Future trends and challenges in spectrum policy for mobile networks

Julia Allford

Welcome to this Analysys Mason podcast on the topic of spectrum policy and spectrum within mobile networks. I'm Julia Allford, and I'm a consultant with Analysys Mason.

I'm joined today by Jannette Stewart, who is a partner in our regulatory practice working on spectrum policy and spectrum valuation. Hi, Janette.

Janette Stewart

Hi, Julia.

Introduction to spectrum policy

Julia Allford

To start with, Janette, can you tell us what spectrum actually is and why it's important in mobile networks?

Janette Stewart

Yes, sure. Spectrum refers to radio spectrum, and what that means is frequencies that wireless networks use to transmit signals containing voice and data or other information. There are lots of different types of wireless networks. We're mostly going to talk about mobile networks on this podcast and the spectrum they use, but other forms of communication that use radio spectrum include satellites, microwave links, the transmission networks used for television and radio broadcasting and the like.

Julia Allford

Thank you. So, within mobile networks, we've witnessed quite an evolution in the capabilities that we have, from early 1G and 2G voice networks to data introduction in 3G and 4G networks with increasing capabilities unlocked as we now move to 5G. We are witnessing a range of approaches being taken in mobile networks as operators decide on different strategies, whether that is looking at private indoor supply or more wide area outdoor use cases. What we are witnessing is quite a variety in the quality of 5G coverage, both within and between markets. We're hearing that operators face particularly hard investment challenges in rural or low-population areas, where they find limited additional revenue potential from investing in additional coverage sites. Some markets also face structural issues where network consolidation is one outcome. One question we've been thinking about is how can spectrum be leveraged to increase coverage. What are your thoughts?

Leveraging spectrum for coverage

Janette Stewart

Thanks, Julia. Yes, choosing the right spectrum deployment is becoming increasingly important in mobile networks as the architectures and the technologies evolve, as you have described. Choosing the right spectrum also depends on the environment that you're covering. So, in areas that are less easy to serve by mobile networks, it's important to find the most economic way to deliver coverage. In urban areas where traffic is higher, then it's important to provide the capacity to provide sufficient quality of service.

The latest generation of mobile networks integrates multiple frequency bands into the radio access network. So, we usually see a combination of low-frequency bands, which are frequency bands below 1GHz. Then there are mid-bands, which are between 1 and 3GHz typically, and then higher frequency bands, which in 5G refers to millimetre wave spectrum, such as 26GHz, etc. Some of those bands work better for coverage than others. So, if increased coverage is the goal, then lower frequencies usually work better. Those lower frequencies can provide coverage over wider geographic areas, and they also provide better in-building penetration, to your point about the indoor scenario.

Where revenues in an area are particularly low, such as areas with lower population or lower traffic per mobile site, it is important to design infrastructure to reduce cost. So that cost reduction can include choosing the right bands to maximise your deployment - so lower frequencies cover wider areas, as I said. What that means is that fewer sites are needed to cover a wider area. Operators can also consider different forms of network sharing in mobile networks, and that includes deploying their spectrum on shared sites or even sharing their spectrum in some environments, depending on the market in question.

In urban areas, deployment approaches are different, and those are usually optimised to provide the best coverage as well as the best capacity in those locations. Operators are seeking to maximise their spectrum deployment to serve the traffic generated by the customer base and also to match or exceed the network quality of their competitors. A lot of our project work is about modelling these network costs and the trade-offs between cost and revenue for different spectrum deployments in different environments. We do that both for regulators and operators to advise on both the best approach to awarding spectrum as well as the best approach to deploying.

Evolving auction approaches for spectrum

Julia Allford

That's interesting. You mentioned there at the end about advising on how to award spectrum. Now, spectrum is a national resource, and it's one that we understand now is very important in mobile networks. Typically, markets use auctions by default as the approach to award this spectrum. Now, these are typically cash-based auctions where operators bid for what they want to pay for a licence above a set reserve price. Now, in light of coverage gaps, do we think the auction approach might evolve as the means of awarding spectrum licences?

Janette Stewart

Well, certainly, the auction approach has been the default mechanism to award mobile licences over a number of years now. However, I think we're already starting to see some evolution in the market. There may be different models applied in markets where there are specific objectives to be met. So, for example, on improving coverage, on accelerating the timing of roll-out or on other investment targets more generally. Where there are these specific objectives, then different forms of auctions, such as cashless auctions, auctions with coverage obligations, auctions with investment obligations, or even other forms of awards, such as a beauty contest or other form of direct award and so forth, they might be used to meet specific objectives.

As 5G evolves as well, and the legacy mobile networks that you mentioned are being switched off, so 2G and 3G, etc., there also needs to be consideration of how the existing spectrum that used to be used for these legacy networks might be treated at the end of the licence period. So there are a number of questions there, such as whether regulators will extend licences in the hands of existing players, possibly in return for coverage commitments. Or there might be considerations in the market that suggest existing licences should be rewarded, such as uneven distribution of spectrum amongst players or seeking to allow new market entry or other forms of innovation.

The future: 6G and beyond

Julia Allford

Yes, that's a good point about the phase-out of, say, 2G and 3G networks and thinking about how that spectrum might need to be repurposed.

Within the evolution of 5G, we actually have 6G that's now being talked about. One of the conferences we attended recently was the 6G Summit in London back in May, where discussion centred around the lessons that we could learn from 5G. Some of the topics discussed were whether or not 6G will have a single global standard rather than disparate three regional standards. The commercial implications of investing in a new standard. Will existing radios need to be replaced, or actually is 6G more of a network upgrade? What is the importance of understanding the use cases and demand for 6G? We understand that actually, this was a major selling point in 5G that perhaps may not have been realised. Furthermore, there's a need for an increased focus on environmental sustainability ability as we move towards our 2030 targets. And finally, what is the role of advanced technologies such as AI and software-defined networking within this evolution? What are your thoughts on 6G?

Janette Stewart

Spectrum-wise, European regulators are studying, for example, how the upper 6GHz spectrum could be used in future and whether a shared use approach between mobile networks and unlicensed use such as Wi-Fi is possible. In the USA, they're looking at a different frequency band. In the USA, they're looking at 7 and 8GHz. The spectrum between 7 and 8GHz is under study at the moment. In that band in the US, there's a lot of federal use currently, so that means fixed links used by the government, satellite, and scientific uses such as earth exploration.

Options for mobile use amongst those existing allocations is under study and receives quite a lot of attention in that market, but will require, I think, detailed consideration going forward.

Julia Allford

So, in summary, there's a lot going on in spectrum policy. From understanding the need and demand for spectrum, thinking about the most appropriate award mechanisms and understanding the importance of sharing with other users.

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