The High Cost of Free TV

Despite the fact that 91 percent of American households get their television via cable or satellite huge chunks of radio-spectrum are locked up in the dead technology of over-the-air television.  In his Economic View column today Richard Thaler features the work of our GMU colleague Tom Hazlett who argues that auctioning off the spectrum to the high value users would generate at least $100 billion for the government and generate a trillion dollars of value to consumers.  Thaler writes:

I KNOW that this proposal sounds too good to be true, but I think the opportunity is real. And unlike some gimmicks from state and local governments, like selling off proceeds from the state lottery to a private company, this doesn’t solve current problems simply by borrowing from future generations. Instead, by allowing scarce resources to be devoted to more productive uses, we can create real value for the economy.

Comments

last time I checked only about 80% of americans paid for their TV.

And no, 99% of Americans don't have easy access to cable. There are a lot of rural areas.

And in a typically sloppy dumb-ass economic professor way, they manage not to bring up the fact that we just did a DTV transition -- moving the frequencies over from the old analog channels.

Perhaps these crazed economic professor types could tell me why wireless data service is still 25 or 39 dollar a month, instead of getting cheaper. Somehow, making AT&T and Verizon pay another 50 billion in fees does not result in cheaper services for consumers...

Why auction off all the channels? The move to digital TV has made the spectrum use much more efficient. For example, each channel can (and often does) have subchanels, so three different programs can be broadcast in the spectrum space it formerly took to broadcast one.

Part of the move to digital included auctioning off what was formerly channels 52-69. If they auction off, say, 20-52, that still leaves 20 channels which can actually be 60 programs.

In short, auction of most of the spectrum but leave some -- broadcast TV is pretty handy.

Did you use the statement "productive uses" and "TV" in the same discussion? Surely this must be a joke. Is it April Fools already?

And what would the government do with all that extra money they just got from the auction? Use it to pay down the debt? Ha! It would be better to auction off members of congress and the government to be personal slaves for a day. That would allow us to get revenge, and is something I would gladly pay for.

Steve:
"Did you use the statement "productive uses" and "TV" in the same discussion? Surely this must be a joke. Is it April Fools already? "

I get joy from watching TV.
I get information from watching the News.
I get free time from allowing my children to watch TV.
I get sexual arousal from watching porn.

These are all very productive for me, even if you might not approve.
That's what a free society is about - respecting other people's choices, wants and needs.

last time I checked only about 80% of americans paid for their TV.

And no, 99% of Americans don't have easy access to cable. There are a lot of rural areas.

Rural areas would be a lot better off with high speed wireless networks that could support streaming video services than with crappy over-the-air HDTV reception. Especially given that satellite TV is readily available and over-the-air reception is often quite poor (and very limited in the number of channels). Not being able to get good data services at a reasonable cost is a very big deal to a lot of people in remote areas...whereas satellite is already a good, reasonably priced solution for TV.

If we're *really* worried about people who can't afford a satellite TV, then auction the spectrum and use some of the proceeds to subsidize basic satellite TV for rural poor people.

Yes!

But let's do it in phases so that a new challenger technology has an opportunity to enter in the future.

The US is far behind Korea, Japan, and Europe in part because we protect incumbents by not making more spectrum available for new technologies.

Incumbents have an interest in slowing things down to protect their investments. They have been successful in getting new bandwith (TV converting to digital) without paying for it. There is a market for spectrum, and let's use the market.

Let's have a little Schumpeterian creative destruction. If we open up for more technologies, we will also foster new businesses and technologies in the US.

I advise a nationally known non-profit radio production company and network.

They tell me the future is ubiquitous WIFI in your car and all spaces the spaces you can be in. I can't wait.

Free the airwaves!

No bottlenecks. Everyone can produce and have it distributed. Even this blog.

maybe what the govt should do is set up a content-neutral automated "traffic cop" exchange through which people can buy a block of broadcast time.

there's really no reason why a broadcaster should be able to monopolize a "frequency". with a little work it would be easy to develop a kind of directory system (similar to an internet naming service) so that your radio could discover where the broadcaster you want to listen to is currently broadcasting.

It needs to be pointed out that the quality of over-the-air HDTV picture is the best available, better than cable or satellite because the latter rely on compression. Why should I pay to get a worse picture?

