2.6GHz Spectrum Strategy and 2.6GHz Spectrum Valuation

2.6GHz spectrum presents operators with some interesting challenges from both a spectrum strategy and spectrum valuation perspective. The frequency range, sometimes referred to as 2.5GHz spectrum or 2.6GHz spectrum, has poor propagation characteristics relative to spectrum in the 900MHz range and also forthcoming spectrum to be awarded as part of the Digital Dividend. In formulating spectrum strategy operators usually regard spectrum in this band as being suitable for increasing capacity on their networks, especially in urban areas, rather than for expanding coverage which is better served by refarming 900MHz spectrum or awaiting the Digital Dividend.

Developing spectrum strategy is further complicated by the fact that the band is typically split into blocks of paired and unpaired spectrum, which are particularly suitable for UMTS/LTE and mobile WiMAX technologies respectively. Operators therefore have to also grapple with the choice of technology. Determining the best approach to the band is aided by the fact that there is typically a large amount of spectrum being made available but this presents its own complications. Some technologies such as LTE provide better performance when they can be deployed in wide contiguous spectrum blocks and so spectrum strategy must also address the optimal block size.

Relatively few countries in Europe have so far successfully completed their allocation of this spectrum. We have seen awards in Hong Kong and also Norway, Denmark and Sweden. A number of auctions can be expected to take place in the coming years. Part of the problem for operators and therefore regulators is that despite rapid growth in mobile data traffic the operators do not yet require the additional capacity that this spectrum offers. They are therefore reluctant to participate in an auction and to commit cash for spectrum that they will not require for a number of years and where there is uncertainty over the availability of technology. Furthermore simply valuing the spectrum is challenging when the operators must value the spectrum in the context of anticipated future awards of spectrum and refarming. It is not surprising that many operators are seeking to delay the process through use of the courts.

Despite all the challenges and complications for regulators and operators alike the process of awarding 2.6GHz spectrum continues in a number of countries. Operators must grapple with a wide range of issues and Coleago has worked with a number of European operators to help them formulate their spectrum strategy and to develop a holistic approach to 2.6GHz spectrum valuation. The valuation has largely been focused on estimating the capital expenditure avoided as a result of being able to provide additional capacity through additional spectrum rather than having to increase the density of the network. Indeed, in some dense urban cities networks are now approaching the limit of network densification and additional spectrum and or new technologies may be the only route for alleviating network capacity constraints.

Main contacts:

Graham Friend
Managing Director
Tel: +41 79 855 1354
graham.friend@coleago.com

Scott McKenzie
Director
Tel: +44 7825 294 576
scott.mckenzie@coleago.com