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.