A pedestrian uses a mobile phone on Orchard Road in Singapore, on Monday, Feb. 29, 2016. Singapore's Infocomm Development Authority plans to auction additional mobile spectrum this year as it seeks to lure a new entrant to compete with the city's three existing providers. (Bloomberg/Bloomberg via Getty Images)

We're hungry for something we can't see, taste or weigh: the spectrum. These invisible electromagnetic waves carry radio, TV broadcasts and, increasingly, full-length movies to our smartphones. Worldwide mobile use is soaring, and capacity is being strained. So operators are going after airwaves once used for television broadcasts, since these travel far and penetrate buildings. They're also looking toward tiny waves that just might enable the next generation of mobile to run even faster. The spectrum keepers, also known as governments, see opportunities to earn some cash.

The Situation

The U.S. completed a spectrum auction in April that raised a total of $19.8 billion, with $7.3 billion going to pay down the national debt. Another $10 billion went to the 175 television stations that relinquished frequencies no longer needed in an age of digital broadcasts. Mobile operators had begged the government to free up spectrum to meet rising demand. U.S. wireless devices have more than tripled since 2000 to reach 396 million in 2016. Video accounted for half of total U.S. mobile data traffic in 2012; by 2020 it's expected to be three-quarters. Beyond the freshly available TV spectrum, operators are also eyeing new bands that could be used for 5G, the fifth generation of mobile service. These high-frequency bands, called millimeter waves because they're 1 to 10 mm long, are so weak they can even be scattered by rain. But they're much faster and, with more base stations to extend their reach, could eventually provide streaming service that's 10 times faster than 4G. Globally, smartphone subscriptions grew more than 17 percent from 2015 to 2016, to reach 3.9 billion. Without greater mobile bandwidth, users could suffer more dropped calls and crashed applications. Dozens of countries — including Canada, France, Israel and Mexico — have used auctions to make more spectrum available.

The Background

In the 17th century, Isaac Newton observed that sunlight passing through a prism split into a rainbow of colors; he called this a spectrum (for specters or ghosts). The entire electromagnetic spectrum ranges from tiny waves shorter than an atom (high frequency), to miles in length (low frequency). Italian radio pioneer Guglielmo Marconi first showed how to send signals wirelessly over distances in the 1890s. Radio soon flourished with little regulation, at first mainly for ship-to-ship communication. The first effort to bring some order, the 1906 International Radio Telegraph Convention, established SOS as an international maritime distress call. In 1912, after radio mistakes prevented iceberg warnings from reaching the bridge of the doomed Titanic, the U.S. Congress established federal authority over airwaves. Later the government began assigning, without fee, licenses that granted exclusive use over certain frequencies. Applicants were winnowed through hearings or lotteries. In 1994, the Federal Communications Commission began assigning airwaves via auctions. Europe's frenzied 2000 and 2001 auctions reaped nearly $100 billion but left the overpaying mobile providers hobbled by debt, leading to bankruptcies and government bailouts.

The Argument

Half the world's adults now own a smartphone. Yet about 5 percent of people live in areas without mobile service and 30 percent don't have access to a connection that allows for high-speed data. One remedy can be spectrum put aside for community networks. After Rhizomatica tested affordable mobile networks in rural Mexican villages, the government awarded spectrum licenses to indigenous communities in 2016. The U.S. government sees expanded spectrum availability as a way to get high-speed Internet access to the 12 percent of Americans who own a smartphone but don't have fixed-line broadband service. And the spectrum auction could result in more competition — there's been speculation that Dish Network Corp., a direct satellite television company, might offer phone service with all its additional bandwidth. While spectrum auctions have brought in money for governments, they often fall short of expectations. India, for example, dreamed of collecting as much as 5.56 trillion rupees ($83 billion) in its 2016 spectrum auction; it pulled in just 657.9 billion rupees. Companies are wary of bidding too much because there's only so much their customers are willing or able to pay. Social scientists and economists warn that expensive mobile service puts it out of reach for many people, which in turn limits economic innovation. The World Bank has estimated that a 10 percent growth in broadband penetration in low- and middle-income countries results in a 1.38 percent increase in economic growth.

First published Nov.

To contact the writer of this QuickTake: Todd Shields in Washington at tshields3@bloomberg.net.

To contact the editor responsible for this QuickTake: Anne Cronin at acronin14@bloomberg.net, Elizabeth Wasserman

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