This paper analyzes the economic effects of the Order issued by the U.S. International Trade Commission (ITC) banning the importation of all new wireless broadband handset models that contain Qualcomm chipsets found to infringe Broadcom’s “sleep mode” patent. We conclude that there are compelling economic policy justifications for disapproving the ITC Order.

In conducting our analysis, we employ conventional economic techniques to estimate the effect of the ITC Order on (1) “consumer surplus” (i.e., lost economic welfare to consumers), and (2) “producer surplus,” including the lost profits of wireless carriers, handset manufacturers, network infrastructure suppliers, and providers of content, applications, and peripherals. In addition, we analyze the “spillover effects” of the Order on productivity across the broader U.S. economy as well as its impact on U.S. international competitiveness. We also estimate the lost revenue for the U.S. Treasury in connection with the upcoming 700 MHz spectrum auction and discuss more generally how the Order threatens to diminish federal spectrum revenue in the future.

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The Costs of the ITC Downstream Exclusion Order to the U.S. Economy