What’s the value of free? That’s the question that FCC commissioner Jessica Rosenworcel is asking as she pushes for more WiFi – i.e. unlicensed and available to everyone at no cost – spectrum to be allocated. The core problem, as she sees it, is that congressional analysts don’t understand what freely available spectrum is worth to the U.S. economy…
Traditionally, the legislative process has overlooked the value of the unlicensed spectrum and favored licensed spectrum. This is not because of some rancorous partisan divide. It’s not because of some unsavory battle between industries. Instead, it simply reflects the way the non-partisan staff of the Congressional Budget Office assign value to spectrum when it is licensed and sold at auction. As a result, bills that direct the FCC to sell licensed spectrum get high grades, while legislation that creates more spectrum for Wi-Fi get low marks.
This accounting method is outdated. It fails to take into account the economic activity Wi-Fi and unlicensed spectrum create every year. But we can address it if every time we identify spectrum to auction for licensed use, we also identify spectrum for unlicensed use.
A spectrum auction is a good thing, generally. Properly run, it allows a fair market value to be placed on private, exclusive use of an otherwise common resource, and it encourages rapid and intensive use of that resource once it’s sold – a company that pays billions of dollars for a small slice will want to generate a return on that investment as quickly as possible.
On the other hand, congress has a hard time quantifying that value. Lawmakers grab onto wildly inflated estimates of what an auction will bring, and then spend it several times over before a single dollar is collected. The current double-auction aimed at converting TV spectrum to mobile broadband use is a perfect example.
Rosenworcel is correct in focusing on the value of spectrum decisions to the overall economy, rather than on shortsighted, and overly optimistic, estimates of immediate income to the federal treasury.