Property Rights in Spectrum: Taking the Next Step

Abstract

On the views of almost all commentators, the primary obstacle to recognizing property rights in spectrum is either a lack of economic sophistication or political will by the relevant policymakers. To such commentators, the FCC (or a court) could simply enforce property rights at the geographic boundary of a coverage area as well as at the boundaries (or edges) of different frequency bands. On such a view, if a spectrum licensee did not respect such boundaries - i.e., trespassed onto a neighboring geographic area or frequency band - the FCC (or a court) should issue an injunction to prevent such conduct.

This paper explains that the transition to a property rights model for spectrum is far more complex than commonly portrayed. First, unlike real property, radio spectrum does not allow for clear boundaries, as radio waves propagate in varying ways depending on a variety of circumstances and practical filtering constraints prevent total isolation between adjacent frequency bands. Second, if property rights are granted in a manner that would allow injunctions for trespass, it is quite possible that parties could bring actions solely to threaten an injunction and obtain a license along the lines of the much-criticized patent trolls. Finally, and most significantly, any workable system of property rights will need to rely on (at least to some degree) the predictive models - i.e., statistical predictions as to how often interference is likely to occur - that generally govern how spectrum is used today. Notably, any such reliance begs the question of how such models will be integrated into an enforcement system and with the reality of whether interference is actually present.

We do not have all of the answers worked out for how a property rights system for spectrum would work in practice. We do, however, believe that the overly simple assumptions underlying the claims of most property rights advocates could lead to unfortunate results and unintended consequences. To avoid such results, commentators - particularly those integrating technological, economic, and legal expertise - need to engage on the merits of a critically important policy challenge. Although we do not yet grasp all of the particulars of the ideal model for property rights in spectrum, we do believe that it will look quite different from its real property counterpart to which it is often inaccurately compared.

Keywords: Spectrum, telecommunications policy, property rights

JEL Classification: L51, L96, O34, O38, K23, K11