Spectrum Refarming: Roll-out 3G services on 2G spectrum
Recently European Union officially ratified the updated GSM Directive which allows 900MHz frequency to be used for 3G and eventually 4G. This means governments across the region will now be obliged to allow operators to use 900 MHz spectrum band to roll out 3G and other high-speed technologies. The usual spectrum band for 3G services is 2.1 GHz but many operators are planning to use the existing 2G spectrum (850 MHz and 900 MHz) for 3G services.
Spectrum refarming is one of the most significant regulatory but those with 900MHz assets see refarming as a threat to their competitive advantage as well as to the quality of their networks. Although operators may feel threatened by the prospect of losing their existing spectrum assets, the opportunity to expand coverage and reduce costs outweighs any hesitation they may have about service deterioration or loss of market share from reduced spectrum holdings.
Generally speaking, refarming may be seen as process constituting any basic change in conditions of frequency usage in a given part of radio spectrum. Such basic changes might be:
- Change of technical conditions for frequency assignments
- Change of application (particular radio communication system using the band)
- Change of allocation to a different radio communication service.
Before we move further, it would be useful to understand the generic spectrum usage plan. The diagram below shows the how the different frequency bands are being used for different purposes.
Key Benefits of UMTS 900
Coverage – Ovum’s analysis indicates that UMTS900 provides between 44% (in urban areas) and 119% (rural areas) increased coverage per Node-B compared with UMTS2100. This is primarily due to the propagation characteristics of the lower frequency band. All 3G applications can be provided and used cost efficiently over much larger area as the coverage radius in 900 MHz is almost double than that of 2100 MHz spectrum- Cost Effective –Radio wave propagation loss is less in 900 MHz, so fewer base stations are required leading to cost savings of around 50–70% compared with networks deployed in 2100MHz core-band 3G spectrum. These coverage and cost-saving benefits mean that operators can bring 3G services to less-densely populated areas that were previously uneconomical to cover
- Better Quality of Service (QoS) - Since fewer base stations are required for UMTS 900 roll-out than UMTS 2100, the customer experience is better due to fewer hand-overs. Lower frequency band have a higher in-building penetration. Over 70% of phone calls are now made indoors and UMTS 900 can help improve the Quality of Service (QoS)
Regulatory status of spectrum refarming worldwide
As mentioned earlier, the European Union has already ratified the GSM directive on spectrum refarming and it is obligatory on part of its 27 member countries to change their laws in line with this directive. However, in most of the countries, it is up to the individual Governments to allow UMTS 900. It is necessary in some countries to re-arrange the band allocations by agreement with network operators in order to enable GSM & UMTS900 in 900 MHz spectrum.
Operators who have launched commercial 900 MHz 3G services
13 operators have UMTS 900 networks across the world till date but the reasons for the roll-out on 900 MHz vary from operator to operator.
Optus Australia launched UMTS 900 to increase its coverage. With a combination of 900 and 2100 MHz, it managed to increase its coverage to 96% of population. AIS in Thailand launched UMTS 900 as the 3G spectrum (2100 MHz) auction was getting delayed. Elisa launched UMTS 900 to save costs.
UMTS 900 Device Market
As per GSA HSPA devices survey conducted in October, 2009, 190 UMTS-900 HSPA devices have been launched in market by 34 suppliers (this includes 39 USB dongles). Most of the HSPA handsets now have 900 MHz support as well.
