Assessment of the Economic Value of Unlicensed Spectrum in the United States

Abstract

ASSESSMENT OF THE ECONOMIC VALUE OF UNLICENSED SPECTRUM IN THE UNITED STATESThis study quantifies all economic benefits of unlicensed spectrum and formalizes a methodology for estimating its total economic value. Along those lines, unlicensed spectrum should be considered a critical production factor that generates value across four dimensions:• Complementing wireline and cellular technologies, thereby enhancing their effectiveness;• Providing an environment conducive to the development of alternative technologies, thus expanding consumer choice;• Similarly, enabling the launch of innovative business models; and• Expanding access to communications services beyond what is economically optimal by technologies operating in licensed bandsIn addition to its intrinsic value, unlicensed spectrum generates “spill-over” value in other domains. The technologies operating in unlicensed bands have the ability to off-load data traffic from cellular networks, which allows service providers to maximize revenues while controlling capital expenditures. In addition, by increasing broadband speed, traffic off-loading to Wi-Fi sites also raises broadband’s consumer surplus. This study’s approach to measuring the economic value focuses first on the surplus generated from the adoption of the technologies operating in the unlicensed network bands. The underlying premise is that the unlicensed spectrum resource generates a shift in both the demand and the supply curves (utilized to measure economic surplus) resulting from changes in the production function of services as well as the corresponding consumers’ willingness to pay. The sum of producer and consumer surplus represents the most important component of economic value creation. However, beyond the concept of economic surplus, the study also measures any direct contribution of technologies, applications, and computer-mediated transactions that run on unlicensed spectrum bands to the nation’s GDP. By quantifying their contribution to GDP, we consider the economic growth enabled by unlicensed spectrum. The compilation of effects outlined above indicates that the technologies operating in unlicensed spectrum bands in the United States generated a total economic value of $222 billion in 2013 and contributed $ 6.7 billion to the nation’s GDP.The paper was presented at Silicon Flatirons on April 29, 2014.