With the upcoming 700MHz spectrum auction, I’m looking to start doing more of a critical reading on governance issues and how that impacts policy. I picked up Toward an Evolutionary Regime for Spectrum Governance – Licensing or Unrestricted Entry? [PDF] from the library. The work is put out by American Enterprise Institute for Public Policy Research and The Brookings Institution, co-authered by William J. Baumol and Dorothy Robyn.
The text has Baumol and Robyn evaluating governance models for spectrum, comparing a market-based approach with an unlicensed commons regime. They offer pros and cons to each model and suggest a modified market approach brings the most amount of gain while minimizing negative outcomes. While the book is specifically examining the FCC, I found overall the book was helpful in thinking about the underlying models of governance that inform the Canadian policy debates that are taking place in my feed reader around ICT development.
Being economists, Baumol and Robyn present their argument largely as theoretical models with selected references to major policies to demonstrate points. Coming from a political scientist framework, I find the models to be too clean and they don’t take into account enough pragmatism. I also find some of the examples they use tend to be a bit disingenuous, employing a straw man quality.
For instance, they use the ‘tragedy of the commons’ view on how current unlicensed spectrum use has resulted in overcrowding. Competing WiFi networks, interference between cellular phones, microwaves and other household and commercial products that make use of unregulated spectrum has necessitated for increased amounts of spectrum being demanded by manufacturers and consumers. Yet simple overcrowding shouldn’t be used as an example of poor spectrum management. The limited amount of bandwidth and poor overall quality of the spectrum isn’t taken into account and the actual usage efficiency of unregulated spectrum is not calculated.
After all, private market actors have requested additional spectrum to meet consumer demand. Using Baumol and Robyn’s critique, that would suggest they are making inefficient use of spectrum.
Baumol and Robyn also critique administrative rationing of spectrum by government actors as an inefficient governance model. I’ll generally will agree with this, with the exception of special intervention for marginalized stakeholders. But governments aren’t the only actors to use this model. Market-based actors will also use administrative rationing, such as the recent case of T-Mobile throttling speeds after 5GB of data transfer. In this regard, I think recent CRTC rulings suggesting the use of economic measures for network management are an improvement on US practices.
Overall, I think spectrum management is going to create a lot of complaints. Incumbents don’t like spectrum being set aside for new competitors. Startups needing to invest large amounts of capital to get into facilities-based competition will not be happy to be spending so much on spectrum licenses. Consumer groups will be unhappy for having to pay for the higher spectrum costs from businesses. Those looking for unlicensed use of spectrum will not like any telecom/cableco receiving exclusive use of the airwaves. Governments will want to maximize auction prices to contribute to public revenues but need to balance their desire with the need to provide next generation infrastructure for broader economic growth.
In this regard, Baumol and Robyn’s assertion that their choice for spectrum governance, tradable and modifiable licenses, is bad but all the others are worse has some validity. Their analysis of mixed models are that they are overall a poor choice for governance has a single paragraph caveat about leaving some bandwidths open for experimental use. They note that such bandwidths have had some success (WiFi and Bluetooth come to mind) and there should be some consideration of such usage, with the FCC continuing to grant experimental licenses for free.
My own preferences remain with a greater mixed model then the tradable and modifiable licenses regime Baumol and Robyn recommend. Balancing the needs of market-based actors (both incumbents and new competitors), consumers, citizens and government is one that will need continued investigation to ensure outcomes are maximized.