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THE SOCIAL VALUE OF TV BAND SPECTRUM IN EU COUNTRIES

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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THE SOCIAL VALUE OF TV BAND SPECTRUM IN EU COUNTRIES

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  1. THE SOCIAL VALUE OF TV BAND SPECTRUM IN EU COUNTRIES Thomas Hazlett Manhattan Institute & The Wharton School twhazlett@yahoo.com Juergen MuellerBerlin School of Economics jmueller@fhw-berlin.de International Telecommunications Society Berlin, Germany Session 13.2 * September 6, 2004

  2. Digital TV Receivers Value of European TV Band ITS-Berlin

  3. If all goes as planned… Value of European TV Band ITS-Berlin

  4. Countries yet to launch

  5. TV Band Spectrum Value 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 Value 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) Value 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 Value of European TV Band ITS-Berlin

  9. Spectrum-Price Relationship Value 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 Value 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 Value of European TV Band ITS-Berlin

  12. PV of TV Band Reallocation Value of European TV Band ITS-Berlin

  13. Political Economy Implications Value 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) Value of European TV Band ITS-Berlin

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