What Are The Proposed NBP Spectrum Auctions Worth?
The Brattle Group, an economic and financial consultancy, is saying that the spectrum proposed to be auctioned under the Draft Mobile Broadband Enhancement Act of 2011 is likely to generate approximately $64 billion in revenue, net of all reallocation and clearing costs.
The National Broadband Plan (NBP) emphasizes that 500 megahertz of new commercial spectrum allocations are needed during the next decade. As such, the NBP and National Telecommunications and Information Administration (NTIA) have identified more than 2,000 megahertz as potential candidates for spectrum reallocation. Based on these targeted bands, the Draft Mobile Broadband Enhancement Act of 2011 identifies 470 megahertz of spectrum to be reallocated for commercial wireless broadband uses. The draft legislation would have the Federal Communications Commission (FCC) assign licenses for this spectrum through a series of six auctions, scheduled at 18-month intervals during the next nine years.
Dr. Coleman Bazelon, principal at the Brattle Group, evaluated each of the six auctions and found that the net return of each varies between $5 billion and $21 billion. As proposed, the auctions collectively would introduce 470 megahertz (444 megahertz of AWS-1 equivalent spectrum) and would generate approximately $100 billion, with a deduction of $6 billion for expected exclusion zones for reallocated federal spectrum and expected clearing costs of about $30 billion, thereby resulting in net revenue of $64 billion.
"In the past, the FCC has been successful in designing auctions which garner close to the full value of the spectrum," Dr. Bazelon explains. "Given that the draft legislation addresses many issues that influence spectrum value, resolving them in favor of higher valuations, it is likely that future well-designed FCC spectrum auctions will generate receipts similar to the full value of spectrum."
Dr. Bazelon’s report, "Expected Receipts from Proposed Spectrum Auctions," was sponsored by the Wireless Broadband Coalition and is available here.
In a separate but related paper, Mobile Future, and Dr. David Sosa and Dr. Marc Van Audenrode of the Analysis Group discuss what they say is “the crucial role mobile broadband can play in boosting the nation’s economy if additional spectrum is allocated for wireless networks.”
According to the authors, the paper explains how robust private sector investment leading to substantial job creation, can be further stimulated by the reassignment of spectrum to mobile broadband. Between 2002 and 2010 alone, capital spending in the wireless industry exceeded $185 billion, creating roughly 420,000 jobs throughout the economy.
As such, reassigning an additional 300 megahertz of spectrum to mobile broadband during the next five years, the report concludes, will spur $75 billion in new capital spending, creating more than 300,000 jobs and $230 billion in additional GDP. The release of an additional 200 megahertz of new spectrum in the following five years will create an additional 200,000 jobs and will increase GDP by an additional $155 billion.
Right now, U.S. mobile networks are operating at 80 percent of capacity, well-above the aggregate utilization rate of 65 percent for all countries worldwide. Drs. Sosa and Audenrode conclude that while "mobile broadband is a critical platform for future innovation, the U.S. wireless industry currently faces severe spectrum constraints, limiting the ability of companies to develop new mobile broadband products and services. Facilitating the reallocation of underutilized spectrum can create a favorable environment for private sector investment in critical wireless infrastructure that will create jobs, spur demand and encourage innovation. And that’s just the tip of the iceberg in terms of long-run economic benefits. The sooner that spectrum is reassigned to mobile broadband, the sooner we’ll see private sector investment and job creation."
The report also stresses that the release of additional spectrum “requires no handouts from the U.S. Treasury and will generate substantial spillover effects as innovative companies rush to create new mobile broadband products and services. Emerging wireless technologies and applications have the capacity to alter economic relationships, lead to productivity and gains, and ultimately boost employment and GDP.”