The Case for Liberal Spectrum Licenses: A Technical and Economic Perspective

50 Pages Posted: 10 Apr 2010 Last revised: 27 Oct 2012

Thomas W. Hazlett

Clemson University

Evan Leo

Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C.

Date Written: March 23, 2010

Abstract

The traditional system of radio spectrum allocation has inefficiently restricted wireless services. Alternatively, liberal licenses ceding de facto spectrum ownership rights yield incentives for operators to maximize airwave value. These authorizations have been widely used for mobile services in the U.S. and internationally, leading to the development of highly productive services and waves of innovation in technology, applications and business models. Serious challenges to the efficacy of such a spectrum regime have arisen, however. Seeing the widespread adoption of such devices as cordless phones and wifi radios using bands set aside for unlicensed use, some scholars and policy makers posit that spectrum sharing technologies have become cheap and easy to deploy, mitigating airwave scarcity and, therefore, the utility of exclusive rights. This paper evaluates such claims technically and economically. We demonstrate that spectrum scarcity is alive and well. Costly conflicts over airwave use not only continue, but have intensified with scientific advances that dramatically improve the functionality of wireless devices and so increase demand for spectrum access. Exclusive ownership rights help direct spectrum inputs to where they deliver the highest social gains, making exclusive property rules relatively more socially valuable. Liberal licenses efficiently accommodate rival business models (including those commonly associated with unlicensed spectrum allocations) while mitigating the constraints levied on spectrum use by regulators imposing restrictions in traditional licenses or via use rules and technology standards in unlicensed spectrum allocations.

Keywords: 3G, 4G, Apple, Blackberry, cellular, Cisco, Ronald Coase, ESPN, FCC, Federal Communications Commission, Google, Intel, Microsoft, Motorola, Palm, property rights, Qualcomm, radio spectrum commons, Research in Motion, telecommunications policy, television, Twitter, wide area networks, WiMax, Yahoo

JEL Classification: H23, K11, K23, L14, L51, L96, O3, P48

Suggested Citation

Hazlett, Thomas W. and Leo, Evan, The Case for Liberal Spectrum Licenses: A Technical and Economic Perspective (March 23, 2010). George Mason Law & Economics Research Paper No. 10-19. Available at SSRN: https://ssrn.com/abstract=1585469 or http://dx.doi.org/10.2139/ssrn.1585469

Thomas W. Hazlett (Contact Author)

Clemson University ( email )

Clemson, SC 29634
United States
8646563430 (Phone)
8646564192 (Fax)

HOME PAGE: http://hazlett.people.clemson.edu/

Evan Leo

Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C. ( email )

Sumner Square
1615 M Street, N.W. Suite 400
Washington, DC 20036
United States

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