Toward an Evolutionary Regime for Spectrum Governance

Toward an Evolutionary Regime for Spectrum Governance: Licensing or Unrestricted Entry?

WILLIAM J. BAUMOL
DOROTHY ROBYN
Copyright Date: 2006
Pages: 85
https://www.jstor.org/stable/10.7864/j.ctt1261x0
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  • Book Info
    Toward an Evolutionary Regime for Spectrum Governance
    Book Description:

    The federal government's approach to regulating the spectrum remains largely administrative, causing major inefficiency and waste. Ironically, just as the FCC has begun to use market mechanisms, some people are pushing to treat spectrum as a common resource open to all entrants. Commons proponents maintain that with new, interference-avoiding technology, licensing is becoming unnecessary and impractical. In this brief study, noted economist William J. Baumol evaluates two options for spectrum governance -a tradable license (market) approach and a commons approach. He compares the practicality of each in terms of six key issues: interference, adequacy of investment in innovation, monopoly power, preservation of diversity, service to rural areas, and the tension between vested interests and the need for adaptable arrangements. Baumol demonstrates that, while neither approach is ideal, a commons regime has severe shortcomings. Above all, he emphasizes the importance of impermanence in the granting of licenses to preserve the flexibility to adapt to unforeseen technological and other developments.

    eISBN: 978-0-8157-0848-3
    Subjects: Business, Technology

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Foreword
    (pp. vii-viii)
    ROBERT W. HAHN and ROBERT E. LITAN

    THIS VOLUME IS ONE in a series commissioned by the AEI-Brookings Joint Center for Regulatory Studies to contribute to the continuing debate over regulatory reform. The series addresses several fundamental issues in regulation, including the design of effective reforms, the impact of proposed reforms on the public, and the political and institutional forces that affect reform.

    In this study, William Baumol and Dorothy Robyn take a fresh look at how radio frequency spectrum should be governed, in response to recent calls for the Federal Communications Commission (FCC) to eschew licensing in favor of a spectrum “commons.” Spectrum is critical for...

  4. Acknowledgments
    (pp. ix-x)
  5. 1 Toward an Evolutionary Regime for Spectrum Governance
    (pp. 1-6)

    TODAY, THE RADIO FREQUENCY spectrum is the shared resource that perhaps most strikingly and most pervasively affects the well being of society.² Its use is governed by a set of rules and narrow restrictions, designed to limit interference, whose origins go back nearly a century. While in recent years some of those rules have been replaced by more flexible, market-like arrangements, the fundamental approach of this institution remains essentially unchanged.

    There is widespread agreement that the current institutional arrangements are a source of major inefficiency and waste, and that the public interest calls urgently for some substantial modifications. So far...

  6. 2 Traditional and Alternative Approaches to Spectrum Governance
    (pp. 7-14)

    THE ORIGINS OF THE TRADITIONAL approach to spectrum governance go back more than eighty years, to when the federal government began assigning exclusive rights to use individual blocks of bandwidth as a way to limit overcrowding and interference.¹ In keeping with the skepticism with which markets were viewed at the time, the Federal Communications Commission (FCC) pursued a command-and-control approach to spectrum licensing that became a textbook example of the unintended consequences of regulation. First, the FCC allocated frequencies to particular uses and permitted little significant modification in the officially designated use either by existing licensees or by new entrants....

  7. 3 Key Issues for a Rational Spectrum Regime
    (pp. 15-56)

    TO EVALUATE THE TWO alternatives to current spectrum policy discussed above, we turn next to a list of considerations that must be taken into account in designing a fully defensible set of spectrum utilization arrangements. Specifically, we compare (a variant of) the market regime and the commons regime in terms of the six key problems with which a rational spectrum regime must deal:

    —control of prospective interference, a special case of a critical and widespread economic problem that economists call externalities;

    —encouragement of investment in innovation

    —prevention of monopoly power or its exercise that may occur if one proprietors achieves...

  8. 4 The Possibility of a Mixed Regime
    (pp. 57-62)

    UP TO THIS POINT, the focus has largely been on two “pure” modes of operation: a commons approach and an approach resting on flexible licenses. But there are other arrangements that potentially can address some of the issues delineated here.

    Other discussions have raised the possibility that enclaves of spectrum use will be created and operated voluntarily by private licensees in their pursuit of profit. There has been much discussion of the feasibility of such “commons parks” or “private commons” (and the FCC recently issued an order enabling licensees to establish “private commons”).¹ However, it has been argued that they...

  9. 5 Conclusion: Tradable and Modifiable Licenses—the Most Promising of the Imperfect Solutions
    (pp. 63-66)

    A BALANCED DISCUSSION must avoid exaggerated claims for the advocated course of action. Here the conclusion offered is that the most rational way of dealing with the problems of spectrum governance is an arrangement using tradable licenses subject to limited regulatory intervention, where the uses of those licenses are flexible, and they can be rented to others, in whole or in part, for other uses. (For a review of the major options and issues discussed here, see appendix B.) Such an arrangement cannot be claimed to solve the problems of spectrum use with anything approximating perfection. Indeed, it is tempting...

  10. Appendix A: An Analog Suggesting Viability of a Private Commons: Voluntary Licensing of Intellectual Property
    (pp. 67-70)
  11. Appendix B: Summary
    (pp. 71-78)
  12. References
    (pp. 79-82)
  13. Index
    (pp. 83-85)
  14. Back Matter
    (pp. 86-86)