SPECTRUM MANAGEMENT: PROPERTY RIGHTS, MARKETS, AND THE COMMONS

[Dave Farber <dave () farber net>]

Some people have asked for the abstract of the paper Gerry and I wrote. Here
it is:

SPECTRUM MANAGEMENT: PROPERTY RIGHTS, MARKETS, AND THE COMMONS

Gerald R. Faulhaber and David J. Farber
 
Abstract
 

Since 1927, the electromagnetic spectrum has been allocated to uses and
users by the Federal government, covering broadcast radio, microwave
communications systems, broadcast television, satellites, dispatch, police
and national defense needs, among many others.  Assignees receive a license
to broadcast certain material (say, taxi dispatch) at a specified frequency
and a specified power level (and perhaps direction).  For many purposes,
this license is time-limited, but with a presumption of renewal; in fact,
radio licenses are almost always renewed.  Licensees can only use the
spectrum for the specified purpose and may not sell or lease it to others.

 

Economists since Ronald Coase have argued strongly and persuasively that
allocating a scarce resource by administrative fiat makes little sense;
establishing a market for spectrum, in which owners could buy, sell,
subdivide and aggregate spectrum parcels would lead to a much more efficient
allocation of this scarce resource.  The Federal Communications Commission
(FCC) has gradually been allocating more spectrum for flexible use and since
1993 has been using auctions to award most new wireless licenses. However,
this experiment in bringing market forces to bear to allocate radio spectrum
has been applied to only about 10 percent of the most valuable spectrum.
Economists continue to press for ³marketizing² spectrum as the surest means
to use this important national resource efficiently.

 

Meanwhile, substantial strides have been made in radio technology, including
wideband radio (such as spread spectrum and ultra wideband (UWB)), ³agile²
radio (one of several applications of software defined radio (SDR)) and mesh
networks (including ad hoc networks and other forms of peer-to-peer
infrastructure architectures). The developers of these technologies note
that the products based on these technologies undermine the current system
of administrative allocation of exclusive-use licenses, and call for an
³open range,² or commons, approach to the spectrum that would do away with
exclusive use.  ³Removing the fences,² in this view, will lead to more
efficient use of the spectrum.

 

While both economists and radio engineers believe the present system of
spectrum allocation is inefficient and wasteful, they appear to have
diametrically opposed views of what should replace it.  Economists seek to
unleash the power of the market to achieve efficient outcomes; engineers
seek to unleash the power of the commons to achieve efficient outcomes.
Which is right?

 

We argue in this paper that this is a false dichotomy.  We propose a legal
regime rooted in property rights that can simultaneously support both
private markets and a commons that can accommodate the rapid diffusion of
the new radio technologies, leading to a far more efficient allocation of
this important and limited national resource.  We also propose a politically
feasible way to get there, based on the work of Kwerel and Williams.

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