Monday, August 29, 2011

4G World Early Bird Registration Ends August 31

There is still time to save on 4G World 2011 registration! Register before August 31 and save up to $600 with Priority Code 4GWMS22 and early bird rates.

With more than 300 exhibitors and sponsors, more than 200 speakers and 80 plus interactive sessions, 4G World delivers unprecedented opportunities for networking, business and partnership development, education and certification.

The program features the WCAI Spectrum Summit on Monday, Oct. 24, starting at 1 pm. This summit will explore the implementation of the Obama Administration’s spectrum plans and their potential impact on the industry. Panel discussions will cover such topics as broadcast incentive auctions, national public safety network deployment, rebanding 2 GHz for mobile broadband, spectrum bands suitable for smart grid and government deployment, and options and opportunities for meeting spectrum capacity needs for fixed networks and networks operating in rural areas.

If you own a 2.5 GHz license, then WCAI’s 2.5 GHz Operator Meeting is a must-attend event for you. Scheduled for Oct. 24 from 8 am to 12:30 pm, the meeting will bring together 2.5 GHz licensees to discuss some of the most pressing issues, including operational challenges, equipment availability, what works in marketing, data security, spectrum protection, bandwidth management strategies, wholesale agreements, regulatory challenges and much more.

Last but not least, WCAI members and friends are invited to attend the WCAI Networking Dinner, held at 6 pm on Oct. 25 in a classic Chicago steakhouse with a beautiful view of the Chicago River. The dinner will feature a closed-door cocktail hour, the annual WCAI Awards Program, and a three-course meal for all attendees. For more information or to register for all three events, please visit the WCAI website.

See you in Chicago!

Friday, August 19, 2011

The Relationship between Universal Service Reform and Incentive Auction Legislation

By Fred Campbell, President and CEO, WCAI

Reprinted from Bits on Broadband blog

"People love to categorize." Categorization helps us make sense of a complicated world. But, when categorization doesn't reflect substantial similarities, it obfuscates as much as it illuminates. So it is with communications policy, which is categorized primarily by the technologies used to deliver communications services ("stovepipes") rather than their impact on consumers. This approach to categorization obfuscates the relevant question - whether a particular regulatory approach maximizes consumer welfare (rather than the prospects of particular competitors).

The ongoing debates about broadcast incentive auctions and universal service reform offer a poignant example of such obfuscation. Because the services that are the subjects of these debates use different technologies, and are thus categorized separately, these debates are being conducted independently. When viewed from the perspective of consumer welfare, however, these debates are inherently interrelated. They both involve regulations that are intended to address the same concern - the widespread dissemination of information to consumers from a multiplicity of sources.

The core question in both debates is to what extent the government should subsidize consumer access to information. Because broadband service provides access to far more information than is possible through over the air broadcast, answering this question in the universal service debate informs the incentive auction debate: If the government subsidizes universal broadband, it would render government subsidization of over the air broadcast duplicative.

The Government Subsidizes Both Universal Service and Television Broadcast

The government subsidizes universal telephone service through mandatory fees. As I explained in a previous post, the broadcast industry is subsidized by the government through the imposition of must-carry obligations on cable providers:

As a result of the success of cable television, it had become clear by 1992 that broadcasters lacked a viable business plan. Because fewer and fewer people were watching broadcast television over the air, broadcasters were having a more difficult time selling advertisements. To prop up the dying broadcast industry, Congress decided to force cable providers to carry broadcast channels on their cable systems. Forced cable carriage ensures that broadcasters reach enough "eyeballs" to satisfy advertisers, which is how broadcasters make money.

Because only about 10% of the population actually watches television transmitted over-the-air, without government mandated must carry, most broadcasters couldn't sell enough advertisements to survive. Forced cable carriage of broadcast signals is thus an indirect government subsidy financed by cable consumers. (For a detailed must-carry discussion, see Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622 (1994) (Turner I).)

Television broadcasters also enjoy subsidized use of radio spectrum worth up to $33 billion. When Congress provided the FCC with auction authority in 1993, it required that FCC auctions promote multiple purposes (see 47 U.S.C. § 309(j)(3)), including:

  • development and rapid deployment of new technologies, products, and services;
  • recovery for the public of a portion of the value of the public spectrum resource and avoidance of unjust enrichment; and
  • efficient and intensive use of the electromagnetic spectrum.

Auctioning broadcast spectrum would support all of these Congressional objectives. For that reason, during the debates that preceded the 1996 Act, multiple bills were introduced proposing to auction digital broadcast channels. (For a detailed history, see Ellen P. Goodman, Digital Television and the Allure of Auctions: The Birth and Stillbirth of DTV Legislation, 49 FED. COMM. L.J. 517 (1997).) But Congress ultimately bowed to broadcast industry pressure and exempted from auction "initial licenses or construction permits for digital television service given to existing terrestrial broadcast licensees to replace their analog television service licenses." (See 47 U.S.C. § 309(j)(2).) As a result, broadcasters lacked economic incentives to transition to digital technology more quickly or use their spectrum more efficiently, and the public didn't recover any of the value of the public spectrum resource the broadcasters squatted on for over a decade.

