Incumbent mentality drives the wireless communications industry to the crisis point
It's been almost three years since the Federal Communications Commission began warning us that we are consuming more wireless bandwidth than the airwaves can support, and in those three years, relatively little has changed to fix the situation. Lightsquared attempted to cleverly utilize satellite-band spectrum to build a ground-based 4G network, but those attempts were squashed by the GPS lobby, and could take another five years to come back.
The FCC is still on its quest to free up a total of 300 MHz of wireless spectrum by 2015 for mobile broadband data services, but time is rapidly running out on that promise. Last Wednesday, FCC Chairman Julius Genachowski announced the commission would be updating its wireless spectrum policies by the end of the year to help free up about 100MHz worth of spectrum in the 3.5 GHz band.
The main problem with the spectrum crunch is that it requires innovative solutions to deliver results, and as we saw with LightSquared, innovation that disrupts someone else's business model is met with ferocious resistance.
If you want to hear a really disruptive solution, take a look at what cognitive radio company xG Technology Marketing president Rick Rotondo suggests: Network carriers such as AT&T, Verizon, and Sprint should share their wireless spectrum with each other. Crazy talk, right?
Though peak network traffic times are generally the same across all providers, they depend upon the location of the user to really affect the wireless bandwidth. Similar to the way carriers offload their traffic to Wi-Fi networks, they could offload the traffic to each other. XG pitches this solution because its wireless radios can find available free wireless channels intelligently on the fly, and incorporate interference canceling technology when they connect for the best quality signal. When network traffic turns into a quality of service issue, the radio can sniff around for a better channel, even if it's on a competing network.
It requires a daunting mix of top-tier collaboration (since they own essentially all of the useful spectrum) and the subsequent standardization, adoption and deployment of uniform radio solutions. Disruptive indeed.
"I think it's a misconception that carriers are trying to protect their cash flow. Really, it's the culture of doing business the way they've always done business," Rotondo told BetaNews. "I don't think anybody would argue that their cash flow has suffered one bit by incorporating wi-fi into their networks. I would argue, rather, the opposite. I think people would have abandoned them a long time ago if all the traffic that now goes over wi-fi was also put over the cellular network. You think you have dropped calls and slow speeds now? Just imagine how it would be with double the traffic."
"It's not cash flow, it's 'We want to do things the way we've always done things,'" Rotondo continued, "I'm not just singling out carriers, that's typical incumbent mentality in any business. 'This has worked for us in the past, let's not change things, let's not get new competitors, let's not get new rules before we introduce new technology.' If Google can offer a [fiber optic gigabit connection] to peoples' house for $70 per month…don't you think Comcast or Cablevision or Bright House or Time Warner has access to that same equipment and technology and know-how? Absolutely they do! It's just not the way they do business. They do business by offering incremental speeds at a time…and by being the only game in town. Sure, they've got gigabit data service, just as soon as a competitor offers you a gigabit. They're happy rolling out ten megabits, twenty megabits, they'll need a competitor like Google to come along and bust the business model. It would not only affect the folks that implement it, but it's going to shake up the incumbents so that they will have to react."
An industry with strongly protective incumbents often has to be put on the brink of crisis to begin shifting business models to the new and different (i.e. The United States automotive industry). The FCC has been warning about the spectrum crisis for years, and our bandwidth consumption has only increased as smartphone and tablet consumption increases.
AT&T, who has relied heavily on Wi-Fi offloading, is being pummeled by smartphones and tablets, yet it has its own plans for building out network capacity over the next five years which don't involve spectrum sharing. With each new iPhone and iPad, data consumption skyrockets approximately 4,000 percent a year, and the carrier might be forced to its own crisis point where it has to consider xG's idea.