Economists Publish New Incentive Proposal in Milken Institute Review
February 22, 2019 – Technology Policy Institute senior fellow Thomas M. Lenard and fellow economist Lawrence J. White, a professor at the NYU Stern School of Business, detail their proposal to create pricing incentives to free up government spectrum needed for the 5G wireless transition in the current edition of the Milken Institute Review.
In “Making Way (Hopefully) for 5G,” Lenard and White cite progress by Congress, the FCC and other agencies on spectrum policy over the years, but say the allocation process remains too slow. The crux of the problem, they argue, is that “[much] of the spectrum needed for next-generation uses is currently controlled by federal agencies…which pay nothing for it and therefore have no incentive to give up their stranglehold.”
Drawing on the federal government’s experience managing vast sums of real estate through the Government Services Administration (GSA), Lenard and White call for the creation of the Government Spectrum Ownership Corporation (GSOC). It would maintain and lease spectrum to government users, charging rates reflecting its value in private uses.
“As agencies economized on spectrum and handed back their surplus [as most federal government entities do with GSA real estate], the GSOC would sell or lease the newly created surplus to the private sector,” Lenard and White write. “The same auction platform might also be used by the private sector as a secondary market to buy and sell spectrum.
“The agency would retain primary rights to the spectrum it uses, taking into account the required rental payments that reflect private opportunity costs.”
Lenard and White acknowledge two challenges with the GSOC approach: creating pricing models and persuading large agencies to relinquish their spectrum control. The first is solvable using current resources to build a model and adjusting according to data collected from spectrum sales. The second is convincing agencies to give up complete control of a resource. But the authors say, “[I]t would be worthwhile trying to wrestle it away…and in any case, enough spectrum would still end up with GSOC to free-up billions of dollars’ worth of surplus for private use.”
“Much of the technological change of the past few decades has depended on spectrum access,” conclude Lenard and White. “The failure to make the most of what is an increasingly scarce resource would constitute a self-inflicted wound of the first order.”
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