Author: Mark Lowenstein

Over the past few years, ‘Mobile First’ has been the rage. Attach ‘mobile first’ to a VC pitch and the valuations multiply, the way “dotcom”, “so-lo-mo”, “cloud-based”, and “big data” did in their heydays. But while designing for mobile remains a key part of any development strategy, I think the concept of ‘mobile first’ and ‘mobile only’ are becoming outmoded and will come to apply only to specialized situations and apps.

The idea of mobile first is to design an online experience for mobile web before designing it for the desktop web. In many cases, it has come to mean something more radical, such as designing almost exclusively for a mobile device or being ‘mobile-centric’, which means development efforts have been prioritized for mobile. The reason of course, has been the tremendous growth in the usage of mobile at the expense of time spent on PCs and other screens such as TVs. But while mobile data consumption continues to rise exponentially, mainly because of video and rich media, the shift in consumption (or cannibalization) has started to level off.

Why is this? Well, it looks like the evolution to the Steve Jobs’ “post-PC” era is taking a bit of a pause or is perhaps weaving in a bit of a different direction than he anticipated. While sales of laptops and PCs are not exactly a growth market, the market isn’t dying, either. Instead, we are seeing a shift toward thinner client devices, with apps and content in the cloud. Look at the success, for example, that Chromebooks have had in certain market segments, such as K-12 education. We are also seeing an evolution of the tablet market, with some successful products, such as the Surface, making progress in combining the best of both worlds. Tablets are fantastic content/media consumption devices and are great for certain occupations such as real estate or pharmaceutical sales. But, for the vast majority of professionals, the PC reigns and the smartphone/tablet is ancillary.

Another factor has been the steady growth and improvement in the quality of Web apps and responsive design, where content adapts to the screen of the moment. This seems to have killed the native app vs. HTML5 debate, at least as far as this being a zero sum game is concerned. It appears to me these will all co-exist for the next couple of years, as the locus of innovation is less on hardware than on software and user experience evolution.

So what does this mean? I think the focus will be less on delivering a ‘mobile first’ experience and more on optimizing for a multi-screen experience, or the “screen of the moment”. Let’s face it: if we were naming the smartphone today, we’d call it a portable computer, rather than a smartphone (to someone under the age of 25, what’s a phone, anyway?). That device has tremendous and unique value: always with you, always on, location-enabled, and becoming more useful for more things every day. So, developing for the evolving capabilities of these portable computers is critical. And there’s likely to be a lot of action over the next few years on combining the tablet/laptop/Chromebook form factors in some way.

We should also pay attention to the role of the TV in all this. As content moves a la carte, cloud-based, and less linear, with better search/discovery and more interactivity, the device formerly known as the “TV that sits in your den” might instead be the 60-inch screen that you use and easily moves around your home. Or, the image that projects on a large surface.

The idea of ‘mobile first’ is evolving to a ‘multi-screen’ strategy. And I’m sure someone will come up with a better term for it. But the action will be evolving online content and apps to adjust, on a dynamic basis, for the portable computing device and context of the moment.

Despite all the marketing, TV ads, and even talk about 4G LTE and now 5G, instances of poor wireless coverage remain a common frustration among users. But even where coverage is generally good, the combination of the imperfections of RF, the hundreds of variables impacting radio signals, and sheer economics, it means we will never have ‘perfect’ coverage. In fact, for each incremental improvement in coverage, getting to the next level becomes economically and physically more challenging.

Despite all this, there is a wave of new technology and products hitting the market in earnest, promising to help address some common coverage and capacity challenges, for both cellular and Wi-Fi. We’re not talking about rural or remote areas where, to be honest, if there’s no tower in the vicinity 30 years after the birth of cellular, there probably never will be. The focus here is on filling dead spots and “donut holes” in outdoor areas, and providing deeper and more reliable coverage inside buildings. Let’s divide these developments between cellular and Wi-Fi.

Cellular

Four important things are happening in the cellular realm that could have some meaningful impact this year. First, wireless carriers are starting to deploy small cells in significant numbers. Small cells increase network capacity and provide improved outdoor and in-building coverage. Verizon for example, is deploying small cells in major cities, in order to alleviate congestion issues being experienced in large issues due to burgeoning data usage. So your four bars of LTE will get you the sorts of speeds that feel like four bars of LTE. Sprint, for its buildout of the 2.5 GHz band in major cities (branded LTE Plus), is relying heavily on small cells.

Second, additional spectrum acquired over the past few years is coming online this year. T-Mobile continues to roll out its A-block 700 MHz spectrum, which provides approximately 2x the coverage from a single cell site, and better in-building coverage, compared to its higher band spectrum. TMO’s A-block holdings now cover about 2/3 of the U.S. population. As another example, AT&T is slated to turn on some of its WCS spectrum this year. And 600 MHz auctions are scheduled to begin soon, although services using that spectrum will not be rolled out until at least 2018.

Third, wireless carriers are starting to employ elements of LTE Advanced, namely carrier aggregation, which combines channels across all their spectrum holdings. This “wider channel” results in capacity and throughput enhancements.

