Harmonization of spectrum as growth engine of the mobile industry

1. Harmonization of spectrum as growth engine of the mobile industry Adrian Foster, Mclean Foster & Co.

2. Spectrum Harmonisation – the usual meaning • A global effort under the auspices of the ITU to encourage governments and regulators to allocate radio frequencies (spectrum) consistently across boarders, thereby enabling international roaming for consumers, improved interoperability by way of reduced interference between systems, and greater economies of scale in telecommunication equipment such as handsets leading to lower prices. The main forum for achieving this is the World Radiocommunications Conference which takes place every four years or so, where global and regional allocations are determined through negotiation and agreement. Decisions emanating from WRC’s have treaty status amongst countries. • Leading example of harmonised spectrum allocation decisions include: the UMTS Bands (1.9 to 2.1 GHz), regional digital dividend bands, and Wi-Fi global allocations in the 2.5 and 3.5 GHz bands. • Spectrum harmonisation refers to the uniform allocation of radio frequency bands at three levels: globally, across entire regions, and within individual countries. Uniform allocation comes with many advantages; it minimises radio interference along borders, facilitates international roaming and reduces the cost of mobile devices. Without spectrum harmonisation, it’s unlikely that mobile would have become the success it is today.

3. Spectrum Harmonisation Framework Decisions – The EU Radio Spectrum Decision No. 676/2002/EC • Regulating Radio Spectrum decision of the European Parliament affecting 28 member countries taking into account the decisions of the ITU and CEPT (48 member states). • Radio frequencies are vital to the operation of many things taken for granted, such as our mobile phones, broadcasting and broadband Internet or remote control devices, are a scarce resource. To ensure their optimal use, the European Union has agreed on how to coordinate its policy in this field to prevent interference in important communications. • Within the EU the availability of radio spectrum and technical conditions for its efficient use will be coordinated. It applies the allocation of radio and wireless communication frequencies, including GSM, third and fourth generation mobile communications (3G, 4G) for frequencies between 9 kHz and 3000 GHz relevant for the internal market.

4. Spectrum Harmonisation – Faster and Faster Still • 2G was first introduced in 1991 (Finland) and reached 1 billion subscribers in 14 years. • 3G was introduced in 2001 (Japan) and reached a 1 billion subscribers in 8 years. • 4G/ LTE was introduced in 2009 (Finland/Sweden) and reached 1 billion subscribers in 6 years. 4G LTE networks will support 1.9 billion connections by the beginning of 2017, and will grow to 5.6 billion by the end of 2022. • Wireless revenues including broadband were $885B USD in 2007 (3.4B subs) and are estimated to exceed $1,100 billion by 2018 (7.6B subs) (Statistica 2017) • In addition, nearly 1.5 billion smartphones were sold in 2016, (Gartner).

5. Spectrum Harmonisation – The Main Benefits • The three main benefits typically associated with Spectrum Harmonisation are: • Improved international roaming for consumers and service providers (Mobile and Broadband Services, PPDR harmonised spectrum across regions). • Reduced interference or improved interoperability • Economies of Scale • We will look at these next.

6. Spectrum Harmonisation – International Roaming • Broadly speaking International Roaming refers to the ability to move to a foreign service provider's network. It is, consequently, of particular interest to international tourists and business travellers. • International roaming is easiest when the same standard is harmonised and used by the world's mobile operators (GSM, for example). However, there are situations where different spectrum bands have been allocated – not harmonised (900/1800 MHz and 850/1900 MHz). • Inter Standard Roaming refers to roaming between two standards (CDMA and GSM) EU eliminates Roaming charges within the EU coming into force on June 15, 2017 "Eliminating roaming charges is one of the greatest and most tangible successes of the EU," statement by the EU Commission – June 17, 2017 Each time a European citizen crossed an EU border, be it for holidays, work, studies or just for a day, they had to worry about using their mobile phones and a high phone bill from the roaming charges when they came home." It had been working hard over the last ten years to fix this "market failure", it said.

7. Spectrum Harmonisation – Interoperability • Interoperability is indispensable in achieving end to end connectivity. This applies to voice call calls made globally over the PSTN, mobile calls, and connecting any computer or smartphone to the Internet. • There is no unique definition of interoperability because the concept of interoperability has different meanings depending on the technical or regulatory context; i.e. the system implementation, vendor implementation, or consumer use. • NTIA ITS definition – the ability of systems, units or forces to provide services to and accept services from other systems, units or forces and to use the services so exchanges to enable them to operate effectively together. • IEEE definition for network interoperability – the continuous ability to send and receive data between interconnected networks providing the level of quality expected by the end consumer without negative impact to the sending and receiving networks.

8. Spectrum Harmonisation – Interoperability in the EU – Maybe?? • According to the GSMA’s Wireless Intelligence, in 2015 there were over 200 live LTE networks, deployed using over 38 different spectrum frequency combinations raising device interoperability issues and leading to spectrum fragmentation reducing the benefits of roaming and economies of scale. • The reality is that Europe lost the lead in 4G because of a very piecemeal approach to spectrum management: as recently as in 2015, according to GSMA because the right spectrum was not available on time on the right terms, 25% of Europeans used 4G services, while 75% of Americans did so. • An example of the problem was triggered by the strategy of some device manufacturers to not cover the 800 MHz and 2.6 GHz bands used for LTE in many European countries resulting iPhones in some European and Asian countries unable to use LTE services.

