Summary
To cap or not to cap operators' spectrum holdings in bands below 1 GHz that is the question.
Analysis
It has become increasingly clear that to compete nationwide in offering mobile broadband services an operator is best placed if it holds a mix of frequencies both below 1GHz and at higher frequencies such as (varying somewhat by country and region) 1800 and 1900 MHz, core 3G (1.9/2.1GHz), AWS (1.7/2.1GHz), extension 3G (2.6GHz) and future higher frequency allocations. Frequencies below 1 GHz are not only well suited to providing coverage more economically (fewer base stations) in rural regions, which supports public policies aimed at deploying universal coverage, but they also offer better in-building penetration than higher frequencies. Since most mobile data communications take place indoors the ability to provide indoor coverage as economically as possible is important. However the major valuable frequencies for mobile communications below 1GHz (850 or 900 MHz; 450 MHz is less important) that were attributed for voice services, but can be and are already being used in many countries for broadband services, are held by the original cellular competitors. There are typically two such "originals", including in most cases automatically the incumbent telephone company, who acquired this spectrum at no cost and before auctions became a common method for awarding spectrum. Now, as has already taken place in the U.S. "digital dividend" spectrum will become available (700MHz or 800MHz as it is referred to in Europe) after the planned transition to digital broadcasting takes place. Current and potential mobile competitors argue that the original cellular operators should be restricted in their access to this new spectrum below 1GHz, or they themselves who currently have none will be placed at an unfair competitive disadvantage. In the U.S. where no limitations on bidders were included in the 700 MHz auction the bulk of this valuable spectrum was indeed acquired by the successors of the original cellular competitors, namely Verizon Wireless and AT&T. The situation regarding spectrum below 1 GHz is being debated in the U.K. (and elsewhere), and a compromise sought (return of some existing 850/900 MHz attributions and/or caps on spectrum holdings below 1 GHz) that will ensure effective competition between a number of mobile operators greater than two. Even the auction of 2.6GHz spectrum in the U.K. has been delayed for this reason among others. Newer mobile competitors and regulators can argue that since no competitor can compete fairly without access to frequencies below 1 GHz operators who do not hold such spectrum already cannot reasonably value 2.6GHz spectrum for the purpose of deciding how much to bid until and unless they know whether their competitors who do hold such spectrum will or will not be restricted in bidding for additional frequencies (800 MHz) below 1 GHz.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
