Spectrum Tragedies Thomas Hazlett International Telecommunications Society Berlin, Germany Session 6.2 * September 5, 2004

T.W. HazlettSpectrum Tragedies ITS-Berlin 2 Common Interest Tragedies Tragedy of the Commons –“not enough” ownership –Over-utilization Tragedy of the Anti-commons –“too much” ownership –Under-utilization –Heller (1998) – Moscow storefronts & kiosks In reality, same general phenomenon Lee Ann Fennell (2004)

T.W. HazlettSpectrum Tragedies ITS-Berlin 3 Busy Sidewalks, Vacant Storefronts

T.W. HazlettSpectrum Tragedies ITS-Berlin 4 Multiple Spectrum Tragedies MMDS – license fragmentation –Textbook ‘anti commons’ WISPs – excessive entry –Textbook ‘commons’

T.W. HazlettSpectrum Tragedies ITS-Berlin 5 Brisk Wireless Business (kiosks) CMRS  189 MHz $90 billion in annual revenue Consumer surplus ~ $80 billion per year CS/PS > 10

T.W. HazlettSpectrum Tragedies ITS-Berlin 6 Economic Activity Across Bands (2003, USA) BandMHzService Rev. Rev. Equipment Network Capex 1.9 GHz20~ MHz, 2.4 GHz $0.03 billion $3.81 billion $0.5 billion 5 GHz555 MHz ~ 0 $0.02 billion 800 MHz, 1.9 GHz 189 MHz $88 billion $13 billion $21 billion

T.W. HazlettSpectrum Tragedies ITS-Berlin 7 MMDS/ITFS MHz Dispersed ownership –Many non-profits –Adjacent interference problems => hold-up Licenses 99% discount from CMRS

“Deinterleaving”

T.W. HazlettSpectrum Tragedies ITS-Berlin 9 Tragedy in Licensed Spectrum Exclusive use rights assigned But with extreme fragmentation Little social value produced –Tragedy of anticommons (under use) –Tragedy of the commons (reform is public good)

T.W. HazlettSpectrum Tragedies ITS-Berlin 10 Coordination of Unlicensed Use Government allocation rules –Power limits –Technical standards –Service categories Property owners –IT departments –Vertically integrated users Technology vendors

T.W. HazlettSpectrum Tragedies ITS-Berlin 11 Commons Relatively Useful for  Corporate/campus –Rules imposed by institution (Intel, CMU) Spectrum within the walls –Baby monitors, cordless phones/PCs Rural WISPs Point to point (beams)

T.W. HazlettSpectrum Tragedies ITS-Berlin 12 Commons Relatively Unsuccessful for  Wide Area Networks

T.W. HazlettSpectrum Tragedies ITS-Berlin 13 Coordination by Part 15 Rules “Wireless Internet Service Providers (WISPs) are using unlicensed spectrum to provide innovative services in rural areas but are finding it difficult to provide adequate signal coverage because of our current Part 15 power limits.” SEPARATE STATEMENT OF COMMISSIONER KEVIN J. MARTIN Re: Facilitating Opportunities for Flexible, Efficient, and Reliable Spectrum Use Employing Cognitive Radio Technologies (ET Docket No ); Authorization and Use of Software Defined Radios (ET Docket No ), Notice of Proposed Rulemaking and Order (Dec. 30, 2003).

T.W. HazlettSpectrum Tragedies ITS-Berlin 14 Unlicensed WISPs on Scarcity This is not just coffee shop WiFi we are discussing… These services are part of the infrastructure of our communities now on a worldwide scale. The aggressive adoption of these bands has come with little protections to WISPs and their high profile customers and is in danger of creating a disastrous implosion if nothing is done to remedy the impending interference hazards on the horizon. WISPs have no rights to the spectrum they use…

T.W. HazlettSpectrum Tragedies ITS-Berlin 15 Property Rights I want to suggest a policy to help solve these issues and provide unlicensed use of this band simultaneously. I propose a new policy called the WISP Homestead Policy… Homestead status would be given to WISPs who register with the FCC and provide documentation proving active use… John Scrivner, Mt. Vernon. Net, Inc., WISP Homestead Policy Proposal For WISP Use of the ITFS Band, Comment filed with Federal Communications Commission, WT (March 19, 2004).

T.W. HazlettSpectrum Tragedies ITS-Berlin 16 Spectrum Coordination Costs LANs  low WANs  high (many potential conflicts) –Efficient market organization is to pay an agent to coordinate –Wireless networks with EAFUS rights invest in complementary infrastructure to increase value of spectrum

T.W. HazlettSpectrum Tragedies ITS-Berlin 17 Spectrum Sharing to Introduce New Technology

T.W. HazlettSpectrum Tragedies ITS-Berlin 18 Where’s McCaw? Clearwire got its start in the wireless business using 2.4 GHz unlicensed spectrum in several markets. The company decided to sell its businesses in several markets and switch to using licensed spectrum in Jacksonville because “that’s where the future and all the new technology is,” according to White. Annie Lindstrom, Carrying the MDS/ITFS Torch, Shorecliff Comm Mag (Sept/Oct 2003).

T.W. HazlettSpectrum Tragedies ITS-Berlin 19 Conclusion Extreme fragmentation of Licensee rights dissipates value of Licensed Spectrum Extreme fragmentation of Use rights in Unlicensed –Is compatible with short-range applications –Is difficult to overcome for wide area applications