Skip to Main Content

Strategic Business Insights (SBI) logo

Mobile Communications May 2019 Viewpoints

Technology Analyst: Michael Gold

Frontier Spectrum on the Auction Block

Why is this topic significant?

US regulators' emphasis on preparations to use millimeter waves and neighboring frequencies contrasts with practices in other nations.

Description

An auction of licenses to use frequencies near 24 gigahertz (GHz) in the United States largely concluded in April 2019. Bid amounts were lower than many stakeholders expected and lower than what Verizon paid for similar spectrum in a private transaction during 2018. Cellular services face uncertainty regarding the eventual costs of using these and other frequencies in the upper part of the microwave band.

Similar low bids might win at another auction that could conclude within a year. In April 2019, the US Federal Communications Commission (FCC) published plans to assign 3,400 megahertz (MHz) of spectrum in three contiguous millimeter-wave bands above 37 GHz. The planned auction will be among the largest frequency assignments in the history of radio.

Many people have doubts about the use of upper-microwave and millimeter-wave frequencies for mobile communications. A Gizmodo reporter tested several Verizon 5G cell sites in Chicago, Illinois that transmit at frequencies near 28 GHz and work over a limited range of "about a block, maybe a block and a half if you're lucky." Coverage did not extend indoors. Similarly, a PC Magazine analyst detected a coverage radius of no more than about 600 feet from an AT&T 5G cell site that transmits at about 39 GHz in Dallas, Texas.

Implications

As of May 2019, relatively few base stations worldwide operate at frequencies above 3 GHz, although the number of those that do will start to grow this year. Industry could be two years away from having full-scale abilities to supply smartphones that use frequencies above 6 GHz, according to Jefferies analyst Edison Lee, although frequencies below 6 GHz are likely to remain "significantly more useful." An April 2019 white paper by CTIA (formerly Cellular Telecommunications Industry Association), the main trade organization that represents the US mobile-communications sector, emphasized the importance of "mid-band" frequencies from 3.45 to 4.2 GHz, stating that "rival nations are moving forward aggressively to expand access" to those frequencies. China, Japan, South Korea, and six nations in Europe are examples, according to FCC Commissioner Jessica Rosenworcel.

Impacts/Disruptions

Rosenworcel warned that the United States may find itself "without a global supply base as mid-band becomes the core of worldwide 5G service," in a protest against her peers' priorities. Another commissioner recently stated that making mid-band frequencies available "is and will remain a top priority for the FCC," but the first opportunity to do so, by auctioning licenses for frequencies near 3.5 GHz, will not occur until 2020 "at the earliest." For at least a few years, many 5G phones will likely work at frequencies near 3.5 GHz in Europe and Asia but not in the United States.

Use of frontier spectrum accompanies a number of issues. Early adopters of 5G phones that use millimeter waves and upper-microwave frequencies might perceive a collection of super-hotspots rather than fully mobile broadband experiences. And even with expected technology improvements, high-density base-station infrastructure could be costly.

An early emphasis on use of millimeter waves and upper-microwave frequencies in the United States might delay the development of worldwide economies of scale for 5G infrastructure and smartphones. Nevertheless, some analyst firms (ABI Research and Analysys Mason are examples) remain bullish on the outlook for 5G in the United States, largely because they see service providers there as being in good financial shape and thus prepared to invest heavily in 5G technology.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: Medium to High

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: Now to 10 Years

Opportunities in the following industry areas:

Mobile communications services, network equipment, managed operations services, managed consulting and implementation services

Relevant to the following Explorer Technology Areas:

Private 5G Networks and Vertical-Service Controversies

Why is this topic significant?

Industries disagree about which parties will supply specialized wireless capabilities to manufacturing, transportation, and other vertical industries.

Description

As the March 2019 Viewpoints describes, 5G has the unique potential to allow industrial users to invent new applications and to replace wired connections with wireless ones. According to recent reports, Germany's telecommunications regulator has reserved 100 megahertz (MHz) of bandwidth near and including 3.5 gigahertz (GHz) for private parties who wish to use private, local 5G networks. BASF, Bosch, BMW, Daimler, Siemens, and Volkswagen have expressed various intentions to build private 5G networks at their facilities in Germany.

Japan is also considering reserving spectrum bands for use by private 5G networks. Cisco, Huawei, and Qualcomm intend to supply 5G gear to private networks worldwide. Also, at a November 2018 workshop organized by the International Wireless Industry Consortium, Nokia and Motorola each described their abilities to support private 5G networks. Another participant was US cellular service Verizon, which promotes various business models that involve quasi-private 5G networks.

Other cellular services—including Deutsche Telekom, Orange, and Vodafone—expressed strong objections to Germany's plan for private 5G networks. Some of these network operators are currently in a bidding war for frequencies that are adjacent to Germany's private-5G band. The GSM Association, a trade organization for cellular services, complained that reserving frequencies for private 5G networks drives up spectrum prices and erodes its members' ability to invest in infrastructure. Also, the CEO of equipment supplier Ericsson expressed concerns that supplying private 5G networks would put the company in the position of competing against its main customers.

In addition to the spectrum that regulators specifically reserve, other wireless channels could enable private 5G networks—at least in some nations. In the United States, enterprises will have access to a 150 MHz band of frequencies near 3.5 GHz, with help from automation that coordinates communications among diverse uses (see the November 2018 Viewpoints). US regulators also plan to allow unlicensed uses of more than 1 GHz of spectrum near 6 GHz—a band that could likewise support private 5G networks and that would depend on automated coordination.

Implications

Industrial players in Germany and elsewhere seem to have no reason to prefer cellular services as the providers of on-premises technologies. BASF's main chemical plant spans about 10 square kilometers and reportedly has 600,000 connected devices—a figure that could grow by an order of magnitude in coming years. Cellular services do not seem to have the skills necessary to operate in such a specialized environment. Private networks might be the only practical ways to realize some of the capabilities of 5G technologies.

Impacts/Disruptions

Although the controversy currently remains focused on Germany and its manufacturing and chemical industries, the introduction of 5G technology seems to have consequences that cellular services did not expect. Shipping ports, airports, and oil wells are among the candidate sites for private 5G networks—which could also benefit municipalities, armed forces, and other public-sector organizations.

Automotive players' apparent wishes to avoid paying monthly charges for the privilege of using 5G technology apparently extends beyond the factory fence. Assuming that wireless communication proves to be important to in-vehicle safety systems, cellular services might have no role. Volkswagen and Siemens are experimenting with smart intersections that rely on the IEEE's 802.11p specification. Municipalities might deploy such technology, but cellular services seem unlikely to do so.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: Medium

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: 5 Years to 10 Years

Opportunities in the following industry areas:

Mobile communications services, network equipment manufacturers, managed services, general manufacturing, shipping ports, airports, distribution centers, chemical and materials producers, oil and gas producers, municipalities, emergency services, armed forces

Relevant to the following Explorer Technology Areas: