Spectrum: Supply and Demand Issues for 2011

By TAP Staff Blogger

Posted on July 14, 2011


The explosion in demand for mobile and wireless devices like tablets and smartphones is driving policymakers to consider how to make more spectrum available for the growing array of wireless services. The spectrum used by wireless devices area is one portion of the electromagnetic spectrum, which includes radio waves, microwaves, infrared, visible light, X-rays, and gamma rays. (For more basics on wireless and mobile devices, see our TAP Fact Sheet on Wireless and Mobile Communications.) In 2011, policymakers will consider a number of proposals to reform the way that the increasingly crowded spectrum is managed; many of these proposals are outlined in a 2010 report by the Congressional Research Service.

The rapid growth of wireless, especially applications that send video over wireless networks, means that wireless carriers must rapidly ramp up the capacity of their networks. (For coverage of the growth of wireless, see FierceWireless and CNET.) AT&T has argued that its need for more spectrum drives its merger with T-Mobile, these claims are countered by opponents of the merger, including Sprint (see coverage from PCWorld, NPR, PC Magazine, and CNET). TAP scholar Gregory Rosston and coauthor Roger Noll outline implications of the merger for spectrum policy in “Competitive Implications of the Proposed Acquisition of T-Mobile by AT&T Mobility.” Controversy over the merger is expected to lead to increased focus on spectrum reform by policymakers.

Concern over slow economic growth has also driven increased attention to spectrum policy by policymakers. President Obama’s Strategy for American Innovation (PDF, 1.24 MB), released February 2011, outlines plans to make more spectrum available among other policies intended to promote growth. Federal agencies have some authority to make more spectrum available without legislative action. The uses of the spectrum for communications are regulated by the Federal Communications Commission (FCC) and the National Telecommunications and Information Administration (NTIA). The FCC usually allocates different portions of the spectrum (PDF, 1.61MB) to different uses, and then assigns licenses to individual users to provide private-sector services consistent with these allocations. Some unlicensed services are also authorized. The NTIA performs a similar function for the use of the spectrum by federal users.

Consistent with this authority, the FCC will continue to allocate additional spectrum. The FCC’s National Broadband Plan, sent to Congress in early 2010, proposed freeing up 500 MHz of spectrum for wireless broadband, including 300 MHz over the next five years. TAP scholar Dale Hatfield’s paper “The Challenge of Increasing Broadband Capacity” notes that in population centers like New York City, this will not be nearly enough.

The main purpose of federal regulation of spectrum is to avoid interference between several users trying to use the same spectrum in the same place at the same time. For decades, the FCC assigned licenses to spectrum users in hearings to decide which user would best serve the “public interest.” Among other problems, this process delayed the growth of new services substantially. In 1994, Congress authorized the FCC to use auctions to assign the right to use spectrum. This speeded the rollout of new services to consumers. Auctions are designed and redesigned to prevent manipulation or collusion among bidders, and/or to facilitate the growth of efficient networks of a certain scale or scope.  On July 19, 2011, the FCC will auction additional licenses to use spectrum in the 700 MHz Band (PDF, 211KB). Jeremy Bulow, Jonathan Levin, and Paul Milgrom’s paper “Winning Play in Spectrum Auctions” talks about strategies for bidding on spectrum.

Some spectrum auctions have raised substantial revenues for the federal treasury, while others raise less than expected. Policymakers can be tempted to think of auctions primarily as a fundraising tool. But this is likely to conflict with the auction’s main benefit to consumers, speeding the deployment of service, as bidders are likely to pay most for spectrum when it is doled out slowly and remains comparatively scarce. Policymakers may seek to design auction rules that support policy goals such as favoring diversity among service providers, to support competition, or to supporting open or free networks; the FCC has proposed to redesign auction bidding to promote diversity (PDF, 131KB) in 2011. These goals may also be in tension with the overall desire to speed the deployment of new services and/or the hope that auctions will raise significant federal funds. Coauthors  Peter Cramton, Evan Kwerel, Gregory L. Rosston and Andrzej (Andy) Skrzypacz, outline issues in trying to design auctions to promote competition in “Using Spectrum Auctions to Enhance Competition in Wireless Services.”

The FCC has also begun to allow more unlicensed services, as some wireless devices can use software to avoid interference automatically, arguably making licensing unnecessary. An influential paper by Richard Thanki, “The Economic Value Generated by Current and Future Allocations of Unlicensed Spectrum” (PDF, 2.3MB), assess the economic impact of unlicensed services.  In January of 2011, new FCC rules (PDF, 224KB) allowing unlicensed wireless devices to use the “white space” between TV channels took effect. The rules require the devices to rely on a “TV Bands Database” to protect existing services from interference. Some scholars had advocated that spectrum generally should be managed in this way, as a “commons.” Others support the use of the assignment of rights to spectrum more like property rights, an issue considered by Dale Hatfield and Phil Weiser in “Toward Property Rights in Spectrum: The Difficult Policy Choices Ahead.

One thorny problem in spectrum reform today is the question of conflicts between established and new users of spectrum. The FCC would like to re-allocate some spectrum from traditional over-the-air television broadcasters to new uses, as the transition to digital television means that television broadcasting no longer requires as much spectrum as it once did. But traditional broadcasters would like to keep all their currently assigned spectrum. (See coverage from CNET, Broadcasting and Cable, Television Broadcast, and Reuters.)

To support reallocation, bills have been put forward to give the FCC authority to share auction revenues with licensees who give up their spectrum or who are displaced, so-called “incentive auctions.” These include H.R. 1622, the Spectrum Innovation Act (PDF, 162KB), to allow revenue sharing; S. 415, the Spectrum Optimization Act (PDF, 154KB) to allow revenue sharing with those who voluntarily give up spectrum; H.R. 911, the Spectrum Inventory and Auction Act of 2011 (PDF, 177KB) in which the FCC could conduct incentive auctions after a comprehensive inventory of spectrum in use; S.455, the RADIOS Act (PDF, 241KB) to allow incentive auctions, and require the allocation of more auction for unlicensed uses, and an inventory; and S. 28, the Public Safety Spectrum and Wireless Innovation Act (PDF, 196KB), which would establish a public safety network and allow incentive auctions.

A related question is the conflict between public and commercial users of spectrum. Federal, state and local governments reserve parts of the spectrum for use by the public sector, including public safety and military users. Many note that public sector services do not use spectrum with great efficiency, and have urged that much of this spectrum be made available to the private sector. Some continue to urge that spectrum must be set aside for military and public safety users; others argue that there is no particular reason that most public safety users could not rely on commercial communications services. S. 522, The Spectrum Relocation Improvement Act of 2011 (PDF, 177KB), was reintroduced in 2011 to stipulate ground rules for reallocation of frequencies from federal to nonfederal use. H.R.607, the Broadband for First Responders Act of 2011 (PDF, 196KB) would allocate spectrum for use by a nationwide public safety network, as would bills such as S. 911. (See discussion in Wired News, The Hill, Fire Chief and Broadcasting and Cable, as well as a report on nationwide public safety released by the White House.)

TAP will continue to post new research on spectrum policy throughout 2011.