Spectrum allocation is not a short-term budget matter

By the end of 2010, there were thousands more devices certified for use in the unlicensed spectrum than in the licensed spectrum. The number of users of unlicensed spectrum in the United States exceeded the number of users of exclusive licensed spectrum for broadband data purposes by 30 percent.  Cellular broadband providers have also seen the benefits of this efficiency, offloading well over one-third of their data traffic into unlicensed spectrum to deliver it to consumers.  Doing so, they avoided adding well over 100,000 cell sites and saved over $25 billion in annual capital and operating costs.

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The dramatic growth and importance of unlicensed spectrum is just as strong in business applications, where intensive intra-firm communications improve the efficiency of health care delivery, the electricity grid, inventory management, fleet monitoring and other machine-to-machine communications. The total value of activity in the shared use spectrum is over $50 billion.     

The unlicensed model succeeded because it is not free but encourages entrepreneurs to invest in products and services that people value. In order to utilize the unlicensed spectrum, device manufacturers must design, build and market devices that consumers buy. Useful applications must be written and distributed. Hundreds of thousands of base stations must be deployed. Consumers or service providers must pay for the transport of traffic to and from the Internet. 

Simply put, without access to unlicensed spectrum, wireless broadband service would be much more costly and far less valuable. Consumers would buy less of it resulting in fewer jobs and less tax revenue. 

The model was able to bring new and unique services to market, increase the value of broadband by extending it to new devices, and provide a lower cost, more efficient avenue to deliver data to consumers by decentralizing decision-making, deconcentrating investment, promoting an end-user focus, allowing user innovation and lowering transaction costs.

Some in Congress, however, mistakenly believe that federal revenues will be increased if all spectrum is auctioned. By slamming the door on additional unlicensed spectrum, we will not only stifle the advancement of the wireless sector and slow innovation and job creation, but also reduce the potential revenue from the auctions as the complementarity between shared and licensed use increases the value of licenses and cellular carriers will bid up the price of spectrum if less is sold at action. In the long run, by making more spectrum available for sharing, the much larger wireless data sector that results will generate more economic activity and more general revenues. 

Viewing spectrum allocation as a short-term budget matter, rather than a long-term communications policy issue, increases the danger of making another hundred-year mistake. The sum of money involved does not even amount to rounding error in the current budget debate, but the long-term cost to the economy could be hundreds of billions of dollars.  

Cooper is the director of research at the Consumer Federation of America.