Friday, April 11, 2014

The Economic Value of Unlicensed Spectrum $228 Billion Annually in the U.S.

According to a new report completed by Telecom Advisory Services, LLC (Raul Katz, Columbia Business School) commissioned by WiFiForward, the economic value of unlicensed spectrum is over $228 Billion per-year in the U.S. alone!
WiFiForward Value of
Unlicensed Spectrum


The Report Overview (1 page) highlights the use-cases and value of each. WiFiForward has also produced an infographic (shown at right) to highlight the various ways in which unlicensed spectrum provides economic value in the U.S.

The report details the value of unlicensed spectrum in the U.S. based on two different economic impacts:
  1. Gross Domestic Product (GDP) - direct sales of technologies, services and applications that run on unlicensed spectrum. This results in $6.7 Billion per-year in value ($4.559 Billion of which is attributed to Wi-Fi).
  2. Economic Surplus - use of technologies that rely on unlicensed spectrum that add value to the economy. This results in $222 Billion per-year in economic value ($91.474 Billion of which is attributed to Wi-Fi).
Missing Data?
I am a bit confused since the value from enterprise Wi-Fi sales and resulting efficiencies appears to be absent from this analysis. Worldwide sales of enterprise Wi-Fi equipment alone is over $4.4 Billion annually according to IDC. A significant portion of that market is in the U.S. but does not appear to be included in the GDP figures from this report, which only include the value from Wi-Fi cellular offloading, WISPs, and wireless PANs (BT, ZigBee, WirelessHART). Additionally, no economic surplus value is attributed to efficiencies that enterprises gain from private Wi-Fi deployments. Surely there is a tremendous amount of cost savings that organizations realize through the use of Wi-Fi that has not been captured in this report!

Additionally, Infonetics forecasts for the carrier Wi-Fi market include exponential growth from $466 Million in 2012 and $388 Million reported in the first half of 2013, to an anticipated total of over $3.9 Billion annual sales in 2016. This would add an additional $3.4 Billion to the annual GDP figure above by 2016.

Comparison to Licensed Cellular Wireless
Just as a quick point of comparison to licensed cellular wireless sales and services, which have been reported as $225 Billion in wireless wide area network (WWAN) sales (including mobile handsets) as of 2006 (Reference The Case for Liberal Spectrum Licenses (Hazlett & Leo, 2010), pg.15). And since the ARPU of mobile network operators is shifting to data-driven pricing, and Wi-Fi offload represents over 50% of mobile data traffic, a case could be made that over half of the mobile handset sales should be attributed to Wi-Fi / unlicensed spectrum instead.

And comparing the data-carriage portion of the WWAN industry to the Wi-Fi offload value, Benkler writes (pg. 98):
Mark Cooper of Consumer Federation of America offers a more expansive approach that includes both imputed value of unlicensed bundled as part of cellular service and savings from Wi-Fi offloading on the supply side and arrives at about $50 billion per year. And in light of efforts to quantify specifically the data-carriage side of Verizon and AT&T’s business that suggest a revenue more on the order of $50 to $55 billion per year for licensed mobile data in the United States, Hazlett and Leo’s claim of a vast disparity in value appears to be inflated. 
So what can we conclude in comparison? The total value of licensed versus unlicensed is very similar, at both an aggregate level and a mobile data traffic handling level, even without reapportioning a significant percentage mobile handsets sales to Wi-Fi.

Comparison to Previous Research
The full report describes the methodology used for arriving at these figures and provides and extensive comparison of the current work with prior research on this topic. It is quite an interesting read! A few of the previous studies and reports on the value of unlicensed spectrum include those listed below.

Note - many of these studies use older statistics for the basis of the figures, which are no longer accurate. These include Wi-Fi penetration in consumer households, the percentage of Wi-Fi traffic offloaded from cellular networks, and mobile handset Wi-Fi penetration.

2011 - FCC Chairman Genachowski estimated that unlicensed spectrum:
- Increased the value of licensed broadband services by $25 Billion per-year
- Reduced cost of cellular service through Wi-Fi offload by another $25 Billion per-year

- $3.8 Billion per-year in direct sales of Wi-Fi equipment (based on 2006 figures, pg. 97) (References The Case for Liberal Spectrum Licenses (Hazlett & Leo, 2010), pg. 14).
- $12 Billion per-year in value from higher speed of Wi-Fi in mobile phones instead of cellular networks (based on 2010 figures, pg. 97) (References The Case for Unlicensed Spectrum (Milgrom, Levin, Eilat 2011), pg. 19).
- $25 Billion per-year in value based on the share of cellular traffic carried over Wi-Fi (based on 2010 figures, pg. 97-98) (References The Case for Unlicensed Spectrum (Milgrom, Levin, Eilat 2011), pg. 18).

- Value of unlicensed spectrum is ~$50 Billion per-year (based on 2010 figures) (pg. 28-29).

2009 - The economic value generated by current and future allocations of unlicensed spectrum (Thanki)
- Value of Wi-Fi in consumer homes in the U.S. is $4.3 - $12.6 Billion per-year based on broadband extension over Wi-Fi, and also increases broadband adoption creating an additional $5.2 - $15 Billion per-year in economic surplus (based on 2006 figures, pg. 27).
- The total value of three unlicensed uses-cases (Wi-Fi in homes, Wi-Fi in hospitals, and RFID) is $16 - $37 Billion per-year in the U.S. (Note: Thanki cautions that these figures are likely significant underestimates on the value of unlicensed spectrum because they only account for 15% of the total unlicensed chipset market.)
- Potential value created by unlicensed / Wi-Fi uses of white spaces could be $3.9 - $7.3 Billion per-year.
- Potential for new unlicensed uses of white spaces for rural broadband and agriculture water savings could be $0.8 - $4.3 Billion per-year in the U.S.


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