Notes from the 2011 Wireless Symposium in Savannah, Georgia

Rural Wireless Industry Participants Discuss Challenges

Forty-one exhibitors and hundreds of attendees came together in Savannah, Georgia last week to attend the Wireless Symposium, sponsored by the National Telecommunications Cooperative Association (NTCA) and the Rural Telecommunications Group (RTG).  Panel discussions centered on the challenges facing rural wireless operators—but unfortunately, from where we sat, the conference raised more questions than it provided answers.  From spectrum limitations to regulatory needs to competitive hurdles, rural wireless operators are being assaulted from all sides.

Keynote speaker Sten Anderson, CTO at Ericsson, focused (not surprisingly) on network quality.  “Your success as a wireless operator will be closely tied to the quality of your network,” he said, adding, “Of the 50 billion connected devices in 2020, how many of these will be connected to your network?”

On a panel entitled 4G Evolution Strategies, Alcatel-Lucent’s David Fritz pointed out that “the folks that are sitting in this room don’t drive the ecosystem.”  He noted that Verizon has LTE up in 38 cities and expects to offer 4G wireless services nationwide by 2013 using its upper 700 MHz spectrum and employing a rural partnership program to fill in the ‘white space.’ 

Fritz attempted to answer the question “Can a rural CMRS carrier skip from 2G to 4G?”  The keys, he opined, will be 1) Device and ecosystem availability, 2) Access, and 3) Price.  Fritz believes that for CDMA carriers, the answer is Yes, over time, but for GSM-based carriers, the answer would be No, based on the current market.  He also pointed out that 100 Mbps (true 4G speeds) will not be possible for rural carriers with only 5 MHz of spectrum up and down.

Nokia Siemens’ Robert Balconi said that the 4G “revolution has just begun.”  He noted that in every single second in 2010 there were: 1) Five subscriptions to a mobile broadband network, 2) 290 apps downloaded to a smartphone or device, and 3) eight smartphones connected for the first time to the Internet.  He said bluntly, “Whatever you’re doing today to adapt, truthfully, may not be enough,” adding, “The future of mobile communications is all about applications and experience.”  Balconi said that it’s about “My tech, not high tech” and noted that “every day, half of Facebook’s 500m users log on.”  He then asked, “What happens when we go beyond our traditional POPs that biz models were built on?” and pointed out that one video download is equivalent to 500k text messages. “That’s what the network has to deal with….There will be a multitude of smart devices, connected anywhere, anytime, including body sensors, machines, smart glasses, tablets, cars, 3D HDTVs, and eMeters.”

Balconi noted that the motivation for carriers to deploy LTE is that it reduces the cost per Megabit and improves the user experience.  “70% of consumers are not loyal and it’s not always about price, it’s about experience,” he said, adding, “The last 10 years were about building bigger, faster networks; the next 10 should be about building better relationships with our customers.”

Richard Ruhl, general manager of Pioneer Telephone Cooperative, described the agreement Pioneer struck in December to be a Verizon rural LTE affiliate.  He said the master agreement allows Pioneer to build out the white space in its Oklahoma territory, and will cover 250k of Pioneer’s total 345k POPs, where Pioneer has leased 22 MHz of spectrum from Verizon.  He noted that Pioneer doesn’t have the southern portion of its service territory under the agreement, due to Verizon’s restrictions in former Alltel territories.  “Anywhere they have existing Alltel service, the LRA (LTE Rural Agreement) is off limits…We can market and sell to those POPs, but they will be using Verizon service.”  Ruhl said that the initial build will cover northwest and southwest Oklahoma, with about 60 cell sites by year-end, and that the ecosystem will be established by mid-2011 with more devices in 2012.  Ruhl noted that Verizon was not open to negotiating price for its rural LTE program, but added, “They’re the tsunami and we’re going to ride their wave.”

Regulatory Morass

Numerous speakers over the two-day meeting pointed to policy and regulatory issues rural carriers are facing as significant.  Larry Movshin, Partner at Wilkinson, Barker and Knauer, said that “These are contradictory times for rural carriers.  The Obama administration is pushing hard for rural broadband, but the economy doesn’t make it easy.”  He noted that the FCC is becoming concerned about the concentration of spectrum held by Verizon and AT&T, and that’s why it has asked for comments on the Windstream/AT&T spectrum deal.  Panelists also noted that the FCC has a new rulemaking forthcoming on stricter build responsibilities.

Jill Canfield of the NTCA said that the RTG will oppose the recently announced Qualcomm/AT&T spectrum deal, and suggest an incentive auction instead, although she acknowledged that that is unlikely to happen.  She added that the Commission “Needs to mandate data roaming if the deal goes through.”  Concerns about USF reform were also raised.  Carrie Bennet, Managing Principal of Bennet and Bennet, asked, “How are you going to support broadband and rural carriers without having the USF grow?”  And regarding the recent “Bill Shock” proceedings, Canfield said “It’s like killing a fly with a sledgehammer, it’s way overkill.”  Speakers agreed that the FCC isn’t likely to go forward with Bill Shock rulings, as it will be too expensive for small carriers to implement.  They also noted that the Net Neutrality transparency and disclosure requirements could be onerous and expensive for small rural carriers to implement.  Bennet said, “The transparency requirements are effectively just a new cost without any tangible benefit to carriers.”

JSI Capital Advisors’ Dave Selzer summarized the major issues that had been raised throughout the conference as being related to 1) the need for access to spectrum that is appropriate for providing service in the rural space (lower band spectrum), 2) access to roaming and 3) a well developed ecosystem of equipment, particularly for bands 12 and 17.  He added that “Build deadlines are looming and it’s difficult to tell what direction the FCC’s going to go with regard to enforcement.”  Selzer concluded, “There is no panacea that’s going to present itself and open up the rural wireless space and allow you guys to compete. This is a marathon, not a sprint.  It’s going to require a tremendous amount of work to force that space open.”  He advised attendees to make incremental steps with regard to entering the wireless space.