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IP: A view of the Spectrum for the formerly Chief Economist, FCC and my Co-Director, Penn Initiative on Markets, Technology and Policy
From: David Farber <dave () farber net>
Date: Sat, 18 Aug 2001 14:17:47 -0400
From: "Gerald Faulhaber" <faulhaber () wharton upenn edu> Dave-- The "spectrum shortage" is one of the great hypes of 2001, and at least in the short run is bogus. There are a few wireless markets (e.g., New York City) in which spectrum is short, but generally there is no national spectrum shortage. Further, existing analog carriers have been slow in converting their analog (inefficiently used) bandwidth to digital, which could give them more capacity without new spectrum being allocated to these markets. Much of the noise has been generated by the perceived need for 3G applications, touted as broadband to the pocket. Again, keep in mind the hype factor: even if successful, 3G is very unlikely to ever provide more than 144 Kbps downstream, not the 2-3 Mbps claimed by early fevered proponents. And as DoCoMo has shown, much of the mobile demand can be met via a relatively narrowband channel: SMS, weather, stock quotes, e-mail, etc. We all know that nobody's gonna watch movies on their cellphone, OK? So demands that we need to greatly expand the amount of spectrum available to wireless in the next few years is largely bogus. A bit more would be helpful, but let's get serious. But the long run problem is more serious. If voice wireless is ever to become a true competitor to wireline voice, or if true wireless broadband (mobile or not) is to be realized, then we are going to have to use our spectrum much more efficiently than today. The problem: how we allocate spectrum. The US and every other country in the world allocates spectrum by government fiat: we'll give this much to the police, this much to broadcast TV, this much to cellphones, etc. For most uses the government also says who gets the spectrum and what they are allowed to use it for. Only for cellphones does the government actually sell the spectrum (actually, it doesn't actually sell the spectrum; it auctions very limited rights to use it). You will recall GOSPLAN in the old Soviet Union, which allocated resources among competing interests? Well, that's the model we seem to be using. The government decides who gets what, and the political lobbying is intense. Well, guess what? We don't have to do it this way. We have this thing called a market economy, in which valuable stuff gets bought and sold, as it moves to its highest valued use. Resources, such as computers, automobiles, real estates, and maybe eventually spectrum, are privately owned (subject to limitations on interfering uses) and traded. We sing the praises of how efficiently the market allocates resources (with well-known exceptions) but somehow we don't get the message with spectrum. And what does it lead to? Shortages and political lobbying, as we see today. If we are to avoid shortages and political handouts to favored constituents in the future, we need to move away from our GOSPLAN system and marketize the spectrum. Let's put *all* the spectrum into the market: some can be owned by private firms and people, and some can be owned by local, state and Federal governments for their use. But any and all of it should be available for sale, so it can move to its highest valued use without waiting for the approval of government bureaucrats. - Some may decry this as squandering a "national resouce" that should belong to all the people. Really? More so than, say, land? Should the government own all the land and parcel it out to farmers, industry, individuals on the basis of "need?" Thank God we don't do that. - Some may decry this as unworkable due to interference problems: "spectrum is different." Is it different than land? There are many things I can't do on my land because it "interferes" with my neighbor's right to use his land, such as build an asphalt plant in a residential neighborhood. We have real property laws to handle this, including zoning, and I am sure the same thing will happen if we marketize spectrum: your property right to use the spectrum will be limited in frequency, power, direction, spillover into neighboring bands, and perhaps time of day. In short, everything that now goes into an FCC license can also be specified as a property right (rather than a government restriction). - And some may decry the loss of unlicensed spectrum, the equivalent of public lands in which anyone can play (subject to some rules). But this need not be lost; after all, the government provides public parks even in a regime of private property. I expect the government would retain (or actually buy) some "public park" spectrum for unlicensed use, continuing to enable the great innovation that has occurred in this space. And some private owners may encourage unlicensed uses as well (for a fee); after all, we have private parks as well as public parks. Of course, technology is constantly challenging what we mean by spectrum use; software-defined radio and ultra-wide band seek to use the spectrum of other licensees on a non-interfering basis, either by only using it when the licensee is not using it, or transmitting at very low (non-interfering) power levels. This contravenes the "barbed wire" model of private property, but that's OK. If property rights are carefully crafted to account for such spectrum sharing (fee-based or not), a market-based system could adapt to these new innovations (as Dave has been advocating). In short, a property rights-market driven model can deliver the terms and conditions we need to accomodate the technology as well or better than the licensing model, but harnessing the dynamic forces of the market to ensure spectrum is used efficiently, rather than the current inefficient political/bureaucratic process. When a resource is not that valuable, we can afford the GOSPLAN solution of political/bureaucratic allocation. But spectrum is too valuable for this; we need to re-think the foundations of our spectrum management policy and get the government out of this business. The US has championed the market model (again, where appropriate) and been highly successful doing so. It's time to move from a centrally-planned GOSPLAN to a dynamic market in order to meet this country's spectrum needs most efficiently. Let's get on with this transition, taking full cognizance of technical issues involved. Professor Gerald Faulhaber Business and Public Policy Department Wharton School, University of Pennsylvania Co-Director, Penn Initiative on Markets, Technology and Policy formerly Chief Economist, Federal Communications Commission For archives see: http://www.interesting-people.org/
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- IP: A view of the Spectrum for the formerly Chief Economist, FCC and my Co-Director, Penn Initiative on Markets, Technology and Policy David Farber (Aug 18)