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The myth of the wireless spectrum crisis

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Last week, CTIA trumpeted the latest results of their semi-annual wireless industry survey with the headline “Consumer Data Traffic Increased 104 Percent.” Among their conclusions were that Americans have a voracious appetite for mobile data, and that the wireless industry in turn needs more spectrum to meet those demands.

However, underlying the statistics are numbers that tell a far different story: in fact, there was a dramaticslowdown in wireless traffic growth during the first half of 2012. Of course, CTIA doesn’t want anyone to realize that, because it is significantly at variance with CTIA’s narrative of an impending “spectrum crunch”into which so much lobbying effort has been invested.

The CTIA press release only quotes total wireless data traffic within the US during the previous 12 months upto June 2012 for a total of 1.16 trillion megabytes, but doesn’t give statistics for data traffic in each individual six-month period. That information, however, can be calculated from previous press releases (whichshow total traffic in the first six months of 2012 was 635 billion MB, compared to 525 billion MB in the final six months of 2011).

Counter to the CTIA’s spin, this represents growth of just 21 percent, a dramatic slowdown from the 54 percent growth in total traffic seen between the first and second half of 2011. Even more remarkably, on a per device basis (based on the CTIA’s total number of smartphones, tablets, laptops and modems, of which 131M were in use at the end of June), the first half of 2012 saw an increase of merely 3 percent in average wireless data traffic per cellphone-network connected device, compared to 29 percent growth between the first and second half of 2011 (and 20-plus percent in prior periods).

Data from Sandvine appears to confirm this slowdown, estimating mean monthly usage per mobile device in North America has fallen by 10 percent since October 2011. To be clear, these figures indicate that device owners have effectively plateaued in their consumption of cell-based data—which seems to fly in the face of conventional wisdom, informed by near constant hype of runaway data consumption by mobile consumers.

What was the cause of this dramatic slowdown in traffic growth? We can’t yet say with complete confidence, but it’s not an extravagant leap of logic to connect it with the widely announced adoption of data caps by the major wireless providers in the spring of 2012. It’s understandable that consumers would become skittish about data consumption and seek out free WiFi alternatives whenever possible. And there’s anecdotal evidence that supports the hypothesis.

For instance, in January the Wall Street Journal first reported on wireless users “shutting off their WiFi option … because constantly searching for a signal can eat up battery life.” But then by March, we were told about new iPad buyers who had started to stream March Madness games in HD only to find out the next day they were “out of gas.” In retrospect both of those stories seem laughable, since offloading traffic to Wi-Fi has become de rigueur for savvy cellular users.

Of course, such changes in behavior may not continue indefinitely, but it seems a fair bet that while caps remain a concern, end users will limit their on-network wireless data usage to a much lower level than is necessary simply to stay within their monthly cap. In addition, as others have noted, the penetration of smartphones is approaching saturation, so we can’t count on growth in the number of devices to pick up the slack.

If continued, the implications of much slower growth in on-net wireless data traffic will be profound. If traffic per device only grows at around 3 percent in the second half of this year, then overall data traffic on cellular network for all of 2012 will be up only about 60 percent on 2011— or about half the widely quoted growth forecast by Cisco. Further, Cisco justifies that number based on the assumption that the “move to tiered pricing does not appear to have an immediate effect on overall mobile data traffic.”In other words, Cisco is making what is essentially an open loop forecast of demand, unconstrained by what customers will be willing and able to afford in the real world.

Those dubious Cisco data points are widely quoted, and especially so by those trying to scare us into thinking that we face a so-called spectrum crunch—a bandwagon that CTIA has all too happily promoted. Even such luminaries as FCC Chairman Julius Genachowski has stated in recent speeches that we are at a crisis point, claiming “U.S. mobile data traffic grew almost 300 percent last year” —while CTIA says it was less than half that, at 123 percent. “There were many skeptics [back in 2009] about whether we faced a spectrum crunch. Today virtually every expert confirms it.”

Perhaps therefore we need to take a step back and think about the motivations of those who are telling us of the need for more licensed spectrum because of a purported looming spectrum crunch. Most obviously, Cisco would certainly like to sell more hardware. Large wireless operators, such as AT&T and Verizon clearly don’t want the FCC to impose caps on their spectrum holdings. Small wireless operators want more spectrum to be made available to lower the cost of network expansion.

