Spectrum and regulatory policy in the Race for 5GThursday, 02 January 2020 07:20
A special report by Telecom Review 5G technical investigative team
As many operators around the globe have or are preparing to deploy and launch 5G networks and devices, the 3.5 GHz band has emerged as the de-facto band for most deployments, which has created economies of scale for devices and network equipment.
That said, one of the key characteristics of this band that makes it suitable for 5G is the availability of wider channels than were possible with 4G bands. This is an often overlooked but critical aspect in the race to 5G without which nations and operators will not be able to compete globally on equal footing.
In many countries, the 3.5 GHz band was traditionally allocated to fixed services (and to a lesser extent to satellite services), and regulators around the world are taking very different approaches to dealing with incumbents and new entrants in the band while making spectrum available to mobile operators for 5G. The amount of 3.5 GHz spectrum allocated to 5G in the 2018-2020 timeframe, and the process used to assign this spectrum, will have a significant impact on each country's ability to compete in the global 5G race.
This article will take a global spectrum view, capturing a sample of what various nations around the world are doing to ensure their ability to deliver 5G services, which are deemed paramount to global competitiveness. Since most markets have 3 to 4 mobile operators per region, and given that 5G standards have defined channels of up to 100 MHz; we believe that 300-400 MHz of 3.5 GHz would maximize the benefits of early 5G rollouts.
Ireland offers an example of a regulator (ComReg) that prioritized mobile by clearing 350 MHz of spectrum for auction in the 3400-3800 MHz band. ComReg gave clear guidance to incumbent fixed-service licensees in April 2010 that their licenses would expire by July 2017 and would not be renewed. In order to sustain their business, the largest fixed broadband access provider, Imagine Communications, chose to bid in Ireland’s 2017 auction to support the continuation of its service offering. Despite the auction not having a set-aside and using a large spectrum cap of 150 MHz (out of 350 MHz being auctioned), Imagine was successful in securing 60 MHz of spectrum in all rural markets. The largest MNOs (Vodafone, Three, and EIR) each acquired 80+ MHz of spectrum in rural markets and 85-105 MHz of spectrum in urban regions; additionally, a new entrant (Airspan, a small-cell producer creating a new wholesale business model) secured 60 MHz of spectrum in all urban markets. Ireland offers a textbook example of a market-driven process supporting an efficient allocation of spectrum.
Germany’s regulator BNetzA determined that their fixed-service incumbents (classified as “existing regional users”) would be moved upwards in the band into the 3700-3800 MHz range, leaving 300 MHz available for nationwide mobile licensing. These users whose licenses expire between 2020-2022 could potentially coexist with new future uses of the 3700-3800 MHz range, which is being assigned outside of the mobile auction process for “local/regional” licensing for industrial/enterprise applications. Even with this significant amount of spectrum available for mobile use, the 2018 auction of 3400-3700 MHz spectrum led to a four-player outcome and very high spectrum prices, leaving some operators dissatisfied.
In contrast, Italy in our opinion offers a perfect example of what a regulator ought not to do. Italy’s communication regulator, AGCOM, has set its near-term 5G future up for failure in two ways. First, by offering incumbent fixed licensees a six-year extension of their 200 MHz licenses (in the 3400-3600 MHz band) originally set to expire in 2023, Italy limited itself to only being able to auction 200 MHz of spectrum in its 2018 auction, split among four players. Compounding this shortage was a globally recognized poor auction design which split the 200 MHz into two blocks of 80 MHz and two blocks of 20 MHz (with a 100 MHz cap). In doing so, Italy forced its bidders to fight desperately for an 80 MHz block, leading to exorbitant auction prices and a distribution of spectrum that only supports true 5G deployment on two networks.
In North America, Canada appears set to follow Italy’s example by allowing fixed incumbents to retain 30 MHz out of a 200 MHz band, leaving only 170 MHz for mobile 5G; while a decision on auction design is still pending the auction is expected in late 2020, ISI (formerly ISED), the Canadian regulator, is contemplating setting aside part of this small band for regional operators, which would see the three national operators bidding for little more than 100 MHz.
The US has been lagging behind its European and Asian peers in the release of 3.5 GHz spectrum; while an auction is planned under the “CBRS” spectrum sharing framework in mid-2020, the suitability of this spectrum sharing scheme for 5G applications has been widely questioned. The FCC appears ready to try to catch up by auctioning 280 MHz in the 3.7-4.2 GHz band before the end of 2020.
On the subject of spectrum allocation, many countries have recognized the importance of early 5G availability over auction revenues, and have taken steps to ensure all operators have access to a minimum amount of 5G spectrum.
For example, Finland divided 390 MHz of 3.5 GHz spectrum into three 130 MHz licenses, so the three national operators were effectively only bidding for assignment of a specific block. In South Korea, where 280 MHz were auctioned with a 100 MHz cap for three operators, contention in the auction was effectively limited to 40 MHz.
The Saudi telecom regulator (CITC) concluded that each of the country’s three mobile operators would require a contiguous 100 MHz block to deploy a 5G network that is capable of supporting the country’s ambitious digital transformation plans. To achieve this goal, the country refarmed the 3.4-3.6 GHz frequency range to free up 100 MHz (by moving fixed wireless providers to the 3.4-3.5 GHz range) and allocated the 3.6-3.8 GHz band to mobile services after previously being underutilized by satellite services. The three mobile network operators then competed in an assignment stage auction to determine the location of each operator’s 100 MHz block. Acknowledging the massive investments required to deploy 5G, auction proceeds were to be paid in equal installments over 13 years starting from 2022 to allow operators to focus spending on necessary network investments to meet their spectrum license deployment obligations and in March 2019, the Saudi regulator auctioned 400 MHz of 3.5 GHz spectrum to three operators.
Some regulators are even dropping auctions in favor of direct assignment. In April 2019 Japan assigned 100 MHz each to four operators (including a new entrant) based on coverage and investment commitments. Similarly, in the UAE two operators were allocated 200 MHz each with potential plans of making an additional 100MHz available.
ARCEP, the French regulator, has proposed to allocate up to four 50 MHz blocks in exchange for a series of “optional commitments”, and the remainder of the 310 MHz band would be allocated in a traditional auction.
The impact of spectrum policy on 5G competitiveness won’t be fully visible until later in 2020 and ensuing years. If we consider South Korea as an early indication of what happens when operators are allocated enough 3.5 GHz spectrum; the country reached 2 million 5G subscribers in just 2 months, far exceeding industry and government projections and outpacing adoption of previous generations of wireless technology.
Suffice to say, spectrum is the lifeline for wireless networks. A true 5G connected world requires that regulators do not treat 5G spectrum allocations in a legacy 4G way. Telecom Review and its editorial team are pleased to shine a light on this highly underserved area in the 5G media.
As the world has been busied out with equipment leadership and trade wars, we remind our loyal readers that treating 5G as another “G” is a missed opportunity. Here is an urgent plea to the politicians and regulators, if you do not allocate sufficient spectrum to the various operators, then you have delivered 4G and underserved your nation in this global 5G race.