The Current State Of Wireless Economics (Part 2)

Part 1 of this feature (click here) reported on the wireless industry’s contribution to the U.S. economy as detailed in Recon Analytic’s new report, The Wireless Industry: The Essential Engine of U.S. Economic Growth. Part 2 examines how spectrum drives the wireless economic engine.

At a Progressive Policy Institute round table last week in Washington, D.C., Roger Entner, founder of Recon Analytics and the report’s author, noted that for every 10 megahertz of licensed spectrum available, the U.S. GDP increases by $1.7 billion. “The faster we can release the spectrum, the quicker we can stimulate the economy,” he added.

Other economic gains derived from 10 megahertz of spectrum include:

• At least 7,000 U.S. jobs created
• A $468 million increase in government revenues
• A $1.9 billion increase in wireless-service-provider revenues
• A $439 million increase in wireless device revenues
• A $263 million increase in wireless app and content sales

The economic impact from adding the 500 megahertz of spectrum promised by the government by 2020 would be a “windfall” that would:
 
• Increase U.S. GDP by $86.5 billion
• Increase U.S. employment by at least 350,000 jobs
• Increase government revenues by $23.4 billion
• Increase wireless service provider revenues by $96.2 billion
• Increase wireless device revenues by $22 billion
• Increase wireless applications and content sales by $13.1 billion

To achieve these gains, however, the spectrum must be available. “Every proceeding that is targeted for [getting 300 megahertz of additional spectrum by] 2015 is behind schedule,” said Thomas Hazlett, professor of law and economics at George Mason University.

Spectrum Growth Needs Regulatory Reform

Why the delay? The problem is “a 85-year-old regulatory system that has never kept up and is now being pressed beyond the breaking point,” Hazlett noted, adding the country needs to “get out of this case-by-case spectrum allocation system, where the burden of proof is always on competing in the marketplace,” and move to a liberal one that allows spectrum to be bid into its most-effective use.

Jim Cicconi, senior executive vice-president/Legislative and External Affairs at AT&T, commented that to continue to fuel wireless economic growth, the country needs both spectrum and investment, and he suggested that the White House eliminate policies that create uncertainty, which blocks investment.

“Much of the spectrum is in the hands of entities that are sitting on it and not using it, or that need policy changes by the FCC to allow it to be used for broadband,” said Cicconi. He noted that speculators also have unused spectrum, as do entities that previously wanted to enter the wireless business, but don’t now.

“The FCC needs to recognize the importance of this secondary market and let the spectrum move more readily out of the hands of those not using it, and into the hands of those who will use it and will invest and build on it. That will bridge the gap until the availability of broadcast spectrum,” Cicconi suggested.

The Motherlode Of Spectrum

Assuming the government eventually makes available 500 megahertz from the planned broadcast incentive auctions, from where will future spectrum come?

“You still have 60 percent of spectrum dedicated to government use. That’s high if you look at other countries,” noted Cicconi.

Hazlett called the TV band “the motherlode of radio spectrum.”

“It’s long past the time where we should be thinking about transiting all over-the-air television,” said Hazlett, calling broadcast TV “highly inefficient.” “If we want to continue to subsidize over-the-air television viewing, we can do that through satellite or cable, at a far, far lower social cost.”

To read the entire Recon Analytics report, click here.

— Jennifer Whalen