Will the US 700 MHz auction be remembered for dismembering wireless?
High spectrum price could lead to catastrophe
The reason that we say that there may immediately be some downside for successful bidders, is that 700 MHz is really not a cure all form of spectrum. It is not much good for use in Urban areas, because its main attribute, and the reason it was chosen for analog TV in the first place, is that it can travel long distances without degradation, interference or fading.
But the longer carrier waves travel, the more difficult it is to tame them. Remember 1 MHz of spectrum will carry the same amount of data as any other 1 MHz – so the payload for these licenses whether they be 5, 6, 10 or 11 MHz, is the same in 700 MHz spectrum as they would be in 2.5 GHz (which Sprint holds in abundance). But of course 2.5 GHz is nothing like as good at propagation as 700 MHz. We are not suggesting that the Sprint spectrum, roughly 90 MHz wide, is worth the same amount per MHz as the 700 MHz, but there is a relationship. If you take an urban area, you need a lot of base stations just because of the number of people that require a voice or a data connections at any point in time. So the base stations have to be close together regardless of propagation and penetration characteristics.
Because of the shorter wave form of the 2.5 GHz, the spectrum will form far more distinctive edges to any given cell. Once the signal runs out of power, it runs out quickly and does not continue echoing off into the distance. That’s not quite the same with 700 MHz, which has to be de-powered to work in urban environments.
But you cannot apply the same price per MHz for each member of the population to a valuation of spectrum, when that spectrum is capable of such different things, and sometimes we worry that investors do just that.
A 90 MHz slice of the 2.5GHz spectrum like Sprint’s can deliver 90 MHz worth of data at any given point. And in an urban environment the base stations have to be as close together for 700 MHz as they would be for 2.5 GHz. Propagation is not the issue, it’s the number of voices or data transactions likely in an area that defines network planning constraints.
Where the equation goes wrong for someone like Sprint is that the 2.5 GHz base stations cannot be further away from a handset than its radio can reach without using up its battery in a few minutes. Battery is especially wasted if the device needs excessive signal amplification, so there is a natural maximum distance apart, that a radio engineer can work out for you, for two way, mobile 2.5 GHz base stations, regardless of how many people are connected to them. This is what is partially undermining Sprint right now, the question of how it reaches the long distances between Urban centers with its build out and still look like a national network.
There is an equation here. What we have been taught to think by the build up to this auction is that the best spectrum is that which goes the furthest and goes through walls. But if this spectrum is the most valuable then 450 MHz would be more valuable than 800 MHz, and it's not. The reasons for this are a combination of political and historical reasons and plain physics.
On the flip side, if you have spectrum that goes too far, then you can only use it once, or it will interfere with neighboring cells. You can turn down its power, and the handsets themselves re-calculate power requirements on the fly in the milliseconds after finding a base station, but that seems a waste.
So the best spectrum is perhaps that which carries far enough, but not so far that when you put lots of cells close together in an urban area (because of the high number of separate connections you need to support) they interfere with each other. In the end most networks will end up with the same number of base stations in urban areas, so they have a practical distance apart not due to propagation capabilities at all, but due to population spread during peak hours.