06.13.11

Uncutting the cord

Posted in General, Regulatory, Spectrum at 10:31 am by timfarrar

If the paradigm shift for the telecom industry in the 1990s was the Death of Distance and in the 2000s was Cutting the Cord, then what might the new paradigm be for the next decade? I’d venture to suggest that one of the most important trends will be data offloading from mobile to fixed networks. As a result, you will need that fixed wire (or cable or fiber) into your home more in a decade’s time than you do today.

The simple reason for this is that the cost of data delivery on a fixed network (at around 2-5 cents per Gbyte) is nearly two orders of magnitude lower than on wireless networks. Similarly, monthly usage per subscriber, despite dramatic increases in wireless usage over the last few years, is also about 100 times greater on wireline networks (15Gbytes per month compared to a few hundred Mbytes on wireless). This ratio is unlikely to change significantly over the next decade, given expected improvements in both wireline and wireless technologies.

What that means is if you want to watch streaming video on your tablet or smartphone, you will be very strongly incentivized (by price) to offload that traffic to a WiFi hotspot and onto a wireline network. For example, at ~2Gbyte per hour for streaming HD video (at 4-5Mbps) to a tablet, you would have to pay $20 per hour at current wireless prices of $10/Gbyte. Even in 5 years time the price will undoubtedly be dollars per hour, not pennies per hour. Unsurprisingly, consumers are already taking these pricing signals onboard and turning to WiFi. However, the impact of this switch is dramatically underestimated in Cisco’s forecasts, which project that in the US only 30% of smartphone and tablet traffic will be offloaded in 2015. Even today, this ludicrously underestimates the amount of tablet offloading, given that the majority of iPads are WiFi-only.

Ironically, the spectrum that might therefore be in greatest demand in the future is unlicensed spectrum, for short range wireless access. That’s why there is considerable pressure from Microsoft and Google to ensure that white spaces are protected in any future broadcast spectrum auction, and why a study for Ofcom on future UK spectrum requirements predicted that there would be more near term demand for incremental unlicensed spectrum than licensed spectrum.

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