Posted by: Joan Marsh on February 1, 2011 at 5:37 pm
In a town that rarely sees agreement, there is now broad consensus regarding U.S. wireless broadband demand trends and the need to ensure that America keeps pace with the global wireless revolution. And almost everyone agrees that the key component to meeting exploding consumer demand for wireless data services is more spectrum. Almost everyone, that is, except NAB. In an astonishing display of denial and false accusation, NAB circulated a letter this week accusing wireless carriers of being spectrum hoarders.
Really?
The wireless industry collectively shares about 425 MHz of mobile wireless spectrum used to serve over 292 million customers, and that number is growing. The broadcast industry, by contrast, currently uses roughly half that to serve only 10 million over-the-air households, and that number is shrinking. The wireless industry is currently racing to build the 4th generation of wireless networks (the third voluntary digital transition), investing billions of dollars and leading the world in wireless innovation and LTE deployment. The broadcasters, by contrast, continue to rely on the same inefficient big stick distribution model that went digital via Congressional mandate in 2009, but otherwise hasn’t changed that much since color television was first introduced in 1953.
Most importantly, the wireless industry is continuing to invest billions of dollars to acquire more spectrum to meet ever growing consumer demand for its products and services. In the 700 MHz auction, spectrum valuations reached an average of $1.28 per MHz/pop. In the meantime, broadcasters are sitting on valuable underutilized broadcast spectrum allocations that, based on total enterprise value, are valued around 15 cents per MHz/pop.
In short, the wireless industry is using its spectrum more efficiently to serve a greater number of customers per MHz and investing billions to acquire additional spectrum to deploy next generation technologies and services. According to the latest forecast from Cisco, global mobile data traffic will grow 26 times between 2010 and 2015, to 6.3 exabytes (a billion gigabytes) per month. And NAB thinks a “real solution” to the real problem of spectrum exhaust is to call us spectrum warehousers.
The fallacy of NAB’s argument is laid threadbare by an examination of the claims made against AT&T. In NAB’s “background” material, it was noted that AT&T spent close to $8B for 700 MHz and AWS licenses (true) that we allegedly have no plan to use “anytime soon” (absurdly false). In fact, these spectrum bands are the foundation for our 4G LTE network build, which will commercially launch this summer and be largely complete by the end of 2013. Far from having no plan for this spectrum, this spectrum is vital to our ability to introduce next generation wireless technologies, with enhanced speeds and capabilities, and new devices and applications to our 95 million wireless customers.
To be fair, the content created and distributed by the broadcasters is enormously popular and valuable. But the manner in which that content is being distributed over-the-air is incredibly inefficient. By some economic estimates, if the wireless industry were allowed to make productive use of more of the TV bands, the resulting social gains would be in the billions, and that does not include the billions that would be generated as proceeds at auction.
The debate about the reallocation of broadcast spectrum and the role of incentive auctions needs to move forward. Yes, it raises tough questions about efficient spectrum use and the allocation of scarce spectrum resources. But even a cursory analysis of the relative valuations demonstrates that the right auction structure could (1) fairly compensate broadcasters willing to exit; (2) fully compensate broadcasters that are relocated; and (3) produce billions of dollars for the Treasury. There is a win-win solution available and the FCC and Congress are working hard to find it. NAB needs to contribute more to this important effort than an unfounded smear campaign.
Come on NAB, it’s time to get real about spectrum. Finding real solutions will be challenging enough without having to resort to specious arguments and spurious accusations – Congress deserves better, the FCC deserves better and U.S. consumers deserve better.
