Spectrum-starved US prepares to feast

Broadband floodgates open

From being one of the most spectrum starved nations on earth, the US is racing towards offering a range of frequencies for wireless services that is in line with other developed economies. The opening up of the 3.6GHz band a few weeks back, with a simple ‘light licensing’ scheme and relatively generous power allowances, is a major step towards enabling operators to provide broadband wireless services, including mobile services, without making multimillion dollar investments in spectrum.

And changes in technology, particularly from the pre-standard mobile WiMAX camp, are making the long neglected 2.3GHz bands look appealing again, with a new deployment in Massachusetts pointing the way forward.

This roll-out, announced this week, is being undertaken by local service provider MegaNet in the state’s Bristol County around New Bedford. The service costs $20 to $40 a month (depending on speed), and can be accessed within a five-mile range of a transmission tower. The initial network will support up to 3,000 users with expansion plans to serve over 10,000.

The plan would be unremarkable if it were not for three factors. First, a broadband wireless operator is offering full mobility, in direct competition with cellcos, with a flat rate for data that peaks at $40, with open access to the internet. This is the key promise of WiMAX, providing mobile broadband data for prices that make 3G look uneconomic, but MegaNet is delivering the promise now, using pre-WiMAX technology.

In our view other, larger players will do the same Clearwire in 2.5GHz (once its NextNet technology supports full mobility) and other holders of 2.3GHz spectrum.

Second, the cost of the network is about $100,000 (based on four base stations) and nearly all the cost of the customer premises equipment (CPE) is borne by the end user because, with the mobility factor, the service is so competitive with other cellular or DSL offerings, and the communities it serves are relatively wealthy.

MegaNet is using mobile, non-line of sight technology from Navini, a specialist in highly mobile broadband wireless networks that is committed to supporting the 802.16e mobile WiMAX standard once that is ratified. The CPE is self installable so the customers, while paying for their terminals, do not have to pay for an engineer’s visit. These economics look highly attractive, despite the relatively high cost of Navini equipment compared to other pre-WiMAX options with more limited mobility.

The third factor is that MegaNet is using 2.3GHz spectrum. Navini, though its customer list is short so far, is one of the pivotal start-ups in WiMAX because of its headstart in the market for 2.3GHz Wi-MAX. There is no official WiMAX profile for 2.3GHz, the US profiles are for 2.5GHz and 5.8GHz, but there are national licenses in this band, held by several major players and, until now, virtually unused. The adoption of equipment such as Ripwave in this band will demonstrate the suitability of the spectrum for WiMAX broadband wireless and is sure to put a 2.3GHz profile on the WiMAX Forum’s to-do list.

The Ripwave equipment operates in various frequencies, but 2.3GHz is important because it is used in Korea for the upcoming WiMAXalike Wi-Bro service, and is likely to be significant in broadband plans for India and China too. Navini has been involved in several trials with major Korean operators, and also with BellSouth, one of the largest holders of 2.3GHz spectrum in the US, giving it a significance in early WiMAX beyond its small size, especially as it supplies the equipment for BellSouth’s trials, and is the OEM partner for Alcatel, BellSouth’s major next generation network supplier.

The main holders of 2.3GHz in the US, which are Verizon, BellSouth, AT&T and the owners of the assets of former operator Metricom, have let the licenses gather dust, partly through fears of cannibalizing their other services and partly because the band is more difficult to exploit in America than elsewhere. This is because there is limited space compared to other countries, just 30MHz in two channels, from 2305MHz to 2320MHz and from 2345MHz to 2360MHz.

Those two channels are separated by the DARS (Digital Audio Radio Service) band. This raises possible interference problems from DARS satellite radio terrestrial repeaters, which have high power limits (2,000 watts). The satellite radio operators, Sirius and XM, having paid $80m each for their DARS frequencies, are highly protective of their signals and even tried to limit 2.4GHz Wi-Fi. That move failed, but their aggression might cause problems for operators in 2.3GHz.

However, Fujitsu is one company that believes that the spectral efficiency inherent in OFDM modulation, combined with work being done by various WiMAX developers on enhancing that still further, could make the WCS bands highly usable by 802.16. Several developments have turned new attention on 2.3GHz – the ability of spectrally efficient new technologies such as WiMAX to use them effectively without interference; the decision by the FCC to consider repossessing licenses that are not being actively used by 2007; and the need by the regional Bell operators to react to the growth of independent challengers such as Clearwire, using unlicensed or MMDS (2.5GHz) spectrum to launch broadband wireless offerings and chip away at DSL and cellular at the same time. The likely entry of South Korea Telecom, a major user of 2.3GHz broadband wireless in its home country, into the US market, via its joint venture with Earthlink, accentuates the threat. The opening up of 3.6GHz will only make this prospect worse, and the Bells with 2.3GHz assets may look at them in a new light, as a potential weapon to fight back.

The MegaNet/Navini system, is using spectrum leased from a company called BalRivgam, whose business is acquiring and developing spectrum property. It already holds metro or rural licenses in Las Vegas, Los Angeles, San Diego, Phoenix, Boston, Minneapolis-St.Paul, and Milwaukee and is seeking to build a significant footprint across the country with a patchwork of licenses, creating a national system that can be leased to service providers and even to launch its own services.

As Clearwire has shown, this will become an increasingly popular model – buying up currently undervalued spectrum assets at low cost, to create widespread coverage using a patchwork approach, and then adopting a two-tier model of leasing and direct services.

Copyright © 2004, Faultline

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