Tellabs Inspire Magazine: Spectrum Of Opportunities

article reprint — TELLABS INSPIRE apRil 2008

Spectrum of Opportunities From Asia to Europe to the Americas, 2008 is the year of the spectrum auction. Here’s what to watch. By Lynnette Luna

Verizon Wireless both have committed to opening their existing networks to new devices and applications beyond those they offer.

Spectrum of Opportunities Freedom isn’t free. Just ask the bidders in the U.S. 700 MHz spectrum auction. The band is widely considered the last of the beach-front property, partly because of its favorable propagation characteristics: Signals travel farther at 700 MHz than at higher frequencies such as 1900 MHz, so operators need fewer base stations to cover an area. That translates into lower overhead costs — a major asset for any operator, but particularly for newcomers who want to be price competitive with incumbents. Such optimism is reflected in the bidding. At press time, the auction had garnered more than $19 billion in bids, significantly more than the $10 billion to $15 billion the FCC had originally projected. “Adding a new swath of spectrum gives new entrants an opportunity to enter the service provider mobile market and/or provides current service operators an opportunity to enhance their current position,” said Emmy Johnson, founder and principal analyst at Sky Light Research. “It is not often that a large portion of spectrum comes up for bid, and it is seen as a key strategic move to take advantage of it when it occurs, especially if this is one tool lacking in the service provider’s tool kit.” The 700 MHz auction has also attracted attention because of the large number of bidders involved (214), particularly those companies with little or no association with traditional wireless operators or technology, including Chevron, and MSOs such as Cablevision and Cox. But perhaps the biggest focus is on Google, which pledged to bid at least $4.6 billion. Why $4.6 billion? Google and a coalition of other Silicon Valley companies and consumer groups lobbied the FCC to require the winning bidder of some of the spectrum to allow open access — in which devices aren’t locked to a single carrier — and $4.6 billion was the minimum amount necessary to trigger the open-access provisions. With the $4.6 billion reserve met, many industry experts believe Google dropped out of the auction after securing the open-access provisions for which it had lobbied. If so, Google has still had a significant impact on the U.S. mobile industry because AT&T and

“Having won its point, Google is expected to stay out of the auction,” said Ken Hyers, an analyst with Technology Business Research. “However, other new players, such as cable companies, may be actively participating in the auctions. Regardless of who wins the auction, the outcome for consumers looks bright since the choice of devices and handsets that can be brought onto networks will expand — something that the operators will have to respond to with more competitive pricing and more attractive products and services.”

WiMAX at 700 MHz Another wild card is the technology that will be deployed at 700 MHz. Most industry pundits believe it will be an all-IP, OFDMAbased technology such as mobile WiMAX or LTE, the 4G path for GSM operators. CDMA operator Verizon, which was expected to go big in the 700 MHz auction, has plans to align itself with partner Vodafone to deploy LTE, which requires a significant amount of new spectrum. Until recently, not much of the 700 MHz band was able to support mobile WiMAX because the technology uses TDD. Much of the 700 MHz band’s spectrum, including the coveted C block, is configured for FDD. That changed in January, when the WiMAX Forum announced that it is adding the 700 MHz frequency to its technology roadmap. The specs will be unveiled soon and will support both TDD and FDD certification profiles. “The 700 MHz spectrum is set to become a key spectrum band globally and many administrations are now considering spectrum arrangements in the band,” said Ron Resnick, president of the WiMAX Forum. “Interest in WiMAX deployments is also reinforced now that 802.16e is part of the IMT-2000 family of standards and certified products are becoming available.” WiMAX or not, few companies have revealed device or service plans for 700 MHz. One exception is Qualcomm, which announced in November that it had added support for WCDMA and CDMA2000 to its transceiver product roadmap. Qualcomm’s MediaFlo mobile TV service already uses 700 MHz, and it is among the bidders. AT&T, meanwhile, has purchased Aloha Networks’ 700 MHz spectrum but hasn’t indicated its plans. “What are these devices going to look like? Is it a phone? Is it going to be used for radio broadcast?” pondered Rick Segil, vice president of marketing at antenna-maker Ethertronics. “We just don’t know if the initial applications are going to be data or voice.”

