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The Art of Spectrum Lobbying: America's $480 Billion Spectrum Giveaway, How it Happened, and How to Prevent it From Recurring

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NEW AMERICA FOUNDATION
THE ART OF SPECTRUM LOBBYING
America’s $480 Billion Spectrum Giveaway,
How it Happened, and How to Prevent it
From Recurring
By J.H. Snider, MBA, Ph.D.
1630 Connecticut Ave., NW
7th Floor
Washington, DC 20009
Phone: 202-986-2700 • Fax: 202-986-3696
WWW.NEWAMERICA.NET
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The Artof Spectrum Lobbying
America’s$480 Billion Spectrum Giveaway,
Howit Happened, and How to Prevent it
From Recurring
By J.H. Snider, MBA, Ph.D.
ResearchDirector
New America Foundation
N
EW
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MERICA
FOUNDATION
Washington, DC
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August 2007 New America Foundation
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Introduction..........................................................................................................................................................................1
Part I: The Spectrum Giveaway............................................................................................3
Amount of Commercial Spectrum Granted Since 1993.................................................................................6
Value of the Spectrum................................................................................................................................................10
Government Receipts from the Assignment of New Licenses....................................................................16
Adding It All Up ...........................................................................................................................................................17
Part II: The Art of Spectrum Lobbying..................................................................21
Economic Strategies....................................................................................................................................................26
Political Communication Strategies......................................................................................................................29
Ten Illustrative Spectrum Giveaways....................................................................................................................32
Part III: Public Policy Recommendations..........................................................35
Reduce the Informational Sources of Incumbents’ Holdup Power..........................................................37
Reduce the Economic Sources of Incumbents’ Holdup Power..................................................................42
Conclusion..........................................................................................................................................................................49
Endnotes..............................................................................................................................................................................51
Contents
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1
Introduction
Inthe late 1980s, the Federal Commu-
nications Commission (FCC) con-
ducted a series of lotteries to allocate
electromagnetic spectrum (popularly
known as the “public airwaves”) for
mobile telephone service. More than
320,000 lottery tickets were acquired by
spectrum speculators, including dentists,
lawyers, accountants, and anyone else
willing to devote the time and hire the
legal talent necessary to fill out the com-
plicated form to acquire a lottery ticket.
Many of the lottery tickets were pur-
chased as partof partnerships, whose
members would collectively enter lottery
tickets for hundreds of different licenses.i
For example, in December 1989, the
FCC selected the winning ticket for a lot-
tery for one such license on Cape Cod,
Massachusetts. The winning ticket holder
then sold the ticket ten months later for
$41.5 million.ii Former Governor Mark
Warner, a U.S. Senate staffer before the
lottery, was among the politically savvy
who made millions by acquiring and flip-
ping the licenses granted in the lottery.iii
The result was widespread outrage
because the public could readily perceive
that billions of dollars of public assets had
been given away to private interests—
well-connected, wealthy Americans—
without public compensation. As the
chairman of the FCC at the time charac-
terized the lotterywinners, “They receive
awindfall and the public gets no pay-
ment.”iv This outrage led to legislation in
1993 to auction future FCC licenses.v
Congressional leaders publicly promised
that, except for a few services—notably
public safety and terrestrial broadcast-
ing—the government would henceforth
grant exclusive rights to use spectrum only
in returnfor monetarycompensation.
This has not come to pass. According to
calculations presented in this paper, since
1993, the government has given to private
interests as much as $480 billion in spec-
trum usage rights without public compensa-
tion. That comes to more than 90 percent
of the value of spectrum usage rights it has
assigned from 1993 through the present.
In addition, the government has ware-
housed as much as $155 billion of spectrum
31962 TXT R1.qxd 8/7/07 2:44 PM Page 1
usage rights in guard bands. The warehousing in itself
is not a giveaway to private interests. But, for reasons
we shall see, it may position incumbent licensees to
acquire the warehoused spectrum without public com-
pensation. Thus, the act of guard band warehousing
may be viewed as part of a multi step process that
leads to giveaways just like
winning a presidential pri-
mary election is necessary to
winning the presidential
general election. For exam-
ple, since 1997 TV broad-
casters have used the digital
transition to acquire more
than $6 billion worth of
guardband spectrum by
winning rights to transmit
programming across a larger
geographic area.vi
How did this happen?
How could the government
give away so much in public
assets to private interests
without public and congres-
sional outrage? A large part
of the answer is that the
government no longer gives
away spectrum usage rights in highly visible ways
such as spectrum lotteries. Instead, incumbent
licensees and spectrum speculators have perfected
strategies that enable them to acquire free spectrum
rights below the public radar. Until public policies are
implemented to render those low visibility lobbying
strategies ineffective—so that spectrum giveaways are
once again as visible as they were in the days of spec-
trum lotteries—spectrum giveaways to private entities
will persist. (Of course, when the FCC or Congress
grants spectrum to public entities or for unlicensed
use, no giveaway in this sense is involved because the
public retains full rights to its airwaves.)vii
This paper deals with what might be considered
the third rail of spectrum policy: the rotten, special
interest politics that has driven lawmakers to give
away the public’s airwaves to private interests with-
out public compensation. In the vast stream of gov-
ernment reports seeking to reform spectrum policy
since 1993, one looks in vain for more than a token
acknowledgement, let alone a serious and sustained
discussion, of this giveaway.viii Like other politically
embarrassing issues, it is an issue that congressional
leaders and their proxies—the FCC, GAO, CBO,
NTIA, and others—would prefer not to talk about.
This, of course, suits the beneficiaries of the give-
away and their army of lobbyists and analysts just
fine. For that very reason alone, however, it is an
issue that desperately needs a public airing.
This paper is divided into three sections: Part I
provides an estimate of the value of the government’s
spectrum rights giveaway since 1993, Part II provides
adescription of the strategies spectrum lobbyists
have used to acquiresuch rights, and PartIII pro-
vides policy recommendations to ensure that spec-
trum rights giveaways (which are closely linked to
warehousing guard band spectrum) come to an end.
2
Introduction
In the vast stream of
government reports
seeking to reform
spectrum policy since
1993, one looks in vain
for more than a token
acknowledgement, let
alone a serious and
sustained discussion, of
[the spectrum] giveaway.
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The Spectrum Giveaway
“A dollar raised in a [spectrum] auction is an extra dollar to strengthen
Social Security and Medicare, to provide tax relief for America’s families,
to make prescription drugs affordable for our seniors, to provide health
insurance for the uninsured, or simply to reduce our debt.
—U.S. Senator Frank Lautenbergix
PARTI
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Rigorously quantifying spectrum giveaways is a bit
like studying power or love in a scientific way. We all
know that power and love exist and are important
explanatoryvariables in the real world. But studying
them with absolute scientific precision—despite
decades of attempts to do so—has not proven feasible.
Similarly,it is abundantly clear that the federal gov-
ernment has been conducting a huge giveaway of
spectrum usage rights to the private sector. This give-
away has been done in such a way that the govern-
ment and each recipient can find a plausible excuse to
argue that, in each particular case, no such giveaway
has been made. However, by keeping focused on the
big picture and making some reasonable simplifying
assumptions, we can see through this cloud of smoke
and demonstrate with confidence that a huge give-
away is in progress and likely to continue unless fun-
damental institutional reformis implemented.
One useful simplifying assumption is that we can
treat virtually all spectrum rights as having been first
licensed since 1993, which was the year Congress
passed a law mandating that new commercial
licenses to spectrum be auctioned.x Prior to 1993,
no spectrum was auctioned. Although the 1993 law
only applied to the allocation of new licenses rather
than modifications of existing licenses, the expecta-
tion of many in 1993 was that the era of spectrum
giveaways was about to come to an end. As we shall
see, this expectation was not fulfilled.
The Art of Spectrum Lobbying
There are two complementary reasons why treat-
ing 1993 as essentially the beginning of licensing is a
reasonable assumption. First, the rights attached to
an FCC license before 1993 were highly restricted.
ATV broadcaster, for example, could only provide a
single analog, standard definition TV channel with
its FCC license. Similarly, a mobile telephone
licensee was restricted to the use of highly inefficient
analog technology and could not add or change indi-
vidual cell towers without FCC permission.
If the telecommunications market were stable, this
wouldn’t have posed a serious financial problem for
incumbent licensees. The services that were efficient
and highly lucrative in 1993 would have continued
to be so in 2007. In fact, however, the telecommuni-
cations market has radically
changed since 1993. Most
licensed services that were
extremely valuable in 1993
would have become far less
valuable and even unprof-
itable by 2007 if licensees
had not received additional
spectrum usage rights.
For example, prior to
passage of the Telecommu-
nications Act of 1996,
which granted TV broadcast-
ers digital rights, TV broadcast industrylobbyists
argued before Congress and the FCC that without
such enhanced rights (called “spectrum flexibility”)
the TV industry would go bankrupt.xi Similarly, if
the original analog mobile telephone licensees had-
n’t been granted digital rights in the late 1990s, they
would have been at a severedisadvantage to the
mobile telephone licensees who purchased licenses
with digital rights after the auction era began. With
digital rights, the analog mobile telephone licensees
could increase by a factor more than ten the number
of telephone calls provided with the same amount of
spectrum. In addition, digital rights allowed them to
provide many new types of data services.
Second, all FCC spectrum licenses have come up
for renewal at least once since 1993. If we assume
that licensees arenot owed automatic renewal, then
any uncompensated renewal since 1993 would be a
giveaway.Although this is surely a controversial
5
If we assume that
licensees are not owed
automatic renewal, then
any uncompensated
renewal since 1993
would be a giveaway.
