Regulation in Light of Changing Technologies
Massachusetts Institute of Technology
Harvard Law School
Prepared as part of the course requirements for
MIT 6.805/STS085: Ethics and Law on the Electronic Frontier
Harvard Law School: The Law of Cyberspace—Social Protocols
The authors would like to thank Professor Yochai Benkler, NYU School of Law, for advising this project and providing his valuable insight into the spread spectrum problem. Special thanks also to Professor Hal Abelson, MIT, and Professor Larry Lessig, Harvard Law School, for introducing us to this topic and helping to guide our efforts.
Designing a regulatory framework that adapts to changing technology is no doubt a daunting task, and Congress and government agencies don’t always do enough to ensure that regulation changes to keep pace with technology. This paper describes one such technical development—spread spectrum technology. Spread spectrum and other digital radio technology has rendered the government’s spectrum management regulation obsolete. For the last sixty-plus years, the government has managed the spectrum by allocating portions of it to individual users through licenses and auctions for licenses. This regulatory scheme was based on the premise that spectrum was a scarce resource, and that in order for anyone to be heard, the government had to ensure that broadcasters did not suffer interference from other broadcasters. Spread spectrum technology, however, has changed these assumptions by allowing multiple signals to be transmitted over wide ranges of spectrum without resulting in interference from other signals transmitted over the same frequencies.
This paper examines and criticizes the present scheme of spectrum management, and suggests that the present system of spectrum allocation be phased out and replaced with a system of open spectrum access. This paper argues that not only is a system of open spectrum access a better policy choice economically and for encouraging innovation, but that is also required by the Constitution of the United States. Finally, this paper argues that viewing the spectrum as a commons furthers goals of individual autonomy and freedom, and that the government should support these values by adopting this regulatory goal.
Table of Contents
I. Introduction 1
A. What is Spectrum? .6
B. Frequency Gradations. 7
C. Spread Spectrum .12
D. Duplexing 16
E. Multiple Access Methods 17
F. Examples 18
III. Overview of Spectrum Use and Past Regulation 19
A. Humble Beginnings of Wireless Communication 20
B. Early Regulation Out of Necessity 21
C. Formation of the FCC and Regulatory Plan 22
D. Studies of FCC Regulation 25
E. Summary 33
IV. Current FCC Regulation and Policies 34
A. Regulations 34
B. Current FCC Policy 42
V. Auctions, and Why the Present System Should Change 50
A. Auctions: A Background 50
B. Answering the Arguments for Auctions 51
C. Additional Disadvantages of Auctions 59
VI. Constitutional Challenges to Existing Regulation 64
A. Constitutional Concerns: First Amendment Implications 65
B. Political Concerns: A Climate for Change 70
VII. Technological and Economic Recommendations 71
A. The Role of Standardization 72
B. Technology Standards 75
C. Market Standards 77
VIII. Conclusion 79
Spread Spectrum: Regulation in Light of Changing Technologies
Few topics have received as much attention in recent years as the growth of the communications industry, spurred along by the amazing growth of the internet. Everyone, from academics to engineers to policymakers, talks about the importance of an information infrastructure as we enter the new millenium. The advent of electronic commerce on the internet has transformed more abstract debates about the political and social implications of the internet to the forefront of discussions about the growth of the national and global economy. As businesspeople and some policymakers attempt to take advantage of the opportunities for economic growth presented by the internet, lawyers and policymakers are seeking solutions to the legal and policy problems posed by this amazing new medium.
Another related and much-talked about development in the communications industry has been the convergence of technologies in the industry. A decade or so ago, the airwaves were used for commercial broadcast and radio, the telephone network was used for interpersonal communications, and cable was used for cable TV service. Today, these distinctions mean little, and we have realized that it is the service—whether it is telephone service or internet access—that the end-user is interested in; the medium is just a way to get it there. This convergence has happened because of the development of technology, and again, law- and policymakers have struggled with creating a regulatory framework within with technology is allowed to develop and flourish.
As the growth of technology shows no sign of slowing down, the development of regulatory frameworks to contend with changing technology—and a world that is changing with it—is increasingly vital. In developing these frameworks, lawmakers must keep two things in mind. First, technology itself can and does act as a regulator, in the sense that it impacts the choices available to society. Second, the technical architectures that we choose—either explicitly or by developing regulatory frameworks that favor certain technologies—have values associated with them. In addition, lawmakers must remember that technology is an ever-changing variable, and should not hesitate to reexamine their earlier choices when changing technology renders their earlier assumptions obsolete.
This paper focuses on one example of a technological change that has made it imperative upon lawmakers to reexamine the existing regulatory scheme. This is the example of spectrum allocation. Strangely enough, the framework for allocating spectrum has changed in the past few years, with a move from licensing spectrum to auctioning off eight-year licenses. However, this change was motivated by economic considerations that were suggested several decades ago, and not by the changes in technology that the wireless transmission world has seen since the original licensing framework was adopted in the 1920s. Recently, wireless transmission technology has changed to an extent that compels us to push for more change—to question the very practice of granting exclusive licenses to broadcast at particular frequencies, and to push for open spectrum access.
It is interesting (especially given the interdisciplinary nature of this project group) to note that objections to the FCC’s practice of spectrum allocation have come from three different viewpoints. The first is technical. The system of allocating a particular frequency band to a single user is based on outdated technology. Early receivers and transmission schemes were such that we needed to be concerned about the possibility of interference. The development and implementation of spread spectrum and digital radio technology allow us to use receivers and transmission schemes such that interference is not a significant concern. By staying mired in a world of exclusive spectrum use, we are hurting the development of digital radio technology. As long as individual parties need a license to transmit, there is no incentive for innovators to design creative new ways for radio transmitters to coexist. Not having open spectrum access is keeping the radio industry from growing like the computer industry, where the open access communications scheme of the internet has spurred innovation that few (if any) developments in history can match.
The second viewpoint from which the FCC’s spectrum allocation process has been attacked is economic. An auction acts as barrier to entry to small firms and unproven technologies, which are often the sites of innovation. Further, auctions tend to "exaggerate actual net revenues raised because [there] is a trade-off between short-term revenue to the treasury and long-term reduced tax yields." Open spectrum access, on the other hand, is a free-market alternative to the government-sanctioned monopolies and oligopolies that auctions create.
The third, and perhaps most intriguing, viewpoint from which the FCC’s spectrum allocation policies can be attacked is Constitutional. By allocating spectrum licenses, the government is essentially picking who can talk and who cannot. While this decision is certainly viewpoint neutral, a government action that favors particular parties’ free speech rights at the expense of others has to be narrowly tailored to serve a substantial governmental interest. Traditionally, the prevention of interference between competing transmissions was this governmental interest. However, the advancements in spread spectrum and digital radio technology mean that this interest no longer exists, since spread spectrum allows multiple signals to be transmitted at the same frequency without the problem of interference.
Before delving into the interesting policy debates, however, a framework for understanding the problem needs to be developed. The next Part of this Paper introduces the technology of wireless communications and the advancements of spread spectrum and digital radio techniques. Part III then presents an overview of past spectrum regulation and spectrum use. Part IV will discuss current FCC policies and regulation. Part V will describe and criticize the FCC’s current policy of auctioning exclusive licenses for using the spectrum. Part VI will continue the challenge to the FCC’s auctioning policy by arguing that the First Amendment of the Constitution compels a system of open spectrum access rather than a system of exclusive licenses. Part VII will introduce some of the technical hurdles that a system of open spectrum access faces, and makes some recommendations on implementing such a system. Finally, Part VIII reiterates the importance of reevaluating the current scheme of spectrum allocation in light of changing technology, and suggests that the FCC take affirmative steps to ensure that open spectrum access allows a "spectrum commons" to develop.
II. Spread Spectrum Fundamentals
The most basic form of wireless communication comes in human speech processing. Sound waves are formed through the compression of air in the vocal chords of the speaker, and these waves are communicated through the ambient air to the listener’s ears. At the ear of the listener, the waves impinge upon the eardrum of the listener and are translated into familiar words, phrases, and tones. When information is transmitted through wireless means such as in radio transmission, this information must first be converted to electrical signals. The signals that are produced from the conversion map closely to the signals that arise in the human ear from sound waves impinging on the eardrum. The analogies of the signal to human audition processing gives rise to the term analog communication. The counter-side of analog communication is digital communication, in which the two major quantities of the signal¾ time and magnitude¾ are obtained through quantization and transmitted in discrete bits. Regardless of the type of communication, the beauty of radio transmission is that it takes advantage of the spectrum in free space. In order to understand the benefits of radio transmission, it is helpful to discuss the nature of the term "spectrum."
A. What is Spectrum?
While the technology-focus of this paper is wireless communications, it is important to understand that "spectrum" is a general term used to encompass the spatial and temporal properties of any medium, including fiber optic cable, coaxial cable, and ambient air. From the view of a strict constructionist, spectrum is a type of division based on frequency or wavelength. Generally, we think of signals in the real-world setting as being functions of time. One could graph a sinusoidal wave as a function of time, as shown in Figure 1
It is an interesting exercise to discover how frequency is related to the time domain. In the time domain, it becomes evident that the sine wave in Figure 1 has similar characteristics after the time T. In fact, the function repeats itself after this point. The point labeled T is a special point in that it marks the periodicity of the function (i.e., the shortest length of time after which the function repeats itself). The frequency, f, of the function is defined as the reciprocal of the period T.
From this expression, it is demonstrated that the frequency domain is the inverse of the time domain. This is seemingly at odds with the original explanation of spectrum.
A better explanation of the term "spectrum" emerges when we restrict the term to the more common application of communications through wireless media. In this light, the term spectrum represents the temporal and spatial opportunities to transmit information. Spatial opportunities are directly analogous to different frequencies in the frequency domain, and temporal opportunities are the spectral equivalent of consecutive slots in a particular frequency. A multilane highway provides a natural and useful analogy to the nature of spectrum. Consider a signal to be a single car (or, in some instances, a group of cars) traveling along the highway. The opportunity for the car to move along the highway is represented by the empty spaces both within and between lanes. Each lane in the highway can be thought of as a different frequency, and each car in a specific lane can be thought of as in a distinct temporal slot.
B. Frequency Gradations
Not all frequencies in the spectrum are created equal. Just as each lane in a highway has different traits of speed and accessibility, so do frequencies in the spectrum. There are inherent differences in the frequencies that make some parts of the spectrum better suited for certain forms of transmission. This section will provide an overview of the different uses for specific portions of the spectrum. Figure 2 shows the popular uses for the different range of the spectrum.
Figure 2:The uses of the electromagnetic spectrum.
The range of frequencies in the electromagnetic spectrum is typically divided into eight bands. These bands span the spectrum from 3 Hertz to 300 GHz. The characteristics of propagation for a signal vary depending on the band in which the signal is transmitted. Typically, signals are transmitted by an antenna device that transmits energy in all directions. The path of this energy depends very heavily on the range of frequencies. Low frequencies, for instance, travel in surface waves along the earth in a pattern that maps closely to the curvature of the earth; these waves dissipate quickly, making them well suited for transmission over short distances. At frequencies around 30 MHz, the energy has an upward movement, bringing it into the region of the earth’s atmosphere known as the ionosphere. See Figure 3.
Figure 3:Signal propagation paths.
The ionosphere is an ionized layer of the earth’s upper atmosphere that acts as a mirror and reflects the waves back down to the surface. Signals at frequencies around 30MHz are transparent to the ionosphere; therefore, they are used primarily for satellite communications. Some waves travel a direct path from the transmitter to the receiver, known as the line-of-sight. A surface-reflected wave is a wave that bounces off the surface of the earth toward the receiver. This wave will be discussed in greater detail later in the paper. Table 1 shows information regarding the common uses of particular frequencies and their respective band classifications.
3 to 30 KHz
Very Low Frequency Band (VLF)
30 – 300 KHz
Low Frequency Band (LF)
300 KHz – 3 MHz
Medium Frequency Band (MF)
3MHz – 30 MHz
High Frequency Band (HF)
30 MHz –300 MHz
Very High Frequency Band (VHF)
300MHz - 3 GHz
Ultra High Frequency Band (UHF)
3 GHz - 30GHz
Super High Frequency (SHF)
Extremely High Frequency (EHF)
Table 1:Information regarding the common uses of particular frequencies
The range of frequencies from 3 to 30 KHz are known as the very low frequency (VLF) band. These signals penetrate a few meters into the ocean; therefore they are used primarily in submarine communication. Signals in the MF band are absorbed by the ionosphere; therefore, their range is limited. The effect is greater in daylight hours, which causes the signals’ range to be sufficiently small during peak operating times. The HF band is used primarily for long-distance short wave communications. In the Very High Frequency (VHF) bands, the signal can only be transmitted in a straight path, i.e. line-of-site. Figure 4 shows that the line-of-sight path can be traversed directly or through a wave that is reflected from the surface of the earth.
