Thoughts on wireless competition, handset exclusivity, and spectrum needs

The wireless marketplace is very competitive. It appears that carriers are focused on price and devices as the competitive levers they tweak to drive flow-share. Moreover, the market is bifurcated. You have intense competition at the high-end with brand name devices, some exclusive and intense competition at the low-end with the prepaid segment, where price appears to be everything right now. What are the implications of this for the long-term? Well, for the short-term, we seem to be in somewhat of a price war, with each carrier trying to upstage the other based on devices and prices. This can be effective in the short-term. However, I wonder if this can be effective in the long-term. If the carrier does not have the fundamentals in place (excellent network, excellent customer service, and brand promise/reputation), it seems to me that the consumer’s loyalty will be fleeting. The degree of stickiness will depend on whether the consumer has other options. Consumer options can be limited or modulated by degrees of exclusivity. The counter tension or force is the government and the degree to which they are willing to allow exclusivity to operate in the wireless marketplace.

Recently the government (FCC) has commented on the need for additional spectrum to support the rapid uptake of mobile broadband. All indications thus far point to the need for more spectrum. A good example is the rapid consumption of network resources by iPhone users. I believe at the recent CTIA IT event someone cited a growth rate in usage of 18 times in two years. To put it into perspective, 1 percent of the users on a particular network consume 40 percent of the resources on the network. If the iPhone becomes available to all carriers and the users on those carriers have similar usage patterns to what is currently being observed, more resources will be needed, including spectrum resources. Network efficiency and spectral efficiency have not increased by a factor of 18 in 5 years. So, you can see the potential problem. More spectrum will help, but the answer is more likely frequency reuse through higher density macro cellular deployments combined with hierarchical network topologies with the macro system forming the foundation and microcells and femtocells overlaid in areas of intense traffic. That doesn't mean further advances in modulation, coding, and beamforming technologies cease to play a role. Each of these technologies will play an incremental role in increasing capacity through efficiency gains.

There is one additional point on spectrum worth mentioning. Carriers appear to favor contiguous spectrum. The reasons are most likely the ease of managing contiguous spectrum, in addition to some inherent efficiency gains you get when using contiguous swaths of spectrum. However, with what appears to be a scarcity of available contiguous spectrum, the industry-carriers, equipment vendors, and standards bodies-have begun working on LTE advanced. This new technology enhances LTE to further improve its spectral efficiency, in addition to taking advantage on non-contiguous chunks of spectrum.