Shared spectrum is a pipe dream

Last week, The Hill ran an interesting piece on the Congress blog by Professor Kevin Werbach entitled Sharing Spectrum to Fuel Growth and Opportunity.  In this op-ed, Professor Werbach argued that given the explosive demand for wireless service, coupled with the rarity of the spectrum resource, the United States should abandon its highly successful policy of clearing and auctioning spectrum in favor of a communal “shared-spectrum” model. 

Touting a wide-range of potential social benefits that would be created by a shared spectrum model, Professor Werbach’s submits that the “burden of proof should be on those who argue for spectrum exclusivity over sharing.”  Unfortunately for Professor Werbach, however, his call for the wholesale shift to spectrum sharing ignores the technology, the economics, and even the politics of spectrum management.

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First, it is well established that the value of a spectrum commons is limited by the poor incentives that go along with them.  For example, spectrum commons are prone to interference and congestion caused by overuse.  As a result, spectrum sharing is useful only for low-power transmissions, such as Wi-Fi and Bluetooth technologies, thereby limiting interference and congestion by shrinking the geographic footprint of the radio.  Alternately, for the “always-on” and reliable mobile data networks Americans value so highly, exclusive licenses are required.  Only with exclusive access will companies invest the billions it takes to build networks that allow high-quality services to be provided (even in a moving car).  Modern high-speed mobile data networks also require large blocks of spectrum with particular properties, and exclusive spectrum permits handsets to be designed cheaper and have a longer battery life. 

Second, spectrum should be allocated between shared and exclusive uses based on a number of factors, including the properties of the particular spectrum to be allocated, the relative scarcity of spectrum in the two uses, among other factors.  While Professor Werbach claims that shared spectrum should be expanded because commercial wireless carriers are today offloading traffic from their exclusively-licensed spectrum to shared bands, his proposal is precisely backwards: Off-loading from exclusively-licensed to shared spectrum implies greater scarcity in the exclusive bands, suggesting we need more, not less, exclusively licensed spectrum relative to shared spectrum.  Further, Professor Werbach’s assertion that shared spectrum creates greater opportunities for “economic development, innovation, new businesses, free expression, and civic participation” is pure, unfounded conjecture.  Mobile wireless networks run on exclusively licensed spectrum are a key driver of economic growth, innovation, and civic participation.

Third, auctioning exclusive spectrum licenses gives Congress the ability to raise revenue which can be used for a variety of social goods without raising taxes.  For example, in the upcoming voluntary incentive auction for broadcast spectrum required by the Middle Class Tax Relief and Job Creation Act of 2012, Congress expects auction proceeds to go to a wide variety of important social needs ranging from an enhanced e911 system to deficit reduction to funding for a nationwide, interoperable public safety network.  However, none of these revenues will materialize if broadcasters don’t participate in the auction, and this participation hinges on the broadcasters’ expectation that they will receive a lot of money for their spectrum.  If the Federal Communications Commission adopts Professor Werbach’s argument to set aside a large chunk of spectrum for shared use, then—by definition—auction revenues will go down, threatening the carefully crafted legislative framework.

Both licensed and unlicensed spectrum provides significant value to consumers.  To adopt a blanket presumption of sharing for all new spectrum as Professor Werbach touts is simply inefficient and wasteful.  Rather, the allocation decision should be made based on which licensing approach is expected to generate the greatest value for the spectrum being allocated.  Shared spectrum is largely for low-power uses only, so sharing spectrum that covers greater distances per unit of power—like the TV broadcasting spectrum—is counterproductive and economically senseless.  High propagation spectrum is, however, ideal for mobile data networks, and thus most wisely allocated to exclusive use and auctioned to the highest bidder.  For shared use, the government should identify bands well suited for unlicensed use—such as the 5 GHz band—but of low value to commercial mobile wireless providers. 

Despite what Professor Werbach would have you believe, there is no single solution to spectrum allocation.  Indeed, there are at least two—good solutions and bad solutions.  Blindly favoring shared use over exclusive licenses is a bad one.

Ford is the chief economist of the Phoenix Center for Advanced Legal & Economic Public Policy Studies (www.phoenix-center.org), a non-profit 501(c)(3) research organization that studies broad public-policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of the digital age. 

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