Tragedy of the Regulatory Commons: Lightsquared and the Missing Spectrum Rights

35 Pages Posted: 3 Jan 2015

See all articles by Thomas W. Hazlett

Thomas W. Hazlett

Clemson University

Brent Skorup

George Mason University - Mercatus Center

Date Written: December 24, 2014

Abstract

The endemic underuse of radio spectrum constitutes a tragedy of the regulatory commons. Like other common interest tragedies, the outcome results from a legal or market structure that prevents economic actors from executing socially efficient bargains. In wireless markets, innovative applications often provoke claims by incumbent radio users that the new traffic will interfere with existing services. Sometimes these concerns are mitigated via market transactions, a la “Coasian bargaining.” Other times, however, solutions cannot be found even when social gains dominate the cost of spillovers. In the recent “LightSquared debacle,” such spectrum allocation failure played out. GPS interests that access frequencies adjacent to the band hosting LightSquared’s new nationwide mobile network complained that the wireless entrant would harm the operation of locational devices. Based on these complaints, regulators then killed LightSquared’s planned 4G network. Conservative estimates placed the prospective 4G consumer gains at least an order of magnitude above GPS losses. “Win win” bargains were theoretically available, fixing GPS vulnerabilities while welcoming the highly valuable wireless innovation. Yet transaction costs — largely caused by policy choices to issue limited and highly fragmented spectrum usage rights (here in the GPS band) — proved prohibitive. This episode provides a template for understanding market and non-market failure in radio spectrum allocation.

Keywords: LightSquared, spectrum, wireless, FCC, Federal Communications Commission, GPS, law, regulatory commons, mobile, transaction costs

JEL Classification: D61, D62, D72, K23, L51, L52, L96

Suggested Citation

Hazlett, Thomas W. and Skorup, Brent, Tragedy of the Regulatory Commons: Lightsquared and the Missing Spectrum Rights (December 24, 2014). Duke Law & Technology Review, Vol. 13, No. 1, 2014. Available at SSRN: https://ssrn.com/abstract=2544673

Thomas W. Hazlett

Clemson University ( email )

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

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

Brent Skorup (Contact Author)

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

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