The Technical Basis for Spectrum Rights: Policies to Enhance Market Efficiency

The inefficiencies inherent in the traditional command-and-control spectrum regulatory system are increasingly costly as demand for spectrum-dependent services explodes. This paper describes a conceptual framework to articulate clear rights of access to spectrum in a way that fosters a market-based allocation of the resource. We also offer simple rules that reasonably account for imperfect receivers and challenging physical properties of radiowaves. The key features of the system we propose are:

  • Regulators construct an initial partition of spectrum rights across the dimensions of space, time, frequency, and direction of propagation. Each partition is called a licensed electrospace right (LER). Regulators devolve these rights to LER owners.
  • Licensees may buy, sell, aggregate, and subdivide their LERs at will.
  • Licensees must keep all signals within their respective LER, including its frequency band, geographical area, angle of propagation range, and authorized time of operation. In particular, all signals must have a power level of less than a regulated limit (E0) outside the LER, with exceptions allowed with a probability no greater than an amount specified by regulators (such as one percent).
  • Licensees must limit transmitter power or field strength within their LER to below a regulator-set level for the band in which they operate (Emax).
  • Regulators or other parties must establish and maintain a detailed database and propagation model that facilitates transactions and enforcement.
  • In this system, regulators set up the rights database and establish a few core parameters for each band. Thereafter their role is limited to enforcing compliance with the simple set of rules on signal strength. Importantly, this system includes no protection of, or constraints on, receivers, so it does not directly control interference. Rather, through transactions and negotiations between LER owners, the system we outline here would induce an efficient level of interference in which the costs of controlling interference are balanced by the benefits.

In the United States, the federal government has traditionally regulated access to radio spectrum with "command-and-control" licensing. Regulators divide the radio spectrum into frequency ranges, or bands, and typically allocate each band for a single type of radio service with very specific rules about its operation. These rules define the system of rights for licensees to provide the specified services for each band.

This traditional command-and-control spectrum regulation has sought to optimize the technical rules for different radio services, generally with good success. However, rapidly evolving technology and increasing demands for wireless services mean this rigid regulatory structure is increasingly poorly suited to optimizing the economic efficiency of the allocation of frequencies across different kinds of radio services. That is because the spectrum rights conveyed by a traditional license are usually exactly sufficient to provide only the services the regulator intends. The licensee can transmit with a specified power, at a specific location, using a specific antenna and tower, employing a specific modulation and bandwidth as needed to provide the specified service. This has generally provided a good "recipe" for operating the intended service with an acceptable quality, but it relies heavily on the regulator, rather than the market, to determine which spectrum resources are used for which applications. This fails to accommodate new services and applications, particularly for cell phones and other wideband wireless services, and it fails to provide efficient incentives to develop and deploy new technology. In most cases, to accommodate new uses regulators have moved the existing users of allocated bands to other suitable bands. Because of the time and expense of such reallocations, regulators need other ways to accommodate a wide range of services without requiring reallocation to each specific new use.

This paper offers a conceptual way forward. It explores the technical fundamentals of establishing rights to access spectrum, including the institutional, scientific, and engineering considerations important to policymakers. It describes how regulators could articulate rights to spectrum access such that rights holders could transfer, subdivide, aggregate, and protect their rights in an economically efficient market that accommodates evolving demands for the resource. We examine current approaches to expressing rights to access spectrum, their advantages and disadvantages, and how they may lead to economically inefficient underutilization of spectrum resources.

The technical basis for spectrum rights, meaning the way the regulatory system articulates rights to access spectrum, is key to achieving an efficient allocation of the resource through markets. If spectrum resource owners can subdivide or transfer their rights in a competitive market, then they perceive the full opportunity cost of holding the resource as revealed by market prices for spectrum rights. In an efficient spectrum market, incumbents would have an incentive to adopt technologies that optimize their use of the resource and to devolve underutilized spectrum to others with higher and better uses. Thus, in a flexible rights regime, market forces and available technologies would determine the efficient degree of partition of rights in any particular band or application, and at the same time market forces would induce investors to develop new technologies that use highly valued spectrum more efficiently and exploit low cost spectrum for new applications.

The paper proceeds as follows. Section 2 outlines the basics of band allocations, frequency assignments, and spectrum licenses. This provides the foundation to examine the details of exclusive spectrum rights and assess the advantages and disadvantages of the current system with an eye toward identifying approaches that could work better. Section 3 describes the physics of radio signal propagation that underlie any spectrum applications and introduces the seven-dimension "electrospace" approach to describing radio signals and the rights to emit them. We argue that increased exploitation of these dimensions will be central in improving spectrum capacity.

Section 4 describes the traditional command-and-control approach to regulating airwaves that is the basis for most management of radio use in the United States and the rest of the world, and Section 5 briefly discusses several frequency management alternatives to command-and-control, including low-power commons and some opportunistic dynamic spectrum sharing techniques. Section 6 describes how the electrospace approach can be the technical basis of flexible-use spectrum rights. We present a way to express the rights to use spectrum that is not tied to any specific service or technology, allowing market forces to allocate spectrum such that new radio technologies and applications can be rapidly accommodated with minimal regulatory oversight. Section 7 describes some challenges with selecting and enforcing exact rules to regulate flexible-use bands. We describe relatively simple rules that can simultaneously prevent interference and allow substantial flexibility in use, and we discuss what we see as the most promising applications flexible-use frequency bands. Section 8 concludes.