Those who have made speculative investments in spectrum want their investors to believe these assets will become more valuable. Even the FCC would like you to believe that their “progress in mobile is driving new waves of job creation and investment.” It seems likely that the emperor really does have no clothes. We’ll have to wait to see whether wireless data traffic in licensed spectrum bands will actually meet or fall short of Cisco’s seemingly over-optimistic projections. And perhaps the leading wireless operators will be forced to soften their data caps by consumer pressure and competition from operators offering unlimited data.

However, given the dominance of Verizon and AT&T, neither seems particularly plausible in the current US wireless market. It seems rather more likely that consumers will adapt to a world of offloading instead, so that wide-area cellular networks will de facto become the backup solution for whenever short range solutions such as Wi-Fi aren’t available.

Even before the recent publicity about data caps, Wi-Fi offload was growing far faster than cellular data traffic, and according to the July 2012 PCAST report, one major carrier now claims to be offloading “more than half of its smartphone traffic onto Wi-Fi.” As the PCAST report also recognizes, low power solutions like Wi-Fi will allow spectrum re-use to increase dramatically, “from 900 to as much as 1.3 million times more than a fixed, large cell-based architecture can provide.”

Then perhaps we will realize, as others have notably pointed out, that “there is no more scarcity of wireless spectrum than there is a shortage of, say, the color purple.”

Tim Farrar is President of Telecom, Media and Finance Associates, a consulting and research firm in Menlo Park, Calif., which specializes in technical and financial analysis across the satellite and telecom sectors. 

46 Responses to “The myth of the wireless spectrum crisis”

  1. Peter Rysavy

    I strongly agree with Richard Bennett’s point of “Do we really want to constrain wireless innovation by concern over pricing when there’s an alternative approach that increases network capacity on the table?” I recently worked with Information Week to conduct a comprehensive poll of 4G adoption in enterprises. Fully 50% of enterprise respondents were unhappy about current data pricing levels, and as their traffic demands increase, they are going to be progressively less satisfied. Consumers with high-resolution tablets and smartphones are going to feel the same way. The only way to keep pace with market demands is to continually increase capacity, which through my engineering analysis can only be done through a combination of advanced technology (LTE, LTE-Advanced), more complex topologies (HetNets, small cells), and additional spectrum.

    Using pricing to inhibit demand will only limit the potential of this market.

    • Tim Farrar

      I’m mystified by your assumption that making more spectrum available to increase network capacity will automatically lead to a fall in the price (presumably per Gbyte) of wireless data. Unless you believe that today’s networks are already (or will shortly be) full (which doesn’t fit with the cuts in capex that Verizon and AT&T are promising investors over the next several years, and AT&T’s statements that it needs to find ways to increase the rate of data traffic growth), then pricing is being set by network operators to maximize profitability not to “inhibit demand”.

      The leading wireless operators (AT&T and Verizon) clearly believe that they would not increase their profitability by reducing the price of wireless data at this point in time, and so they are focused on increasing network usage *at current price points*.

      You state that enterprises and consumers are “unhappy about current data pricing levels”. How much would prices have to come down to enable the “market demands” that you perceive? Open loop forecasts of “traffic demand” are completely worthless without an underlying assumption of price over time, because demand is a function of price. For example, I would estimate that to enable essentially unconstrained use of long form streaming video, the marginal price per Gbyte would have to be well below $1 (i.e. a cost of <<$0.50 for an hour of HD streaming), and for HD video streaming probably no more than $0.20 per Gbyte. That's a 50-fold reduction from current price levels (assuming $10 per Gbyte), and completely infeasible in the near term. Indeed, any significant reduction (leading to an average price of say <$5 per Gbyte) would almost certainly lead to a dramatic fall in profitability for network operators (remember LightSquared was talking about a wholesale price of $6-$7 per Gbyte).

      Now competition could force price reductions and a decline in overall profitability (presumably why the FCC et al got excited about LightSquared), but in the current situation, its far from clear that simply making more spectrum available to the highest bidder would do anything to change the competitive dynamics in the US wireless market.

      Indeed, economic principles would suggest that in a competitive auction, the price of spectrum would settle at a level equal to the cost of alternative ways of increasing capacity (i.e. spending more capex to re-use existing spectrum more efficiently). A corollary of this is that current reductions in capex suggest that the perceived value of incremental capacity (and therefore spectrum) to existing operators at this point in time is declining.

