Spectrum auctions hit new highs, mid-band is expected to become the new golden band

Mid-band frequencies help achieve a good balance of data speed and coverage

The first phase of the FCC's auction of 280MHz spectrum in the 3.7-3.98 GHz band ended on January 15. After 97 rounds of bidding, the bid price reached $80.9 billion, the highest spectrum auction price in U.S. history, far higher than the record of $44.9 billion set in the AWS-3 band auction in 2015.

The record-breaking auction price demonstrates wireless operators' desire for spectrum assets and proves the value of mid-band spectrum. User experience tests conducted in live 5G networks also show the huge advantages of mid-band spectrum.

In the chart above, we summarize the test results of Verizon and T-Mobile's 5G networks by OpenSignal. It can be found that in June 2020, Verizon's download speed was significantly ahead of T-Mobile, but the network coverage was very low, while T-Mobile's network coverage was good, but the download speed was only about one-tenth of Verizon's. The reason behind this is precisely the choice of spectrum. Verizon initially used the millimeter wave band to deploy 5G networks, while T-Mobile mainly used the 600MHz band.

By January of this year, the test results had changed dramatically. Verizon's 5G network coverage improved, but its download speed dropped sharply. On the other hand, T-Mobile's download speed and network coverage have steadily improved, and its 5G download speed even exceeded Verizon. This change can also be explained by spectrum selection. Verizon began to deploy 5G in low-frequency bands such as 850MHz using dynamic spectrum sharing (DSS) technology, which can improve coverage but limit its network speed. In contrast, T-Mobile actively used the 2.5 GHz spectrum obtained from the acquisition of Sprint to deploy 5G networks. The 2.5GHz mid-band spectrum enables T-Mobile to achieve a good balance between data speed and network coverage, while Verizon, which lacks mid-band spectrum resources, finds it difficult to achieve such a balance.

It can be seen that the mid-band can help operators achieve a good balance between coverage and system capacity, and is expected to become the golden band in the 5G era. This is probably one of the reasons why the US C-band spectrum auction set a record price. US operators have fully realized the value of the mid-band spectrum.

Licensed spectrum is critical to ensuring high-quality Internet access

During the COVID-19 pandemic, people's communication needs have driven a surge in Internet usage in many countries and regions. An OECD report pointed out: "Since the outbreak of the COVID-19 crisis, demand for broadband communication services has surged, with some operators' Internet traffic increasing by 60% compared to before the crisis." The figure below briefly summarizes the growth of Internet data traffic in some countries.

As can be seen from the figure, not only developed countries, but also developing countries have experienced significant growth in Internet traffic. For example, Chile saw a 10.4% increase in data traffic between September and December 2019, which can be considered a baseline before the COVID-19 crisis. Between December 2019 and March 2020, data traffic increased by 38.3%, an increase of about 3.7 times that of the previous quarter. Brazil and South Africa also reported similar trends.

During the pandemic, applications such as working from home, online learning, and remote consultation surged. UNESCO pointed out that at the peak of the pandemic, a total of 1.6 billion children worldwide were unable to conduct normal offline learning. Data from the US Centers for Disease Control and Prevention showed that in the last week of March 2020, when the pandemic broke out in the United States, the number of remote consultations in the United States soared 154% year-on-year. These applications have pushed up the demand for services such as video conferencing and video streaming. In March 2020, when the pandemic spread rapidly around the world, the data traffic of the video conferencing platform Zoom soared 535% year-on-year. A large number of video applications have put forward new requirements for the quality of broadband connections. Traditional broadband access technologies such as ADSL and Cable have gradually failed to meet the rapidly developing market demand, but the penetration rate of fiber broadband in most markets around the world is still significantly insufficient, which makes mobile broadband technologies represented by 4G LTE and 5G NR play an indispensable role in providing quality broadband. The following table compares the penetration rates of fiber home broadband and mobile broadband (4G LTE and 5G NR) in major regions around the world.

It can be seen that, whether in developing or developed markets, mobile broadband networks have become an important foundation for providing high-quality broadband connections, and high-quality spectrum resources are crucial to ensuring the healthy development of mobile broadband networks. Sufficient licensed spectrum can help operators expand the coverage of mobile broadband networks and provide broadband services to those who do not yet have access to fiber broadband and Wi-Fi connections. Mid-band spectrum can achieve a good balance between coverage and system capacity, not only providing consumers with basic connection services, but also helping to improve their user experience.

6 GHz: An expanding ecosystem to support the connected society

The industry is currently discussing the spectrum allocation plan for the 5925/6425 – 7125MHz band. As pointed out in the Strategy Analytics blog (The 6 GHz Band will be Key for 5G Growth; Regulators and Standards Bodies Should Act in 2021), the 6 GHz band is a key resource for the mobile communications industry to "provide long-term value creation strategies for consumers and enterprise customers."

In addition to benefiting the development of the mobile communications industry itself, we must also emphasize that the 6 GHz frequency band is also of great value to human and social development.

In July 2016, the United Nations stated that the right to Internet access should be considered a basic human right. However, in some developing regions, providing Internet access to everyone remains a serious challenge.

At a recent online conference jointly organized by Nokia, Ericsson, GSMA, Huawei and ZTE, a representative of Telefonica Latin America said: "Fixed broadband service penetration and data rates in Latin America are low, so 5G applications become more important in the region, such as enhanced mobile broadband and fixed wireless access." At the same event, Ericsson also pointed out that "in Latin America, the bottleneck is fixed broadband access," and "5G-based broadband services do not have the bottleneck problem of last-mile connectivity."

These views are basically consistent with our analysis in the previous section. Mobile broadband networks based on licensed spectrum are essential for people in developing countries to access the Internet and obtain universal services. With the development of the Internet of Things, mobile networks can also help improve the overall productivity of the economy, which will benefit the whole society.

Currently, more than two dozen telecom companies and industry organizations have begun to work together to promote the development of the 6GHz mobile ecosystem. Some large economies have planned to start testing on the 6GHz band in 2021.

China's IMT-2020 Promotion Group has announced that it will test 5G base station prototypes and conduct field trials in the 6GHz band. Russia's state-owned radio research institute NIIR also plans to test 5G networks in the 6,425-7,100 MHz band. The work done by these large economies in the 6GHz band will lay a solid foundation for the development of the 6GHz mobile ecosystem.

Looking ahead to the World Radio Conference to be held in 2023, we believe that allocating the 6GHz band for mobile broadband services will not only benefit the development of the global mobile communications industry, but will also promote the protection of basic human rights and the development of a connected society. It is necessary to re-evaluate and recognize the value of mid-band licensed spectrum. The 6GHz band will surely play an important role in the development of a connected society and become the new golden band for mobile broadband networks.