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This chapter outlines the broad market forces that will play a critical role in shaping the ongoing later growth period (2004–2024) of the global wireless industry.
This is a major issue in meeting the growing demand for wireless services: under the current system, spectrum shortages are expected within about a decade.
The central problem is that the regulatory framework is largely a legacy, 28 built around the technology of the first global wireless industry, namely: radio broadcasting. During that era, the only way of avoiding interference was to grant exclusive use of specific frequency bands. As a consequence, radio spectrum has been treated as a scarce resource that "must be allocated by governments or bought and sold like property." 29
Since the 1930s, governments have decided on the best use of the airwaves. This central planning approach has allocated exclusive free licenses "in the public interest": from radio and television to local government, the military and educational broadcasters. A market-based approach to spectrum use is still seen as novel. Although governments in both North America and Europe began to auction frequency bands in 1995, central planning still accounts for 98 percent of spectrum use: even now, auctions represent only 2 percent of "prime spectrum."
Prime spectrum, the 1 percent of all frequencies below 3 GHz, is worth more than the other 99 percent of radio spectrum between 3 GHz and 300 GHz. The lower frequencies are prized because they are much better at penetrating rain, trees and buildings. However, the legacy of almost a century of regulation has been to vest huge swaths of frequency to underutilized purposes; new uses of desperately-needed prime spectrum are systematically starved as a result.
Most of the spectrum is empty most of the time. It's absurd.
Dennis Roberson, former CTO, Motorola 30
For example, TV broadcasters control 15 percent of prime spectrum but serve only 11 million U.S. homes (cable and satellite serve the other 88 percent — using no prime spectrum). Cellular carriers get only half as much spectrum to serve 137 million customers. Wi-Fi serves 20 million customers with only half the spectrum allocated (but rarely used) to distribute video to schools.
The pregnant question is: what if we took a tiny amount of good spectrum and repurposed it?
Tren Griffin, Telecom Strategist, Regulation, Microsoft 31
The resulting opportunity cost of services and technologies not offered because of legacy allocation of spectrum is estimated at $771 billion in the U.S. (2001). 32
In summary, the problem of radio interference that long ago led to the current regulatory regime is in fact a technological issue. Moreover, developments in radio technology are obviating the need for central planning.
There are five broad developments in wireless technology that effectively increase the ability of users to share spectrum:
Like all technological systems, the performance of wireless depends on developments in supporting devices, components and materials. While a detailed analysis of these areas is beyond the scope of this document, key issues are listed below:
Batteries will also be a factor in the market penetration of newer wireless technologies like WiMax 36 that offer faster network speeds at the expense of higher power consumption.
In summary: "growing processing capabilities and application demands are in conflict with the slow development of battery technology." 37
While chip fabrication technology will run into fundamental barriers 41 imposed by quantum physics as feature sizes decrease, this is not expected to create any significant bottlenecks for the development of wireless applications over the 2006–2016 roadmap timeframe.
Consequently, photonics connections have increasingly replaced electronic ones where high bandwidth (bits/second) is required. In fact, electronic approaches to deliver 10 Gbps 45 at motherboard level have proven (so far) problematic. 46
Initially, chips were very low-level building blocks of electronic systems: a data sheet was sufficient to support their application in systems. Today, advances in fabrication technology have made it possible to shrink entire systems onto a single chip. This is referred to as system-on-chip (SoC) technology. The result is that where there was once a clear separation between chip and systems design, these two activities are converging.
For example, it used to be that chip makers supplied the lower-level software and third parties developed the operating systems. Once the wireless system was provided to users, they developed the specialized applications software. However, systems integration presents a whole new challenge: now, software all the way from the chip level to systems to subsequent applications has to work together seamlessly. The result is hardware/software co-design.
