22 - 25 March 2010

Amara Sanctuary Resort Hotel Sanctuary, Singapore

Spectrum Refarming: Roll-out 3G services on 2G spectrum

By Mohit Agrawal

Recently European Union officially ratified the updated GSM Directive which allows 900MHz
frequency to be used for 3G and eventually 4G. This means governments across the region will now be
obliged to allow operators to use 900 MHz spectrum band to roll out 3G and other high-speed
technologies. The usual spectrum band for 3G services is 2.1 GHz but many operators are planning to
use the existing 2G spectrum (850 MHz and 900 MHz) for 3G services.

Spectrum refarming is one of the most significant regulatory but those with 900MHz assets see
refarming as a threat to their competitive advantage as well as to the quality of their networks.
Although operators may feel threatened by the prospect of losing their existing spectrum assets, the
opportunity to expand coverage and reduce costs outweighs any hesitation they may have about service
deterioration or loss of market share from reduced spectrum holdings.

Generally speaking, refarming may be seen as process constituting any basic change in conditions of
frequency usage in a given part of radio spectrum. Such basic changes might be:

• Change of technical conditions for frequency assignments

• Change of application (particular radio communication system using the band)
• Change of allocation to a different radio communication service.
 Before we move further, it would be useful to understand the generic spectrum usage plan. The
diagram below shows the how the different frequency bands are being used for different purposes.

Key Benefits of UMTS 900

1. Coverage – Ovum’s analysis indicates that UMTS900 provides between 44% (in urban
areas) and 119% (rural areas) increased coverage per Node-B compared with UMTS2100. This
is primarily due to the propagation characteristics of the lower frequency band. All 3G
 applications can be provided and used cost efficiently over much larger area as the coverage
radius in 900 MHz is almost double than that of 2100 MHz spectrum
2. Cost Effective –Radio wave propagation loss is less in 900 MHz, so fewer base stations are
required leading to cost savings of around 50–70% compared with networks deployed in
2100MHz core-band 3G spectrum. These coverage and cost-saving benefits mean that operators
can bring 3G services to less-densely populated areas that were previously uneconomical to
cover
3. Better Quality of Service (QoS) - Since fewer base stations are required for UMTS 900 roll-
out than UMTS 2100, the customer experience is better due to fewer hand-overs. Lower
frequency band have a higher in-building penetration. Over 70% of phone calls are now made
indoors and UMTS 900 can help improve the Quality of Service (QoS)

Regulatory status of spectrum refarming worldwide

As mentioned earlier, the European Union has already ratified the GSM directive on spectrum
refarming and it is obligatory on part of its 27 member countries to change their laws in line with this
directive. However, in most of the countries, it is up to the individual Governments to allow UMTS
900. It is necessary in some countries to re-arrange the band allocations by agreement with network
operators in order to enable GSM & UMTS900 in 900 MHz spectrum.

Operators who have launched commercial 900 MHz 3G services

13 operators have UMTS 900 networks across the world till date but the reasons for the roll-out on 900
MHz vary from operator to operator.

Optus Australia launched UMTS 900 to increase its coverage. With a combination of 900 and 2100
MHz, it managed to increase its coverage to 96% of population. AIS in Thailand launched UMTS 900
as the 3G spectrum (2100 MHz) auction was getting delayed. Elisa launched UMTS 900 to save costs.
UMTS 900 Device Market

As per GSA HSPA devices survey conducted in October, 2009, 190 UMTS-900 HSPA devices have
been launched in market by 34 suppliers (this includes 39 USB dongles). Most of the HSPA handsets
now have 900 MHz support as well.

Will the operators completely switch off 2G in favour of UMTS900

The operator business is getting complex with many operators having to manage 2G, 3G and LTE
networks. It is expected that with the stabilization of LTE by 2016/17, the operators would switch off
their 2G networks (so far Japan is the only country to switch off 2G networks). However, due to the
migration to UMTS 900, it is possible that the operators switch off the 2G networks much before the
expected timelines. This would help the operators save on opex for running multiple networks and
would also make the operations less complex requiring fewer people. The 2G network can be sold off
to new operators coming up in emerging countries. However, there are a few challenges that would
hold the operators back from switching off 2G networks:

• Migration from 2G to 3G handsets: Though the spectrum band would remain the same at 900
MHz, the 2G users would need to replace their handsets to be able to use the 3G network. The
carrier would need to provide handset subsidy to encourage the users to replace their handsets
but then the benefits have to be substantially higher than the costs involved
• Inroaming Revenues: With the voice tariffs dipping, the roaming revenues are a significant
portion of the revenues. In case an operator decides to switch off the 2G networks, the users
from other 2G networks will not be able to log on to the operator’s network. This loss of
revenues may not be sufficiently covered by any opex savings or ARPU upside
• 1800 MHz: Many 2G networks are on 1800 MHz. UMTS 1800 is still not a viable option given
the low ecosystem support. Apart from this, many operators may be holding both 900 and 1800
MHz spectrum and optimizing between the two. In this situation, the operator may not want to
switch off 2G network

Another interesting option is that the operators carve out a portion of their 900 MHz spectrum for 3G
roll out while retaining the rest for 2G. This would allow them not to participate in the 3G spectrum
auctions and have substantial savings. Are the Indian operators listening?

This article was first published on Telecom Circle (www.telecomcircle.com)

Register for the 5th Annual Mobile Network Evolution summit (22 – 25 March 2010, Amara
Sanctuary, Singapore) organized by IQPC Telecom IQ. For more information please feel free to email
enquiry@iqpc.com.sg or visit www.mobilenetworksasia.com