Wireless Spectrum in 2016: A Policy Update
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The document summarizes wireless spectrum policy in the United States in 2016 and discusses potential future policy directions. It provides an overview of spectrum characteristics, increasing demand but constrained supply, the history of spectrum policy, current federal and non-federal allocation and management, recent auctions that generated billions for the Treasury, and proposals to repurpose underutilized federal spectrum through incentive auctions, geographic sharing, and overlay license auctions. The goal is to increase commercial access and use of spectrum to spur innovation while balancing federal needs.
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Wireless Spectrum in 2016: A Policy Update
- 1. Wireless Spectrum in 2016: A Policy Update Brent Skorup, Research Fellow, Technology Policy Program
- 2. Agenda • Spectrum Basics • Spectrum History • Spectrum Policy Today • Spectrum Policy in the Future mercatus.org
- 3. Spectrum Characteristics • The “medium” that transmits electromagnetic waves – Spectrum license – a right to use and a right to exclude others from a certain frequency in a geographic area • Scare resource • Like real property, spectrum can be bought, sold, leased, divided, and subdivided • Most people deal with “MHz” every day – FM radio dial – 88 MHz to 108 MHz – Mobile carriers operate at bands between 700 MHz to 3500 MHz (3.5 GHz) – Most popular Wifi “band” is 100 MHz wide at 2400 MHz (2.4 GHz) mercatus.org
- 6. Increasing Demand for Spectrum… • Valuable input for commercial and government users – Broadcast television – Wireless broadband – GPS – Training exercises for military – Public safety communications • Wireless broadband is driving most use on commercial side mercatus.org
- 7. …But Supply is Constrained by Physics and Policy • A fiber optic wire has over 2000x the capacity of spectrum licensed for US mobile carriers (Rysavy 2014) • On average, a cell site in the US is shared by over 1000 users – As few as three people watching 4K Netflix can consume all LTE capacity • How do carriers increase capacity? – Upgrade technology and radios that use existing spectrum more efficiently – Build more towers—over 300,000 sites in US and the cost per cell site ~$550,000 (FCC 2010) – Buy more spectrum mercatus.org
- 8. Spectrum = Tech Innovation • Inefficient use of spectrum is a costly national problem – US government holds ~ 60% of “beachfront spectrum,” likely worth hundreds of billions of dollars – Freeing 10% of beachfront spectrum could result in $1 trillion in economic benefits (Lenard et al. 2010) – Economic costs from inefficient spectrum use exceed $1 trillion (Furchtgott-Roth 2013) • More commercial spectrum = more innovation – Lower prices and more competitors in broadband and TV – Cheaper to test and deploy Internet of Things applications, drones, driverless cars, virtual reality, and medical devices mercatus.org
- 9. History • 1927 – Radio Act creates Federal Radio Commission – Effectively nationalizes radio spectrum – Members of Congress concerned about broadcast radio licensees gaining vested property rights – All spectrum is collectively owned by the public and administered on behalf of the public by the US government according to the “public interest” • 1934 – Communications Act creates Federal Communications Commission • 1959 – Ronald Coase urged market allocation of spectrum • 1993 – Congress permitted spectrum auctions mercatus.org
- 10. History • Federal spectrum is administered by the President – Delegated to the Department of Commerce – National Telecommunications & Information Administration (NTIA) – But: agencies have a lot of discretion over their spectrum • Non-federal spectrum is administered by the FCC – Commercial – State government – Utilities • Decision about whether spectrum is federal or non-federal is decided informally by the NTIA and FCC mercatus.org
- 15. AWS-3 Auction • Concluded in January 2015. • Bidders: AT&T, Verizon, Dish and its affiliates, T-Mobile, others • 50 MHz of paired spectrum sold for over $40 billion • $7 billion+ earmarked for a nationwide public safety network • $20 billion+ to US Treasury for debt repayment mercatus.org
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- 21. Uses of Beachfront Spectrum • ~ 3200 MHz total, – spanning 300 MHz to 3500 MHz • ~ 20% for mobile broadband (580 MHz) (FCC 2014) • ~ 10% for broadcast TV (294 MHz) – NBC, ABC, CBS, FOX, PBS and affiliates – Around 10-15% of Americans watch broadcast TV solely • ~ 60% has a dominant federal use (1500 MHz+) (PCAST 2012) – ~ 18% is exclusively federal, the rest is nominally shared with non-federal users – “effectively precludes substantial commercial use of those bands” (PCAST 2012) – NTIA analyzing about 30% of beachfront spectrum for sharing and transfer (960 MHz) mercatus.org
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- 24. Valuable Federal Asset • ~ 1 to 2% of beachfront spectrum sold for over $40 billion in 2015. • ~ 60% is precluded from commercial use by federal users. – About 60 agencies and departments have 240,000 spectrum assignments – Big nine: DoD, FAA, DOJ, DHS, DOI, Ag., US Coast Guard, DOE, and Commerce • Spectrum is underpriced for agencies—encourages overuse – Agencies pay a $122 annual fee to NTIA for each assignment (GAO 2012) – Fees paid to NTIA totaled about $30 million in FY 2012 – But: agencies purchase other necessary inputs at approximately market rates (vehicle fleets, electricity, labor, gasoline, office space, etc.) mercatus.org
- 25. Recent Spectrum Bills • “Incentive Auction” – March 2016 – From 2012 Middle Class Tax Relief Act – FCC pays TV broadcasters in 600 MHz band for spectrum for re-sale to carriers • Federal Spectrum Incentive Act (Reps. Guthrie, Matsui) – Allows agencies to receive 1% of auction proceeds for sequestration-related cuts • Wireless Innovation Act (Sen. Rubio) – NTIA tracks opportunity costs • Mobile Now Act (Sen. Thune, Nelson) – Make 255 MHz available for wireless broadband by 2020 (under 6 GHz) – Easier wireless network deployment on federal property – Requires Commerce report about incentivizing agencies to share or relinquish spectrum mercatus.org
- 26. Spectrum Policy in the Future mercatus.org
- 27. Repurposing Federal Spectrum • More clearing agencies after auction – Auction off encumbered spectrum and force agencies to move – CSEA (2004) allowed payments to agencies for relocation activities – Middle Class Tax Relief Act (2012) allowed payments for planning relocation • More commercial-federal geographic sharing • Densifying networks • Unlicensed dynamic spectrum sharing? – TV White Spaces results has been discouraging – “Legacy device problem” • GSA for spectrum? mercatus.org
- 28. Overlay Auctions? • Based on proposal from FCC Commissioner Jessica Rosenworcel • Encumbered federal spectrum is auctioned off to commercial users – Licensee can deploy in markets where no federal operations are – In areas where agencies operate, licensee can negotiate compensation (in-kind or cash) for agency to cease or decrease operations • Overlay auctions helped free about one third of mobile broadband spectrum (encumbered commercial spectrum) • But: Miscellaneous Receipts Act generally precludes agencies from selling their assets mercatus.org
- 29. Conclusion • Spectrum Basics • Spectrum History • Spectrum Policy Today • Spectrum Policy in the Future mercatus.org
- 31. Bridging the gap between academic ideas and real-world problems