The new iPad illustrates the importance of mobile broadband spectrum and the device eco-system
From: Stefan Zehle, CEO, Coleago Consulting
13th March 2012
The New iPad was launched early March 2012 in many markets world-wide. It appears to be a highly desirable device. Among its many features Apple touts 4G connectivity. However, a closer look reveals that only the American region 4G bands, namely 700MHz and 2100MHz have been included in the radio chip set. Of course the device also includes 3G connectivity and here it is compatible with European 3G/HSPA in the 2100MHz band and also in the 900MHz band.
It is likely that Apple will launch a European iPad version with LTE at 800MHz and 2.6GHz, but in the meantime there is a problem. In Europe, not many operators have refarmed the 900MHz spectrum to 3G HSPA and some operators do not hold any 900MHz spectrum. This means in Europe mobile broadband access for the iPad is restricted to more densely populated areas where 3G is available in the 2.1GHz band.
This matters, because the new iPad is a desirable device and customers making device choices will also have to make mobile operator choices. Take Germany as an example. Vodafone, T-Mobile and O2 each purchased 2x10MHz of the digital dividend 800MHz spectrum in the May 2012 auction and deployed LTE and, under the terms of the licence, rolled out the network first in rural areas. Vodafone and T-Mobile hold 2×12.5MHz of 900MHz spectrum whereas E-Plus and O2 only hold 2x5MHz. This means Vodafone and T-Mobile are in a position to refarm 2×5 MHz of the 900MHz spectrum to WCDMA whereas the two other operators will find it near impossible.
This gives T-Mobile and Vodafone in Germany a marketing advantage. The most ardent iPad fans are probably also high voice spenders and can be locked in with a 24 months contract. Even if a European device becomes available in 6 or 12 months, in the meantime O2 and E-Plus are disadvantaged. For O2 this is all the more annoying because they spend €1.15 billion to acquire 800MHz spectrum in May 2010. Of course E-Plus who does not have any 800MHz spectrum will remain disadvantaged for the foreseeable future.
The lesson here is that spectrum matters, as device manufacturers have to make chipset choice. The multiplication of bands and technologies introduces technology barriers to competition and switching. This is a very different situation compared to the relatively harmonised GSM world of the past.
From an operator’s perspective, spectrum diversity provides the best device eco-system insurance. However, in Europe where only 2x30MHz of 800MHz spectrum is available, markets with more than three network operators are facing a problem if regulators are keen on packaging the spectrum in a minimum block size of 2×10 MHz. There are of course benefits of deploying LTE in a channel wider than 10MHz, but the benefits are overstated. Spectral efficiency in terms of bits per MHz only increases marginally when moving for 5 to 10 or even 20 MHz wide channels. While headline speeds are higher, the user experience is governed by other factors such as the number of concurrent users in a cell, distance to the cell edge, or the position within a building. In contrast the negative impact on competition resulting from different spectrum allocations, particularly in the lower band is very real.
One disturbing aspect about the European iPad launch is that even in Europe, Apple highlights the 4G capability, yet it is not compatible with the European 4G bands. Could Apple not have waited a couple more months and introduced also a European version with LTE 800, LTE 2600 and possible also LTE1800? Of course there is a little asterisk and a footnote “4G coverage is not available in all areas and varies by carrier”. Not all areas? That’s putting it mildly. Not anywhere in Europe would be a more appropriate statement. Some disappointed buyers will take a dim view of Apple’s marketing tactics.