Wireless & Spectrum Policy

A quick recap and then some thoughts. As part of the digital TV transition, broadcasters will return spectrum they currently use in the 700 MHz band to the federal government. Congress decided that 24 MHz of that returned spectrum will be given to public safety agencies and the rest (36 MHz, I believe 60 MHz) will be auctioned.

The system by which spectrum is doled out to, and used by, public safety agencies is broken. If you or I want mobile communications, we don’t file for an FCC license or build our own towers, we simply go to a wireless carrier who has a comparative advantage and economies of scale and buy capacity from them. Public safety agencies, on the other hand, build their own infrastructure, which, as Thomas Hazlett has said, is much like “shipping each police department tons of steel, plastic and rubber to make them responsible for constructing their own patrol cars.” Not only is that inefficient, but because they don’t often coordinate, their different systems are incompatible.

Nextel founder Morgan O’Brien’s new venture, Cyren Call, recently filed a petition with FCC that proposes creating a nationwide, completely interoperable wireless network that could be used by public safety users. To help finance it, private users would also be sold capacity on the network, but would be bumped off in case of emergency to give public safety users priority. The catch, however, is that Cyren Call’s plan calls for this network to be built not on the 24 MHz of spectrum set aside by Congress for public safety, but on 30 MHz of the spectrum slated for auction, which Cyren Call wants (Congress, presumably) to give free and clear to a national “public safety broadband trust.”

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I’m pleased to see that Tim Wu took the time to respond (here and here, scroll down to the bottom of the comments) to my recent posts on his paper on Hayek and intellectual property. Here’s what he had to say on the spectrum issue:

The point made by Tim Lee is decent. It is certainly true that the FCC would have to state some kind of standard to make possible permissionless entry into the spectrum market (as it does for the garage band used by 802.11b). In addition, private actors could, if they wanted, similarly allow permissionless use of spectrum. The question is why they would want to.

In general I cannot understand the strength of Jerry’s and others’ objection to the substance of rules that would create permissionless market entry into the spectrum market. In my view, reflected in that paper, permissionless market entry is one of the holy grails of an effective market system.

Perhaps Jerry will jump in with his thoughts, but I think it’s crucial here to distinguish between short-range and long-range spectrum. For short-range transmission, Wu’s argument has a lot of merit because short-range wireless applications are nearly non-rivalrous. Cordless phones and WiFi seem to work quite well in an unlicensed environment.

A big part of the reason for this is that there are only a handful of people who want to transmit short-range signals in any given geographical location. There are only half a dozen WiFi networks within range of my apartment, and I live in a dense urban environment. Because I’m only competing with a handful of people, informal sharing mechanisms work pretty well. In this case, the WiFi protocol can operate on several different “channels,” and access points self-organize by selecting a channel where their signal won’t interfere with others (at least that’s my rather limited understanding of it–geeks please correct me if I’m wrong).

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I was generally impressed with Tim Wu’s paper on Hayekian analysis of intellectual property, but I did want to note one place where his analysis goes off the rails:

A second example is broadcast spectrum reform, which has been under consideration for about a decade in the United States. The question is whether broadcasting at certain frequencies should be propertized. In other words, the question is whether some firm should own the alienable rights to broadcast between frequencies X and Y. The impact of the government’s decision whether to grant property rights or not will have important decisional consequences. Granting no rights will create decentralized market entry for spectrum-dependent projects or technologies. Any entity willing to make the investment may develop a project that depends on access to spectrum, albeit at the cost of many failed projects. Granting government-specified licenses or property rights, conversely, makes some kind of hierarchical decision structure possible in the first place. That is, we should expect to see greater screening of spectrum-dependent projects or technologies before they are launched.

Which is better is slightly ambigious. For some uses of spectrum there may be good arguments for a hierarchical, centralized authority who decides what the spectrum will be used for, perhaps to ensure public safety. But otherwise, whether we want propertized spectrum depends on whether there is any argument that spectrum-dependent projects be carefully screened. Absent risk the public, the answer must sometimes be no.

This strikes me as rather misguided. As Jerry has explained in this space before, the difference between spectrum and ideas is that spectrum is rivalrous and scarce, whereas ideas are not. Complete decontrol is never an option–somebody has to pick the rules governing how the resource will be consumed, and the only question is who will make the rules.

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Lots is happening in the world of wireless telecommunications these days.  And lots is not.  First, let’s look at a couple things that are happening.

WiMax is poised to move forward as a significant new platform for broadband.  As TLFers know, “WiMax” is the popular name for the 802.16 wireless metropolitan-area network standard.  It’s like WiFi but can travel a lot farther.  It easily traverses the “last mile,” the complicated and expensive rights-of-way that create a high barrier to entry for competitors to DSL and cable.

Recently, Intel announced that a line of its chips will support WiMax.  It also invested $600 million in leading WiMax provider Clearwire.  Clearwire recently pulled back from an IPO, though, fueling speculation that Clearwire and WiMax are not all they’re cracked up to be.  Since then, Sprint Nextel has announced that it would spend up to $3 billion to build a WiMax network.  Nothing is certain, but WiMax looks pretty good right now for bringing more competition to broadband.

