The sale of wireless spectrum has been very much in the news lately. Interesting phrases such as “red underpants” and “waterfront property” have been thrown around as government, businesses and the media prepare for the multi-billion-dollar spectrum auctions on April 16.
Telstra, Optus and Vodafone have all confirmed they’ll take part in the auctions, despite being annoyed at prices that are reportedly 3.5-times greater than those in comparable countries.
So with this in mind, it might be useful to explain just what “spectrum” is and how it relates to mobile communications.
Spectrum
Quite simply, spectrum consists of a range of electromagnetic frequencies – which, in turn, begs the question: what is a frequency?
Wireless communication is based on rapidly varying an electromagnetic carrier wave in response to another information signal – a process known as modulation.
When we talk on a mobile phone our voice signal (the information signal) is mapped (modulated) onto a sinusoidal (or “sine”) carrier wave (see video below).
The carrier wavefront repeats a certain number of times per second. The number of times the wavefront is repeated per second is the frequency, measured in Hertz (where one cycle per second = 1 Hertz).
Mobile communications, such as GSM (2G), UMTS (3G) and LTE (4G) use frequencies in the range of several hundred Megahertz (millions of wavefronts per second) to several Gigahertz (billions of wavefronts per second).
An unmodulated carrier wave occupies a single frequency, but modulation causes the signal to occupy a range of frequencies. For example, voice signals consist of frequencies between roughly 300 and 3,500 Hertz.
Depending on how the voice signal is mapped to the carrier wave, the resulting signal will occupy a range of frequencies around the carrier frequency. What is true for voice is true for data or any form of wireless communication.
Any useful communication will require a range of frequencies. In a single word it requires “spectrum”. And the more users there are, the more spectrum is needed.
Tweak the frequency
It turns out that not all spectrum is suitable for mobile communications. Low frequencies require large antennas and are subject to more interference from natural sources – such as solar flares, aurora, atmospheric conditions – than higher frequencies.
But higher frequencies have problems too. In mobile communications, most of the time we do not have direct line of sight with the tower (base station) via which our communication travels. The signal we send and receive is usually obtained from a mix of reflection, diffraction (the “bending” of signals around obstacles) and scattering.
Unfortunately, the higher the frequency, the less effective these non-line-of-sight propagation methods become. Also, absorption of a signal tends to be higher at higher frequency. Consequently, there is a range of frequencies that are best suited to mobile communications – from roughly several hundred Megahertz up to several Gigahertz.
The spectrum suitable for mobile communications is a scarce and valuable resource, the use of which is tightly regulated by government agencies (apart from an exception I will mention in a moment). Government agencies control who can use this spectrum, for what purpose, what signal strength they use, and so on.
Waterfront properties
Some of the spectrum is allocated for television and special purposes emergency services. But much of it is allocated to mobile communications services, and it’s this which is attracting attention at the moment.
Of particular interest is a range of frequencies around 700 MHz that has been freed up as a result of the move from analog to digital television.
The frequencies in this band of spectrum are particularly attractive because they are close to optimal as far as mobile communications are concerned. These frequencies happen to be among those at which LTE (the technology usually touted as 4G) can operate. They are the “waterfront properties” – the “premium spectrum” we’ve heard of lately.
Competition
When telecommunications was a government monopoly (before 1991) the decision as to how spectrum was allocated was simple. There was only one carrier and they got it.
But with the arrival of multiple telecommunications companies came competition for exclusive use of spectrum, and the realisation by governments around the world that this could be used to raise significant amounts of money by auctioning it.
In the early 2000s spectrum sold for staggering amounts, notably in Germany where one sale raised €51 billion. The Australian government hasn’t been quite that ambitious with the 700 MHz band, but it has still set a fairly ambitious A$3 billion as a floor price.
It is worth considering for a moment why telecommunications companies want exclusive use of spectrum. The reason is to avoid interference caused by two or more parties using the same spectrum in the same place at the same time.
In the past such a situation with most mobile technologies would be unworkable. But in the past decade or so, things have changed.
Technologies have evolved such that interference of this kind is not unworkable. As mentioned before, there is an exception to the case of spectrum being tightly regulated.
Avoiding interference
These are the Industrial, Scientific and Medical bands (ISM), the most interesting of which, for communications purposes, are around 2.4 GHz and 5.7 GHz. These bands are those at which wireless LANs, Bluetooth and other short-range, private communications systems operate.
Equipment that operates in these bands must still conform to regulation requirements, but it is not necessary for a user to purchase a licence for exclusive use. Rather, communications technologies that operate in these bands are designed to deal with interference from other users and devices.
Of course, if a particular region of spectrum is crowded then overall bit rate – the speed of communication – suffers, but only in extreme cases does it become unworkable.
It may be that later generations of mobile communications technology make use of similar techniques and licenses for exclusive access will no longer be necessary. But that’s not the case at the moment.
For now the government is in the happy position of being able to auction spectrum to the highest bidder.