The shortage of spectrum in the wireless market is no secret. It’s been written about ad nauseam, including by me and many others at the American Consumer Institute. The consensus is that there’s not enough spectrum allocated to the wireless companies, and there’s plenty of it available, ready to be sold off. The unused spectrum is mostly held by television companies and the government. The solution, many agree, is to hold voluntary spectrum auctions, a process where current holders of the unused spectrum can opt to sell it, sharing the proceeds with the government.
There are currently more wireless subscribers in the United States than there are people. Americans are in a wireless device buying frenzy, purchasing tablets, smartphones and other devices that utilize the wireless broadband. If you don’t have your own smartphone or tablet yet, that could change this coming Christmas—sales of smartphones and tablets are expected to rise 55.8% and 39.5%, respectively, in the fourth quarter of this year. Next year, analysts estimate that 1.2 billion devices will be purchased worldwide. These devices use up the available spectrum, causing an increasing strain on the supply available to consumers. As more and more devices utilize the spectrum, speed and quality of service will continue to diminish, rendering the expensive hardware less and less useful.
It’s not just the direct benefits to consumers through better service that we need to hurry up with the auctions. Releasing more spectrum into the wireless market would have a huge effect on the economy, at a time when we greatly need it. As the White House’s Council of Economic Advisors has pointed out, spending on wireless broadband would have a great impact on jobs, growth and investment. It would help to create many high paying jobs and spur new investment. Data from the CTIA’s Wireless Industry Indices Report, US Census Capital Expenditures Survey and the FCC Auction Page show that, since 2000, the three highest years of investment in wireless infrastructure were the same years that auctions were held. The data seems to show that having auctions encourages further investment, beyond the value of the spectrum that was just purchased. It’s a stimulative effect that both helps the economy, and gives consumers what they want and need.
While the government has shown movement in holding more spectrum auctions, it needs to move much faster. The latest spectrum auction to be authorized doesn’t complete the auction cycle until 2022. This is too long to wait, especially when some estimates suggest we could see a major crunch in the market starting in 2016, with demand increasing 18-fold from our current needs. Government inaction is hampering the growth of the wireless market. Major action is needed, or that new iPhone under the Christmas tree could end up being as useful as the old Walkman in your basement.