WHAT TYPES OF DEVICES might ride on the 700 MHz frequency licenses now up for bid in the United States?
The question is as open and varied as the 214 qualified spectrum bidders and their disparate strategies, analysts said.
“We don’t know what the winners of the 700 MHz auction will use the spectrum for,” said Will Strauss, principal at Forward Concepts, a semiconductor research firm. “Would it be WiMAX? Would it be more MediaFLO? Would it be for cellular? None of this is yet obvious.”
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Among the qualified bidders, “90% of them you’ve never heard of,” said Mike Thelander, principal at Signals Research Group, L.L.C. The list of 214 reveals many modest, regional, cellular players, the analyst said.
Diverse bidders, niche opportunities
“The motives of the bidders are extraordinarily diverse,” said John Jackson, analyst at Yankee Group. “They all have different business models with different motivations to obtain 700 MHz spectrum. The thinking is that this will create a more compelling market for devices and services that go beyond cellphones and laptops.”
Despite the spectrum’s desirable characteristics, the exciting issues such as “open access” the auction has raised, the high financial and strategic stakes and technical possibilities, even the holder of a nationwide footprint of 700 MHz spectrum licenses represents a mere niche for currently recognizable, global device vendors, the analysts said.
The C Block, in particular, with its open-access provisions, does not represent a major market opportunity for multinational device makers, Thelander said.
“Just because the open-access provision of the C Block requires an operator to support all devices that can ride on it doesn’t mean that the major handset vendors have to build devices to that requirement,” Thelander added. “If your device doesn’t win carrier support, you’d be stuck with all the marketing expenses for what amounts to a niche opportunity. Conversely, if a carrier agrees to support a certain type of device, the big vendors may go for it.”
And if license winners take away less than a national footprint, the market opportunity for device builders may favor smaller players eager for business, rather than the multinationals that depend on economies of scale for their profits, Thelander said.
“There’s a certain degree of uncertainty,” Thelander added, “and a degree of technical certainty. For instance, LTE, HSPA and WiMAX are technologies that make sense to work on 700 MHz. The uncertainty with all three is: how large a market opportunity is there?”
“This is another part of the challenge,” Jackson agreed. “The 700 MHz auction is happening only in the United States, which as a whole represents only 15% of the global cellular business. This doesn’t have a ton of visibility for many international players.”
Once license winners assess their new holdings, they likely will take some time to develop the service strategies that promise the highest return on investment for the billions of dollars they will have spent, both Thelander and Jackson said.
Device development cycles
That will initiate development cycles that range from months to a year or more. No device on the market today runs on 700 MHz, according to Thelander.
Although the 700 MHz spectrum presents some technical challenges, the analysts said, none are considered insurmountable hurdles. But different technologies have different development cycles, Thelander pointed out.
Should a spectrum winner choose to deploy HSPA on an existing CDMA2000 1x EV-DO network – essentially rebanding a 3G solution – it might take six to nine months to develop the base station technology, including the chipsets and longer for the devices, particularly due to testing demands, Thelander said. If the license holder seeks to deploy LTE, there’s a time-to-market disadvantage (unrelated to 700 MHz characteristics) that could delay implementation for two years or more.
If the service-of-choice for a license winner turned out to be 3G cellular service, according to Jackson, a multinational device maker might seek chips and develop devices that support four frequency bands (700, 850, 1700 and 1900-2100 MHz) plus Wi-Fi, GPS, Bluetooth and WiMAX.
“This is the reality that software-defined radio guys have been waiting for,” Jackson said. “SDR, now called ‘agile radio,’ means tuning a device’s reception on-the-fly to accommodate all those radio bands. That will affect the whole signal chain, from the antenna to the radio. We do know there’s a cost and complexity to supporting all those bands. It could be challenging and expensive.”
