One of the end results of 5G should be a devaluation of operators’ overall spectrum holdings. While their sub-2 GHz bands – exclusively licensed for the most part, and in relatively short supply – are likely to remain high value items on their asset sheets, many 5G deployments are focused on higher frequency, higher capacity spectrum. This is unlikely to be as expensive to buy, or as valuable as an asset, because of its more plentiful nature, and because of changes in regulatory thinking.
If 5G is to deliver the ambitious objectives set for it by many governments, in terms of social and economic impact for citizens and for many industries, its must be able to be deployed cost-effectively by a wide variety of organizations with the knowledge required to target specific verticals and use cases. Cost-effectiveness and a more open, WiFi-like service provider ecosystem start with accessible spectrum.
Early auctions in the 3.5 GHz band (C-Band) are showing a measure of 5G inflation, and the wild variations in pricing that tend to accompany the early years of a new technology. But over the coming years, as millimeter wave frequencies enter the fray and regulators become more creative about access the C-Band, the overall trend will be firmly downwards in cost and value.
While the first wave of 5G-targeted auctions have followed conventional patterns, largely missing the opportunity to open up airwaves to non-MNOs, that will gradually change. The German regulator has already, controversially, set aside some spectrum for Industrie 4.0 use – the auction is ongoing, but those airwaves are likely to go to a consortium or neutral host provider, which would then allow many manufacturers to use a 5G network specifically optimized for their needs.
Other countries, such as Ireland and the Netherlands, have already allocated spectrum, in the guard bands or in 3.5 GHz, for neutral host and private network use, in 4G or 5G. Others, such as the UK, are considering similar moves when they come to auctions in the higher portion of the 5G mid-band (3.7-4.2 GHz, or a subset).
There will be rising interest in the results of the USA’s three-tiered system in its own 3.5 GHz band, CBRS, which will have some licenses (to be auctioned this year), along with a wide swathe for unlicensed usage (subject to measure to avoid interference with federal incumbents or the licence holders).
And in some countries, regulators are even giving 5G spectrum away free, sacrificing a quick boost for the Treasury for an acceleration of build-out and better chance of seeing the desired economic impacts in the near future. This is particularly achievable in the mmWave bands, where there is plentiful spectrum on offer and the opportunity to support new business models and operators.
In Hong Kong, for instance, the Office of the Communications Authority (Ofca) has assigned 1,200 MHz of spectrum in the 26 GHz and 28 GHz bands to three of the state’s four MNOs with no upfront or usage fees. China Mobile, HKT and SmarTone have received 400 MHz each for 5G.
Late last year, Ofca said it would “adopt an administrative approach for spectrum assignment in view of the abundant supply of spectrum in the two bands”. This was followed by a ruling from the Department of Commerce and Economic Development, that no spectrum usage fees would be charged for these two bands, “unless 75% of the available spectrum in these bands is assigned or occupied”. Ofca had 4,100 MHz of spectrum available for mobile services in these bands, so by applying for just 1,200 MHz, the MNOs were assured of free airwaves.
Even if the fourth MNO, 3 Hong Kong, had also applied for 400 MHz, the threshold would not have been reached but it stayed out of the process, citing concern over the roll-out requirements that accompany the licences, as well as a lack of mmWave 5G devices in the short term.
This does not mean 3 Hong Kong is delaying 5G altogether – late last year it concluded trials of outdoor 5G services in the 3.5 GHz and 28 GHz bands, supported by Massive MIMO technology, using temporary permits. The operator is likely to be more interested in the mid-band auctions, in 3.3 GHz, 3.5 GHz and 4.9 GHz, which will be held in July and August this year. These will be sold in the usual way, since there is less availability – 100 MHz in the 3.3 GHz band, 200 MHz in 3.5 GHz and 80 MHz in 4.9 GHz. Ofca has yet to finalize the terms of the auctions but operators are already expressing concern about high reserve prices.
So in the mid-band, regulators are still mainly conforming to type, but there is a growing, if cautious, willingness to adopt a mixture of free and auctioned licensing. In Denmark, the regulator announced the results of its latest auction last week. This raised DKK2.2bn ($333m) across multiple bands, but MNOs were given some free airwaves provided they agreed to coverage targets to support 19,000 underserved homes and businesses.
The regulator set a reserve price of zero for certain lots of spectrum in the 700 MHz and 900 MHz bands, which came with the coverage conditions. There are 212 territories, split into three non-overlapping blocks, in which licence owners will have to cover 90% of the geographical area, with download speeds of at least 30Mbps and uplink of 3Mbps, by April 2022. These areas cover about 19,000 homes and businesses.
The Danish Energy Agency said that all three Danish MNOs accepted the coverage obligation in return for free spectrum, and Telia – bidding via its TT Network joint venture with Telenor – said that it had secured 10×2 MHz in the 900 MHz band for “no upfront cost”. Its current 900 MHz licence is due to expire at the end of the year. Its entire spend of DKK107.6m went on 2×5 MHz of 700 MHz spectrum.
Incumbent TDC spent DKK1.62bn on paired frequencies in 700 MHz and 900 MHz, as well as 20 MHz of 700 MHz supplemental downlink spectrum and 60 MHz of an available 100 MHz of unpaired 2.3 GHz spectrum; the remainder of the 2.3 GHz TDD frequencies went unsold.
“TDC has won 14 of the [20 available] blocks, which makes it possible to roll out 5G networks in all parts of Denmark and strengthen the capacity of the existing 4G network,” the telco said in a statement.
European regulators may be willing to give away mmWave licences, but this does not mean they are sacrificing only marginal amounts of income. In the USA, the recent 28 GHz auction raised only $700m, but the current 24 GHz sale had reached $1.6bn as of the start of Thursday’s bidding.