      So, returning to my point above, what we see in today's lobbying campaigns is a claim that "more spectrum good" (a motherhood and apple pie statement) backed up by extremely weak (and in many cases misleading) analysis. If it is to be economically rational, a forecast like that produced by Cisco needs to include an explicitly stated price assumption (and preferably an analysis of how much price would influence the end result) along with an analysis of how traffic compares to network capacity. Only then can you start to determine how much more network capacity is required, and assess what will be the profitability-maximizing decisions taken by the operators. You might even be able to understand whether or not a new entrant could shake up the market and build a profitable business with much lower prices.

      All that may be asking too much, but what we have today is a disjointed series of contradictory analyses, based on the (currently unsupported) assumption that allocating more spectrum will automatically produce lower prices and enable faster growth in wireless traffic. In fact, more spectrum may change nothing whatsoever if the major operators face little competition and are able to simply decide on their capex plans and pricing to maximize near term profitability.

  2. But Richard Bennett said ‘broadcast doesn’t solve the problem’. Is he wrong? Are the wireless carriers crazy for going down this path? (sorry, I must remember to stop picking on Richard…and I will when he starts acting civilized…)

    Of course he’s wrong (again), and (no) the carriers know that broadcast is an import means to effectively preserve capacity with certain types of content. eMBMS & MBSFN (more fully possible with LTE-A rev10) are certainly a part of the future for carriers if they can manage the impact and provide the distinction in services that better manage their infrastructure.

    It is this very capability (and the seminal announcement) that makes me confident that there exists a way to better manage the combined resources of the television broadcast and wireless carrier networks at the radio layer. It is a spectrum issue for sure, but can be driven forward with a new television broadcast platform that is harmonized with a variety (including 3GPP) global standards.

    Not an easy task, but I believe a task that is doable and should be taken up (perhaps demanded) by the responsible players that are looking forward to providing a better future reflecting the public’s interests. I am ready to sit at the table, and if no one else does so, I might even be the guy that buys the drinks to get the conversation started.

    Next Generation Broadcast Television…While perhaps not the ideal environments (maybe the right place to get this work done has not yet been established…), it is clear many parties are looking at the the needs in similar light. ATSC & their 3.0 activity? FoBTV? NABA and their stated position on the subject? Where is NAB on this? Well, you would have to ask them, I can’t talk to it…but you might be surprised…

    • Richard Bennett

      Broadcast TV viewing has been steadily declining for thirty years, and I see no reason for the trend to reverse itself. All we need mobile broadcast for is sports TV, and there are ways to handle that which don’t require permanent assignment to TV and only TV. Rather, we need spectrum allocations that permit nimble use.

      • Again, Mr. Bennett, you seem to be denying published numbers regarding broadcast TV. I assume you are bright enough, but have you been under a news-deprived rock? OTA (over-the-air) TV viewing increased to 18% this past year, this from 12-15% two years ago. Viewers are combining OTT/OTA and within five years this combo will command close to 50% of TV viewing. How much additional spectrum do you think the wireless carriers need. Until a spectrum inventory is available all that remains is smoke and mirrors. What happens when most of the spectrum is in the hands of a few–prices are set with impunity and the consumer ultimately suffers. Do you seriously think that putting more spectrum in the hands of the ‘Big Two’ (VZ & AT&T) serves the consumer well? All it serves is to raise prices while stockpiling spectrum.

  3. The following comes from an article written by Stephen Lawson:

    Verizon Wireless expects to use broadcasting to deliver live video over its upcoming LTE network, as part of efforts to deal with heavy demand for capacity, a company executive said Monday.

    The plan was one of several insights that Verizon Wireless CTO Tony Melone provided at the Open Mobile Summit in San Francisco. The carrier is on track to launch LTE (Long-Term Evolution) in 38 cities later this year and across its whole current 3G coverage area by the end of 2013, Melone said. He and other speakers said growing demand for video poses one of the biggest challenges in the mobile world.

    “We’re working with all of our infrastructure providers … to develop the technology to incorporate a broadcast capability. To evoke that, you have to dedicate a portion of your spectrum. So a portion of your capacity would have to be allocated to this broadcast capability,” Melone said during a panel discussion. “We think that will be a solution to this problem down the road, that there will be a broadcast element to our 4G network that can then more efficiently deal with the live content.”

    Broadcasting requires less capacity per user if many subscribers want to watch the same content at the same time, because the carrier can send out just one stream of content to many users instead of a separate one for each user. There are mechanisms for broadcasting and for multicasting, another resource-conserving way of distributing content, built into LTE, according to Nokia Siemens Networks CTO Hossein Moiin, who also spoke on the panel.

    Note that Tony Melone, Verizon, was addressing broadcast capabilities.

