8 Pages Posted: 10 Aug 2017 Last revised: 14 Sep 2017
Date Written: August 7, 2017
Commercial radio spectrum use rights in the US are traditionally assigned using licenses over large geographic areas with 10- or 15-year terms, to encourage infrastructure investment. However, such long-term licenses are difficult to reassign as more valuable uses for spectrum arise. Licenses with shorter term limits over smaller areas expedite reassignment of spectrum to innovative entrants, but provide lower incentives for long-term investment. Recent economic theory suggests that this trade-off between protecting long-term investments and enabling valuable, innovative entry can be muted by a new, more efficient “depreciating” license. A promising application is to priority access in the 3.5GHz band, where thousands of licenses are about to be auctioned. Alternatively, carefully redesigning auction rules may offer similar benefits.
Keywords: depreciating license, 3.5GHz, priority access licenses
JEL Classification: K23, D44, H4
Suggested Citation: Suggested Citation
Milgrom, Paul R. and Weyl, E. Glen and Zhang, Anthony Lee, Redesigning Spectrum Licenses to Encourage Innovation and Investment (August 7, 2017). Regulation, Vol. 40, No. 3, 2017; Stanford University Graduate School of Business Research Paper No. 17-55. Available at SSRN: https://ssrn.com/abstract=3015929