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The FCC to explore the Spectrum Frontiers

Yesterday Federal Communications Commission chairman Tom Wheeler channeled President John F. Kennedy in his announcement that the Commission will be issuing rules that release additional spectrum for use by 5 G devices and services. The release will also include 14 GHz of unlicensed spectrum. Mr. Wheeler wants to make 5 G a national priority given the role it plays as a platform for the internet of things. Mr. Wheeler did not come to this point overnight or by himself.

Working groups in the private sector have been making regulators aware of the spectrum requirements necessary for deploying effective 5 G networks. For example in August 2015, 4 G Americas, a wireless trade association, released a whitepaper identifying the best spectrum bands for 5 G. The paper makes the following key points:

  • “Mobile spectrum bands below 6 GHz will be valuable to allow the smooth integration of 4 G and 5 G systems.
  • Spectrum bands in the range above 6 GHz will offer technical challenges; however, capabilities for mobile services are possible in the higher band ranges with new radio solutions.
  • A variety of bands are needed to address both coverage and capacity needs of evolved 4G and 5G systems.
    • Lower frequencies have better propagation characteristics for better coverage and thus can support both macro and small cell deployments.
    • Frequencies beyond those traditionally used for cellular systems, especially those above 6 GHz are important to consider.
    • Higher frequencies can support wider bandwidth carriers due to large spectrum availability at millimeter-wave bands for providing very high peak data rates in specific areas where traffic demands are very high.
  • Action is needed by regulators to ensure that new spectrum needs are addressed for the evolution of 4 G and additionally to address the timely introduction of 5 G by identifying new spectrum ranges to be studied in the ITU- Radiocommunication Sector (ITU-R).” (Source: Yahoo! Finance)

The telecommunications services sector was in the positive this morning along with other sectors in the economy so saying that Mr. Wheeler’s announcement moved mountains much less the telecom sector would be a reach.Acting as a monopoly licensor of spectrum, I suspect that wireless companies will be seeking licenses at a premium given the scarcity of the resource. Mr. Wheeler admits that the emerging technology should be driving demand for spectrum. Fortunately in this case he appears willing not to hinder deployment but issuing new rules.

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Is the FCC making venture capital investment in unlicensed spectrum risky?

Posted May 19th, 2016 in spectrum, unlicensed spectrum and tagged , by Alton Drew

Venture capital investing in device makers that use unlicensed spectrum have a number of challenges. One challenge is interference from other networks operating in unlicensed spectrum bands. For example, the Federal Communications Commission has in circulation an item containing a request by Globalstar to deploy a low power broadband network in the 2473-2483.5 MHz band where certain devices using unlicensed spectrum operate. The Commission needs to determine whether this service will interfere with devices using unlicensed spectrum.  A number of providers, like Bluetooth, that use unlicensed spectrum to provide services have raised their concerns with the Commission. If consumers find they cannot use devices due to interference, smaller revenue streams may result, putting the device maker’s business model in jeopardy.

Another challenge comes from using unlicensed spectrum itself. Not only is its use less protected from interference as opposed to licensed spectrum, but since the provider also has no license to use as collateral for financing. Will a venture capitalist want to pick up the financing slack (and risk) when additional financing can’t be obtained from banks?

Also, since devices simply need certification that they meet Commission operational rules for unlicensed spectrum, barriers to entry in the unlicensed device space are lower than that in the licensed space. The potential for increased competition means potential reduced revenue streams which lowers returns on a venture capitalist’s investment.

The Commission can’t do much in terms of upfront capital costs or encouraging investment in proprietary technology, the kind of moats that providers of devices using unlicensed spectrum could create to protect their turf. The Commission has to come up with workable definitions of acceptable interference in the unlicensed spectrum space. The Commission should also ensure that deployment of a broadband network in unlicensed space doesn’t result in privatization or a gatekeeper scenario that keeps other unlicensed device providers out of the unlicensed spectrum space.

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Driver-less cars and the nanny state on steroids

Posted May 12th, 2016 in spectrum, unlicensed spectrum, Wi-Fi, wireless communications and tagged by Alton Drew

I’m not a fan of the driver-less car concept. What’s the fun of a driver-less car unless the car itself is not fun to drive to begin with. What’s not so fun is a brewing fight over the best uses for unlicensed spectrum as driver-less car producers bump heads with communications providers. In this article from The Washington Post, there is a discussion about a proposal from Transportation secretary Anthony Foxx that would require all new cars be equipped with car-to-car communications devices. These devices would operate within 75 Mhz of the 5,9 Ghz band. Groups, like the National Cable and Telecommunications Association, argue that spectrum is running out and unlicensed spectrum needs to be made available to fill the gap.