  4. A large part of the solution lies fully in correcting the architectural flaw that has CTIA crying “spectrum shortage”. Unicast does not suit itself to efficiently providing the ‘essence’ most demanded by a video consuming public on the move. Broadcast does. ‘Solving’ the manufactured nature of the storyline that is driving acquisition of spectrum by the carriers can only happen with a massive ‘rethink’ of who and how across what spectrum the ‘ravenous beast’ (video consuming public) gets fed. If the respective industries were man/woman enough to sit down and have an honest discussion, we could have this ‘problem’ solved in two years or less. Doing so would be good for all Americans. I doubt anyone who should come and sit at the table wants to have that discussion because such a discussion puts people before profits. And I am saying that as an honest to goodness capitalist! What happened to doing the correct thing?!

    But I happen to believe that we find ourselves in unusual times, and unusual people will have to do unusual things with unusual partners to avoid a very fatal day of reckoning. Let us stop bludgeoning the American consumer with the swinging of half truths, and come together to solve the real problem. Call me a well meaning television broadcaster…not your run of the mill ‘country club’ Board member just trying to pinch the most for himself… Doing the right thing will be good for all of us in the long run. I have the economic studies to prove so. Look me up…

    • Richard Bennett

      No, broadcast doesn’t solve the problem because smartphones are not simply mobile TV sets. Qualcomm spent a lot of money building a broadcast system for mobile called “FloTV” that very efficiently provided shared streaming a la over-the-air TV to handsets. It was a flop so they ended up selling the spectrum to AT&T for, you guessed it, unicast celluar use.

      The National Association of Broadcasters is an enemy of American innovation. The sooner we stop wasting spectrum for to send out ads that nobody watches the sooner we can increase the efficiency of the cellular networks that we all use. Over-the-air TV has gone the way of the horse and carriage.

      • Richard, you seem to be missing what is happening regards viewing habits of video consumers. They gravitate to the best available screen. The facts you argue for are coming unglued! This is not just about ‘smart phones’ (the thought has crossed my mind, based on your very ‘gruff’ remarks to many, that you may have most unfortunately received an errant ‘smart ass phone’). Tablets are at the center of the stage. This is about creating an opportunity for virtually any device capable of supporting video and audio becoming a much more useful device for the consumption of such content. This is about reinventing the interrelated capabilities that would allow a device to seamlessly transition from one physical (bearer) layer to another by leveraging harmonized standards.

        This is all about providing American consumers with a choice that does not have to pass through the toll gates of the wireless carriers. I sense that THAT is the real problem. This is every bit about who provides what to whom, and it would appear that you are willing to put a sensible discussion of the ‘art of the possible’ aside to argue for the monopolies that feed you. But this is about ‘feeding’ all Americans with rich, consumable video content on a fully portable basis across multiple platforms. It does NOT take a wealth redistribution (ala spectrum) approach to make that happen, although that may well work to the advantage of the carriers (take away broadcast spectrum, shove it into the corner, take the consumer base, fully monopolize all of the wireless possibilities?).

        Put a fully capable broadcast platform into the hands of television Broadcasters, and a huge burden is taken off the unicast networks. BROADCAST WORKS. UNICAST WORKS. But they do different things well. They need to be redesigned to work together! Television broadcasting was saddled with a monolithic ‘first gen’ digital system that was designed to do one thing, and that was the fault of many with limited vision. Times are changing, and so is the nature and makeup of this industry.

        We need to get the right folks together, sit across the table, and do what is good for the American consumer. If you plow ahead thinking that you are going to force a unicast network to provide all of the content that consumers most want to watch (the providing and creation of which local Broadcasters are very good at!), then we ALL lose. All! It is time to trade in that ‘smart ass phone’ for a phone that allows a real conversation to take place.

      • BTW…”FloTV” failed for all of the right reasons. It was a bad business. The cost/value equation did not strike the balance with consumers. Cost too much for too little content that did not equate to expected viewing added up to something that was far short of being anything close to television. The biggest missing piece? Local television broadcasting. It did not fail because of technology. The technology only has to be good enough to support the business proposition. BTW, free OTA provides a value proposition people understand well.

  5. Steve Crowley

    Qualcomm is working on increasing mobile capacity 1000x in the next ten years. One scenario they have is placing small cells in 9% of homes in a macrocell. In that case, capacity in that cell increases 500x. Doubling spectrum increases capacity 2x. Putting the two together increases capacity 1000x. It gives you an idea of the relative capacity increases that can be had by increasing spectrum versus increasing the number of small cells.

