The looming spectrum shortage: Spectrum harmonisation and re farming critical for future growth
Deloitte predicts that although additional spectrum will continue to be made available in 2013 in many global markets, spectrum exhaustion will continue to exacerbate in many countries, especially in dense urban areas. End users will continue to see performance impacts as a result, primarily in the form of lower speeds, but also through inability to access networks and dropped calls or sessions. The reason is simple demand for spectrum will exceed supply. Demand for wireless bandwidth continues to grow in leaps and bounds, but supply is relatively constrained. By 2014 the US alone may suffer a 275MHz spectral “deficit”65.
To be clear, a spectrum shortage is highly analogous to a crowded highway: it doesn’t just “stop working” like an electrical grid that goes down in a storm with no power to anyone across wide areas, sometimes lasting for days. Instead, the likely outcome of the predicted shortage will be most intense in cities, on certain networks (those with the most subscribers) and in peak wireless hours. Users can expect wireless ‘rush hours’ to be characterized by two to three times as many failed attempts to connect, three to four times as many dropped calls or frozen web browsing, and both 3G and 4G speeds 50-90 percent lower than expected. In the worst situations, download speeds may be under 1Mbit/s for lengthy periods of time, making video streaming impossible and even web browsing difficult.
The cellular device market sends and receives in the portion of the electromagnetic spectrum ranging from 600MHz to 3600MHz. These bands are strictly regulated by national governments and allocated for specific purposes.
Spectrum allocations in the Middle East – A case of wide disparities
In some parts of the Middle East region, particularly in North Africa, current spectrum assignments fall below those in more developed countries such as the US and the EU member states. North African countries have relatively higher levels of connections per MHz, making them more vulnerable to network congestion and quality-of-service issues.
The average spectrum assignment by operator across the different Arab states also reveals some interesting insights. Bahrain, the UAE and Qatar have allocated well above 100MHz of spectrum per operator, positioning them at the top of the sample. In contrast, Morocco, Egypt and Oman have less than 50MHz of spectrum per provider, which are levels comparable to India.
Lack of spectrum harmonization likely to impact take-up of new technologies such as LTE
Based on a study conducted by Deloitte and the GSMA66, the mobile industry’s spectrum holdings in the region are operationally inefficient, due to the lack of harmonization67. There is also a risk, as with global markets, that spectrum will be insufficient in the future, due to changing consumer habits leading to increased data traffic.
While most of the spectrum in the region is allocated in paired frequencies, a number of countries have allocated fragmented, non-harmonized spectrum in unpaired frequencies. This includes Bahrain, Morocco, Jordan, Qatar and Saudi Arabia, which have used time division duplexing (TDD) technology68. The difference between this technology and the usual frequency division duplexing (FDD)69 is that TDD allows both the uplink and the downlink to be carried using the same frequency band. In certain cases, the ratio of the uplink to the downlink can be adjusted to allow for asymmetric data consumption.
Harmonization minimizes interference coordination issues not only within countries but also across country borders, as some spectrum could be unusable in border areas of countries which have failed to harmonize their allocations. When this is the case, operators agree to reduce the power of transmission or tilt antennae which are closer to the border. This is a costly operation as it implies reduction in the coverage radius, so this may imply the need of more base stations to provide the same coverage.
An example of lack of spectrum harmonization is found in Saudi Arabia. Zain is the only operator to deploy LTE in the 1800MHz band. STC and Mobily are using LTE in 2.3GHz and 2.6GHz respectively. These two spectrum bands are not supportive of a wide range of handsets. As witnessed globally, the lack of spectrum harmonization in the Middle East can lead to higher device costs due to reduced economies of scale in the production of handsets with the additional cost of non-standardized chipsets. Regional governments will need to work towards achieving band harmonization across the region, to ensure operators in the region can introduce affordable, best-of-breed devices to the region.