What is the total value of spectrum rights
the government has given away to private
interests? Answering this question is very
difficult and involves making many simplifying
assumptions. However, despite the difficulty of arriv-
ing at a precise estimate for the giveaway, the effort
is worthwhile and doable. It is worthwhile because as
long as the giveaway remains below the public radar,
it will continue. And it is doable as long as readers
understand that the purpose of such an exercise is
not to arrive at a precise number, but to demonstrate
that there is something seriously amiss with current
spectrum management policies. For this purpose, a
reasonable ballpark estimate of the magnitude of the
giveaway is adequate. This paper estimates a range
between $140 billion and $480 billion. Readers unin-
terested in the methodological details behind this
calculation may want to jump to PartII of this paper.
31962 TXT R1.qxd 8/7/07 2:44 PM Page 5
assumption, especially for licenses purchased at auc-
tion, the Communications Act is clear that license
renewal should not be automatic. The Act reads:
It is the purpose of this Act, among other things, to
maintain the control of the United States over all the
channels of radio transmission; and to provide for the
use of such channels, but not the ownership thereof,
by persons for limited periods of time, under licenses
granted by Federal authority, and no such license
shall be construed to create any right, beyond the
terms, conditions, and periods of the license.xii
In case a licensee might later profess ignorance of
this clause, the Communications Act requires that
licensees must agree in writing to it:
No station license shall be granted by the Commis-
sion until the applicant therefor shall have waived
any claim to the use of any particular frequency or
of the electromagnetic spectrum as against the reg-
ulatory power of the United States because of the
previous use of the same, whether by license or
otherwise.xiii
And in case those who purchased their licenses at
auction might want to argue that they are a special
exception, the Communication Act states that even
such licenses would have to be of limited duration:
Nothing in this subsection [on auctions] or in the
use of competitive bidding shall… be construed to
convey any rights, including any expectation of
renewal of a license, that differ from the rights
that apply to other licenses within the same service
that were not issued [by auction].xiv
Writing in the Federal Communications Law Journal,
Mark Fishman elaborates on the meaning of these
passages:
Certainly,the overwhelming body of precedence is
that FCC licenses do not have the sort of property
right that is protected from an unconstitutional
taking, in contrast to property rights in equip-
ment, which are fully protected…. What is indis-
putable is that in allowing members of the public
to use any particular portion of the spectrum,
Congress was careful to specify that such authori-
zation was temporary, limited, and subject to with-
drawal in a wide variety of circumstances.xv
In response to arguments that terminating a license
is an unfair public taking of private property, Fish-
man cites a well known precedent, General Telephone
v. United States.The case involved FCC adoption of
rules barring telephone companies from continuing
to possess cable TV franchises, a situation analogous
to possessing spectrum licenses. The court ruled that
the FCC could adopt rules that had retroactive
effects as long as the rules were reasonable.xvi In this
case, they were to foster new entry and competition
in local telecommunications service.
Fishman also acknowledges that regardless of the
original intent of Congress when it passed the Com-
munications Act, political reality appears to dictate
ignoring the law. He cites FCC Commissioner Glen
O. Robinson observing: ‘[despite] the legal theory of
the Communications Act that a license is not a prop-
erty right, the practical reality has been quite differ-
ent, as all the world knows.”xvii
What, then, is the value of the commercial spec-
trum rights given away since 1993? A rough cut
involves estimating the following three sets of num-
bers: 1) the amount of spectrum allocated for various
types of commercial services, 2) the market value of
that spectrum, and 3) the upfront monetarypayment
to the government (mostly auction receipts) for the
right to use that spectrum.
Amount of Commercial Spectrum
Granted Since 1993
How much commercial spectrum has the FCC
licensed to commercial users since 1993? To reduce
the difficulty of answering this question, only grants
of commercial rights below 3 GHz have been
included. These cover only one percent of the entire
radio spectrum, which is generally considered to
range from 0 to 300 GHz. Obviously, this will tend
to reduce the total estimated size of the giveaway.
But the reduction is likely to be relatively small since
the most valuable spectrum is located below 3 GHz,
which is often described as “beachfront” or “prime”
spectrum because of its favorable propagation char-
acteristics. According to the U.S. General Account-
ing Office, more than 90 percent of spectrum use
occurs below 3.1 GHz.xviii Donald Evans, Secretary
of the Department of Commerce, estimated that
morethan 95 percent of spectrum using devices
6
The Spectrum Giveaway
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operate below 3 GHz.xix Figure 1 is the official U.S.
government spectrum chart. Figure 2 shows the
value per MHz of spectrum on the vertical axis ver-
sus frequency on the horizontal axis. The chart illus-
trates that the value of spectrum drops offrapidly
above 2 GHz.
Thereare three categories of licensed commercial
spectrum below 3 GHz that interest us because they
each occupy spectrum worth at least ten billion dol-
lars: 1) flexible use spectrum (estimated hereat 693
MHz), 2) Wide area but not flexible use spectrum
(estimated here at 88.8 MHz), and 3) guard band
spectrum polluted by incumbent licensees and ware-
housed on their behalf by the government (esti-
mated here at 227 MHz). Spectrum excluded from
these calculations (1,991.2 MHz or about two-thirds
of the spectrum below 3 GHz) include spectrum
allocated for commercial point-to-point communica-
tion (such as a telephone company using a point-to-
point link to connect two rural central offices),
shared use within narrow industry segments (such as
The Art of Spectrum Lobbying
TV broadcast stations within
agiven TV market sharing
spectrum to transmit news
from the field back to their
stations), state and local gov-
ernment use (e.g., police, fire,
and medical), federal govern-
ment use (e.g., the U.S. mili-
tary, the Federal Aeronautics
Administration, and the
CIA), commercial flexible use
allocated but not licensed
(the 60 MHz to be auctioned
after the DTV transition),
and unlicensed use (e.g., for
Wi-Fi and Bluetooth).
Flexible Use Spectrum
Flexible use spectrum can
simply be defined as spectrum that can be used for
its most profitable use. The FCC has defined license
flexibility as granting licensees “the maximum possi-
ble autonomy to determine the highest valued use of
their spectrum, subject only to the rules that are
necessaryto afford reasonable opportunities for
access by other spectrum users.”xxi The opposite of
flexible use spectrum is encumbered spectrum.
Spectrum licensed for commercial flexible use can
be divided into two categories based on whether the
license can be used flexibly now or must overcome
some relatively minor encumbrances before it can be
so used. The first category, also known as CMRS or
PCS spectrum, is approximately 190 MHz in size
and occupies 6.3 percent of the spectrum below 3
GHz.xxii Companies that use this spectrum for cellu-
lar telephone and data service include Verizon Wire-
less, AT&T, Sprint Nextel, and T-Mobile.
The second categoryis approximately 503 MHz
in size and occupies 15.7 percent of the spectrum
below 3 GHz. Most of the spectrum in this category
7
FIGURE 1. U.S. SPECTRUM CHART
3kHz 300 GHz2GHz 5GHz 50GHz
FIGURE 2. VALUE OF SPECTRUMxx
MARGNAL FLEXIBILITY VALUE
31962 TXT R1.qxd 8/7/07 2:44 PM Page 7
achieved its flexibility since 2002 and occupies spec-
trum between 2 GHz and 3 GHz.xxiii None of it has
yet achieved widespread use on a national basis.
About 80 percent occupies just three bands: 195
MHz in the MMDS/ITFS band; 95 MHz in the
Mobile Satelite Service (MSS) band, and 90 MHz in
the Advanced Wireless Service (AWS) band.
MMDS/ITFS. In 2004, the FCC modified the rules
in the joint 195 MHz Multichannel Multipoint Dis-
tribution Service (MMDS) and Instructional Televi-
sion Fixed Service (ITFS) allocation, now called the
Broadband Radio Service (BRS) and Educational
Broadband Service (EBS) allocation, to allow incum-
bent licensees to provide mobile services.xxiv But first,
those licensees within each geographic region have to
negotiate among themselves to reorganize the band.
Only a small percentage of them have yet completed
this negotiation process. But given their high payoff
for doing so, it is reasonable to expect that they will.
AWS. In September 2006, the FCC auctioned 90
MHz for Advanced Wireless Service (AWS), which
allows for the provision of mobile wireless service.
But first, the bidders must clear offthe existing fed-
eral government and commercial users, which for
some licensees may take until December 2014.xxv
MSS. Beginning in January2003, the FCC allowed
the failed Mobile Satellite Service (MSS) licensees
the right to provide terrestrial mobile service,xxvi
eventually allowing 95 MHz of their spectrum to be
used for such service. As with the AWS band, vari-
ous terrestrial incumbents had to be cleared before
the MSS licensees could use the spectrum terrestri-
ally.In addition, the FCC placed some limitations
on terrestrial mobile use of the formerly satellite
spectrum that other mobile terrestrial licensees don’t
have. However, those limitations are relatively minor
and can reasonably be expected to be eliminated at
some point in the future should they prove to be
more than a token obstacle to the affected licensees’
financial success.
Adding these two categories of flexible use spec-
trum together gives us a total amount of flexible use
spectrum of 693 MHz (23 percent of the spectrum
below 3 GHz).
