The Hunt for Broadband Spectrum

To lure broadcast TV stations into giving up spectrum so it can be made available for wireless devices, the FCC's chairman wants to pay them

Decisions made in Washington this year could mean your smartphone will run faster—and eventually produce billions in added revenue for wireless companies.

The Obama Administration has pledged to double the amount of airwaves available for data-hungry devices such as smartphones and tablet computers. Accelerating demand for these gadgets could bring a "spectrum crunch," saddling consumers with lousy service and high prices, says Julius Genachowski, chairman of the Federal Communications Commission. The squeeze could come soon. Wireless data flows may increase 35-fold over the next five years, Genachowski told attendees at the Consumer Electronics Show in Las Vegas on Jan. 7.

One place to look for spectrum, he says: the airwaves controlled by broadcast TV stations, whose owners include CBS (CBS), News Corp. (NWSA), and Walt Disney's (DIS) ABC. TV stations switched from inefficient analog broadcasting to efficient digital signals two years ago, freeing up a portion of their allocated airwaves. To lure TV stations into giving up spectrum that he believes is no longer vital to their business, Genachowski wants to pay them. Money would come from auctioning excess airwaves to mobile carriers such as AT&T (T), Verizon Wireless, T-Mobile, and Sprint Nextel (S). The airwaves could fetch $48 billion and add that same amount to carriers' annual sales, according to Coleman Bazelon, an economist with the Brattle Group in Washington.

Proponents of the idea include the Consumer Electronics Assn., with members such as handset makers Motorola Mobility and Samsung. CEA President Gary Shapiro says broadcasters "are squatting on our broadband future."

TV stations are in no rush to give up spectrum. Gordon H. Smith, president of the National Association of Broadcasters, says stations need time to experiment with digital uses of their airwaves. "There has to be sufficient room in the Digital Age for both broadband and broadcast," Smith says. His members could ask Congress to block the FCC. "Is it really the government's role to pick winners and losers?" Smith asks.

The analyst's take: Bloomberg Government estimates reallocated television spectrum is seven times more valuable at auction to wireless providers than when it's used by TV broadcasters. TV generates about $51 million for each megahertz used. That compares with $365 million that wireless companies paid for each megahertz at auction in 2008.

Learn more about Bloomberg Government

Before it's here, it's on the Bloomberg Terminal.