Comments on: Why don't we just auction the 'white space'?

Policy analyst Thomas Lenard says Congress is close to introducing a significant setback to a rational spectrum policy.

[pierredv]

Unlicensed brings greater benefits and lowers regulatory risk

The benefits of unlicensed are evident in the 2.4 GHz unlicensed band. Few would argue today that it should have been auctioned off years ago. We have seen dramatic technology innovation, from the alphabet soup of 802.11 advances to a plethora of devices from laptops to cameras that are ?Wi-Fi ready?. There has also been dramatic business innovation, from rural entrepreneurs offering broadband Internet to their communities for the first time, to hotspot access packages from mobile telephone companies.

An unlicensed allocation would lower regulatory risk. The argument that spectrum is allocated to its highest-valued uses by allowing a market in spectrum rights to develop is based on assumptions like low transaction costs, well-defined rights, significant spectrum scarcity, and competitive markets. If these assumptions, and/or the economic models built on them, prove to be false, the promised benefits may not materialize. Putting all our eggs in the spectrum-as-property model will have been a bad, irreversible choice. Diversity in the portfolio of regulatory models will protect us against this risk.

The unlicensed model isn?t unique in its need for rules. A market in spectrum licenses not only needs rules to manage and promote competition; it also needs rules that define precisely what is to be traded. The experience to date in the FCC?s secondary markets proceeding indicates that defining suitable ?bundles of rights? is complicated and painfully lawyer-prone, even for spectrum where coexistence with incumbents like broadcasters is not at issue.

At this point, economic analysis can?t help society make a choice been the licensed and unlicensed models. Licensed spectrum has a few participants and well-defined prices; unlicensed as huge numbers of participants and few, fuzzy prices. Economic analysis can only get traction when there are prices; that?s why virtually all the economists that study spectrum like markets in spectrum licenses. It?s the only way their models make sense. The work to create proxy prices for unlicensed uses has not yet been done. Until it is, economic arguments won't be much help in deciding between licensed and unlicensed.

TV spectrum is already being auctioned in the 700 MHz bands. Prudence dictates that some of this spectrum is allocated to unlicensed. Even if we stipulate that spectrum will remain very scarce in spite of increased tradeable licenses and advances in technology, it?s worth recalling that our society does not allocated every scarce good through tradeable property rights. For good reason, the trading of licenses is not used to allocate access to many roads, art collections, parks, or airspace. The same should be true for at least part of our national spectrum resource.

[pierredv]

Unlicensed brings greater benefits and lowers regulatory risk

The benefits of unlicensed are evident in the 2.4 GHz unlicensed band. Few would argue today that it should have been auctioned off years ago. We have seen dramatic technology innovation, from the alphabet soup of 802.11 advances to a plethora of devices from laptops to cameras that are ?Wi-Fi ready?. There has also been dramatic business innovation, from rural entrepreneurs offering broadband Internet to their communities for the first time, to hotspot access packages from mobile telephone companies.

An unlicensed allocation would lower regulatory risk. The argument that spectrum is allocated to its highest-valued uses by allowing a market in spectrum rights to develop is based on assumptions like low transaction costs, well-defined rights, significant spectrum scarcity, and competitive markets. If these assumptions, and/or the economic models built on them, prove to be false, the promised benefits may not materialize. Putting all our eggs in the spectrum-as-property model will have been a bad, irreversible choice. Diversity in the portfolio of regulatory models will protect us against this risk.

The unlicensed model isn?t unique in its need for rules. A market in spectrum licenses not only needs rules to manage and promote competition; it also needs rules that define precisely what is to be traded. The experience to date in the FCC?s secondary markets proceeding indicates that defining suitable ?bundles of rights? is complicated and painfully lawyer-prone, even for spectrum where coexistence with incumbents like broadcasters is not at issue.

At this point, economic analysis can?t help society make a choice been the licensed and unlicensed models. Licensed spectrum has a few participants and well-defined prices; unlicensed as huge numbers of participants and few, fuzzy prices. Economic analysis can only get traction when there are prices; that?s why virtually all the economists that study spectrum like markets in spectrum licenses. It?s the only way their models make sense. The work to create proxy prices for unlicensed uses has not yet been done. Until it is, economic arguments won't be much help in deciding between licensed and unlicensed.

TV spectrum is already being auctioned in the 700 MHz bands. Prudence dictates that some of this spectrum is allocated to unlicensed. Even if we stipulate that spectrum will remain very scarce in spite of increased tradeable licenses and advances in technology, it?s worth recalling that our society does not allocated every scarce good through tradeable property rights. For good reason, the trading of licenses is not used to allocate access to many roads, art collections, parks, or airspace. The same should be true for at least part of our national spectrum resource.

[derlac]

flawed analysis

the analysis of the economic efficiency of white space allocation is flawed. The analysis in the article fails to account for significant collective action \ transaction cost problems. The idea for the unregulated space model is that individual economic utility would be maximized by allowing individual decision making on use of the spectrum. Since such a model incorporates the use of a disaggregated collective there is no efficient way to negotiate and transact between the parties. True economic value would be maximized, it just would not be allocated.

Lenard ... Read some Coase (i suggest Wikipedia) and check the current share price of Google. The internet is an unlicensed "collective" based on a series of regulatory rules created through convention ... lets auction that while we are at it.

[derlac]

flawed analysis

the analysis of the economic efficiency of white space allocation is flawed. The analysis in the article fails to account for significant collective action \ transaction cost problems. The idea for the unregulated space model is that individual economic utility would be maximized by allowing individual decision making on use of the spectrum. Since such a model incorporates the use of a disaggregated collective there is no efficient way to negotiate and transact between the parties. True economic value would be maximized, it just would not be allocated.

Lenard ... Read some Coase (i suggest Wikipedia) and check the current share price of Google. The internet is an unlicensed "collective" based on a series of regulatory rules created through convention ... lets auction that while we are at it.