No bidders thus far for the 700MHz Spectrum Auction for 4G LTE - CAPEX concerns as Serious Man of Steel Investors are needed to assist Jamaica to become a more Connected Society

Wednesday 22^nd of May 2013 has come and gone and thus far no serious bids have been made for either of the two (2) 700MHz blocks of spectrum as described in my blog article entitled “Spectrum Management Authority moves up 700MHz Spectrum License Auction to Wednesday May 22 2013 - Everything is Possible despite 5 year Mission Impossible Ghost Protocol”.

The question is now being asked as to whether the price of US$40 million, which increases to US$45 million for the Spectrum license that includes the building of a Fiber Optic Network is too expensive as stated in the article “Are the new telecoms licences up for sale too pricey?”, published Wednesday, May 22, 2013, The Jamaica Observer .

This is so much so that Minister of Science, Technology, Energy and Mining Phillip Paulwell has had to travel to China and the Far East to drum up interest in the Spectrum Auction so as to deploy 4G LTE Network and thus kick us into the 21^st Century. However, the price of the Spectrum is not the reason at all.

There are other considerations aside from the Bidding price that’s raking havoc on the minds of potential investors, despite news of failures of the Australian and British Telecom Authorities failing to meet their Spectrum Auction Targets.

The first is the lack of a proper Regulatory authority in the Telecoms Sector. The OUR (Office of Utility Regulations) is calling the shots, as the much promised Telecom Regulator as promised in the Geezam blog article entitled “New Telecom Act Coming for Jamaica – Providers surprised with their Own Regulator” is yet to be set up. So it’s still a lot like the Wild, Wild West, with Telecom Providers still challenging the authority of the OUR to do its job.

Another disincentive is the fact that the very same OUR has plans to lower the Cross-Network Calling Rate to JA$2.00as mentioned in my blog article entitled “JA$2.00 Cross-Network Rates expected from OUR in May 2013 - Postpaid Renaissance, Pain and Gain for Digicel Prepaid in LIME's Ender's Game”.

In essence, Prepaid is made unprofitable but Postpaid is more feasible thanks to this lower price. But Jamaicans have a Prepaid Psychology and as such prefer to buy credit than commit to a Postpaid Plan. Worse, there’s a push towards smartphones thanks to the sub-US$100 (approximately JA$10,000) price point of such entrants and the Digicel DL600 as argued in my blog article entitled “Digicel to launch the DL600 Smartphone in Jamaica on Thursday 30th or Friday 31st of May 2013 - Digicel DL600 is coming Fast and Furious 6 to make smartphones accessible to all”.

Any new entrant into the Jamaica market would thus make a harsh discovery. They’d discover that their GSM Network, which has to be built out before they can upgrade their licenses with their Telecom Equiptment Supplier to install 3G and eventually 4G LTE, would hardly have any Voice Traffic other than that of their RF Technicians building the Network.

They, like Telecom Provider Digicel or Telecom Provider LIME, would end up having to use advertising or other Analytical Calling Models to make persons make more calls, such as Free Calling with Calls being paid for via advertising as argued in my blog article entitled “LIME and Digicel Networks routing Callers to Voice Mail - Hit and Run Advertising while Test out Free Voice Calling”.

Finally the cost or CAPEX (Capital Expenditure) of the entire five year build-out is very daunting. Despite being a very large inland with nearly 3 million people, to cover the inland using the 700MHz spectrum would require at least 1000 Cellular Towers. Under the new Telecoms Act, Co-location, which involves the sharing of Cellular Tower space, is now mandatory. 

But most of the Cellular Towers are short, under 150m in height. At 700MHz, which fall in the UHF (Ultra High Frequency) and VHF (Very High Frequency) Bands, if the Cellular Towers were utilized as is, the Radio waves would have a significant amount of Ground Waves, Waves that travel close to the Ground. These Radio Waves are easily attenuated and don’t travel very far.

They’d also interfere with the other equiptment in the Yard, making it necessary to introduce space Diversity via making the Towers Taller. So despite the fact that Tower Sharing is in effect, they Cellular Towers would have to be made taller, roughly to about 300m, to make the Radio Waves travel further with less Ground waves to reduce power wastage via attenuation and interference with existing equiptment at the Cell Site, effectively adding to the already high CAPEX.

Coupled with the cost of the License for the T-1 Circuits, the need to build out a Fiber Optic Backhaul for the 4G LTE as well as Microwave Backhaul initially for the GSM Service and the cost of deploying the Network goes up significantly. My estimate when all is considered over the five year period for either a New or Incumbent Telecom Provider: US$5.6 billion dollars.

To summarize, it’s not the cost of the Spectrum License that scaring away bidders. It’s the overall CAPEX as well as worries about meeting the deadlines and making profit that make this a Sisyphean Task set by the Ministry of Science, Technology, Energy and Mining.  Only very Cash-rich FDI (Foreign Direct Investors) in partnership with Local Investors can thrive as argued in my blog article entitled “LIME outsources Network Maintenance to Ericsson - The Lone Rangers in Telecoms may have to Tag Team to get a 700Mhz license for 4G LTE”.

Companies such as the likes of Google, which is now seeking to enter into the Telecoms Game in Sub-Saharan Africa and Eat Asia to connect people with Broadband Internet as stated in the article “Google may build wireless networks in emerging markets, WSJ says”, published May 24, 2013 12:22 PM PDT by Roger Cheng, CNET News are what Jamaica’s seeking.

Google’s even considering the use of Satellite Broadband and even Blimps with Wi-Fi (IEEE 802.16d) to being Wireless Internet to the people in these parts of the world as stated in “Google said to deploy Wi-Fi blimps in Africa and Asia”, published May 27, 2013 5:13 PM PDT by Dara Kerr, CNET News.

Speaking of which, does the Ministry of Science, Technology, Energy and Mining have any plans set for Satellite Broadband introduction in Jamaica as yet another Last Mile solution for Broadband coverage? Serious Man of Steel (2013) Investors are needed to assist Jamaica to become a more Connected Society.

More on this as the story unfolds.