Here’s another thing happening: The Federal Communications Commission is amidst an auction of wireless spectrum.  In 1993, Congress gave the FCC the authority to use competitive bidding for allocating rights to use radio spectrum.  This beats comparative hearings and lotteries by a mile because companies that have paid good money for spectrum tend to be well focused on making good use of it.  This redounds to the benefit of consumers and the public through new, competitive wireless services.

But much more can be done to improve how this natural resource is deployed.  It is widely recognized that creating property-like rights in spectrum will foster secondary markets and help move spectrum to its highest and best use.  That work seems not to be happening very quickly, however.

And a report Cato released yesterday shows that much difficult work remains to be done if we are to have a property regime for spectrum, with all the benefits it entails.  In “Toward Property Rights in Spectrum: The Difficult Policy Choices Ahead,” University of Colorado professors Dale Hatfield and Philip Weiser, show why creating a property-oriented system for electromagnetic spectrum rights will not be easy.

“Even though the merits of the case for property-like rights in spectrum is beyond dispute, the details about how such a regime would work must still be defined,” Hatfield and Weiser point out.  Variation in the way radio waves behave means that simple geographic borders cannot define how rights to use spectrum are divided. Regulation of transmitter technology and power can not be replaced wholesale with enforcement of radio “trespass.”  Rather, ownership of rights to use spectrum must be defined and enforced with a model suited to the particular characteristics of radio propagation.

The study is a nice tour through radio for the technically uninitiated – you can find out why radio arguably has seven dimensions.  And it challenges readers (and hopefully the FCC) to think about the set of rules that will best divide and organize spectrum licenses so that Ronald Coase’s vision can be realized in the area where he did his early work.

[Cross-posted, with edits, from Cato@Liberty]

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Heritage has just released a new paper by my colleague James Carafano, THF’s homeland security guru, on the federal role in emergency communications. The paper finds that throwing more money, or spectrum, emergency communications systems is not the answer. “The commercial space uses the spectrum about 20 times more efficiently than governments,” Carafano writes. “The spectrum licensed to federal, state, and local public safety users supports fewer than 3 million users across the U.S. In contrast, commercial oper­ators (such as Sprint and T-Mobile) support about 80 million users in a comparable amount of spec­trum.” Instead, he argues, policymakers should focus on:

– Scaling back bloated, bureaucratic programs and wasteful homeland security and interoper­ability grants;
– Focusing on developing capabilities to enhance regional information sharing and response to catastrophic disasters;
– Revising federal policies and laws to open dual-use spectrum for commercial and emer­gency management use, as well as facilitating the sharing of spectrum among local, state, and federal users;
-Setting national standards to promote open-architecture, non-proprietary systems that are compatible with commercial standards;
-Establishing services that can provide an emer­gency wide-area network wireless system to sup­port existing responder communications equip­ment and emerging capabilities like VoIP; and
-Assigning specific missions and responsibili­ties to agencies for the implementation of criti­cal policies.

Worth a read.

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Via Techdirt, there’s fresh evidence that drivers are ignoring cell phone bans:

HUGE numbers of motorists risk causing accidents by driving while using their mobile phones, eating, drinking, smoking, reading maps or even putting on or removing clothing, a survey reveals today.

More than half of motorists still talk and text on their mobile phones while on the move despite a ban on hand-held mobiles in vehicles.

Yet as many as three-quarters of drivers agree with the ban and believe it should carry a fine and penalty points on a licence, the poll from Auto Trader magazine showed.

Now I can’t say I’m a whiz at math, but if half of people drive while using their cell phone, and 75 percent of users think doing so should be illegal, doesn’t that mean that at least 25 percent of the population of the UK are hypocrites?

As I’ve argued before, cell phones aren’t especially dangerous (relative to other distracting things people do in cars), they just happen to make a convenient scapegoat for peoples’ reckless driving. Because they’re so new, and because a lot of people happen to find them intrinsically annoying, it’s easy to whip up populist anti-cell-phone sentiments. The only problem is that most of us have also discovered that being able to make a phone call from your car is incredibly convenient. So many of us apparently do one thing, and tell pollsters another.

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Today there are reports that a startup headed by former FCC Wireless Bureau chief John Muleta and @Home founder Milo Medin has asked the FCC to give it a spectrum license to offer a national wireless broadband service. No auction, just an assignment. According to Reuters, “Most wireless spectrum is auctioned to the highest bidder but M2Z has offered to pay the U.S. Treasury 5 percent of its gross revenues from the premium broadband service it plans to offer alongside free, but slower, Internet access.” You can read their filing here (PDF).

If this deal goes through, we will have officially learned nothing. The FCC Spectrum Policy Task Force Report found that “To increase opportunities for technologically innovative and economically efficient spectrum use, spectrum policy must evolve towards more flexible and market-oriented regulatory models.” But this would cut in just the opposite direction. Spectrum would be licensed for one particular use and wouldn’t be flexible. The five percent kickback to the U.S. Treasury is eerily reminiscent of the uncompetitive franchise fees that cable operators have paid to municipalities for a local monopoly. And what would this do to the natural development of a market in wireless broadband when every other competing network has to bid for spectrum at auction? M2Z was able to raise over $400 million in venture capital, so why can’t it put it’s money where it’s mouth is and buy the license?

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