Tuesday, September 1, 2009

3G Vs WiFi

One of the key distinctions between 3G and WiFi that we have only touched upon lightly thus far is that 3G and other mobile technologies use licensed spectrum, while WiFi uses unlicensed shared spectrum. This has important implications for (1) Cost of service; (2) Quality of Service (QoS) and Congestion Management; and (3) Industry structure.

First, the upfront cost of acquiring a spectrum license represents a substantial share of the capital costs of deploying 3G services. This cost is not faced by WiFi which uses the shared 2.4Ghz unlicensed, shared spectrum. The cost of a spectrum license represents a substantial entry barrier that makes it less likely that 3G services (or other services requiring licensed spectrum) could emerge in a decentralized fashion. Of course, with increased flexibility in spectrum licensing rules and with the emergence ofsecondary markets that are being facilitated by these rules, it is possible that the upfront costs of obtaining a spectrum license could be shared to allow decentralized infrastructure deployment to proceed. Under the traditional licensing approach, the licensing of the spectrum, the construction of the network infrastructure, and the management/operation of the service were all undertaken by a single firm. Moreover, rigid licensing rules(motivated in part by interference concerns, but also in part, by interest group politic) limited the ability of spectrum license holders to flexibly innovate with respect to the technologies used, the services offered, or their mode of operation. In the face of rapid technical progress, changing supply and demand dynamics, this lack of flexibility increased the costs and reduced the efficiency of spectrum utilization. High value spectrum trapped in low value uses could not be readily redeployed. With the emergence of secondary markets, it would be possible for spectrum brokers to emerge or service integrators that could help distribute the spectrum cost to enable decentralized infrastructure investment for licensed spectrum.

Second, while licensed spectrum is expensive, it does have the advantage of facilitating QoS management. With licensed spectrum, the licensee is protected from interference from other service providers. This means that the licensee can enforce centralized allocation of scarce frequencies to adopt the congestion management strategy that is most appropriate. In contrast, the unlicensed spectrum used by WiFi imposes strict power limits on users (i.e., responsibility not to interfere with other users) and forces users to accept interference from others. This makes it easier for a 3G provider to market a service with a predictable level of service and to support delay-sensitive services such as real-time telephony. In contrast, while a WiFi network can address the problem of congestion associated with users on the WiFi network, it cannot control potential interference from other WiFi service providers or other RF sources that are sharing the unlicensed spectrum (both of which will appear as elevated background noise). This represents a serious challenge to supporting delay-sensitive services and to scaling service in the face of increasing competition from multiple and overlapping multiple service providers. A number of researchers have started thinking about how to facilitate more efficient resource allocation of unlicensed spectrum, including research on possible protocols that would enable QoS to be managed more effectively. Third, the different spectrum regimes have direct implications for industry structure. For example, the FreeNet movement is not easily conceivable in the 3G world of licensed spectrum. Alternatively, it seems that the current licensing regime favors incumbency and, because it raises entry barriers, may make wireless- facilities-based competition less feasible.

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