Suppliers of wireless services, and many at the FCC, say the US is running headlong into a spectrum shortage as more people want more capability from their wireless devices. However, a study from Citigroup Global Markets says that while wireless providers face challenges, lack of spectrum is not one of them.
Citi summarized its findings, and since we can’t summarize it any better, we’ll just let the researchers make the case:
* Mixed Signals — Robust Smartphone and tablet sales suggest wireless demand is growing rapidly. And, the FCC suggests the US faces a long-term spectrum shortage. However, several new wireless carriers – Clearwire, LightSquared and Dish – have been slow to light-up their spectrum suggesting excess supply. So, who’s right? Is there a spectrum shortage or not?
* Spectrum Availability High, Use Low — Today, US carriers have 538MHz of spectrum. And, additional 300MHz of additional spectrum waiting in the wings. But, only 192MHz is in use today. And 90% of this in-use spectrum is allocated to 2G, 3G and 3.5G services. As such, we estimate carriers can only offer average wireless speeds of 0.5-1 mbps during the peak busy hour.
* But, Spectrum Is in the Wrong Hands — 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.
* Full 4G Can Deliver 5Mbps — 100% conversion of 538MHz allows carriers to offer 5Mbps with 10% simultaneous usage during peak busy-hour. This speed allows for very robust mobile use and limited home use. However, it is not sufficient for in-home replacement capable of large screen HD video streaming.
* Bottom Lines — We do not believe the US faces a spectrum shortage. However, unless incumbent carriers accelerate their 4G migration plans, or acquire more underutilized spectrum, upstart networks – like Clearwire, LightSquared and Dish – could have a material speed advantage over incumbent carriers provided that they can clear meaningful hurdles for funding and distribution.
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