9. Spectrum Harmonisation – Interoperability – Mobile Money • The GSMA (SOTIR) 2015 on mobile banking states that Bank2Mobile and Mobile2Bank transactions are increasingly important (mobile cash-outs from bank accounts in particular), and that between 2013 and 2015, the number of banks connected to mobile money schemes increased by 66%, to 520 banks with 120 mobile money schemes (see also Pasti and Vonthron • 2015a). • December 2015, almost two thirds of markets where mobile money is available there are two or more live mobile money services (60 of 93 markets) and more than one third have three or more live mobile money services (35 markets, with a median of five services per market). By mere numbers of competitive operators, there is a vital need for interoperability.

10. Spectrum Harmonisation – Interoperability – the emerging context • Two forces have acted to transform and model the telecommunications and ICT landscape. These are convergence and deregulation. These trends have not led to a reduction in the number and types of networks nor in the simplification of services and infrastructure. The contrary is more true – increased complexity and heterogeneity.

11. Spectrum Harmonisation – Economies of Scale • Economies of scale can exist on either the supply or the demand side in mobile telecommunications markets. • Supply side economies of scale exist where the average costs per unit of output decreases with the increase in the magnitude of output being produced by a firm. For example, it does not cost much, if anything (i.e. assuming that the network does not require expansion), for a service provider to connect one more customer to the existing network. • In one estimate related to 3G at the time, the additional manufacturing costs due to spectrum fragmentation in spectrum amounted to $15 US per device for a production of 8 million units, $1.5 US for 80 million units and $0.15 for 800 million devices, subject to certain assumptions (GSMA 2007). • Demand side economies of scale are often referred to as a “network effect” whereby the addition of one more customer to the network increases the aggregate social value of the network beyond the private value gained by the additional customer.

12. Spectrum Harmonisation Examples – 700 MHz • The 700 MHz band may be the most telling example of harmonisation efforts leading to a series of band segmentation standards to address many of the future requirements for wireless broadband spectrum. The 700 MHz band was at the heart of World Radiocommunications Conference (WRC-12) and WRC-15. The WRC-12 allocated the 700 MHz band for mobile use, on a coprimary basis. In view of various options proposed at WRC-15, In view of these alternatives, different regions have chosen different segmentation plans: • The different band plans for the digital dividend in the 700 MHz and/or 800 MHz bands are as follows: • CEPT allocated the 790-862 MHz band for mobile communication (digital dividend); • the Asia-Pacific Telecommunity (APT) designed a different band plan for the 700 MHz band (698-806 MHz); • CITEL adopted a recommendation for CITEL administrations that wish to deploy broadband networks to meet PPDR needs in the 700 MHz band, and consider the bands 703-748/758-803 MHz and 758-768/788-798 MHz

13. Spectrum Harmonisation –Justifying use of the APT Band Plan in Region I (Economies of Scale) • Cofetel estimated the time required to deploy a wireless network using the APT and the United States band plans. It concluded that the time required for deployment would be at least 1.5 times less using the APT and not the United States/Canadian band plans, initial investment in networks and infrastructure would be 5.6 times less and mobile carriers would need to deploy 4.5 fewer radio stations. Harmonised FDD arrangements in the 698-806 MHz Band, APT Report 14.

14. Spectrum Harmonisation Implementation – Economies of Scale • Experience from 2G to 3G Cost-effective Roll-out of N/Ws and Accessible devices for consumers

15. Spectrum Harmonisation Implementation – The Reality • There are many different obstacles to harmonising spectrum allocations from current spectrum uses such as, for example, the costs in migration of incumbent radio systems in providing additional spectrum for commercial communication services, radio and television broadcasting, or in the provision of key public services, such as emergency services. Boston Consulting Group – Measuring the Cost of Delay

16. Spectrum Harmonisation - Reform Needed?? • 5G is viewed as a key factor in restoring the competitiveness of many industries competing to establish global digital leadership. • It will involve significant investments in much denser networks, as some of the massive gains in capacity will come from using new spectrum bands which have shorter ranges than those mainly used today. • Testing of 5G equipment is beginning. The US started this year in eleven cities, followed by South Korea next year and Japan in 2020. • Steps are needed to avoid a repeat of the problems associated with multiple instances differing spectrum allocations for LTE.

17. Spectrum Harmonisation – Towards a Broader Definition • When we think about Spectrum Harmonisation, we typically think about uniform allocations of spectrum for services across regions. • A broader definition is needed to include the following important potential constraints on optimal spectrum use and achieving maximum economic and social benefits. • A broader definition of Spectrum Harmonisation includes: • Spectrum allocations • Technical conditions of use • Spectrum Policy developments on licensing, assignment and use leading to: • General Authorisations; • Technical Flexibility/Neutrality – Spectrum User Rights; • Longer Licence Durations 25 + years; • Growth of Secondary Markets - Trading used to remedy post-auction defects; • Binding tools to resolve cross-border interference issues • Strengthened regulatory capability in both technical and economic spectrum management – reality can be characterised by either too little or too much.