While the world blithely throws out cellular spectrum for mobile operators to build on, with each successive generation eating up more spectral resources, and in the process making cellular operators everywhere richer ‘ there is less thought given to making more Wi-Fi spectrum available.There’s a reason for this. No-one owns the Wi-Fi spectrum, so there is no-one to lobby governments to open up more of it.
But if a report from the European Commission earlier this month is to be believed, we have to grow unlicensed Wi-Fi spectrum at least at the same speed as we grow licensed cellular spectrum, because it is already the largest wireless network in the world ‘ far bigger than all cellular operators globally put together – and without it, none of the cellular operators will be able to grow.
Now that very fact raises many questions, not least of which is why should we issue ANY more cellular spectrum to mobile operators when they sell it back to the public at such a savage and expensive rate, if most of our future wireless data requirements are in fact coming from impoverished (not quite so profitable) fixed line operators who provide Wi-Fi cheaply in and around the home. Why should we allocate more spectrum to cellular operators at all?
The answer to that is no one source of spectrum will be sufficient by itself, though there may need to be more radical thinking about how spectrum is allocated and auctioned, and how to open it up more freely, perhaps on the ‘on-demand’ or marketplace lines touted by Google and pioneered in Wi-Fi already. Recently, the idea of two camps ‘ unlicensed and licensed ‘ has faded in the face of the rise of HetNets, and the need for all kinds of operators to tap into every spectrum source they can. Comments like those from the UK’s biggest cellco, EE, which said that the launch of LTE has sparked a considerable drop-off in use of Wi-Fi by its customers, are designed for quick attention, and do not reflect a realistic view beyond the very short term. EE’s impressive LTE networks, soon to be upgraded with 150Mbps speeds and carrier aggregation, will soon fill up like the legendary new freeway, and the firm will be turning to Wi-Fi offload once again.
There is no doubt that Wi-Fi has been the chief catalyst for many fundamental shifts in industry thinking ‘ that users could demand broadband speeds over wireless connections for low (or no) cost; that unlicensed spectrum could support acceptable QoS for most purposes; that fixed line operators could participate in the quad play via WLans. That effect will continue and most cellcos know they must turn the tide to their advantage, not try to reverse it.
So it seems sensible to make more Wi-Fi spectrum available, at the same rate that we add cellular spectrum, because more cellular spectrum involves more expensive build-out and slower data rates and more profitability to cellular investors, but more Wi-Fi leads to a balance in the pricing formula, and is good for consumers, because it tends to be cheaper. It also stimulates disruptive cellular players operating in hybrid with LTE, which makes good sense too – Wi-Fi is already in small cells, and already suited for data distribution, but it is poor at delivering voice and high reliability services.
The report, authored by Wik Consult and Aegis Systems, recommends that the higher levels of the 5GHz band, right up to 5.9GHz, should be made globally available to Wi-Fi, while the 2.6GHz and 3.5GHz bands should be made fully available for cellular use, supporting small cells. The combination of these high frequency spectrum options could deliver a high capacity, high density small cell HetNet in future, seamlessly combining Wi-Fi and LTE as required.
This would require enhanced offload mechanisms, with two main approaches – the one used now, where most users manually switch between cellular delivery to their smartphones or tablets, because they are within reach of their home or work WLan; and the other, where the operator controlling the device switches that from saturated cellular to a Wi-Fi network. This type of seamless transfer back and forth between the two networks requires new management protocols installed within the core cellular network and the existence on either the device or the access point or both, of one of the protocols ‘ Hotspot 2.0 or ANDSF.
The report says:’The volume of traffic that is already being offloaded, chiefly to Wi-Fi in the home, already exceeds that of the mobile network, and can be expected to grow even faster as well.’ And it calculated that savings of some €35bn had already been made due to offloading and that if these spectrum steps are taken, this could go as high as €200bn in Europe.
But who exactly will be saving that money? As we pointed out earlier, the chances are the shareholders of European cellular operators will make the gain, not the public, unless some of that goes back into building out Wi-Fi. Where consumers would benefit is less penalty pricing when they went over their data caps in cellular, because cellcos wouldn’t feel the need to be quite so aggressive. Most predictions have a growth of around 66% per annum in cellular data traffic or higher. Of course, cellcos don’t HAVE to arrange for that kind of growth to be catered for, they can instead just dig in their heels and keep prices high and risk their customers churning. But if one operator has an enlightened view, as Free had in France, then it would be set to take millions of customers from less enlightened operators, and in this case this might price the Wi-Fi data at a lower tariff than its own cellular data.
Given the rising investment in public WLans by cable and telco operators, and these companies’ enthusiasm for ‘homespots’ in their subscribers’ residences, we could be moving towards a point where a fixed line operator, now valued in a lowly fashion by the stock market, could be providing over 70% of the broadband data delivery for a cellular operator. If that was the case and this data was properly charged for, then the fixed line operator valuation would, over time, change, improving its profitability and reducing that of the cellular operator.
But that realization by capital markets is in the future. The dynamics of what would happen if new Wi-Fi bandwidth were made available either globally, or initially in Europe, would favor the cellular players, even though they have so little Wi-Fi in the ground themselves. But that will change ‘ which was a factor prompting Vodafone to buy Kabel Deutschland in Germany, and will shake up ownership at many Wi-Fi heavy companies around the world in short order.
If there is a race, in which different kinds of operators try to install newer Wi-Fi equipment, which addresses these wider bands of spectrum, it might not be so straightforward. We suspect that smaller ISPs would be acquired by cellular operators in that scenario, because they know they can fund the installation of a new generation of Wi-Fi more rapidly than large fixed line operators. Right now the onus is on cellular operators to access Wi-Fi which is already built out, so they are being encouraged to go after tier one Wi-Fi operators.
But none of this is new. In the US the FCC has been sounding out extending 5GHz for some time, and last year the agency took initial steps to unleash about 195MHz of additional spectrum in the band, and we imagine that this report was commissioned so that Europe can decide if it suits them to come into line with this policy. Once both the US and Europe sign up for this, it will almost certainly happen.
Today the use of the existing parts of the Wi-Fi 5GHz band has not been heavy, and it was only about two years ago that the first 802.11n devices began shipping in dual-mode. That has now migrated so that top end devices are coming out with 802.11ac designs, some of which are also dual-mode in that they address both Wi-Fi spectrum chunks.
So this is not urgent, but spectrum used for Wi-Fi is so much more effective at delivering data to phones and tablets, that it is bound to happen once every regulator has had time to think about it ‘ probably inside 4-5 years and maybe a lot faster, and with more Wi-Fi spectrum, that means that even more portable activity can be shifted from cellular to Wi-Fi, making the GSMA roadmap less important, and turning Wi-Fi effectively into the dominant wireless global carrier. It will also lower the price of entry for starting a new cellular service or MVNO, which may well be the most disruptive factor of all.
This analysis appeared first, in longer form, in Wireless Watch’s sister publication Faultline, which provides weekly in-depth analysis of technologies and market trends related to digital video, multimedia content and the quad play.