Why exactly do we have a “spectrum crunch”?

by on October 22, 2010 · 5 comments

It’s wonderful to see that the FCC is putting spectrum front and center on its agenda. Yesterday it held a spectrum “summit” at which it released several [papers](https://docs.google.com/viewer?url=http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-302330A1.pdf) looking at the challenges and opportunities mobile broadband faces, and it was [announced](http://techdailydose.nationaljournal.com/2010/10/spectrum-on-november-fcc-agend.php) that at its November meeting, the chairman will introduce several items related to spectrum reallocation. NTIA is keeping pace, [identifying over 100 MHz](http://techdailydose.nationaljournal.com/2010/10/ntia-identifies-federal-spectr.php) now in federal hands (mostly DoD) to be moved over for commercial use.

The consensus that has led us to this happy time is that there is a spectrum “shortage” or spectrum “crunch,” as many said yesterday. Here’s how Chairman Genachowski [explained it](https://docs.google.com/viewer?url=http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-302331A1.pdf&pli=1):

>The explosive growth in mobile communications is outpacing our ability to keep up. If we don’t act to update our spectrum policies for the 21st century, we’re going to run into a wall—a spectrum crunch—that will stifle American innovation and economic growth and cost us the opportunity to lead the world in mobile communications.

>Spectrum is finite. Demand will soon outpace the supply available for mobile broadband.

Every natural resource is finite, however. So how exactly did we end up with this “spectrum crunch”?

Spectrum is a vital input to the mobile industry, just as steel is for the automobile industry or timber is for housing and paper products. Yet even during the productive peaks of those industries, we never saw any meaningful shortages of resources. That is because (aside from some government interference here and there) those resources are freely traded in a market. If demand for them increases, prices rise accordingly, and supply moves to better uses. Higher prices will also create an incentive for entrepreneurs to develop more efficient uses of finite resources.

In contrast, spectrum is barely traded in a market. It’s uses are largely mandated by government fiat. For example, less than 15 percent of U.S. households depend on over-the-air TV broadcasts because they do not subscribe to cable or satellite. Yet our most valuable spectrum is in the hands of broadcasters, with no easy exit, thanks to government regulation. This is the cause of the “shortage,” and we shouldn’t forget that as we move to reallocate spectrum.

The incentive auctions and secondary market rules the FCC will consider steps in the right direction. But once the spectrum is released from the grasp of old and inefficient technology, we should make sure we don’t make the same mistake again. Television and radio were the most important technologies in the world at one point, which is why they were given so much spectrum by government. Today it’s mobile broadband, and that’s where we want the spectrum to go. But let’s be careful we don’t earmark the spectrum in any way so that fifty years from now we find that we have a spectrum crunch for teleportation because it’s in the hands of broadband.

Reallocated spectrum should be made as property-like as possible. Exclusive, flexible, and tradable. The spectrum “crunch” is another instance of the government stepping in to clean up a mess it made. Let’s hope they get it right this time.

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