There is No Windfall in the White Space

As Alexander Pope opined, hope springs eternal: And exploiting this natural optimism are interest groups holding out the hope of a budgetary windfall for a cash-strapped Congress if only more spectrum can be auctioned at ever-higher prices. Now it is the turn of the digital television (DTV) "white space" to spur this forlorn hope. And this hope is as precisely forlorn as the economic analysis presented below concludes. A one-time auction of the guard band and other vacant channels in each local television market – so-called "spectrum white space" – would provide minimal revenue to the Treasury, while simultaneously ensuring that most of this unused "beachfront" spectrum will remain fallow, stifling the broadband services and innovation that could generate far more long-term economic activity.

Unlike the recent 700 MHz auction, or the 2006 AWS-1 auction, TV white space spectrum is so fragmented and encumbered that an auction is likely to produce outcomes not unlike the recent failure of the 700 MHz “D Block” auction. Alternatively, opening unlicensed access to the DTV white space for use by all American homes and businesses would do far more to promote opportunities for broadband deployment, innovation and efficient utilization of this spectrum.

Incumbent TV band licensees lobbying against the FCC's proposed reallocation of the TV white space for WiFi-type unlicensed use all rely on a study, funded by QUALCOMM (itself a holder of TV spectrum licenses), that concludes an auction could generate as much as $9.9 billion, or even as much as $24 billion if TV viewers are not protected from interference from new licensed services. This cornerstone study for the case in support of auctioning exclusive licenses to use TV band white space was authored by the Brattle Group, an economic consultancy.

This paper demonstrates that the Brattle study's auction revenue estimates are wildly inflated thanks to the multiplier effect of a series of flawed and unreasonable assumptions. Because this particular spectrum fits the business model of very few companies other than QUALCOMM, the auction is likely to raise a negligible amount of revenue – certainly just a fraction of what Brattle estimates by comparing it to the auction of frequency bands that can be aggregated for contiguous high-power use across entire regions and even nationally. Perhaps more significantly, this paper reveals that under Brattle's own assumptions, the auction they recommend would necessarily leave the vast majority of TV white space spectrum fallow, provide little or no availability of vacant TV channels in the nation's largest metro markets, preclude low-power use of the band by individual homes and business, and even preclude continued use of the band by hundreds of thousands of churches, theaters, sporting arenas, concert halls and other venues currently using the white spaces to operate wireless microphone systems.