Figure 4:Two Paths traversed from transmitter to receiver
Since the path of the reflected wave is longer than the line of sight path, one may experience interferences of the signal as a result of the two signals arriving at different times. The height of the transmitting antenna is critical in the VHF band in order to achieve greater distances. The Ultra High Frequency (UHF) band is used primarily for broadcasting via television in addition to mobile communications. In this band, line-of-sight issues are even more critical than in VHF and obstacles such as hills and buildings may cast shadows that impede the signal.
The highway analogy that was introduced earlier in Section II.A also provides insight into the finite nature of spectrum. It has been argued that spectrum is infinite. While this situation may present itself given increasingly more sophisticated transmitting devices and interesting modulation schemes opening up higher and higher frequencies, infinite spectrum is not truly the case. At a given state of technology, the amount of spectrum that is available for communication is necessarily limited. Just as a highway can grind to a halt both within and between lanes, information can be halted due to a lack of opportunities to transmit. As technology progresses, data can be sent at increasingly higher frequencies and with finer temporal granularity, thereby bringing more spectrum into productive use. The advancement of technology is general accepted to be governed by an increasing exponential, typically known as Moore’s Law; thus, at any given stage of development, the amount of useable spectrum is indeed finite. This situation does not occur in wireline transmission—when fiber spectrum becomes an issue, we can simply add more fiber to the system. In wireless communications, however, we must seek other avenues for utilizing spectrum in constrained times.
Wireless spectrum is not replicable. In order to simulate the adding of extra fiber to the wireline system, one must implement a scheme of spectrum reuse. Consider the case of two radio stations separated by a large distance. If the two stations transmit on the exact same frequency and limit the power at which they transmit, the two signals will not interfere. Since signal power drops off as the inverse square of the distance away from the transmitter, a communications system can be devised to judiciously place transmitters in cells such that they overlap slightly. This scheme of overlapping cells almost doubles the capacity of the system in a single transmitter case. It is, in fact, the wireline equivalent of laying down another line of fiber between the two communication points, effectively doubling the capacity of the circuit.
We have discussed the nature of spectrum, the gradations of spectral frequencies, and the reuse of portions of the spectrum, but we have not delved into the nuts and bolts of spread spectrum
C. Spread Spectrum
In general, signal transmission is enabled through some means of modulation. In the past, systems have relied primarily on narrow-band modulation schemes. In these systems, all of the power in a transmitted signal is confined to a very narrow portion of the frequency bandwidth. As a result of these narrow frequencies, an interfering frequency at or near the transmitting frequency can cause interference, which render the signal unrecoverable. Amplitude Modulation (AM) is one example of a narrow-band modulation scheme in which the amplitude of the carrier signal is made stronger or weaker based on the information in the signal to be transmitted. The large amounts of power that are associated with Amplitude Modulation allow the signal to travel large distances before it attenuates to an undetectable level. A second popular form of modulation is Frequency Modulation (FM), in which the phase of the carrier frequency is adjusted in accordance with the signal being transmitted. Narrow-band modulation schemes are not the only implementations available to broadcasters. Broadcasting entities may take advantage of the fact that a defined spectral power density may be achieved not only through high power over a very narrow frequency range, but also through lower powers spread over much larger frequency ranges. See Figure 5.
Figure 5:Graphical Display of Narrow-Band and Wide-Band Signals
Spread spectrum is a class of modulation techniques developed over the past 50 years. In order to qualify as a spread spectrum signal, the following criteria must be met:
Most commercial spread spectrum systems transmit an RF signal bandwidth in the neighborhood of one to two orders of magnitude greater than the bandwidth of the information that is being sent. Transmitted bandwidth can be as large as three orders of magnitude above the bandwidth of the information. There are a number of benefits that are obtained from spreading the transmitted signal bandwidth. First, because the spread spectrum signal is being spread over a large bandwidth, it can coexist with narrow-band signals with only a slight increase to the noise floor in a give slice of spectrum. This coexistence is possible because the spread-spectrum receiver is "looking" over such a large range of frequencies that it does not see the narrow-band frequency. Even if the spread-spectrum receiver does detect the narrow band signal, it does not recognize the signal because it is not being transmitted with the proper code sequence. There are a number of incarnations of spread spectrum modulations. We will concentrate our attention on two popular forms of spread spectrum modulation, Direct Sequence and Frequency Hopping, making note that a third hybrid form of the two presented here does exist in practice.
Direct Sequence is one of the most popular forms of spread spectrum. This is probably a result of the simplicity with which direct sequencing can be implemented. In this form of modulation, a pseudo-random noise generator creates a high-speed pseudo-noise code sequence. This sequence is transmitted at a maximum bit rate called the chip rate. The pseudo-random code sequence is used to directly modulate the narrow-band carrier signal; thus, it directly sets the transmitted radio frequency (RF) bandwidth. The chip rate has a direct correlation to the spread of the information. The information is demodulated at the receiving end by multiplying the signal by a locally generated version of the pseudo-random code sequence. While direct sequence is a very popular form of spread spectrum transmission, it is not by any means the only method available. Another popular from of implementing spread spectrum takes an entirely different approach to spreading then that of direct sequencing.
Frequency Hopping is a from of spread spectrum in which spreading takes place by hopping from frequency to frequency over a wide band. The specific order in which the hopping occurs is determined by a hopping table generated with the help of a pseudo-random code sequence. The rate of hopping is a function of the information rate. The order of frequencies that is selected by the receiver is dictated by the pseudo-random noise sequence. While the transmitted spectrum of a frequency-hopping signal is quite different from that of a direct sequence signal, it is sufficient to note that the data is spread out over a signal band larger than is necessary to carry it. In both cases, the resultant signal appears noise-like and the receiver utilizes a similar technique to the one employed in transmitting in order to recover the original signal.
There are many advantages to using spread spectrum. Since spread-spectrum receivers can effectively ignore narrow-band transmissions, it is possible to share the same frequency band with other users. These users can weather a significant degree of overlap without interference effects. In both mechanisms discussed above, a pseudo-random noise sequence was employed—either to directly modulate the signal or to determine the order of frequencies in the hopping table. Since this pseudo-random signal makes the transmitted signal appear as noise, only receivers possessing the proper duplicate pseudo-random noise code sequence will be able to recover the signal. This fact has great implications for ensuring the privacy of point-to-point communications (or point to multi-point communications, as the case may be). In fact, the US military has for some years used the fact that the noise-like character of the transmitted signal drastically reduces the probability of signal detection and interception to ensure secure communications. The secure communications in and of itself is not sufficiently interesting as strong encryption and spoofing countermeasures can be added (perhaps at great cost) to existing narrow-band communications. The property of interest in spread spectrum transmission is the scheme’s ability to provide point-to-point communications without explicit coordination of the speakers. A crude analogy can be made to the CB radios that truckers often employ: the speaker keeps switching the channel until a free spot is open. Spread spectrum’s more sophisticated hopping sequence spreads the speaker’s message over various channels at different points in time (in one incarnation of the system). This pseudo-random hopping behavior unseats the long-held assumption that signals from two or more speakers may not overlap in time and space in order for communication to occur. To the contrary, all spread-spectrum systems have a threshold or tolerance level below which useful communication continues unimpeded. The question that remains is coordination of users in a multiple access regime.
In order to communicate, we must be able to send and receive information. The bi-directional nature of communications calls for two channels to exist, at least in an abstract form. The method by which we established these channels in the communications realm is defined as the method of duplexing. There are primarily two major methods of establishing send and receive channels: Time Division Duplexing (TDD) and Frequency Division Duplexing (FDD). This section will describe the two duplexing methods in order to lay the groundwork for a discussion of multiple access methods. In our discussions of traffic flow, we will employ two acronyms for convenience. Traffic from the transmitter to the receiver will be term T-R traffic, and traffic from the receiver to the transmitter will be denoted as R-T traffic.
To revisit our highway analogy in a slightly altered form, Time Division Duplexing (TDD) is analogous to a highway in which traffic can only go in one direction at a time. In a TDD system, the traffic pattern alternates. For a period of time, all traffic is T-R; then, the T-R traffic is curbed and only R-T traffic is allowed to flow. In this way, we have created two abstract channels; however, only one type of channel—send or receive—can exist at any given point in time. This system is quite different from the implementation of a frequency division duplex system.
In a frequency division duplex system, we have essentially a bi-directional highway for all time. FDD systems assign specific portions or frequencies of the spectrum to T-R traffic and the rest of the spectrum to R-T traffic. These bands do not have to be continuous; however, the sum of the T-R and R-T bandwidth should be the total bandwidth available. Once we have established the nature of the lanes to-and-from a specific location, it becomes necessary to put in place structures for managing multiple users.
E. Multiple Access Methods
There are primarily three major methods for managing multiple access in broadcasting. These methods are Frequency Division Multiple Access (FDMA), Time Division Multiple Access (TDMA), and Code Division Multiple Access (CDMA). In keeping with the highway analogy that pervades this Paper, the major difference in each of these multiple access methods is determining what constitutes a car on the highway. We have drawn analogies to cars seeking spots in and between lanes in order to progress from one point to another. In FDMA, the T-R and R-T channels are further subdivided into more distinct channels. These channels represent cars on the highway. In a TDMA system, however, the channels are composed of individual time slots. Each user can send information in a specific direction (T-R or R-T) using their time slot. This mechanism is much like time sharing in large-scale corporate mainframe systems. A completely different mechanism for multiple access that is devoid of anchors in the time or frequency domain is Code Division Multiple Access (CDMA). In CDMA, each user is given a unique code. Receivers may be highly selective in what information they listen to by tuning in to a specific code. Since the number of available codes is not necessarily bounded by strong limitations on availability, CDMA has become the multiple access enabling method of choice in many applications of cellular communications.
Spread-spectrum techniques have implications in a number of applications from networking to broadcasting. For example, spread spectrum techniques may be used in areas such as wireless communications where the last mile of fiber to the home maybe a significant investment for rural locations. In fact, the cost of local loop infrastructure may be up to 50% of the expenditure for a fixed-line telecommunications operator. In these special situations, spread spectrum local loop networks could alleviate a very large investment in infrastructure. Spread spectrum systems were used in similar situations to network school districts in New Mexico and Colorado. But high communications infrastructure costs extend beyond rural locations. Metricom’s Ricochet wireless network has been successfully deployed in several urban areas to provide internet and telephone access. Meanwhile, corporations in older metropolitan buildings may find the cost of upgrading network equipment to be a sizable portion of their technology budgets. Ripping up existing fiber to include a more extensive installed fiber base is an expensive process. Spread spectrum provides a method of circumventing additional infrastructure cost in the form of Wireless Local Area Networks (WLANS). These wireless networks are primarily located in four major industries: Healthcare, Manufacturing (factory floors), Banking, and Education.
In the healthcare industry, WLANS can be used to give doctors up-to-the-minute information on patients by accessing databases through laptops and some hand-held devices. Additionally, patient health levels through blood pressure and heart rate may be monitored at a distance. Factories use WLANS to give up-to-the-minute information to the docks regarding inventory in addition to quickly realigning production to meet incoming orders and specifications. Similar incarnations of WLANS are present in the financial industry where down time of the network is critical. Information may be updated or transferred in banks without shutting down the network through the use of wireless local area networks. While down time in educational institutions is not a major concern, the classroom becomes more distributed through the implementation of WLANS. Distance learning becomes a great deal more feasible at very low costs as a result of WLAN technology.
In addition to the areas listed above, spread spectrum has applications in a number of other areas such as amateur radio, radio frequency identification in areas such as key fobs for cars, and position location.
III. Overview of Spectrum Use and Past Regulation
Knowledge of what has happened in the past with regards to spectrum use and regulation is necessary in order to make recommendations of our own. The large range of frequencies capable of carrying information through the air defines the spectrum. The number of uses of this resource has grown considerably since the Morse Code transmissions early this century. In fact, most people probably take for granted how important the spectrum is to our society. For one, it made possible one of the largest and most influential industries of our time, television. Even more important is the ability to communicate without the wire in other respects, giving freedom to emergency services, marine transportation, and, of course, the space program. One organization has had the task of regulating this spectrum, the Federal Communications Commission. The FCC has made some difficult decisions regarding every aspect of spectrum use. One of the more relevant reasons for regulation is spectrum scarcity where extensive use within a particular band causes interference. This section of the paper will show how the FCC has dealt with scarcity in the past. A review of past regulation and spectrum allocation by the FCC will illuminate on the mindset of the organization. This information will be valuable in deciding how to approach the FCC today in suggesting a regulatory scheme for spread-spectrum technology.
A. Humble Beginnings of Wireless Communication
The spectrum was first used around the turn of the century as a means for wireless telegraphy. Morse Code transmissions were sent through the air which provided a new way to communicate. Of course, the equipment at the time was primitive in that it could not focus on narrow frequencies, so there were interference problems right away. Obvious methods were used at first to combat the problem, such as scheduling times for certain transmissions and placing the transmitters a distance away from each other. In light of these few annoyances, the Navy immediately saw the technology as a breakthrough. The Navy essentially took control of the radio industry in the early 1900s, and there was a way to communicate with ships at sea. The Navy started building shore stations and handing out contracts to inventors of radio technology.
