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Unlicensed LTE could rock the mobile space in the coming years

Unlicensed LTE could rock the mobile space in the coming years

Mobile Network

Mobile Network

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BARCELONA, Spain — Mobile World Congress is a very different conference than CES. Where CES is a wild, glitzy affair with a lot of consumers around, MWC is very much a business conference.

People from all over the world come to Spain each year to network and make deals. For some companies it’s the only time during the year that the whole management team sees each other in person.

Some of the technology discussed here — like 5G — is too far off in the future to have much bearing on the mobile business today. But other technology trends — like unlicensed spectrum — is very top of mind, and could have real, near-term implications for mobile operators.

In broad terms, unlicensed spectrum means unregulated and un-owned radio waves on which pretty much any provider can run wireless services like LTE. Wi-Fi, for example, runs on unlicensed spectrum.

The biggest topic of debate in telco circles is the idea of running LTE service within unlicensed spectrum bands. This is known as “U-LTE.”

For big wireless carriers U-LTE is seen as a way to scale up wireless capacity and speeds in a world where licensed spectrum is limited and where demand for mobile Internet service continues to shoot upwards.

But it also presents an interesting problem for wireless carriers that have spent billions to buy licensed spectrum. The most recent FCC spectrum auction yielded $45 billion. Verizon spent $4.5 billion on a single spectrum block. But how much are these investments worth with all this free spectrum around?

It could also create new competitors and downward pricing pressure. “What’s to stop someone from using unlicensed spectrum to launch a competing service,” says PwC’s Dan Hays, echoing the concerns of telco executives he’s talked to here.

“It’s the Wild West; you don’t know what you’re going to find there,” another mobile industry executive said. This also makes it tough for carriers to manage traffic, prioritize time-sensitive data types, and guarantee service levels.

PwC’s Hays points out that something like this happened before with another service that runs on unlicensed spectrum — Wi-Fi. The telcos once wanted to block Wi-Fi service on their phones, but they eventually realized they would have to go along.

The telcos are now going along with U-LTE. Right now they’re interested in running LTE service in unlicensed spectrum as a sort of buffer against “surge” periods when traffic is high.

The U-LTE back story

About a year ago, Qualcomm and Ericsson lobbied the 3GPP standards committee to allow LTE service to run on the 5.8 GHz band. That band is one of two unlicensed bands that are typically used by Wi-Fi service. One executive told me Qualcomm wants LTE to run in unlicensed spectrum because operators must pay it royalties when they do so.

There was pushback against the U-LTE idea at the time, because LTE service has a way of pushing other wireless services out of the way when moving in the same spectrum band. “It’s a bit of a bull in a China shop,” our telecom exec told us, while “Wi-Fi is known as a ‘polite service’ and can be easily pushed out of the way.”

But because the 5.8 GHz band is relatively uncrowded, and because new softwares have been developed to make the various signals play nice within a shared spectrum band, U-LTE in the 5.8 GHz band is winning acceptance.

“It’s a starting point people tend not to argue with,” say one industry executive, pointing to the fact that some operators, and likely Ericsson and Qualcomm, may try to win acceptance for running LTE on other Wi-Fi bands later on.

So the genie appears to be well out of the bottle; U-LTE looks like it’s here to stay. The interesting question is whether unlicensed spectrum might represent a breeding ground for new startups that would launch new kinds of wireless services to detriment of Big Telco and to the benefit of consumers.

It’s possible and even possible. Savvy investors should keep a careful eye out for such startups.

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