Broadcast incentive could net US treasury over $33bn
February 16, 2011
CTIA – The Wireless Association and the Consumer Electronics Association (CEA) have submitted a white paper to the Federal Communications Commission (FCC) demonstrating that the auction of 120 MHz of under-utilised broadcast television spectrum will produce more than $33 billion in net proceeds for the US Treasury. In addition to providing the US government with deficit-offsetting revenue, such an auction will also fulfil the vision of the FCC’s National Broadband Plan for continued wireless innovation and US technology leadership.
Key findings from the white paper are:
– The auction model projects, using conservative assumptions, that licences auctioned in the broadcast TV band should be valued at approximately $0.978 per MHz-POP and that estimated net auction revenues would be approximately $33 billion. The paper notes that revenue may be much higher if valuations are consistent with recent auctions for similar spectrum rights.
– Only a very small percentage of the nation’s broadcast stations need participate in the auction in order to address the nation’s broadband spectrum shortage. Indeed in the vast majority of broadcast markets, an incentive auction will still be successful even if no broadcast stations participate. In a limited number of markets, the number of licensed broadcasters will exceed the channels that will remain available for TV use following a reallocation. As a result, a number of potential voluntary avenues to freeing additional channels have been proposed that rely on commercial incentives, including “paying” broadcasters to exit the market through an incentive-based auction mechanism, paying broadcasters to share channels, paying broadcasters to adopt a cellularised architecture and paying broadcasters to relocate to low VHF spectrum.
The estimated enterprise value of those broadcast TV licensees that might voluntarily surrender their channels ranges from $1.2 billion to $2.3 billion. This conservatively assumes those stations that participate in the voluntary incentive auction surrender their licences rather than accepting lower-cost options such as channel sharing or cellularisation.
Remaining broadcast facilities operating on TV channels 31-51 would need to be relocated or “repacked” to the new core channels at TV channels 7-30. Based on National Telecommunications and Information Administration (NTIA) data, CTIA and CEA estimate repacking would cost approximately $565 million.
After deducting the costs of voluntary exits and repacking, the estimated net proceeds from auction of 120 MHz of broadcast TV spectrum are $33 billion. In light of spectrum valuations at recent FCC auctions, this number may be much higher. Furthermore, while incumbent broadcasters may require a price over their market value to exit (which is not considered in the analysis), the net revenues from a TV spectrum auction would still be considerable.