Demand for Wireless Spectrum Overexaggerated, Says USC Paper

NAB seized upon the paper, “Overestimating Wireless Demand: Policy and Investment Implications of Upward Bias in Mobile Data Forecasts,” and emailed a link to it to reporters covering spectrum issues as evidence that relying on “inaccurate estimates to make public policy could lead to incorrect decisions and overvalued spectrum licenses.” But critics named in the paper as having devised or promoted the wireless demand estimates shot back at the report’s conclusions. Its co-author, Aalok Mehta, said the paper has no connection to NAB.

The paper, posted earlier this month on the Social Science Research Network (http://bit.ly/YRH5eE) “is an independent research paper,” Mehta told us by email Sunday. “We have not received any funding for the research and have no affiliation with NAB. We were not aware that NAB has been distributing the paper, which is publicly available on SSRN as a means to gather feedback and facilitate discussion. Please keep in mind that this is an in-progress, preliminary draft of a working paper and subject to substantial revision at any time. The paper has not been peer-reviewed.”

Mehta’s co-author on the paper, Armand Musey, is managing director of Goldin Associates, a New York consulting firm with expertise in telecom and media regulation, among other specialties, according to the firm’s website. In January, the website shows, Musey wrote a blog post in which he argued fears of a looming spectrum crunch might well be overblown (http://bit.ly/1nuYnnj). “Current network growth projections, combined with increases in Wi-Fi offloading and small cell deployment call into question the National Broadband Plan’s central conclusion that 300 additional MHz of mobile broadband spectrum would be needed to meet demand by 2015,” Musey said. “As we approach 2015, it’s become obvious the spectrum crunch is not as severe as once projected. Large swaths of mobile spectrum remain undeveloped -- including prime sub-1 GHz spectrum in the 700 MHz band auctioned over six years ago."

However, Musey told us Monday that he, like Mehta, had no commercial interest in and no link to NAB in co-authoring the paper. “We were not even thinking about the NAB in the slightest when writing it and certainly were not aiming to support any of their positions,” he said. “We just sought to address the issue that many of the spectrum demand projections that policy makers put a lot of emphasis on seem to be flawed.” As testament to his independence, he said, he wrote a previous paper about property rights in spectrum licenses “that really aggravated the NAB.” Of this latest paper, he and Mehta “were a bit surprised to find out the NAB distributed it,” he said, though what NAB actually distributed was only a link to the paper. “It was on a public database (SSRN), so I guess we can’t complain -- but we would have preferred the final copy (it’s still a draft) was the one circulated."

Mehta and Musey investigated “upward biases” in wireless projections by examining forecasts from Cisco and others and comparing them with updated projections over time and actual results, the paper said. “Assuming such projections are neutral, the number of projections that overestimate demand should be roughly equal to those that underestimate demand,” it said. “Likewise, we would expect that, as projections are updated over time, errors on the upward side should roughly equal those on the downward side. However, the evidence reveals a persistent tendency to overestimate in both number and value."

The paper took Cisco’s Visual Networking Index particularly to task, saying it has a history of unreliability. “Of the past seven Cisco mobile traffic forecasts for North America, for example, overestimates were nearly twice as frequent as underestimates (19 vs. 10),” it said. “The longer the timeframe, the more likely the estimates are likely to be over-projections due to exponential growth issues. Many of these errors result from failures to anticipate or correct accurately for new business practices, such as mobile offloading or tiered data plans."

According to the paper, wireless policy decisions “have long timeframes” in that more than half of recent U.S. spectrum reallocations “have taken a decade or longer, and incumbent users often possess significant technical and political power to stall or limit spectrum reorganizations.” As a result, “persistent upward biases” in mobile demand projections “have significant, long-term policy implications, including possibly overweighting spectrum policy towards expensive clearings for new licensed bands over more flexible shared or unlicensed management systems,” it said. “Such biases may also lead to businesses overvaluing spectrum licenses and to governments overestimating the contributions of exclusive spectrum allocations to deficit reduction and economic growth.” The findings “suggest the mobile industry contains much higher levels of inherent demand uncertainty than is commonly estimated and that business and governments may not be fully factoring it into their policy decisions,” said the paper.

In response, Mary Brown, Cisco director-technology and spectrum policy, said her company stands by its research. “Cisco’s Visual Networking Index forecast data has correctly projected a dramatic rise in mobile data traffic driven by the adoption of mobile devices,” Brown said in a statement Monday. “The trends are undeniable and mobile data traffic is increasing by leaps and bounds in the US and around the world."

Cisco as a practice “makes every effort to be as accurate as possible in its forecasts of mobile demand,” Brown said. “We update our forecast once a year to reflect changes in the data demand growth curves. The type of traffic changes as consumer usage patterns shift, as the device mix changes, and as we improve data inputs for greater accuracy. Given the dynamic changes in the marketplace, it is important to keep in mind that 5 year forecasts are just that -- forecasts. Cisco is proud that our Mobile Visual Networking Index study has demonstrated high degree of accuracy in spite of the challenges in forecasting demand. For example, when comparing our forecast for 2013 (published in 2010) to the 2013 actuals, we found that actuals were within 10 percent of our projections for that year. We anticipated 50 exabytes per month of global IP traffic by year-end 2013, and the actual value was 51 exabytes per month."

The paper faulted the FCC and CTIA for using the Cisco research in part to promote rhetoric about a looming spectrum crisis. FCC representatives didn’t immediately comment. But Scott Bergmann, CTIA vice president-regulatory affairs, said in a statement Monday that “even a quick glance at this ’study’ shows that instead of using actual real-world usage numbers, the authors chose to ‘guess’ at consumer data usage in 2013. As every other study by well-respected and independent organizations” has shown in the past few years, “there is a significant increase in consumer demand now for mobile broadband and this will only continue to grow exponentially as long as the U.S. wireless industry has access to more spectrum,” said Bergmann. CTIA hopes that “all interested parties will look forward to working together to ensure a successful [broadcast spectrum] auction that has bipartisan support from the Administration, members of Congress, FCC Commissioners and other policymakers so that consumers may continue to enjoy the world’s leading wireless industry,” Bergmann said. CEA wasn’t mentioned in the paper, but has staked out policy positions similar to CTIA’s on the spectrum issue. CEA representatives didn’t immediately comment.