McAdams On: South Carolina’s Leased Spectrum

11/20/2009 11:22:40 AM
Prima facie, South Carolina spectrum lease could not have come at a worse time. While broadcasters fend off aggressive calls to give up TV spectrum to make way for broadband, South Carolina leases out its licenses for that very purpose. The state’s licenses belonged to its Educational TV organization, which for some reason had spectrum in the 2.5 GHz band--well out of TV territory. South Carolina’s been working on a deal with wireless and WiMax providers for months to make use of the spectrum. It just happened to come together at the precise moment that the attack on broadcast frequencies reached a fever pitch on Capitol Hill.

Yet South Carolina’s lease begs the question--why, if 2 GHz spectrum is adequate for broadband, is there such a hue and cry to wrench licenses away from broadcasters? Cost would be the obvious reason. Signals travel much more efficiently in the 700 MHz spectrum freed up by the DTV transition than in 2 GHz. GigaOm estimates that building a nationwide wireless network in the 700 band would cost around $2 billion versus $4 billion for PCS network at 1.9 Ghz. The primary reason for the cost differential is that the higher band requires roughly 10 times more cell towers to achieve the same coverage as one in the 700 MHz band.

Then again...

Clearwire and DigitalBridge got 1.59 GHz of bandwidth for $143 million for 30 years--around $90,000 per megahertz. Bidders shelled out $19.6 billion doled out for the 52 MHz auctioned off in the 700 MHz band--around $377 million per megahertz. That’s 4,189 times more than what Clearwire and DigitalBridge paid. So which broadband network would logically cost less to the subscriber? I wonder.

I also wonder which one will be built out first. It’s truly disingenuous to hammer for more broadband spectrum when what’s already been allocated to 4G wireless services has yet to be built out. It’s also delusional to believe that any commercial wireless provider is going to build out in remote areas if they haven’t done so already, which is why a singular nationwide broadband network seems to be an ill-conceived concept.

It’s an attractive concept, to be sure, from the perspective of a few regulatory resumes. But the approach is reminiscent of Yul Brenner’s Pharaoh. “So let it be written, so let it be done.” Not, “what is the most efficient, cost-effective and technically feasible way to bring everyone in the country online?” The first mode of operation launches immediately into justifications for itself, e.g., economic projections, social benefits, etc. The second asks right off the bat what’s the best way to reach these benefits.

An admittedly oversimplified comparison of South Carolina’s deal with the 700 MHz auction certainly doesn’t comprise a white paper on the topic of approach, but it’s unfortunately closer than the hyped being shoveled on Capitol Hill. A community-by-community approach to building out broadband might be the most logical, cost-effective way to achieve ubiquitous and reasonably secure access. It may not make one or two wireless providers unimaginably even more wealthy, but based on the government’s own mandate, that’s not the point.