In Pursuit of Affordable Internet Access

The FCC’s Auction 1000 finally came to an end last month, after nearly a year and four rounds of bidding. Participating telecom operators had the opportunity to purchase spectrum in the 600 MHz frequencies, which had been previously held by TV broadcasters. Social Capital surprised some when we registered to participate in the auction, citing our interest in creating a new, tech-enabled wireless carrier. And while we’re more excited about opportunities in the wireless industry than ever before, we ultimately decided that purchasing 600 MHz spectrum wasn’t the right approach for us. Thanks to the time we’ve spent with breakthrough startups tackling various parts of the wireless ecosystem, we came to the conclusion that bidding on traditional spectrum would simply reinforce a dated way of thinking about telecommunications.

We believe the telecommunications industry is on the cusp of generational change, and our energy is better spent exploring the new ways spectrum could function in a more modern wireless ecosystem.

The Scarcity of Traditional Spectrum

Just as the gasoline that runs our cars is a scarce resource, the “fuel” that feeds our communication networks today is also scarce. To power our wireless networks, we select specific radio frequencies in the electromagnetic spectrum — frequencies that cannot be used for any other purpose until repacked and resold. Historically, we’ve been limited to frequencies between 800 MHz and 2.4 GHz thanks to the architecture of our wireless infrastructure:

1. The macrocells on our cellular towers are designed to provide coverage in a hexagonal pattern, because it limits interference and provides a higher signal to noise ratio.

2. The lower the frequency, the more likely radio waves can travel through solid material and go long distances, which is key to offering broad coverage in today’s low density, homogenous network, where cellular towers are often miles apart.

The “Not-so-Scarce” Electromagnetic Spectrum

Fortunately, technology has meaningfully advanced since we first built these networks. We can now control what area a cell covers (“beam forming”), we can decide what frequency a cell works at, we can use many antennas (“MIMO”) and we’ve developed different types of cells with distinct characteristics — all of which means that we can finally build a dense, heterogeneous wireless network.

Heteroegenous Network of different type of cells, densely packed with varying coverage areas

Furthermore, we are on the cusp of developing new technology to enable us to use frequencies all the way up to 90 GHz and, in many cases, even beyond radio waves to visible light. Many of these frequencies will either be coordinated unlicensed spectrum or lightly licensed spectrum (like the CBRS / 3.5 GHz spectrum) — with more than 14 GHz of additional unlicensed spectrum on its way.

When the cells on today’s towers are sparse, they need to be able to reach far, which has restricted us to the use of a very small part of the electromagnetic spectrum. But if cells are densely packed, we can now take advantage of a much broader range of frequencies. Even better, if this previously ignored spectrum continues to be unlicensed or lightly licensed, the cost of spectrum goes down dramatically. Traditional licensed spectrum costs $1 per MHz-POP or about $9.6 billion in spectrum costs to build a nationwide network, which means only the biggest players can afford to compete. With unlicensed or lightly licensed spectrum, that would plummet to a few million dollars in spectrum costs. Suddenly, we have the opportunity to build new networks at far lower costs than were ever before possible, with better quality and 100X the capacity.

Spectrum for the Affordable Internet

Affordable internet access is one of the hard problems we want to solve at Social Capital, so when the 600 MHz spectrum auction came along and industry insiders dubbed it “beach front” spectrum, we considered it really carefully. However, as we’ve looked through the murkiness of what is considered a valuable commodity today to what we expect the future holds, we believe we’re on the cusp of a generational change driven by technology. Namely, the ability to use unlicensed and lightly licensed spectrum to build dense heterogeneous networks.

And we’d rather put our capital to work to bring affordable, high quality Internet to billions. So, we’ve bowed out of these expensive spectrum auctions — and commit to the potential of unlicensed spectrum.

Of course, solving the spectrum problem is necessary but not sufficient to building great, affordable communication networks. We still have to cover some key issues, including building intelligent networks that leverage software and cloud infrastructure, and enabling a shared economy around these common utilitarian telecom assets.

So where does the telecommunications industry go from here? Stay tuned.