Redesigning Spectrum Licenses to Encourage Innovation and Investment

8 Pages Posted: 10 Aug 2017 Last revised: 14 Sep 2017

See all articles by Paul R. Milgrom

Paul R. Milgrom

Stanford University

E. Glen Weyl

Microsoft Research New York City; Princeton University - Julis Rabinowitz Center for Public Policy and Finance

Anthony Lee Zhang

Stanford Graduate School of Business

Date Written: August 7, 2017

Abstract

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

Milgrom, Paul R. and Weyl, Eric 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

Paul R. Milgrom (Contact Author)

Stanford University ( email )

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HOME PAGE: www.milgrom.net

Eric Glen Weyl

Microsoft Research New York City ( email )

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HOME PAGE: http://www.glenweyl.com

Princeton University - Julis Rabinowitz Center for Public Policy and Finance ( email )

Princeton University
Princeton, NJ 08544-1021
United States

Anthony Lee Zhang

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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