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Thursday, April 19, 2007

Market-based spectrum allocation, Reed Hundt, and the Frontline proposal
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PFF’s Digital Age Communications Act (DACA) project included a report on spectrum policy by a working group of experts that Larry White of NYU and I co-chaired. That report noted the “widespread dissatisfaction with the legacy command-control-system” and that “the costs associated with inefficient utilization of the spectrum under [that system] have become enormous.” The report went on to endorse a market system as the best way to “assure that spectrum is allocated to its best and highest-valued uses,” noting that “there is no serious contender for a system that can be expected to perform as well or better.”

An (almost) as articulate a case for a market-based system is contained in an article written by Reed Hundt when he was FCC Chairman (and coauthored by Greg Rosston who was also member of our DACA working group). (See IEEE Communications Magazine, December 1995). That article notes that “The key to this investment boom [then occurring in wireless] is the FCC’s decision to grant flexibility in the use of PCS spectrum. PCS licensees have the flexibility to provide the services most valuable to consumers in the same way companies throughout our economy provide the services consumers demand. This is a sea change in FCC policy, and it should be continued.”

Notwithstanding the evidence that market forces are the best way to allocate spectrum there is an unfortunate tendency to revert to the old command-and-control system (and the attendant politicized decision making), especially when there is a specific problem – e.g., public safety – that we want to address or a specific constituency that we want to satisfy. This is illustrated by the recent proposals by Cyren Call and by the Frontline group, of which Mr. Hundt is a prominent member. The Cyren Call proposal seems not to have much support any more, but the Frontline proposal is being taken quite seriously.

The Frontline proposal seeks to have the FCC set aside 10 MHz of the 700 MHz DTV spectrum for shared use between public safety and private uses. (This would be in addition to the 24 MHz already set aside for public safety). Some sort of shared-use arrangement is clearly efficient, because if the spectrum were solely allocated to public safety it would be seriously underutilized.

Under the Frontline proposal, the 10 MHz would be put up for auction, but eligible bidders would be limited to setting up a wholesale network and would be required to comply with common-carrier type open-access conditions. The defects of such arrangements are well-described in a recent piece by my colleague Scott Wallsten. Indeed, in his article, Mr. Hundt notes that “Rules for shared-use bands generally specify protocols and not services, thus preserving service flexibility.” Even specifying protocols is probably unnecessary, particularly when the spectrum is under single ownership.

Leaving aside the question of whether an additional 10 MHz is needed for public safety ( which is not obvious), the Frontline proposal imposes conditions on the private uses of the spectrum that are at variance with the principle – espoused both by the DACA Spectrum Report and Reed Hundt, when he was FCC Chairman – that we should allow the market to guide spectrum to its highest valued uses.

If the FCC decides that public safety requires an additional 10MHz, for a total of 34 MHz, it should do two things. First, the Commission should explain the analysis that supports allocating the additional spectrum. Second, it should ensure that any conditions put on that spectrum are explicitly related to achieving public safety objectives and refrain from imposing conditions extraneous to those objectives.

posted by Tom Lenard @ 2:39 PM | DACA , Spectrum

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