Friday, February 22, 2013

Number-Crunching Study Supports Additional Spectrum Availability

Spectrum is a key input for commercial wireless broadband services. The FCC has acknowledged there is a shortage of this valuable resource or "spectrum crunch." This has made federal spectrum policy a matter of critical importance.

A paper published in January by Technology Policy Institute's Scott Wallsten's offers insights into the dynamics of spectrum value that should inform any policy regarding spectrum allocation and use. It's titled "Is There Really a Spectrum Crisis? Quantifying the Factors Affecting Spectrum License Value."

In the paper, Wallsten lists four categories of factors impacting the value of spectrum, namely:
  • Characteristics of the spectrum license itself, including the geography and population it covers and its frequency;
  • Underlying demand for wireless services, for which spectrum is an input;
  • Institutional factors including the rules governing each license, such bandwidth size and usage rules; and
  • How technological change and innovation affect the extent to which spectrum is a substitute or a complement for other inputs into wireless service provision, such as cell splitting and spectrum sharing.
While institutional factors are the direct result of spectrum policymaking, sound policy must also reflect the realities of the other factors. Of critical importance with respect to institutional factors are findings yielded by Wallsten's economic analysis. Those include:
  • [L]icenses with paired spectrum are more valuable than those without, all else equal.
  • [U]sage rules affect the value of licenses... Licenses that allow broadband — especially the Broadband-Fixed Wireless combination — are the most valuable. The least valuable are licenses that allow only television broadcasting, followed by licenses that allow only paging. These results are sensible — as services are increasingly all digital and delivered over IP network it makes increasingly less sense to have spectrum devoted to specific (and dying) services.
  • [F]lexibility is generally valuable. Licenses that allow broadband are generally flexible —every license (in this database) that allows broadband also allows at least one other use.
Wallsten also finds evidence regarding increasing spectrum prices supports the now widely-held view that more commercial spectrum needs to be made available. He concludes: "The FCC and NTIA should continue to move spectrum into the market and ensure that spectrumalready available be able to move smoothly and efficiently through secondary transactions."