There's too much uncertainty and too few possible bidders to make selling spectrum anything other than a big gamble. Selling spectrum is not unlike when Internet IPs were given by the bucket load at first, just to become extremely difficult to obtain today, which wouldn't be a problem if we didn't have extremely large chunks of it used in an extremely inefficient manner by a few institutions. Entire countries have less available IP space than MIT.

Since we can't know if, 50 years from now, what we are selling today is a bunch of glass beads or if it is the Louisiana purchase, why not just lease it for 30 years instead? By then, technology will have changed so much that we can re-price it again, instead of giving the risk to companies that by then will be old dinosaurs.

And the best thing about it is, if the payments for sprectrum are in a lump sum, there is NO impact on pricing for future use of that spectrum. Its just one big beautiful transfer!

Mulp, there are no fewer than four incorrect things in what you wrote here. You don't need satellite+some other thing to get your local channels, satellite can provide them. 50 million is far, far too high. There aren't 50 million people without satellite or cable, and nowhere near 50 million households (it's about a quarter of that). You can get basic service for far less than $1000 a year (less than $500, actually).

Sat TV doesn't cover my most local channel and only covers part of the sub-channels of the ones it does cover, and it doesn't deliver them in HD. And it costs $70 a month, which is $800+ a year. Cable does offer a $30 a month without any HD - local HD OTA is rendered as SD. And it doesn't deliver any subchannels of the OTA. Both cable and sat deliver less than OTA for a lot more money.

Both are fixed installations, while most places can plop a TV down somewhere and with some antenna can get some stations, if not most, without any cable connection. Put a TV in your RV, and you can get OTA where ever you camp.

So, while a household might have cable, that doesn't mean they aren't operating some TV's OTA.

And 35 million households requested DTV converter box coupons, with 53 million actually used to buy them. Lots of TVs have been sold that contain DTV receivers, at least a hundred million, but it isn't known how many operate OTA while the only reason to redeem the DTV coupon is for OTA.

A lot of people, tens of millions, get their DTV OTA. And the cable/sat TV alternative is far more expensive with many people seeing no value in that cost.

what we are selling today is a bunch of glass beads or if it is the Louisiana purchase

very good .and I think the best things come when you at least expect them to be true

I tried to think so, but i found it was not as the same in the actual process. As you mentioned, I still have doubts, but really thank you for sharing!

It's so tough to encounter right information on the blog. I realy loved reading this post. It has strengthen my faith more.There's too much uncertainty and too few possible bidders to make selling spectrum anything other than a big gamble. Selling spectrum is not unlike when Internet IPs were given by the bucket load at first, just to become extremely difficult to obtain today, which wouldn't be a problem if we didn't have extremely large chunks of it used in an extremely inefficient manner by a few institutions. Entire countries have less available IP space than MIT.

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yes though it's free it cost much more

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By the way, how do you manage to handle writing in this site? Do you have writers to do this for you or you just do it all alone? It would be nice of you if you could tell me. Thanks very much.

Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming.

I think that the TV would gradually become a thing of the past as when you have the option of watching TV over the Internet and you do have good speeds of Internet at you location you would not be opting to have these services. VoIP has been one of the recent ones to get to the IP. It is just a waiting games until things get better and better.

I'm not sure what to believe anymore with respect to modern TV culture. Well, we should factor in that there is a growing number of people who now watch things streamed over the internet versus the traditional "tube", so to speak.

Nonetheless, it's definitely interesting information and food for thought.

lets try to good site

Free Tv has always been a big thing. We can never be sure that what we are watching is really real and quality information.

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it's only few percent paid tv user in my country

i think i'm gonna post this into my blog...i want to see lot opinion about this issue

Some Great comments! great blog, thanks for sharing..

I think that the TV would gradually become a thing of the past as when you have the option of watching TV over the Internet and you do have good speeds of Internet at you location you would not be opting to have these services.

I think that's great, cable tv could kill local tv in the end i will for sure i reckon.

Passed without incident.

without TV I would go crazy

Watching too much TV turns your eyes square

the 100 billion will not fix the economic problems US is having, I think we need to look at the spending and figure out where is all the money going.

Its all in the soup recipes for sure

I remember a classic episode from Friends when Joey sees that his TV has gone missing - "but where is all the furniture going to point to?" hahaha

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