    Another advantage of small cells is that handset battery life is increased because reduced transmitter power is needed for the uplink to reach the closer small cell. Increasing capacity by just increasing spectrum does not decrease handset transmitter power.

    Finally, to the extent more spectrum is made available to mobile broadband, Qualcomm’s research suggests (work continues) that higher frequencies are better for small cells. The supposedly “beachfront” UHF frequencies propagate well, and their interference does too. Interference from higher frequencies does not propagate as far, which may make interference management for small cells easier.

    Regardless, I think spectrum remains one of the key components for increasing capacity, along with advanced network topology (small cells, Wi-Fi, heterogeneous networks) and advanced radio technology.

  6. Tim–I went into the numbers, but going back to CTIA’s publications (as you described). Pretty much got the same result, slight difference in the absolute value, but the same result: Growth in data-per-device has slowed. As CTIA’s response to this post (Dr. Robert Roche) indicated, there is still growth–but not the 25-30% growth previously seen.

    As this is only a six-month result, there may be a one-time cause. I don’t have the best insight into how the data were defined and collected, so I’ll refrain from speculating. But I agree you have an interesting point, and one that bears following in the future. Good catch…


  7. Richard Bennett

    This guest post is Idiotic.

    Like so many others who claim “X is a myth,” where “X” is a matter of common sense, Farrar’s evidence doesn’t support his conclusion. He jumps to speculations about the motives of the network operators to close the holes in his vapid argument.

    There is a difference between supply and demand, which in this case is the gap between the capacity of today’s cellular networks and the things that users would do if the networks were more capable. When we hit the capacity limits of the networks, or the capacity limits of users’ ability to pay for their use, actual traffic will plateau. That doesn’t mean that demand has been satisfied, however. The continuing growth in Wi-Fi utilization by smart phones, tablets, and M2M devices tells us just the opposite story than the one that Farrar is selling.

    If it’s the case that consumer demand for cellular data is declining because of usage caps, as Farrar claims, policy makers have to ask whether that’s a good thing. Do we really want to constrain wireless innovation by concern over pricing when there’s an alternative approach that increases network capacity on the table? I think not.

    Linking the equally idiotic blog post about the plenitude of the color purple doesn’t help the author’s case; it simply underscores the fact that his thinking imitates other weak thinkers, a commodity that is certainly not in short supply.

    • Brett Glass

      I’d say that Richard’s post was idiotic, but it isn’t quite. The reasoning is faulty and the “facts” are false, but more importantly the motivation is to serve his little DC lobbying shop’s clients.

      • I’ve noticed that Mr. Bennett always has to be the ‘smartest kid in class’. I will pose the same question to him that I posed to Mr. Osman regarding a spectrum inventory–where is it?. Mr. Bennett goes around spouting off about supply and demand but never once have I seen him demand a spectrum inventory. He may or not be a tool for the wireless industry but his arguments are less than genuine and after a while he comes across nothing more than a blowhard and a would be intellectual bully.

      • Richard Bennett

        I have argued for spectrum inventories, JCB. The FCC keeps good records on its spectrum assignments to there’s not much urgency on their side, but NTIA has in fact lost track of many of the assignments it has made to government agencies and therefore has a lot of work to do.

      • Brett Glass

        ITIF is exactly that: a DC lobbying shop. Richard even said, when he was hired on there, that he was going to be a lobbyist. Then, he got to DC and found out that lobbyists are so unethical that they won’t even admit to being what they are.

      • Richard Bennett

        You’re lying, Brett. ITIF is a 501(c)(3) public interest corporation forbidden from lobbying. If you think we’re abusing our status, complain to the IRS. Now go back under your rock.

      • Richard Bennett

        That’s a different question. Brett claims that all of the Washington media establishment, all of the tech blogs, and all of the policy wonks are Google lobbyists, a very specific claim.

        The question of “beholdenness” becomes very interesting in the case of public interest corporations with diverse groups of supporters with diverse interests. ITIF isn’t in anybody’s pocket

    • I will ignore the ad hominem attacks in Richard’s post, and simply note that they don’t do his cause any favors. I’ll also point out that I haven’t taken a penny from either side in this debate, and so it would be interesting to know just how much Richard and his firm is being paid by the cellular industry for his work on this issue.

