A study prepared for ComReg suggests delays in awarding additional 5G spectrum have caused as much as €1.06 billion to €2 billion in lost economic benefit to Ireland. That estimate involves extrapolating from other studies of 5G economic benefit.
To be sure, it is reasonable to assume that delayed spectrum awards also mean delayed construction projects, which, by definition, provide some temporary economic boost as the work is done. And if one believes 5G services boost average revenue per unit, then some losses might be expected on that score.
But it is complicated. Not all the activity occurs locally, or in Ireland, so there is “leakage.” Also, there is “substitution.” Even if one assumes some 5G customers spend a bit more than they did for 4G, the net changes might not be so large. When a “new 5G customer” also was an existing 4G customer, a 4G account is “lost” as the 5G account is added.
The net change is not as great as the raw numbers might indicate. And that is not a novel issue. One example is the estimated economic impact of new sports stadia.
Economic impact studies on the impact of 5G, home broadband or artificial intelligence are always based on assumptions various observers will disagree about.
One big issue is the necessity of qualifying every forecast with the caveat that it implicitly or explicitly assumes “all other things remain equal” or unchanged. Rarely does anything important remain “unchanged” when other big changes happen.
But without assuming away all those changes, analysis would be impossible.
For example, if one added up all the economic benefit estimates from all studies in a single nation, in a single year, from every industry and all investments, the total would clearly exceed total economic output by a substantial margin.
Perhaps each participant in a value chain--such in car production--each adds value to a complete car, but cannot each claim the full economic value of the car produced.
When many industries contribute to an examined area of economic growth, one ends up “double counting” output when each contributing industry claims the economic boost is entirely from its own efforts.
In other cases, even claimed “growth” might simply be “substitution.”
Consider the example of economic benefits from municipal funding of sports venues and stadiums. One always sees estimates of revenue generated by such investments:
Coates, D., & Humphreys, B. R. (2008). The growth effects of sports franchises and events. Journal of Regional Science, 48(4), 697-718.
Rosentraub, M. S. (1999). Major league losers: The real cost of sports stadiums and arenas. Brookings Institution Press.
Wenner, L. A. (2000). Sports economics: A survey of the literature. Journal of Sports Economics, 1(1), 1-31.
On the other hand, rival studies suggest there is no net benefit:
"The Economic Impact of Sports Franchises: A Critical Review of the Literature" by Dennis Coates, Brad Humphreys, and Andrew Zimbalist (2006)
Baade, R. A., & Matheson, V. A. (2003). The economic impact of sports teams and facilities. Journal of Economic Perspectives, 17(3), 115-132.
Coates, D., & Humphreys, B. R. (2002). The economic impact of professional sports teams and facilities: A critical review. Journal of Economic Policy Reform, 5(1), 1-24.
Noll, R. G. (1974). The economic effects of professional sports leagues. Brookings Institution Press.
For all such reasons, it is difficult to say much about what delays in licensing 5G spectrum might actually mean, in terms of economic output.
