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It's Not Super WiFi, but It's Still Important: The Debate Over 'Unlicensed Spectrum'

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This is a complex issue that could spur a new wave of technological innovation in America.

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Innovation

As Julius Genachowski, Chairman of the FCC, has said, "Freeing up unlicensed spectrum is a vibrantly free-market approach that offers low barriers to entry to innovators developing the technologies of the future and benefits consumers."

In his paper presented to the FCC on January 25, Valdez spoke for the benefits of unlicensed spectrum, arguing that a "nationwide contiguous unlicensed spectrum will attract the widest pool of investors and entrepreneurs." There are three key points supporting his idea:

Unlicensed spectrum would spur investment and job creation in rural, remote, and underdeveloped areas. Say a dentist in a small town wants to invest in data management software that requires an Internet connection. Without an affordable, reliable connection to high-speed Internet, such an investment is not possible. Though access wouldn't be free, because someone has to pay for it, unlicensed spectrum could create opportunities for businesses in small or remote communities that major providers with licensed spectrum have little or no presence in. There is already a company, Carlson Wireless Technologies, that uses TV white space in the form of fixed wireless microwave and UHF digital radio systems to provide broadband access to rural areas.

Unlicensed spectrum could bring a new wave of innovation led by small- and medium-sized businesses. SMBs, being smaller than the big players, have nimbleness and lack much of the red tape that makes larger firms slower to act in terms of innovation in niche and underserved markets. One of the big areas for growth here would be in cloud and virtualization platforms, products, and services. We could also see increased potency and reliability in wireless routers, remotes, and any others devices that communicate with other devices over unlicensed spectrum.

There is historical precedence for the potential of freeing up unlicensed spectrum. In 1985, the US government made a very limited amount of unlicensed spectrum available, producing an unexpected burst of innovation with products as wide ranging as baby monitors, garage door openers, and wireless stage microphones. These products just did not exist in the mainstream market before that unlicensed spectrum was opened up.

Going back even further, we can examine the dissolution of AT&T and the Bell operating system in 1984, per a Justice Department mandate. AT&T had a monopoly on telecommunications in much of the US and Canada; people even had to rent actual phones from the company. In 1949, the Justice Department alleged in an antitrust lawsuit that AT&T and the Bell operating system were using their monopoly to stifle related companies and technologies, especially the fledgling computer industry. The dissolution of Bell, which owned many wires and equipment that are still in use, paved the way for the Internet, arguably one of the greatest drivers of progress in human history.

The Case Against Unlicensed Spectrum

All that being said, many big companies are making their cases against the plan.

The most vocal detractors are major cell phone providers, but some other tech companies have raised dissent as well. Intel (NASDAQ:INTC) has said that unlicensed WiFi spectrum could crowd the airwaves, and moreover, that those airwaves should be devoted to 4G cellular network. Executive Director of Communications for Intel, Peter Pitsch, has said, "We think that that spectrum would be most useful to the larger society and to broadband deployment if it were licensed. As unlicensed, there would be a disincentive to invest in expensive networking and provide users with optimal quality of service."

Another big tech company, Cisco (NASDAQ:CSCO), urged the FCC to reconsider because of uncertainty regarding what freeing up unlicensed spectrum would effectively do. The company argues that the FCC should "firmly retreat from the notion that it can predict, or should predict…how the unlicensed guard bands might be used."

Other major tech companies, like Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT), support the plan to make unlicensed spectrum available. It is worth noting that these are over-the-top-technology companies, meaning that they develop and market services that use existing network; without having to worry about maintaining spectrum exclusivity, they stand to gain from more unlicensed spectrum, which will potentially boost innovation in the tech devices the companies sell, without any significant costs to the established firms.

Tap Water and Bottled Water

Is there room for both licensed and unlicensed spectrum? David Valdez put it like this: It's like bottled water (licensed) vs. tap water (unlicensed). The cost of tap water is virtually zero, but even Valdez says, "If I'm going to drink water, I'm going to drink bottled water." Here's the thing about this analogy: Tap water is not likely to sink bottled water; they serve different needs and different markets. Licensed spectrum offers exclusivity, much as bottled water offers better taste and purity.

It's Complicated

In the end, there are no easy answers about how we should use unlicensed spectrum, but the importance of the discussion -- and its potential impact on innovation and US businesses -- is only becoming clearer. Roslyn Layton, an American Ph.D. fellow in telecom economics at Aalborg University in Copenhagen, Denmark, tells me that the issue requires much more transparency and clarity, a fact illustrated perfectly by the initial confusion about a Super WiFi network. Furthermore, she says this debate must take into account the value of competitiveness and the questions of investment in infrastructure. Who will finance the plan, and how will it affect businesses, big and small? Should unlicensed spectrum be auctioned off? Ultimately, says Layton, "This is not a matter of yes or no."

Also see:

If the Microsoft Surface Pro Was a Monster Hit, We'd Know It

Google's Cloud Is a Pandora's Box

Why Match.com Is Taking Part of Its Business Off-Line With 'The Stir'
No positions in stocks mentioned.
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