Friday, June 2, 2017

Like Growing Wheat on Wall Street

The FCC recently concluded an historical auction. Spectrum licenses have been auctioned off for mobile phone service in the past and licenses to use spectrum within a specific assignment have been exchanged in the past. But this represents one of the few times (only?) that an auction was implemented to move spectrum from one assigned use (TV Broadcast) to another (Mobile Broadband). Broadcasters have a huge chunk of spectrum (most of the light blue in lines 2, 4 & 5 in the chart) but few people still receive TV signals over-the-air. Thus, it is in a low-valued use.

At the same time, users have been demanding ever more bandwidth from broadband mobile providers. Some 145 TV broadcasters (mostly fringe or duplicative channels in large markets) volunteered to go off the air for $10 billion. The mobile broadband providers will pay $19 billion with the difference going to the US Treasury. Just imagine what sort of fancy gizmos this will make available. Just imagine how many more if the US government did not impose such a hefty tax.

The whole episode reminds me of a comment Tom Hazlett made once. "Our Spectrum allocation is less efficient than using Wall Street for wheat farming."

Hat tip: Lisa George

1 comment:

  1. It seems like good practice to continually evaluate markets that have become irrelevant and see if any of the inputs can be recovered for higher value usage. I am sure this is already done, but it seems like an opportunity to purchase may have existed in that situation before an auction took place and competitors increased price (unless auctioning is the standard practice).