Wide Area But Not Flexible Use Spectrum
Broadcasters have wide area but not flexible use
rights. They have exclusive rights to transmit infor-
mation over large geographic areas, but they can not
use their spectrum to provide mobile telecommuni-
cations services. Broadcasters have been actively pur-
suing more flexibility and have already received
more of it than most people recognize. Part II of
this paper, by explaining why broadcasters have been
successful in gradually attaining more flexibility in
the past, explains why they are also likely to gradu-
ally attain more flexibility in the future. The FCC’s
Spectrum Policy Task Report essentially concedes
that after the digital TV transition, incumbent TV
broadcasters will be granted flexible use rights, even
if complete flexibility takes many years to bring
about.xxvii Abook by this author, Speak Softly and
Carry a Big Stick: How Local Broadcasters ExertPoliti-
cal Power,explains in great depth why the broadcast-
ers are likely to be successful in this endeavor.xxviii
In 1995, the FCC estimated that the average
American lived in a TV market with approximately
13.3 stations or 80 MHz of spectrum licensed for ter-
restrial TV broadcast service.xxix During the digital
TV transition, this number temporarily increased to
160 MHz as each station was loaned a second chan-
nel. But when that transition is complete and stations
return one of their two TV channels, the amount
will once again be approximately 80 MHz. Since the
entire TV band will then occupy 294 MHz, that
gives us 214 MHz for guard band spectrum that
broadcasters claim is necessary to protect themselves
from harmful interference.xxx The corresponding
estimate for terrestrial AM and FM radio broadcast-
ing is 8.8 MHz of spectrum licensed to stations on a
national basis and 13.2 MHz of guardband spectrum
to protect those stations. This gives us a total of 88.8
MHz licensed to terrestrial broadcasters .
Guard Band Spectrum Warehoused by Government
on Behalf of Incumbent Broadcasters
Most spectrum originally allocated to terrestrial
broadcasting service was not actually licensed to
broadcasters but left fallow to protect incumbent
licensees. Consider the striking observation that the
average American could only receive 13 TV stations
terrestrially over-the-air,despite the fact that there
8
The Spectrum Giveaway
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were slots for 67 TV stations on a terrestrial, over-
the-air TV tuner (the typical over-the-air tuner runs
from channels 2-to-69, with channel 37 reserved for
astronomy and medical telemetry). To the extent that
terrestrial broadcast licensees were successfully able to
protect themselves with an excessive amount of guard
band spectrum, they reduced the economic value of
adjacent spectrum in a socially harmful way, what
economists call creating a “negative externality.” (An
externality occurs in economics when a decision causes
costs or benefits to individuals or groups other than
the person making the decision; a negative externality
occurs when the externality involves a cost to others.)
That negative externality averaged as much as 24
MHz for every 6 MHz incumbent TV license. The
popular termfor creating a “negative externality” is
“pollute.” Thus, in effect, a TV broadcast license to
use 6 MHz of spectrum polluted large amounts of
adjacent spectrum, crippling its productive use.
Over time, new technology has been evolving to
greatly reduce the cost of using the unused spectrum
(called “white space”) without significantly harming
nearby incumbent licensees. Digital technology, for
example, made it possible to loan each incumbent
TV broadcaster a second channel from the spectrum
previously viewed as TV guard band spectrum. The
same spectrum is often characterized as “guard
band” or “white space” depending on whether it is
viewed as necessaryto protect incumbent licensees
or is available for productive use.
Broadcast licensees have played a two pronged
game in relation to this white space. First, they have
insisted to the FCC that any use of it by anyone but
themselves would cause intolerable interference to
their licenses. Meanwhile, to the extent that technol-
ogy allows, they have lobbied the FCC to grant the
white space to themselves. In this, they have been
verysuccessful. For example, the AM and FM
broadcasters effectively doubled their spectrum
holdings in 2002 as the FCC awarded each incum-
bent radio broadcaster the first half of each channel
adjacent to its licensed channel.xxxi Similarly, TV
broadcast licensees have greatly expanded their cov-
erage areas since the commencement of the digital
TV transition in 1997, and in a variety of current
FCC proceedings are proposing that new technol-
ogy should allow them to expand their service areas
The Art of Spectrum Lobbying
yet further.xxxii The FCC mindset that the broadcast
bands are allocated for broadcasting and that broad-
casting service should be expanded as long as it
doesn’t conflict with existing high powered TV serv-
ice contributes to this seemingly ceaseless leben-
sraum of the TV white spaces.
Although at first glance it might appear inconsis-
tent to both claim that nobody else can use the spec-
trum and claim that you can use it yourself, this is
not necessarily the case. To the extent that the con-
trol of pollution in nearby spectrum is a sacred right
granted to broadcast licensees, then broadcasters’
claim that they are the only
entity capable of utilizing
the polluted spectrum
(because they can internal-
ize the cost of clearing it
up) arecompelling.
The total amount of
white space currently used
to protect terrestrial radio
and TV broadcasting is
approximately 227 MHz
(214 MHz for terrestrial
TV broadcasting and 13.2
MHz for AM and FM radio
broadcasting). Whether
terrestrial broadcasters can
succeed in warehousing and
then acquiring this spec-
trum for themselves has yet to
be seen. The FCC currently is conducting a rule-
making to allocate much of that spectrum in the TV
band to unlicensed use.xxxiii TV broadcasters, of
course, arelobbying intensely to maximize the
amount that will remain warehoused until they have
an opportunity to acquire more of that spectrum for
themselves. In 2002, FM broadcasters succeeded in
doubling their spectrum by acquiring guard bands
adjacent to their licenses.xxxiv To date, TV broadcast-
ers have been far less successful in acquiring guard
band spectrum, perhaps because the amount of spec-
trum involved is more than an order of magnitude
greater than in the FM radio band. This, in turn,
may have led high profile politicians, including Sen-
ate Majority Leader Bob Dole and Senate Com-
merce Committee Chair John McCain, to threaten
9
If we add up the total
amount of spectrum allo-
cated to terrestrial broad-
casting below 3GHz—
both the spectrum that
has been licensed and
warehoused—we get 422
MHz or 14.1 percent
of the total.
31962 TXT R1.qxd 8/7/07 2:44 PM Page 9
to make a public issue of giving a second channel to
incumbent TV broadcasters at an estimated cost to
the public of $70 billon.xxxv
If we add up the total amount of spectrum allocated
to terrestrial broadcasting below 3GHz—both the
spectrum that has been licensed and warehoused—we
get 422 MHz or 14.1 percent of the total.
Value of the Spectrum
What is the current value of spectrum? The most
common unit of valuation used by spectrum valua-
tion experts is the $/MHz-pop. This means the
amount of money an investor is willing to pay per
person for a Megahertz of spectrum. For example, if
alicense for 10 MHz of spectrum covers a geo-
graphical area with 10 million people living there
and costs $100 million, then the valuation of the
spectrum is $1/MHz-pop ($100 million/(10 MHz *
10 million people ) equals $1/MHz-pop).
Unfortunately, the $/MHz-pop metric has some
severe weaknesses because the value of a MHz-pop
varies greatly in different regions of the country. For
example, the value of a MHz-pop is greater in high
income, densely populated areas of the country.
That’sbecause the demand for spectrum services is
higher in those areas and the cost of providing it
less. Similarly, in areas with many day workers or
tourists but relatively little residential population,
such as Washington, DC or New York City, the
value of MHz-pops is inflated.
For this reason, a better valuation metric for our
purposes is the value of a MHz aggregated across
the entire United States. For example, if the average
value of a MHz-pop is $1, then the value of a MHz
across the entire country of 300 million people is
$300 million. By extension, a licensee with an aver-
age of 10 MHz of spectrum across the United States
and an average value of spectrum of $300
million/MHz, has a total spectrum portfolio worth
$3 billion (10MHz * $300 million/MHz).
This aggregated metric has the methodological
advantage of evening out the wide variation in
$/MHz-pop based on local demographic conditions.
But since most FCC licenses are transacted on a
local basis, relying solely on licenses acquired on a
national basis loses most potential spectrum valua-
tion data points.
One compelling way to value unencumbered flexi-
ble use spectrum on a national basis is through the
use of SEC filings by the major mobile telephone
companies. The top four companies (Verizon Wire-
less, AT&T/Cingular, Sprint/Nextel, and T-Mobile)
have an average of 175.7 MHz per market and a
total valuation of their spectrum of $120 billion. See
Table 1. This comes to $684 million per MHz, or
$2.28/MHz-pop.xxxvi
Why is this spectrum valuation compelling? SEC
filings are government mandated and follow account-
ing practices set by the Financial Accounting Stan-
dards Board concerning FCC licenses. Companies can
pay large fines for misleading accounting practices,
and there are significant checks and balances—such as
the use of outside auditors—designed to discover and
punish fraudulent accounting claims. In this case, the
SEC mandates that FCC licenses are reported annu-
ally at fair market value. Moreover, if those market
values change since the previous accounting period,
the FCC license valuation must be changed.
10
The Spectrum Giveaway
TABLE 1. VALUATIONS
OF FCC LICENSES FOR
THE FOUR LARGEST
MOBILE TELEPHONE
COMPANIESxxxvii
Sources: *SEC 10-K for 2006.
**UBS Warburg report cited
in Dan Meyer, “Sprint Nextel
Combo Clears Legal Hurdle,”
RCR Wireless News,
August 8, 2005, p. 1.
2006 Value of National
Company FCC Licenses* MHz** $/MHz $/MHz-pop
AT&T Mobility LLC $25,245,000,000 57.3 $ 440,575,916 $ 1.47
Verizon Wireless LLC $50,959,000,000 40.4 $1,261,361,386 $ 4.20
Sprint Nextel Corp. $ 19,519,000,000 51 $ 382,725,490 $ 1.28
T-Mobile USA $24,448,510,254 27 $ 905,500,380 $ 3.02
Total $120,171,510,254 175.7
Weighted Average $ 683,958,510 $ 2.28
31962 TXT R1.qxd 8/7/07 2:44 PM Page 10
The SEC filings for these particular companies
are also compelling because they control for local
variation and are for unencumbered spectrum used
for a service, mobile telecommunications, most
highly valued by the market. The value of a MHz of
spectrum differs greatly for a person in New York
City and rural Montana. That’s for reasons of both
supply and demand. On the supply side, New York
City has a much denser population of users, includ-
ing commuters and tourists who don’t live in New
York City. This density reduces the cost of building
anetwork. On the demand side, New York City is a
high income demographic that makes unusually high
use of mobile telecommunication services. The four
carriers used in this valuation are all national carri-
ers, so these geographic discrepancies are averaged
out. Similarly, the valuations are primarily for unen-
cumbered flexible use spectrum, which is a fairly
small portion of the total spectrum currently
licensed for exclusive commercial use.
