An academic view on allocating spectrum

Regardless of the politics, one thing is certain: The Obama administration is going after spectrum, and television broadcasters are the main target.

Last week, “The New York Times” published an article by Richard H. Thaler, a professor of economics and behavioral science at the Booth School of Business at the University of Chicago, about the high value of the broadcast spectrum and why it should be sold for increased wireless use.

Thaler, who agreed with FCC chairman Genachowski that the spectrum is now used inefficiently, proposed reallocating the airwaves now used for television broadcasting to free up more space for iPhones, BlackBerrys and laptops. The spectrum used by broadcasters is described as “beachfront property,” Thaler wrote, because these low-frequency radio waves have desirable properties: They travel long distances and permeate walls.

Why are the 49 channels of spectrum for broadcast TV so inefficient?

“First, because of the need to prevent interference among stations, only 17 percent of it is actually allocated by the FCC for full-power television stations. (The so-called white space among stations is used for some limited short-range applications like wireless microphones),” Thaler wrote.

“Second, over-the-air broadcasts are becoming a nearly obsolete technology. Already, 91 percent of American households get their television via cable or satellite. So we are using all of this beachfront property to serve a small and shrinking segment of the population,” he said.

If this spectrum (now owned by the government) was put up for sale, it could raise at least $100 billion for the government and, more importantly, create roughly $1 trillion worth of value to users of the resulting services, Thaler said.

Who would oppose this plan?

“Local broadcasters are likely to contend that they are providing a vital community service in return for free use of the spectrum that was put in their hands decades ago. Whether the local news or other programs are vital services is up for debate, but their value isn’t the issue, because they can be made available via cable, satellite and other technologies, including improved broadband,” Thaler wrote.

Assuming there are 10 million households that still get their television over the air, 99 percent of these households have cable running near their homes, and virtually all the others, in rural areas, could be reached by satellite services. The FCC, Thaler wrote, could require cable and satellite providers to offer a low-cost service that carries only local channels, and to give vouchers for connecting to that service to any households that haven’t subscribed to cable or satellite for, say, two years.

That would cost about $300 per household, or $3 billion — a tiny amount of overall spectrum value. It could reduce the number of channels available in a community from 49 to five. “I know that this proposal sounds too good to be true, but I think the opportunity is real,” Thaler wrote.