Waiting for 3G

December 2001
By Henry S. Kenyon

Legal, allocation problems hamper wireless technology rollouts.

Regulatory and spectrum issues may delay widespread release of third generation wireless technologies in the United States and Europe. The root of the difficulty is the lack of available bands for new applications in North America and questions surrounding rule-making authority in the European Union.

Mobile communications systems are now a vital part of daily life in much of the world. Successive generations of devices have become more lightweight and capable, with items such as laptop computers and cellular telephones now able to access the Internet via wireless networks. Experts predict continuing growth of these worldwide markets as the technology offers more applications.

However, this expansion does not come without a price. Radio frequency spectrum is a crowded place, and many networks have reached their maximum capacity. The only possible means for more growth is in acquiring additional bandwidth from existing users or creating technologies that allow more services on a single slice of spectrum.

Legal and regulatory issues also surround the introduction of third generation (3G) systems. Pressure is building on decision-making bodies such as the European Union (EU) to decide whether 3G and other wireless applications should be regulated at the national or international levels.

Third generation technology promises enhanced service and performance over existing second generation (2G) digital systems for telecommunications providers and their customers. These systems can offer broadband and multimedia applications such as voice, video and data. They also use spectrum more efficiently and are more capable than 2G technologies because they provide higher data rates under different mobility conditions, support for packet-based data services and support for asymmetric services.

Spectrum allocation for 3G and other advanced wireless systems is the primary communications issue that government and industry in the United States face. The disputed allocations involve blocks of spectrum in the 1710- to 1770-megahertz and 2110- to 2170-megahertz bands. The first range is mainly used by military, state and federal government agencies, while the latter is used exclusively by commercial entities.

The commercial wireless sector contends that it needs the additional spectrum to grow and to provide 3G services. According to William Belt, director of the Telecommunications Industry Association’s wireless communication division, Arlington, Virginia, industry is working with the government to identify possible bands for 3G applications. It also is pursuing two broader goals. The first is for more spectrum, with firms seeking an additional 160 to 200 megahertz of bandwidth to use. Under current expansion rates, network operators in major markets such as New York City and Los Angeles will reach their maximum capacity by the end of 2002, he says.

Frequency harmonization is the second and long-term goal. This would allow a person to use their cellular telephone or wireless device anywhere in the world. However, harmonization is likely to take some time because the global market is currently a patchwork of technologies that are only regionally harmonized in areas such as Europe. The industry also would like the Federal Communications Commission (FCC) in Washington, D.C., to raise or remove the current spectrum caps on bandwidth available to providers in a given geographical area.

However, the part of the spectrum most coveted by industry belongs to the U.S. Defense Department. But certain parts of that band have recently been excluded from the allocation process due to national defense requirements. Other sectors are open to negotiation, although the affected forces will require adequate replacement frequencies. “The Defense Department clearly cannot vacate that spectrum without having comparable spectrum. There is a push to find out how to find it, get it for them and what to do with the incumbents who are there,” Belt says.

In March 2001, the U.S. Commerce Department’s National Telecommunications and Information Administration (NTIA) released a report exploring the spectrum issue and possible means to share bandwidth between current users and 3G services. Based on the report’s findings, a new 3G-spectrum allocation plan was developed in October 2001 by NTIA, FCC, the Department of Defense and executive branch agencies. Commerce Secretary Donald Evans and FCC Chairman Michael Powell agreed to extend the time frame for a final decision on spectrum allocation for commercial advanced wireless services, including 3G applications. Although a deadline of September 30, 2002, exists for the 1710- to 1755- and 2110- to 2150-megahertz bands, the Bush administration has proposed legislation to push the date to September 30, 2004.

The plan will examine potential uses of the 1710- to 1770- and 2110- to 2170-megahertz bands for commercial advanced wireless services. However, the 1770- to 1850-megahertz band was excluded because of its key government and military uses. The evaluation also will investigate possible frequency sharing between incumbents and new 3G users and will attempt to identify alternative spectrum bands to replace displaced federal and private sector systems.

According to NTIA officials, relocation spectrum will be identified through the National Defense Authorization Act of 2000, and a time frame for moving displaced incumbents will be created. Government users of the 1710- to 1770-megahertz band also will evaluate their future spectrum needs in light of new national security demands.

The 2110- to 2170-megahertz band also will be assessed for additional spectrum allocation. The FCC will use the rule-making process to examine other means to address wireless spectrum needs in this band. These include the evolution of existing wireless services such as cellular and personal communications as well as special mobile radios and 3G; possibly reallocating some spectrum from mobile satellite services and other wireless services; reallocating some television broadcast spectrum; and allowing licensees in the 2500- to 2690-megahertz band to provide mobile services. The government plans to complete the process by the late spring of 2002. Once the assessment is finished, the NTIA will coordinate with the FCC and the executive branch to resolve wireless spectrum allocation issues. However, the rule-making process will remain open through this period as additional changes are considered.

Use of the 2500- to 2690-megahertz band by educational television and multichannel distribution services is one issue. Many wireless providers are beginning to offer broadband data services and Internet access in this spectrum, explains one FCC official. The FCC decided not to take this spectrum away from the existing licensees, allowing them the option to instead offer mobile services.

