The Role of Spectrum Auctions in the Telecom Recession

The Role of Spectrum Auctions in the Telecom Recession

Third-generation Cellular: Technical and Economic Challenges Dr. Ray W. Nettleton Telecommunications Consultant Denver, CO [email protected] Agenda Third Generation Cellular Technical Challenges: Range, Coverage, Capacity, & Spectrum Economic Challenges: Market Share & 3G Spectrum Auctions A Modest Proposal ISART Boulder CO March 2002 2 3G in the Big Picture Personal Area Bluetooth IEEE802.11 / Picocell/Indoor Hiperlan Microcell/Picocell W-CDMA/TDD Macro/Micro/Picocell

CDMA2000 Macrocell/Microcell W-CDMA/FDD Regional/Continental Source: ETSI & ANSI Standards Satellite 1 10 100 1,000 Data rate kbit/s 10,000 100,000 ETSI has created a hierarchy of personal communications modalities that provide the maximum data rate possible given where the customer is at a given time. In the US this is complemented by CDMA2000. ISART Boulder CO March 2002 3 IMTS 2000: 5 Standards UTRAN (W-CDMA, UMTS)

EDGE ISART Boulder CO March 2002 These are the terrestrial standards only. There will be satellite standards also. The GSM camp sponsors UTRAN; the CDMA camp sponsors IMT-MC (CDMA2000). The US TDMA camp sponsors EDGE (IMT-SC) and will migrate to W-CDMA. 4 Whats Special About 3G? Motorola Compaq Siemens Its not just phones. Its PDAs, videophones, Internet browsing, location-based services, interactive games, and a whole lot more. Ericsson Panasonic Nokia

ISART Boulder CO March 2002 5 Evolution of 3G Systems CDMA-2000 CDMA IS 95B 64kbit/s 64kbit/s 1XRTT 144kbit/s 1.25MHz 1XEV-DO 2Mbit/s 1XRTT 384kbit/s 3X?? 1XEV-DV 4Mbit/s Eventual Target: One 4G Stanndard TDMA (IS136) 5MHz W-CDMA (UMTS) 2Mbit/s

GAIT Dual Standard GSM/TDMA Phones EDGE 384kbit/s Phase-in periods only are shown. Each technology will continue in parallel with the others for a time. 200kHz GSM GPRS 114kbit/s Pre-Edge 2.5G 2001 Source: ITU 2002 2003 ? Timeline may be delayed due to economic technical and standards issues ISART Boulder CO March 2002

6 3G Status CDMA2000 is operating in Korea with about a million customers. World availability expected mid late 2002. W-CDMA is operating in Tokyo using Ericsson equipment. World availability expected late 2002 first half 2003 Cingular is rolling out GPRS (precursor to EDGE) nationwide in the US a $3B exercise ISART Boulder CO March 2002 7 Range / Coverage CDMA2000 operators will need to build more, smaller coverage cells to make this work Source: JMS Worldwide Reproduced by permission Max free space path loss dB Coverage Cell Size Reduction from Base InBuilding Outdoor low mob InVehicle

Radius Area 1XEV-DO 127.56 140.40 142.83 81% 65% 1xRTT 127.76 n/a 142.32 77% 59% Base Case: IS-95 130.81 n/a

146.31 W-CDMA 129.06 150.36 146.02 99% 98% EDGE-2 (384kbit/s) 124.80 148.50 n/a 75% 56% EDGE-1 (144kbit/s) n/a n/a 143.30

87% 76% 129.20 n/a 145.40 GSM- W-CDMA CDMAoneCDMA2000 Standard Base Case: GSM Base case Base case GSM operators are expected to build more base stations for EDGE that they wont need for W-CDMA! ISART Boulder CO March 2002 8 Capacity W-CDMA achieves its high data rates with QPSK 2Mbit/s is not a stretch for a 5MHz signal

Number of simultaneous users 1000 100 Roughly 10:1 advantage to WCDMA (bandwidth ratio is 4:1) CDMA2000 achieves its high data rates by going to 16-QAM, losing link budget and capacity along the way 10 Interference averaging breaks down when the number of users is small 1 10 100 1000 Average data rate per user kbit/s ISART Boulder CO March 2002 10000 W-CDMA has 2.5 times the capacity of CDMA2000

9 Market Share CDMA PDC 5% 10% TDMA 9% CDMAone and half of PDC transition to CDMA2000 GSM 76% GSM, TDMA and half of PDC transition to W-CDMA CDMA2000 10% W-CDMA 90% Source: www.cellular.co.za ISART Boulder CO March 2002 10 Spectrum Confusion US PCS/UL

US MDS FCC: Both! Sources: ITU, ERO, FCC Once again the US is isolated by the FCCs prior actions ISART Boulder CO March 2002 11 Spectrum Auctions Worldwide $330B $330B Auction proceeds US $Billion 350 300 Current Projected 250 $182B $182B 200

150 100 50 0 Pacific Rim (Asia / Oceania) Europe Latin America US & Canada Totals ISART Boulder CO March 2002 Hundreds of spectrum auctions have already been run. The proceeds so far - $182B - are shown as current. The projected numbers are based on demographics and announcements

of future auctions. 12 The Big Spenders Auction Proceeds $B Proceeds per pop $ UK $ 38.50 $ 594.20 Germany $ 50.80 $ 566.90 Italy $ 10.18 $ 174.20 S. Korea $ 3.30

$ 60.80 Holland $ 2.68 $ 158.90 These Top Five 3G auctions, held in the last 18 months, account for more than 58% of the total $182B proceeds collected from auctions worldwide over the past 15 years. Altogether 3G auctions alone have accounted for $142B of the total, or 78% ISART Boulder CO March 2002 13 How Much is $330B? It is the Gross Domestic Product of Switzerland. It is the combined annual revenue of Exxon-Mobil and General Electric It is $1,172 for every man, woman and

child living in the United States If you can count your money, you dont have a billion dollars J Paul Getty ISART Boulder CO March 2002 14 $330B to the same scale Air vs. Hardware ISART Boulder CO March 2002 15 Air vs. Revenues 22% $330B 46% ISART Boulder CO March 2002 16 Air vs. Cellular 10 $B Source: ITU 300 200

150 100 Current proceeds Including projections 250 50 K) Ce lln et (U BT es ma nn Ma nn (Ita ly) Om nit el

DD I (J ap an ) TIM AT &T Sp rin tP CS Vo da fon e( UK ) Ch i na Te lec om ow oC oM o NT

TD sn Au cti on Au cti on st ota l 0 The Auctions are already level with the top 10 cellcos combined. If the projections are correct, it would be much larger than the top 20! ISART Boulder CO March 2002 17 Mark Andersons Modest

Proposal The debt burden of 3G operators is as oppressive as that of some third world countries The wireless industry cannot recover this outlay, which was due to extortion bidding Governments should return the 3G money as an interest-free loan The EU has started hearings on the question The FCC has been forced to give up part of its anticipated revenue (NextWave case) Source: http://www.tapsns.com/newsitem.shtml?7-25-2001 ISART Boulder CO March 2002 18 Conclusions 3G is late but provides a rich array of services that will likely stimulate the market CDMA2000 will have the toughest time small market share, licensees often not receiving new spectrum W-CDMA wont be easy either huge spectrum auction costs, later entry than CDMA2000 ISART Boulder CO March 2002 19 Thank You!

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