After World War I, the Navy stepped aside and private enterprise took over radio broadcasting. By now radio was more than plain telegraphy, taking more of a broadcast form with radio stations similar to what we have today. KDKA in Pittsburgh was one of the first radio stations and actually covered the 1920 Presidential elections with its initial broadcast. This was a time where companies involved in radio which had survived the War such as GE, RCA and AT&T became directly involved in the broadcast boom. The result was an industry formed around the selling of inexpensive receiver sets for radio. Broadcast stations and the quality of programming were directed at increasing the sales of these receiver sets to virtually everyone in the country. As more and more stations appeared, the Department of Commerce, which was in charge of handing out licenses, doled out more and more of them. Radio broadcasting was quickly heading to a crisis.
B. Early Regulation out of Necessity
As more and more organizations wanted to use the spectrum for broadcasting, interference became an unavoidable problem. Interference was addressed some time before the radio broadcasting boom with the Radio Act of 1912. The legislation was a direct response to the sinking of the Titanic whose distress calls might have encountered interference at the critical time. For reasons of public safety, then, the Act was passed which said that no one could transmit without permission. In 1920, however, the Department of Commerce was handing out a large number of licenses. The only way to prevent interference now was to restrict the number of licenses issued. In 1923 a court ruling took away that assumed power of the Department. Since interference was such a severe problem, Hoover, who was at the head of the Department, met with people involved in the radio industry to try and devise a regulatory plan. The product of this effort was the (standard) broadcast band allocation plan that is still in use to some extent today. The plan called for high-powered stations to be free from interference over a large area, medium-powered stations over a smaller area. Amateurs were left in the shadow of industry because they were regulated to the low-power realm, which had limited reach. The number of hours they were allowed to broadcast was also limited. In addition, most of the restrictions on what to broadcast were placed on the amateurs. Another court ruling in 1926 took away most of these assumed powers of the Department. They could no longer impose restrictions on frequency, power, and hours of operation pertaining to a license. Hoover, feeling frustrated, put an end to the regulation of the airwaves.
With no regulation, the airwaves became unruly and riddled with interference. True legislation had to be passed in order to make the spectrum useful. What happened after Hoover took the Department of Commerce out of broadcast regulation was aptly described as chaos. With no restrictions on the number of licenses, power, or frequency, the spectrum became replete with interference. More powerful stations were blasting out weaker ones on nearby frequencies. Some stations were hopping around the spectrum with the hopes of finding a better location. And more and more broadcasters were entering the fray. A tragedy of the commons was the result, where everyone was allowed to operate in the spectrum but the resource was practically ruined. Congress quickly came to the conclusion that regulation was needed in order to save the spectrum. It passed the Radio Act of 1927, which, for the most part, enacted the regulation that the Department of Commerce was following only a year earlier. The Act named the Federal Radio Commission in charge of the regulation. The realization that the spectrum was a finite resource easily susceptible to interference was sobering. In order to protect radio as a public good—to make it beneficial to all—regulation was required.
C. Formation of the FCC and Regulatory Plan
In only a few years time, the task of regulation was given to a larger, more organized body, the Federal Communications Commission. In the years following the passage of the Radio Act of 1927, the FRC quickly became overwhelmed, as did another organization that dealt with the telephone and telegraph industries, the Interstate Commerce Commission. The Communications Act of 1934 created the FCC to take over the responsibilities of both. Authorization was given to the Commission to regulate every aspect of the spectrum not used by the federal government. This includes spectrum use by state and local governments, private and nonprofit broadcasters, business, industry, transportation and other specialized users. An excellent summary of the specific regulatory powers given to the FCC by the Act, mostly concerning radio at the time, is restated here from Levin’s text:
The Communications Act essentially gives the FCC a number of regulatory goals. Full occupancy refers to sec. 303-g of the Act, which requests a "larger more effective use" of the spectrum. The lengths to which the spectrum can be filled always depend on current technology. Decisions have to be made concerning wire alternatives and available technology when dealing with the expansion of the spectrum to more services. Efficient usage refers to the correct allocation of spectrum to all users. Incorrect allocation is described by users who (a) do not need their entire bandwidth for their communications, (b) are in need of more bandwidth mainly to offer more reliable service, and (c) could benefit everyone involved if they were in a different part of the spectrum. Usually this is a problem when an old allocation plan places a service in the spectrum. Some years later, new technology may better serve the other spectrum users by enabling the service to be placed elsewhere. Sustained development again refers to the goal of "larger more effective use" of the spectrum through research and development. The improved technology will aid in better serving users and broadcasters as well as adding capabilities to accept more services into the spectrum. Equal access refers to the type of options potential spectrum users have regarding entrance into the broadcast arena. They can either enter on their own, by building and operating their own communications systems, or they can purchase service from a carrier. The last goal deals with wide diffusion from sec. 1 of the Act, which calls for the provision of a "service with adequate facilities at reasonable charges." The FCC is then required to provide the most economical service by the spectrum at the lowest rates.
The dual role of the FCC to be both pro-competitive and regulatory is described more broadly in the Act. Sec. 3-h emphasizes that broadcasting is not a public utility. Other parts of the Act constrain license rights and require the waiving of rights despite prior use. Protection by the FCC through regulation seems to be discouraged by these remarks in the legislation. In fact, pro-competitive tendencies are encouraged in sections of the Act which apply antitrust laws to broadcasting. For example, a broadcaster may be forbidden from entering telephone, telegraph, or cable if he threatens to upset a competitive balance. The Act goes on to suggest that regulation is necessary but should always refer to the public character of the spectrum. An example is the Commission’s licensing power, where licenses should only be granted in the public interest. This public interest is protected by the FCC who has the power to change industry behaviors through regulation and due process as long as censorship is not the end result.
D. Studies of FCC Regulation
There are three different areas which spectrum users fall into and which the FCC regulates differently. These are broadcast service, common carrier, and the safety and special radio services. The broadcast service mainly covers radio and television. Here the FCC is more pro-competitive, using entry controls and service standards but favoring competition. Common carrier refers to services that allow the transmission of messages—mainly by telephone or telegraph, but today even by digital transmissions. The FCC regulates these services similar to the manner in which public utilities are regulated, more so than in the case of broadcasters. Heavy regulation is involved here to protect the public good, including control of rates, routes, charges, and quality of service. The safety and special radio services are treated differently as well, mainly due to the number of different services involved. They allow for non-broadcast private users to communicate over walkie-talkies, CBs and the like. The non-broadcast public includes the safety officials (mainly police), fire, local government, and special emergency services. Thinking about these different services in terms of what is offered to the user results in two distinctions. The broadcast realm offers programs and entertainment, venues for the public to express themselves. Common carrier and emergency services provide a different service, the ability to directly communicate with another person. Examples of past regulation in these two realms will be reviewed with the hopes of further understanding how the FCC uses regulation to combat scarcity and utilize new technology.
1. Regulation in Standard (AM) and FM broadcasting
AM broadcasting has had its ups and downs since the Communications Act of 1934. There was a stall in growth during the Second World War, followed by another boom. New AM stations were appearing everywhere and the Commission soon had another problem on its hands. Shortly after the War, the FCC casually approved licenses for new stations just by waging the cost of some interference with the benefit the station may provide. The consequences of this type of deliberation were not immediate, but around 1960 interference again became an unavoidable problem. The resulting regulation from the Commission practically killed AM. Starting in 1968, every broadcaster applying for an AM license had to prove they could not put their service on FM first! This inevitably led to the broadcasting landscape we now have today where FM is more widely used. What is important here is that the FCC was using a non-technical restriction on licenses; in order to decrease spectrum scarcity in the AM band, regulation was put into effect that ignored technology as a viable solution. With broadcasting, the damage was compounded with the possibility of infringing on First Amendment rights. In this situation the regulation of the FCC further restricted access to the AM band and violated the rights of some broadcasters who were denied licenses.
One possible way to decrease the scarcity of the AM band was to decrease the frequency spacing between the channels. Through most of AM’s history, stations were given broadcast frequencies that were 10kHz apart. This was in direct conflict with the 9kHz spacing used in other countries. Major broadcasting areas had documented that their 9kHz channel spacing eliminated most of the interference found between close broadcast frequencies. Even more importantly, the new spacing would result in a more efficient use of the spectrum in the United States. More stations would be allowed in the AM band and the thought was that this would increase diversity and loosen the regulation concerning AM allocation. The interesting thing about the proposal was that all of the major broadcasting groups were behind it, even though it clearly threatened broadcasters with direct competition. The possibility of acquiring more spectrum for commercial or noncommercial use just seemed too attractive. One of the few groups in the industry that was not so excited about the move to 9kHz spacing was the manufacturers of AM receivers. They were upset that their digital receivers would not work correctly with the new spacing and claimed they were not given fair advanced notice. These digital receivers, however, comprised less than one percent of the existing AM receivers, and the FCC had no problem in approving the move to 9kHz in 1981. Very soon afterwards, studies were issued to allay the fears that existing technology would not cooperate with the new spacing. Directional antennas had been used in broadcasting at times to have more control over a frequency, to steer it away from interfering with nearby channels. The changes in frequencies did cause very minor attenuation with some of the antennas, barely noticeable with expert measuring equipment. There was also the threat of increased interference with AM receivers because of the spacing, but this proved to be a similar case where the problem was barely noticeable, and that was in only a few units.
Partly due to the regulation of AM, we have a situation today where FM is very popular and becoming very crowded. The FCC and FM got their start virtually at the same time, around the year 1934. There were excited demonstrations of comparison between AM and FM, but the listeners were at a loss regarding the significance of the new signal. The engineers immediately recognized that the higher frequency of FM required less power to transmit, which could make entry more affordable. Perhaps due to the stronghold that AM had on the broadcasting industry and its success at the time, the FCC was actually reluctant to allow a permit for experimental FM operation. It was only around 1940 that FM was allowed into an experimental band, and a boom quickly followed. To avoid some interference with sunspots, the FCC moved the FM band to a permanent location, which put a halt to the FM growth. Since the band was moved in the spectrum, the old receivers could not tune into the stations. This is a recurring problem where equipment becomes instantly outdated because of changing spectrum regulation. Despite this, FM has since become more popular than AM to both broadcasters and listeners. FM receivers quickly picked up on the high fidelity of FM even though similar technology was used in some AM transmissions. Also, there is a greater ability for FM to disregard unwanted signals and prevent interference. Receivers are able to grab the strongest signal and "lock onto" it. In contrast, different AM signals which are close together just compound themselves and produce interference.
When the FM band started to become crowded in the early 1960s, the FCC was eager to prevent the allocation disaster they had just experienced with AM. In 1963, the Commission offered a solution by drawing up an allocation table for all of the FM channels. Spectrum slices of predetermined size were allocated to broadcasters in an area with the goal of preventing interference. Unfortunately, the table was rather inflexible because it did not take into account the possible use of directional antennas and the fact that all stations did not use the same amounts of power. The pleas for the ability to use directional antennas were denied by the FCC in favor of the allocation table. What was missing was an explanation by the Commission as to why they preferred the table scheme. One reason was that a similar allocation table had been used in the allocation of TV channels with some success. Also, the tables were easy to administer and maintain while providing an almost sure way to provide some quality of service to the users.
There were a couple of problems regarding the FM allocation plan, which allowed for spectral inefficiency. A number of stations which got their start on FM could not afford the type of equipment powerful enough to take advantage of the broadcast area their license provided. According to the allocation plan, the FCC had to treat this station similar to all others in its class, allowing it to grow into their spectrum assignment. There were only three different classes of FM licenses, each having their own power specifications. The complaint in the late 1970s was that more classes were needed in order to increase spectral efficiency. Spectrum was being wasted by stations that only met the low end requirement for a class. More classes with smaller power ranges would eliminate the problem of weaker stations not using part of their allocation. As of 1980, the FCC was leaning more towards a five class system as a possible solution. The other problem with the FM allocation plan was that it ignored the potential of directional antennas. This serves as another good example of a regulatory scheme that ignores technological solutions to spectrum scarcity. The decision had ties to TV’s allocation plan, which seemed to work fine in the absence of directional antennas. In fact, other than TV and FM, the technology was used in almost all other services. The reason behind this blind eye towards directional antennas may have involved TV in another way as well. The three big networks at the time (ABC, CBS, NBC) were comfortable with the TV allocation plan, and if directional antennas proved successful in FM, other TV broadcasters would use the technology to sneak into the viewing area. The broadcast industry immediately wanted to know the exact demand for more FM stations and whether or not the market could support more stations. They also rumored that the directional antennas would be costly and susceptible to lightening damage even though this proved not to be the case.