These broadcast subsidies remain in place today even though "the social opportunity cost of using the TV Band for television broadcasting . . . is conservatively estimated to exceed $1 trillion (in present value)." (Thomas W. Hazlett, Unleashing the DTV BAND: A Proposal for an Overlay Auction (2009) at p. 5.) This opportunity cost dwarfs the benefits of over-the-air broadcast television. Only about 10% of the population actually watches television transmitted over the air and there is little evidence all of these viewers actually need subsidized television. Because over the air broadcast subsidies are not targeted to lower income Americans, the 10% of over the air TV watchers includes middle-class and wealthy Americans who have no need for government subsidies. Given the high opportunity costs and limited benefits of over the air broadcasting, it's hard to understand why there is any interest at all in subsidizing television.

Both Universal Broadband Service and Television Broadcast Serve the Same Purpose

Preservation of free over-the-air broadcasting was originally intended to promote the widespread dissemination of information from a multiplicity of sources. (See Turner Broadcasting System, Inc. v. FCC, 520 U.S. 180 (1997) (Turner II).) In the Turner decisions, the Supreme Court upheld must carry legislation because broadcasting was "a principal source of information and entertainment for a great part of the Nation's population." When the Turner II decisions were issued in the 1990s, 40% of American households still relied on over the air signals for television programming. Although consumption of programming over the air had declined by the 1990s, broadcasting was still a significant source of information.

Over the last decade the facts have changed dramatically. As noted above, broadcasters now serve only about 10% of the population over the air. At the same time that over the air viewership has declined, broadband availability and subscription rates have exploded. Approximately 95% of the U.S. population has access at home to broadband service capable of delivering high quality video (4 mbps downloads) (see sixth broadband deployment report, available here), and approximately 66% of Americans use a high-speed connection at home. Because universal service reform would ensure that all Americans - regardless of their income - have access to broadband offering high quality video capabilities (just like TV), there would no longer be any rationale for subsidizing over the air television. The purpose served by over the air television - the widespread dissemination of information from a multiplicity of sources - would be served by universal broadband access.

Although government subsidies can promote consumer welfare, "[i]t is widely acknowledged that subsidies are generally economically inefficient." (Erwin H. Bulte, Richard Damania, and Ramón López, On the Gains of Committing to Inefficient Production: Corruption and Low Land Productivity in Latin America (2004) at p. 2.) Subsidizing duplicative programs that serve the same purpose would be blatantly wasteful. Such waste would be particularly egregious in this context due to the high opportunity cost of using spectrum for over the air television. Television programming can be (and primarily is) delivered via the wired Internet, cable, and fixed satellite systems; but the wired Internet, cable and fixed satellite systems cannot provide the mobility that broadcast spectrum can enable.

When universal service reform and incentive auction policies are viewed holistically, the best course of action is clear: enact both policies this year. Universal broadband service would give every American consumer access to more information from more sources than could ever be made available via broadcast television, and freeing broadcast spectrum for mobile use would help the United States meet its goal of leading the world in mobile broadband. The resulting win-win would boost the U.S. economy, create jobs, and spur innovation.

Monday, August 8, 2011

Wi-Fi Offload

Wi-Fi Offload: Build Your Own Wi-Fi Network or Share It?

By Monica Paolini, Senza Fili Consulting

From FierceBroadbandWireless

For mobile operators fighting network congestion, Wi-Fi offloading has been an unqualified success. In some high-traffic locations in Hong Kong, up to 80 percent of the cellular data traffic is offloaded. In South Korea, SK Telecom has 62,000 hotspots which are actively used for Wi-Fi offload of cellular traffic. The operator plans to add 45,000 more locations during 2011.

In the U.S., the Wi-Fi offload strongest proponent is AT&T (NYSE:T), with 25,000 Wi-Fi locations. AT&T was the first operator in the U.S. to see the sudden increase in data traffic in urban areas where adoption of the iPhone was the highest (most notably New York and San Francisco) and, as a result, was the first that had to address systemic network congestion--not just the occasional congestion that may be driven by a specific event.

An increasing number of mobile operators are looking at Wi-Fi offload to relieve network congestion, keep costs under control, and improve the subscriber experience. As in many public locations Wi-Fi access is free and most households and office locations with smartphone users have Wi-Fi, offloading cellular traffic to these networks is a low-hanging fruit. The marginal cost to both operator and subscriber is zero (there is a cost to the operator that backhauls the Wi-Fi traffic, but so far Wi-Fi offload represents a small fraction of the entire wireline network traffic, so this has not yet surfaced as a major issue). All the operator needs to do is to nudge the subscriber towards Wi-Fi--not a difficult task, since most subscribers know performance over Wi-Fi is likely to be better than over 3G.

