Three Cheers for the FCC Spectrum Task Force Report

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In what may go down as a watershed moment in the history ofAmerican telecommunications policy, the Federal CommunicationsCommission's Spectrum Policy Task Force recently released itseagerly awaited report and proposed nothing less than a revolutionin federal spectrum management. The task force was established byFCC chairman Michael Powell in June 2002 to explore improvements inspectrum management and conduct the first ever comprehensive reviewof spectrum policy at the agency. The Spectrum Task Force report not only does an excellent job oflaying out the problems associated with federal management of theelectromagnetic spectrum, it also outlines a refreshingly bold setof policy recommendations to correct the problems associated withnearly a century's worth of central planning in wirelesstelecommunications.

The report begins by acknowledging: "The time is ripe forspectrum policy reform. Increasing demand for spectrum-basedservices and devices is straining longstanding and outmodedspectrum policies." The report notes that the FCC's traditional"command-and-control approach" to spectrum management is theprimary cause of regulatory failure because that approach hasimposed significant usage restrictions on spectrum use and users.The task force then goes on to suggest a bold vision for governingspectrum in the future that has as its cornerstone the principle offlexible use. Importantly, however, the task force notes that thereare two ways to achieve the goal of increased flexibility-throughexclusive use rights or by way of a "commons" model of governance.Under an exclusive use model, spectrum holders would be grantedclearly defined rights and have the ability to use or sell theirspectrum however they wish. This is really just a good old-fashionprivate property rights regime for spectrum allocation, even thoughthe FCC doesn't call it that. Under a commons model, by contrast,spectrum would not be exclusively held, but instead shared amongmany users who would use frequency-hopping technologies to scan thespectrum for unused frequencies. Using smart antennas,software-defined radios, and mesh networks, spectrum users wouldincreasingly be able to simultaneously operate alongside otherexclusive spectrum users if such "overlay" or underlay" rights arepermitted for low-power, non-interfering devices andtransmissions.

The intellectual battle between adherents to the property rightsand commons models of spectrum governance has been a refreshingtelecommunications debate for two reasons. First, at the heart ofboth models is a desire to promote increased flexibility,innovation, and efficient use of the spectrum resource. Moreimportant, both groups generally agree that the currentcommand-and-control system is a complete failure and must bereplaced. Indeed, both commons and property rights proponentsquestion the continuing need for the FCC in this process at all.Second, and perhaps because of these preceding points, this war ofideas has not been characterized by the rancor typically witnessedin other telecom industry disputes. Advocates of both models havebeen willing to listen to one another, take seriously thecriticisms of the other side, and even integrate some of theirsuggestions into each other's models. And there is good reason forthem to do so. Ultimately, the future of spectrum governance cannotcome down to an either-or choice between these two models; rather,it must reflect a synthesis of the two schools of thinking.Property rights proponents are correct to stress the importantbenefits of exclusive use in the spectrum resource since many userswant the freedom to own, sublease, combine, or sell spectrum ontheir own terms. Moreover, many current incumbent users of spectrumwill argue that they have de facto rights in their spectrumlicenses and should be granted unconditional property rightsanyway.

On the other hand, the commons crowd is equally correct instressing the importance of preserving certain portions of thespectrum for shared, nonexclusive use by companies and consumers.Such shared use could take one of two forms. First, government candesignate (or, better yet, purchase at auction) certain bands ofspectrum for commons use, much as it purchases large portions ofland for public parks and opens those areas to common use. Inaddition, overlay and underlay areas should be allowed throughoutthe spectrum as long as users do not interfere with other users.This is a quite practical solution as such "easements" alreadyexist today in some bands of the spectrum, but many otherunderutilized portions of the spectrum could be opened up for suchhomesteading. Finally, it is important to acknowledge that privatespectrum owners will likely contract with independent users tocreate commons areas within their exclusive allocations. Just asshopping mall owners lease store or sidewalk space to thirdparties, so too will private spectrum band managers subleaseportions of their property for other uses, including commonsareas.

Now that the Spectrum Task Force has done such an outstandingjob of laying out the problem and some potential solutions, thenext logical question is when and how this new vision will be putinto action by policymakers. Ironically, another remarkable reportissued by the FCC the same day as the Task Force report may offer afirst step. In a new working paper entitled "AProposal for a Rapid Transition to Market Allocation ofSpectrum," an ingenious scheme to expedite the transition to aspectrum free market is outlined by Evan Kwerel and John Williamsof the FCC's Office of Plans and Policy. Kwerel and Williams, whohave done pioneering work on spectrum policy at the FCC, propose toexhaustively auction off untapped or underutilized spectrum whileencouraging incumbent licensees who control large swaths ofspectrum to put their holdings on the auction block. Althoughincumbents would have the right to opt out of the auction entirely,if they put their spectrum on the block they would have the abilityto buy back that spectrum and gain complete and immediateoperational flexibility. If they didn't put it up for auction,flexible use would be denied for five years. They would also havethe right to accept the highest price bid for their spectrum andjust walk away. For incumbents, such a scheme would help reveal themarket price of spectrum and give them an idea of what the trueopportunity costs of holding that spectrum really were. For othersdesiring more spectrum, this process would finally give them achance to get their hands on it.

Even if the FCC took no more action on this issue, the SpectrumTask Force report and the new OPP study would likely constitute themost important legacy of the Bush administration's FCC. But thereis good reason to believe that the agency will take action; it hasalready has taken several other important steps on this front, andits leaders remain committed to the task of spectrum reform. Forexample, in a recentspeech, Chairman Powell argued: "Today's marketplace demandsthat we provide license holders with greater flexibility to respondto consumer wants, market realities and national needs withoutfirst having to ask for the FCC's permission. I believe licenseholders should be granted the maximum flexibility to use-or allowothers to use-the spectrum (within technical constraints) toprovide any services demanded by the public." And during the CatoInstitute's annual Technology & Society conferencelast week, FCC commissioner Kathleen Abernathy delivered a sweepingset of remarks on spectrum reform that mirrored the task forcereport's findings. It would have been unthinkable for an FCCofficial to deliver such speeches even 10 years ago. This is astunning sea change in opinion on federal spectrum management. TheFCC, and the Spectrum Task Force in particular, deserves highpraise for this ground-breaking report and breathtaking set ofpolicy recommendations.