US spectrum is in wrong hands, but no shortage

Contrary to the Federal Communications Commission (FCC) warning of a “looming spectrum crisis”, there is no shortage of radio spectrum in the USA, according to analyst firm Citi Investment Research & Analysis. However, the firm warned, too much of the spectrum is in the wrong hands.

The company said that US carriers currently have 538MHz of spectrum, and there is an additional 300MHz of spectrum ready to be used, but only 192MHz is in use today.

In addition, 90 per cent of this in-use spectrum is allocated to 2G, 3G and 3.5G services.

“We do not believe the US faces a spectrum shortage,” the firm said.

“Too much spectrum is controlled by companies that are not planning on rolling out services or face business and financial challenges. 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.”

Stefan Zehle, CEO at consultancy Coleago, told that the US telecoms industry needs to accept that inefficiencies are inevitable.

“In theory, if you gave all the spectrum to a single operator, that would be the most efficient way of doing it, from a spectrum perspective. But of course, that’s not the most efficient way to do it economically, as you end up with a monopoly,” he said.

“That is why you have to balance the need to have multiple operators and accept inefficiencies in the use of spectrum.”

He added that the issue is not limited to the US, which is relatively balanced. Problems are much starker in markets where there is less spectrum available and more operators, with India being a prime example.

One way many other markets have managed to ensure efficiencies in spectrum allocation is by introducing ‘use it or lose it’ provisions; if operators don’t use the spectrum within a specified period, they have to hand it back to the regulator, but according to Zehle, it will be difficult to implement this in the USA.

“These ‘use it or lose it’ provisions could be quite loose or quite prescriptive in terms of providing coverage in rural communities, for example. In May 2010, the auction in Germany had specific rollout obligation for the 800MHz digital dividend spectrum. This provision is used in a lot of markets, but not in the US, and that’s part of their problem.”

“It’s relatively easy to remedy if you have a new auction but it’s difficult to remedy once it’s done, because if you have assigned the right to the spectrum to someone and they’ve paid for it, it’s difficult to take that away.”

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