Admittedly, the SEC data are far from perfect.
The SEC gives companies a lot of leeway in how
they assess the value of their licenses. Companies,
for example, may use one of three basic valuation
methods—cost, market, and present value of future
discounted cash flows—to assess the value of FCC
licenses. But this leeway and reliance on good faith
estimates applies to the valuation of other corporate
assets as well.
Where the SEC data tend to be most unreliable is
when companies are in a “greenfield” or startup situ-
ation. In such a situation, there are no market com-
parables and estimates of future discounted cash
flows can vary wildly. Unfortunately, this situation
pertains to the major new allocations of flexible use
spectrum, including WCS, MSS, and MMDS/ITFS.
In none of these bands are there currently major,
ongoing business operations.
Given the high level of discretion at arriving at
FCC license valuations, one might expect that non-
market criteria could influence the valuations. That
does appear to be the case, especially for the imma-
turebusinesses noted above where the level of dis-
cretion is greatest. One rule of thumb appears to be
that companies that have primarily acquired spec-
trum rights through lobbying (e.g., Sprint Nextel)
tend to value their spectrum rights on public 10-Ks
The Art of Spectrum Lobbying
more conservatively than companies that acquired
them via auction (e.g., Verizon Wireless). A related
rule of thumb is that companies that have acquired
spectrum and have yet to launch businesses with it
(such as mobile TV providers Qualcomm and
Crown Castle) tend to value it much lower than
companies (such as conventional mobile telecommu-
nications companies) with ongoing businesses.
For Table 1 above, the Verizon Wireless number,
at $1.26 billion/MHz, appears to be high, perhaps
because the basic valuation metric was established
shortly after the dot com
boom ended in 2000, when
spectrum valuations
reached a peak. Still, the
valuation is 25 percent less
on a $/MHz basis than
what Verizon Wireless bid
to acquire $8.8 billion of
spectrum licenses in
2001.xxxviii In contrast, the
Sprint Nextel number
appears to be low, perhaps
because Sprint Nextel’spri-
marystrategy for acquiring
spectrum usage rights is to
acquire FCC licenses with
significant encumbrances
and then lobby to be
granted spectrum flexibility.
For such a business strategy, high public spectrum
valuations may be an embarrassment because they
call attention to the giveaway of public assets.
Adding to the difficulty in valuing SEC licenses is
the fact that Congress and the FCC do not design
auctions to maximize revenue. At first glance, it
would appear that auction data are the best basis for
valuing FCC licenses. But this valuation method
would make the faulty assumption that the goal and
practice of Congress and the FCC is to maximize
auction revenue—the type of behavior we’d expect
from a conventional asset seller in a market. For
example, the Communications Act states that “In
making a decision… to assign a band of frequencies…
the Commission may not base a finding of public
interest, convenience, and necessity on the expecta-
tion of Federal revenues…”xxxix The FCC has inter-
11
The top four companies
(Verizon Wireless,
AT&T/Cingular,
Sprint/Nextel, and T-
Mobile) have an average
of 175.7 MHz per mar-
ketand a total valuation
of their spectrum of
$120 billion.
31962 TXT R1.qxd 8/7/07 2:44 PM Page 11
preted this to mean that “[r]adio spectrum is a public
resource of the United States that Congress has
authorized and directed the Commission to manage
in the public interest,” with “the Commission’s most
basic spectrum-management power is to assign spec-
trum to achieve public interest benefits other than
monetary recovery.”xl An example of a public interest
benefit might be the provision of pre-school, news, or
public safety programming at a financial loss.
Consider the auction of three TV channels in 2002.
Those channels were auctioned in 2002 for use when
the digital TV transition was completed. The catch
was that no one knew with confidence when the tran-
sition would be complete. It might have become com-
plete on January 1, 2007 at the earliest, providing that
anumber of ill-defined and renegotiable conditions
were met, such as that 85 percent of Americans had
TV sets capable of receiving digital, over-the-air sig-
nals. But few expected the 2007 date to be met and
many expected it would take many more years for auc-
tion winners to actually be able to use the licenses they
would acquire. The result, of course, was steeply dis-
counted licenses. “A jackass out of a barn lot could
have done a better job of selling this public property,”
commented Representative John Dingell of Michigan,
currently chair of the House Commerce Committee.
“They set auction deadlines that were asinine, consti-
tuting a gross mismanagement of the spectrum.”xli
Should the winning bids or some other method be
used to value the licenses? It turns out to be a tricky
question. In a 2005 white paper and letter to congres-
sional leadership, Aloha, one of the winning bidders,
valued comparable spectrum in the 700 MHz band at
up to $500 million/MHz, even though it paid far less
only three years previously.xlii Aloha is a private com-
pany and doesn’thave to file public FCC license valu-
ations. But Qualcomm, a public company and another
winning bidder in the same auction as Aloha, reports
the value of its licenses at close to cost ($164 million
in its 2005 10-K) rather than at the future market
value (from $2 billion to $3 billion) Aloha projects.
As we shall see, auctions for WCS, AWS, and PCS
spectrum also were not designed to maximize revenue.
Another limitation of the SEC valuation data in
Table 1 is that mobile telephone companies have
spectrum holdings that are not being used to pro-
vide mobile telephone service. These companies
have substantial rights to spectrum above 3 GHz for
fixed, point-to-point backhaul telecommunications.
They may also have spectrum rights in other bands,
notably the MMDS/ITFS and WCS bands. Since
companies only provide aggregate license valuation
data to the SEC, this information cannot be parsed
out. Still, the valuations of the other bands should
have a relatively small impact (certainly less than 50
percent) on the valuation metric derived above. The
fixed, point-to-point spectrum is above 3 GHz and
therefore of relatively low value despite occupying a
large swath of frequencies. The WCS and
MMDS/ITFS spectrum represents less than 50 per-
cent of the spectrum in those bands, and the
MMDS/ITFS spectrum in the near term retains
substantial encumbrances. For example, morethan
50 percent of the spectrum in the MMDS/ITFS
band is controlled by educational licensees and the
only way for an aspiring telephone company to
access that spectrum is through a sub-leasing
arrangement with one of those institutions (it is ille-
gal for the educational institution to actually sell the
license to the telephone company).
Thereare a variety of complementaryvaluation
indicators that suggest the $684 million/MHz metric
is a reasonable ballpark estimate of the value of
unencumbered flexible use spectrum. In 2005, the
FCC valued 10 MHz of unencumbered, flexible use
spectrum allocated to Nextel at $4.8 billion ($480
million/MHz or $1.60/MHz-pop) as part of a spec-
trum swap. A sophisticated study by Kane Reece,
paid for by Verizon Wireless, valued the 10 MHz at
$5.28 billion ($528 million/MHz).xliii The Cellular
Telecommunications & Internet Association valued
the spectrum at $5.76 billion ($576 million/MHz).xliv
Many spectrum auctions with essentially national
coverage have had higher valuations. In April 2000,
an auction in the United Kingdom brought in $35.4
billion ($4/MHz-pop); in July 2000 a German auc-
tion brought in $46.2 billion ($8/MHz-pop), and in
2001 a U.S. auction brought in $16 billion
($4.2/MHz-pop).xlv In a New York Times op-ed on
June 2, 2007, FCC Commissioner Michael Copps
estimated the value of the 402 MHz of terrestrial
TV spectrum at up to half a trillion dollars, which
can be derived from essentially the same MHz-pop
valuation as the 2001 U.S. auction cited above that
12
The Spectrum Giveaway
31962 TXT R1.qxd 8/7/07 2:44 PM Page 12
brought in $16 billion at $4.2/MHz-pop. xlvi
Yet other spectrum auctions have brought in
much lower sums. In FCC Auction #41 conducted
in 2001, one PCS license sold for only $0.02/MHz-
pop. Some individual licenses haven’t even had a sin-
gle bidder.
Estimating different license valuations for each
different frequency and special circumstance is a
worthy undertaking but unnecessary to achieve the
ballpark estimates adequate for the purposes of this
paper. For example, as already noted, not all spec-
trum frequencies are equally valuable: the value of
spectrum frequencies above 3 GHz tends to be
worth much less than spectrum below 3 GHz. But
even below 3 GHz not all spectrum is worth the
same amount. For example, spectrum in the broad-
cast bands below 1 GHz tends to be valued more
than spectrum above 2 GHz. Still, the SEC valua-
tions, which predominantly involve spectrum below
2GHz, are within the ballpark of spectrum valua-
tions above 2 GHz and below 3 GHz.
The results of the most recent auction of national
flexible use spectrum deserve special note because on
apure$/MHz-pop basis they suggest the SEC-
based valuation of flexible use spectrum is too high.
On September 18, 2006, the FCC concluded an auc-
tion of 90 MHz of spectrum for advanced wireless
service, the type of service most highly in demand
The Art of Spectrum Lobbying
by the marketplace. Half the spectrum was in the 1.7
GHz band and the other half in the 2.1 GHz band.
