5G Spectrum Wars – Whose Gain, Whose Loss?
The Australian Communications and Media Authority (ACMA) has finally announced late November auction dates for 39 lots of residual mobile spectrum in 1.8GHz, 2GHz, 2.3GHz and 3.4GHz bands, opening up a new market of 38.5 million people across Australia. The spectrums come with a hefty price tag nearing AU$5.7 million, but the figure looks small when you consider the potentially unlimited profits out there. With the stakes so high, telcos are leaping into the fray, and things are bound to heat up. Let’s take a ringside view of the upcoming 5G spectrum wars.
What is a Spectrum?
All wireless communication signals from television broadcasts to your mobile phone data travel over the air via radio frequency, also known as the spectrum. If you still listen to the radio, (I do. Doesn’t everyone?) you probably have a favorite channel, like 93.9 FM or 104.7 FM. The FM indicates that your music is being transmitted over the 93.9 or 104.7 Megahertz frequency. No two channels transmit over the same frequency because they would interfere with each other and you would only get to listen to garble. If you are a radio aficionado, you also know that your favorite channels are geographically limited. You probably won’t get to hear them when you are out of town for a holiday.
All of this applies to mobile phones too. No two telco operators can transmit wireless signals over the same frequency in the same market. As end users, we don’t realise this because modern devices do all the tuning and receiving automatically. You travel all around Australia and continue receiving calls on your phone, but the fact is that the underlying radio wave infrastructure might have dramatically changed from city to city. For example, your Vodafone network in Melbourne might be operating in the 700MHz range but might be operating in the 1.8 GHz range in Sydney. Telstra’s network, on the other hand, could be 1.8 GHz in Melbourne, but 700 MHz in Sydney.
Why is spectrum so important?
Spectrum ownership is significant for telcos because it gives them access to new markets. It also lets them serve their customers better. The biggest priority for any mobile phone user in Australia is coverage. Given the vast breadth of our country, many regions still do not have access to multiple operators. Less competition allows spectrum owners to hold customers at ransom by charging ridiculous amounts for mobile data. If another operator wants to get in, they have to ‘rent’ frequency from the spectrum owner, who wins either way.
Clearly, spectrum range ownership is more lucrative than real estate ownership, if you gain access to the right markets. Mobile data spectrum is even more of a premium because most of the bandwidth has already been allocated to government agencies, radio and television operators. The demand for the limited frequency that is available is increasing exponentially due to
- The proliferation of mobile broadband devices (like tablets and smartphones)
- The increasing ‘data heavy’ consumption on mobile (like videos, live streaming etc.)
- The increasing number of users using broadband in parallel.
The government wants to regulate this industry as best as it can, and one way it does this is by holding periodic spectrum auctions. Telcos are willing to invest huge sums because spectrum is the lifeblood of the industry – in the 2016 auctions, operators spent AU$543 million to gain licenses for the 1.8GHz spectrum – Optus and Telstra paid nearly AU$200 million each to own airwaves in all the regions available then. TPG paid AU$1.26 billion early this year for the 700MHz and 1.8 GHz bands and became the fourth network owner in Australia
How is Spectrum shortage being dealt with?
The telecommunication industry is investing heavily to gain access to higher and higher frequency for optimising data transfer and data speeds. The 4G spectrum is currently under 6 GHz, but the 5G spectrum can be anywhere from 1 to 100GHz. Obviously, telco operators want to access the under 5 GHz bands presently up for grabs, but many are also pushing for the millimetre Wave (mmWave) spectrum – a range of 24GHz and up. This high-frequency range, if accessed, would allow end users to see lightning fast data speeds not even imagined till date.
Of course, ACMA won’t auction off any spectrum until the technology has caught up and is able to access it. International standards and innovation are progressing rapidly and it expects the 26 GHz band to become accessible by 2020. 5G in the mmWave spectrum presents a great opportunity for Australia to lead the telecommunication industry worldwide.
What to expect in the November Auction?
The November auction will take place in three stages with the bands being rolled out in lots of 5 and 10MHz for each. The auctions will be conducted online using the latest, highly secure and efficient auction system software in the market. All auction applications must be submitted by 27th October, and a mock auction will be conducted to test the platform before the big day. Auction integrity will be maintained by granting users private logins along with one time password generation through a smart phone app.
Some numbers that indicate the scale of the mega auction coming up:
- Starting price of 2x 10MHz blocks of the 1.8GHz frequency in Mackay is AU$1.12 million
- Starting price of 2x 10MHz blocks of the 2GHz frequency in Canberra is AU$2.147 million
- Starting price of 2x 5MHz blocks of the 2GHz frequency in Adelaide is AU$2.346 million
- Starting price of 2x 5MHz blocks of the 2GHz frequency in Perth is AU$3.045 million
- A non-refundable application fees of AU$10,000 will be charged.
- The auction will grant market share of mobile broadband coverage to approximately 38.5 million people in both metro and regional areas.