And finally, improved femtocell and residential small cell products are becoming available. The most public and notable example is T-Mobile’s residential 4G LTE CellSpot product, which the carrier is basically giving away to subscribers who require improved in-building coverage (read our test drive of the product here). As another example, Nextivity, a leader in the femto market, has introduced a new signal booster for in-building coverage, supporting LTE and UMTS, that provides significant increases in gain and bandwidth compared to previous products.

Wi-Fi

Wi-Fi is another important part of connectivity, of course. What’s always been amazing to me is consumers rush out and buy the latest smartphones, or try to make the most out of their cellular network, while their router hasn’t been updated in five years and sits behind a shelf collecting dust. Well, now might be the time for an upgrade. A new crop of routers is coming to market, promising significant improvements in range and performance. The most advanced 802.11ac routers, such as the D-Link AC3200 Ultra Wi-Fi Router have one channel at 2.4 GHz and 2 channels at 5 GHz and up to 8 spatial streams of MIMO, providing 4x the channel bandwidth of previous versions. And just a couple of weeks ago, Eero launched its new home “Wi-Fi System” to rave reviews. Eero relies on multiple APs in the home connected via a mesh network to deliver significantly improved coverage and performance.

In addition to new and better Wi-Fi network equipment, there are significant efforts to increase capacity in the unlicensed (Wi-Fi) bands. Over the past couple of years, additional capacity has been allocated in the 5 GHz band for Wi-Fi, which has led to a new crop of multi-band routers. There’s also terrestrial low power service (TLPS), which uses a slice of the spectrum that satellite provider Globalstar owns in the 2.4 GHz band, as a supplemental channel for Wi-Fi. Globalstar has petitioned the FCC to allow it to open channel 14, which would add to channels 1, 6, & 11 in the 2.4 GHz band currently used for Wi-Fi, providing a meaningful increase in capacity. Finally, there’s progress being made on LTE-U, which would allow incumbent wireless operators to use up to 500 MHz in the 5 GHz unlicensed band, for mainly downlink LTE services. LTE-U promises about 2x the range and capacity of current Wi-Fi (see my recent piece on LTE-U).

RF will always be capacity-limited and coverage will never be perfect. But 2016 looks to be a breakout year in terms of more spectrum and innovative products and solutions in both cellular and Wi-Fi.

What if wireless operators had the ability to add substantial capacity to their networks without having to pay billions of dollars for additional spectrum? And what if this also made your WiFi work better? Well, there has been quite a bit of work going on behind the scenes on something called LTE Unlicensed (LTE-U) and 2016 is going to be a pivotal year. Just this week, the LTE-U community cleared an important hurdle, with the FCC authorizing live tests of LTE-U at two Verizon facilities. So what is LTE-U, what is its status, who is it for, and what are its prospects for success?

LTE-U is a proposal to use commercial 4G LTE cellular services as we know them today, in 500 MHz of the 5 GHz unlicensed band, which is also used for WiFi. It is considered ‘unlicensed’ because the operators would not have to buy separate, licensed spectrum in order to operate LTE-U services. However, LTE-U only works alongside licensed wireless services. LTE-U is also referred to as Licensed Assisted Access (LAA), which represents the 3GPP’s effort to incorporate LTE-U into Release 13 by requiring Listen Before Talk, which is a standardized effort to ensure there is no interference with WiFi before LTE is invoked. LTE-U is sort of a “pre-LAA version” of LAA that might be permitted in the U.S. and some other countries.

LTE-U promises about 2x the range and capacity of current WiFi. The idea is it would work like WiFi but better (hence the term “carrier WiFi”) and as a seamless extension of cellular services on LTE-U equipped phones. For operators, LTE-U is part of their overall “carrier aggregation” strategy, which combines channels across their spectrum holdings to deliver higher speeds and more capacity. Operators gain the capacity at LTE-U venues while keeping traffic on their network, with the additional benefit of offloading traffic from the macro. LTE-U would be used mainly for indoor locations and venues such as hotels, stadiums, universities, and casinos. On the equipment side, LTE-U compliant small cells/APs would have to be installed by the operator or venue owner. Only new phones and other devices equipped with an LTE-U chipset would work.

Qualcomm has been spearheading the LTE-U movement, clearly with the objective of selling more chipsets (on the transceiver and user equipment sides). The LTE-U Forum and a consortium called Evolve, consisting of leading equipment vendors including Qualcomm, Ericsson, Samsung, and several carriers, have been pushing to move things along in industry and with the FCC. The main obstacle is the potential interference with WiFi in the 5 GHz band. The WiFi crowd has been instrumental in securing increased channels for WiFi at 5 GHz from the FCC over the past couple of years and is concerned about the potential for interference from LTE-U. This is a valid concern, especially because LTE-U is the “stronger party” — sort of like a 6 foot, 250 pound football player getting on a field where everyone else is 5’8″ and 175 pounds. Qualcomm and others have done a lot of work to address the potential for interference and have shown many LTE-U simulations in an attempt to dispel these concerns. At a high level, the idea is LTE would dynamically shut itself on & off in the unlicensed band, depending on the level of contention for WiFi.

