Economic growth relies on an invisible infrastructure

As Washington debates deficit reduction, politicians should consider how revisions to wireless spectrum policy could provide a cost-effective boost to economic growth while generating additional revenues for the Treasury. This would include two key measures: moving away from traditional FCC auctions in favor of a revenue sharing model and increasing unlicensed bandwidth availability and usage. These changes would raise more revenue over time and encourage market-driven innovation in smart devices through more ubiquitous broadband access.

Wireless technology is at an inflection point and a new wave of innovation is possible – if the right policies are implemented. I’ve witnessed such pivotal moments before while running a company that Verizon acquired to build out its coverage. Investments in physical wireless infrastructure spawned an industry that now has over 321 million subscribers in the U.S. alone, according to CTIA.

The rapid growth of mobile data is changing the way we communicate. It’s now possible to find the best restaurant in town, pay bills, and do business from a mobile device. However, this require wireless spectrum, and we are rapidly running out of it. Data-hungry apps, devices and services consume up to 120 times more mobile traffic than traditional cell phones. Demand will soon outpace the existing supply of spectrum, the “invisible infrastructure” that carries all that data. This is creating a potential roadblock to growth.

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Congress has historically handled the need for additional wireless infrastructure by auctioning off swaths of spectrum to the highest bidder (typically large telcos), earning a one-time infusion of billions in revenue. That spectrum is exclusive to the carrier and cannot be used by anyone else for the life of the lease.

This method of parceling out spectrum has become outmoded and is an economic drag. The latest technology has made sharing spectrum possible, creating an opening for policy innovation. President Obama announced a plan in June ordering government agencies to explore spectrum sharing for “innovative and flexible commercial uses” to grow the economy. I applaud this significant first step and strongly urge the FCC to consider complementary new approaches that reflect the reality of today’s marketplace.

One would be to lease the spectrum to carriers and charge them a percentage of revenues as a usage fee. Similar to a royalty model, spectrum lease fees received from licensees will bring recurring revenue to the Treasury, which could be used for deficit reduction or other public initiatives. Payments to the Treasury would grow with carrier revenues, ensuring the best return on investment.

Giving telcos exclusive use of spectrum, a finite and increasingly vital public resource via one time auction payment, is inefficient, and does not provide taxpayers the highest return. The optimal solution is to do what’s right by taxpayers and consumers.

I also urge policymakers to free up spectrum for unlicensed usage. Unlicensed spectrum, which is outside the control of carriers, enables the royalty model that I described. The long-term economic benefit of unlicensed spectrum can be significant, as the market has already proven over the past decade.

Just think of what Wi-Fi, the best-known example of unlicensed spectrum, has done for the wireless industry. New technologies for sharing unlicensed spectrum and interference reduction could have an even greater impact by placing even more wireless bandwidth in the public domain. They’ll also work with today’s smart devices. Unlicensed spectrum transfers almost as much data as licensed spectrum from wireless service providers, transforming homes and offices into hot zones by extending fixed broadband access.

Sharing this unlicensed spectrum among technology users could provide even greater benefits. The economic activity resulting from sharing spectrum has been proven in studies, and former FCC Chairman Julius Genachowski has said that new Wi-Fi-like innovations would be an engine for sustainable growth. The Consumer Federation of America (CFA) concluded that the efficiency gains from sharing unlicensed spectrum would grow exponentially over the next decade. Spectrum generates the most positive economic outcome.

A truly visionary policy approach would combine usage-based spectrum fees with the open and shared aspects of unlicensed spectrum. Fortunately, the FCC has taken initial steps to implement the recommendations of the President's Council of Advisors on Science and Technology and major carriers including AT&T, T-Mobile, and Verizon are participating in an exploratory spectrum sharing trial.

It would be shortsighted to limit the debate solely to more auctioning of licensed spectrum. Taking a new perspective on these issues is critical since spectrum is responsible for significant economic activity, can provide long term revenues for the Treasury, and could drive further wireless technology innovation.

Schmitt, a recent inductee into the Wireless Hall of Fame, is the former president of Omnipoint (now T-mobile), where he built the largest PCS network in America. Currently, he is   chairman of xG Technology, a company that makes spectrum sharing technology.