A Macroeconomic Model of Federal and Commercial Spectrum Usage

Abstract

All wireless communication depends on effective and efficient access to the electromagnetic spectrum. Spectrum is a critical national resource that enables both national and economic security. Demand for spectrum is growing, while its supply is practically limited.

A Macroeconomic Model of Federal and Commercial Spectrum Usage is one of multiple research projects on the topic of Spectrum Innovation for the Whole-of-Nation. This research is developing innovative toolsets and capabilities to help meet the United States (U.S.) objective of using electromagnetic spectrum as efficiently and effectively as possible while balancing economic, national security, and other national goals now and in the future.

The project team built a capability to conduct objective and transparent macroeconomic analysis of the impact of spectrum decisions on the U.S. economy. The initial proof-of-concept model addressed the questions: What value does spectrum bring to the U.S. economy based on a shift from fourth generation (4G) to fifth generation (5G) wireless technology? What is the marginal value of additional spectrum to 5G? This spectrum macroeconomic model estimates the impact of spectrum decisions on U.S. Gross Domestic Product (GDP).

The model consists of three components: a wireless network infrastructure model that estimates the relative costs of 4G and 5G services, a 5G use case model that estimates industry level impacts on cost and demand, and a tailored a computable general equilibrium (CGE) model that estimates economy-wide, impacts.

This research required a diverse team with multi-disciplinary expertise in economics, modeling, electromagnetic spectrum, wireless communications, wireless network infrastructure, operations research, systems engineering, and policy. The team developed new methodologies and integrated data sets across multiple domains including: 4G and 5G wireless gross and network demand, wireless network cell sizes and throughput, demand over geographic coverage areas, downlink allocation and efficiency, mobile network operators, channelization, cost of production for 4G and 5G wireless services (capital, labor, other intermediate goods), operating expenses, network buildout strategies, total factor of productivity assumptions, depreciation rates, useful life of capital, residual value of assets, national income product account data, and Census and Bureau of Economic Analysis data on population, labor supply, GDP components, inflation indices, and exchange rates. This novel research tailored a best-in-class CGE model to the spectrum domain.

In addition to building the model, the team examined relationships between parameters and variables of the different models to test the overall sensitivity and developed initial results and key findings. The research can be used to inject objective data and optimization into decision-making processes. Applications of the model could inform Federal spectrum sharing/allocation policies, 5G and sixth generation (6G) network evolution strategies, and balancing Federal/Non-Federal spectrum value. This research contributes to addressing spectrum issues with an impartial, transparent, consistent methodology across stakeholders, in the public interest, and as a Whole-of-Nation.

Keywords: 5G, economic, macroeconomic, spectrum, wireless, GDP

JEL Classification: E, O, Q