Economics will place significant limitations on the commercialization of wireless technology. The major factors are outlined below:
The core structural problem is that Canada's ICT sector is fragmented. SMEs dominate: fully 98 percent of the 32 000 ICT firms employ fewer than 100 people. The large, vertically-integrated companies that used to be an effective industry training ground for newly-graduated scientific and engineering talent are gone. They exposed young graduates to the whole range of doing business: taking products from ideas through to market; from R&D to engineering and production prototypes then on into manufacturing and distribution.
In the new global economy, functions like R&D, manufacturing and marketing are each located separately. Head office integrates the results across many countries. Because of Canada's favourable environment for performing R&D, a significant portion of the research is often done here. However, SMEs have to cover the entire range of business activities. Their source for the needed experience (about five years) was the large vertically-integrated companies. Unfortunately, these are gone, bought by global giants and redirected to more specialized missions.
Even billion-dollar Canadian companies have been bought out. A short list of ICT examples includes Newbridge Networks (by Alcatel), ATI (by Advanced Micro Devices), C-Mac (by Solectron), and Creo (by Kodak).
Although third-generation (3G) networks are the current industry standard, there are already concerns that 3G networks may fall short of the demands of important new applications:
"3G may not be able to meet the performance required for future multimedia, full motion video and wireless teleconferencing." 47 Others put it more bluntly; "3G isn't good enough to meet wireless broadband demands." 48
Yet, at the outset of the industry's later growth stage — a time of slowing single-digit market expansion — wireless network operators are caught in the vise of high fixed costs and declining marginal revenues (see Chapter 3: The Wireless Industry). There is a need to invest in technologies beyond 3G, but the switchover costs are prohibitive. As illustrated in Figure 9, the cost of the new equipment may be only one-third the cost of the old equipment, but the cost of switch-over may exceed the cost of the existing equipment.
Moreover, as major public companies, the adverse effects of asset write-downs compel wireless operators — the key customers for large infrastructure investments — to manage with their existing asset base.
Finally, Canada's Competition Bureau found that "there are very high barriers to facilities-based entry, including high capital costs to construct and run a network, regulatory requirements and foreign ownership restrictions." 50
Wireless access is now taken for granted. Users expect a minimum level of service; a normal development in the technology lifecycle when new products begin to be taken for granted, fading into the background as an everyday convenience.
Privacy concerns over the use of wireless are increasing as the technology makes it easy to intrude to the point of tracking the location of individuals. Security is a major issue as well, in particular as e-commerce grows.
The disposal of obsolete computers and their accessories is becoming a major issue throughout the industrialized world. Many states in the U.S. (per example, California, Massachusetts, and Minnesota) have outlawed their disposal in landfill sites and incineration operators are apprehensive about placing certain items (particularly batteries) in their plants. As the waste products become smaller and smaller, many small businesses are discarding them in their household garbage because its disposal requirements are generally less stringent. It is estimated that 500 million personal computers were taken out of service between 2000 and 2007.
Waste management companies in the more regulated areas are offering specialized disposal services at costs that are in addition to their normal disposal costs. In less regulated areas, such equipment is finding its way into the hands of junk dealers who dismantle it, making it more difficult for authorities to track its disposal. In keeping with other environmental legislation, the manufacturers of such equipment will face more and more legislation that facilitates the safe disposal of their products. This could result in the application of new technologies (per example, sensors) at the manufacturing stage in order to monitor compliance.
34 "For example, a radio designed for, say 3.7 GHz, cannot be easily adapted to 3.5 GHz because it strays too far from the optimal performance of its RF components governed by the laws of physics" John Visser, P.Eng. International Wireless Standards, Nortel (May 18, 2007). (Return to text)
42 Transmission capacity is measured by the product of bit rate (B) x distance (L). B is the transmission speed (bits/sec.) and L is the distance signals can travel without regeneration. (Return to text)
48 "Nortel CEO: 3G can't cut it" http://www.lightreading.com/document.asp?doc_id=117486 (Feb. 15, 2007). (Return to text)
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