FRAMINGHAM 15 FEBRUARY 2011 - Wireless auctions using spectrum voluntarily given up by television stations could raise $33 billion or more for the cash-strapped U.S. treasury, according to a new paper from two tech-related trade groups.
So-called incentive auctions, in which TV stations would give up spectrum in exchange for a share of auction proceeds, could also raise up to $2.3 billion for the stations, based on the business value of the spectrum, said the paper, released Tuesday by CTIA, a trade group representing mobile carriers, and the Consumer Electronics Association (CEA).
The incentive auctions for 120MHz of spectrum now held by U.S. TV stations would raise $36 billion or more, with most of the money going to the U.S. treasury, said Steve Largent, CTIA's president and CEO.
CTIA has long pushed for additional spectrum to be auctioned for commercial uses, with the trade group arguing that the U.S. mobile carriers are facing a spectrum crunch as customers flock to mobile broadband service.
"Data use is literally exploding," Largent said.
The U.S. Federal Communications Commission, in a national broadband plan released last March, recommended that the U.S. make 500MHz of spectrum available for mobile broadband and other uses over the next decade, with 120MHz coming from TV stations.
Last week, President Barack Obama made similar recommendations in a plan to cover 98% of the U.S. with 4G mobile broadband service within five years. The White House estimated new auctions would raise $27.8 billion over the next decade, less than CTIA and CEA estimate, and presumably on a larger band of spectrum than the 120MHz they targeted for incentive auctions.
Several other countries, including Japan, Germany and South Korea, are making additional spectrum available, Largent said. "This has got to happen in the United States," added Chris Guttman-McCabe, CTIA's vice president of regulatory affairs. "It's not that we're going to fall behind; we're already behind."
CTIA and CEA's estimates are based on recent spectrum auctions, and the paper projects the TV spectrum auctions would raise less money per megahertz pop -- a unit of spectrum -- than the 700MHz spectrum auctions concluded in early 2008.
The auction estimates in the paper are conservative, and the actual bidding could go much higher, Guttman-McCabe, said. If the incentive auctions sold at the same value as the B block of the 700MHz auctions, they would raise about $99 billion, the paper said.
CTIA and CEA estimated that $565 million raised by the incentive auctions would go to help relocate TV channels that voluntarily give up their spectrum, and $1.2 billion to $2.3 billion would be the business enterprise value of the spectrum to the TV stations. The trade groups used two common valuation methods -- one based on the TV stations' gross revenue and one based on cash flow -- to determine the enterprise value of the spectrum.
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