HedgeFundLIVE.com – I recently did a write up on Clearwire (CLWR). In doing the research for that company I came across quite a bit of opinion on the future scarcity of wireless spectrum. At first, this made me question my negative opinion on CLWR. But, after having done quite a bit of reading on the topic, I am less concerned about the predicted future scarcity of wireless broadband spectrum. As a matter of fact, not only is there not a shortage, there appears to be an over-abundance of wireless spectrum so I would caution those who are currently bidding up the shares of wireless broadband carriers to remember the days in the late 1990’s when most people thought that we would not have enough fiber capacity for the oncoming tidal wave of fixed broadband usage. Well we all know how that turned out. The following are a few non-technical reasons why I do not think there will be a wireless broadband spectrum shortage in the next decade.
1) It appears to me that at least currently, there is a large surplus of spectrum. The US market is near full saturation in mobile phones yet I still see multiple cell phone commercials every hour on TV which indicates to me that the carriers, at least currently, are able to add subscribers to their systems without running out of spectrum. It seems like the carriers are simply trading their subscribers between one another.
2) There are many carriers with more spectrum than they currently know what to do with. Take Clearwire for example, they currently have 46bln Mhz-POPs of spectrum serving a tiny 4.4mln subscribers. Their growth in retail subs has slowed and the company is now trying to sell some of its spectrum. Apparently, it is having trouble doing so as this spectrum has been for sale since the middle of last year.
3) The Federal government controls massive amounts of spectrum that are currently going unused or underused, this spectrum could be reallocated to the private sector should the need arise. As a matter of fact, the NTIA and the FCC have been tasked with reallocating 500Mhz of spectrum over the next 10 years (with 300Mhz of the 500Mhz goal allocated over the next five years) for the use of broadband starting with 115Mhz of spectrum currently being used for weather satellite and military radar systems (15Mhz in the 1695-1710Mhz band and 100Mhz in the 3550-3650Mhz band).
4) Unused or underused commercial spectrum is also being targeted for reallocation/terrestrial deployment under the National Broadband Plan which includes 120Mhz of very-robust broadcast TV spectrum as well as 90Mhz of MSS spectrum and 40Mhz of AWS spectrum. Included in the 90MHz of MSS spectrum being targeted for accelerated terrestrial deployment is 40MHz in the S-band (2000-2020MHz and 2180-2200MHz) owned by two bankrupt satellite companies DBSD and TerreStar (Charlie Ergen is currently bidding for control of these two entities), as well as 40MHz controlled by SkyTerra (LightSquared)and Inmarsat (LightSquared partner) in the L-band (1525-1559MHz and 1626.5-1660.5MHz) and 10MHz in the Big LEO (two 16.5MHz blocks at 1610-1626.5MHz and 2483.5-2500MHz) controlled by Globalstar and Iridium. The AWS spectrum includes the AWS-2 “H” and “J” Blocks which is 20MHz at between 1915-2180MHz and the AWS-3 band which is 20MHz between 2155-2175MHz.
5) There are large amounts (by some estimates as much as 150MHz) of currently unused commercial spectrum (primarily AWS-1 spectrum) that is not being targeted by the FCC/NTIA. Much of this spectrum is owned (and currently going unused) by the cable companies who are apparently just sitting on the spectrum hoping that prices for it appreciate. The FCC could force the owners of this spectrum to either use it or lose it so to speak.
6) We must also consider technological advances that effectively increase the capacity of currently available spectrum including better video compression, increasing tower density, cognitive radios for spectrum sharing, femtocells and wireless VOIP to name a few.
Through technological advances as well as additional sources of spectrum, I believe that the US will not experience a spectrum shortage for many years to come.
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