In the U.S., Verizon and T-Mobile are the two operators leading the charge on LTE-U. It appears 2016 will be a year of testing and proving. There are still contentions between the LTE-U community (which has formed the Evolve alliance) and the WiFi community (WiFi Alliance, WiFi Forward) in terms of who is doing the testing, how it will be done, and what are the parameters required to make LTE-U acceptable on both the network and the user experience side. Then there is the FCC approval process, where the exact procedures, requirements, and timing are still uncertain. It’s not even that clear to me the extent to which the FCC would actually have to approve LTE-U.

On the equipment side, it looks like some of the network products will be available in 2Q/3Q. Another key is whether—and when—LTE-U will be available in handsets. The device OEMs have said very little publicly. Between the tests, approvals, and equipment commitments, certifications, and lead times, commercial LTE-U services aren’t likely before mid-2017 and probably into 2018.

But the real question is what the market is for LTE-U and what its role is given the continued expansion of alternatives, such as the better coexistence of WiFi and cellular with Hotspot 2.0/Passpoint and the deployment of more small cells, both indoor and outdoor. Certainly for the operators, LTE-U represents a cost effective way to expand capacity, especially for video, which is highly consumptive of the downlink bandwidth. It’s also a way to more fully leverage the Carrier Aggregation capabilities of LTE Advanced, which is an important part of the LTE roadmap for the next few years, in advance of 5G. And if Sprint (which is not a backer of LTE-U) is truly able to roll out a high-speed, high capacity ‘LTE Plus’ wireless network in certain cities, leveraging its 2.5 GHz spectrum, then LTE-U could be a counter weapon available to its competitors.

The full business case for LTE-U has still not been fleshed out. For example, what will be the division of cost responsibilities between the operator and the venue/enterprise for equipment? This is an issue that has held up the deployment of indoor small cells and other coverage/capacity enhancers. On the other hand, small cells that incorporate LTE-U in addition to LTE and WiFi could expand the use cases and market potential of small cells.

Even though the business case is a bit tenuous, we should also view LTE-U as a solution not in isolation, but in the increasingly Venn Diagram-esque world of wireless network solutions that include and incorporate cellular macro cells, small cells, and WiFi. For example, more work needs to be done to improve the user experience of moving between cellular and WiFi (see my November piece, “Cellular and WiFi Need to Get Along Better”), which is hopefully being incorporated into some of the work on LTE-U.

Additionally, the work being done on interference mitigation by Qualcomm and others will likely have broader benefits in a world of denser, heterogeneous wireless networks that include macro cells, small cells of various stripes, and WiFi. Mutual coexistence between licensed and unlicensed services, more effective management of traffic between cellular and WiFi, and a more seamless customer experience might be the ultimate beneficiaries.

Even though there were no ‘blockbuster’ product announcements, this was the most exciting CES in some time. Between discussions and demos of drones, self-driving cars, IoT, AR/VR, and the next generation of screens, sensors and wearables, we came away with a pretty good technology roadmap for the next five years. There was some game changing stuff with potentially significant impacts on how we live and work.

In many of these areas, the technological development is moving rapidly and the platforms and ecosystems are falling into place. But I think that, over the next couple of years, the discussion will increasingly center on policy. Just like there are the “Three Rs” of education — reading, writing, and ‘rithmetic’ — so too, are there ‘three Rs’ that will have a huge impact on how some of these products and technologies are brought to market: Rights, Rules, and Regulations.

Let’s look at a few of the most exciting areas of the consumer tech landscape to see how these 3Rs apply.

TV Everywhere: It is clear the technology is there for the vision of “TV Everywhere” and/or the disruption of the traditional pay TV model, which continues to happen in increments. Apple for example, could physically and technologically execute on its vision of the future of TV tomorrow. But the hold up here is rights. Using Apple as the example, they have not been able to do in TV what they have done in music mainly because of the enormous complexity of rights issues.

Self-Driving Cars: It has become clear over the past year the technology for the self-driving car is evolving very rapidly. We are just now turning to the business, policy, and regulatory framework for self-driving cars, which of course is a huge governor for how, and how quickly, the market evolves. Many aspects of safety, liability, and so on will need to be revamped.

Health & Wellness: There were some fantastic new products related to general and digital health and wellness at CES. It was encouraging to see the presence of some of the major health care organizations and insurance companies at the show. There are some important legal, policy, and regulatory questions to sort out over the next couple of years. The issues of accuracy and reliability of these products is one area, as evidenced by the suit against FitBit. Issues of privacy related to consumer data and big data also need to be tackled. With so many products being introduced that can impact outcomes, the policy, legal, and regulatory framework is starting to get pulled along. An important part of conversations with innovators in this category will be not just about their products but also where they are in the regulatory/approval/compliance cycle.

Fitness Wearables: Of concern was the number of fitness wearables demoed at the show that have very similar functionality. There is going to be a significant shakeout in this category in 2016. However, one encouraging sign is there is a new class of products loaded with more and different types of sensors, geared toward the serious athlete or are best-of-breed with respect to a handful of functions, such as measuring sleep or certain types of motion. If these products are used at the elite level and are linked to training programs and particular outcomes, the concomitant legal framework will have to develop as well.