Bandwidth plays a critical role in spectrum allocation because multiple users can share the same frequency. Additional spectrum will allow providers to design their systems to cover more customers and offer high data rates to existing clients. The FCC has designated three tiers for 3G use: 144 kilobits per second for vehicular use, 384 kilobits per second for pedestrians, and up to 2 megabits per second for fixed or indoor applications.

The FCC official, who spoke on condition of anonymity, is sanguine about the outcome of the allocation process. He notes that it is not a question of whether spectrum will be made available but rather how much will become open, in which bands, and to what extent they will harmonize with other systems around the world. Although confident that spectrum will become available, he warns that none of it is vacant and selecting the proper bands will take time.

While the spectrum question is being decided, wireless providers are beginning to roll out the first 3G systems and planning ways to migrate other 3G-related services onto existing bands. Citing the example of AT&T Wireless, Belt notes that the company has released 2.5G—an interim technology—in several markets across the United States. AT&T’s 2.5G consists of an always-on Internet connection for wireless devices that is much faster than current cellular telephone access.

The commercial sector deployment reflects a fundamental difference between American and European approaches to wireless technology, the FCC official observes. The European Union has designated separate frequency bands for 2G and 3G technologies, while in the United States, the private sector is allowed to provide 3G services in their existing spectrum. “People will quibble about whether they meet the definition of 3G or not, but they’re data services,” the official says.

While spectrum issues dominate the U.S. market, European wireless providers are focused on regulatory matters. At stake is a proposed legislative package that could swing authority away from general oversight by the European Union and back to individual national bodies. Commercial telecommunications firms prefer broader EU regulation, contending that scattering rule-making across the union’s 15 member nations may slow wireless sector development and possibly halt or severely reduce investment in 3G.

Called the Telecoms Communications Review, the legislation is currently before the European Union’s Council of Ministers—one of the three branches of the EU government. The package consists of five elements: an overall general framework directive, sections dealing with access, interconnection, universal service obligations, a data protection proposal and an authorization proposal.

According to Brooks Tigner, press and communications officer for the European Telecommunications Network Operators’ association (ETNO), Brussels, Belgium, one of the main issues is how these elements are regulated. “The pendulum seems to be leaning heavily in favor of national regulatory authorities. This is something many of our members are worried about because they, like members of industry in every other sector in Europe, would prefer a predictable, harmonized regulatory landscape,” he says.

If authority reverts to the national level, individual nations such as Italy or Sweden could issue or strike down rulings, leading to a patchwork environment. Tigner notes that the Telecoms Review’s original goal was to roll back sector-specific regulations. “If the watchdog power swings more to national authorities, the fear is that there will be a re-regulation of the different sectors in the telecommunications industry,” he says.

Mobile telephony is a relatively unregulated sector that could suffer. While Europe is ready for a 3G rollout, passing the package poses the risk that this part of the industry could be subject to sector-specific regulation, Tigner says. Additional regulation in the form of tariffs could further stifle investment in 3G technologies and applications.

The fear of regulation and added cost is acute because of the high price many wireless firms paid to acquire 3G spectrum licenses. This expense was not shared equally by all nations, however. Tigner notes that while bidders in France, Germany and much of the European Union paid high licensing costs, some nations like Sweden practically gave away their licenses. “So here we have a lot of telecom operators in Europe who swallowed these gigantic costs. They are saddled with debt and waiting to roll out the third generation equipment and services. They will only do that—they want to do that—in an atmosphere of commercial freedom. If there’s a risk of sector-specific regulation, that could pose great uncertainty for them,” he explains.

The European Commission can impose sector-specific regulation if a particular operator or sector with significant market power abuses its position or if there are a number of failures or bankruptcies of sector companies. Tigner notes that the commission tends to use obscure methods to determine its criteria, which would then be open to further interpretation and cause more contention. Also, appealing a decision is a time-consuming process that only adds to the uncertainty, he says.

The Council of Ministers is scheduled to vote on the package in early December. But possible complications may occur before then. The European Parliament is in favor of a stronger regulatory role for the European Union, and if it cannot reach agreement with the Council of Ministers, both groups may enter a period of arbitration that may move the deadline to the end of December or into early 2002.

While the regulatory issue will dominate the European market in the near future, 3G services remain poised to roll out. Key drivers for those applications will be messaging and entertainment features, explains Benjamin Wood, a United Kingdom-based analyst with the Gartner Group. Voice will continue to be a major factor in 3G systems, but because of the high licensing costs paid by European telecommunications firms, additional revenue areas will have to be explored. “That means nonvoice services. That means people not talking into telephones, but interacting with them,” he says.

Location-based services will be another important feature for 3G, Wood notes. By pinpointing a person’s location via their wireless device, providers can send area-specific services to them. This feature will first appear in major urban areas that have good infrastructure, but Wood sees opportunities in rural areas for 911 applications and emergency pick-up services for stranded motorists.

Wood expects the first launch of 3G commercial infrastructure to begin by 2003. However, Tigner cautions that while these systems may roll out in north central Europe, which has a well-developed communications infrastructure, in some cases, 2G has not been fully exploited on the continent. “There is still some transition there and will be for quite some time between 2G, 2.5G and 3G,” Tigner explains.

Additional information on 3G wireless issues is available on the World Wide Web at http://www.ntia.doc.gov, http://www.tiaonline.org.

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