Will the operators completely switch off 2G in favour of UMTS900
The operator business is getting complex with many operators having to manage 2G, 3G and LTE networks. It is expected that with the stabilization of LTE by 2016/17, the operators would switch off their 2G networks (so far Japan is the only country to switch off 2G networks). However, due to the migration to UMTS 900, it is possible that the operators switch off the 2G networks much before the expected timelines. This would help the operators save on opex for running multiple networks and would also make the operations less complex requiring fewer people. The 2G network can be sold off to new operators coming up in emerging countries. However, there are a few challenges that would hold the operators back from switching off 2G networks:
- Migration from 2G to 3G handsets: Though the spectrum band would remain the same at 900 MHz, the 2G users would need to replace their handsets to be able to use the 3G network. The carrier would need to provide handset subsidy to encourage the users to replace their handsets but then the benefits have to be substantially higher than the costs involved
- Inroaming Revenues: With the voice tariffs dipping, the roaming revenues are a significant portion of the revenues. In case an operator decides to switch off the 2G networks, the users from other 2G networks will not be able to log on to the operator’s network. This loss of revenues may not be sufficiently covered by any opex savings or ARPU upside
- 1800 MHz: Many 2G networks are on 1800 MHz. UMTS 1800 is still not a viable option given the low ecosystem support. Apart from this, many operators may be holding both 900 and 1800 MHz spectrum and optimizing between the two. In this situation, the operator may not want to switch off 2G network
Another interesting option is that the operators carve out a portion of their 900 MHz spectrum for 3G roll out while retaining the rest for 2G. This would allow them not to participate in the 3G spectrum auctions and have substantial savings. Are the Indian operators listening?
I guess Spectrum re-use will be highly benificial even if we are looking for evolution for NGN.
But, the launching of 3G or 4G services depends on lot of other factors than just cost saving through Spectrum. So, the operators will make use of this only if they find a good business case.
Good Article btw .
I think Spectrum refarming is great tool for off-loading the current highly loaded 2G network for the existing 2G operators in India in case if they don’t get the 3G spectrum through auction. As the demand for 3G coverage is growing and the Voice ARPU is decreasing, there is a need for cost efficient WCDMA network expansion and operation, which provides Guaranteed high speed data services along with superior quality of voice for indoors. Now a days as the regulators are opening 900/850MHz band for WCDMA the WCDMA900/850 terminals arriving in to the market, so the need for spectrum refarming will be there and more and more operators will go for that.
As stated in the article it provides better coverage, it is an attractive solution for rural areas. It offers better indoor penetration hence it is possible solution also in metropolitan areas (to be balanced with capacity issues). It enhances cost-competitiveness of WCDMA/HSPA compared with alternative technologies working at lower frequencies than current WCDMA bands.
It leverages current investments in base station sites, core networks and common network management with existing network.
In north and latin America the 850 MHz WCDMA already in operation, no regulatory restrictions for usege. WCDMA 900 MHz allowed in New Zealand, Australia and Indonesia, WCDMA 850 MHz allowed in Australia. In the India too hopefully it will be allowed.
By the way nice article Mohit.
Regards,
Jignesh
Re-farming of 2G spectrum for 3G makes little sense for many operators today.
The primary reason is not that, in isolation, this does not make sense in terms of ability to meet rising bandwidth and multi-service demands but that a transition to 3G at a time when the industry is starting to shift to NG==>4G technology framework is short-sighted and less promising.
The LTE and recalcitrant WiMAX developments are positioned to provide a way forward to multi-carrier IP operation of networks that is longer-term, more inclusive, and more productive.
3G is far from being a dead-end for many operators not exposed to the most demanding or promising use of spectrum. However, it is not the way forward to re-farm spectrum.
I have advocated, first within the WiMAX effort, (pre-LTE) and as the way forward for 3GPP the direction taken up by ITU for IMT-Advanced. The technology has progressed quickly such that Telenor/Tele2, AT&T and others have become strong advocates and have announced multi-carrier LTE deployments starting in 2011.
I believe that this factor spells the nail in the coffin climax for any hope that WiMAX will become universally adopted as 4G except as Greenfield and overlay networks. The history of the development of multi-carrier, particularly of sub 1GHz combined with >2GHz spectrum, will provide a lesson in how a challenger to the mainstream mobile industry could ignore the broader implications of network designs set in the context of evolving markets.
While some operators may adopt multiple carrier 3G, I believe the rapid entry of m-c LTE will convincingly sway the argument by extinguishing the incumbent marketplace advantage.