Harmonization also facilitates international roaming, allowing countries to be more attractive to leisure and business travelers. Given that several operators work across countries in the region, failure to harmonize would limit the economic growth of their operations in the region, as well as their ability to achieve economies of scale, which is an important element in driving service prices down. Deloitte estimates that if spectrum was made available in a harmonized manner, data consumption could grow 25-fold between 2015 and 2025, from 103 Pb per month to 2,700 Pb per month. In countries such as Egypt and Jordan, data consumption is set to increase 37 and 40 times, respectively, compared to 2015 levels.
The demand for additional spectrum is tied directly to the rapid expansion in consumption of wireless broadband communications. Wireless traffic has more than doubled each year since 2009 and the increasing penetration of smartphones and tablets only serves to exacerbate the problem70. Today, the average smartphone drives 35 times more traffic than a typical cellphone. It is expected that by 2016 wireless traffic will have increased 50 fold from 2012.
Likewise, the significant growth of Arabic-language content is expected to increase data demand. YouTube is capitalizing on this trend by launching localized versions of the platform in several Middle Eastern countries, which currently report over 167 million views a day. Saudi Arabia is already the country with the highest per capita use of YouTube in the world, with over 90 million views a day70a. Up to 93% of Egyptian internet users have indicated they use YouTube at least once per week, and 19% of smartphone users access the platform on their device. As demand for data increases, the Arab countries could be faced with a shortage of spectrum by 2020 unless existing operators and new entrants undertake further investment in network infrastructure to support this traffic growth.
Spectrum re-farming and liberalization as an interim solution
The availability of radio spectrum can be improved by only two methods. The first is accomplished through more efficient assignment of frequency bands to spectrum seekers who would maximize the use of spectrum. As the distribution of spectrum can have major economic implications for competition and accessibility, many governments and regulators have put significant effort into designing spectrum licensing frameworks which maximize economic benefits for the country. This includes reallocation of spectrum bands to new usages (e.g. the “Digital Dividend case with reallocation from broadcasting to mobile), increased popularity of auctions as a way to transparently and efficiently assign spectrum, spectrum pricing (e.g. AIP) and in some cases spectrum trading.
The second method is to make more efficient use of limited spectrum. Fourth generation (4G) technologies such as LTE have substantially improved spectral efficiency. LTE is almost 16 times better than 3G at moving a bit of data over a Hertz of spectrum. However, in the seven years it has taken to develop and widely deploy this new technology, wireless traffic increased 30-fold. Vendors simply cannot develop new technologies fast enough to meet growing demand. The emerging LTE-Advance standard expects to further double71 spectral efficiency over LTE. While this seems a great achievement, it only results in adding less than a year of additional capacity at current growth rates.
For governments in the Arab states, there are upcoming options to mitigate this spectrum scarcity. These options include releasing harmonized spectrum through the digital switchover in the Digital Dividend bands (700MHz and 800MHz), promoting spectrum liberalization by re-farming72 the 1,800MHz band, and promoting further release of the 2,600MHz band. There are already a few examples of governments in the region successfully leveraging these options including spectrum liberalization and technology neutral licencing:
- Saudi Arabia’s technology-neutral approach of spectrum policy for universal service providers allowed the provision of high-speed internet in rural areas. This led to the deployment of 3G/UMTS services over the 900MHz band, previously allocated to 2G technology.
- Lebanon has also proposed that the 2.6GHz band be subject to re-farming through its initiative for mobile broadband aiming at repackaging the band to be harmonized internationally.
- Other examples are Egypt and Tunisia, which awarded technology-neutral licenses in 2007 and 2009.
Emerging technologies, such as Heterogeneous Networks or HetNets, have the potential to address some of these concerns. HetNets consist of a series of wireless access layers, protocols, and equipment allowing mobile devices to seamlessly move between wireless networks of various types. Voice calls and data sessions can be maintained without interruption as devices move between macrocells (covering dozens of km), microcells (covering kms), picocells (100s of meters) and femtocells (tens of meters) and back. Emerging technologies and standards can extend HetNets across Wi-Fi, Mesh and Ad-Hoc wireless networks as well.
