Evan Kwerel, Ruth Milkman, Michael Ostrovsky, Greg Rosston, and Scott Wallsten (moderator)
Key Takeaways
- Flexible use of spectrum, not auctions, was the most important market-based innovation in spectrum policy, enabling spectrum to be repurposed as technologies evolved
- Traditional spectrum sharing through geographic separation has existed for years; newer models like CBRS, while useful, represent relatively simple sharing arrangements
- A proposed “dual-track auction” system could help choose between different allocation approaches, but still requires administrative decisions about clearing costs
- Creating effective incentives for government spectrum users remains a persistent challenge, with even market-based solutions like spectrum fees proving ineffective
- Some administrative decisions in spectrum allocation are inevitable
- Market mechanisms effectively reveal private valuations but we should consider how to incorporate broader social benefits and national security considerations
- Future progress requires finding new approaches beyond the “low-hanging fruit” already implemented and attracting talented experts who can bridge theory and practice
Expanding those points:
The Primacy of Flexible Use: The panel emphasized that while spectrum auctions are often celebrated, the most revolutionary change was actually the introduction of flexible use policies. This policy shift allowed spectrum to be used flexibly within certain parameters rather than for only specific, designated uses like taxicabs or forest services. This flexibility, both in use and technical standards, enabled spectrum to be repurposed as technologies and market needs evolved.
Evolution of Sharing Mechanisms: The discussion clarified that spectrum sharing between federal and commercial users isn’t new – it has existed through geographic separation and other mechanisms for many years. While CBRS is often cited as an innovative sharing model, panelists characterized it as a “particularly simple” sharing arrangement. The panel explored whether truly novel sharing mechanisms exist beyond CBRS, with some skepticism about finding fundamentally new approaches.
Dual-Track Auction Innovation: Michael Ostrovsky proposed incorporating allocation decisions directly into market mechanisms through “dual-track auctions.” This approach would run parallel auctions for different spectrum usage models (like exclusive vs. shared use), allowing market participants to reveal their valuations while accounting for different clearing costs. While innovative, the panel noted this still requires administrative decisions about clearing costs, which could become a new focal point for lobbying.
The Government Incentive Challenge: A central theme was the persistent difficulty of creating effective incentives for government spectrum users, particularly the Department of Defense. Even proposals like spectrum fees have proven ineffective, as agencies fear that any demonstrated savings would simply lead to budget cuts. Panelists were pessimistic about making much headway given the decades of work.
The Limits of Market Mechanisms: The panel drew an analogy to Arrow’s impossibility theorem, acknowledging that some administrative decisions are inevitable in spectrum allocation. Just as there’s no perfect democracy without someone setting the rules, spectrum allocation will always require some administrative framework. However, the discussion suggested opportunities to push market mechanisms further back in the process, even if they can’t eliminate administrative decisions entirely.
Market Values vs. Public Interest: Throughout the discussion, panelists wrestled with how to incorporate non-market values and public interest considerations into spectrum allocation decisions. While market mechanisms can reveal private valuations effectively, they may not capture broader social benefits or national security considerations, requiring careful balance in policy decisions.
Future Challenges and Leadership: A crucial closing theme was the observation that while many of Ronald Coase’s key insights have been implemented, they were probably the “low-hanging fruit” of market mechanisms, and therefore we need new approaches to see progress. The panel emphasized the importance of attracting high-caliber economists and other experts to regulatory agencies who can understand both theoretical principles and practical challenges. This requires giving them scope to think creatively and collaborate across disciplines.
Sarah Oh Lam is a Senior Fellow at the Technology Policy Institute. Oh completed her PhD in Economics from George Mason University, and holds a JD from GMU and a BS in Management Science and Engineering from Stanford University. She was previously the Operations and Research Director for the Information Economy Project at George Mason School of Law. She has also presented research at the 39th Telecommunications Policy Research Conference and has co-authored work published in the Northwestern Journal of Technology & Intellectual Property among other research projects. Her research interests include law and economics, regulatory analysis, and technology policy.
Scott Wallsten is President and Senior Fellow at the Technology Policy Institute and also a senior fellow at the Georgetown Center for Business and Public Policy. He is an economist with expertise in industrial organization and public policy, and his research focuses on competition, regulation, telecommunications, the economics of digitization, and technology policy. He was the economics director for the FCC's National Broadband Plan and has been a lecturer in Stanford University’s public policy program, director of communications policy studies and senior fellow at the Progress & Freedom Foundation, a senior fellow at the AEI – Brookings Joint Center for Regulatory Studies and a resident scholar at the American Enterprise Institute, an economist at The World Bank, a scholar at the Stanford Institute for Economic Policy Research, and a staff economist at the U.S. President’s Council of Economic Advisers. He holds a PhD in economics from Stanford University.