In the 1980s, a number of new technologies were still being developed regarding both AM and FM. AM stereo is a technology that has been around for some time but has never really caught on, probably because simple AM receivers do not support it. Unfortunately, putting AM stereo capability in new receivers today will not bring people to the stores because FM stereo is so readily available. Likewise, FM may have the ability to add channels to their signals with the advent of FM quad technology. This is an attempt by FM to join the surround-sound technology movement. The same question still applies as to who will manufacture the receivers and who will purchase them. The two bands are also continuously trying to better utilize or increase their portion of the spectrum. The AM industry proposed to extend their band from 1605 kHz to 1860 kHz, but at what advantage? Sure the move would open up the spectrum to more broadcasters, but there is still the question of the manufacturing of receivers. On the FM side, the industry is trying to increase spectrum use by reducing channel spacing as well. Besides the receiver manufacturing question, there are other more serious concerns as well. Questions regarding the effects on FM fidelity and the proposed FM quad technology are definitely warranted.
2. Regulation in Safety and Special Radio Services
There is another radio service that has a similar history to standard broadcast radio. Land mobile radio (LMR) is a specialized service that enables communication between mobile users with portable devices. The service started simply as a one-way communication between a base-station and a receiver. Today, the expansion of the service has led to paging and cellular communications. The one-way type of LMR began in 1921, when the Detroit Police Department placed receivers in police cars. By 1930, the technology had become popular as 29 other cities were already involved. The first license was issued in 1932 allowing for a portable transceiver that enabled two-way communications. Technology further improved leading up to the War because of military requirements for mobile communication. Two new bands in the spectrum were created, the Very High Frequency (VHF) and the Frequency Modulation (FM) band.
Spectrum scarcity became an issue with LMR almost immediately, and regulation was necessary. In the early 1930’s, the FRC allocated some spectrum for police use right above the broadcast band (AM). The newly created FCC allocated additional frequencies in the VHF band for LMR. Since the growth of the service was so fast around this time, different categories of LMR were devised. These categories included a number of private services dealing with land transportation and emergency services. A major ruling in 1949 addressed the serious allocation issues arising from increased use. In addition, the new mobile telephone service was given consideration. The Bell system had for some time been asking for spectrum in order to experiment with their new technology. The pro-competitive FCC ended up allocating spectrum for the mobile telephone service to both wireline common carriers (WCCs) and radio common carriers (RCCs). A decision by the Commission in 1958 created another new service and, in effect, increased the number of licenses available for LMR. The business radio service experienced immediate exponential growth concerning the number of licenses handed out. In 1961, the RCCs were able to negotiate a connection into the Bell system that put them on an equal level with the WCCs. Around this same time, the Bell system was experimenting with another one-way LMR service that used very small personal receivers. In 1960, the FCC recognized this new service by reallocating some channels in the spectrum, but the growth was so fast that another ruling in 1968 equally allocated channels to the RCCs and WCCs specifically for paging.
LMR usage was exploding with these new services and the FCC had to find a way to accommodate the new users in the spectrum, which seemed to have no room. There was little time to wait for technology to solve the problem, which would include better receivers to parse through more precise (more narrow) LMR frequencies. Instead, the FCC had to decide if the public interest would be better served by taking some spectrum from UHF television, allowing for increased allocation to LMR. UHF was an easy target in the 1960s because most of their allocated spectrum was not being used. Nevertheless, the LMR and UHF groups were in disagreement about the proposed allocation scheme. LMR broadcasters and users stated that most of the UHF channels were a waste of spectrum. UHF providers, including educational broadcasters, felt that the lack of spectrum for LMR was due more to poor utilization than mere lack of room. The FCC did not solely pick on the UHF broadcasters without exhausting the alternatives. Other users of spectrum around the 900 MHz range were looked at and the technology was studied as well, only to determine that the under-utilization of the UHF band was the only answer. The decision was made by the FCC to allocate some of the UHF spectrum to LMR in 1970, but this did not end all contention. Infighting immediately began among the different services of LMR who each wanted a big slice of the newly allocated spectrum. The Bell system stated that it needed a larger part of the new spectrum in order to provide a more efficient common carrier service that would have room to expand. Providers of other LMR services such as land transportation and public safety believed that their usage was going to grow the most. They chided the Bell system for trying to steal spectrum away from the more efficient and standard mode of dispatch. The FCC would struggle for some time to satisfy all groups in allocating the new spectrum channels.
The only thing left for the Commission was to choose the technology that would enable the LMR services to better utilize the new allocation. The current technology was a single-channel system consisting mostly of a transceiver at a base-station and the receiver/transmitter units. To increase the broadcast area, repeaters could be used which were placed on tall buildings or hills. There was a cost advantage here because the repeaters could be shared by broadcasters and even a single channel could be shared within an area. Another technology involved computer control and promised more efficient use of the newly allocated spectrum. Called a multi-channel trunked system, it takes advantage of the fact that in any one area usually some frequencies are used more than others. For example, in urban areas the frequencies for dispatch (taxi cabs) will be used more than say the forestry frequencies. Computer control of the spectrum takes advantage of this by placing a user in an unused part of the spectrum, or if the spectrum is full places the user in a queue. The third possibility was cellular technology proposed by AT&T. How the technology works should be familiar to many today. An area is divided into hexagonal cells that mesh rather nicely. In each of these cells are transceivers and receivers that communicate with base stations where there is a connection to the landline. The activity in these cells is controlled by a computer at the base station. The benefit of all of this is again better spectral efficiency. The smaller area that the cells cover, the more a particular channel is used.
The lengthy deliberation and final decisions of the FCC had a great influence on the industries involved in LMR. For instance, just imagine the Commission ignoring common carrier or land transportation services when spectrum was being handed out. Cellular would have been killed if common carriers were not given any consideration. The telephone monopoly at the time constantly had to be kept in check as well. With the Bell system involved in LMR, they needed to be constrained as to the amount of resources they could use to further their cellular service. In 1974, an important ruling was made by the FCC to allocate certain amounts of spectrum according to the technologies previously discussed. 30 MHz of the spectrum would be used each for the conventional and trunked systems while the common carrier cellular service would get 40 MHz. This was significant because it was the first time the Commission recognized the different technologies in an allocation, not the services involved. All of the eligible groups then could grab a part of the allocated band in a first-come, first-serve basis. In the end, another ruling adjusted competition by prohibiting wireline common carriers (WCCs) from manufacturing, providing or maintaining LMR equipment.
Looking at the history of radio broadcasting and LMR shows the types of issues that the FCC has to deal with concerning spectrum use. The most recurrent problem is that there is never enough room for any service in the spectrum. On the one hand, the Commission has to prevent this scarcity in an expedient but pro-competitive manner. On the other hand, the FCC has to be forward-thinking enough to recognize important new technologies that may alleviate scarcity or provide better service. The Commission has always tried to be fair to corporations, mainly because of the fear of monopoly. What was seen in this review was that the FCC can more easily stifle private broadcasters through strict regulation which inhibits free speech. The goal of course is to prevent scarcity, but having regulatory measures which ignore technology seem wasteful and detrimental. Many radical ideas were discussed regarding broadcasting that aimed at helping alleviate the lack of spectrum. Since improved technology has allowed the possibility of spread spectrum, it would make sense to allow users a part of the spectrum that would be more efficient and would make more room in other bands. At the conclusion of the LMR study, the Commission began thinking of spectrum allocation toward technologies and not services. It seems that spread spectrum technology should be thought of this way as well. In some areas the new technology may end up being a better regulator than the Commission itself.
IV. Current FCC Regulation and Policies
While the Telecommunications act of 1996 marks a significant turning point in the legislation of wireline communications, wireless law has emerged relatively unchanged from its inception in the Radio Act of 1927. The FCC enforces a 70-year-old regulation based on the spectrum’s scarcity theory, and has neglected to include significant regulations for new technologies, such as spread spectrum.
1. Statutory Sources
The 1996 Telecommunications Act modified the Communications Act of 1934. Title III of the Communications Act contains the provisions related to radio. Title 47 of the Code of Federal Regulations contains the regulations related to telecommunications, with Chapter 1 pertaining to the FCC.
The values leading to the interpretation of the Communications Act are indicated in the very first section of the radio title. Among the purposes of this Act is the maintenance of the control of the United States over all radio transmission and for the use of such channels for limited periods of time. Moreover, this Act declared that such use has to be granted by licenses issued by the FCC, permitting specific people to operate the apparatus for the transmission of energy, communications, or signals by radio.
The FCC has the general power to regulate radio communications and the spectrum. Led by public demand, interest, or necessity requirements, its purpose is to make a rapid and efficient radio communication service with adequate facilities at reasonable charges. This mechanism has been established for several reasons, such as national defense, the safety of life and property, and interstate and foreign commerce.
2. The Scope of FCC Regulation
The FCC exercises its power in various manners. It is important to underline, however, that all of these provisions are clearly inspired by the spectrum scarcity theory, a very different approach than the possibility of using the spectrum without allocation.
Along these lines, the FCC classifies radio stations and prescribes the nature of the service to be rendered by each class of licensed stations and each station within any class. Likewise, the FCC assigns bands of frequencies to the various classes of stations, in addition to assigning frequencies and determining the power that each station shall use and the time during which it may operate. The licenses cannot be granted for periods longer than eight years.
Furthermore, the FCC has the power to define the location of stations and regulate the kind of apparatus to be used, based on its external effects and the purity and sharpness of the emissions from each station and its apparatus. This provision concerning the regulation of standards of the apparatus is critical in developing spread spectrum technology. Nevertheless, the intention of the FCC power as written does not relate to the new technologies being developed. It is merely contemplated among the tools needed for an efficient use of the allocated spectrum.
The FCC also has the power to establish areas to be served by any station, to prescribe the qualifications of station operators, and to classify them according to the duties being performed. In the same manner, the FCC has the authority to suspend the license of any operator if there is sufficient proof to satisfy the Commission that the licensee has violated the act or license provisions.
Besides this, the FCC has express power to study new uses of radio, to provide for experimental uses of frequencies, and to generally encourage the larger and more effective use of radio in the public interest. This is consistent with the idea that spread spectrum technology is the future solution for spectrum management.
The FCC uses licenses to allocate the spectrum. However, such licenses have specific limitations imposed by the Communications Act. From these parameters, the FCC also develops other kinds of limitations to the licenses. Further, the FCC has the mandate and the ability to impose sanctions and specific limitations to specific operators.
It is clear that no license shall be construed to create any right, beyond the terms, conditions, and validity period of the license. These limitations have quality and quantity considerations. Regarding quality, the operators have to comply with technical standards to avoid interference with other operators. Similarly, the operators have to transmit in accordance with power levels imposed by the FCC, preventing the obstruction of weaker signals by stronger ones. Quantity considerations basically refer to the number of years for which a license can be granted. However, a renewal of the license may be granted for a term not to exceed 8 years from the date of expiration of the preceding license.
When there was more than one application for a license, the FCC would grant licenses based on a "random selection" system. In this case, the FCC had to determine that the main use of the spectrum would not involve the licensee receiving compensation from subscribers in return for which the licensee enables those subscribers to receive or transmit communications signals, such as in a cellular service. Nevertheless, the criteria that the FCC employed was that the use of the spectrum always had to be in the public interest, convenience, and necessity. However, if the use involved receiving compensation from subscribers, the FCC would use a competitive bidding system, rather than random selection.
The random selection criteria seem to respond to the concept of fairness and equality of opportunities. If two or more persons want to have access to the spectrum, and there is only one frequency to assign, the idea of a random selection avoids the specter of preferences. Further, it helps soothe the constitutional concerns of denying spectrum access to some and granting it to others.
However, the "popular" system is that of "competitive bidding", a practice that led the FCC to recognize that the spectrum belongs to the public, and the public should get some compensation for its use. At the same time, this system aims to grant the license to the user who values it the most.
4. Unlicensed Operation
The FCC has provided small allocations for unlicensed uses that have been used to develop wireless internet access and mobile communications services. Unfortunately, due to the limited nature of these experiments, the global impact has been small. However, the most promising of these experimental allocations seems to be the recent FCC order permitting the operation of the "Unlicensed National Information Infrastructure." The devises used for this purpose have to meet some specifications that, inter alia, ensure that there is no interference with licensed operators. However, these devises do not themselves have legal protection from interference.
The FCC regulation for unlicensed operations is focused basically on general requirements regarding equipment. This is a convenient approach to a new understanding of spectrum management. Rather than regulate the spectrum itself, the FCC can lay down basic rules and standards for the devices to be used in a common spectrum or open access system. In such a way, the people who need access to the spectrum will not have to ask for licenses or any kind of permissions. They will simply have to use a given technology that allows the communal use of the spectrum, avoiding interference.