All licenses involved a sliver of both bands, as one
band was used for receiving information and the
other band for sending it. The auction raised $13.7
billion, equivalent to about $150 million/MHz, or
$0.53/MHz-pop. That is approximately one-quarter
of the $2.28/MHz-pop derived from the SEC data
used above.
There are four major factors that explain much of
this discrepancy: 1) the AWS spetrum was heavily
encumbered 2) the auction format allowed signaling
between bidders, 3) the AWS frequencies were sec-
ond-tier beachfront spectrum, and 4) no affordable
mobile telecommunications equipment was available
to operate in the AWS band.
1) Encumbrances. Bidders for the AWS spectrum
faced a major encumbrance. There were 1,990 fed-
eral frequency assignments that had to be cleared off
the band before they could use it, and the govern-
ment wouldn’tguarantee that the incumbent gov-
ernment users would be cleared off until December
2014—morethan eight years after the auction com-
menced.xlvii Various divisions of the Department of
Defense and Department of Energy, for example,
estimated they would take up to six years to clear the
band once the U.S. government transferred reloca-
13
Low- vs. High-Frequency Spectrum
Why do exclusive licenses for low frequency spectrum earn a premium in the marketplace? There are
two long-termstructural reasons why low frequency spectrum is most valuable for mobile communica-
tions. Both are based on the propagation characteristics of low frequency spectrum, which allow it to
easily transmit information through obstacles such as walls, cars, and trees. High frequency spectrum
cannot easily transmit information through obstacles, so it tends to be used for fixed, line-of-sight
communications. It turns out that these fixed communications have close and superior substitutes with
wired telecommunications. Optical fiber, for example, is rapidly being used to connect all businesses
and residences in the U.S. Once this network is in place, it greatly reduces any premium that high fre-
quency wireless services can charge. Meanwhile, wired networks are a very poor substitute for mobile
communications. For example, you cannot communicate over a wired network while driving a car.
This gives mobile applications—using low frequency spectrum—a fundamental comparative advantage.
31962 TXT R1.qxd 8/7/07 2:44 PM Page 13
tion funds to them.xlviii This transfer of funds was a
new process, could take months to complete, and
would not commence until after the FCC actually
handed out licenses for the band, which usually took
at least four months from the date an auction ended.
In a litigated auction, handing out the licenses could
be further postponed, or the auction could be can-
celed altogether.
Moreover, prior to the auction, the government
users would not say exactly where they used their
assignments because they considered this classified
information. If terrorists knew where the govern-
ment’s radios were, they could jam them or other-
wise harm vital public safety communications. As
Medley Global Advisors advised its clients shortly
after the first few rounds of the auction: “Govern-
ment entities are not obligated to release any spe-
cific information about what partof the band they
occupy and when they planned to relocate due to
national security concerns. This leaves active bid-
ders… vulnerable to unforeseen obstacles… once the
relocation process commences.”xlix
Finally, it didn’t matter if all of a bidder’s spec-
trum was encumbered. If only half a bidder’sspec-
trum wereencumbered, it had the same effect as if
the whole wereencumbered because one band (the
1710-1755 MHz band) would be used for upstream
communications, and the second band (the 2110-
2155 MHz band) would be used for downstream
communications. A mobile broadband service that
could only communicate in one direction would
be useless.
How did this encumbrance affect the price of the
auction? Clearly, the uncertain and potentially long
delay in being able to use the spectrum would tend
to depress prices. One senior official with spectrum
valuation responsibilities at one of the four largest
mobile telephone companies estimated on a not-for-
attribution basis that the uncertainty and delay
reduced bids by as much as 50 percent. A Yankee
Group report published before the auction predicted
a25 percent discount for the encumbrances.lAfor-
mer FCC Chief Economist who consulted for one
of the bidders characterized the bidders’ dilemma
quite colorfully: “The FCC didn’t give us the neces-
sary information; it treated us like s**t.”li The pre-
cise discount will never be known but the 50 percent
figure would put the auction valuation at $27.4 bil-
lion, equivalent to about $300 million/MHz or
$1.06/MHz-pop—much closer to the SEC valuation
used above.
2) Signaling. The AWS auction, by requiring that
bidders identify themselves in up to 150 ascending
rounds, would have facilitated signaling among bid-
ders during the early rounds. As argued by econo-
mist Gregory Rose in a paper for the New America
Foundation, this signaling would have facilitated a
variety of strategies to reduce auction prices, includ-
ing blocking and retaliatory bidding. Blocking bid-
ding seeks to prevent new competitive entry. Retal-
iatory bidding punishes small company bidders who
dareto bid on particular licenses avidly sought by
large company bidders. Rose argues that the way to
eliminate these demand-reducing bidding strategies
would be to shift from open to anonymous bidding
(also known as “sealed” bidding), which would
greatly reduce, if not completely eliminate, the abil-
ity to signal during the opening auction rounds.
Unfortunately, Rose does not estimate the revenue
lost from using open bidding in the AWS auction.lii
3) Frequencies. The average frequency of AWS
spectrum was 1,932.5 MHz (the bands auctioned
were 1,710-1,755 MHz and 2,110-2,155 MHz, with
sections of the lower and upper bands paired for
separate upstream and downstream communica-
tions). In contrast, the primary frequencies valued in
the SEC reports for mobile telephone licenses range
from 824 MHz to 1,990 MHz, with a weighted aver-
age of 1,438.7 MHz.1The discount for second tier
beachfront frequencies is unknown, but it is note-
worthy that fifteen years ago spectrum suitable for
mobile telephone service was not even thought to
reach above 2 GHz. Only in recent years has the
beachfront/mobile spectrum generally been consid-
ered to reach 3 GHz.
4) Equipment. With the development of WiMax
and other smartradio technologies, the availability
of specialized equipment on favorable terms is rap-
idly becoming less of an issue in valuing spectrum.
But for at least the next few years and probably
another decade, the absence of an installed customer
14
The Spectrum Giveaway
31962 TXT R1.qxd 8/7/07 2:44 PM Page 14
base with a correspondingly large frequency-specific
equipment market would have been a significant
barrier to entry, especially for relatively small com-
panies that lack the resources to a) vertically inte-
grate into the equipment manufacturing market (a
common strategy to jumpstartequipment markets in
The Art of Spectrum Lobbying
newly allocated frequency bands), b) sell consumer
equipment at a loss to jumpstartthe market, or c)
wait for years hoping and praying that an equipment
market would develop on its own.
***
15
Major Terrestrial FCC License TV Radio
Broadcast Station Groups Valuation Stations Stations
ABC TV Stations Group (Walt Disney) $1,400,000,000 10 70
Belo Corp. $1,289,504,000 21
CBS/Viacom $9,531,000,000 27 104
Citadel Broadcasting $1,327,305,000 223
Clear Channel Communications $4,326,592,000 33 1,177
Cox Radio $1,702,442,000 76
Cumulus Broadcasting Inc. $ 934,140,000 299
Emmis Communications Corp. $ 916,518,000 24
E.W. Scripps Co. $ 309,243,000 10
Entercom Communications $1,351,389,000 102
Entravision Communications Corp. $ 746,048,000 22
Fox/News Corp. $6,910,000,000 35
Gannett Broadcasting $ 183,514,000 22
Gray Television $1,059,066,000 30
Hearst-Argyle Television Inc. $2,413,257,000 29
Ion Media Networks
(formerly Paxson Communications) $ 844,150,000 53
LIN TV Corp. $ 1,041,153,000 26
Media General $ 721,437,000 23
Meredith Corp. $ 517,799,000 12
NBC Universal $2,295,000,000 26
Nexstar Broadcasting Group. $ 163,795,000 28
Post-Newsweek Stations $ 517,742,000 6
Radio One Inc. $ 1,826,127,000 68
Sinclair Broadcast Group $ 409,620,000 55
Tribune Co. $ 871,946,000 23
Univision $4,220,180,000 40
Young Broadcasting $ 475,929,000 11 74
TOTAL $48,304,896,000 542 2,217
TABLE 2. VALUE OF TERRESTRIAL TV
AND RADIO BROADCAST LICENSESlv
31962 TXT R1.qxd 8/7/07 2:44 PM Page 15
The value of a license to use spectrum, if allocated
for fixed, terrestrial broadcast service, is substantially
less than if it were allocated with the flexibility to
provide mobile telecommunications service. Thus,
in the broadcast bands, we have to clearly distin-
guish between the opportunity cost of the spectrum
and its current value to incumbent licensees.
To find the present value of spectrum licensed to ter-
restrial radio and TV broadcasting, we can again use
the SEC valuations. Using this method, we get $48.3
billion for the total value of TV and radio licenses, or
$544 million per MHz ($48.3 billion divided by the
88.8 MHz licensed to incumbent TV and radio broad-
casters in an average metropolitan area). See Table 2.
These valuations are derived from the public compa-
nies among the top 25 broadcast TV groups as ranked
by Broadcasting & Cableliii and the top 10 publicly-
traded radio groups as ranked by the Center for Public
Integrity website for 2006. On the one hand, this is an
underestimate because the private companies in the top
categories are ignored (four of the top 25 TV groups
areprivate) as are any stations or station groups outside
the top groups. Of TV stations, approximately 31 per-
cent (542 of 1,756) arecovered in this valuation; of
radio stations, approximately 16 percent (2,217 of
13,837).liv However,TV and station groups tend to
own the largest stations in the areas with the best
demographics, so the top station groups cover a signifi-
cantly larger fraction of the U.S. population than these
percentage numbers would suggest.
