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Free Spectrum

July 6, 2005 05:08 PM

Back in 1969 with several coauthors (a lawyer, an engineer, and two fellow economists) I published a paper in the Stanford Law Review showing how a market would allocate the electromagnetic spectrum. Our most difficult task was to show how you could define and enforce property rights in the spectrum. This is the bandwidth on which radio, microwave, satellites and many other communications technologies rely to transmit information. In this paper, we were following up on a suggestion by Ronald Coase (Nobel laureate in economics).

We were almost laughed at by critics who said it was technologically impossible and politically naive, but we got the last laugh. A lot of the criticisms came from people whose jobs depended on the system as it was then. And many Congressional fortunes depended on the allocation system (including Lyndon Johnson's fortune).

None of those criticisms held up and they didn't deter us from doing our article because I never thought you should restrict science or policy considerations to things that seem doable in the political arena. Ideas are far more powerful than current opinion or what is politically doable.

Spectrum auctions have come to the US, New Zealand and other countries and it has brought in billions to governments. By now the FCC license is tradeable and resembles an enforceable property right. In instances where property in spectrum were created in other countries, they pretty much use our definition.

So, in an edition celebrating the "let-the-market-do-it" research in spectrum allocation, the Journal of Law and Economics asked me to say where we are and where we need to be in a market for spectrum. No need to go into that here, but one of the things I did stress was to let the unused spectrum be used temporarily and without interference to its resident licensee by others. Roaming computers would "sniff out" unused spectrum, of which there is plenty, and essentially find free bandwidth for others to use.

Well now it is happening.

The IEEE has its 802.22 working group busy setting up standards for access to the unused frequencies allocated by the FCC to television broadcasters. There are 'acres' (not really the measure, but if you get the idea there is lots of it then that is the point) of spectrum that go unused in many areas and cannot be used under current license restrictions and technology. It is really a pretty dumb system because the FCC just assigned these huge blocks of spectrum to TV broadcasters right across the country, whether they had a station in a local area or not. This was easy for the FCC, but bad for spectrum users. A regulatory agency always dumbs down allocation processes because they can't have the information and knowledge they need to keep current. So, they make it hard and dumb for everyone and just lock things into a scheme they are barely smart enough to handle. One allocation fits all.

There is a private firm named WiFi already ahead of the IEEE in developing a standard called WiMax. Private standards are voluntary and they are great because they represent experiments with the many possible standards. The IEEE is trying to set one and so are private firms, but the test is: what will the market choose? What will emerge among the competing standards? The best one will be the one that extracts the highest value from the resource.

There are likely to be several technologies because computers are easy to program to work with any of them compared to human beings. But, here is the most remarkable thing: the private market is finding a way to make spectrum use so efficient that it will be a free and unlimited resource. In other words, private markets and making spectrum into the public good it has been thought by most economists to be. It never was before but we are on the verge of it now.

· Uncertainty

Comments

Posted by: Flower Online [TypeKey Profile Page] at September 12, 2006 6:42 AM

"Defining property rights" for spectrum, like establishing any other property rights, is a tough political problem. It seems to me a mistake to think these problems can be solved by fiat. This mistake seems to me a weakness of the spectrum property rights literature to which you were a seminal contributor. For some historical perspective on this problem, see Revolutionary Ideas for Radio Regulation

Posted by: Galbi [TypeKey Profile Page] at August 15, 2005 7:39 AM

Not really on topic, but I like the new site design.

Chris

Posted by: Chris H at July 7, 2005 2:16 AM

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