1. Models for Spectrum Allocation: Which is Most Efficient Wayne A. Leighton Francisco Marroquín University, Guatemala Presentation to the International Telecommunications Society Berlin, Germany September 2004

3. Three perspectives on spectrum policy: Engineering : Technological advances improve cooperation gain and processing gain. Law: Is the use of licensed spectrum without the licensee’s permission trespass, nuisance, or something else? Economics: Efficiency is restricted by overuse as well as underuse. What to do?

4. Engineering Issues Ultra Wide Band (UWB): a low-power application Cognitive Radio: both low- and high-power applications How is the difference between low- and high-power applications reflected in the rights of licensees?

6. Legal Issues Unauthorized use of licensee’s spectrum. Is it trespass? Is it nuisance? Trespass: tangible interference with an owner’s possession of land Nuisance: tangible interference with an owner’s use and enjoyment of land

7. ‘If I invade your land with smells and stenches, pollution or electromagnetic radiation, I am no trespasser under traditional law, for I have not interfered with your possession. In such cases, I am liable if at all for interference with your use and enjoyment, that is, for nuisance.’ Dobbs, Dan. 2000. The Law of Torts. Minneapolis: West Group. Is cognitive radio analogous? Yes and No

8. Additional legal issues: which apply? Eminent Domain? Probably not. More a regulation than a taking. But remember Oliver Wendell Holmes… Adverse Possession? Not really. It is not open and notorious use. Privilege? Perhaps. It is forward-looking, and it was applied to aviation.

9. Economic Issues: Tragedies of the Commons and Anti-Commons Tragedy of the Commons: Inefficient overuse, due to many ‘owners’ where no one has the right to exclude. Tragedy of the Anti-commons: Inefficient underuse, due to at least two very different causes…

10. Causes of the Anti-Commons Tragedy 1. ‘failure’ of licensees to combine resources Example: UWB 2. failure of government to fully assign rights

12. 1. Balance the ‘tradeoff’ between commons and anti-commons problems. 2. Accept what we cannot change and deal with what we can. (Demsetz) 3. Apply a liability rule. (Posner) Some solutions:

13. 1. Balance the use of commons and anti-commons All commons → large costs associated with the tragedy of the commons All exclusive use → large costs associated with the tragedy of the anticommons

15. 2.Accept what we cannot change. That is, avoid the Nirvana fallacy. ‘Those who adopt the nirvana viewpoint seek to discover discrepancies between the ideal and the real and if discrepancies are found, they deduce that the real is inefficient.’ Demsetz, 1969. Transactions costs as market failure? No

16. 3. Apply the liability rule Property rights are preferable to regulation where voluntary transactions are feasible. (Landes and Posner) But what about high transaction costs?

17. Some applications: WiFi – small geographic areas, low costs of internalizing the externality WiMax – large geographic areas, large costs of internalizing the externality

18. Recommendation Employ an allocation model that focuses heavily on exclusive use (best incentives), but allocate some to commons, especially for uses in which externality is internalized.

19. Transition Options 1. The ‘Big Bang’ (Kwerel and Williams) 2. The ‘Really Big Bang’ 3. The ‘Expanded Rights’ Model

20. 1.The Big Bang (by Evan Kwerel and John Williams) 434 mghz of spectrum Licensees may participate or not Participating licensees receive flexibility Participating licensees may refuse any bid, or sell and keep the proceeds

21. 2. The Really Big Bang Same as above, applied to all spectrum Geographic overlay of site-based licenses Same benefits and costs as the Big Bang, only bigger…

22. 3. The Expanded Rights Model All licensees receive flexibility Use restrictions limited to technical rules Geographic overlay of site-based licenses

23. Conclusion Legal: Proceed carefully in granting rights to opportunistic use, and recognize precedents. Economic: Stress exclusive use, for efficiency and to avoid the tragedy of the commons. To avoid the tragedy of the anti-commons, two things are needed: 1. government assignment of rights (flexibility) 2. limited application of commons, e.g. in small geographic areas for WiFi applications.