8 INFO: The journal of policy, regulation and strategy for telecommunications, information and media 62-73 (2006). Thomas W. Hazlett, Professor of Law & Economics, George Mason University School of Law, Jüergen Müller, Professor of Economics at Berlin School of Economics, Berlin, Germany, Roberto E. Muñoz, Senior Fellow, Information Economy Project and Professor, Federico Santa María Technical University, Santiago, Chile.
This paper aims to estimate the social gains from an analog TV switch-off in 13 EU countries, focusing on the value of TV band spectrum in alternative uses. By using data from existing mobile phone markets, changes are projected in retail prices for wireless voice services, assuming a reallocation (to mobile telephony) of about 42 percent of TV band spectrum. It is forecast that retail mobile phone tariffs would substantially decline if a transition to digital television led to enhanced availability of VHF/UHF spectrum for wireless telecommunications. Consumer surplus gains offset transition costs by at least 2-to-1, and as much as 45-to-1. These net benefits are conservatively estimated in that other services (apart from mobile telephony) could prove more socially valuable, and because we ignore the considerable increase in video choices the transition could provide. It is also found, however, that wireless operators’ profits sharply decline with additional spectrum, due to more intense competition. This suggests a public choice dynamic, often overlooked, that potentially helps to explain the slow pace of the digital TV transition. Regulations blocking TV band spectrum from reallocation to non-TV applications ought to be re-examined in light of the associated costs and benefits. This paper quantifies, using conservative methods, the cost of current spectrum policies.