On the other hand, the $48.3 billion is an overes-
timate because News Corp. also owns DirectTV, a
satellite TV company. Terrestrial broadcasters also
have access to about 4 GHz of relatively high fre-
quency spectrum used for auxiliary services such as
transmitting information to TV studios from TV
towers, satellites, and reporters in the field. Rights
to use this spectrum are a privilege that comes with
possession of a terrestrial broadcast license on TV
channels 2-69. This spectrum is generally shared
with other broadcasters and considered of relatively
low value because of its high frequency.
Given all these qualifications, it is therefore sur-
prising that the SEC valuations are close to the flexi-
ble use valuations above. This might in partreflect
forward thinking about the future prospect of
receiving spectrum flexibility.
The value of the white space is harder to assess. If
we assume that this warehoused spectrum were
granted full flexibility—that is, used for its highest
marginal value in the marketplace—it would be rea-
sonable to use our benchmark of $684 million/MHz
as an upper bound. Applying this value to the 225.8
MHz of white space in the terrestrial TV and radio
bands would give us $154 billion. Tom Wolzien, a
media analyst, used such a method when he issued a
report in early 2001, when spectrum valuations
reached their peak, valuing the entire terrestrial TV
band as potentially worth $365 billion in total.lvi
FCC Commissioner Copps used a similar valuation
method when, in a 2007 New York Times op-ed, he
estimated the total value of the TV broadcast band
at as much as $500 billion.lvii
However, these valuations say nothing about the
likelihood that the broadcasters will be able to cap-
ture that value for themselves. In the radio band,
broadcasters have so far been far more successful at
capturing white space than in the TV band. If the
status quo persisted or the broadcasters were unable
to capture any of the white space for themselves, the
ultimate giveaway would be zero.
Government Receipts from the Assignment
of New Licenses
According to U.S. government estimates, only two
percent of FCC licensees wereoriginally allocated by
auction.lviii Of course, there is only an imperfect corre-
spondence between the percentage of the total number
of licenses and the percentage of the total value of
licenses. Nevertheless, it is clear that only a small frac-
tion of spectrum has been allocated via auction.
In addition to granting licenses, the FCC grants
license modifications. In 2007, the FCC’s Wireless
Telecommunications Bureau granted 137,132 such
modifications.lix The FCC seeks no monetarycom-
pensation to recoup the market value of these modifi-
cations.lx In the future, most spectrum rights will be
granted via license modifications because, as the U.S.
General Accounting Office observes, “nearly all of the
usable radio spectrum has been allocated already.”lxi
Total net bids for new licenses auctioned by the
FCC totaled $59 billion from the first completed
auction in 1995 to the last completed auction in
2006. (Net bids arethe bids for licenses after bid-
16
The Spectrum Giveaway
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ding discounts for designated entities—small and
minority-owned bidders—are deducted from gross
bids.) As of December 31, 2006, however, the Trea-
sury only reported $20.8 billion in net receipts.
What explains the discrepancy?lxii
Many winning bidders didn’t actually pay for the
licenses and so they had to be re-auctioned. Thus,
there is substantial double counting in the FCC
data. Other winning bidders found that they could
keep their licenses without paying for them if they
filed for bankruptcy protection. In the case of the
re-auction of the NextWave spectrum in 2001, a
court ruled that the government had to give back
the winning bids of more than $16 billion because
the licenses had been protected in bankruptcy court.
Another factor is the discrepancy between the
time an auction is completed and the time the Trea-
sury receives the money.In the case of the AWS
auction, the final tally that goes to the Treasury may
not be known until December 2014, when the relo-
cation of federal incumbents must be complete.
If we now add the actual U.S. Treasury receipts as
of December 31, 2006 ($20.8 billion) plus the
receipts from the AWS auction in late fall 2006
($13.7), we get a total value of $34.5 billion.
The federal government also took in a net of $2.7
billion in a controversial 2005 swap of spectrum
with Nextel. Of that $2.7 billion, however, $500 mil-
lion was paid to relocate the equipment of TV
broadcasters from their electronic newsgathering
band at 2GHz, so the government only took in a net
of $2.2 billion (and even then it was not clear what
the final cost to relocate the broadcasters would
be).lxiii With this adjustment, we get a total value of
$36.7 billion.
This is not a complete tally.From this figure
should be deducted the costs of administering spec-
trum auctions from 1993 to the end of 2006,lxiv the
costs to relocate commercial licensees taken out of
the trust fund created by the Commercial Spectrum
Enhancement Act, and the cost of the interest free
loan to designated entities in the early PCS auctions.
In the case of the cost of relocating commercial
licensees, the total cost is currently unknown and
may not be known for some years. From this figure
should also be added the cost to winning bidders of
relocating government users prior to passage of the
The Art of Spectrum Lobbying
Commercial Spectrum Enhancement Act, which
pays for such relocation costs out of a trust fund cre-
ated from auction receipts.
All these adjustments, however, would be rela-
tively small. In total, it is unlikely the government
has received more than $40 billion from assigning
new licenses since the auction era began.
Adding It All Up
If we multiply the valuation per MHz of spectrum
($684 million/MHz) by the number of flexible use
MHz below 3 GHz (693 MHz), we get a total value
for exclusive, commercial, geographic area service
licenses of $474 billion. If we then add $48.3 billion
for the terrestrial TV and radio bands, we get $522
billion. If we then subtract the $40 billion that went
to the U.S. Treasury, we get approximately $480 bil-
lion unaccounted for.
Excluded from this calculation is the warehoused
TV and radio band spectrum valued at up to $155
billion (227 MHz X $684 million/MHz), a fraction
of which incumbent radio and TV licensees are
likely to be granted in coming years. This spectrum
is excluded because of the difficulty in assessing
when and how much of it the incumbent broadcast-
ers will succeed in acquiring.
One way to arrive at a more conservative valua-
tion of the FCC licenses is to simply add up the
available valuations contained in financial reports
submitted to the SEC. This could give us a lower
range to juxtapose against the higher range we have
used above. Table 3 attempts to do this by focusing
on 41 of the largest FCC license holders, which col-
lectively have license valuations reported to the SEC
of $177 billion. Unfortunately, there are tens of
thousands of entities with FCC licensees (Thereare
more than three million licenses in the FCC license
database but many of these licenses arepossessed by
the same entity), and many of these belong to pri-
vate entities that don’t need to file FCC license valu-
ations with the SEC. Thus, the $177 billion repre-
sents only a very small fraction of entities with FCC
licenses, albeit a large fraction of the entities with
the most valuable licenses. Given that the $177 bil-
lion figurerepresents a subset of SEC valuations, we
shall round it up to $180 billion. From this figure
we can deduct the $40 billion of government
17
31962 TXT R1.qxd 8/7/07 2:44 PM Page 17
18
The Spectrum Giveaway
Major Terrestrial 2006 License
Broadcast Station Groups Valuation
ABC TV Stations Group (Walt Disney) $ 1,400,000,000
Belo Corp. $ 1,289,504,000
CBS/Viacom $ 9,531,000,000
Citadel Broadcasting $ 1,327,305,000
Clear Channel Communications $ 4,326,592,000
Cox Radio $ 1,702,442,000
Cumulus Broadcasting Inc. $ 934,140,000
Emmis Communications Corp. $ 916,518,000
E.W. Scripps Co. $ 309,243,000
Entercom Communications $ 1,351,389,000
Entravision Communications Corp. $ 746,048,000
Fox/News Corp. (includes DBS licenses) $ 6,910,000,000
Gannett Broadcasting $ 183,514,000
Gray Television $ 1,059,066,000
Hearst-Argyle Television Inc. $ 2,413,257,000
Ion Media Networks (formerly Paxson Communications) $ 844,150,000
LIN TV Corp. $ 1,041,153,000
Media General $ 721,437,000
MeredithCorp. $ 517,799,000
NBC Universal $ 2,295,000,000
Nexstar Broadcasting Group. $ 163,795,000
Post-Newsweek Stations $ 517,742,000
Radio One Inc. $ 1,826,127,000
Sinclair Broadcast Group $ 409,620,000
Tribune Co. $ 871,946,000
Univision $ 4,220,180,000
Young Broadcasting $ 475,929,000
Total $ 48,304,896,000
Major Public Mobile Telephone Companies
Alaska Communications Systems $ 18,193,000
Alltel Corp. $ 1,657,800,000
AT&T Mobility LLC $ 25,245,000,000
Centennial Communications $ 483,339,000
Cincinnati Bell $ 94,200,000
Dobson Communications Corp. $ 1,941,226,745
Leap Wireless International $ 1,563,958,000
NTELOS $ 133,696,000
Rural Cellular Corp. $ 524,713,000
Sprint Nextel Corp. $ 19,519,000,000
Suncom Wireless Holdings $ 640,991,000
T-Mobile USA $ 24,448,510,254
US Cellular $ 1,494,327,000
Verizon Wireless LLC $ 50,959,000,000
Total $ 128,723,953,999
Grand Total $ 177,028,849,999
TABLE 3. VALUE OF FCC
LICENSES AS REPORTED
BY LARGE PUBLIC
COMPANIES TO THE SEClxv
31962 TXT R1.qxd 8/7/07 2:44 PM Page 18
receipts, to come up with a discrepancy between
current value and government receipts of
$140 billion.
Of course, there are other possible explanations
than a giveaway for the discrepancy between the
current value of spectrum usage rights and the
amount of receipts the government has received
from assigning new licenses. In particular, changing
conditions of supply and demand could help explain
the discrepancy. Take an auction of spectrum from a
decade ago. If soaring demand and fixed supply
occurred since then, using a current valuation would
be a misleading way to estimate the size of the give-
away. Similarly, if soaring supply and fixed demand
occurred since then, using a current valuation would
also be misleading. For purposes of this paper,which
only seeks reasonable ballpark estimates, the market
clearing price of spectrum usage rights has been
assumed to remain roughly constant since 1993.
