Federal agencies have too much spectrum

Few dispute that mobile carriers are being squeezed by the relative scarcity of radio spectrum. This scarcity is a painful artifact of regulatory decisions made decades ago, when the regulators gave valuable spectrum away for free to government agencies and to commercial users via so-called “beauty contests.” As more Americans purchase tablets and smartphones (as of a year ago, smartphones comprise a majority of phone plans in the US), many fear that consumers will be hurt by higher prices, stringent data limits, and less wireless innovation.

In the face of this demand, freeing up more airwaves for mobile broadband became a bipartisan effort and many scholars and policymakers have turned their hungry eyes to the ample spectrum possessed by federal agencies, which hold around 1500 MHz of the most valuable bands. The scholarly consensus–confirmed by government audits–is that federal agencies use their spectrum poorly. Because many licensees use spectrum under the old rules (free spectrum) and use it inefficiently, President Obama directed the FCC and NTIA to find 500 MHz of spectrum for mobile broadband use by 2020.

I recently published a Mercatus working paper surveying plans that encourage federal agencies to economize on their use of radio spectrum, with the ultimate goal of auctioning cleared spectrum to the highest bidders (probably mobile broadband service providers given consumer needs). In my research, interviewees pointed to two problems with reclaiming federal spectrum: (a) there is no effective process to get federal users (especially the powerful Department of Defense) to turn over spectrum, and (b) federal users don’t pay market prices for spectrum, resulting in inefficient use and billions of dollars of value annually wasted.

I’ll note two of the promising spectrum management plans here. As for improving the process of quickly getting federal spectrum auctioned off, there is a bill, promoted by Sen. Kirk and Rep. Kinzinger, to “BRAC the spectrum.” BRAC (the Base Realignment and Closure procedure), as Jerry Brito documents, was a move by Congress in 1988 to successfully accomplish the politically difficult task of closing military bases. BRAC-ing the spectrum would mean the congressional creation of a commission with the authority to clear federal users out of their spectrum. All spectrum-clearing decisions by this commission during its tenure would stand, absent a disapproving joint resolution from Congress. The identified spectrum could be auctioned off within a few years and the proceeds could be used to move the federal systems to other bands, with the remainder going to the Treasury.

The second proposal I highlight is the creation of a GSA-like agency that controls federal spectrum. This proposal, from Thomas Lenard, Lawrence White, and James Riso, would accomplish the second goal of making federal users pay substantial fees for their spectrum. The federal government pays market rates for many important inputs–tanks, carriers, land, etc.–so why is spectrum free? The GSA, the authors explain, owns real estate and buildings and it leases those to federal agencies. Just as paying rent forces federal agencies to economize on building size and amenities, a “GSA for spectrum” would lease spectrum to agencies, hopefully preventing the sort of waste currently seen in federal bands.

I’m probably the first TLF author to favor the creation of 2 new federal agencies in a post (hopefully not my last!), but these proposals may be necessary given the damaging status quo. Federal waste of spectrum assets isn’t disputed and the consumer benefits of freeing up spectrum are obvious. The fight lies primarily between powerful interest groups and affected congressional committees, some of whom will see their constituent oxen gored (DoD, defense contractors, technology firms). Given the urgent needs, it’s foolish to continue to do nothing.

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