The Value of the Frequency Spectrum Allocated to Specific Uses

Abstract

Because spectrum is a non-priced resource in which ownership rights are not freely transferable, the Federal Communications Commission rarely considers the value or the opportunity cost of spectrum allocated to a particular use or class of users. In this paper some alternative methods used in the past to estimate the value of spectrum-are reviewed. The implications of those alternative estimation techniques are considered. Both the sale price of television stations and the profits eamed by television stations have been used as a measure of the economic rents earned when new entry into the market is prevented. If spectrum users were charged in a manner similar to renters of land, the intensity of spectrum use would change substantially. Attempts have also been made to compare the average productivity of spectrum among various classes of users and to compare the costs of moving whole classes of users from the spectrum to some other altemative. However, such comparisons are meaningful only if they are made on the basis of the marginal user of the spectrum, rather than the average user. Selling or leasing or renting spectrum to the highest bidder would lead to the most efficient use. However, even if the original rights were given away or rented for free, if the FCC allowed the intial owner or renter to resell or sublet his or her rights, the efficiency of spectrum use would be greatly increased.