This experimental band that opens the door for a new concept of spectrum management is commonly known as the "U-NII band." This is one of the rare regulations allows the understanding of the spectrum as a non-scarce resource, or at least as a larger one. The importance of this U-NII band is that it provides the opportunity to observe the management of the spectrums as a commons, rather than the traditional understanding that required allocations. This is well explained by Professor Benkler:
The U-NII Order does not "reserve" spectrum for unlicensed use. It gives users of U-NII devices no "rights." It simply removes the prohibition to transmit that underlies the present system. It is this prohibition that necessitates an FCC license, or permission from a licensee, before one can transmit. . . . The U-NII band opens a legal space for multilateral coordination of communications to develop as a mechanism for avoiding interference. It also raises the possibility that unlicensed wireless devices will provide a component of the information infrastructure that is not owned by anyone. No other communications facility currently offers that promise.
However, the range of frequencies assigned to this experimental system of spectrum management is so limited that the outcome will not be as ambitious as it could be. The new technologies have been relegated to a "dark corner" of the spectrum. It is necessary to provide a wider part of the spectrum to this experiment toward the goal of providing the next generation with a more accessible and communal spectrum.
B. Current FCC Policy
The FCC commissioners have recently had several opportunities to express their views about spectrum regulations, the scarcity rationality, and the future of spectrum management. There were two strong speeches recently, presenting the possibility of drastically changed paradigms. Besides those, however, most of the statements have been related to the status quo of the scarcity theory. However, some of the arguments expressed by the commissioners indirectly endorse the new paradigm.
1. Spectrum Management
An illustrative example is the theory of spectrum management expressed by Commissioner Susan Ness. She pointed out eight principles, which lead the FCC spectrum policy: (1) the FCC’s goal should be to maximize flexibility, efficiency and the public interest; (2) the spectrum belongs to the public; (3) the FCC must review, reallocate, and license the spectrum expeditiously; (4) licensees need flexibility to respond to market needs; (5) the FCC should generally avoid mandating standards; (6) not all spectrums or services are created equal; (7) there is a need for unlicensed uses and other public services; and (8) the FCC must improve internal coordination and accelerate decision-making to provide global spectrum leadership. Some of these points will be discussed below:
a. "The Spectrum Belongs to the Public"
Commissioner Ness indicates that the spectrum is a national asset. "The FCC licenses the use of the spectrum for a renewable term of years, but the spectrum remains a national asset." Further, Ness asserted that the spectrum is one of the most valuable and scarce natural resources, which cannot be allowed to be warehoused or wasted.
This principle expressed by Ness responds simply to the basic provisions of the Communications Act of 1934. The basic concern is the scarcity of spectrum, far from other more proactive considerations. Nevertheless, the concept of spectrum as a national asset is not in contradiction with the new spectrum access paradigm. Innovation can be developed in the concept of spectrum management consistently with this view.
Moreover, Ness supports this principle by expressing concern at the possibility of spectrum controlled by a few operators: "spectrum is our prime communications link. It should not be controlled by a few—a bottleneck that can silence other voices." This is certainly a common point between the present rationale and the main goal of a new concept of spectrum management without allocation—broader access to the spectrum.
b. "The FCC Must Review, Reallocate, and License the Spectrum Expeditiously"
According to Commissioner Ness: "The Commission has not always responded as rapidly as we should to accommodate advances in technology. We must move expeditiously if we are to stay in the forefront in the development of new technologies and services."
This is a natural duty of any government agency in charge of the management of a public asset that is the subject of rapid technological changes. Furthermore, this principle demonstrates how allocation is understood as a non-questionable system of spectrum management. However, the idea that the FCC is willing to review and reallocate spectrum is a necessary step towards new paradigms. Naturally, the idea of the spectrum as a commons, somehow, will require the FCC to review the present allocation, before the final step of minimum or no allocation. The interest in the advancement in technology also directly supports the use of spread spectrum and other digital radio technology.
c. The FCC Must Promote Efficient Use of Both Licensed and Unlicensed Bands of Spectrum
Commissioner Ness argued the possibility of infinite capacity of the spectrum, despite its being a scarce resource. There are two ways to increase the spectrum’s capacity—allocating new parts of the spectrum or making more efficient use of the existing spectrum. Further, she pointed out that the trade-off is between using additional spectrum that could support other services and the cost of developing and deploying new, more efficient technology in the existing spectrum.
Along these lines, Ness concluded that unlicensed bands must share the spectrum with a wide assortment of other unlicensed services. "The Commission must also promote spectrum efficiency in the unlicensed bands. There, parties must share spectrum with a wide assortment of other unlicensed services, frequently adapting their technologies to avoid interference." However, she expressed that a problem arises with low cost, high volume unlicensed consumer products.
This principle is without a doubt the most unreceptive to the new paradigm of spectrum management. She understood the prospect of a new concept of spectrum—scarce, but infinite in its capabilities. Nevertheless, she does not discuss the probability of an entire spectrum without allocation. The idea of dividing and licensing the spectrum still dominates this rationale. In addition, the tragedy of the commons seems to be an eternal concern with new technologies in a non-licensed environment.
d. "The FCC Must Give Licensees Greater Flexibility to Respond to Marketplace Needs"
Commissioner Ness has said that the FCC "should provide greater service flexibility, particularly for emerging technologies. Generally, licensees should not need Commission approval to adjust their services to meet market demand where there is no interference. . . . Allowing greater flexibility will enable the licensee to respond rapidly to market conditions."
It is clear in a capitalistic environment that no regulatory consideration should block the development of new solutions to the market’s needs. This argument again supports the idea of spread spectrum technology leading to a new paradigm of spectrum management. If the market demands new and broader solutions, the FCC and the current regulation should not be the obstacle to better services and more extensive and greater access to the spectrum.
e. "The FCC Must Generally Avoid Mandating Standards"
Commissioner Ness indicated that the marketplace should resolve the debate between competing technologies. "Let's apply the Stupka paradigm to standard setting. The free market will work better if the FCC avoids setting standards where the technology is an extension of an established service." For emerging technologies, she said, the FCC has chosen to propose only the minimal spectrum-sharing etiquette to promote spectrum efficiency.
The Commissioner’s position here is a step in the right direction. However, after being disfavored for so long in comparison to licensed services, spread spectrum and other digital radio technology probably need some active assistance in order to share the spectrum without either allocation or interference. While a system of open spectrum access generally means less regulatory involvement, it may actually necessitate larger governmental involvement in standard setting.
f. "Not All Spectrum or Services Were Created Equal"
Ness suggested that there is greater efficiency if spectrum users bear some relationship to the propagation characteristics of the spectrum. "In this chaotic world, it is tempting to believe that all spectrum is created equal. But not even a Wireless Summit can by edict eliminate the laws of physics. The higher the frequency, the shorter the wavelength and the shorter the distance the signal is carried. Mobility is best achieved in bands 2 GHz and below." Also, she said, some bands are pretty crowded already, and sharing and overlays are possible in some bands and unlikely in others.
This is a critical point when looking at the actual stage of new technology experiments. The frequency ranges assigned to develop the spread spectrum services and others similar are very limited. In order to create a global impact using the new paradigm, it is necessary to have a broader part of the spectrum, and not simply a "black corner" as is the case today.
Somehow, Ness decided to express her sympathy for the auction methodology while developing this principle. She indicated that auctions should be the FCC’s primary method for selecting licensees. "We are now two years and $20 billion into my five year term of office," was part of her introductory phrases for this speech. However, she pointed out that there are times when the public is better served by not auctioning licenses. For example, she said that the FCC has set aside bandwidth for unlicensed services, such as cordless telephones, remote home and auto security devices, and wireless access to the Internet. This idea, among others, indirectly gives support to a new concept of spectrum management.
2. The Theory of Scarcity
The most important issue in this entire discussion is the scarcity paradigm, present in the courts’ decisions as well as in the actual legislation prepared by Congress. The judicial and legislative authorities of the United States presume that spectrum is scarce. They founded all the norms and jurisprudence on the spectrum scarcity presumption.
However, discussions inside the FCC have addressed the scarcity theory. Some commissioners, such as Gloria Tristani, think that scarcity is a present reality that can not be changed, at least in the near future. On the other hand, commissioners Furtchtgott-Roth and Michael Powell have expressed their concern about the theory because it is an anachronism. Those who have argued against the scarcity paradigm have indicated that new technologies and the number of outlets are the main reasons for designing a new spectrum theory. However, this intention does not seem as novel and futuristic as one may expect.
Commissioner Harold W. Furtchgott-Roth, has expressed some pertinent ideas about the spectrum’s scarcity theory. He started by pointing out the congressional goal embodied in Section 202(h) of eliminating anachronistic regulation. Furthermore, Commissioner Furtchgott-Roth indicated that "many, if not most, of the rules under review in this proceeding are based upon a theory well known to those in the communications world: the "spectrum scarcity" rationale. I believe the Commission is obliged to review the factual underpinnings of this fifty-five year-old rationale to see whether they hold true in today’s day and age"
Moreover, Furtchgott pointed out that the Supreme Court has not overruled its decisions that rely upon the spectrum scarcity rationale in affirming the constitutionality of FCC regulations. Along these lines, the Commissioner mentioned that when it comes to empirical questions relating to an administrative agency’s area of expertise, courts have traditionally deferred to agency judgments on those matters. But, he explained, the Supreme Court has clearly indicated that it might revisit its constitutional jurisprudence in this area if the FCC signaled that the technological reality had changed enough to consider it. Thus, the Commissioner indicated that the FCC is duty-bound to reexamine the facts upon which it has based its regulatory judgments about broadcasting in the past.
There is a conclusion that can be implied from the rationality of Commissioner Furtchgott-Roth. There is a juridical reality dictated by the courts. Besides this, the technical organism that is in the best position to judge the situation of spectrum scarcity is the FCC. It is the FCC who has to indicate to the courts that the spectrum is not longer scarce, or at least, that its uses are much broader than in the past. If this conclusion were to be reached by the FCC, it would be the courts’ and Congress’ duty to understand this fact as decisive to change the way that the spectrum has to be managed.
However, Commissioner Furtchgott-Roth seems to base his entire argument on the proliferation of outlets, rather than in the existence of new technologies that allow other, more productive uses of the spectrum itself. Nevertheless, his approach to the scarcity rationality widely supports the necessity to change the present spectrum regulation, even if the argument did not include the spread spectrum or other new technologies as one of the reasons for such change.
Finally, the Commissioner closes his argument with a phrase that does not require further comment: "If the world around us has changed to such a degree that our past assumptions no longer make sense, then we must acknowledge that truth. We cannot stick our heads in the regulatory sands, hoping that no one will notice the eroded foundation of our rules."
Leaning in the same direction, Commissioner Michael Powell has expressed that because the courts continue to refer to scarcity as a distinguishing characteristic of broadcasting, the FCC should squarely confront the theory and judge its validity. Powell developed his position by indicating that the belief that spectrum is uniquely scarce is false; and that it is also false that there is an excess of demand for the limited number of outlets available, leaving the government to choose among applicants. Both of these fundamentally misunderstand the technology and the nature of the broadcast industry, Powell said. Along these lines, the Commissioner states: "The fact is that spectrum is not really scarce. It may actually be infinite, dependent only on advances in technology that can make ever-increasing efficient use of it."
Commissioner Powell specifically addressed spread spectrum to support his position. He said that advanced technologies such as spread spectrum have ushered in all sorts of innovative and efficient services. Indeed, rather than being a uniquely scarce resource, the spectrum has the potential to be a bottomless resource. Furthermore, Powell asserted that "perhaps it is uniquely abundant rather than uniquely scarce."
In conclusion, the FCC commissioners have recently been addressing the issue of spectrum management, and more specifically the scarcity rationale. Despite the differences of opinions, the scarcity rationality is not any more of a solid argument to support than any new spectrum regulation. The time is ripe for a new concept of spectrum management that will be based on a new paradigm.
V. Auctions, and Why the Present System Should Change
A. Auctions: A Background
After congressional passage of the Omnibus Budget Reconciliation Act of 1993, the FCC began to sell monopoly rights to radio spectrum via competitive bidding. Pursuant to this mandate, the FCC created the Wireless Telecommunications Bureau ("WTB") on December 1, 1994, which has since become the busiest division of the FCC. According to congressional testimony by Daniel Phythyon, Chief of the WTB, the WTB has in the past fiscal year disposed of 305,000 applications, responded to 49,435 inquiries and 10 millions requests for information, and conducted 6 auctions. As of October 22, 1998, the WTB had conducted 18 separate spectrum auctions, with a total of 6801 licenses awarded and governmental receipts of $22,903,134,860. The most recent auction, which sold licenses for 220 MHz voice and data services, closed on October 22, 1998, after selling 220 licenses for a total of $21,650,301 in bids.
The auctioning process shows no signs of slowing. Based on its expanded auction authority granted by the Balanced Budget Act of 1997, the FCC recently announced its plans to sell off the spectrum for "all full power commercial radio and analog television stations." Thus, there is good reason to fear that the spectrum may soon be irrevocably privatized, unless powerful arguments are made against the auctioning process on both a constitutional and public policy basis.