Drones: Drones for consumer and business use have become an industry almost overnight. There were some products and applications shown at CES that were downright amazing. One senses there will be a significant effort to evolve the “Three R” framework for this category, especially since there are so many practical enterprise applications for drones.

Finally, if there was one over-arching theme at CES, it was that this was probably Year One for IoT, except perhaps for a few earlier breakout verticals. These billions of connected devices will help to transform our homes, cities, our transportation and energy infrastructure, and our health. Naturally, there are “big data” opportunities linked to IoT, as well as concerns about privacy and security. It was encouraging to see substantive discussion about these issues at CES. Un-sexy as it might sound, the development of the proper “3R” framework will be as important as the products and business cases in key IoT verticals.

This year, some 50 million fitness trackers will be sold. Devices such as the Fitbit HR, Jawbone Up, and Garmin Forerunner are among the most popular “tech” gift items this holiday season. This category has come a long way in terms of capability and functionality. 2015 was the year where “optical heart rate monitoring” moved into the mainstream, catalyzed by the introduction of the Fitbit HR.

Yet, shopping for these devices is overwhelming. Going online to read the many articles on the “best wearable tech of 2015” yields little sense of major product differentiation. Ask the guy at Best Buy which one to buy and you’ll get a deer in the headlights sort of stare.

One of the reasons Fitbit has nearly 70% market share is because it’s the wearable tech equivalent of the old adage, “you’ll never get fired for choosing IBM” (or an iPhone). There are at least 25 fitness oriented wearable devices that do almost exactly the same thing. With Fitbit, you’re buying into the ecosystem and what all your friends have. Withings and Misfit make beautiful looking devices but are not as strong technically. Garmin and Polar are the athletes’ products. With Pebble, you’re rooting for the ‘startup’. If you buy the Apple Watch, it shouldn’t be because of its fit-tech capabilities. Android-based wearables are like most Android phones: lots of choice and a little cheaper, but generally lacking in hardware refinement and software polish. You want to root for the Microsoft Band 2, which is a very competitive product, but falls just short of the mark in a few key areas.

One has the sense this space is about to plateau. The devices introduced for the holiday selling season, such as the Microsoft Band 2, Polar A360 (is it car?), and Garmin Vivosmart HR, don’t break any new ground. You can get a good device with optical HR for ~$100 now. That same price point next year will probably feature GPS, too (if you want/need it). What’s interesting is there is no one “best” product in the category, such as “if you are willing to spend an extra X, then get this”. The device with the most accurate optical HR isn’t the best for sleep tracking, etc, etc.

So, with commoditization a distinct possibility, what’s needed in order for fitness wearables to get to the next stage? I’ve broken it into a few categories.

Accuracy. Read the reviews and this is the area that still needs work. We’re in the early days of optical HR and most devices out there don’t perform as well as a chest strap. GPS accuracy is also an issue with some who are introducing this capability into fitness trackers, compared to those who have been in the “GPS Watch” business for a long time. Some companies have also put a lot more effort into being able to passively determine what activity one is doing, such as walking/running/cycling/tennis, etc.

Sensors. This will be a continual area of product innovation. Today’s best of breed products incorporate an accelerometer, motion sensor, HRM, altimeter, and more. Other categories ‘in development’ include blood pressure, hydration, oxygen levels, cholesterol, etc. Which of these measures are for the mainstream market and what are the tradeoffs in form factor, price, and, potentially, battery life? Another question is whether there will be any modular type capability in these products. For example, the ability to buy a base band and then add sensors or functions geared toward a particular area of interest, such as fitness, sleep, nutrition, and so on.

Ecosystems. We all know a huge part of Apple’s success is the ecosystem: Hardware-software-apps. Fitbit comes the closest in this category, which is one of the reasons why it has nearly 70% share. This success, and a strong IPO, has allowed the company to continue to be the category leader, making acquisitions, hiring a large sales force to push into the enterprise, and provide great customer service. The other strong ecosystems in this space are, in my view, Garmin, which remains the athlete’s choice, and Apple, more for the foundations (Watch, HealthKit) it has laid. Withings is another interesting one because of its focus on superior design and a focus on the health rather than the fitness category, and their product innovation.

Additional Analytics. A slick, detailed dashboard has become the ‘ante’ in this category. I think the next wave is to provide additional analytics by pulling data from other sources, whether on the net or apps on your phone. How do weather, nutrition, type of work, and other aspects of lifestyle affect goals? For the daily runner, for example, is there a correlation between sleep and speed? Are there correlations between diet/exercise and sleep quality? An interesting aspect of this could be having some information to report to your doctor/nutritionist/coach, etc., all permission-based and with the right safeguards and controls.

Big Data. The leading companies have been very careful about privacy and the sharing of data, as they should be. But as the devices become commoditized, I believe there are some compelling additional opportunities for monetization, with the appropriate safeguards in place, given the incredible amount of data being collected. Waze, for example, has done this with traffic, packaging its crowd sourced data, on an anonymized basis, to entities such as government departments for urban planning and other initiatives.