That is, both demand for spectrum and the supply
of it have greatly increased since 1993 (and are likely
to continue to increase at a rapid rate in the future),
but it is assumed they have done so in such a bal-
The Art of Spectrum Lobbying
anced way that the price of spectrum has remained
roughly the same; that is, there may be significant
short-term fluctuations in value, but the overall
trend is fairly flat. Support for this assumption is
that the valuations of FCC licenses submitted to the
SEC on an annual basis have changed remarkably
little despite an SEC requirement to reappraise
them annually for changes in value.
Should we accept that the value of the government’s
spectrum usage rights giveaway is somewhere between
$140 billion and $480 billion? I believe this is a rea-
sonable range. But even if the actual sum was much
smaller, the giveaway would be huge. If Representative
Jefferson can be indicted for accepting bribes of less
than $1 million, and an average citizen can be thrown
in jail for attempting to walk out of a government
building with a decrepit chair worth $5, then surely a
giveaway of public assets of at least ten billion dollars
deserves careful public scrutiny to ensure that the con-
ditions that caused it do not persist.
Part II of this paper seeks to explain how the spec-
trum giveaway occurred, and Park III proposes
remedies to prevent additional giveaways.
19
31962 TXT R1.qxd 8/7/07 2:44 PM Page 19
20
31962 TXT R1.qxd 8/7/07 2:44 PM Page 20
The Art of Spectrum Lobbying
They used to rob trains in the Old West. Now we rob spectrum.”
—U.S. Senator John McCain
PARTII
31962 TXT R1.qxd 8/7/07 2:44 PM Page 21
31962 TXT R1.qxd 8/7/07 2:44 PM Page 22
Conventional media explanations for the success
of special interest groups tend to rely on easily
quantifiable and comparable indicators of political
resources, notably campaign and lobbying expendi-
tures. As a way of explaining the government’s give-
away of public spectrum to private interests, these
indicators certainly merit note. The companies and
industries that have been the greatest beneficiaries of
the spectrum windfall—the wireless telcos and the
broadcasters—are widely known to be among the
most politically powerful and best represented in
Washington, D.C. According to the Center For
Responsive Politics, for example, the telephone utili-
ties industry, which included both wireline and wire-
less telecommunications companies, contributed
$107 million to federal candidates from 1990-2006
and spent $368 million on lobbying from 1998-
2006. In addition, the mass media industry,includ-
ing TV and radio broadcasters, Hollywood, and the
record industry, contributed $202 million from
1990-2006 and spent $393 million on lobbying from
1998-2006.lxvi
However,this paper offers a different type of expla-
nation, one that focuses on the special characteristics
of spectrum as a public asset. Spectrum is different
from other public assets the government manages
because of the public’s relative ignorance of it. It is, to
use the title of one of the most important early works
on spectrum policy, “the invisible resource.”lxvii
Why is invisibility such an important political
resource? Because when you can steal something
from someone without being noticed, you can get
away with it without paying a cost. Plato captured
this idea—as well as the ethos of the spectrum lob-
bying community—in his famous story of the Ring
of Gyges. Gyges, a shepherd, finds a ring that allows
him to become invisible. He then uses this power to
commit a series of foul deeds. After telling this story,
Plato reflects on its meaning:
“No man can be imagined to be of such an
iron naturethat he would stand fast in justice.
How did this giveaway happen? How was the
government able to give tens of billions of
dollars worth of public assets to private
interests without monetary compensation? And how
did this giveaway happen with so little media atten-
tion and virtually no political accountability?
The Art of Spectrum Lobbying
No man would keep his hands off what was
not his own when he could safely take what he
wanted…. If you could imagine any one
obtaining this power of becoming invisible,
and never doing any wrong or touching what
was another’s, he would be thought by the
lookers-on to be a most wretched idiot,
although they would praise him to one
another’s faces….”lxviii
Capturing the moral temp-
tations of invisibility, a for-
mer FCC official who
wished not to be cited
described a church official
lobbying the FCC for
favorable license modifica-
tions to his diocese’sITFS
licenses potentially worth
hundreds of millions or
even billions of dollars. The
church official joked that
grave sites and spectrum
werehis diocese’stwo main
sources of income. Then he
fretted that acquiring spec-
trum rights was a tempta-
tion from the devil.
The causes of the public’s
ignorance of spectrum are
multifaceted and deep
rooted. They include the
public’s scientific ignorance of
spectrum’s physical and economic properties (e.g.,
the relationship between technology, economics, and
white space), the unprecedented natureof spectrum
applications (e.g., Wi-Fi, Bluetooth, RFID, Zigbee,
and UWB), and the various government decision-
making processes, including the FCC rulemaking
process and the Congressional budget process, that
have been designed to foster that ignorance for the
benefit of incumbent spectrum licensees (described
in PartIII of this paper).
Compare the ability of the government to give
away spectrum usage rights to the granting of rights
to use tangible, easily understood, public assets. The
New York City Department of Parks and Recreation
23
[A] church official lobby-
ing the FCC for favorable
license modifications…
joked that grave sites
and spectrum were his
diocese’s two main
sources of income.
Then he fretted that
acquiring spectrum
rights was a temptation
from the devil.
31962 TXT R1.qxd 8/7/07 2:44 PM Page 23
maintains more than 1,700 parks, playgrounds and
recreation facilities and sells short-term concessions
to operate hot dog stands in many of those locations.
What if a hot dog vendor wanted the right to operate
his concession in perpetuity; wanted the right to con-
struct and sell office, retail, and residential real estate
on the territory covered by his concession; and did
not want to pay for any of the above rights? One
could not conceive of a hot dog vendor acquiring
such rights on such terms because the stench of cor-
ruption would be impossible to hide. But when it
comes to FCC licensing, this type of rights expansion
is routine and passes without controversy, even when
the rights expansion is orders of magnitude larger
than what a hot dog vendor could hope to win even
in the implausible scenarios above.
***
Let’s now explore the art of spectrum lobbying—the
strategic games that spectrum lobbyists can play to
acquirespectrum rights without paying for them.
Strategic behavior involves taking actions to influ-
ence the actions of other rational actors. In this case,
the strategic decision making involves changing both
the real and perceived social costs associated with
giving public spectrum assets to private entities with-
out public compensation. The real costs involve cre-
ating unnecessarybut real economic harmif incum-
bents are not given the spectrum windfalls for which
they will later lobby. The perceived costs involve the
public’s awareness that its property is being given
away to private interests without compensation.
Although the details vary greatly, the overall
sequence of spectrum lobbying tends to follow a
highly predictable pattern. The four stages in the
sequence are:
1) Aproblem is created that the potential licensee can
solve
2) The potential licensee makes a public interest
promise to solve the problem
3) The incumbent licensee increases its negotiating
power vis-a-vis the government
4) The incumbent licensee exploits its enhanced
power to renegotiate the license terms in its favor.
24
The Art of Spectrum Lobbying
The politics of spectrum
To help understand how spectrum lobbying works,
here’s an analogy with federal land grants:
The rightsholder later lobbies for rights to
build on the land,arguing that this meets
publicneeds,as well as paying the
rightsholder for his investment.
Similarly, lobbying by incumbent licensees for
spectrum ‘flexibility’ can turn a limited-term, low-value TV license
into a permanent and farmore valuable mobile Internet service.
4
The rightsholder lobbies the government to
grant extended rights that include mining
and oil development.
3
2
The government grants limited grazing
rights at favorable sub-market rates.
Thegovernment owns undeveloped land.
1
FIGURE 3lxix ILLUSTRATES THE CUMULATIVE EFFECT OF SPECTRUM LOB-
BYINGWITH AN ANALOGYBASED ON AN INITIAL ASSIGNMENT OF CAT-
TLE GRAZING RIGHTS RATHER THAN HOT DOG CONCESSION RIGHTS.
31962 TXT R1.qxd 8/7/07 2:44 PM Page 24
These four stages may be referred to as “the political
economy of an FCC license.” The first two stages
belong to the initial licensing phase and the next two
belong to the license modification phase. In all
stages, the spectrum lobbyist seeks to acquire spec-
trum usage rights at the least possible cost. In the
licensing phase, the spectrum usage rights must gen-
erally (since 1993) be awarded through a competitive
process such as an auction or comparative hearing.
In the license modification phase, the FCC can
grant the rights to the incumbent licensee without
first considering the best competitive offer for the
grant of rights.
Unlike stages one and two, which are complete
when the license is acquired, stages three and four
tend to forman endless cycle, the cumulative effect
of which accounts for most of the giveaway from the
public to private interests. This is reflected in this
paper’s estimate that auctions for new licenses since
1993 raised $40 billion for the government, while the
total value of spectrum usage rights given away since
then may be as much as $480 billion. This paper,
unlike the great majority of published work on the
granting of new rights to use spectrum, focuses on
the license modification phase. Insofar as licenses are
automatically renewed and no new highly valuable
(below 3 GHz) exclusive commercial spectrum will
be assigned, this is the phase where the lion’s share of
the giveaway will take place in the future.
Indeed, since many license modifications so sub-
stantially change the rights and market value associ-
ated with a license, simply avoiding the competitive
auction of a modified license is a key objective of the
spectrum lobbyist.
