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THE SOCIAL VALUE OF TV BAND SPECTRUM IN EU COUNTRIES Thomas Hazlett Manhattan Institute & The Wharton School twhazlett@yahoo.com Juergen Mueller Berlin School of Economics jmueller@fhw-berlin.de International Telecommunications Society Berlin, Germany Session 13.2 * September 6, 2004
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T.W. HazlettValue of European TV Band ITS-Berlin 2 Digital TV Receivers 2001 (000s)2003-II (000s)% of Households UK 1,2171,5106.1 Sweden831754.2 Spain1501301.1 Finland51506.5 Germany01700.5 Netherlands080.1
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T.W. HazlettValue of European TV Band ITS-Berlin 3 If all goes as planned… LegislationAnalog Switch-off* UKJuly 19962005-2010 SwedenMay 19972008 SpainOct. 19982007-2009 FinlandMay 19962006 GermanySpring 2002until 2010 Netherlands1999starting 2004
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4 Countries yet to launch LegislationAnalog Switch-off* Portugal20002010 Switzerland20032015 FranceAug. 2000starting 2008 NorwayMarch 2002Starting 2006 Austria20012012 DenmarkDec. 20012011 Belgium20022005 (Flanders) IrelandMarch 20012010 ItalyNov. 20012006
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T.W. HazlettValue of European TV Band ITS-Berlin 5 TV Band Spectrum Frequencies (MHz) BandChannelsBandwidth (MHz) 47-68VHF Band I2-421 174-230VHF Band III5-1256 470-862UHF Bands IV & V 22-69392 TOTAL469
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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
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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)
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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
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T.W. HazlettValue of European TV Band ITS-Berlin 9 Spectrum-Price Relationship
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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
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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 discounted @ 0.05 Estimates producer surplus –Incremental revenues minus operating costs –PV of perpetuity discounted @ 0.05
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T.W. HazlettValue of European TV Band ITS-Berlin 12 PV of TV Band Reallocation
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T.W. HazlettValue of European TV Band ITS-Berlin 13 Political Economy Implications
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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)
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