Though many changes take longer than initially expected, one might argue that communications business models based on scarcity of any sort are going to be seriously challenged over the next decade, in many markets.
From “scarce” access networks (“just one network”) to “scarce bandwidth” (copper, fixed satellite, mobile) to “scarce business models” (limited supply, robust demand), we are likely to move to “less scarce” local access providers (more competition) to “abundant bandwidth” (more spectrum, shared spectrum, new spectrum, new undersea cables, more dense optics, new platforms) and “multiple business models (new ownership methods, new revenue sources).”
As much as global telecom markets have changed over the last several decades because of privatization, competition, wireless, the shift to IP networks and changed end user demand, more change is coming over the next couple of decades.
Looking only at “supply” changes, and recognizing it is a long process, we might already be starting to see some change in the perceived value of spectrum assets, for example.
We might soon get a test of mobile service provider willingness to pay, and perceptions of spectrum value, as the Indian government gets ready to auction off about 2.3 GHz of mobile spectrum for 3G and 4G purposes.
Over the longer term, bigger changes are likely. In the U.S. market, for example, up to 29 MHz of new mobile and communications spectrum--up to 7 GHz being offered unlicensed--will be released for use. That is an order of magnitude, or up to two magnitudes, more bandwidth than presently available in the U.S. market for all mobile and Wi-Fi networks.
Add the impact of new networks, ranging from low earth orbit satellite constellations to new fixed wireless platforms, spectrum sharing and flexible use of spectrum, plus advances in radio technology, modulation and core network properties, and one has to believe the valuation of spectrum will change to reflect abundance, rather than the traditional scarcity.
That will significantly affect, if not undermine, many business models based on “scarcity.”
In India, some estimate that the leasing of just 770 MHz of that spectrum--in the 700-MHz band--could generate as much as 70 percent of total proceeds, even though the 700-MHz block represents just about a third of the available spectrum.
But others think operators will not bid so much, either for 700-MHz or the other spectrum, for entirely practical reasons: they might not believe they can earn a reasonable return on the investment.
Some speculate that sold spectrum–assuming virtually everything is purchased–will amount to about US$83 billion, increasing mobile service provider debt loads as much as 185 percent.
Few think mobile operators will buy all the spectrum at proposed prices, for that reason. They simply might not be able to earn a return on the spectrum investments.
At such expected levels, the auctions would represent more than 25 percent of the country’s national budget for the financial year 2016-17, and more than double the combined revenues generated (around $38 billion) by all telecom companies during the financial year 2014-15.
The problem is that some observers believe the service providers cannot possibly afford to buy all that spectrum, at suggested minimum prices. A 2010 auction of 3G spectrum, for example, occurred at prices higher than seen in similar auctions in Germany and the United Kingdom.
Some have called the earlier 3G prices irrational. Perhaps more would simply note that at the minimum bid prices, not all the spectrum will be sold.
In other markets, spectrum strategy likely already is being affected by the prospect of much new unlicensed, shared spectrum and vast amounts of brand-new communications spectrum to be released for 5G and other untethered network purposes.
Though scarcity will remain a key issue, on a longer term basis, in many markets, scarcity value will lessen, making high spectrum prices dangerous for business models.
Changing supply and demand issues, and the business model for Internet access, is a key focus of the Spectrum Futures conference.
New lower-cost platforms and huge increases in spectrum supply are among the issues to be discussed.
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