McAdams On: Fun with Numbers

It would seem that a complete government realignment of industries ought to be based on solid figures. One would think a federal strategy that appears to favor one business sector over another would endeavor to be airtight or something like it. How about at least leading the research with a kicker: “Assumptions in this paper could be amended to yield somewhat different numerical benefit estimates.”

So states the FCC’s most recent white paper on reallocating spectrum for wireless broadband. It’s yet another marketing tract about how doing so will flood the economy with billions of bucks. “Mobile Broadband: The Benefits of Additional Spectrum” was released the same day FCC chief Julius Genachowski laid out the plan to bribe broadcasters into handing over spectrum.

The white paper asserts that reassigning 300 MHz of spectrum for wireless broadband will yield $100 billion in market value. Among the things it does not account for is how much the bribes will cost.

Based on what Verizon paid for the 22 MHz C-block of spectrum in 2008, the 120 MHz sought from broadcasters is worth $25 billion. So now the value of handing 300 MHz to Google I mean the wireless industry I mean reallocating it for wireless broadband is $75 billion, or 38 percent of Google’s market cap.

Then there’s the assumed cost of building out the current wireless network infrastructure to accommodate assumed traffic demands in 2014. Assuming the continued availability of unlimited data plans and a magic barn for the magic pony--which are all equally likely.

I.e., if new cell towers capable of handling the unlimited data traffic of 2014 each cost $550,000, the post-bribe savings remains $75 billion. However, if that’s a bit long, as the white paper concedes it could be, then our $75 billion goes south a bit. At $450,000 each for new cell site, the savings is cut to $55 billion, or the rough estimate of real estate commissions in 2007.

But wait! There are more pesky facts! For example, although 547 MHz of spectrum is currently licensed for wireless broadband, only around 170 MHz is being used. So the need for an additional 300 MHz of spectrum is based on 170 MHz, even though there’s 377 MHz now available! And yet, there’s still more. The FCC’s white paper is like a veritable jackpot of Ginsu knifery!

It supposes that 33 percent of that 170 MHz was actually used for data, though in cities the figure is closer to 50 percent. But that’s neither here nor there because of reasons that are impossible to determine. One-third of 170 MHz, or 57 MHz underlies 300 MHz/$100 billion, see? Except for maybe all 57 MHz was not actually used for data traffic. Perhaps it ran at just 70 percent of capacity, or 40 MHz, p. 23 says.

If so, 40 MHz times flat growth of cell-phone towers and modest improvements in spectral efficiency equals $90 billion less in savings, or a very large number. Take $90 billion away from the $55 billion that’s left after broadcasters are bribed and the country’s remaining trees are turned into cell towers... then reallocating 300 MHz of spectrum for wireless broadband by 2014 costs $45 billion, or what I wish to be my after-tax lottery winnings.

This episode of “Fun with Numbers” was brought to you by Television Broadcast, which is now going to check out free Mobile DTV before the spectrum is handed to companies charging for same service.