and Vodafone
UK already pre-qualify as having enough spectrum holdings to provide a high- speed LTE service,” says Blades. “That means we’re not guaranteed any 800-MHz spectrum, whereas 3UK and Everything Everywhere would be if they placed reserve bids on each of the spectrum floors outlined by Ofcom.” O2 and Vodafone UK each have 2x17.4
MHz of 900-MHz spectrum, which under Ofcom’s sub-1GHz cap of 2x27.5 MHz means they would be restricted to acquir- ing 2x10 MHz of 800-MHz spectrum. Everything Everywhere and 3UK, which don’t have any 900-MHz assets, would be able to bid for much more. “Ofcom says that if you have got 2x15
MHz of 900-MHz [spectrum] you can a run a high-speed LTE service,” says Blades. “The one rather large flaw in that argument is that LTE 900 MHz is only standardised for 10-MHz carriers because there are so few 900-MHz operators that have more than that. There isn’t an ecosystem to support a high-speed service at 900 MHz using 2x15 MHz and there won’t be. We can’t understand why Ofcom hasn’t picked up on that important fact.” By contrast, LTE 800 MHz is standard-
ised for larger carriers—2x15 MHz and 2x20 MHz—which enable higher speeds than 2x10 MHz. Moreover, O2 maintains that it needs 900 MHz to support its 2G and 3G customers. “We are not yet in a position to give a
view on the relative merits of the differ- ent arguments,” says Graham Louth, Ofcom’s spectrum policy director. The caps and conditions that NRAs
impose on auctioned spectrum, as well as their judgement on the future use of
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