      I’m left somewhat mystified by the confused series of arguments in Richard’s post. Is he claiming that cellular networks are currently at the limit of capacity? If so, why are major operators like Verizon saying that they are planning to reduce their capex over the next few years? If not, why is cellular-based usage starting to plateau already? Presumably because users are unwilling to pay by the drink for additional cellular data (as Richard hints but doesn’t explicitly say), given the high prices charged by US cellular operators. In contrast, offloading to WiFi is almost always free and uncapped.

      Is “concern over pricing” created by a lack of spectrum, or by operators charging a profit maximizing price for cellular data? Surely its the latter and if so it isn’t a lack of spectrum that is “constrain[ing] wireless innovation”. How could more spectrum possibly help? Would cellular operators decide to reduce the price of data out of the goodness of their hearts and suddenly reject their profit maximizing approach to pricing? That sounds rather implausible.

      Finally, note that capacity can be increased either by investing in (and then deploying) new spectrum or investing in infrastructure to make better use of current (or stockpiled) spectrum assets. If operators believed there was more profit to be made by adding vastly more capacity to their networks and lowering the price of data then they would be doing that. They aren’t.

      • Richard Bennett

        Tim, if you’re going to toss Latin phrases around, please use them correctly. I attacked the reasoning in your post, not your person, so my attack is “ad argumentum,” an appeal to reason, not “ad hominem. You’re university educated, so please act like it instead of playing the victim. Your insinuation that I’m a telco shill is a good example of ad hominem argument, and it’s baseless as well. I’m employed by a variety of organizations, ranging across the entire IT sector, the public interest sector, and the government sector. I won’t ask who pays your rent because it’s irrelevant to the quality of your argument or the lack thereof. You claim the spectrum crunch is a myth and offer lame reasons and lame authorities to support your belief. I believe it’s real and offer my own reasons. That’s how policy discourse works.

        The cellular industry changed its pricing strategy for data two years ago when the large, successful carriers saw that demand for spectrum was growing faster than they could afford to increase capacity. The transition from “all you can eat” data plans to metered plans caused usage growth to slow. This does not mean that demand has been satisfied now and forever, it simply means that users are economizing. This should not be seen as a desirable state of affairs, as innovation demands a continual increase in network capacity. This is how IP-based networks differ from the traditional PSTN which seems to be your point of reference.

        Network capacity can be increased by technical means and it can be increased by deploying more spectrum. Wireless data capacity is like food production that this regard: Food goes up with more acres in production and also by more bushels per acre. The question is which means is more cost-effective. Adding spectrum to the inventory does not require new towers, simply additional radios on existing towers. That’s a huge cost savings as towers cost $100-200K each. Spectrum currently assigned to low-value uses such as sat phones, TV broadcasting, and obsolete government systems can be reassigned to cellular through auctions, which would be good for consumers, who benefit as capacity increases and operator costs decrease. Two of the four national networks still offer all you can eat plans, and customers are free to move if they want; Sprint even has the iPhone with an unlimited plan. Verizon and AT&T compete partially on the basis of price per unit of data capacity. That’s how markets work.

        Finally, it’s not the case that “offloading to WiFi is almost always free and uncapped” if we look at Internet services. Wi-Fi only forms the fuzzy edge of an infrastructure system that has the most of the same costs that cellular does, in terms of backhaul and radios. It’s not a no-cost system, it’s simply a system in which costs are often hidden from view. And if you’ve used Wi-Fi in an airport, hotel, or conference setting lately, you’re aware that it’s not immune from congestion either, largely because Wi-Fi providers don’t support the use of the ample spectrum available in the 5.8 GHz range.

        Capitalist network operators seek to maximize profits, and they’re smart enough to realize that the best way to do that is to take customers away from their rivals. This dynamic drives the public benefits mechanism in network markets.

        I’ve noticed that 90% of the people who argue that the spectrum crunch is a myth refuse to offer arguments that delve into the specifics of network expansion costs, technology limitations, or the unmet backlog of consumer demand for data capacity. Your article fits this mold so I don’t find it persuasive.

      • I’m glad we both agree that “The transition from “all you can eat” data plans to metered plans caused usage growth to slow”.

        Despite that CTIA continue to insist ( that the “truth about the wireless spectrum crisis” is that “you see a [cellular] usage curve that is shooting up dramatically” at a “pace [that] would bear out Cisco’s projections”.

        So let’s focus on the real issue. CTIA is denying the reality of a slowdown in data growth after being caught trying to spin their numbers. Cisco claimed in Feb this year that North American data growth in 2012 would be even higher than they had previously expected (118% instead of the 99% they had estimated back in Feb 2011). It seems we both agree that they are wrong

        I have no problem with you arguing that more spectrum would improve wireless networks. Clearly it would, just as increased capex by wireless operators would improve wireless networks. But let’s hear realistic perspectives on future growth rather than unrealistic hype as a justification for operators’ future spectrum needs.

