Open Wireless vs. Licensed Spectrum: Evidence from Market Adoption

Article excerpt

V. IMPLICATIONS FOR POLICY

A. Proposals for Exhaustive Auctioning Should Be Rejected Outright

The period between July of 2011 and July of 2012 saw diametrically opposed views of the future of wireless regulation expressed in two published government documents. The first, distributed on July 13, 2011, was the House Republican staff discussion draft of the Spectrum Innovation Act of 2011. (361) By requiring that any new allocations of bands to open wireless devices be permitted only if these bands had been purchased at auction by potential open wireless equipment and services developers, the draft legislation would have effectively eliminated any future open wireless allocations. (362) The idea is not new, (363) but the obvious counterarguments have never been adequately addressed. Namely, provisioning a band in which anyone is permitted to operate presents a collective action problem: the firms that would contribute would either limit access to their devices, thereby controlling competition and innovation in the market for devices, or would face significant free rider problems. (364)

The argument in favor of this proposition is hard to pin down, but likely reflects a basic ideological commitment to private property and a failure to appreciate that "spectrum property" is more akin to a tradable permit than to a fee simple, while a "spectrum commons" is akin to speed limits and traffic signals. (365) At a minimum, those who claim to support spectrum property in the defense of private enterprise and free markets should look at actual markets and actual companies adopting open wireless strategies. If they did, they would recognize that the system to which they object is neither based on Soviet-style planning (366) nor old-school progressive agency control. (367) Rather, this system provides a technique for dramatically decreasing the role of government in deciding who gets to develop, sell, and deploy services and equipment. But unlike a property-style approach to decentralization, it emphasizes freedom of action rather than power to control, a technique that has had enormous success across practically all market segments that require wireless communications capacity.

The second document, which offered the most extensive embrace in a government publication of spectrum sharing and open wireless techniques, was the PCAST Report of July 2012. That report stated unequivocally:

   PCAST finds that clearing and reallocation of Federal
   spectrum is not a sustainable basis for spectrum
   policy due to the high cost, lengthy time to implement,
   and disruption to the Federal mission. Further,
   although some have proclaimed that clearing and reallocation
   will result in significant net revenue to the
   government, we do not anticipate that will be the
   case for Federal spectrum ... The essential element
   of this new Federal spectrum architecture is that the
   norm for spectrum use should be sharing, not exclusivity. (368)

While "sharing" here includes short term leases as well as unlicensed, open wireless use, this is nonetheless the most expansive statement yet of the broad change in policy--from exclusive use and auctions first, complemented by some open wireless, to dense infrastructure, open wireless as a foundational strategy, complemented by mechanisms to allow purchase of exclusive use where necessary. (369)

Although the PCAST Report has its own limitations, the basic insight is that proposals that would effectively prevent future open wireless allocations should be off the table. That proposition is supported by persistent evidence across diverse, cutting-edge, and broad markets. Considering the value only of remote payment systems--even looking solely at toll collection systems that have saved untold hours and gallons of gas waiting in tollbooths, multiplied by the number of years since toll road operators were able to deploy E-ZPass and similar systems throughout the United States--the value of open wireless becomes clear. …