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article reprint — Spectrum of opportunities

3G Spreads Across Latin America The rapid deployment of 3G across the globe largely missed Latin America during the past three years, but the region is finally becoming a hotbed for next-generation deployments. Plans for 3G networks sat on the back burner during 2006 and 2007 as Latin American operators recovered from the massive capital expenditures they incurred migrating from TDMA to GSM or CDMA. But 3G has gained importance now that mobile data services are making inroads into the region and 3G handset prices are falling. As a result, Latin American regulators are auctioning off spectrum, although some operators have already launched 3G services in their existing spectrum. According to Tarcisio Ribeiro, Tellabs vice president and general manager of Latin America and the Caribbean, the new 3G spectrum coming into the region will enable operators to extend services beyond voice and compete with both cable and wireline telephone companies. “The spectrum they are acquiring will allow them to offer broadband services, with the added advantage of gaining mobility,” Ribeiro said. Here’s a rundown of what has already happened and what is ahead:

Bridging the Digital Divide At its November 2007 meeting in Geneva, the WRC adopted an international treaty to increase available spectrum for mobile broadband services. The ITU adopted a proposal, promoted by African governments, to identify a chunk of UHF spectrum for mobile broadband services in developing countries and rural areas of developed countries. Europe, the Middle East and Asia all backed the proposal, agreeing to allocate the same 790–862 MHz band; the Americas identified 108 MHz in the 698–862 MHz band for mobile broadband services. The WRC also identified 200 MHz of contiguous spectrum in the 3.4–3.6 GHz band for high-capacity, next-generation mobile networks. “This decision by the WRC is an important step towards enabling hundreds of millions of people in the developing world and rural parts of the developed world to gain affordable access to broadband services,” said Tom Phillips, chief government & regulatory affairs officer of the GSM Association. “Radio signals in the UHF spectrum will travel further than signals in the higher bands, enabling future mobile broadband networks to reach as far as 2G networks do today.”

n Brazil

— Regulators auctioned off 3G spectrum in the 1900 MHz band. All of the country’s existing operators won spectrum at prices that reached up to a 104 percent premium over the minimum bid determined by the government. In the first two years of offering 3G services, the operators are required to offer coverage of at least 50 percent of the urban area in Brazil’s capital cities, in the Brasilia Federal District and in cities with more than 500,000 inhabitants. WiMAX spectrum will be auctioned this year in the 3.5 GHz band.

n Mexico

— About 90 MHz is expected to be released this year, according to Erasmo Rojas, director of Latin America and the Caribbean with 3G Americas. Regulators plan to sell spectrum at 1900 MHz, 2100 MHz and 1700 MHz, which aligns with the U.S. AWS bands. WiMAX spectrum in the 3.5 GHz band is expected to be offered this year.

n Colombia

— The 1700 MHz AWS band has been reserved for 3G services, and the government appears ready to auction it this spring, Rojas said.

Europe Opens Up 2.6 GHz The United Kingdom, Norway and Sweden are expected to become the first European markets to auction spectrum in the 2.6 GHz band, which will be used for mobile broadband on a technology-neutral basis. These auctions will set a baseline for how much 2.6 GHz spectrum will be reserved for operators that want to deploy OFDMAbased systems, such WiMAX and LTE, rather than 3G technologies such as UMTS. One question is how much of the spectrum will be allocated to TDD to enable WiMAX. CEPT says that regulators should allocate 50 MHz for TDD and two 70 MHz blocks for FDD. But U.K. regulators don’t believe those guidelines match the potential operators are looking for and are prepared to take another approach. Sources close to the WiMAX Forum say it plans an FDD version of WiMAX at 2.6 GHz, although it’s unclear when that might be released.

n Venezuela

— Sixty MHz in the 1900 MHz band was auctioned in December 2007.

n Chile

— Operators have launched 3G in existing spectrum, but Chile plans to auction 700 MHz spectrum for 3G in 2009, aligning itself with the United States. WiMAX will be auctioned in the 2.5 GHz band in the second half of 2008.

Rojas said the initial steps for those operators that have launched 3G is to offer Internet access through laptop data cards, but as handset prices fall they can begin to target enterprises, as well as consumers with e-mail, music and streaming video.

Also in Europe: n United Kingdom

— Ofcom plans to auction spectrum in the 2010–2025 MHz and 2500–2690 MHz bands this summer. That spectrum will be offered on a technology-neutral basis, a boon for operators considering LTE and WiMAX.

Amid objections from the country’s operators, Ofcom plans to buck the European Commission’s decision to allocate FDD/TDD spectrum within the 2600 MHz band by allowing greater flexibility in allocating unpaired spectrum to accommodate WiMAX. Operator objections include the perceived potential for interference.

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n Norway —

Open access is becoming a mantra of sorts, particularly for the U.S. 700 MHz auction. Accenture, a consultant to the world’s largest operators, has been advocating this open-access business model for several months.

Craig Wireless won 50 MHz and is planning a nationwide WiMAX network. It’s not immediately known if the other winners will deploy WiMAX, but the probability is high, say industry watchers.

“The writing is on the wall,” said Shahid Ahmed, partner with Accenture’s Technology Consulting Group and the lead for the firm’s Network Technologies Wireless practice. “Regulatory-wise and policy-wise, everyone is endorsing open access. Times have changed since the Internet debacle in the early 2000s. The cost of IT is now significantly less than it was then. All of this bodes well for a wireless world. It’s the next frontier.”

