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The Return on Our Investment of Spectrum

November 5th, 2009 by Blair Levin - Executive Director, Omnibus Broadband Initiative

When you’ve been a Wall Street analyst for the past 8 years, as I have, you think a lot about how to get the best return on invested assets.  In my return to the FCC, I’ve found that the same question is relevant, particularly as to our nation’s spectrum.  Of course, our “return” is different—we don’t just think about maximizing profit, we think about providing important public benefits.  But still, it’s the question the broadband team asks each day: how can we maximize the return on our most valuable assets to their owners—all of the American people? 

Recently, I’ve seen a lot in the press about our efforts to consider the best way to maximize the benefits on spectrum.  Much of this chatter was triggered by a recent study submitted through the Consumer Electronics Association (CEA).  The study suggested that broadcasters own licenses to approximately $62 billion worth of spectrum, but only extract $12 billion of value from that spectrum.  In different hands, the study argues, that spectrum could be worth an extra $50 billion which in turn would drive an extra $500 billion to $1.2 trillion dollars of economic activity. Not everybody agrees with the study, though, and Communications Daily reports that some broadcasters and broadcasting trade groups, including the NAB and MSTV, are preparing to commission their own research that takes into account a different range of factors than did the CEA study. 
We welcome this as great news.  As the record indicates, spectrum is a key input for broadband, but we know that it also has other uses of great economic and social importance.  So we welcome a robust debate about how we can best allocate spectrum—both to maximize economic growth, but also to maximize the public good.  We look forward to the NAB findings. 
Beyond the study, there have been reports about conversations I’ve had with broadcasters about spectrum.  I’m not in the practice of publicly discussing details of private discussions—I want to ensure that every party is as candid as possible in helping us determine the best strategy to move America forward— but I do want to clear up a few details.   
These conversations originated from a few broadcasters, who recognized that they had more spectrum than they needed to deliver an economically efficient bitstream.  We started discussing whether there could be a market-clearing solution that allowed them to monetize their extra spectrum, while allowing us to maximize the public good.  This is the driver behind our discussions: we want the country to use most effectively one of its most valuable resources, while increasing optionality of those broadcasters who recognize that they’re not maximizing returns for their shareholders.  We recognize that not all broadcasters would make the same choice but our goal is to determine if there is a mechanism that will attract the interest of a critical mass. 
I don’t know if we will succeed in our efforts to allow broadcasters that option, but I do know that if we didn’t try, it would be a disservice to citizens and stakeholders on all sides of the equation.

 

4 Responses to “The Return on Our Investment of Spectrum”

  1. Guest says:

    Let me get this straight: You're talking about WORKING FOR THE BROADCASTERS to HELP THEM sell their unused spectrum AFTER YOU SOLD THE SPECTRUM TO THEM IN THE FIRST PLACE??? That is NOT YOUR JOB. YOUR job is to maximize broadband availability in the USA....NOT to "MAXIMIZE ECONOMIC OPPORTUNITY" for entities that already own spectrum.

    Why are you NOT working on legislation to fight phone companies who have sued cities which attempted to do what you have been PAID TO DO: i.e. Offer free broadband to inhabitants of the city?

    This is what you should be doing: You should be following the charter of your organization, and finding ways to offer broadband to the citizens of the USA.

    You are, it seems, the wrong person for this job....as you came from a Wall Street background. Your job is not to focus on "Investment opportunity". Quit focusing on that. This is *not* about how to make more money for the greediest bastards in our country; people who fly to work in helicopters and own 5 homes apiece scattered around the country whose inhabitants are taxed to death paying for the military which keeps this country free and open for those people's homes.


    Try this: If they don't use the spectrum they buy, they must return it to the USA, who will resell it to help defray the exorbitant costs associated with regulating these greedy people and their parasitic corporate entities. Better yet, the spectrum will GIVEN to anyone who is willing to create ad supported WiFi access for a 50 square mile area, provided the ads do not involve content monitoring of the users, and the ads servicing consumes no more than 5% of the spectrum delivered.

    Get with the program, or get out of government. We don't need another opportunistic Wall Street parasite making public policy decisions.


  2. Doug Flutie Fan says:

    In a previous post, you use analogy of Doug Flutie, his height and spectrum. I am a Buffalo Bills fan and I was sorry to see them cut Flutie, he was our last QB to get the Bills into the Playoffs, However I view the possible giving of Broadcast spectrum, to Wireless companies, the same way I viewed Doug Flutie being cut by the Bills. I live in a rural area and I watch OTA TV, I also have broadband Internet. I agree that broadband access opens many opportunities to rural communities and sincerely hope the FCC achieves it's goals to provide it nationwide. However the problem I have with the debate on the best use of spectrum, is that Broadcaster, (like Flutie with the Bills) give me a cost saving free service at this very moment, however it would appear the FCC is willing to look at giving up that free service, for a future pay service via Wireless High speed Internet, which is very expensive in comparison to other Broadband services currently available. As a consumer you are talking about taking away a free service, that serves me well. to go to a pay video service, with the promise that auctioning of that spectrum which I get benefits from right now, to Wireless Provider, which to be honest I am probably never going to benefit from, who really don't even have an infrastructure in place to service hard to get to rural areas and as a consumer, puts me into a position that guarantees that I will pay more and more money for video service and the Internet while Wireless providers and cable providers make more and more money. Kind of like the Bills Cutting Doug Flutie for Rob Johnson the QB of the future, what future? If the same wireless companies were, at least attempting to service the rural areas, but instead the line they are giving is give us the spectrum first and then will come the investment. It sounds like someone trying to sell me the Brooklyn Bridge and sadly it looks like the FCC is willing to buy a bridge. Worst yet, perhaps the FCC is trying to sell me the Brooklyn Bridge. I don't question the FCC authority to overseer the radio spectrum for the public interest, but I do question the FCC pie in the sky view of wireless broadband. Sadly wireless companies, such as Verizon and Sprint, need spectrum right now to continue to offer current services and it appears the FCC under the guise of broadband internet for everyone, is more then willing to give them prime broadcast spectrum, but at what cost to the general public? What guarantees in the form of real action by these wireless providers show an real interest in service to hard to get to rural areas?