As little as two years ago, this lack of portability was not a significant issue for most end users. Mobile devices connected to the cellular network were typically used in such a way that virtually all traffic was managed by a traditional macrocell, usually located on a tower. The problem is that moving between these networks is sometimes not transparent to either the end user or the network provider. Users may need to: manually identify and select a different network (either microcell or Wi-Fi); provide necessary credentials to authenticate onto the new network; and re-establish a session with the application.
HetNet is based around more intelligent devices and networks that can monitor the current wireless environment for available networks and single quality and, when appropriate, automatically select, authenticate and hand over current sessions without user intervention.
At this time, some of the technologies needed to deliver HetNet services have yet to be widely deployed. Further, HetNets require changes to the end user device, access points and the network core making adoption more complex and expensive.
Internet Protocol Version 6 (IPv6) is the successor to the widely used IPv4, which has “only” 4.2 billion unique addresses. Almost all of those are in use, requiring addresses to be re-used. While that helps mitigate the shortage of addresses under IPv4, it means that new addresses must often be dynamically assigned, making it difficult to maintain existing session information and to determine exactly where devices are located. IPv6 has 1038 addresses (or enough to give every star in the known universe a trillion IP addresses) and will be able to give each device a unique identifier, and simplify the handover processes.
The standards behind HetNet have been under development for several years (the IEEE 802.21 working group was established in 2004). However, since HetNets span networks defined by multiple standards bodies (including IEEE, 3GPP, 3GPP2, ITU-T and IETF) a number divergent attempts at standardizing network interoperability have occurred delaying widespread adoption. Although current initiatives have begun to show progress (such as 802.11u) there is still much activity. The Wi-Fi Alliance’s Hotspot 2.0 program73 began administering the Passpoint™ certification process in June 2012, which covers mobile devices and hotspots that automatically select and authenticate access to Wi-Fi networks using a devices SIM card. At present, only a limited number of certified devices are available. In parallel, the Wireless Broadband Alliance, as part of its own Next Generation Hotspot initiative74, is working closely with the Wi-Fi Alliance to validate certified devices in real world conditions. Phase 2 trials with several global carriers began in Q4 of 201275. It is expected that many carriers are waiting on the outcome of these trials before making significant investments in HetNet related infrastructure.
While strong progress is being made towards making HetNet services a reality, it may take most of 2013 to resolve these challenges. Foundational technologies will continue to be rolled out, standards compliant equipment will become widely available and business concerns will be ironed out. Some markets will see the introduction of limited HetNet capabilities and limited pilots. Additional acquisitions in the Wi-Fi service provider and equipment market are likely as lagging carriers and manufacturers look to quickly build their footprint or expand their product offerings.
There is another approach, called cognitive radio, where the device detects all parts of the wireless spectrum and dynamically alters its transmission or reception parameters according to which bits are currently not being used. This allows much more data to be sent over a given spectrum band at a given point in time76. Also known as dynamic spectrum management, it does work in labs today. But it is likely years to decades away from adoption.
While progress is being made towards making additional spectrum available, and considerable effort is being made to improve spectral efficiency, demand for wireless bandwidth will likely attempt to outstrip these improvements in supply for at least several years. Major metropolitan areas in some geographies should expect to see continued deterioration in end user experience. The other alternative is that carriers may want to increase what they charge for data and speeds: if spectrum truly is a scarce resource, then using price to signal its value is likely to reduce demand to the point where service standards do not fall.
Regulators may wish to accelerate and streamline their spectrum allocation process. Although auctions are an equitable and transparent process that also raises money for the treasury, the process around them can take years or even decades. Further, they can look at allocating larger spectrum blocks (the blocks have tended to be somewhat fragmented) and encouraging solutions that promote spectrum sharing, particularly at the higher frequency bands.
Further, regulators in the Middle East region need to work towards harmonization of spectrum bands as LTE adoption could be severely hindered by device inoperability. Spectrum re-farming and spectrum liberalization could serve as interim solutions to the spectrum challenge as operators wait for additional spectrum to be allocated by governments.
