The GSM directive currently stipulates that 900MHz frequencies must be reserved for GSM networks in Europe. It is expected that this legislation will be lifted, which will enable these valuable frequencies to be refarmed for emerging UMTS 900MHz deployments.
The anticipated benefits of using 900MHz for UMTS deployments include lowering the cost of deploying UMTS and mobile broadband services in less populated, rural areas, and improving in-building signals. These benefits could be realised by incumbents, new operators or recent entrants across Europe.
However, there are two aspects of market evolution that will determine the benefits generated from early refarming: whether 3G voice and mobile broadband becomes a nationwide proposition, and whether there is a rapid migration of subscribers, handsets and voice traffic to UMTS networks (and subsequent rationalisation of the old GSM networks).
If refarming is delayed, any gains would be significantly diminished. For mobile operators, this could impact in three ways.
They would be required to make extra investments to deploy their networks at 2100MHz, without being able to rely on long-term access to the more cost-effective, refarmed 900MHz spectrum.
They would have to limit the extent of mobile broadband deployment, focusing on cities and dense suburban areas and neglecting areas of lower population density.
Mobile operators would also have to delay their migration to 3G and operate overlapping GSM and UMTS networks in parallel for longer.
Figure 1 shows the relative values of refarmed spectrum, estimated using a generic cost model of a mobile operator.
In the situation of rapid migration to 3G combined with the early roll-out of nationwide mobile broadband, delays to 900MHz refarming will be costly. The value of having unrestricted access to this spectrum reduces rapidly by 97% for delays during the three years in which rapid network evolution occurs.
If the evolution of the mobile network is slower – with either limited migration or limited mobile broadband service availability – early refarming would still be important, but delays would result in a smaller reduction in spectrum value, around 40%–60% over three years.
If migration to 3G is slow and mobile broadband services are limited to urban areas, delays in refarming the 900MHz spectrum will not be significant. However, in this situation, the overall development of the mobile market could be significantly impeded.
Figure 1: Relative values of refarmed spectrum 2009–2013 [Source: Analysys Mason, 2008]
In order to create the maximum benefit for mobile operators, and to generate the greatest value, GSM restrictions on 900MHz frequencies should be lifted as soon as practical, ready for spectrum refarming from 2009 or 2010.
Consequently, the directors of spectrum policy in regulators and mobile operators should explore the opportunities for early 900MHz refarming within their jurisdiction and consider their options in the context of expected mobile market evolution. As experienced advisors to regulators, policy makers and operators, Analysys Mason is ideally placed to support organisations engaged in the debate on spectrum refarming.