Nutrition. While there has been some progress in making it easier to incorporate nutrition data into these apps, for the most part the process is still painstaking, time consuming, and not accurate. Whoever is able to pull off the “Shazam of Food” is a guaranteed Unicorn. If we find a better way to incorporate nutrition with health/wellness/fitness, this space will become a much larger ‘lifestyle’ category.

Clothing. Many have thought ‘smart clothing’ would be one of the next big things in this area. So far, these products remain niche, expensive, and gimmicky. But there are some serious dollars and designers doing work in this category and it would be great to see breakthrough products some time in the next year or two, particularly if they play well with existing ecosystems.

Market Segmentation. The thrust for most companies in the space has been toward the mass market. I think we will see more segment-specific wearables emerge over the next couple of years. They will all have some core functionality but then elements of hardware and/or software geared toward particular market segments, such as athletes, nutrition/weight loss, and so on.

Finally, I think we will see some consolidation in wearable tech. Already, a couple of companies have pulled their products over the past couple of months. Rumors swirl about Jawbone. I can see Garmin and Polar coming together.

The pieces are in place for the fitness wearable category to move to the next stage in 2016.

Imagine you have a congested commute. Every day, you sit on a crowded two-lane highway, which was clearly not built to accommodate the traffic on it. Yet, a few years ago, the government sold land it owned right next to that highway to a private entity, with the provision that it be used to add an extra lane within a couple of years in order to increase capacity. That owner has been sitting on that land, seeing its value steadily increase, but has neither built that needed extra lane, nor sold/leased it to someone who would. The more cars there are and the less additional land there is to build on, the worse it’s going to be for commuters.

That has been DISH’s strategy in wireless. Poker-playing Charlie Ergen is clearly winning at the game of “spectrum hold ‘em”. DISH holds 50 MHz of downlink and 20 MHz of uplink spectrum in highly desirable mid-tier bands. Even though nearly 100% of the company’s revenue comes from its pay TV business, its spectrum holdings are valued at $35-50 billion, representing some 80% of the company’s current valuation. Ergen’s poker playing acumen has extended to exploiting the rules and finding loopholes. For example, DISH cleverly used its spectrum assets to lower its tax bill and found a way to push out the FCC’s build requirements on some of its spectrum holdings from 2016 to 2019 (yet the company did have its hand slapped to the tune of $3 billion for setting up shell ‘Designated Entities’ in the AWS-3 auction).

At the same time, given the ~50% annual growth rate in wireless data usage fueled, in part, by aggressive price cutting, network capacity is becoming a defining currency in the wireless business. Sprint’s 2.5 GHz holdings are its greatest asset and potential differentiator. T-Mobile’s aggressive pricing and video offers such as Binge On are possible because it has more aggregate network capacity per subscriber than AT&T and Verizon. It’s a fascinating juxtaposition. AT&T and Verizon have 75% share of wireless subscribers and the lion’s share of industry profitability. But Wall Street analysts are generally negative on them because of the foreseen costs in capacity acquisition (spectrum) and capital expenditures that will be required over the next several years to meet demand.

DISH holds a lot of the cards here. I doubt they really want to build out a network themselves. We certainly don’t need a fifth facilities-based wireless network, given there are no other countries where even four facilities-based operators are all healthy and profitable. Some have speculated DISH could use its spectrum to build out a competitor to broadband. That would fill a gap in DISH’s portfolio. But while data demand is surging in wireless, it is in fixed broadband as well, where the average Netflixing household is consuming 100 GB of data or more, with UHD on the way. There is no way a wireless network could meet that capacity.

The timing could be right to make a move. The incumbent operators and other potential wireless wannabees are preparing for the 600 MHz auction, which is scheduled to start in March, 2016. An acquisition of some of DISH’s spectrum or some sort of lease deal would change the 600 MHz spectrum picture quite dramatically. Verizon, the most likely suitor here, is not going to overspend in the auction and then go back to the well to do a major deal with DISH at the level of valuation Charlie Ergen would like. T-Mobile is also in the mix, though its capacity situation is better than Verizon’s (at least for the medium term).

The other possibility is some sort of merger or acquisition, likely involving DISH, T-Mobile, and Sprint in some form. I can also see a scenario where DISH acquires T-Mobile and Comcast or Verizon ultimately acquires Sprint.

The irony in all of this is operators must come up with billions of dollars for the auction, while DISH sits on a trove of un-utilized capacity. I am pretty sure Tom Wheeler, Chairman of the FCC, is not thrilled about how expertly DISH has gamed the system. Certainly, DISH is not the first company to buy and hold spectrum as a tradeable asset, in the same way a developer accumulates land. It actually might be in DISH’s best interest to hold the spectrum for another year or two, until the capacity situation is even more dire. This is just a case of what’s good for DISH and its shareholders might not good for consumers or the health of the wireless industry.

Looking at the current balance sheets and margins of AT&T and Verizon is not likely to elicit much sympathy from regulators or customers. But the fact that effectively not one analyst on Wall St. has had a buy recommendation on either of these companies for some time should be a warning signal.

