Dr. Hossein Eslambolchi
January 2012
It is clear and evident that the communications industry is going through some massive transformation and if you look underneath all the technical jargon we use every day, there is something that is fundamentally changing the life of every person and business on the face of the planet over the next decade. We are right at the beginning of transformation from legacy systems, processes, applications into a state of art, broadband wireless, virtual IP World.
As a service provider to be able to compete in the world I am envisioning, one needs to have the best wireless network, Packet Core for Broadband Wireless, superb Radio Access network and finally and perhaps most importantly, sufficient spectrum to drive revenue and deliver an un-throttled, differentiated mobile broadband experience for the end user.
Current MNOs (Mobile Network Operators) worldwide are working with different vendors of choice to build very agile, self-healing and autonomic applications, networks and services which will allow them to migrate off old PSTN and move the traffic to 21st century network based on IP and Wireless, thus improving EBITDA and Revenue including Free Cash Flow to be able to invest for future of the networks. Most MNOs believe that the value of their network is proportional to square number of end points (Metcalf’s Law) but I personally believe that the value of the network is proportional to quadruple number of applications on the networks driven to variety of smart phones with much better processor, memory and intelligence in coming years.
So, use of spectrum is huge deal for MNOs and that is why Verizon recently spent nearly $4B in spectrum buying from MSOs to continue to thrive toward better customer service and provide users in both business and consumer with superlative wireless applications which will drive revenue in the long term.
So, how much does one Hertz of Spectrum Cost?
Spectrum unit is normally measured in terms of transaction which is in Billion MHZ-POPs. For example, Verizon recently paid $0.70 per MHz POP for cable’s AWS channels which equates to 5.43B MHz-POP and DISH network paid about $0.26 for their 2GHz channels. Another example is what ATT would have gotten in wireless spectrum as compared to paying $7B for failed merger of T Mobile. I estimate and assume say $0.50 per MHZ-POP; AT&T would have had 14B MHz-POP which will consist of 20-40 MHz of spectrum in a Top 50 market in US.
Now, how much services can one deliver with 20-40 MHz of spectrum per market on a nationwide basis? If we assume a busy hour speed of 5 Mbps per user and an average tonnage of about 3 GB per user per month, my back of the envelope estimate is that this can support anywhere from 20M to 50M 4G devices nationwide. That’s a lot high speed mobile devices!
Dr. Hossein Eslambolchi
January 2012
