The Market Value of Spectrum
It appears desirable to assign some fee for spectrum occupancy, to
encourage fairer and more efficient use of scarce resources, especially by
avoiding extended "free parking" by inactive holders of frequency
assignments. Even in the absence of competition, an incumbent holder of
frequencies should be given sufficient incentive to vacate or share them for
alternative use when not exploiting them fully.
Evidently this fee should reflect the economic interest
in spectrum resources and must be in line with
the business plan of operators, in particular with
investments and operational costs and
the income that
operators can generate from their services.
Start page of video from Short Course
Video from Wireless Communications Networks Short Course
"If I can give you one megahertz of spectrum for a period of one year and you're allowed to
do with it whatever you want.
Let's ignore for a moment the technological, standardization and
investment issues, and only consider operational aspects.
If you can decide
whether you put up a commercial
radio station, a commercial television system or a cellular
radio system, what would be the most lucrative thing to operate? . ... ."
Embedded QuickTime Video
In 1949, the FCC allocated the spectrum between 470 and 890 MHz to television broadcasting and turned down requests to set apart spectrum for radio telephony.
In the last decades the opposition against the substantial use of spectrum by television
Nicholas Negroponte argues that because of the growing demand for spectrum
resources, these will eventually only be used for services that cannot be tethered, particularly
personal communications and mobile computing.
Television broadcasting, which currently occupies about half the radio resources below 1 GHz,
could better be provided through cable networks.
Additional Services Carried by Broadcasters
On the other hand, broadcasters
argue that new developments allow sufficiently efficient use of the spectrum.
Moreover, broadcast facilities increasingly offer personal communication services.
Examples of such broadcast-related systems are
- In the European teletext standard, any inactive video lines of a TV signal
can be used to broadcast or download a substantial amount of data to arbitrary
locations inside the coverage area of each TV transmitter network. This is
commercially used in several European countries and by Luxembourg's commercial
broadcasting satellites ASTRA.
- Narrowband public datacasting of traffic information to automobile radios
is offered in several European countries, using residual transmit
capacity on standard FM-radio carriers in the broadcast band 88-108 MHz
and the European Radio Data System (RDS)
Is spectrum really scarce?
The effeciency of spectrum usage has tremendously increased
since 1896. In fact the growth is exponential, similar to the famous
Moore's Law for computer performance. On average, the "capacity",
expressed as the number of telephone calls that can be conducted simultaneously
in all available spectrum, has double every 30 months. since 1901, it
has increased by a factor of 1 trillion (1,000,000,000,000).
Since 1950 the spectrum efficency improved 1,000,000
- About 15 time because technology for higher spectrum
bands became available.
- Modulation methods in itself resulted in a modest
- The ability to reuse spectrum in a cellular fashoin
resulted in an improvement factor of 1,000 to 10,000. This was indirectly
made possible by using better modulation methods.
Fair Frequency Assignments
It is not yet evident on which basis equitable access by competitors to scarce
frequency and number resources can best be granted.
Experiences in the United States
In the US, the FCC has
experimented by replacing cumbersome administrative hearings by simple
lotteries of frequency assignments. This resulted in rapid taking of
'windfall profits' by fortunate winners, who simply sold their successful lots
immediately after award. In one case a license won with
a few hundred dollars was sold to an interested network operator for 40 Million dollar.
This proves that frequencies have a substantial
Where the Public Purse wishes to enjoy the profit of this, the
government designed an auction system and the defined associated property
rights very carefully to avoid being outsmarted by collusions of bidders.
US PCS licensees have already (1995) spent some $ 7.7 billion to buy 99 franchises in
the 1900 MHz band in auctions organised by the FCC in early 1995.
have to choose among the three available standards, the GSM-like PCS-1900 and IS-54 (TDMA),
or IS-95 (CDMA).
Randy Katz discusses allocation policy issues
addressed in Washington.
Experiences in The Netherlands
In a country of 15 Million inhabitants, the Ministry of Traffic, Public Works and Telecommunications
administers 91,000 licenses to operate radio transmitters, out of which
Radio communication in its broadest scope provides 1 percent
(about 4 Billion USD) of the gross national product.
- 18,000 are granted for mobile services
- 45,000 for maritime services
- 15,000 for ham radio amateurs
- 13,000 are granted for other services, including public and commercial broadcasting
Cellular in Holland
The license for a second GSM operator was based on studying
'bid books' of four potential operators in great detail.
However, differences between their proposals appeared to be
marginal. While the costs for evaluating the proposals
exceeded 1.5 Million U.S. Dollar, the license was eventually granted
on minor details.
In 1997, frequency bands for a DCS 1800 cellular telephone
operator and four FM broadcast frequencies will
Experiences in New Zealand
In New Zealand, 'one-shot' auctions lead to wildly varying
winning bids for different allocations.
Governments, broadcasters, cellular operators all have difficulty in assessing
the exact value of spectrum. Would you be able to estimate it, or at least
approximate the order of magnitude? Try to estimate investment and operational costs
of the operations and estimate possible revenues.
Try to find out the value of radio spectrum (per MHz, hour,
square kilometer) for
Include in your investigation also frequency planning margins needed
to allow proper frequency reuse. Which is the most profitable use?
- TV broadcasting (does it differ for commercial and pay-tv programming?)
- Radio broadcasting
- Cellular telephony