Fact-Checking the Spectrum Food Fight

[Commentary] The Federal Communications Commission has undertaken an important quest to use an incentive auction to repurpose broadcast spectrum for wireless broadband. Some in Washington oppose designating any of the recovered spectrum for unlicensed technologies. They see this process merely as a way to raise money for the U.S. Treasury, rather than focusing on the much larger and more important impact it would have on the national economy — and they believe that designating any of the recovered spectrum for unlicensed technologies, which was explicitly authorized by Congress, would reduce the auction revenue that would flow to the US Treasury. Others support an unlicensed designation and believe that a large unlicensed band will lead to “free” Wi-Fi. Unfortunately, both sides of this battle are wrong.

Those who want to auction every last hertz of spectrum overlook two basic economic facts about unlicensed spectrum:

• First, if spectrum is as valuable as mobile carriers claim it is, reducing the amount of spectrum available for auction by dedicating some of it for unlicensed use should drive up the price of the remaining auctioned spectrum.
• Second, unlicensed spectrum is the most valuable part of the wireless broadband product space by a wide margin.

Those who think that more unlicensed spectrum will lead to “free” Wi-Fi also overlook basic economic realities. Even though unlicensed spectrum is very good for consumers and the economy, it is important to recognize that not paying money at auction to gain access to unlicensed spectrum does not mean that it is free to put it to use. Quite the opposite is true.

[Cooper is the Director of Research at the Consumer Federation of America and a fellow at the Donald McGannon Center for Communications Research at Fordham University]