Vodafone UK’s CEO said this week that consistent quality of service was more important to LTE customers than ubiquitous coverage on a “thin and flimsy” basis. Of course the comments were a shot at rival EE, which had been talking up its latest 4G leadership figures the day before, but Jeroen Hoencamp nevertheless struck at the heart of an important issue for regulators and operators – that spectrum decisions remain obsessed with coverage, but that is no longer the critical issue in the 4G era.
Hoencamp wrote in a corporate blog: “It’s not about who’s got the most coverage. It’s more about having the strongest signal. We’d love to expand the network faster, but it’s about doing it right first time; I’d rather do it at the pace we’re doing and get it right, than try to go faster and build a thin and flimsy network. You can have a few sites here and there, but that would give you really patchy signal. We only turn 4G on when we have built or updated enough sites.”
Vodafone has struggled with 4G and came bottom in a report last summer on the mobile networks – which it argues was too driven by coverage at the expense of quality. It has tried to differentiate its services via content deals, such as one with Netflix, and better indoor coverage options.
It remains very common for regulators to issue mobile licences with coverage obligations; and that inflates the value of the sub-1 GHz spectrum bands, which are best suited to achieving near-universal service at affordable cost. Of course it is socially important that all citizens have access to the latest services, but there are few commercial incentives for operators to pay more than lip service to that goal – as seen by the huge holes in rural coverage which still exist, in most European countries, even in 2G and 3G networks (the UK cellcos’ ongoing dispute with regulator Ofcom about achieving 2G universality via enforced roaming highlighted this).
In reality, even many areas which are officially ‘covered’ receive patchy and unreliable 4G service – just enough to tick the regulatory box, but without the investment in capacity, innovative services, and network optimization which would deliver the LTE benefits users actually want. These are not occasional peak data rates, but a level of QoS, and access to rich media services, which create a measurably different experience from that of 3G – all the time, not just on a lucky day or location.
If more attention were paid to a really distinctive, high quality experience, some users might be more prepared to pay a premium for LTE. This is something Hoencamp gets right – the value of low frequency spectrum should not be seen just in low cost coverage, but in its ability to support a strong indoor experience. He wrote in the posting: “Our 4G is on a lower frequency, which travels further and deeper indoors. Forget all the technicalities, though: all it means is that we can offer great indoor coverage, and that’s important because the bulk of mobile activity actually takes place indoors – whether people are at work and at home.” (Vodafone actually as the same amount of 800MHz LTE spectrum as O2, with 2x10MHz, while EE and Three have 2x5MHz each in that band.)
The race to achieve coverage and headline speeds has led to operators in many countries failing to differentiate their offerings or add value. That has seen service providers awake abruptly from the dream of a honeymoon period when they could charge higher rates for 4G, and most are engaged in a price war similar to the one which decimated their profits in 3G.
To add significant value and differentiation on top of the basic high coverage network means changing the prevailing view of what constitutes ‘beachfront spectrum’. Yet the sub-1GHz coverage bands still attract feeding frenzies at auction, while many capacity bands, including unpaired spectrum, are undervalued. It seemed logical that, once the main operators had built extensive LTE coverage networks, they would start to value the capacity spectrum more highly and pay higher sums for frequencies above 2GHz, for example. Early movers like Verizon are starting to add higher frequency networks to their initial 700MHz roll-outs, but the pattern of auctions still shows an unbalanced focus, round the world, on lower bands.
This is unlikely to change when the European Union countries start to auction 700MHz broadcast spectrum licences, or when the US does the same in 600MHz next year. It could be argued that these frequencies will be at best incremental, since LTE coverage will largely have been achieved in the first digital dividend bands, and operators should now be supplementing those with capacity spectrum. But in Europe, TDD spectrum still goes unclaimed while the excitement about forthcoming 700MHz allocations is already mounting.
This week, the European Commission launched its public consultation on opening up the 700MHz UHF spectrum for mobile broadband. This will be controversial, since many other interest groups also want to retain or acquire rights in this band, especially for emerging services in the internet of things, for which low frequency spectrum is valuable, but which do not necessarily run best over LTE. Many regulators are accused by other groups, including broadcasters, unlicensed spectrum advocates and private network operators, of blindly putting mobile broadband’s needs ahead of any others, even though that is a high capacity application which should logically be expanding up the spectrum, not down.
The Commission is inviting interested parties to submit their views on the options laid out by former Commissioner Pascal Lamy in his report published last September, which recommends that a large part of the 700MHz band be turned over to mobile broadband in the 2018-2022 timeframe. The consultation will run until April 12.
Several national regulators are also leaping ahead with 700MHz consultations and plans. The French government has published its Order PRMX1430559A which modifies the national table of frequencies and assigns spectrum in the 700MHz band to the telecoms regulator Arcep, on an equal basis to the broadcasting watchdog CSA, which previously oversaw this spectrum exclusively. The two agencies will have joint rights until June 30 2019, when Arcep will exclusively manage the 703MHz-733MHz and 758MHz-788MHz blocks. The auction should take place late this year and most of the transfer of frequencies will take place between October 2017 and June 2019. President Francois Hollande has pledged that resources will be made available to ensure the broadcasters can still make their own migration to new digital terrestrial TV platforms, notably MPEG-4 AVC in 2015 and DVB-T2 by 2023.
The 800MHz auction in France raised €3.5bn in December 2011 and the government hopes to secure an additional €2bn or more from 700MHz, which it has already earmarked for defence spending. Iliad’s Free Mobile unit is likely to be a major bidder, as it has far less spectrum than its rivals and relies on MVNO deals with Orange (as well as its own extensive WiFi network). Adding sub-1GHz LTE to its dense deployment of WiFi homespots and 3G/4G femtocells could increase its disruptive effect, which has also sparked a vicious price war and a round of consolidation in France.
The global reach of 700MHz services could be increased if the EMEA region adopts a similar band plan to that to be used across most of Asia-Pacific and Latin America (the APT700 plan). Much of the momentum for opening up more broadcast spectrum for mobile broadband has come from the Middle East and Africa but the major European economies are taking the initiative now, ahead of the World Radio Conference later this year.