Unleashing the Potential of Mobile Broadband: What Julius Missed

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March 7th, 2013

In yesterday’s Wall Street Journal op-ed, FCC Chairman Genachowski correctly focuses on the innovation potential of mobile broadband.  For that potential to be realized, he points out, the U.S. needs to make more spectrum available.  A spectrum price index developed by my colleague, Scott Wallsten, demonstrates what most observers believe – that spectrum has become increasingly scarce over the last few years.

The Chairman’s op-ed highlights three new policy initiatives the FCC and the Obama Administration are taking in an attempt to address the spectrum scarcity:  (1) the incentive auctions designed to reclaim as much as 120 MHz of high-quality broadcast spectrum for flexibly licensed – presumably, mobile broadband – uses;   (2) freeing up the TV white spaces for unlicensed uses; and (3) facilitating sharing of government spectrum by private users.

There are two notable omissions from the Chairman’s list.  First, he does not mention the 150 MHz of mobile satellite service (MSS) spectrum, which has been virtually unused for over twenty years due to gross government mismanagement.  A major portion of this spectrum, now licensed to three firms – LightSquared, Globalstar, and Dish – could quickly be made available for mobile broadband uses. The FCC is now considering a proposal from LightSquared that would enable at least some of its spectrum to be productively used.  That proposal should be approved ASAP.  The MSS spectrum truly represents the low-hanging fruit and making it available should be given the same priority as the other items on the Chairman’s list.

Second, if the FCC and NTIA truly want to be innovative with respect to government spectrum, they should focus on the elusive task of developing a system that requires government users to face the opportunity cost of the spectrum they use.  This is currently not the case, which is a major reason why it is so difficult to get government users to relinquish virtually any of the spectrum they control.  To introduce opportunity cost into government decision making, Larry White and I have proposed the establishment of a Government Spectrum Ownership Corporation (GSOC). A GSOC would operate similarly to the General Services Administration (GSA).  Government agencies would pay a market-based “rent” for spectrum to the GSOC, just as they do now to the GSA for the office space and other real estate they use.  Importantly, the GSOC could then sell surplus spectrum to the private sector (as the GSA does with real estate). The GSOC would hopefully give government agencies appropriate incentives to use spectrum efficiently, just as they now have that incentive with real estate.  This would be a true innovation.

In the short run, administrative mechanisms are probably a more feasible way to make more government spectrum available.  For example, White and I also proposed cash prizes for government employees who devise ways their agency can economize on its use of spectrum.  This would be consistent with other government bonuses that reward outstanding performance.

Sharing of government spectrum is a second-best solution.  It would be far better if government used its spectrum more efficiently and more of it was then made exclusively available to private sector users.  This is, admittedly, a difficult task, but worth the Administration’s efforts.

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