THE SOCIAL VALUE OF TV BAND SPECTRUM IN EU COUNTRIES Thomas Hazlett Manhattan Institute & The Wharton School Juergen Mueller Berlin School of Economics International Telecommunications Society Berlin, Germany Session 13.2 * September 6, 2004
T.W. HazlettValue of European TV Band ITS-Berlin 2 Digital TV Receivers 2001 (000s)2003-II (000s)% of Households UK 1,2171, Sweden Spain Finland Germany Netherlands080.1
T.W. HazlettValue of European TV Band ITS-Berlin 3 If all goes as planned… LegislationAnalog Switch-off* UKJuly SwedenMay SpainOct FinlandMay GermanySpring 2002until 2010 Netherlands1999starting 2004
4 Countries yet to launch LegislationAnalog Switch-off* Portugal Switzerland FranceAug. 2000starting 2008 NorwayMarch 2002Starting 2006 Austria DenmarkDec Belgium (Flanders) IrelandMarch ItalyNov
T.W. HazlettValue of European TV Band ITS-Berlin 5 TV Band Spectrum Frequencies (MHz) BandChannelsBandwidth (MHz) 47-68VHF Band I VHF Band III UHF Bands IV & V TOTAL469
T.W. HazlettValue of European TV Band ITS-Berlin 6 Cost/Benefit Analysis Cost of ‘creating’ spectrum Value of alternative use of TV Band Explore: –Lost welfare of delay in DTV transition –Political economy ‘driving’ inertia
T.W. HazlettValue of European TV Band ITS-Berlin 7 “Berlin Switch” Unique Political Constraints => quick transition (completed Aug. 2003) Trivial costs of transition –180,000 (~9% HHs) purchased CPE –6,000 (of 10,000 eligible) HHs subsidized ~ €100 each 12 analog signals => 27 digital programs 12 channels (analog) => 7 channels (digital)
T.W. HazlettValue of European TV Band ITS-Berlin 8 Simulation Model Hazlett-Muñoz (2004) Model predicts price as a function of cost and demand variables 3 equations (demand, mark-up, instrument) 29 countries, quarterly data (99I-03II) Explanatory variables include -- bandwidth -- bandwidth squared
T.W. HazlettValue of European TV Band ITS-Berlin 9 Spectrum-Price Relationship
T.W. HazlettValue of European TV Band ITS-Berlin 10 Cost Assumptions $300 per non-MVPD HH for CPE Transition self-sustaining thereafter Broadcast TV station costs sunk
T.W. HazlettValue of European TV Band ITS-Berlin 11 Spectrum Value Assumptions 200 MHz of TV Band made available (5/12)*(489 MHz) [Berlin] reallocated to mobile licenses in H-M simulation Estimates consumer surplus –Integrates increment under Demand Curve –PV of perpetuity 0.05 Estimates producer surplus –Incremental revenues minus operating costs –PV of perpetuity 0.05
T.W. HazlettValue of European TV Band ITS-Berlin 12 PV of TV Band Reallocation
T.W. HazlettValue of European TV Band ITS-Berlin 13 Political Economy Implications
T.W. HazlettValue of European TV Band ITS-Berlin 14 Berlin Switch In Germany, government officials and industry participants are implementing the DTV transition largely for the purpose of improving the viability of terrestrial television; officials do not expect to recapture radio spectrum after the transition. (GAO 2004, Abstract)