B. Answering the Arguments for Auctions
There are several arguments that are traditionally offered on behalf of auctioning the spectrum, as opposed to the former systems of either lottery or comparative hearings. The first and most common argument is that selling spectrum rights will lead to the greatest economic efficiency by putting "spectrum into the hands of those who . . . value it most highly." According to this rationale, the "social value of a license . . . is equal to the most efficient firm’s valuation of it." Thus, as Peter Huber put it, selling spectrum allows the buyers to "get on with putting spectrum to the best possible use." Or, to quote a report from the President, "Auctions can help promote economic efficiency, by ensuring that spectrum is deployed in the highest-return uses . . . ."
The first problem with this argument is that it seems difficult to verify empirically. As the FCC Report said, "[d]etermining the value of spectrum in advance of an auction is very difficult." If the value of the spectrum cannot be measured ex ante, then there seems to be no basis for saying that the final winners in a particular auction are necessarily those who valued the spectrum most highly. One suspects that the definition of "value" being used here is circular—the highest-value-user is defined as whoever happens to win an auction, and then the auction is praised for its magical power of discovering the highest-value-user.
The problem is that there might be any number of uses which would produce greater social value ultimately, but which will not come out on top in a particular auction. For example, the FCC might auction off a certain area of the spectrum for PCS in a given city. The winner might pay, say, $10 a pop ($10 per capita). But absent an a priori valuation of the spectrum at that level, how are we to know that $10 a pop reflects the highest social value? Perhaps the highest value use for that spectrum would be for three PCS companies to compete simultaneously in a spread spectrum system. But because of the FCC's artificial rules constraining the use of the spectrum to one type of service and one winner, there is no guarantee that the outcome is necessarily the most efficient. (The Coase Theorem would not hold here; transaction costs would be high because the winning PCS bidder will not want to stimulate its own competition.)
The FCC claims that one indication of auctions’ efficiency is that few auctioned licenses have been resold. In 1996, for example, 12 PCS A and B block license representing 6.5% of total revenue were resold, whereas 75 cellular licenses distributed by lottery were resold in 1991. The problem, of course, is that the auction price for a certain area of spectrum may be a substantial barrier to entry for a startup company, even if that company could potentially put that spectrum to better use. By selling off spectrum to the highest bidders, who then make even larger investments in infrastructural networks, we may be guaranteeing that fledgling, innovative startups will not be able to pay the incumbent for the use of that spectrum. If that is the case, the low rate of resale may well represent the fact that auctions put up higher barriers to entry for smaller and younger companies.
Another problem with the efficiency thesis is one that is endemic to law-and-economics—it fails to account for social value that is not able to be valued monetarily. Take, for example, the FCC’s plans to auction off the broadcast spectrum. If the Jerry Springer Channel beats the History Channel in a particular auction, has social value really increased simply because Jerry Springer is able to sell more advertising space? A legal economist might say yes, but that is because economic valuations of legal outcomes all too often tend to be scrupulously Benthamite—pushpins are seen as equal to poetry, or even far superior (if more teenagers play pushpins). Yet, to repeat an old cliche, what if it really is better to be Socrates dissatisfied than a pig satisfied? And if there are two pigs for every Socrates, and the pigs win all the auctions, have we really maximized the social value of our culture?
Yet another problem with the efficiency thesis is that it does not consider the potential diminishment of social value caused by the oligopolies in broadcasting that are certain to arise. If the entire broadcast spectrum ends up in the hands of large companies like Disney/ABC, then there is good reason to think that social value will decrease as the modes and content of communication are effectively monopolized by corporate management. In a system of property rights over spectrum, in which the highest bidders will almost inevitably be those corporate networks that depend on advertising revenue for their income, the diversity and robustness of public debate could be stifled.
Second, auctions are praised for being more quickly implemented than either lotteries or comparative hearings. According to an FCC Report, it took about two years on average to award cellular licenses in comparative hearings and over one year by lotteries. In contrast, FCC auctions have taken as little as two days to run, although it still takes an average of 233 days from the filing of an application to the license grant under the auction system. The problem with this sort of thinking is that the baseline standard is the old system of comparative hearing or lotteries. Judged by this standard, auctions are indeed an improvement in efficient and timely administration. But if one views the appropriate baseline as a hands-off system of regulating only equipment protocols and power restrictions, (which would involve zero governmentally-caused delays in allowing new users to participate in spectrum usage), the auctioning system loses some of its lustre. It all depends on your view of the baseline reality.
Third, auctions are supposed to promote technological innovation. In this area, the FCC has not earned the highest reputation. It is only the FCC's reputation for stifling innovation that makes it possible for the auctioning system to seem innovation-friendly by comparison. Cellular telephony provides an example of the FCC’s historically suspicious attitude towards new technology. As Thomas Hazlett said:
Take the case of cellular telephony, first demonstrated as technical reality . . . in 1946. The FCC leapt into action, designating a bloc of UHF spectrum to be used for the service . . . in 1968. But, believing it may have acted too hastily, the commission reconsidered. It took until 1984 to begin issuing licenses in earnest; the job wasn't finished until . . . 1989.
In contrast, say the proponents of auctions, selling off rights to the spectrum encourages innovation. By forcing firms to "use their own resources to compete for valuable spectrum, auctions encourage firms who value the spectrum the most to use it productively and in innovative ways." Or as one especially enthusiastic supporter put it, "[e]ntire new industries . . . are thereby allowed to develop and create jobs for thousands of workers." To take another example, the FCC Report on Spectrum Auctions made the following claim:
Aggregation [as allowed by auctions] may also facilitate the adoption of new technologies and services. For example, if a company uses an innovative technical standard for its equipment that is not compatible with other standards, then aggregating licenses in adjacent geographic areas would allow the company to provide seamless service over a large area.
In the FCC Report on Spectrum Auctions, several companies are described as paragons of the innovation supposedly stimulated by the auctioning system. For example, the Report says:
Airadigm Communications was the first broadband PCS C block licensee to launch service in Green Bay and Madison, Wisconsin. Airadigm has not only provided services to parts of rural America but it has also reached some of the most underserved Americans by joining into a partnership with the Chillicothe Native American tribe, which plans to provide cutting edge wireless local loop service on the tribe's reservation.
The admirable efforts of Airadigm are ascribed to the auction system, a claim which has some truth to it—such innovation might not have been possible under comparative hearings or lotteries. But such innovation would be not only possible, but more profitable and widespread, under our proposed spread spectrum open access system. It is only the FCC’s reputation for stifling innovation that makes it possible for the auctioning system to seem innovation-friendly by comparison. Again, one’s view of baseline reality is critical. If one sees an excruciatingly drawn-out bureaucratic process as the normal state of affairs, then one might well see auctions as a welcome relief. If the baseline state is one of FCC-forbidden access to spectrum, then the auctioning process might be praised for opening up the spectrum to new and valuable industries. But surely the same industries (or who knows how many others) would have developed even more rapidly had the FCC never forbidden access to spectrum in the first place. And with spread spectrum, companies are free to experiment and innovate without being inhibited by the barriers of artificially-created spectrum monopolies. In our framework, the auctioning process functions more as a barrier to entry than as a facilitator of new industry. By forcing companies to pay large up-front fees for access to the spectrum, auctions may in many cases represent a substantial barrier to innovation and experimentation.
Fourth, auctions are seen as a source of fodder for the federal budget. This is not surprising, considering the origin of FCC auctions in congressional efforts to balance the budget. But not only Congress has its eye on auction money; political lobbyists and special interest groups also perceive in auctions a chance to win revenue for their pet projects. The problem with this view is that it fails to recognize that money does not grow on trees. If telephony providers, for example, have to pay $10 per customer for the monopoly rights to a particular chunk of spectrum, the providers will ultimately have to charge their customers higher rates. If broadcasters have to pay for spectrum, they will have to charge higher advertising rates, which will cause higher prices for goods that are advertised via broadcast technologies. Any price paid into the government treasury for spectrum access will ultimately translate into higher prices for goods and services that the public buys. Furthermore, by allowing freer access to spectrum, we may well stimulate economic activity to such an extent that the tax base will expand sufficiently to cover the supposed "loss" suffered by the government.
A serious problem with the budgetary justification for auctions is that auctions tend to create a self-serving oligopoly between the large companies and the politicians. Now that politicians have come to depend on auction revenue for balancing the budget, it is in their interest to keep access to the spectrum artificially scarce, and therefore expensive. The WCS auction debacle of 1997 serves as a prime example of what happens when a spectrum auction is hurried for budget purposes—out of the 128 licenses sold, some went for as little as a dollar each. In the future, politicians will be sure not to allow too much spectrum to be sold too quickly. In fact, Rep. Rick Boucher (D., Va) opposed a bill which would allow greater spectrum flexibility, on the grounds that it "amounted to a net increase in spectrum supply . . . and would reduce demand for the FCC auctions, costing the government money." Similarly, it is in the interest of the current incumbents to lobby Congress and the FCC to maintain spectrum scarcity, because they do not want their potential competitors to gain access at less expensive rates. Thus, the auctioning system has the potential to create a mutual back-scratching society consisting of communications companies and bureaucrats.
Fifth, auctions are seen as preferable to the old systems of lotteries and comparative hearings because of transaction costs—under the former systems, applicants had to expend resources on preparing the "best" application, and the FCC had to administer a costly system of allocation. Now, applicants no longer have to make large expenditures on rent-seeking and pursuing licensure, and governmental administrative expenditures have similarly decreased. Again, though, one’s view of baseline reality is what matters. The same sorts of transaction costs would not merely diminish, but disappear under our proposed system of equipment protocols, liability standards, and thinly-drawn use allocation.
One last benefit of auctions, usually glossed over by academic economists, is that there is now a small cottage industry for economists and auction theorists in providing consultation to both the FCC and large companies who hope to manipulate the bidding process. Formerly toiling away in obscurity, these academics (who sing in glorious unison the praises of auctioning) now make handsome consulting fees. One such scholar, in a candid moment, has said that the first FCC auction in 1994 was "the biggest use of economic theorists as consultants" since the 1984 breakup of AT&T. It is a small wonder, then, that economists are now busy writing papers with such titles as The Efficiency of the FCC Spectrum Auctions.
C. Additional Disadvantages of Auctions
The affirmative action ideals sought by the FCC may be the most problematic element of the auctioning system. Congress has specifically instructed the FCC to take such considerations into account, listing one of the goals of auctioning as follows:
[P]romoting economic opportunity and competition and ensuring that new and innovative technologies are readily accessible to the American people by avoiding excessive concentration of license and by disseminating licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women.
In pursuit of this end, the FCC has used several different means of helping disadvantaged businesses win spectrum auctions, including bidding credits, installment plans, and, for the auctions of broadband PCS, "entrepreneurs’ blocks," which are special areas of spectrum set aside for bidders under certain financial thresholds. Following the Supreme Court decision of Adarand Constructors, Inc. v. Pena, the FCC modified its approach to affirmative action, choosing to concentrate its efforts on small businesses, which are often owned by minorities and women anyway. Currently, the FCC plans to offer "new entrant" bidding credits, which would target startup companies or companies with no prior media interests. Because such companies are often small minority- and woman-owned businesses, the FCC believes that "new entrant" credits would satisfy the congressional mandate while keeping within constitutional constraints.
The first problem with the bidding credits is that there is no guarantee that they will help the intended beneficiaries in the slightest. As Ayres and Cramton demonstrate in an insightful article, the likely result of bidding preferences for "weak bidders" is that stronger bidders will be forced to bid more aggressively in order to win the auction. They say, "Bidding subsidies for weak bidders—far from being ‘giveaways’—can prevent giveaways by forcing relatively strong bidders to bid closer to their reservation prices." Their results are fairly easy to demonstrate. Suppose an auction is conducted with only two bidders: a small company ("Small"), whose reservation price for a chunk of spectrum is $2,250,000, and a big company ("Big"), whose reservation price is $3,000,100. If the auction is conducted without any subsidies, Big will bid slightly over $2,250,000, thus winning the auction for much less than its reservation price, decreasing efficiency. If, however, Small is given a 25% subsidy, then Small can effectively bid up to $3,000,000, forcing Big to bid far closer to its actual reservation price, thus increasing efficiency. But if the objective of the bidding credit is to aid Small, the results are ambiguous—either Small loses the auction if Big’s reservation price is greater than Small’s total bid, or it wins if its total bid, including the credit, is greater than Big’s reservation price. But when Small wins, it will likely end up paying the maximum that it can afford, regardless of the bidding credit involved. Thus, bidding credits may maximize revenue for the seller, but do not necessarily lower the barriers to entry for small companies.