The other type of Wi-Fi offload--the one championed by SK Telecom and AT&T--is fundamentally an extension of the operators radio access network (RAN) to include hotspots directly managed by the operator. Wi-Fi hotspots are not designed to capture most of the network-wide traffic, but rather to reduce the traffic load in areas where the cellular infrastructure does not have enough capacity. As such, operators can choose to deploy hotspots where (and when) they see congestion in their network.
While congested areas typically represent a small percentage of a nation-wide cellular network, they are where many of the subscribers concentrate and where the need (and value) of mobile data access is highest. At these locations, the Wi-Fi infrastructure can carry the "low-margin bits," as Jeff Thompson, CEO of Towerstream, calls them--the traffic from bandwidth-intensive applications like YouTube that generates limited revenues to operators, but that has the potential to disrupt higher-margin services such as voice over the macro cellular network.

Mobile operators that decide to offload to a Wi-Fi hotspot network specifically built for this purpose have so far preferred to build and control their own networks. But is this the most effective--in terms of cost, performance, and time-to-market--route to Wi-Fi offload? Or should operators have some other company build them and operate the Wi-Fi infrastructure on their behalf? And if doing so, would it make sense to share the network with competing mobile operators--not on a roaming basis, but sharing the infrastructure with them?

The obvious advantage in building and operating a network is that the operator has complete control of it. As Wi-Fi uses license-exempt spectrum that is inherently shared with whoever decides to use it at any given location, mobile operators cannot exert the same level of control they have over the cellular RAN. Furthermore, the Wi-Fi infrastructure is typically not integrated within the broader cellular network, and operators have little visibility into what the subscribers experience is when they use Wi-Fi or to manage the Wi-Fi traffic as they do (or can) with the cellular traffic.

The depth of expertise among mobile operators resides on large and complex macro networks, not in Wi-Fi hotspots. Macro base stations are expensive and require lots of expertise to deploy and, in most cases, dedicated real-estate assets (i.e., towers or roof-top locations). Wi-Fi equipment is cheaper, faster, and easier to install, but the number of installations is higher and getting access rights and backhaul to them may require substantial effort and money.

The inherent lack of control over Wi-Fi networks and the fact that they are not developed or operated as an integral part of the cellular networks makes Wi-Fi offloading an ideal candidate for a wholesale or infrastructure-sharing model, in which one mobile operator or third-party operator builds and operates a Wi-Fi network that can be shared among operators, or in which one Wi-Fi operator builds and runs the networks for a mobile operator.

Although mobile operators cannot use the Wi-Fi network as a differentiator from other operators if they share the same network, they gain access to a much wider network with higher capacity than they could if they built one on their own at a comparable investment level, and do not have to risk to get distracted by the Wi-Fi network as they try to upgrade 3G or deploy LTE.

To date, the success of infrastructure-sharing initiatives has been very limited in the U.S., where operators do not seem to be under sufficient pressure to relinquish total control over their networks (although Sprint Nextel's (NYSE:S) plans to develop 4G network in partnership with LightSquared and Clearwire (NASDAQ:CLWR) seem to indicate a more welcoming attitude towards infrastructure sharing). This makes a third-party network for Wi-Fi offload a risky proposition, but nevertheless one that may gain acceptance because the need of operators to act quickly to increase network capacity in high traffic locations as their resources are more effectively aimed at their 4G networks.

Towerstream has launched an ambitious project to build a near-carrier-grade Wi-Fi network (to the extent that this is possible using license-exempt spectrum) that mobile operators can use for traffic offload. They decided to build the first network in Manhattan (San Francisco is next), where they have 1,000 Wi-Fi locations, with a plan to grow to 1,500. The next 500 locations will be chosen on the basis of "heat maps" generated by social networking traffic, which is expected to be correlated with mobile data traffic. The Manhattan network is currently in a trial stage, but we should expect tenants in a few months' time.

It will be interesting to see how this project develops and what type of acceptance it will gain among operators. There have been attempts at building Wi-Fi wholesale networks in the past. In fact, AT&T's Wi-Fi network is mostly the result of the acquisition of 20,000 hotspots from Wayport and the Starbucks network (previously operated by T-Mobile USA) in 2008. Before 2008, Wayport was the wholesale provider to AT&T. However the Wayport network was not built for Wi-Fi offload, but rather around partnership with companies like McDonald's which facilitated access to a nationwide network of well-recognized locations.

Towerstream approach and core advantages are distinctively different. The Towerstream network is optimized for offload and covers mostly outdoor locations, which pose a very different set of challenges than indoor locations such as Starbucks. Not only equipment has to be protected differently if installed outdoors, but power and backhaul connectivity may not be available or too expensive. Here Towerstream advantage is that it has access to backhaul connectivity (Towerstream is an enterprise wireless service provider in 12 cities in the U.S.) and has the experience in gaining access to a wide-range of outdoor mounting assets.

As real estate access and backhaul are crucial to build the networks that mobile operators need for offload, cable operators are also well positioned to address this market as they can use strand-mounted equipment installed on assets they control (no need to get deals with Starbucks) and use their own network for backhaul.

The success of a third-party business model can greatly expand the potential for Wi-Fi offload to address congestion in cellular networks. But intriguingly it can also offer a very good model for small cell deployments, where very similar real estate and backhaul challenges exist and are tempering mobile operators' enthusiasm for emerging heterogeneous topologies.