The Myth of the Wireless Spectrum Crisis
Last week, CTIA trumpeted the latest results of their semi-annual wireless industry survey with the headline “Consumer Data Traffic Increased 104 Percent.” Among their conclusions were that Americans have a voracious appetite for mobile data, and that the wireless industry in turn needs more spectrum to meet those demands.
However, underlying the statistics are numbers that tell a far different story: in fact, there was a dramaticslowdown in wireless traffic growth during the first half of 2012. Of course, CTIA doesn’t want anyone to realize that, because it is significantly at variance with CTIA’s narrative  of an impending “spectrum crunch”into which so much lobbying effort has been invested.
The CTIA press release only quotes  total wireless data traffic within the US during the previous 12 months upto June 2012 for a total of 1.16 trillion megabytes, but doesn’t give statistics for data traffic in each individual six-month period. That information, however, can be calculated from previous press releases  (whichshow total traffic in the first six months of 2012 was 635 billion MB, compared to 525 billion MB in the final six months of 2011).
Counter to the CTIA’s spin, this represents growth of just 21 percent, a dramatic slowdown from the 54 percent growth in total traffic seen between the first and second half of 2011. Even more remarkably, on a per device basis (based on the CTIA’s total number of smartphones, tablets, laptops and modems, of which 131M were in use at the end of June), the first half of 2012 saw an increase of merely 3 percent in average wireless data traffic per cellphone-network connected device, compared to 29 percent growth between the first and second half of 2011 (and 20-plus percent in prior periods).
Data  from Sandvine appears to confirm this slowdown, estimating mean monthly usage per mobile device in North America has fallen by 10 percent since October 2011. To be clear, these figures indicate that device owners have effectively plateaued in their consumption of cell-based data—which seems to fly in the face of conventional wisdom, informed by near constant hype of runaway data consumption by mobile consumers.
What was the cause of this dramatic slowdown in traffic growth? We can’t yet say with complete confidence, but it’s not an extravagant leap of logic to connect it with the widely announced adoption of data caps by the major wireless providers in the spring of 2012. It’s understandable that consumers would become skittish about data consumption and seek out free WiFi alternatives whenever possible. And there’s anecdotal evidence that supports the hypothesis.
For instance, in January the Wall Street Journal first reported  on wireless users “shutting off their WiFi option … because constantly searching for a signal can eat up battery life.” But then by March, we were told  about new iPad buyers who had started to stream March Madness games in HD only to find out the next day they were “out of gas.” In retrospect both of those stories seem laughable, since offloading traffic to Wi-Fi has become de rigueur for savvy cellular users.
Of course, such changes in behavior may not continue indefinitely, but it seems a fair bet that while caps remain a concern, end users will limit their on-network wireless data usage to a much lower level than is necessary simply to stay within their monthly cap. In addition, as others have noted, the penetration of smartphones is approaching saturation, so we can’t count on growth in the number of devices to pick up the slack.
If continued, the implications of much slower growth in on-net wireless data traffic will be profound. If traffic per device only grows at around 3 percent in the second half of this year, then overall data traffic on cellular network for all of 2012 will be up only about 60 percent on 2011— or about half the widely quoted growth forecast  by Cisco. Further, Cisco justifies that number based on the assumption that the “move to tiered pricing does not appear to have an immediate effect on overall mobile data traffic.”In other words, Cisco is making what is essentially an open loop forecast of demand, unconstrained by what customers will be willing and able to afford in the real world.
Those dubious Cisco data points are widely quoted, and especially so by those trying to scare us into thinking that we face a so-called spectrum crunch—a bandwagon that CTIA has all too happily promoted. Even such luminaries as FCC Chairman Julius Genachowski has stated  in recent speeches that we are at a crisis point, claiming “U.S. mobile data traffic grew almost 300 percent last year” —while CTIA says  it was less than half that, at 123 percent. “There were many skeptics [back in 2009] about whether we faced a spectrum crunch. Today virtually every expert confirms it.”
Perhaps therefore we need to take a step back and think about the motivations of those who are telling us of the need for more licensed spectrum because of a purported looming spectrum crunch. Most obviously, Cisco would certainly like to sell more hardware. Large wireless operators, such as AT&T and Verizon clearly don’t want the FCC to impose caps on their spectrum holdings. Small wireless operators want more spectrum to be made available to lower the cost of network expansion.
Those who have made speculative investments in spectrum want their investors to believe these assets will become more valuable. Even the FCC would like you to believe that their “progress in mobile is driving new waves of job creation and investment.” It seems likely that the emperor really does have no clothes. We’ll have to wait to see whether wireless data traffic in licensed spectrum bands will actually meet or fall short of Cisco’s seemingly over-optimistic projections. And perhaps the leading wireless operators will be forced to soften their data caps by consumer pressure and competition from operators offering unlimited data.
However, given the dominance of Verizon and AT&T, neither seems particularly plausible in the current US wireless market. It seems rather more likely that consumers will adapt to a world of offloading instead, so that wide-area cellular networks will de facto become the backup solution for whenever short range solutions such as Wi-Fi aren’t available.
Even before the recent publicity about data caps, Wi-Fi offload was growing far faster than cellular data traffic, and according to the July 2012 PCAST report , one major carrier now claims to be offloading “more than half of its smartphone traffic onto Wi-Fi.” As the PCAST report also recognizes, low power solutions like Wi-Fi will allow spectrum re-use to increase dramatically, “from 900 to as much as 1.3 million times more than a fixed, large cell-based architecture can provide.”
Then perhaps we will realize, as others  have notably pointed out, that “there is no more scarcity of wireless spectrum than there is a shortage of, say, the color purple.”
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October 22, 2012