      • Richard Bennett

        That’s a very moderate and sensible statement, Tim. Now let’s be careful not to fall into the analytical trap of confusing a short-term reduction in the rate of increase in utilization growth with long-term plateau in demand. We unfortunately do not have data on the actual demand for spectrum; nobody measures the number of packets waiting in transmit queues, we only count the ones that are successfully transmitted. We learned long ago with our measurements of Ethernet traffic that the critical dimension of network performance is the amount of time that packets wait for transmission.

        The problem with your article, to summarize it simply, is that you declared the spectrum crunch a “myth” because of a *short-term decline in the rate of increase of spectrum usage.*

        As I’ve tried to demonstrate, you’re making a leap that goes far beyond what the data will support. There are always going to be periods of time when spectrum usage grows faster or slower than the long-term trend, driven by whichever application is the flavor of the week and spot upgrades in congested cells. Practically every graph needs smoothing to convert samples into a trend line.

        I don’t think any serious analyst expects that long-term data usage on mobile networks is flat or declining, but when you assert that the crunch is a myth that’s what you’re asserting.

      • I’m glad we’ve got onto a reasoned debate about the issue at hand.

        No-one is suggesting that wireless data traffic won’t continue to increase, simply about the rate of growth of traffic on cellular networks. Estimates in the range of 5-8x increase in total traffic on cellular networks in the next five years (in North America) don’t strike me as unreasonable. That is similar to what operators like AT&T and T-Mobile were saying last year.

        Its also not dissimilar to what we see on the fixed Internet (30%-40% CAGR = 4-5x growth in 5 years). There, 10 years ago, when we were going through the same ramp-up curve as more consumers came online, we had numerous people screaming that the Exaflood would cause the Internet to meltdown, in order to attract investors, sell more equipment, etc. That fearmongering was massively exaggerated and based on bad data points, as Andrew Odlyzko has documented very well.

        So my problem is that people are doing exactly the same with mobile data traffic and relying on bad data and unreasonable forecasts (as I noted 2 years ago Maybe this posturing is the only way to get Congress to act, and is characteristic of the lobbying-driven modus operandi in Washington DC, but I can’t be alone in thinking the FCC ought to act more responsibly and evaluate the situation rationally, just as Ofcom does in the UK.

      • Richard Bennett

        Again, “traffic” is one thing and “demand” is another. Traffic cannot grow faster than capacity permits, but it’s fallacious to assume that demand is never higher than capacity. The issue is how long and how common the peak load periods are. When a cellular network is running above 90% of theoretical capacity, we can fairly judge that there is unmet demand for network capacity.

        You can say the same about wired networks, although the threshold is a bit higher because of the way the protocols work. Traffic analysis doesn’t lead to the conclusions you want it to show, and the constraints on mobile network performance are different from those for wired nets.

        The Internet was saved from Exaflood by advances in optical engineering that permit optical capacity to double every 8 months simply by technology upgrades with no new wires. Advances in radio technology are much slower, doubling every 30 months per Cooper’s Law.

        There is no empirical support for the idea that the spectrum crunch is real, or that unlicensed Wi-Fi will alleviate the pressure. It’s also incredibly expensive to build new towers, and there’s been no shortage of investment by the major carriers.

        There is also no reason to leave all the legacy spectrum allocations as they are. We should assume that all spectrum systems have a limited life and that upgrade and reassignment are permanent parts of the bargain. The cellular carriers have taken this lesson to heart, but the broadcasters and government users haven’t. That’s where things need to change.

    • Phillip Dampier

      More Halloween scare stories from a guy paid with industry money to support its evidence-lacking contention of a wireless data exaflood.

      While AT&T and Verizon Wireless slap usage caps on their wireless customers, they are telling investors these usage caps are not about controlling demand as much as monetizing data usage for fat profits.

      In fact, while Richard defends the shortage argument, AT&T just pulled the rug out, telling its investors it needs to find ways to leverage MORE usage on its wireless networks to boost revenue. What data tsunami? AT&T sure doesn’t have one when it hints at a Nov. 7th announcement of new machine-2-machine applications and video streaming to cars to enhance revenue. Meanwhile, its network upgrade continues at a pace that belies the hair-pulling crisis some in the industry want to us to believe in enough to throw sensible spectrum policy out the window. Remember, this should be about enhancing competition as much as it enhances the spectrum grabs by deep pockets like AT&T and Verizon.

