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Use the Market to Allocate Spectrum

Use the Market to Allocate Spectrum

TPI President Tom Lenard has a post on The Hill’s Congress Blog discussing the benefits of allocating spectrum via voluntary incentive auctions.  Authorizing the FCC to hold auctions would not only make more spectrum available for the development of wireless broadband, but will also be a big step in creating a more efficient, market oriented spectrum regime.

Purchasers of spectrum through an FCC auction receive an “exclusive license” allowing them to use the spectrum for whatever purpose they want, so long as they don’t interfere with other licensees.  Those uses can change as new technologies emerge—e.g., as subscription TV overtakes over-the-air TV.  This is why this market-based system is flexible and can be expected to achieve an efficient allocation over time.  Moreover, these quasi-property rights are necessary for providers to invest the tens of billions of dollars necessary for advanced wireless services.

Lenard also addresses calls to allocate a significant portion of spectrum freed-up by incentive auctions to unlicensed uses.

Under the unlicensed model, the FCC establishes rules—such as power limits for approved devices—under which any device and any user can operate.  While this approach has yielded benefits—WiFi most notably—as with the legacy command-and-control model, there is no market mechanism in an unlicensed regime to move spectrum to its highest-valued uses.  It is also extremely difficult to determine the opportunity cost of allocating spectrum to unlicensed uses, and no way—other than relative lobbying clout—to determine how much, if any, should be so allocated.

Lenard warns that the amount of spectrum obtained from incentive auctions that is set aside for unlicensed uses would have a direct impact on the amount of funds available for reducing the federal deficit.

The Congressional Budget Office estimates that incentive auctions would yield about $16 billion assuming proposals on the table to allocate spectrum and money to a public safety network are adopted.  The net contribution of incentive auctions to deficit reduction would be reduced substantially if any significant part of the spectrum is not auctioned and instead is set aside for unlicensed uses.

Read the entire post on The Hill’s Congress Blog.

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