In another possible situation, bidding credits result in inefficiency, according to the FCC’s definition of selling the spectrum to whoever values it most. Imagine the following scenario. Small values the spectrum at $2,500,000. Big values the spectrum at $2,700,000. Without subsidies, Big will obviously win, an efficient outcome. With the 25% subsidy, however, Small will be able to bid past Big’s reservation price, thus winning the auction for slightly over $2,700,000. But the result here is inefficient—Small won the auction, despite valuing the spectrum less than Big. This potential inefficiency is confirmed by Ayres and Cramton, who say that "subsidies often cause inefficiency whenever the good is actually sold to a weak bidder."
The only situation in which bidding credits can be both efficient (according to the FCC’s definition) and help the small company to win is if and only if two conditions are met. First, the small company must have a reservation price that is higher than the big company’s. Second, the small company must be unable to obtain the financing needed to actually bid up to its reservation price. Thus, if Small values the spectrum at $3,000,000, but can afford to pay only $2,250,000, and if Bid values the spectrum at $2,500,000, then without bidding credits, Big will win inefficiently, while the 25% bidding credit help the small company obtain the spectrum at an efficient price. Nevertheless, without empirical evidence as to the incidence of such situations, it seems intuitively more likely that bidding credits will be either useless (because the small companies lose anyway), or inefficient (because the small companies are able to inflate their bids far past their true value).
Another problem with the bidding credit system is that it gives the minority and weaker participants a false sense that they are being done a favor. An analogy might make the point clearer. Imagine that the government required everyone to pay a "licensing fee" of $10 every time they spoke out loud. But, in order to help out those who are less well off, the government announced that out of the goodness of its heart it would allow poor people to speak out loud for only $7.50. Most of us would readily recognize that the poor people are not being done any favors here, especially compared to the current system in which all people can speak out loud for free. But if we were caught up in a frame of reference in which the government had the power to put fees on speaking, a lowered price for poor people might indeed seem like a valuable subsidy. Once again, it all comes down to one’s view of the baseline reality.
And it is not only one's view of governmental regulation that matters; it matters what metaphors we use to describe the very nature of the spectrum. If the spectrum is conceived as a physical object over which it is possible to have ownership, then a system of quasi-property rights might be seen as inevitable or unquestionable. It is such a misconception about spectrum that leads to complaints of the unfairness in "giving away" the spectrum. As columnist Michael Schrage put it, "[d]o we give farmers free farmland when they want to grow new kinds of crops? So why should the FCC give spectrum to broadcasters who want to grow new business?" One might ask, using similar logic, why the government has for so long "given away" the use of sound waves by letting anyone speak whenever they please. This sort of question ignores the fact that there is no such thing as the spectrum, not in the same way that there is such a thing as land. Spectrum is a property of nature, like gravity or the Bernoulli principle. To sell the right to use electromagnetic waves is almost as absurd as selling the right to use gravity.
Indeed, one of the original proponents of market-based allocation for spectrum, the esteemed economist Ronald Coase, recognized this conceptual problem in his landmark article on the FCC. Coase noted that both musical notes and colors correspond to various frequencies, yet "it has not been thought necessary to allocate to different persons or to create property rights in the notes of the musical scale or the colors of the rainbow." Instead, if a person’s use of sound waves or light waves interferes with other people, the government may "establish the rights which people have to make sounds which others may hear or to do things which others may see." In other words, problems of interference between competing wave uses (whether sound or electromagnetic waves) are usually handled by some sort of nuisance law, not by a system of property rights and centralized allocation.
"There is some doubt whether the ether exists," he said, and "its properties correspond exactly to those of something which does not exist, a tunnel without any edges." What is really being allocated by the FCC, said Coase, is not a property right at all, but simply the "right to use a piece of equipment to transmit signals in a particular way." There can be little doubt that this conception is truer to reality than the conception of spectrum-as-property; since there is no such thing as the spectrum, the FCC is actually just selling the right to use equipment. And this is precisely what we claim is unconstitutional. The government should not be in the business of deciding who has the right to use equipment to speak, where and when the speaking may take place. The next Part expands on this idea.
VI. Constitutional Challenges to Existing Regulation
This paper seeks to inform policy makers of the misfit of current regulatory standards to spread spectrum technology. As discussed above in Parts IV and V, current spectrum regulation does not encompass the earmarks of an ideal regulatory framework structured to adapt to technological evolution. Recommendations follow for approaching spectrum management from a framework that embraces and encourages changing technology.
Before providing specific recommendations, it is important to address the impetus for retooling the way the FCC approaches spectrum management. Beyond the notion that regulatory frameworks should be continually evaluated for effectiveness and appropriateness as technology changes, there are legal and political reasons to take a second look at spectrum management. First, the constitutionality of a regulatory regime that allocates spectrum, giving exclusive property rights to a select few, is uncertain with the introduction of technology that no longer requires dedicated frequencies for meaningful broadcast. Second, the time to look at regulatory approaches is ripe as several important actors in the public and private arena have expressed a desire to change—or arguably at least a willingness to reevaluate—the existing regulatory framework. Each reason is discussed more fully below.
A. Constitutional Concerns: First Amendment Implications
The First Amendment provides that "Congress shall make no law . . . abridging the freedom of speech, or of the press." Protection for speech is not absolute; when government wants to regulate speech, the rights to free speech are weighed against the interests to be served by regulation. Regulation is denied unless the regulation interest outweighs the individual right to free speech.
1. Regulation Under the Present Understanding of Spectrum
Historically, whether speech has been in print or broadcast has determined the amount of First Amendment protection from governmental control the speech would be given, with print media receiving the greatest protection against regulation. Broadcast media has been treated differently based on a theory of scarcity. Under scarcity theory, spectrum is considered a limited resource requiring dedicated frequencies for communication. As such, the government’s role in facilitating electronic speech has been to divide or allocate spectrum frequencies to users. Without such allocation, there would exist a "tragedy of the commons" where all users’ communication signals would effectively drown each other out and deny meaningful expression of ideas over spectrum. Allocation has thus far avoided judicial scrutiny on First Amendment grounds because it has been considered a necessity in facilitating spectrum-based communications.
The Supreme Court has realized that by limiting the number of broadcasters to as many as spectrum could tolerate, it was denying the opportunity for unlicensed would-be broadcasters to speak. To remedy limited access, the Court has charged licensed broadcasters to serve as fiduciaries to represent the "views and voices which are representative of [their] community and which would otherwise, by necessity, be barred from the airwaves." This fiduciary role for broadcasters has allowed Congress to push regulation from content-neutral to content-based restrictions that are so repugnant to First Amendment values, but that are necessary when access to spectrum is given as property rights.
2. Regulation Under Spread Spectrum
When other forms of broadcast regulation have come under judicial scrutiny for First Amendment challenges, courts have generally limited their rulings to the current understanding of spectrum communication technology. Looking to the state of development today, spread spectrum technology has matured sufficiently to enable speech without exclusive allocation.
For a regulation to pass First Amendment scrutiny in broadcasting, it must be "narrowly tailored to further a substantial governmental interest." The accepted governmental interest here is to preserve wireless speech. The central issue is thus the extent to which government broadcast regulation is necessary to further that interest.
Whether a regulation is narrowly tailored is a function of the "interests of the public and broadcasters in light of the particular circumstances of each case." Here the public and broadcaster interests may be antagonistic at one level. Where the public interest is in individual autonomy through the right to access and utilize wireless communications capabilities, the licensed broadcasters’ interests are to maintain their capacity for distributing information in an effective manner. Effectiveness in broadcasting may mean continuing the status quo in allocating spectrum access to the exclusion of others. This interest in continued effectiveness alone, however, is not sufficient to deny others their same basic right to speak.
Factoring out the "effectiveness interest," there remains a common interest between the public and broadcasters in having open, minimally-regulated wireless speech. This interest goes to the heart of the First Amendment jurisprudence which has endeavored to "preserve an uninhibited marketplace of ideas." "[The First] Amendment rests upon the assumption that the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public." Against this backdrop, speech interests weigh heavily against regulations that might restrict expression where restriction is not necessary to maintain a wireless communications forum.
What then is necessary to maintain wireless communications? Allocating monopolies to broadcast over frequencies to the exclusion of others—in essence creating and sustaining property rights in the spectrum—seems to fall beyond necessary governmental regulation and therefore outside the ambit of what is meant by a narrowly-tailored regulation.
Narrowly tailoring spectrum regulation in light of spread spectrum technology means something less intrusive than allocation. Scarcity does still exist—there is certainly a limit to spread spectrum’s ability to negotiate information transfer in an unregulated environment—but regulation necessary for wireless speech does not equate to continuing the present property system in spectrum. Rather, regulation under spread spectrum requires only coordination among users. This coordination, as opposed to the allocation system, would allow all potential users of spectrum a voice. Anything beyond this would cut too deeply against speech interests by unnecessarily denying a voice to a great number of would-be users in this medium, and cannot be justified under current technology as a narrowly tailored means to facilitating wireless speech.
B. Political Concerns: A Climate for Change
The argument to do away with spectrum allocation based on scarcity is ripe for review. In 1984, the Supreme Court stated that it would not decide whether the FCC’s current regulatory regime should be overhauled. Instead the Court punted the issue, indicating it was not prepared to decide the issue at that time "without some signal from Congress or the FCC that technological developments have advanced so far that some revision of the system of broadcast regulation may be required." The FCC has already sent at least one signal in Syracuse Peace Council, where it urged the Supreme Court to reconsider Red Lion and treat broadcasters the same as newspaper publishers for First Amendment purposes.
Besides the Supreme Court and the FCC, private actors in the broadcasting arena have argued for revamping regulation. In a recent Supreme Court case challenging the Communications Decency Act, several major players in broadcasting appeared as amici to support the ACLU’s protective stance for internet speech. Specifically, the National Association of Broadcasters, ABC, CBS, and NBC argued that scarcity can no longer serve to justify lesser First Amendment protection for broadcasters. Although this is not an argument to end allocation as is now urged, it is a statement that these important figures are looking for change.
All of these viewpoints indicate that the regulatory scheme that has remained virtually unchanged since the 1920s is desperately in need of review. It is now time to send the signal the Supreme Court has been waiting for and begin the process of updating an outdated framework to meet the demands of today and the challenges of tomorrow.
VII. Technological and Economic Recommendations
In the previous section, the case was made for treating spectrum space as a commons. Just as the notion of a traditional commons is supported, if not defined, by its rules for access and use, a spectrum commons must also provide the appropriate incentives and mechanisms to end users. The task of designing these parameters for a public park, for example, is not particularly challenging since the users have a good understanding of how it is used and how to interact with others. However, given the historical problem of user coordination and the cemented expectations of providers in an oligopoly framework, the shift to unlicensed usage of spectrum is daunting. This section develops a standards framework for understanding the various technological mechanisms and economic policies that can marshaled to create such an open-access system.
To stick with the analogy of a public park, the simplest way to think about a system of open spectrum access is to draw an analogy to nuisance laws. In general, one should be able to access the spectrum without restriction, but one is still subject to ground rules that ensure one doesn’t abuse the system. The analogy is to the ability to use a public park as long as one’s use does not impinge on other’s use of the same public resource. Paul Baran suggests rather creatively that the ground rules for common access be similar to those learned in kindergarten of a tough neighborhood—rules which enable individual users to coexist while sharing a common resource, such as a playground.
A. The Role of Standardization
Between the poles of anarchy and tyranny lives standardization. Standards liberate end users by providing a foundation upon which to build further invention, but they also necessarily constrain the realm of possible applications. The "best" standards are those that protect the system, encourage innovation, and minimally interfere with previous freedoms. The Internet’s best-effort service model is example of this delicate balance: programmers are free to develop applications without first creating a network, but they must contend with the inability to reliably provide real-time services. Computer operating systems are another example: standards free programmers to focus on building applications but also constrain the quality of the end product.
The utility of standards is not the question, but rather their proper application in this new spectrum context. The communications spectrum already boasts a large body of standards¾ power emission of a cellular tower, frequency band use of a garage door opener, etc. The introduction of a spectrum commons does not herald the elimination of all standards but rather a call to modify them. Even in light of technological change, standards that balance system reliability and user freedom must be in present from the outset. Revisiting an example from an earlier Section demonstrates this delicate balancing act: automotive standards exist to encourage car manufacturing and safety but also to provide driver freedom. The rules that govern any commons, spectrum or otherwise, must be minimally defined to protect the system while also supporting choice among users. While the existing system of spectrum management allows users relatively broad freedom of speech (e.g. common carriers cannot censor), it eliminates the possibility of users to provide their own communications services. So the matter is not whether to have standards, but to determine their nature and application.
Since standards are not agnostic and are difficult to modify once they are adopted, the goals of the spectrum commons must be elaborated before the standards process begins. The basic framework is driven by the argument made in the previous section: regulation of spectrum where scarcity does not exist is unconstitutional, so the case for regulation must be proactively waged against an assumption that scarcity is not present. An overview of the goals of this new system is a necessary precursor to any discussion of the specific technological and economic mechanisms.