      Sure, let’s allocate more spectrum — but let us do it sensibly to ensure there is robust competition in this market.

      • Richard Bennett

        So now you’re a spectrum expert and not just a net neutrality advocate, Philip? Good for you.

        You and I happen to agree that we need to allocate more spectrum to the systems that consumers actually want, and we need to do so sensibly.

  8. Roy Reese

    This “problem” has its roots in the FCC’s implementation of “Spectrum Auctions” in the 1990’s; nothing more than an extravagant TAX on the public for the “purple ether” we call spectrum. These auctions stifle innovation and progress – and effectively drives up “costs” of data access to consumers.

  9. Rich Osman

    The articles and most of the replies are missing some major points;

    1) spectrum access takes upwards of a decade to make happen. Arguing based on quarterly stats is misguided at best and simply misleading.

    2) Tower do not equal capacity. It’s far more complex than that. They generally relate to coverage, but two towers 1/2 km apart probably aren’t doing much for coverage.

    3) Wireless capacity is largely (but not precisely) linear with investment. Wireline capacity has a huge up front investment, but once that’s made additional capacity is mostly a matter of improving terminations and intervening infrastructure. The costs are decidedly NOT proportional to capacity.

    4) Wireless has defined limits on spectral efficiency that limit the capacity of spectrum. While ongoing work will improve this, the improvements will be incremental. There are physical laws that govern what’s possible and we are asymptotically approaching those limits. Things like MIMO double capacity and take years to make their way from R&D to consumers.

    5) WiFi is great and evolves more quickly than cellular, but it’s not a replacement. As most folks find, the best strategy is a mix. WiFI for ‘nomadic’ use and cell for true mobile and truly reliable use (provider coverage issues notwithstanding.) Nobody (at least nobody who is paying the bills) in their right mind uses only cell or WiFI.

    6) The cost of capacity numbers quoted in reports and by industry pundits are almost always “last mile” costs. The true operating costs are MUCH higher. You only need to look at the operator’s annual reports to see the real numbers.

    • Mr. Osman,

      The point is that until a spectrum inventory is available there is no clear path to knowing what the wireless carriers have in terms of fallow spectrum. As a broadcaster, and further more as a LPTV broadcaster, I have to worry that impending spectrum shortages are artificial and created as a means of a spectrum land grab.

      Please help me with this.

  10. Not only did they screw up the coverage area but most peoples phones battery life went to hell as a result a trend that continues today.

    Then there’s the whole compressing images and videos before it even gets to you…so much fun.

  11. a trade group back in 08 estimated that it was around 1.00 to deliver 1gb of data all costs included for the carrier and that was on gsm. With LTE the costs should be somewhere less than .25 per gb delivered. Then when you considered voice becomes digital at the switch your talking 4-6gb per month of actual use per person on a 70 dollar contract.

    Yeah that’s a 6900% profit and they are nowhere near the throughput potential – Spain has networks delivering 1gbps to normal users for the last couple of years.

    They lie like when ATT bought Cingular and terminated many of its tower contracts – In SLO they had 2 towers before they tore up the contracts on and built just 1 to replace it.

    Yep ATT halved the coverage for customers on Cingular – then they lied there ass off about it like they didnt know what happened.

  12. WaltFrench

    Data caps may be a hot button for some, but the basic issue is that carriers have moved from pricing the last MB of data from $0.0000 under an unlimited plan, to some very real cost under the typical tiered system.

    The marginal cost of zero made a LOT of sense when the carriers were trying to encourage use, and knew that users wouldn’t saturate their overbuilt network; real costs make sense when you’re somewhat matched in capacity.

    But Econ 101 pretty clearly says that higher cost restricts usage—as people make sensible tradeoffs about for instance, whether to watch part of a baseball game on their mobile, they’ll go for similar entertainment that uses less data. Hardly radical thought.

    Data usage MIGHT resume its previous, higher growth rate if/when costs of it fall. The next 25% of the population, the ones who have NOT chosen to buy a $600 device with a two-year, $2000+ contract, will need to see costs fall, maybe by a half, before they get on board.

    Of course, the CTIA members all employ economists who can estimate these “price elasticities” much better than my SWAG above, but for now it looks like they get the optimum profits by favoring high price over higher usage. That’s exactly what the second chapter of Econ 101 says that monopolies and oligopolies (few enough providers that it’s LIKE a monopoly) do.