With the millions of iPhones, BlackBerrys and Androids sold in the U.S., the massive demand for data use is far exceeding the supply of spectrum - the range of all possible frequencies through which signals can be transmitted.
The growing demand has seen wireless companies scrambling to gain an advantage over rivals by finding new and creative ways to acquire the spectrum, in order to provide the growing number of cellular customers the abilities to surf the web, instant-message friends and download full length movies... all from their fingertips.
Spectrum is the lifeblood of wireless service, Piper Jaffray analyst Chris Larsen put it to the International Business Times. The challenge, however, is in acquiring enough of that lifeblood to keep the system going.
The use of data on a cellular plan is contingent on spectrum, which is owned by the public and controlled by the Federal Communications Commission. In order for a customer to receive the smartphone data, the wireless carrier must have licenses to a sufficient amount of spectrum channels to provide the service.
The Spectrum Hunt
The most recent example of how a wireless company is trying to claim more spectrum is AT&T's proposed $39 billion merger with T-Moble USA.
Should that merger occur, AT&T would gain a significant amount of spectrum licenses from T-Mobile, further helping AT&T roll out its 4G wireless network. If the merger doesn't occur, which seems more likely because of opposition from the U.S. Department of Justice and the FCC, AT&T will be required to give $1 billion in spectrum to Deutsche Telekom, the German-based parent company of T-Mobile.
Smaller carriers may also benefit from the fight between the merging parties and the federal government. Many analysts suggest that AT&T would need to sell some of its assets in order to garner government support for the merger, and some of those assets can include spectrum.
Other carriers on the spectrum hunt include Verizon Wireless and Leap Wireless, who on Monday announced a spectrum swap, where Leap Wireless will acquire a block of spectrum in Chicago for $204 million, while Verizon will obtain spectrum in a variety of U.S. markets for $188 million.
Verizon isn't just looking at acquiring spectrum from other wireless carriers. Last week, Verizon announced plans to acquire wireless spectrum from U.S. cable company SpectrumCoLLC for $3.6 billion. SpectrumCo is a joint venture between cable giants Comcast, Time Warner Cable and Bright House.
The agreement will allow companies in the joint venture to provide wireless service on Verizon's network, while Verizon can sell cable company services in its stores.
The Spectrum Spread
Spectrum refers to frequencies on the electromagnetic spectrum. There are only so many frequencies on the electromagnetic spectrum -- therefore spectrum can't be created or destroyed.
Frequencies on the spectrum can be used for many functions and the FCC determines the best use of the frequencies when they are auctioned to companies, Forrester Research analyst Charles Golvin told the IBTimes. He said wireless companies are eager to get a hold of broadcasters' spectrum since it would allow the providers to build stronger networks in a more efficient and cost effective manner.
The major wireless carriers were able to roll out 4G networks using newly available spectrum after U.S. households had to switch their televisions from analog to digital, Golvin said.
The roots of this spectrum shortage began approximately seven years ago, when the FCC auctioned off a significant amount of spectrum to telecommunications companies, said independent telecommunications analyst Jeff Kagan. At that time, the iPhone and Android smartphones didn't exist, and the Blackberry and Palm phones were not widely used.
In the last couple of years, data-driven smartphones have gained enormous traction. About 62 percent of U.S. adults ages 25 to 34 have a smartphone, according to a survey released last month by Nielsen Media Research. Only 30 percent of U.S. adults ages 55 to 64 have a smartphone, but the figure is quickly rising.
The (spectrum) problem is going to get worse in the future as smartphone use continues to grow, Wedbush analyst Suhail Chandy told the IBTimes. He also predicts the problem will be exacerbated by the nascent tablet market in the future.
But while wireless companies struggle with a spectrum shortage, cable companies have a lot of unused spectrum. Kagan said companies such as Comcast, Time Warner and Qwest have spectrum from when they initially looked into breaking into the wireless market.
Cable companies would sell wireless products as part of a bundled package, he said. It didn't really work for them.
Divvying Up the Spectrum
Many solutions have been proposed to solve the spectrum problem. AT&T and Verizon have introduced tiered-pricing for data plans, meaning those who use the most data on the cellular network will have to pay more.
Sprint-Nextel has advertised unlimited data plans, even though CreditSights analyst Ping Zhao noted it has less spectrum than larger competitors AT&T and Verizon.
I'm pretty sure [unlimited data] won't last too long for them, she told the IBTimes.
With a tiered-data plan, Zhao said customers would be more inclined to cut down on data usage or offload data from a cellular network to a WiFi network. A WiFi network uses unlicensed spectrum, which means the spectrum doesn't belong to any specific company.
It will be difficult to significantly decrease cellular network use, as many places are not equipped with WiFi. But a study in August conducted by digital analytics firm comScore found that 37.2 percent of digital traffic coming from mobile phones occurred through a WiFi connection, up 3 percentage points from three months earlier.
The federal government has taken an active role in trying to divide spectrum up differently. In 2009, the FCC launched the National Broadband Plan. The plan recommended making an additional 500 megahertz (MHz) of wireless spectrum available within the next 10 years, with 300 of those MHz coming within the next five years.
A bill, the Jumpstarting Opportunity with Broadband Spectrum (JOBS) Act, is going through Congress to give financial incentives to broadcasters to turn in unused spectrum to the FCC, which it would likely sell to wireless carriers. The House Energy and Commerce Subcommittee on Communications passed the legislation last week and the bill awaits a vote by the full committee.
In addition to clearing up more spectra, supporters of the legislation argue it will raise necessary revenue since some of the proceeds of the sale would go to the government. Supporters also say the bill would create up to 100,000 jobs since it would give wireless providers the spectrum necessary to roll out stronger networks.
Another solution, which Kagan supports, is sharing spectrum, where wireless users can access spectrum from a variety of different carriers.
All of the spectrum should be pooled... every carrier should have access to the spectrum, he said.
Spectrum sharing would help make sure spectrum was used more efficiently, Zhao said, since one network wouldn't be clogged up while another has unused spectrum available.
But with different carriers using different frequencies, the idea isn't revolutionary, she said.