Unlicensed spectrum has been touted as a space for technology and communications innovation. It’s the area in the electromagnetic spectrum where certain wireless devices play including WiFi hot spots, medical equipment, wireless headsets, remote car door openers, wireless keyboards, and cordless phones. With cognitive radio technology, unlicensed spectrum’s vulnerability to interference can be addressed making unlicensed spectrum an emerging alternative for carrying communications.

The only long-term benefit I see from driver-less cars is that flowing to companies like Zip Car. Uber drivers should be scared shitless because why get in a car with a driver with a criminal record when all you have to do is call up a driver-less car from Google. And while the State makes an argument that driver-less cars can reduce the number of non-alcohol related accidents by 80%, shouldn’t drivers (and the insurance companies that issue policies) be prepared to take on the costs of accidents?

I would rather see every available piece of spectrum provided to households that pursue a self-sustainable path. For example, using unlicensed spectrum for their internal needs like monitoring electricity usage or connecting their homes to their rooftop solar panels or wind turbines. Or using unlicensed spectrum to connect with neighbors and public safety.

The Obama administration’s nanny-state approach to the use of unlicensed spectrum by going to bat for initiatives like driver-less cars is a waste of a valuable resource.

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Sprint may plan to mortgage its license proceeds but not the spectrum license

Posted March 16th, 2016 in spectrum, Sprint and tagged , by Alton Drew

Sprint, a mobile broadband provider, has been plodding through eight years of losses. It has been toiling under the weight of $34 billion of debt. To give itself relief, Softbank, the entity with majority control of the carrier, has come up with a plan that involves creating another subsidiary of Softbank and have that subsidiary lend Sprint the money to bail itself out. According to Bloomberg Businessweek:

“According to Sprint Chief Financial Officer Tarek Robbiati, the proposal is to create another subsidiary of Son’s Japanese corporation that will lend Sprint money. The new unit plans to accept the carrier’s wireless equipment and some of its rights to slices of the wireless spectrum as collateral. Sprint says that while it won’t give up control of those precious airwaves—worth more than $115 billion, according to Bloomberg Intelligence—it’s aiming for $3 billion to $5 billion this year from these loans.”

The way Bloomberg Businessweek reports the initiative the first impression one gets is that the actual spectrum licenses can be mortgaged. What can happen is that a security interest in the proceeds of a sale of a spectrum license can be formed. The United States Court of Appeals-Ninth Circuit in MLQ Investors v. Pacific Quadracasting, Inc.held that:

In other words, the FCC may prohibit security interests in licenses themselves because the creation of such an interest could result in foreclosure and transfer of the license without FCC approval.   Such approval is necessary to regulate the airwaves in the public interest.   No such public interest is implicated, however, by a security interest in the proceeds of licenses, which does not grant the creditor any power or control over the license or the segment of the broadcast spectrum it represents.

Sprint investors should be aware of this distinction.

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Is there enough flexibility for innovation in the high frequency spectrum space?

I wouldn’t exactly say that a political battle is brewing per se around the Federal Communications Commission’s proposed rule making on opening spectrum use beyond 24 gigahertz but some interested parties would like to see the Commission open up this portion of the electromagnetic wave opened up to more technology than just mobile wireless.

For example, the Consumer Electronics Association wants the Commission not to focus solely on mobile broadband but on a wider range of services.  Harold Furchgott-Roth in apiece for Forbes argues that the Commission should allow for flexibility in spectrum use by not limiting the type of technology that can be developed and commercialized in the high frequency bands.  Like CEA, Mr. Furchgott-Roth believes just limiting the 24 GHz to 39 GHz to mobile broadband would be a waste of spectrum’s final frontier.

During the comment period on the Commission’s proposed rules we may get a better view as to how the private sector wants the spectrum real estate developed.  From an entrepreneurial and investor perspective, Mr. Furchgott-Roth and the CEA make good arguments.  Can the markets afford a restriction on innovation in the high-frequency space where the Commission for the most part limits use of this spectrum to mobile wireless?