The great wireless land grab

8 Jun 2006

As students basked in the midday sun by the glittering waters of the lake beside University College Dublin’s O’Reilly Hall, they were unaware that a fierce debate raged over a resource that could soon impact their future lives in terms of information, communication and entertainment.

Regulators and experts from all over the world attended an OECD workshop on wireless spectrum hosted by the Commission for Communications Regulation (ComReg) in University College Dublin recently. The debate centred on the best way to allocate licences to operators for various frequencies and technologies such as Digital Terrestrial Television (DTT), WiMax and Ultra Wideband.

These peculiar terms may mean nothing to you now but could form the cornerstone of the future telecoms industry, the television industry and the internet industry. Media moguls, take note! It appears that important lessons have been learnt from the financial bloodbath that was the 3G licensing fiasco. Hype surrounding the importance of 3G saw European mobile operators spend €160bn in auctions to acquire licences for what they saw as super-fast mobile data services. As the telecoms downturn of 2001-2002 began to take its toll, many of these operators asked the European Commission to get them their money back but to no avail.

Unlike many European countries, mobile operators in Ireland were granted their licences following a ‘beauty contest’ held by ComReg; instead of paying several billion euro per licence they paid on average €127m per licence. “The lesson we’ve learned from 3G is that it was seen as ‘the technology’,” said Robert Mourik, the head of regulatory affairs at O2. “In reality, 3G is just a technology and the services you can provide over it are very important. However, it is just one of the solutions and not ‘the solution’. Voice revenues are plateauing. Instead of seeing the double-digit growth of recent years, operators are experiencing single-digit growth. It is a mobile industry imperative that we develop alternative sources of revenue.”

This time round, regulators seem open to more flexible licensing arrangements such as granting temporary licences so mobile operators can test a frequency or technology for its commercial merits. This autumn in Dublin, O2 will trial the new DVB/H (digital video broadcasting to handheld) standard, which could be the cornerstone of future mobile TV services.

In the US, allocation of wireless spectrum is a major topic of discussion. Eric Stark, an administrator on telecoms policy at the US Department of Commerce, paraphrased President Bush when he said: “If you want something to flourish, don’t tax it.”

Stark continued: “Wireless devices are changing the way business is done. This is a key driver for the spectrum argument and the president has issued memos to agencies to keep up with the pace of technology because economic growth is at stake. We are looking at moving away from ‘command and control’ regulation to offering market-based incentives and economic mechanisms to boost innovation.”

Thomas Hazlett, professor of law and economics at George Mason University and a former chief economist at the Federal Communications Commission, said: “Liberalisation of spectrum policy means ’embrace and enable’, not ‘clamp and restrain’. In the Eighties the US led the world in cellular. Delays by regulators on licensing meant that the European cellular market passed the US by in the Nineties.”

Chairwoman of ComReg Isolde Goggin said that existing and future wireless operators in Ireland should be prepared to exploit the large amount of wireless spectrum available. She said that ComReg is interested in talking to companies about giving them licences to test services on wireless frequencies. “We want to move away from picking technology winners to
technology- and service-neutral licensing.”

The Minister for Communications, Marine and Natural Resources Noel Dempsey TD agreed that Ireland’s abundance of spectrum is an important opportunity for the business world. “Economists believe that establishing a market for radio spectrum is the most efficient way to allocate the resource. If new technologies cannot find an efficient place in the spectrum or are not assigned any spectrum at all, there will be static losses of efficiencies. This may have a dampening effect on the whole incentive to innovate. This is a key point about spectrum: it is a tremendous natural resource. If not used properly it has the possibility of acting as a ‘bottleneck’, inhibiting innovation and growth,” Dempsey remarked.

It seems the sun is setting on the traditional dominance by mobile operators in the wireless arena. A new dawn awaits the next generation of players who make the right platform choices.

By John Kennedy

Pictured: Mike Byrne, ComReg; Communications Minister Noel Dempsey TD; and Isolde Goggin, chairwoman, ComReg