TCS Daily

A 'Commons' Misconception

By Arnold Kling - February 21, 2003 12:00 AM

In The Mystery of Capital, Peruvian economist Hernando De Soto argues that poorly defined property rights contribute to poverty in underdeveloped countries. In those countries, poor people live in houses to which no one has clear title. As a result, they do not benefit from improving their property, and they cannot use it as collateral for loans.

In De Soto's words, housing without property rights is "dead capital."

In the United States today, companies that license spectrum are like Third-World squatters. They do not have clear title to their spectrum, so that any attempt they make to innovate must run the gauntlet of the Federal Communication Commission's regulatory process. As a result, spectrum in the United States is "dead capital." Call it dead air.

The Wireless Last Mile

What the United States needs today is more spectrum allocated to spread-spectrum wireless. With enough spectrum available, the problem of "the last mile" for broadband Internet could be solved using wireless networks. Moreover, wireless voice-over-IP could result in meaningful competition to both the wireline and cellular telephone industries.

There is plenty of unused and under-used spectrum available. The problem is that the licensees are not permitted to allocate their spectrum to the wireless Internet. If you are a TV licensee, then you must use your license for television. If you are a satellite licensee, then you must use your spectrum for satellite transmissions, etc.

The FCC's Spectrum Policy Task Force explains the issue by describing three ways of determining spectrum use.

  1. Clear Title. In this case, the spectrum licensee would have clear, specific rights to use spectrum for any purpose, and to sell it to others. A spectrum license would be like title to property. The task force calls this the "exclusive use" model, which I think is a misnomer, because it sounds as though spectrum licensees would assign their spectrum to an exclusive use. Instead, what it means is that licensees would be free to assign their spectrum to any use, including to multiple uses.

  2. Commons. In this case, no one would own the spectrum, and anyone could use it, subject to regulations that would keep any individual or device from impeding other users.

  3. Command-and-control. This is the current system, where licensees must use spectrum for specific purposes according to FCC regulations.

The task force recommends that the FCC "should expand the use of both the exclusive use and commons models throughout the radio spectrum."

A Commons Misconception

A common misconception among advocates of spread-spectrum wireless is that only the commons approach will lead to more spectrum allocated for wireless network applications. Their dogmatic viewpoint sets up an unnecessary conflict with what is an easier path to spread-spectrum wireless, namely, the clear title approach.

One way to picture the result of the "clear title" model is to imagine what might happen if a company like Intel could buy a large swath of spectrum. In the next decade, Intel would like to sell lots of software-defined radios, which are a critical component in spread-spectrum wireless. As owners of spectrum, they would want to make sure that software-defined radios could achieve their maximum potential, which in turn would mean that Intel would make its spectrum available for spread-spectrum wireless use. Since Intel makes money on hardware, it is possible that it would not choose to charge for spectrum use itself.

The "clear title" approach would rapidly get the FCC out of the business of spectrum regulation (which is why the FCC staff puts a lot of effort into coming up with phony reasons why it would be difficult to implement). It would also rapidly lead to spectrum being allocated away from inefficient uses (such as VHF television) to the wireless Internet.

One possible path to greater spectrum use for the wireless Internet is to "underlay" wireless Internet applications in the same band as existing applications. For example, it may be possible to implement a wireless Internet application in the same band as a television station, provided that the wireless application uses low power and conforms to other specifications. If the television station had clear title to its spectrum, it could sell the "underlay rights," which would obviate the need for the FCC to get involved in adjudicating the underlay issue.

To implement the "commons," the FCC first has to confiscate spectrum from existing licensees, which is not going to happen in the foreseeable future. In addition, the FCC must determine the rules that regulate the Commons, which means years of hearings, comment periods, and so forth. Instead, a private owner of spectrum could set standards tomorrow.

To implement the "clear title," all the FCC has to do is give licensees clear title. That means defining the exact band and geographic area each current licensee owns. Once title is defined, then spectrum can be bought and sold in a capitalist frenzy. Although collectively, the value of licenses may fall (because spectrum will be used more efficiently), individually each licensee will have no reason to complain. That is because each licensee will be getting a "better" license, one that allows the licensee to continue using the spectrum as it does now or allocate it to something else or sell the license.

Turn the Boats Around

The Spectrum Task Force Report pays wonderful lip service to the view that "command and control" regulation is inferior and will retard the wireless Internet. However, the recommendations are complex, reflecting the interests of regulators, lobbyists, and consultants in keeping their hands in the spectrum regulation process. Unfortunately, the "commons" advocates play into the hands of the bureaucrats by encouraging this politicization of spectrum.

During the Vietnam War, humorist Mort Sahl satirized liberals who were disillusioned with the war but who argued that it would be difficult for the United States to extricate itself. Sahl imagined a teen-ager saying, "Gee, Dad, why don't we just turn the boats around?"

The Spectrum Task Force Report makes it sound as if it will be very difficult for the FCC to extricate itself from the current spectrum allocation system. Its recommendations are a recipe for an even more intricate regulatory morass. Instead, the FCC should "turn the boats around" by implementing the clear-title approach. The market will take care of the rest.

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