In the meantime, there’s some 70 MHz of spectrum that is “shovel ready” and could be used to relieve network congestion, keep prices reasonable, encourage new business models and potential new entrants, and further U.S. leadership in wireless services.

It’s time for DISH’s spectrum to be put to work.

One of the most promising yet amorphous segments of the burgeoning Internet of Things (IoT) field is the so-called “smart city”. Tech sector heavyweights such as IBM, Cisco, and Qualcomm have significant smart city initiatives. Smart city concepts and demos are prominently featured in the many ‘innovation centers’ that dot the country. To date, actual implementations of smart city concepts have been more along the lines of individual projects. The smart grid project here, the transportation management initiative there.

The time might be right, however, to take the smart city concept to the next level: an actual, working, and continually evolving smart city, where all the disparate, siloed elements of today’s smart city initiatives are brought together into a more holistic approach.

Imagine how this could work. A Smart City Consortium, comprised of major stakeholders in the IoT ecosystem — from Cisco to AT&T to Disney to GE — would come together and fund Smart City. The Smart City would be located in a defined geographic neighborhood, which must have the characteristics of fairly dense population, along with a healthy mix of commercial, residential, and retail activity. This could be an emerging district or neighborhood of a city, like one of the new “lifestyle centers” that have become increasingly popular, such as Redmond Town Center in Seattle or Santana Row in San Jose. Barcelona, which seems to be the permanent home of the annual Mobile World Congress, could turn the Fira de Barcelona area into a working prototype smart city. Alternatively, Disney could raze Epcot, which has long felt outdated, and re-imagine it as Smart City.

Smart City would be a live, working test bed actively used by all residents, workers, and visitors. It could have ambitious goals, such as:

• Ubiquitous broadband connectivity
• 50% reduction in carbon footprint or 50% less energy use than comparable neighborhoods
• Leave your wallet at home
• Opportunities for re-imagining transportation, with KPIs around reducing traffic and private vehicle use

I envision the following key elements for Smart City:

1. Network: High-speed broadband connectivity that is ubiquitous and pervasive, featuring a mix of gigabit, WiFi, and mobile, depending on context. This could be a great opportunity to test small cell and some early 5G wireless services. These networks, which are the 21st century equivalent of water and electricity, would be free, widely available, and open to those who want to offer and test smart city services.

2. Hotspots, Sensors, Beacons: Complementing pervasive broadband networks would be a mix of hotspots, sensors, and beacons. For example, sensors would be located to test intelligent parking and traffic management. Retail locations would be outfitted with beacons to test advanced shopping and marketing concepts and initiatives.

3. Smart Energy: Smart City would harness the latest technologies and capabilities promoting intelligent energy management. A veritable grab bag of green energy initiatives, from solar energy to waste management to smart lighting and so on. A goal could be using 50% of the energy of comparable neighborhoods.

4. City Services: With Smart City, the days of dreading a trip to the Department of Motor Vehicles are over. Smart City would be a great opportunity to test e-Government services. The goal? As close to coinless, paperless, and frictionless as possible. As an example, rather than some of the individual initiatives we see today around say, sensor-based parking, the whole idea of traffic management, of which parking is a part, is looked at more holistically.

5. Retail: Ubiquitous broadband, and the density of hotspots, sensors, and beacons would offer a great opportunity to experiment with next-generation retail concepts. Residents and visitors to Smart City would be willing participants in envisioning the future of the physical store, in addition to innovative sales and marketing techniques.

There would be open APIs across some of these smart city concepts, which would allow for entrepreneurs to develop and test new apps for the Smart City. Smart City would also a Big Data fest, with regular reports discussing progress across the sectors and which initiatives have been successful.

Another key component would be the Smart City Innovation Lab. This is different than private sector initiatives in that this Lab would be free and open to the public. This would be more like a living museum, an ‘attraction’ where companies could demonstrate and test new IoT/Smart City concepts. Visitors to the Lab would be willing participants in demos, tests, focus groups, and so on.

Imagine if Smart City came to fruition. It could be a destination site. Not unlike how people moved to, and tourists visited, Celebration, Florida when it was the vanguard of the New Urbanism movement. Imagine taking your kid, armed with a smartphone, a connected car, etc. to Smart City for the day. This would be Tomorrowland and Epcot all wrapped into one (without the $10 turkey drumsticks). Except that it would be real, live, and iterative. What a showcase for the forward-thinking mayor, municipality, district, or lifestyle mall owner who accommodates and facilitates Smart City.

Comcast’s announcement on its earnings call last week that it is triggering the MVNO relationship with Verizon and plans to test a ‘WiFi First’ wireless service over the next few months will once again shine a spotlight on the relationship between cellular and WiFi. My view is there are still some significant usability challenges that must be addressed before a ‘Wi-First’ service, as I call it, is ready for prime time.