  3. Brett Glass says:

    If we want the maximum return on our nation's spectrum resources, we must one thing very clear in our report to Congress: Any spectrum which is exclusively licensed and then warehoused, hoarded, taken out of play to forestall competition, or even not used to its maximum potential is spectrum wasted, regardless of how much it brings at auction.

    In my small, rural community, I can take out a spectrum analyzer, scan the airwaves "from DC to daylight," and find only a tiny portion in use. Above the shortwave and citizens' bands, one sees a dozen FM stations; a few TV stations (delivered by the translators of the local antenna TV society) in the lower and upper TV bands; an occasional signal from a cell phone tower; very tall but narrow lumps in the Part 15 unlicensed bands (900 MHz, 2.4 GHz, 5 GHz); then flickers from licensed microwave links. (Due to massive overcharges for special access lines by Qwest, every licensed microwave channel which can legally be used in our area is filled. In fact, cellular carriers are even resorting to the use of unusual unlicensed bands, such as 24 GHz, for inter-tower links because there are no other options.)

    All the rest of the spectrum, much of which is licensed, is unused. And I, a wireless broadband provider (the world's first WISP, in fact), can't legally use it for love or money. So, I am forced onto the Part 15 unlicensed bands, where interference from consumer devices is intense and where I may be subjected to harmful interference by competitors. (Just this month, an out-of-state competitor moved its transmitter onto a channel I was using in the downtown area, degrading broadband services to dozens of my customers. Given that such interference is mutual, why would it do such a thing? My guess is that since this competitor has far fewer customers than I, it did so intentionally so as to harm my business. But on the Part 15 bands, I can get no help from the FCC when this occurs. Other examples of this sort of behavior abound; I have been told that just south of me, on the Front Range of Colorado, wireless broadband providers have set up noisy transmitters -- such as Motorola Canopy access points -- that served no customers, simply to "clear the channel" of competitors.)

    We also experience inteference problems from the Wal-Mart on the edge of town. This interference isn't malicious; Wal-Mart likely does not even realize that it is occurring. However, every Wal-Mart store is filled with hundreds of cordless bar code scanners, all of which operate on the 2.4 GHz unlicensed band at or near the maximum legal power. (Our access point cannot radiate more power than any ONE of those scanners, even though it would make sense because we are going much farther.) And the scanners are on every channel, so there's no tuning to avoid them.

    Alas, because the Wal-Mart -- like most -- is at the edge of town, we can't easily reach over it to areas outside of town that are in need of broadband; the interference is too great. And any customer whose antenna is pointed at, or anywhere near, the Wal-Mart cannot reliably hear our signals. But since we are restricted to the Part 15 bands, we have no spectrum at our disposal that is not subject to similar interference problems.

    Clearly, the current regime is not maximizing the utility of spectrum; in fact, in many ways it is doing precisely the opposite.

    We need to change this. Some suggestions for Congress:

    * Place a higher value on the productive use of spectrum than on the one time revenues from spectrum auctions.

    * Adopt strict "use it or lose it" requirements for all exclusively licensed spectrum -- and do not allow licensees to flout them by deploying, for example, a few point-to-point links rather than ubiquitous service.

    * Release at least 400 MHz of spectrum for non-exclusive use for the delivery of wireless broadband services, subject to the use of cognitive radios which observe mandatory spectrum ettiquettes and have a minimum spectral efficiency of at least 2 bits per second per Hertz. The database approach currently being developed for the TV "white spaces" holds promise as a way of clearing some spectrum for this purpose.

    * Do not allow any holder of an exclusive spectrum license to buy more spectrum at auction -- or control any more through subsidiaries or investments -- until and unless it has made use of what it already controls.

    * Institute a principle similar to "adverse possession" for spectrum, in which a would-be user is granted a license by the Commission if he or she can prove that the current exclusive licensee has not made substantial and efficient use of that spectrum to provide service to the public for six months in a given geographic region.

    * When spectrum is auctioned for exclusive use, allow winners to "pay as they go" rather than paying a lump sum. Consider allowing bids to take the form of a percentage of gross revenues from the service provided in the license area (no cross-subsidies from other areas allowed!) to allow small businesses a chance to compete on a level playing field. Also, vary the "aspect ratio" of the auction offerings, auctioning larger swaths of spectrum spanning smaller geographic areas as well as small ones spanning large geographic areas. (This is necessary to enable high speed fixed wireless broadband.) Finally, give newcomers precedence over owners of existing spectrum licenses -- and prevent them from keeping their licenses if they are acquired by those existing licensees -- to encourage competition.

    --Brett Glass, Owner and Founder, LARIAT

  4. Guest says:

    Hey,
    What about the spectrum that was GIVEN to the DBS operators? Why don't you go after that spectrum and auction if off to the Broadband people.
    What has this country come to? The TV Broadcasters spent the past 60 years in serving the public needs with free OTA TV, while the cable companies like perasites used them to extract fees from consumers. Now that the cable companies have 80% of the country wired you want to dump the broadcasters and get your grubby hands on their spectrum so that you can get some more money for you peasites to spend.

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