Regulation / Technology

Free the Fuel for Technological Innovation

Every time you get a text message, watch a YouTube video, Google a question on your phone, or jam out to “97X BAM, the future of Rock n’ Roll”, you are utilizing the radio spectrum. As the fuel for essentially all communication between connected devices, everything, from the free WiFi you enjoy at Starbucks, to the GPS signal that gets you to the nearest Chipotle, is only possible because of the radio spectrum. As telecom companies, cable providers, satellite operators, and militaries all over the world compete for control of spectrum, it has become one of the most valuable natural resources of the 21st Century. It’s often been called the new oil and the lifeblood of the mobile industry, but sadly its usage has been bottle-necked and inefficiently distributed by the Federal Communications Commission (FCC).

Since our ability to harness the radio spectrum in the early 1900’s, its usage as a resource has been strictly regulated in a “command-and-control” model. Occasionally, narrow strips of spectrum would be allocated for specific commercial applications like AM and FM radio and TV broadcasting, but only businesses who met the incredibly vague “public interest” mandate of the FCC could partake. It was the economist Ronald Coase who finally pointed out the incredible inefficiencies of this system in his 1959 landmark paper. And while it took over 30 years for any meaningful reform to take place, the FCC’s adoption of spectrum auctions and flexible-use licenses in the 1990’s gave the Internet the fuel it needed to take off. It does, however, remain a far-cry from the system that Coase envisioned.

While improvements have undoubtedly been made in the way spectrum is allocated, we are still facing a shortage of commercial spectrum. As smartphones and tablets become ubiquitous, cell phone providers are finding themselves squeezed for spectrum use, with some considering mergers to get their hands on more. Add to all of this the oncoming revolution of the Internet of Things. As more devices in our lives and houses become networked, analysts have predicted a doubling of the number of connected devices by 2020. And these devices aren’t going to connect through Ethernet, they are going to communicate through the radio spectrum, adding even more pressure to the existing infrastructure.

Perhaps the most baffling factor in this whole situation is that most of the supply of spectrum has been artificially constrained. While commercial interests compete for licenses in narrow bands of spectrum, the government has sole or primary claim to 60-70 percent of spectrum available for mobile broadband. While some argue that the government has need of this spectrum to prioritize defense communication, both scholars and government auditors have found that federal agencies use their spectrum poorly. Brent Skorup, Technology Policy scholar at the Mercatus Center, has argued this is because “agencies have no cost pressures and don’t economize spectrum use”. This contrast is even clearer when comparing the number of individuals utilizing each part of the spectrum. Over 286 million U.S. adults use 40% of the spectrum compared with the nearly 22 million in the government workforce using 60%. The government should clearly consolidate its spectrum usage and allocate more to the private sector. Recently, President Obama has taken a step in the right direction by asking the FCC to allocate 500 MHz for private usage by 2020.

However, 500 MHz won’t be enough to fuel the Internet of Things and the ongoing atmosphere of innovation we want to foster. As Senator Mark Kirk and Representative Adam Kinzinger have suggested, we should set up a BRAC-like commission for spectrum auctions. This would more effectively find prime bands of spectrum to auction off while balancing the needs of military and government communication.

In addition to a BRAC commission for spectrum, the FCC should expand the number of flexible use licenses and allow companies to sell spectrum from their licenses. By lessening the restrictions on how companies may use spectrum and allowing them to sell spectrum when they have excess, we could more closely approximate the property-rights system that Coase described, and thereby avoid many of the inefficiencies of our current command-and-control system.

Spectrum is vital for the increasingly connected world we hope to build. Not only does it allow our devices to connect, but it allows us to connect with others through our devices. The Internet revolution has brought access to information to millions across the globe, and as we head towards the future and the Internet of Things, it is more important than ever that we free the fuel for technological innovation.

 

wireless station by slimmer_jimmer is licensed under CC BY-NC-ND 2.0

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