Wi-First services along the lines of what Comcast plans to offer have already been available for a few years from MVNOs such as Republic Wireless and Scratch Wireless. As well, Intel and FreedomPoP recently announced they will be working together on a new phone for FreedomPop’s Wi-First service. Their services, available on specific devices, are positioned as a less expensive alternative to a typical cellular plan, offering unlimited voice, text, and data while on WiFi, with the option of using the cellular network as a backup when WiFi is not available. Google’s ‘Project Fi’ adds a twist of choosing the ‘always best connected’ scenario between WiFi and two cellular networks: Sprint and T-Mobile. Cablevision has been offering its Freewheel service for about a year, but the fact there is no cellular option when outside range of a hotspot is a major drawback.

So far, ‘Wi-First’ services have not taken off. The services are available only on select, purpose-built devices. They have not been heavily marketed. There have been some issues with the user experience. And cellular prices have been dropping. For those looking for a bargain, prepaid services such as Cricket and Straight Talk offer plans for as little as $30 per month.

A Comcast MVNO however, will up the Wi-First ante, by virtue of its size (23 million broadband subscribers, 55 million households passed, ~150 million ‘POPs’), and the fact it has deployed 10 million hotspots as part of the Cable WiFi consortium that also includes Time Warner, Cox, and Brighthouse. These Cable WiFi hotspots are a combination of about 9.5 million residential gateways (APs) equipped with a dual SSID (homespots) and 500,000 additional indoor and outdoor APs that Comcast and the other cable MSOs have deployed. The density of coverage in some neighborhoods is quite compelling. Comcast has marketed Xfinity WiFi as a convenient and useful broadband extension for its existing customers and as a way of saving on cellular data usage.

The idea is Comcast’s wireless service would leverage these millions of APs and would use Verizon’s wireless network when not in range of a WiFi hotspot. Presumably, Comcast’s service would be less expensive than conventional wireless plans and would be a convenient add-on for its existing subscribers, delivering Comcast potentially $30-40 in additional monthly ARPU for each customer that takes the service (before payments to Verizon).

Note also that, even if on the surface a Wi-First service might appear to be a threat to the mobile operators, they benefit from the MVNO relationship and the fact that data traffic is being offloaded from the cellular network.

The early Wi-First providers have done some pioneering work in developing a seamless experience between cellular and WiFi. This includes the ability for cellular features such as text messaging and voice mail to be delivered when the phone is in WiFi mode. The handoff of voice calls between cellular and WiFi works some, but not all, of the time. And WiFi voice quality can be excellent when the stars align between AP signal, device, software, and so on.

But, in my view, there are two major usability bugaboos that need to be addressed before Wi-First services are ready for the mass market. First, there continue to be issues related to how phones switch between ‘WiFi mode’ and ‘cellular mode’. Put simply, smartphones still often default to a WiFi hotspot even if the signal is weak or it is congested. This issue will become even more pronounced when voice is added to the equation, since voice quality really falls off a cliff when the signal is poor or the AP is congested. There also continue to be issues of having to re-authenticate to hotspots that are already known, which impacts the idea of a seamless Wi-First user experience.

In my use of Cable WiFi outside the home for example, I frequently encounter inexplicable “cannot join” messages, or experience very slow speeds, even where it appears there’s a good signal from the Cable WiFi AP. This also frequently happens in public locations that the phone ‘remembers’, such as at airports and coffee shops. In fact, in an increasing percentage of instances when away from the home or office, I find myself turning off WiFi because the cellular network is more consistent, reliable, and, ironically, often faster. Plus, cellular data costs less than it used to. This is a far cry from a few years ago, when customers invoked WiFi wherever they could.

Apple has clearly recognized this issue, offering a new feature called WiFi Assist, which switches the iPhone to “cellular” mode when the WiFi signal is weak. However well intentioned, Apple has received some backlash because it didn’t do a lot to inform customers of this feature, which can cause a spike in cellular data usage charges.

The second major issue is that Wi-First services must be available on the majority of devices users already own. Today, services from MVNOs such as Republic, Scratch, and Google only work on a handful of devices customized with purpose-built software for Wi-First. If Wi-First services aren’t available on the leading iOS and Android devices, they’ll never have broad appeal.

Fortunately, there’s progress on this issue. WiFi calling is now supported in iOS and is becoming more broadly supported by the operators in addition to T-Mobile. Voice over WiFi works pretty well, though there still continue to be issues when multiple users/devices contend for a hotspot and with handoff to cellular when leaving an AP. The spread of VoLTE should ease some of the handoff issues, since it’ll all eventually be data anyway.

There is a lot of complexity involved in delivering a reliable, seamless, and high quality service combining cellular and WiFi, which is why Google, Comcast, and others have been decidedly cautious in their approach. There is no panacea, just a lot of incremental work on both the network and device sides to tune and refine the experience. The major usability issues must be addressed before a “WiFi First” service is ready for the mainstream, mass market.

On March 29, 2016, the FCC is scheduled to kick off the 600 MHz spectrum auction. The stakes are high because a significant chunk of bandwidth (50-80 MHz) is being made available and this is likely the last major swath of spectrum that will be auctioned for the foreseeable future. Additionally, the 600 MHz band is considered ‘beachfront’ spectrum, because it has better propagation characteristics than higher band spectrum. It makes it particularly attractive for operators who need to improve their coverage outside of cities and inside of buildings.

