The FCC needs to re-evaluate the facts when it comes to competition for LTE services in the 700 MHz band.
The FCC appears to be really pushing to have at least one additional 700-MHz LTE system built out in the United States. It has recommended to Congress in its Broadband Report (delivered in March of this year) that the D Block, a 10-MHz slice of spectrum that was offered but not won during the main 700-MHz auction, will go back out to auction but without the requirements that it be developed in connection with the adjacent public safety spectrum.
Apparently, the FCC is concerned that there will not be enough competition in the LTE market with only two nationwide LTE providers. This was the same concern a previous FCC expressed about the two analog cell service providers a number of years ago, and the reason the 1900-MHz band was auctioned – to provide more competition, and therefore, better pricing for cell phone service. But the FCC is not considering all of the facts when it comes to competition in the 700-MHz band that will be built out with LTE services.
First of all, 10 MHz of spectrum (5X5) is not enough for any network operator to be able to provide adequate LTE service in major metro areas. It has been proven that 10 MHz is not enough spectrum for public safety with less than 5 million users nationwide, and it certainly is not enough spectrum to provide a third nationwide network operator with the spectrum necessary to compete with AT&T and Verizon. One network operator that has expressed interest in bidding on the D Block says it recognizes that this is not enough spectrum to serve its customer base but that it would get them into the 700-MHz game and from there it should be able to craft roaming agreements with AT&T and/or Verizon to be able to serve its customer base.
An FCC Notice of Proposed Rulemaking for roaming services is expected to be introduced this summer, and it seems as though it should be possible to provide roaming agreements for network operators that don't own spectrum in the 700-MHz band and, in reality, it should be up to the spectrum holders to work out their own roaming agreements. Verizon already has said that it is working with a number of rural service providers to share networks and perhaps even sub-lease spectrum to them. It is in everyone's best interests to have as much of this country covered with LTE as possible in the shortest possible time.
The wireless community is market driven, which is a good thing. It pits company against company and provides competition that has continued to drive down prices over the last 25 years of cell phone service in the United States. Today we have some of the least expensive wireless voice and data services in the world, and the network operators continue to spend billions on new cell sites and better coverage for all of us. The FCC's view that there needs to be more competition doesn’t seem to be based on the reality of today's situation.
For example, when the FCC looks at the 700-MHz band, it sees only two providers that will be offering nationwide service, AT&T and Verizon, and reportedly doesn't think this is enough competition. However, if we step back and look at the nation on a metro-bymetro basis, we see an entirely different picture. In most metro areas, there is one if not two more license holders including MetroPCS, Cox Communications and others. If we look beyond the top 100 metro areas, the number of contenders in a given area is even greater.
Another way to view competition for nationwide LTE coverage is to look at how many of the four networks (or five, depending on how you count Nextel) started out as nationwide networks. The answer is only one. Sprint, with the 1900-MHz spectrum it bought at auction. The others all grew into nationwide networks over many years with acquisitions and mergers. And since the FCC has promised to "find" another 500 MHz of broadband spectrum over the next 10 years (300 MHz within five years), there will be more competition coming into the market in the not too distant future. Force fitting another LTE service provider into 10 MHz of spectrum will not result in a network that is competitive with the others already licensed in this band.
The D Block is only 5X5 MHz, while the smallest block of 700-MHz spectrum is 6X6. What does this mean? First, LTE is designed to operate in 1.4, 3, 5, 10, 15, and 20 MHz bandwidths. A company that owns a 6X6-MHz allocation will run 5 MHz of LTE bandwidth leaving ½ MHz on either side for what is commonly called a guard band. If a guard band is required for the D Block, and my investigation shows that it is, the maximum LTE bandwidth that can be used on the D Block will be 3X3 MHz, meaning the network operator will lose a full 40 percent of the bandwidth in that block.
The bottom line is that the FCC is trying to fix a problem that does not exist. T-Mobile USA already has modified its broadband data pricing, which will put additional pressure on prices that will be charged for LTE services, and as mentioned, there are more than two competitors already in the 700-MHz marketplace. It seems to me that market dynamics work better than forced competition. Those who believe AT&T and Verizon won't be offering great pricing for LTE services need to think again. Competition is working and will continue to work in the wireless marketplace.
Seybold heads Andrew Seybold Inc., which provides consulting, educational and publishing services. For more information, visit www.andrewseybold.com.