Secondary Markets in Radio Spectrum

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Secondary Markets in Radio Spectrum

• FCC Forum
• May 31, 2000
• Washington, D.C.

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The Wireless Craze, The Unlimited Bandwidth
Myth, The Spectrum License Faux Pas, and the
Punchline toRonald Coases big joke Thomas
W. HazlettUniversity of California,
DavisAmerican Enterprise Institutethazlett_at_aei.o
rg
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The Wireless Bandwidth Market Challenge, Redux

•  In 1959 the FCC invited future Nobel economist
  Ronald Coase to testify about his proposal for
  market allocation of spectrum.
• First question --

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Is this all a big joke?
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I know of no country on the face of the globe --
except for a few corrupt Latin American
dictatorships where the sale of the spectrum
could even be seriously proposed.

• -- Referees Report on Coase (Rand Study
  with W. Meckling J. Minasian, circa 1960)

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The Road To Bandwidth Markets

• Public Interest Allocation

Property Rights
Bandwidth Markets
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Policy should worry about

• Traversing the Regulatory Gauntlet
  
• (a hazard-strewn political Line of Death from
  Public Interest Allocation to Property Rights)

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Policy should not worry about

• Spontaneous Combustion in the Marketplace
• Property Rights to spectrum will spark
• Bandwidth Markets w/o a rule making
• Wireline bandwidth exchanges popping up
  everywhere
• Fiber pipes create private property rights in
  spectrum

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Deconstructing Property Rights

• flexible use (service definition)
• flexible technology (standards)
• flexible divisibility
• transferability (including liability)
• right to use unoccupied bands

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Unleash the Cornucopia

• Full property rights for spectrum users
• Restrictions limited to interference contours
• Burden of proof shifts to those opposing entry
• Liability rules
• Streamlined standards, technical adjudication
• Generic antitrust, not by band classification

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Plausible?

• Liberalization benefits consumers
• Spectrum reforms since 1964
• PCS overlay rights
• AM/FM sub-carrier frequency use
• Long distance telephone microwave links
• UHF Channels 60-69 (1992 OPP paper)
• Miles to Go
• TV Band (1952 technology in transition)
• Blocked technologies such as UWB
• Crowded spectrum vastly under-utilized

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No. Orden No. Registro LA SUPERINTENDENCIA
DE TELECOMUNICACIONES DE GUATEMALA Con base en el
Artículo 57 del Decreto 94-96 del Congreso de la
República extiende Título de Usufructo de
Frecuencia

• Banda o Rango de Frecuencias
• Horario de Operación
• Potencia máxima efectiva de radiación
• Máxima intensidad de campo eléctrico o potencia
  máxima admisible en el contorno
• Area Geográfica de influencia

Fecha de Emisión Fecha de Vencimiento
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Policy Reforms to Encourage Markets
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1. Spectrum Registry

• Easy to use spectrum allocation database
• Actual use (and users) defined
• Possible to decipher w/o counsel
• Public access

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Voluntary Reallocation

• Overlay Rights
• Shift spectrum reallocation to the market
• Speed services to the public
• Rules can help structure negotiation
• Underlay Rights
• Low-power zones for emerging technologies
• Entrants assume liability for interference
• Cooperative or competitive market structure

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3. Private provision of public goods

• Competitive bidding for enterprise- or
  market-level communications systems
• Price, terms conditions
  (á la data processing contracts)
• Band manager emerges with spectrum resources and
  obligation to serve (Nextel)

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4. Privatize Rulemakings

• Set time table for Allocation
• Rival consortia submit NPRMs
• Liability and Adjudication addressed
• FCC and other parties Comment
• Best Orders submitted by applicants
• Comments by non-FCC parties
• FCC selects Best of the Best
• Auction conducted for rights (if necessary)

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Proposed Schedule for UWB Rulemaking in 2000

• Draft NPRMs Aug. 1
• Comments (non-FCC) Sept. 1
• Comments (FCC) Oct. 1
• Final NPRMs submitted Nov. 1
• Comments (non-FCC) Dec. 1
• FCC selection Dec. 24