Carriers will likely want to do even more with Wi-Fi, as well as find picocell and femtocell business models that lead to more rapid adoption. One possible strategy is that instead of having consumers pay for the small cells (which they have been loath to do) carriers can respond to complaints of poor coverage by paying for the femtocells themselves, and thinking of it as a customer retention tool and associated cost. Any coverage of adjacent areas and cellular offload is just gravy.
Spectrum isn’t just needed for smartphones and tablets: as 4K TV rolls out, TV broadcasters may want to get back some of the spectrum that they gave away in the transition from analogue. Although compression is likely to improve the amount of bandwidth that 4K broadcast signals will require, it is unlikely to provide a true 4K signal in the current spectrum allocated for HD digital.
Ironically, in the short term, some customers may experience improved voice performance as delays in implementing VoLTE (Voice over LTE) will allow data traffic to migrate to 4G networks, while freeing up 3G networks to more effectively carry voice traffic.
There are some cities where macro-cell sizes are as small as they can usefully be: rooftop antennas and towers cannot be spaced any more closely. But that is not the case in all areas – sometimes the local resistance to new antennas is such that it can take years to erect a new tower77. Streamlining the cell site approval process – while continuing to allow for citizen input, of course – would help reduce some of the impact of spectrum scarcity.
Finally, along with cognitive radio, smart antenna technology with variable gain can correct for certain inefficiencies by directing signals toward devices generating or consuming traffic. In effect this shrinks the cell site by only occupying the spectrum in the direct line of sight between the tower and device. As other devices consume traffic, they can share that same spectrum by also taking advantage of the directionally focused antenna78.
- Source: Airwave overload? Addressing Spectrum Strategy Issues That Jeopardize U.S. Mobile Broadband Leadership, Deloitte Development LLC, September 2012. See: www.deloitte.com/us/spectrum
- GSMA- Arab States Mobile Observatory 2013
- GSMA- Arab States Mobile Observatory 2013
- Time division duplex (TDD) refers to duplex communication links where uplink is separated from downlink by the allocation of different time slots in the same frequency band. It is a transmission scheme that allows asymmetric flow for uplink and downlink data transmission. Users are allocated time slots for uplink and downlink transmission.
- Frequency division duplex (FDD) is a technique where separate frequency bands are used at the transmitter and receiver side. Because the FDD technique uses different frequency bands for send and receive operations, the sending and receiving data signals don’t interfere with each other.
- Source: Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2011–2016, Cisco, 14 February, 2012. See: http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-520862.pdf
- Source: 4G LTE-Advanced Technology Overview, Agilent Technologies. See: http://www.home.agilent.com/agilent/editorial.jspx?cc=IN&lc=eng&ckey=1905163&id=1905163
- Spectrum re-farming is the re-use of spectrum for new technologies such as LTE. Spectrum re-farming costs significantly lower than acquiring a new LTE license.
- Source: Wi-Fi CERTIFIED Passpoint, Wi-Fi Alliance. See: http://www.wi-fi.org/discover-and-learn/wi-fi-certified-passpoint%E2%84%A2
- Source: Next Generation Hotspot (NGH) Program, Wireless Broadband Alliance. See: http://www.wballiance.com/wba-initiatives/next-generation-hotspot/
- Source: Major Telcos to Trial Next Generation Hotspots Using First Commercially Ready Equipment, 26 June, 2012. Wireless Broadband Alliance.See: http://www.wballiance.com/2012/06/26/major-telcos-to-trial-next-generation-hotspots-using-first-commercially-ready-equipment/
- Source: Cognitive Radio, Wikipedia. See: http://en.wikipedia.org/wiki/Cognitive_radio
- Source: Airwave overload? Addressing Spectrum Strategy Issues That Jeopardize U.S. Mobile Broadband Leadership, Page 32, Deloitte Development LLC,September 2012. See: http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/TMT_us_tmt/us_tmt_Spectrum_Thought_Leadership_September_092512.PDF
- Source: Airwave overload? Addressing Spectrum Strategy Issues That Jeopardize U.S. Mobile Broadband Leadership, Page 23, Deloitte Development LLC,September 2012. See: http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/TMT_us_tmt/us_tmt_Spectrum_Thought_Leadership_September_092512.PDF