Citigroup questions if US spectrum shortage exists

The U.S. has plenty of spectrum for mobile broadband, it's just in the wrong hands, analysts say

For more than two years, the U.S. mobile industry has warned of an upcoming spectrum shortage, but two analysts at Citigroup don't buy it.

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AT&T, trade group CTIA and even officials with the U.S. Federal Communications Commission have talked frequently about a coming spectrum crunch, as mobile customers move to data-sucking smartphones and tablets. Smartphones use 24 times the spectrum compared to standard mobile phones, and tablets use 120 times the spectrum, FCC Chairman Julius Genachowski said in a speech on Tuesday.

"The spectrum crunch is the single biggest threat to one of the most promising parts of our economy," Genachowski said.

But Citigroup analysts Jason Bazinet and Michael Rollins questioned what has become the convention wisdom in the mobile industry. The U.S. has plenty of spectrum for mobile broadband, but much of it is in the wrong hands, they said.

U.S. carriers have 538 MHz of spectrum dedicated to mobile data and voice and are only using 192 MHz, the two analysts said in a report released Sept. 22. Major carriers control 422 MHz of spectrum, Bazinet and Rollins estimated.

"Too much spectrum is controlled by companies that are not planning on rolling out services or face business and financial challenges," the report said. "And, larger carriers cannot readily convert a substantial portion of their spectrum to 4G services, because most existing spectrum provides 2G-3.5G services to current users."

Some large U.S. carriers may face a spectrum shortage down the road, but much of the U.S. spectrum available for mobile broadband is in the hands of companies slow to move forward with business plans, Rollins said. "It's the control of spectrum, not the availability, that's the real constraint," he said.

Cash-strapped Clearwire has 133 MHz of spectrum, but provides 4G service to markets covering only about 42 percent of the U.S. population. Startup LightSquared controls 59 MHz of spectrum, but its plans to build a nationwide 4G and satellite network are stalled because of interference concerns raised by GPS users.

Dish Network controls 47 MHz of undeveloped spectrum, with the company asking the FCC in August if they can use it to offer LTE (Long Term Evolution) service. The Citigroup report counts the Dish holdings as spectrum available in the future, not currently available spectrum.

In addition, some U.S. carriers have significant amounts of spectrum tied up in 2G and 3G services, Rollins said. He and Bazinet estimated that 147 MHz of the 192 MHz of spectrum now in use for mobile services is currently dedicated to 2G and 3G services.

"Their pace to 4G is dampened by the needs of converting spectrum over to 4G," Rollins said. "Because there's so many [2G and 3G] users on that, they need extra space, they need extra room, to be able to manage this conversion. That's where some specific players could use more spectrum, but there's a lot already licensed in the industry, so it's a question of how they get it."

CTIA officials disputed the Citigroup report's numbers, saying Bazinet and Rollins appear to be using information from 2010. More spectrum has gone into service this year, CTIA said, with Verizon Wireless, for example, launching 4G service on the 700 MHz band of spectrum to more than half the country since late 2010. Verizon won 22 MHz of spectrum in the C block of the 700 MHz band in an FCC auction that ended in early 2008.

The report uses numbers that are foreign to CTIA, said Chris Guttman-McCabe, the trade group's vice president for regulatory affairs. "I dispute each of the elements of it," he said. "Where did they get the 500 MHz, and where did they get the 190? I would dispute each of their numbers."

Guttman-McCabe questioned why the report included LightSquared spectrum, when it is tied up in regulatory limbo. He also disputed Citigroup's description of 194 MHz available in the Broadband Radio Service (BRS) and Educational Broadband Service (EBS) bands between 2.4 and 2.7 GHz, when an FCC decision in 2008 found only 55.5 MHz available for mobile broadband in those bands.

The U.S. mobile carriers use their spectrum more efficiently than carriers in any other nation, CTIA officials said, yet several other developed nations are in the process of making more spectrum available, or are looking for more spectrum.

"Every other country out there is bringing hundreds and hundreds of megahertz to market," Guttman-McCabe said. "What's the magic secret in the sauce that Citigroup knows that no one else does?"

Rollins defended the report's methodology. He and Bazinet started with 2010 numbers, but updated them, he said. The two used averages to come up with spectrum use estimates; if a carrier has a 10 MHz nationwide block, but is only delivering service to half the U.S. population, the report considers that 5 MHz of used spectrum, Rollins said.

The numbers are based on ongoing research, including discussions with carriers and information from the FCC, Rollins said. Citigroup did not give an explanation of the BRS and EBS numbers it used in the report.

CTIA also questioned why the National Association of Broadcasters sent the report to journalists. The NAB has concerns about an FCC plan to take back 120 MHz of spectrum from U.S. TV stations, with the stations that volunteer to give up spectrum sharing in the auction proceeds. The NAB pointed to the Citigroup report as evidence the broadcast spectrum isn't needed.

But the report reaches its conclusion about spectrum needs based in part on the FCC's plan to make available 300 MHz of "high-value" spectrum for mobile broadband, including 120 MHz from TV stations, over the next 10 years. The FCC's national broadband plan, released in early 2010, calls for a total of 500 MHz to be made available in 10 years, with 300 MHz suitable for mobile broadband.

"If [the report's] conclusion is, if we bring 300 MHz to market, and there's not a short-term spectrum shortage, I wouldn't be that troubled by that, especially if we can get that in the next couple of years," Guttman-McCabe said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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