Wednesday, May 20, 2009

The $Billion Wireless Study No One Knows | The $Billion Wireless Study No One Knows | 29 March 2009

The House stimulus bill included $B for wireless, a major surprise because most of the public advocates where thinking the money would go for fiber and landline subsidies. One key reason is that a CTIA study on "ubiquitous 3G wireless" was circulated around the transition team, along with a comment that spending perhaps a quarter of the stimulus money on wireless towers would be by far the most effective use of the money. 


The world is going mobile, so ensuring wireless everywhere is good public policy. A wireless build is much cheaper and faster than rural fiber/coax, and is a natural complement. I believe 50+ meg to every home is worthwhile while LTE and WiMAX speeds will typically be 2-10 meg. We need both.

Stimulus money is one way to make this happen, but the FCC's Adelstein has a proposal that doesn't require public money:"Use It Or Lose It" wireless licensing. By far the least expensive and most sensible way to get near universal service with voice and megabit wireless and a pretty obvious step forward. When wireless licenses come up for renewal, require that the operator actually is servicing the territory. Perhaps require 92% population coverage for the first renewal, about the current U.S. average. Raise that to 98% coverage for the second renewal, with very limited exceptions. Since U.S. wireless licenses are typically 10 years and most territories have several, in a few years 98+% would be covered without a penny of government subsidy. 

1 comment:

Jody said...

Actually, the "without a penny of subsidy" is only correct as "without a penny of direct subsidy."

1) The proposal would reduce the value of spectrum (by making it more costly due to adding marginal coverage that appears to not be profitable).

2) This would in turn reduce the amount that is bid on spectrum auctions (as the NPV of the spectrum is lower at the time of purchase).

3) Thus future spectrum auction revenues would decrease - the indirect subsidy.

This phenomenon more or less played out in the D-block auction where the added conditions (read as added costs) and regime uncertainty (read as added costs) resulted in no bid meeting the reserve price.