Benefit–cost analysis in the 5.9 GHz band

In 2020 the Federal Communications Commission (FCC) revisited a spectrum allocation decision it made in 1999. The Agency found that frequencies set aside for specific technologies used by vehicles – Intelligent Transportation Services (ITS) – had been left largely unused. It crafted new rules, shifting 45 MHz of the 75 MHz allocation to newly designated wireless services focusing on Wi-Fi applications, while leaving the remaining (40% of bandwidth) reserved for ITS. The FCC decision was premised on a cost–benefit analysis performed by the agency, supported by two similar studies submitted by outside interests. Yet, upon examination, the cost–benefit calculations prove stunningly uncompelling. In their economic logic, their understanding of existing market data and their use of FCC policy, fundamental errors render net benefit estimates irrelevant to decision-making. In particular, the value of marginal products (VMPs) as well as the opportunity costs of rival allocations are ignored. These failings are stunning, both on their own and given that the FCC, in its reallocation, critiqued its 1999 decision as socially unproductive – and yet deployed just the same basic methodological format, relying on FCC administrative determinations to select favored business models for supplying wireless services.