Many analysts believe this auction will be a bonanza, raising upwards of $60 billion, similar to the 2014-15 AWS-3 auction, which raised $45 billion (a record $2.53/MHz-pop), largely from AT&T, Verizon, T-Mobile, and DISH. Data traffic over the wireless network is expected to grow by nearly 50% per year through 2020, driven by video and other rich media. The two largest wireless carriers, AT&T and Verizon, hold two-thirds of wireless subscribers but less than one-half of industry capacity and T-Mobile needs more low-band spectrum in order to be competitive with the “big boys”. Some believe that outside players, like cable companies or perhaps even Google or Apple, might participate in this auction in order to become masters of their own wireless domain.

I have a contrarian view. I don’t believe the auction will be a dud, but it could well disappoint. The markets could go for less money (on a MHz per pop basis) and fewer companies may participate, in a serious way, than anticipated.

There are three main reasons why I am more conservative on the prospects for this auction. First, the 600 MHz auction is extraordinarily complicated, with uncertainty as to exactly how and when the spectrum will be available to be put to commercial use. Without going too deeply into the details, this is a pioneering ‘incentive’ auction, in which the incumbent TV broadcasters share their spectrum or move channels in return for receiving part of the auction proceeds. There is a ‘reverse’ process and a ‘forward process’ (more details here). There is also contention about exactly what the rules are and how it will all work. And there is an uncertainty as to how, and when, the incumbent broadcasters will move off that spectrum – especially in cities. The best-case scenario is this spectrum will be available for commercial use in 2019-2020, but that timeframe could easily move out a couple of years, especially in the larger urban markets. Auction prices could be depressed if some operators believe there are better, alternate mechanisms for obtaining spectrum and putting it to work sooner.

Second, circumstances in the wireless market have changed over the past 2-3 years. Yes, all of the major operators will need more capacity in the coming years to address the expected growth in data consumption. However, the financial resources they need to bid for this spectrum have become somewhat more constrained. We are coming out of a fairly vigorous wireless price war in the U.S., which has affected operator margins. The operators are also quite highly leveraged: AT&T acquired DirecTV, is venturing into Mexico very aggressively (and building out an LTE network), and is upping its spend on fixed broadband in the U.S.; Verizon, whose balance sheet is still feeling the effects of the Vodafone buyout, acquired AOL and is saving some of its powder for other potential acquisitions (in my view); T-Mobile has a conservative corporate parent in the form of Deutsche Telekom which will, at some point, want to wring some profits from its profligate progeny; DISH is in the FCC’s financial penalty box due to the AWS-3 Designated Entity debacle and does not particularly need this spectrum; and Sprint has said it will not participate in the 600 MHz auction (although some have speculated that SoftBank, Sprint’s owner, might). Operator CFOs are going to be more disciplined about this auction than the last time around.

Third, there is more spectrum available right now than many people think and it could creatively be put to work sooner than the 600 MHz spectrum. Examples:

• Unlicensed LTE. Progress is being made to allow wireless carriers to use channels in the unlicensed 5 GHz band (also used for Wi-Fi) to add capacity to their LTE networks. Verizon and T-Mobile are pushing hardest on this.

• Sprint 2.5 GHz spectrum. Given Sprint’s financial challenges, it is possible Sprint could more aggressively court a wholesale MVNO partner, such as Google or DISH, or sell some of this spectrum outright to raise funds.

• DISH. I believe there will be some action involving DISH prior to the 600 MHz auction. It could do a deal with Sprint, or possibly make a bid for T-Mobile, as has been rumored. Verizon could also make a play for some of DISH’s spectrum.

• Spectrum sharing possibilities. The FCC is pushing a spectrum sharing proposal for the 3.5 GHz band, which could be used for small cells; there are spectrum sharing possibilities as well, using “TV White Spaces” in the 600 MHz band; and possibilities for some excess spectrum being made available as part of the FirstNet build.

Putting unlicensed band and spectrum sharing possibilities to actual use will require unique levels of intra- and inter-industry cooperation, as well as a daft FCC (in an election year).

Finally, I am less optimistic than some that non-incumbent players will be major players in the 600 MHz auction. For the wireless historians among us, Cable is already 0 for 3 in the facilities-based wireless business. The TWC-Charter-Brighthouse triumvirate is caught up in merger approvals so the timing is not right for them. Comcast is the cable elephant in the room and, despite their aggressive investment in Wi-Fi, I don’t believe they are convinced they have to buy spectrum if they want to make a cellular play. As for Google, Apple, Facebook, and other potential auction participants, I think there will be more attractive potential wholesale opportunities than there have been in the past. Plus, I don’t see a compelling business case for an additional facilities-based wireless provider, given four existing national LTE networks, plus DISH, out there.

It is not necessarily a bad thing if the 600 MHz auctions are not as lucrative for the Treasury Department as hoped for. After all, the purpose of spectrum auctions is to make more capacity available for wireless use, not to raise money for the federal government. And if wireless players spend a little less than planned to buy the spectrum, conceivably they’ll have more resources to build more network more quickly.