Regulators auctioned 2.6 GHz spectrum in November and didn’t follow CEPT’s recommendations because of demand from potential WiMAX operators. The Norwegian plan for the 2500–2690 MHz band called for two 40 MHz blocks allocated to FDD and 100 MHz for TDD.

n Sweden —

Two auctions are scheduled: one for 1900–1905 MHz and the other for 2.6 GHz. Both bands will be service-neutral and, within certain limitations, technology-neutral. For example, the winning licensees could use the spectrum for mobile communications or wireless broadband services. The 1900–1905 MHz auction will be for a single national license, while the 2.6 GHz auction will be for 15 frequency blocks: 14 for FDD and one for TDD.

Asia: Mobile WiMAX Hotbed Analysts say Asia will become a hotbed for mobile broadband services, with more than 40 million mobile WiMAX subscribers by 2013, according to Jupiter Research. That’s more than half of all mobile WiMAX subscribers worldwide. Jupiter expects countries such as Australia, India, South Korea and Taiwan to drive growth of mobile WiMAX technology because they’re ideally suited for quick deployment in underserved areas. “Licenses in countries such as India, Japan and Thailand, as well as in more countries in other regions, will be auctioned over the next year,” said Howard Wilcox, a Jupiter analyst. “Timely award of these licenses will accelerate market development.” In December, Japan granted two 2.5 GHz licenses to Wireless Broadband Planning, a WiMAX joint venture headed by KDDI, and Willcom, which is planning an advanced PHS network. KDDI and its investors, which include Intel, Kyocera and a number of Japanese companies, plan to spend about $1.3 billion on the WiMAX network with the hope of covering about 90 percent of the population in 2013. Trials are due to start this spring, with commercial launch by summer 2009. The service will cost $47/month for unlimited data, mainly accessed via PC or laptop data cards.

Free for All? Regardless of what’s being auctioned or awarded and where, the new spectrum is likely to shake up telecom markets worldwide. One example is the push for open access, where operators no longer sell contracts and subsidized devices but instead offer a broadband experience for many types of consumer devices.

Ahmed says operators can monetize open access by encouraging third-party developers to use their APIs and SDKs, which enhance the value chain and add stickiness because applications can only be used on that carrier’s particular network. QoS will also play a large role as operators can now offer tiers of service, offering limited throughput to lower-spending customers and wide-open pipes to higher-paying customers. “If you look at the investments happening in the Web 2.0 world, there is no place in the world like California, where investments in Web 2.0 companies are greater than any other sector,” Ahmed said. “Look at companies like Flickr and Facebook. There is tremendous movement and transformation happening in the Internet. The wireless industry has a golden opportunity to take advantage of all of these things happening on the Web and translate them into new services.” For those operators embarking on the open-access route, there are examples to follow in the United States. Mobile WiMAX operators Sprint Nextel and Clearwire are both pushing a new business model that dismantles the traditional walled-garden content approach, ends traditional wireless device subsidies and doesn’t require long-term contracts. Both operators are encouraging their device partners to come into the market under their own brands. This enables customers to buy devices at major retail outlets and activate and program services without Sprint’s or Clearwire’s help before they make their first run on the mobile WiMAX networks. The upshot: Freedom for carriers, for device vendors and for end users. Ben Wood, Clearwire CEO, noted during the company’s recent analyst day event, “In 2009, we’ll start seeing WiMAX chipsets in consumer electronics services, opening up a wide variety of revenue streams and allowing consumers to do the same things they do on the tethered Internet.”

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article reprint — Spectrum of opportunities

Acronym API Application Program Interface AWS Advanced Wireless Services CDMA Code Division Multiple Access CEPT European Conference of Postal and Telecommunications Administration FCC Federal Communications Commission 4G Fourth-Generation FDD Frequency Division Duplexing GSM Global System for Mobile Communications IMT-2000 International Mobile Telecommunications-2000 ITU International Telecommunication Union LTE Long Term Evolution

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MSO Multi-Service Operator OFDMA Orthogonal Frequency-Division Multiple Access PHS Personal Handy-phone System QoS Quality of Service SDK Software Development Kit 3G Third-Generation TDD Time Division Duplexing TDMA Time Division Multiple Access UHF Ultra High Frequency WCDMA Wideband Code Division Multiple Access WiMAX Worldwide Interoperability for Microwave Access WRC World Radiocommunication Conference

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Statements herein may contain projections or other forward-looking statements regarding future events, products, features, technology and resulting commercial or technological benefits and advantages. These statements are for discussion purposes only, are subject to change and are not to be construed as instructions, product specifications, guarantees or warranties. Actual results may differ materially. The following trademarks and service marks are owned by Tellabs Operations, Inc., or its affiliates in the United States and/or other countries: TELLABS®, TELLABS and T symbol®, and T symbol®. Any other company or product names may be trademarks of their respective companies. © 2008 Tellabs. All rights reserved. 74.1937E Rev. A 3/2008