Spectrum is in increasingly short supply. Especially mid-band spectrum. My fellow Free State Foundation scholars and I have highlighted wireless industry reports indicating that, absent additional spectrum clearing, the United States is at risk of falling behind other nations in making more available, in particular for 5G. The most likely source? Frequencies currently allocated to government agencies.
Legislation introduced by Senator Mike Lee (R-UT) would facilitate difficult discussions regarding whether government spectrum is being put to its best and highest use by directing NTIA to determine its real-world monetary value. That, in turn, would infuse the process with greater transparency and data-driven analysis.
The federal government, led by the Department of Defense, has exclusive or primary use of the majority of spectrum between 225 MHz and 3.7 GHz. In 2012, the President's Council of Advisors on Science and Technology (PCAST) found that "nearly 60% of … beachfront frequencies are predominantly allocated to Federal uses, a statistic that illustrates the importance of finding more effective mechanisms to share Federal spectrum."
Sen. Lee's bill, the Government Spectrum Valuation Act (S. 1626), champions a market-oriented approach. By directing NTIA to assign dollar values to government-held spectrum, it would enable quantitative comparisons between private and public allocations. In addition, by including those amounts within agencies' budgets, it would provide them with economic incentives to relinquish underutilized capacity in order to secure funding for higher priority initiatives.
In the commercial realm, market forces reveal the value of spectrum. Commission-led auctions, such as the one scheduled to take place this December for 280 MHz of high-value mid-band spectrum in the C-Band, afford interested parties the opportunity to bid competitively on scarce resources. The highest bidders prevail, and the dollar amounts they agree to contribute to the Treasury establish what the spectrum is worth.
But that is not the case with government spectrum, which in many cases was allocated years ago and under vastly different – and much less efficient – technological circumstances. As Visiting Scholar Gregory J. Vogt explained in a recent Perspectives from FSF Scholars, "Coordinated Government Decisionmaking on Spectrum Issues: It's Vital to Locating More Spectrum for 5G Use":
There is a significant "opportunity cost" associated with government spectrum, which is defined as the loss of potential benefits when a suboptimal alternative is chosen over one that would generate higher consumer welfare. In May 2015, Coleman Bazelon and Guilia McHenry estimated the economic value of 645.5 MHz of licensed spectrum in the hands of government users was $455 billion. If this spectrum was auctioned off to commercial users, it would generate about $1.7 trillion in 2015 dollars in economic activity.
Indeed, as Sen. Lee noted when he introduced the Government Spectrum Valuation Act, "because federal agencies pay such a minimal fee to NTIA for their allocations – absent of a market-based allocation – they have little incentive to share spectrum or make it available for commercial use."
Nor are policymakers able to make objective, apples-to-apples comparisons between commercial and government allocations. They might have imperfect information as to what that spectrum would fetch on the open market, but the other side of the balance – its true and full value to government users – often is unknown.
(To be sure, government spectrum plays an important role, including in our national defense, that in certain instances cannot be made public. The legislation as proposed would allow NTIA to consider, and require it to keep confidential, "classified, law-enforcement sensitive, or proprietary information" relevant to the assigned dollar value.)
To address this, the Government Spectrum Valuation Act would require NTIA to work with the FCC and the Office of Management and Budget (OMB) to estimate the value of spectrum. Such valuations would be based "on the value that the electromagnetic spectrum would have if the spectrum were reallocated for the use with the highest potential value of licensed or unlicensed commercial wireless services that do not have access to that spectrum as of the date of the estimate."
It also would direct NTIA to "consider the spectrum needs of commercial interests while preserving the spectrum access necessary to satisfy mission requirements and operations of Federal entities."
The bill would establish the following schedule pursuant to which NTIA must complete its valuations:
- 3 KHz to 33 GHz: within 1 year and every 3 years thereafter
- 33 GHz to 66 GHz: within 2 years and every 3 years thereafter
- 66 GHz to 95 GHz: within 3 years and every 3 years thereafter
It is worth pointing out that FCC Commissioner Michael O'Rielly repeatedly has advocated for a similar approach, noting in 2018 that "requiring U.S. Government agencies to put a market price on their spectrum holdings will fix a budgetary anomaly and promote overall spectrum efficiency by incentivizing each agency to release unneeded spectrum."
Although Sen. Lee unveiled the Government Spectrum Valuation Act back in May 2019, it has been the recent subject of renewed focus. Representatives Cathy McMorris Rodgers (R-WA) and Yvette Clarke (D-NY) introduced companion legislation in the House on September 14, 2020. Two days later, the Senate Commerce Committee voted to approve Sen. Lee's version. That bill now is before the full Senate.
Then-NTIA Administrator David Redl stated in 2019 that, "[i]f we're being honest, the era of easy spectrum decisions is over." Passage of the Government Spectrum Valuation Act would facilitate that process by assigning specific dollar values to government spectrum, thereby enabling policymakers to make rational, informed decisions regarding its best and highest use.
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