Maurice: If spectrum could be made so efficient that 1.25 MHz could handle all needs for all people, then yes, the value of spectrum would go to zero. But that's not the situation.
Your theory has some critical flaws. However, I do agree with your point.
Charge too much and very few people make a call. Charge too little and huge numbers of calls are made but the revenue is low. Charge just right and revenue is maximized.
If you charge too little.. And competition is fierce. Then it becomes a commodity.
In theory, the Federal Government through it's spectrum management concepts is designed to regulate the amount of spectrum available into the Free Marketplace. Doing so will hopefully regulate the spectrum available, while somehow trying to "serve the public's interest" in providing competitive services to all areas (Meto, Rural). So now you have a system of check's and balances that will aid the Free Market in obtaining that 'Sweet Spot' in the pricing curve. However, the Europeans understood that the capacity of the Spectrum could be increased dramatically via emerging technologies. So, they understood that, not only the amount of capacity available had to be regulated. But, the Technology deployed on that Spectrum also had to be regulated.
So by controlling the technology deployment, and the amount of spectrum available. European regulators have been able to assure a acceptable level of public service, and a comfortable business environment to the Wireless Service Providers which allow them to stay out of the Bankruptcy Courts, for the most part.
Let's look at the Original Auction 5 Nextwave spectrum.
30Mhz paired spectrum which allows 11 (1.25Mhz FDD paired channels). That was back in the IS-95A testing and pre-launch days. Since then we have had a double of voice capacity with IS-95B (equvelant to 60Mhz), then a double with 1X (equivalent to 120Mhz), next we have the dual antenna diversity concept which will provide another double (equivelant to 240Mhz). So technology has provided the equivalent of 800% more spectrum compared to the Auction 5 days.
800% more "equivalent spectrum" in 6 years. Now we have the 700 Mhz spectrum coming to auction. And another 27Mhz of "one off" spectrum parcels.
I agree that there is a point to be made that technology can make spectrum worth additional monies. But, there comes a point where unchecked gains in the capacity of spectrum via technology can destroy the underlying value of spectrum due to the imbalance of supply and demand.
The Free Market can not regulate itself to achieve the desired "sweet spot" in pricing and services in relation to the advancement of technology. The European's have chosen to provide a "saftey valve" in this process, by not only regulating the amount of raw spectrum available to the market place. But, also the technology which is made available.
US Bankruptcy laws allow a single competitor to file bankruptcy, then the assets are transferred to another owner. Who now has a huge cost advantage over the competition who are trying to make an honest living (pay their debt). They are then priced out of the market, which in turn causes a continuous stream of other competitor's seeking Bankruptcy.
Denying the ability of companies like Nextwave to destroy the competitive balance in the marketplace is a solid fiscal decision by the US Govt.
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