1. Increasing Spectrum for Broadband: What Are the Options?
Lawrence J. White
Stern School of Business
New York University
Presentation at NBER, Cambridge, MA, July 26, 2010

2. Overview Recent TPI paper The expanding demand for mobile broadband
The problem of the supply of spectrum
The 3 potential sources of supply
Under-utilized government spectrum
Broadcast TV spectrum
Mobile satellite services spectrum
Proposals for freeing up spectrum from each source
Conclusion

3. Recent TPI paper
“Increasing Spectrum for Broadband: What Are the Options?”
Thomas M. Lenard, Lawrence J. White, and James L. Riso

4. The expanding demand for mobile broadband
The expansion of wireless broadband is a bright spot in the U.S. economy
New uses and services
Predictions that the number of users will double between 2008 and 2013
More spectrum is needed

5. The problem of the supply of spectrum
Most spectrum is locked into narrow uses by “command-and-control” regulation
Flexibly licensed spectrum accounts for only a small fraction of all spectrum
The unavailability of more spectrum for wireless broadband will mean
Slower expansion
Higher prices
Delay in new services
Loss of consumer satisfaction
Loss of potential government revenues from auctions

6. Where can additional spectrum come from?
Freeing up government-held spectrum
Broadcast TV spectrum
Mobile satellite service spectrum

7. Government-Held Spectrum

8. The dilemma
Difficult to know whether government-held spectrum is being used efficiently
Strong suspicion of inefficiency
Difficult to motivate government agencies to consider the opportunity costs of spectrum
The absence of a market context
The absence of a profit motive
Spectrum licenses, once obtained, are a free good
Budget re-allocations could net-out the extra revenues from any sale of surplus spectrum
So why not just hold on to it?

9. Freeing up government-held spectrum in the short run
NAS study to provide a census of government-held spectrum and likely sources of surplus spectrum
Government task force to recommend spectrum package for auctioning
Annual NTIA reports on likely surplus spectrum
OMB becomes a skeptical auditor of government-held spectrum
Agency incentive programs for employees to economize on the use of spectrum
Agencies should pay opportunity costs for any new/additional spectrum

10. Freeing up government-held spectrum in the long run (1)
Use the model of the Government Services Administration
GSA owns or leases buildings
Government agencies lease space in GSA buildings
Agencies pay market-oriented rents to GSA
GSA returns surplus to U.S. Treasury

11. Freeing up government-held spectrum in the long run (2)
A “Government Spectrum Ownership Corporation” should take possession of all government-held spectrum
All agencies would have annual leases, perpetually renewable at the option of the agency
The GSOC would charge annual rental rates that approximate opportunity costs, return surplus to Treasury
OMB’s annual budget negotiations with agencies would recognize GSOC rents but not adjust one-for-one
Agencies would have the appropriate incentives to economize on spectrum
Surplus GSOC spectrum could be auctioned

12. Broadcast TV Spectrum

13. Availability Broadcast TV currently uses 294 MHz of spectrum
Less than 10% of all U.S. households exclusively use over-the-air broadcasts
The current market value of that spectrum (for TV broadcast use) is about $12 billion
The market value of that spectrum if auctioned for alternative uses could be $60-$120 billion
The value of the new services for consumers would likely be 10 times these amounts
How to free up this spectrum?

14. Freeing up broadcast TV spectrum
Retain only standard-definition video stream; or
Retain only VHF (2-13) over-the-air channels; or
Subsidize the transition of all over-the-air viewers to MVPDs
Lifetime subscriptions would cost about $9.3 billion
Federal government revenues from spectrum auctions would be more than adequate
Need to prevent current MVPD subscribers from canceling so as to qualify for subsidy
Hold reverse auctions in which MVPDs bid for blocks of transitioning viewers

15. Who would get the windfall from auctioning the broadcast TV spectrum?
Option 1: Incumbent broadcasters keep their (now flexible) spectrum
Government clears and auctions the “white spaces”
Government also gains tax revenues from increased broadcaster profits
Option 2: The government clears the spectrum and auctions it
Incumbent broadcasters are given transferable auction vouchers

16. Mobile Satellite Service Spectrum

17. Availability
About 154 MHz of spectrum
Underutilized

18. Freeing up MSS spectrum
Allow it to be flexibly used
How will the windfall be shared?

19. Conclusion
There are large social gains to devoting more spectrum to mobile broadband
There are 3 prominent potential sources of spectrum for more flexible licensing
Under-utilized government spectrum
Broadcast TV spectrum
Mobile satellite service spectrum
Freeing up spectrum from these sources is feasible
Consumers gain, incumbents gain, federal government revenues increase
This is truly a “win-win” opportunity that should be seized