Friday, January 04, 2008

Favoring Property Rights In Spectrum

Sprint Nextel and T-Mobile have just submitted a filing at the FCC in support of a proposal to license new fixed services in the “white spaces” of the TV bands. They state that the TV bands, because of their favorable propagation techniques, are well-suited for the delivery of lower-cost and reliable backhaul services needed to operate their wireless services.

What caught my eye is the support for establishing a regime of licensed, rather than unlicensed, use for the so-called “white spaces.” While proposals for unlicensed spectrum use seem to be in high fashion these days, just like all sorts of proposals for “open access” and “unbundling” of communications networks, licensing has the advantage of establishing a property rights-like regime in which the rights and obligations of the license holder can be defined. When the license is bid at auction, this regime allows the spectrum to go to those who value its use most highly in accordance with the rights defined by the license.

Although often the assertion is otherwise, as a practical matter, in an unlicensed regime, there still must be “rules” (sometimes more gently called “protocols” or “standards”) to police against interference to licensed uses. Otherwise, there is little or no incentive for the spectrum to be used in the most efficient, most innovative, and highest value manner. Rather, in an unlicensed regime, without a set of defined property rights in the spectrum, the incentives necessarily run in the direction of “use as much of the spectrum as you can whenever you can” because it is “free” or a “commons.” In other words, the tendency runs in the direction of inefficiency.

This notion of spectrum as a free resource is not unrelated to the dangerously fashionable notion in some quarters that communications networks, having been constructed and operated with billions of dollars of private risk capital, ought now to be shared under mandatory “open access” or "net neutral" regimes that will necessarily require government management and rate-setting.

I haven’t studied all of the questions that might be relevant to establishing any technical rules that might needed for use of the TV bands. As a general rule more flexibility in use when defining the parameters of the licensing rights is preferable to less flexibility. And to the extent that Sprint Nextel and T-Mobile justify their support for a licensed regime for the TV white spaces as a means to provide backhaul for their wireless services in order to avoid what they call unreasonable special access costs, I am not here endorsing their characterization of the current level of special access prices. One thing of which I am sure, though, is that, whatever one believes about the existing state of competition, it is far better for the FCC to try to facilitate even more alternatives, in ways consistent with respect for property rights and property rights-like regimes, than it is for the agency to consider re-regulating the incumbents’ special access services.

In the first few days of this new year, I may already have missed some not-so-encouraging communications policy developments. That's okay. I am afraid there will be plenty to discuss in the days and weeks ahead. But, as 2008 begins, I am happy to take note of an FCC filing that essentially embodies a property rights-protective approach over one that is the antithesis.