1. Open Access
The spectrum belongs to the public, so the extent to which it is regulated must be confined to creating the rules of use and policing for abuse. By enforcing a spread spectrum framework, the need for explicit coordination among users is significantly relaxed. Mechanisms for encouraging responsible use can be introduced progressively, much like a public forest may require an entrance fee to cover policing and maintenance costs. However, the assumption must be that scarcity does not exist.
2. Best-Effort Quality of Service (QoS)
The government should refrain from dictating the level of service provided by a network of spread spectrum users. Unlike existing telephony regulations that impose fines on carriers for failure to provide a level of service set by the government, the QoS model of the spectrum commons should be a best-effort packet delivery system. Such a design encourages the most flexible use of the spectrum space while simultaneously removing the costly barriers of strict QoS. Universal service should be seen as the possibility for all users to communicate, not as an opportunity to sanction carriers who do not meet the government's arbitrary standard of quality.
Whether fairness means equal access to all users or a first-come first-served service is not clear from the outset, but the technology and economics must be designed to realize the final vision. Vertically integrated control of spectrum prohibits direct access to spectrum by consumers. Coupled with an auction system that rewards complete communications hegemony to the highest bidder, fairness is eschewed in favor of revenue interest. A fair system is one that is open to as many users as the technology allows, and permits the community of users to determine the nature of the network's purpose. Fairness also entails standardization in equipment and power settings, so that no one user can destroy the utility and purpose of the commons.
Networks thrive on the externality effect of other users¾ the value of the network increases in proportion to the number of subscribers. Interconnection need not be mandated by the government, as is presently for telephony carriers, but the commons process must include some incentives to encourage it. By establishing standards for conveying the traffic of other users, both within and without the local network, the size of the spread spectrum community can foster further research and investment. In the presence of market failure, however, the government may have a strong role to play in enforcing it.
While the phrase "local access" has been left ambiguous in this paper, at some stage it is necessary to standardize power cell sizes for these spectrum commons. An understanding of the demand for information services and the economic makeup of the community go far in determining the optimal configuration and size of the served community. Whether the goal is to supplant wireline telephony or simply to connect public schools together, the technological and market solutions need to be flexible enough to accommodate the needs of different communities.
Given the general system goals above, a variety of policies and mechanisms are available to the designer of the commons, some of which are mutually exclusive while others can be employed selectively and progressively. While an open access system must account for a wider range of user behaviors and expectations, key contributions by technology and economics help to create and sustain a spectrum commons despite these challenges.
B. Technology Standards
While a myriad of engineering considerations participate in the design of any complex system, the most important set of factors in the creation of a communications space is layering. Similar to the OSI 7-layer connection model, spread spectrum communications can be thought to occur on at least 3 distinct layers: physical, link, and network. These divisions provide a useful framework for translating the ultimate design goals (e.g. fairness, open access, etc.) into actual algorithms. The physical layer addresses all the concerns surrounding the actual carriage of the electromagnetic signal across time and space¾ power, frequency, etc. The link layer contains the functionality to transfer a single piece of information from one adjacent radio to another. The network layer provides the facility to send a packet of information from one host to another across a heterogeneous network of users. Though in theory these 3 layers provide orthogonal, non-overlapping functions, the design of these layers is typically an iterative and organic process.
In the realm of spread spectrum, the understanding of the physical and link layers is rather well developed; however, understanding should not be confused with standardization. Different spread spectrum packet radios today do not conform to any standard, greatly reducing the effectiveness of the technology in creating ad hoc networks. Standardization of the pseudo-random hopping codes, which the technology uses to "spread" a signal across a wide frequency band, is a critical foundation for allowing open access to the spectrum commons. Users will not be able to reconstruct signals from senders if the right scheme is not employed, and the efficiency of sharing the spectrum space is compromised if a variety of code methods occupy the same spectrum space.
Another lower layer concern is upgrade capability in an open access system. Within spectrum oligopolies, service providers simply mandate the type of phone that the network will support. In addition, the central information aggregation aspect of most wireless providers (e.g. cell tower) provides a smooth technology upgrade path: the end user equipment is highly standardized and the focus of technology investment is the central equipment. However in an open access network, standards must bear the responsibility for technology coordination, rather than let the burden fall back upon the users. If the spectrum commons is premised upon decreased need for user coordination, then the industry and government must play a strong role in this standards process.
The network layer provides another set of challenges, especially when faced with ad hoc collections of users. In the Internet, routing packet from one endpoint to another is a nontrivial service: routing tables must be maintained, links must be monitored, etc. Providing such a service over wireless is certainly possible, but the complication is the organization of the network for optimal operation. Will there be a central repeater for an entire area through which all packets flow, or do packets hop from one user to another user? Will users be regulated as common carriers to ensure forwarding of packets of other users? Who will be in charge of maintaining routing tables for the community? As long as interpersonal communications occurs via intermediaries and aggregators, standardization can provide a suitable network layer for spread spectrum communications.
C. Market Standards
The management of the spectrum commons is not only an issue of technology standards but also of economics. Information economics is a rich and growing field in the network community, but there are no easy answers. Since users value network characteristics (e.g. data, speed, fidelity) in varying amounts, designing a single market mechanism that satisfies all users is highly unlikely. Instead of attempting to design a universal solution appropriate for all contingencies, mechanisms can be tailored appropriately for the local demand for information transmission. For a rural schoolhouse that requires broadband Internet access, but cannot afford to pay the many hundreds (if not thousands) of dollars per month for a wireline solution, there need not be any explicit market mechanism. In this case, since there is presumably no contention for spectrum resources, the only necessary costs should be the capital equipment costs.
A middle class neighborhood provides a good example of a moderately dense area with a fair amount of communications needs. The municipality may assist in organizing a town coalition to establish a network of radios and repeaters to provide basic data service to its residents. If demand increases, a central tower, operated by either the town or an outside entity, may provide a higher grade of service and a larger link to the Internet. So long as demand does not exceed the available useful spectrum, there need not be centralized control of who may transmit.
In a dense metropolitan area with high demand for data, there would need to be explicit coordination of locating cell structures and perhaps mandatory interconnection of cell networks. A real-time spot market for spectrum can be created to provide varying levels of service to users. Whatever the case, the government need not declare scarcity prematurely and then carve the spectrum into oligopolies. If and when scarcity rears it ugly head, only then does the government have constitutional permission to introduce market (or non-market) mechanisms to address the shortage.
Unlike the current system spectrum auction and oligopoly operation, these solutions encourage diversity in both applications and speakers. By reducing the barrier to becoming a "station," minority broadcasters need not rely on alliances and subsidies to operate a business in the spectrum space. By providing a robust bit carriage service rather than a specific application (e.g. pagers), diversity of applications is motivated much as it is on the Internet (e.g. WWW, telnet, ftp). While it may not be technologically possible to ensure strict quality of service guarantees over the open access wireless networks proposed here, this does not imply that the service has no value. Just as the Internet does not guarantee timely or even eventual delivery of packets, users may elect the service if it suits their needs. If a user requires a service that is not provided by the commons, she is certainly free to utilize other private services, so the lack of specific transmission guarantees should not be an impediment to adoption.
Given the inertia and investment behind traditional spectrum regulation, adopting the above schemes will prove difficult as there are still many unanswered questions, such as:
As in the case of technology, market standardization role in reducing investor uncertainty and boosting user confidence is crucial.
This paper has discussed one area in which new technology has changed the way we ought to look at regulation. When it first started licensing parts of the spectrum, the government may very well have been justified in selecting that particular regulatory scheme. The technology was such that in order for the broadcast medium be useful at all, a governmental role in licensing broadcasters seemed appropriate. But, as always, technology changes. Spread spectrum technology has been around for years, and recent gains in processing power have enabled the effective use of this technology. Given this new technology, it simply no longer makes sense to allocate parts of the spectrum for exclusive use by some to the exclusion of others. The technology has changed and, as Commissioner Furtchgott-Roth put it, the FCC must remove its head from "the regulatory sands" and recognize the "eroded foundation of [its] rules." This erosion has been occurring for some time now, and it is incumbent on the FCC to delay no longer.
In advocating open access to the spectrum, the authors realize, of course, that there are significant problems with respect to the reality of the industry. Many licensees invested large sums of money expecting a monopoly interest in their band of the spectrum, and their interests must be protected for now. Similarly, broadcasters have invested huge amounts in developing their spectrum allotments, and have contributed significantly to the value of the spectrum through their content. In addition, one cannot ignore the interest of the consumers who have invested large amounts in receivers (televisions, radios, cellular phones, etc.) that were designed for the present system of spectrum allocation. We do not suggest that the spectrum be turned into a commons overnight, rendering all these products useless.
On the technical front, the previous section pointed out that the transition to a system of open spectrum access is a daunting technical task, especially given what the public has come to expect from wireless services. Turning the spectrum into a commons overnight will likely result in chaos reminiscent of the 1920s. This, however, should not be seen as a negative. The reason that an open access system would result in such confusion is that it has not had the opportunity to develop in a world where open spectrum access is widespread. Companies have not had the incentive to solve the problems of open access since use of spread spectrum and other spectrum-sharing devices are currently relegated to a few narrow bands of the spectrum, and are subject to stringent requirements that they not interfere with "traditional" devices operating in licensed parts of the spectrum. What the authors suggest is that the FCC make serious efforts to allow spread spectrum and similar technologies to develop by ensuring that significant portions of the spectrum are available for unlicensed use. The FCC should start by first designating larger portions of the spectrum for unlicensed use. The FCC should also remove limitations on devices that are designed to protect licensed devices from interference, and instead allow unlicensed devices to function subject only to restrictions based on the operation of other unlicensed devices. The authors envision a transitional phase (which may last for a long time) when the present-day licensed uses coexist with unlicensed devices, allowing the unlicensed device industry to develop on an experimental basis. Allowing unlicensed spectrum use to develop in such a manner will enable spread spectrum and other digital radio technology to solve many of the problems that were raised in the previous section, and will allow companies to develop innovative new uses for the spectrum. If the open access world of the internet is any indication, open spectrum access will give rise to an as-yet unimaginable array of new applications that will have a large impact on society.
In the end, given the reality of the situation, the authors suggest that open spectrum access be seen as the ultimate goal in all future decisions by the government relating to spectrum access. This means stopping the process of auctioning off large portions of the spectrum to individual parties and instead designating "freed up" portions of the spectrum for unlicensed use. This means no longer automatically renewing licenses, but thinking seriously about reclaiming licensed portions of the spectrum after the current licenses expire. This also means actively supporting the development of unlicensed use of the spectrum by assisting in establishing rules and standards that facilitate unlicensed use without stunting its development. In short, any government action in the area of spectrum management should be taken with the system of the spectrum as a commons as the ultimate goal.
Finally, the importance of the need for an open spectrum access system must be reemphasized. This paper has discussed technical advantages to open spectrum access—it will spur technological development as smaller, innovative companies are allowed to use the spectrum (or design products that use the spectrum) without the huge barrier to entry that the current auction scheme presents. This paper has also discussed economic reasons for open spectrum access—the idea that auctions maximize governmental income is not only far from certain, but the idea that the government can essentially sell one of our greatest public resources to private interests to balance the budget should cause serious concern. This paper also discussed constitutional reasons that compel the transition from a system of spectrum allocation to one of open spectrum access—allowing certain people to "speak" while not allowing others (or making their ability to speak dependent upon the will of a private licensee) runs afoul the First Amendment.
Implicit in these reasons is another, more compelling reason to transition to a world where the spectrum is treated as a commons, one that goes beyond mere technology or constitutional doctrine. This is the interest in the values that a system of open spectrum access represents, those of individual autonomy and freedom. There is a fundamental difference between a system in which, as an individual seeking to express oneself, one has to obtain a license from the government, and a system in which one is free to use any part of the spectrum for whatever purpose. To go back to the example of a highway, once can draw an analogy to the difference between a highway system and a railway system. Both systems enable individuals to get from Point A to Point B. However, there is an immense difference in the values that these systems support. The railway system is in some ways more convenient—it leaves the "driving" to someone else. Yet, it constrains us in so many ways—we cannot leave when we want, we cannot go everywhere we might like, and, perhaps most importantly, we are always dependent upon some private party to get to where we would like to go. A highway system, on the other hand, distributes control to the end-users. The individual decides where to go, when to leave, what route to take, and where to stop along the way. To be sure, there are rules of the road that need to be followed—traffic rules and speed limits that one must obey, classes of vehicles that one may operate, driving on the right side of the road, and so on. Still, the sense of freedom and individual autonomy that pervades the idea of the open road is palpably different from the values associated with a national railway system.
The analogy to the current system of spectrum allocation and the proposed system of open access is clear. The current system maintains centralized control over the use of the spectrum and leaves the government involved in all decisions one takes regarding the spectrum. A system of open access, on the other hand, shifts the control of this resource toward the end-user, leaving individuals to decide how to use it. The choice, as the authors see it, is clear. It is time for the government to act.