Spectrum Reform Now!

by on June 12, 2011 · 7 comments

Last week the Senate Commerce Committee passed–with deep bi-partisan support–the Public Safety Spectrum and Wireless Innovation Act.

The bill, co-sponsored by Committee Chairman Jay Rockefeller and Ranking Member Kay Bailey Hutchison, is a comprehensive effort to resolve several long-standing stalemates and impending crises having to do with one of the most critical 21st century resources: radio spectrum.

My analysis of the bill appears today on CNET. See “Spectrum reform, public safety network move forward in Senate.”

The proposed legislation is impressive in scope; it offers new and in some cases novel solutions to more than half-a-dozen spectrum-related problems, including:

1. Voluntary incentive auctions – The bill authorizes the FCC to coordinate “voluntary incentive auctions” (VIA) of under-utilized spectrum from over-the-air TV broadcasters to better uses, including mobile broadband. Broadcasters giving up some or all of their licensed spectrum would share the proceeds with the government. The FCC has been asking for this authority for two years.

2. Public safety network – The bill would break the logjam over the long-desired nationwide interoperable public safety network. It would create a new non-profit public-private partnership to build the network, with an outright grant of the D-block of 700 Mhz. spectrum. (That block, freed up as part of the 2009 transition to digital TV, has sat idle since a failed auction in 2008.) Financing for the build-out would come from proceeds of the VIAs. The public safety network has been in limbo since it was first proposed soon after 9/11. (The proposed bill is S. 911.)

3. Spectrum inventory – The FCC would be required to complete a comprehensive inventory of existing licenses (which, amazingly, doesn’t exist) within 180 days. President Obama ordered the agency to complete the inventory over a year ago, but so far only a “baseline” inventory has been created.

4. Secondary markets – The FCC would be required to begin a rulemaking to review current limits to secondary spectrum markets that interfere with liquidity, in the hopes of making them more robust. (VIAs could take years to organize and conduct.)

5. Public spectrum – The National Telecommunications and Information Administration would be required to identify significant blocks of underutilized federal spectrum allocations and make them available for auction by the FCC.

6. Spectrum innovation – The National Science Foundation and other grant-making agencies would be required to accelerate research grants for new technologies that would make spectrum use more efficient.

7. Repacking – While the FCC can’t require broadcasters to participate in VIAs, it can force them to move to nearby channels if doing so would free up more valuable blocks of spectrum for auction. A fund would be created to compensate stations for the disruption of switching channels.

The range of issues that S.911 deals with suggests the breadth of the current spectrum crisis. Here it is in a nutshell. Radio frequencies are a limited public resource. Up until recently, however, there’s been more than enough to go around. Following the advice of Nobel prizewinning economist Ronald A. Coase, the FCC has used auctions to find the best and highest use for this resource, generating significant revenue in the process.

But the digital age has changed the dynamics of spectrum. Mobile uses are exploding, as are mobile devices, mobile applications, mobile users and mobile everything else. Moore’s Law is rapidly overtaking FCC law once again. Existing wireless networks are groaning under the strain of volume that has increased 8000% since the launch of the iPhone.

Last year’s National Broadband Plan, for example, predicted that 300 Mhz. of additional spectrum would need to be found in the next five years to keep mobile broadband on track.

But the government’s current processes of finding and allocating more spectrum are simply too slow to keep pace with the current wave of technological innovation. It will get worse as 3G moves to 4G and from there–well, who knows? All we can safely predict is that the “G”s will keep coming, and arrive faster all the time. So radical re-thinking of spectrum management is urgent. We need serious spectrum policy reform, and we need it yesterday.

Part of the solution will come from technology itself, including innovation to make more efficient use of existing allocations, expanding the range of usable spectrum for more uses, capabilities to dynamically share spectrum and rebalance loads, and so on. There are impressive developments in these and other strategies for coping with the potential of spectrum exhaustion, but no one can say with confidence that the solutions will outpace the problems.

The bigger issue underlying spectrum exhaustion is the glacial pace with which current regulatory systems work to rebalance allocations.

Once a license is granted, the licensee can largely rely on keeping it indefinitely. If they operate in a stable or shrinking market (such as over-the-air broadcast, which the Consumer Electronics Association said recently has shrunk to only 8% of U.S. households), there’s no incentive to optimize the property, which, for the licensee, is a sunk cost.

Given the limits of secondary markets, there’s also little incentive to find more efficient uses of the allocation and free up spectrum that is no longer needed for its licensed purpose. Indeed, even for operators who want to exit the market in part or in whole, use limitations on existing allocations make transfer through secondary markets cumbersome if not impossible.

Even if the FCC unblocks these markets, game theory problems may constrain the effectiveness of either the VIAs or the secondary markets.

Federal users, of course, feel no competitive threat to optimize their allocations, and fall back to the conversation-ending “national defense” excuse whenever the possibility emerges of giving up some of the frequencies they are warehousing.

And then there are state and local authorities, who also share jurisdiction over communications. Limits on cell tower construction, use, and other technical improvements aren’t addressed in the proposed legislation. But they are equally to blame for the crisis mentality.

S. 911 is a good start toward removing some of the institutional barriers that limit our flexibility in rebalancing spectrum needs and spectrum allocations. But it’s only a start. If the information revolution is to continue uninterrupted, we need a lot more improvements.

And soon.

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