Analysts see growth for equipment providers regardless of FCC decision
Companies from inside and outside the wireless industry are excited about the Federal Communications Commission’s plan to make more spectrum available in the 3550-3700 MHz band. Citizens broadband radio service, or CBRS, could deliver the reliability and security of cellular connectivity at price points that will support new business models.
The FCC’s decision on how to auction this spectrum could impact which new business models take hold. The agency has said it will allocate the CBRS spectrum in three tiers. Tier 1 is for incumbent users, many of whom are fixed satellite service providers. Tier 2 will be licensed for commercial use, and Tier 3 will be generally available to any users who can deploy the spectrum without disrupting service in the two higher tiers.
Tier 2 is the contested space. Large wireless service providers want the FCC to offer 10-year, renewable licenses covering partial economic areas. Smaller providers want licenses covering smaller census tracts, and they want shorter time periods for the licenses so that they will sell at lower price points. They are joined by some of the largest companies in the U.S., who would like to buy small-area licenses in order to deploy their own corporate LTE networks.
Analyst Joe Madden of Mobile Experts, author of a recent report on CBRS, would like to see the government reserve some of the spectrum for private companies and smaller providers, while auctioning the rest on terms that would appeal to the big wireless carriers.
“I am hopeful that they will keep some of the licenses based on census tracts because there is a place for private LTE,” Madden said. Eventually, private LTE networks could evolve to private 5G networks, and could support robots and other smart factory applications. Madden said using traditional cellular service to support smart factories could be prohibitively expensive for some companies because of the high volume of data they will need to send over the networks.
Analyst Iain Gillott of iGR Research also sees demand for private LTE, which he says could start to erode carrier control over cellular communications.
“The 150 megahertz of CBRS has the potential to disrupt the mobile operator’s grip on cellular voice and data services by enabling new players – enterprises, schools and universities, hotels and hospitals – to build and operate their own private LTE networks,” Gillott wrote.
Equipment vendors like Federated Wireless, Ruckus Wireless, and Baicells are busy developing hardware to manage access to this spectrum, and will be ready to help private companies deploy CBRS if they are able to acquire licenses. Madden said he expects radio giants Nokia and Ericsson to join smaller players in the race to create CBRS small cells. Even if CBRS licenses don’t end up in corporate hands, analysts expect the newly available spectrum to benefit radio equipment manufacturers.
“There are different driving forces for all these business models,” said Madden. “So even if one or two don’t work out, the others will.”
So-called neutral host providers could be buyers of CBRS equipment and even of CBRS licenses. These are companies like ExteNet Systems, Mobilitie, Crown Castle and American Tower, who deploy cellular equipment on behalf of the carriers and try to bring several carriers onto each system. Neutral host providers could bid on CBRS spectrum, and monetize it by deploying small cells and renting access to carriers.
Smaller carriers and wireless internet service providers stand to benefit from the CBRS auctions if the government creates census tract licenses. Some wireless internet service providers are already using the 3.5 GHz spectrum, according to Gillott, and affordable CBRS licenses would enable them to expand their services. They also want to use CBRS to deploy indoor small cells for their business customers.
“Wireless ISPs that have been using Wi-Fi or WiMAX are looking for a step up in terms of reliability and quality,” said Madden. WISPs and rural carriers have been vocal opponents of the large carriers in the battle over how the FCC should auction the CBRS spectrum.
If the FCC auctions 10-year licenses for partial economic areas, large wireless carriers stand to benefit, as do the cable operators who are inching their way into the wireless market.
Wireless carriers will use CBRS to add more small cells to their networks and to add new 3.5 GHz radios to existing small cells. The ability to deploy more small cell capacity will help operators roll out 5G networks, which are expected to require very dense deployments to support low latency applications like autonomous driving.
Cable operators are also seen as potential buyers of CBRS spectrum. They can get into the wireless business much more cost-effectively if they can deploy their own spectrum instead of buying access to carrier-controlled spectrum as they do now. In addition, cable companies are already placing boxes in peoples’ homes, and could potentially add CBRS radios to this on-premise equipment at some point in the future.
“CBRS could enable wired broadband providers to disrupt mobile operators’ market share via the residential market,” said Gillott, highlighting the fact that CBRS is a double-edged sword for the carriers. On one hand, it can help them achieve the small cell density 5G networks will require, but it may also loosen their grip on the overall market for wireless service.
All four nationwide carriers are members of the CBRS Alliance, as are the largest cable operators, radio manufacturers, and neutral host providers. All of these companies see potential in the 3.5 GHz band, and analysts say that even if the auctions end up favoring some companies over others, the winners will outnumber the losers as CBRS small cells make their way to market.
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