On March 18th, the Ministry of Science, ICT and Future Planning (MSIP), a ministry of South Korean government, finally revealed its plan to hold a much overdue auction for mobile spectrum at the end of April, in 2 years and 8 months after the last one in August 2013. At the auction, a total of 140 MHz (2x70 MHz) across 5 blocks will be offered. Each of the Korean big 3 operators will have a chance to obtain up to 60 MHz (2x30 MHz). Below we will discuss what are offered for allocation, and how the new allocations will affect the operators' strategies in the coming years.
Who has what
Currently, the big 3 are operating a total of 250 MHz (120 MHz in DL and 130 MH DL) in 5 bands as shown in the Figure below. With the recent launch of 3-band CA, they all are supporting up to 300 Mbps in DL, each using a total of 40 MHz bandwidth. SK Telecom additionally converted 20 MHz (2x10 MHz) in 2.1 GHz band, originally used for 3G, into LTE use in Sep. 2015, but the spectrum is used for multi-carrier purpose and not for CA.
Commercial LTE spectrum allocations
2016 spectrum auction
New spectrums to be auctioned: total of 140 MHz (2x70 MHz) in 5 blocks across 4 bands
5 blocks (2x70 MHz) to be auctioned in April 2016
Of all the bandwidth available in 2.1 GHz band, the licenses for 100 MHz (2x50 MHz, UL: 1930 - 1980 MHz, DL: 2120 - 2170 MHz) are expiring at the end of the year. Of the 100 MHz, SK Telecom is using 60 MHz (2x30 MHz), and KT is using the rest 40 MHz (2x20 MHz), for LTE or 3G purpose. In the auction, 20 MHz (2x10 MHz) out of the 60 MHz that SK Telecom has in the band will be offered.
The channel to be allocated has not been determined yet. This is to let the winner at the auction have a 'wideband' channel by selecting a channel that is right next to its current channel (i.e. neighbor channel) . If SK Telecom wins, it can continue to use the same channel. If KT wins, a neighbor channel of its current channel is assigned. The same rule applies to LG U+ too. The rest 80 MHz (2x40 MHz) will be re-assigned to SK Telecom and KT.
Restrictions in allocation: Restrictions apply to the number of total wideband channel and the amount of total spectrum one operator can have. Each operator can have only one of the following blocks: block A, block D, or block C (A and D are already widebands, and C is extendable). The auction will likely let the operators, each already with a wideband channel, get another one. Because of the restriction in the total spectrum, each operator can be allocated only up to 60 MHz (2x30 MHz). For example, the maximum spectrum one can be allocated will be:
Bidding/Re-allocation price: With the total of minimum bidding prices being KRW 2.578 trillion (about USD 2.3 billion), the total bidding/re-allocation prices can easily exceed KRW 3 trillion (about UD 2.8 billion), considering that 80 MHz (2x40 MHz) in 2.1GHz is to be re-allocated.
Network deployment obligation: The winner of the coming auction must complete deployment of a nationwide network that utilizes the spectrum allocated:
Doubling speeds through CA to handle increasing LTE traffic
South Korea has the highest LTE penetration rate in the world. After the LTE service launch in July 2011, LTE penetration jumped to 30% by the end of 2012. Then it continued to rise to exceed 70% at the end of, increasing by 2.4 times in just 3 years.
During that period of time, monthly LTE traffic (used on a 4G smartphone) surged by 6.2 times, from 27.7 PB in 2012 to 171.1 PB in 2015, but the total LTE spectrum in use (in DL) increased by 2.4 times from 50 MHz to 130 MHz. Spectrum growth does not seem to keep up with the accelerated growth of LTE traffic driven by the high penentration of LTE.
To accommodate growing LTE subscriptions and traffic, South Korean operators have managed to double speeds by means of CA. Faster speeds were made possible by securing more frequencies. The operators launched LTE-A service capable of 150 Mbps in June 2013, wideband LTE-A service capable of 225 Mbps in June 2014, and 3-band LTE-A capable of 300 Mbps in January 2015.
LTE traffic growth (blue line) and CA evolution (orange line)
With an auction being delayed for so long, speed enhancement could not be achieved through CA any longer. So, there came a new solution, LTE-WiFi aggregation. In June 2015, all the big 3 introduced MPTCP Proxy-based LTE-WiFi aggregation capable of 1 Gbps - first KT (GiGA LTE), followed by SK Telecom (band LTE WiFi) and LG U+ (Giga Multi-Path). It was a decision made not just to achieve faster speeds, but also to prevent quality degradation arising from surging LTE traffic and scarce LTE frequency.
Impact on operators' strategies
At the auction, each operator will obtain additional spectrums: one wideband, and one or two narrowbands. This will likely resume the competition in CA-based speed enhancement that has been paused for a while. Some blocks are ready for CA (e.g. block C), and others require deployment of a new network (e.g. block A and D).
Until the new allocated spectrums begin to do their job properly in heavy traffic areas, solutions utilizing WiFi bands can serve the same purpose. By the end of the year, commercialized LTE-U is expected to arrive, and MPTCP-based LTE-WiFi aggregation will become more popular.
MSIP expected the auction would help ease the mobile traffic growth by 2020. And LTE penetration already reached 70%, approaching maturity level. However, ever-evolving video services of these days demand even wider bandwidth, and more IoT combined businesses are born every day. As a result, mobile traffic will continue to grow more and faster.
Next time, it would certainly be hard to afford the costs of purchasing spectrums and deploying new networks, which is over KRW 1 trillion conservatively. This year will finally see standardization of LTE-WiFi aggregation solutions like License Assisted Access (LAA), LTE-WiFi Link Aggregation (LWA), and more, which will make unlicensed bands more appealing and compelling to mobile network operators.
As the mobile traffic growth forecasting is hard to predict combined with high market demand for new services, controlling over service bands is strategic goal for service providers. This future assets can be either used to upgrade thier mobile networks or lease bands to small and medium businesses. However, this might introduce a challenger yo these organizations to absorb the exorbitant cost while keeping enough momentum for growth. It is more practice to concentrate in design efficency for base stations ensuring that services quality provided with immunity against co/ channel interferences.
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