As a practical matter,it may be hard to distinguish
between a new license and a license modification. Is
an FM broadcast licensee’s acquisition of an adjacent
guardband channel a new license or a license modi-
fication? Is a TV broadcast licensee’s acquisition of
the right to provide ten times the number of previ-
ously allowed standard definition TV programming
streams a new license or a license modification? Is a
mobile satellite service licensee’s acquisition of rights
to provide terrestrial service with a license that pre-
viously allowed only satellite service a new license or
alicense modification? All the modifications above
have generated huge windfalls for incumbent
The Art of Spectrum Lobbying
licensees, but they have nevertheless been deemed
relatively minor modifications by the FCC. This is a
vital advantage for incumbent licensees who greatly
prefer acquiring spectrum rights via modifications
rather than new licenses because the former process
allows them to avoid the higher cost and scrutiny
that comes with the use of a formal, competitive
rights allocation process.
Once we understand that the big payoff for a
spectrum lobbyist usually comes in the second
phase, the license modification phase, we can see
that the strategic imperative
of the first phase is simply
to get your foot in the door.
This involves finding and
promoting a problem and
then making a public spir-
ited promise to solve it.
The public spirited prom-
ise, of course, must appear
to be a good deal for
the public.
Public spirited promises
may include offers to pro-
vide “public safety,” “free
TV,” “universal broad-
band,” “free broadband,”
“educational program-
ming,” “minority program-
ming,” and “news and pub-
lic affairs programming.”
Since 9/11, public safety has
been the favorite argument for commercial compa-
nies to win spectrum windfalls.lxx Auctions may miti-
gate the ability to later renegotiate a promise but do
not necessarily eliminate the ability to renegotiate.
For example, NextWave bid $4.7 billion for spec-
trum but was able to keep the spectrum even after it
didn’t pay for the licenses because it protected its
spectrum assets by entering bankruptcy court pro-
tection. Economically, this is no different than a TV
broadcaster who promises public interest obligations
to get a license and then doesn’tprovide them.
After the license is in hand, the strategic situation
between the public and the entity seeking additional
spectrum usage rights changes. In the licensing
phase, the negotiating power of the entity seeking
25
Once we understand that
the big payoff for a spec-
trum lobbyist usually
comes in the second
phase, the license modifi-
cation phase, we can see
that the strategic impera-
tive of the first phase is
simplyto get your foot in
the door.
31962 TXT R1.qxd 8/7/07 2:44 PM Page 25
additional spectrum usage rights is relatively weak.
This radically changes in the license modification
phase, where the incumbent licensee can now obtain
“holdup power” over government license modifica-
tions. Holdup power occurs when one party to a
negotiation has enough power to win the entire sur-
plus to be gained through a negotiation. In this case,
that means instead of the public getting compen-
sated for the use of its spectrum asset, the asset must
be simply handed over to the incumbent licensee.
Holdup power is gener-
ally obtained through two
mechanisms, one political
and one economic. Politi-
cally, it of course helps that
an incumbent licensee has
substantial economic
resources that it can trade
for political influence. But
those seeking to acquire
new licenses presumably
have the same level of eco-
nomic resources as those
seeking to acquireadditional
rights for the licenses they
currently have. The critical
difference is that in the sec-
ond phase, due to the lack
of a formal, competitive
process, the giveaway of
rights can become much less
visible. A shrewd incumbent licensee can exploit this
difference to greatly improve its negotiating position.
Economically, the situation also changes because
the social costs of license modifications arenot fixed.
The social cost of not renewing an incumbent’s
license at the end of its term and of not granting it
additional spectrum usage rights arevariables that
can change. A shrewd incumbent can take steps to
increase those costs to the maximum extent possible,
the result of which is that it actually becomes in the
public interest to grant incumbents additional spec-
trum usage rights in a way that would otherwise be a
windfall. All this strengthens the incumbent
licensee’snegotiating hand.
The legal system can also contribute to the cre-
ation of holdup power because of the special posi-
[B]usiness people suf-
fer when they enter into
aholdup relationship,
whereas politicians are
rewarded with campaign
contributions, positive
newscoverage on radio
and TVbroadcast sta-
tions, and praise for their
political astuteness.
tion it gives to licensees. If licensees can credibly
threaten to hold up an FCC action in the courts for
years, then the public may be better off not charging
for the new spectrum usage right so that the new
service can quickly get to market. However, the ulti-
mate power of incumbents in the courts tends to
result from the economic and political forces
described above. This paper will ignore judicial
sources of holdup power.
The public could, of course, fight back by chang-
ing the visibility associated with license modifica-
tions and preventing incumbents from changing the
social costs of license modifications after acquiring a
license. But this requires a deep understanding of
the strategic situation and a clear focus on the long-
term. These are not intellectual traits closely associ-
ated with the DC policymaking community in gen-
eral, let alone the spectrum policy community in
particular. Part III of this paper nevertheless
attempts to provide such a perspective.
Holdup power also exists in the private sector, as
evidenced by the large business literature urging
general managers to avoid entering markets and
business relationships wherethe other party to a
transaction is likely to possess holdup power.lxxi The
difference is that business people avoid getting
themselves into such situations like the plague,
whereas Congress and the FCC have been attracted
to them like moths drawn to a light. The strategic
difference is that business people suffer when they
enter into a holdup relationship, whereas politicians
are rewarded with campaign contributions, positive
news coverage on radio and TV broadcast stations,
and praise for their political astuteness.lxxii
Now let us exploresome of the strategies incum-
bents can use to enhance their holdup power in
acquiring license modifications on more favorable
terms. These can be divided into economic and
political communication strategies.
Economic Strategies
In understanding economic incentives, it is often
useful to distinguish between a short-term and long-
term perspective. Clearly, from a long-term perspec-
tive, it is unnecessaryand harmful to give away vast
economic resources to special interests skilled in the
arts of spectrum lobbying. But from a short-term
26
The Art of Spectrum Lobbying
31962 TXT R1.qxd 8/7/07 2:44 PM Page 26
perspective, giveaways may actually make sense. The
skilled spectrum lobbyist understands this and thus
encourages the creation of social costs in such a way
that at any given point in time a giveaway actually
appears to maximize social welfare.
An analogy would be a general who destroys the
bridge necessary for his soldiers to escape from the
enemy. If the bridge existed, the soldiers would have
an incentive to retreat in the face of an enemy
onslaught. But by destroying the bridge, the general
can motivate his soldiers to fight to the death.
Asset Specificity Strategy. Aspecialized asset is a
non-redeployable investment specialized to a task.
For example, a machine that can only produce a sin-
gle product, such as a glove compartment for a par-
ticular brand of car, is a highly specialized asset. In
moretechnical terms, asset specificity is the extent
to which the investments made to support a particu-
lar transaction have a higher value to that particular
transaction than they would have if they were rede-
ployed for any other purpose.lxxiii
In private markets, asset specificity is closely asso-
ciated with economic opportunism. An employer,for
example, can often exploit an employee foolish
enough to invest in a highly specific skill that cannot
easily be transferred to another occupation (universi-
ties address this problem by granting academics
tenure, thus encouraging them to become narrow
specialists). In business and economic textbooks,
investments in specific assets are discouraged
because they lead to negotiating weakness and an
invitation to exploitation.lxxiv
In lobbying, however, asset specificity can be a
great negotiating strength. This has been especially
true with spectrum lobbying. Thereare two types of
asset specificity of particular importance to the spec-
trum lobbyist: 1) the stranded investments of an
incumbent’s customers should an incumbent cease
operation, and 2) the stranded investments of an
incumbent himself should his license not be
renewed. Spectrum lobbyists may seek to increase
both types of asset specificity.
For type 1 asset specificity, consider a mobile tele-
phone company that can cripple all the cell phones
its customers use so that they will only operate on its
own network. Taking away an incumbent’slicense
The Art of Spectrum Lobbying
would therefore economically harm its customers
and provoke their political opposition. Similarly,
consider the TV broadcasting industry that can that
can claim that a hundred million people would lose
TV service if spectrum allocated to terrestrial, over-
the-air TV were re-allocated to mobile telecommu-
nications service. Recalling TV broadcasters’
licenses and converting TV broadcast spectrum
from broadcast to broadband service would there-
fore economically harm broadcasters’ customers and
provoke their political opposition.lxxv
For type 2 asset specificity, consider a mobile
phone operator that only invests in cell tower equip-
ment useful with its particular FCC license. The
result would be that any attempt to let a license
expirewould create a lot of collateral economic
damage, which in turn would harm telecommunica-
tions investment and innovation.
To a large extent, asset specificity doesn’t have to
be real. It only has to be perceived. For example,
TV broadcasters constantly harp that if analog TV
sets go offthe air, tens of millions of expensive TV
sets will lose their economic value. But this is not
quite right. The vast majority of TV sets areused
primarily for purposes other than watching TV ter-
restrially over-the-air. This includes watching TV
via satellite, cable TV, and telco TV; playing
videogames; and increasingly using it as a general
interface for a computer and Internet connection.
They would retain economic value even without ter-
restrial over-the-air broadcasting. And to the extent
that they would lose value, the whole TV doesn’t
need to be replaced, just an inexpensive converter to
watch a digital signal on an analog TV set.
However, asset specificity is often very real, even
if through modest upfront investments it could have
been avoided. The key strategic insight is to design
equipment (such as mobile phones that cannot
switch providers) that maximize asset specificity
when it strengthens your market and lobbying
power. The mobile phone example is especially
good because in that case the licensee pays an
upfront premium to increase asset specificity. The
phone is manufactured with the flexibility to roam
across many frequencies and carriers, but the
incumbent licensee pays a premium to cripple that
functionality.
27
31962 TXT R1.qxd 8/7/07 2:44 PM Page 27
Pollution Strategy. An FCC license typically
involves creating a negative externality on nearby
spectrum. To the extent that electromagnetic waves
don’t magically stop at the edge of a licensee’s terri-
tory, some interference is inevitable. This negative
externality can be maximized to the incumbent
licensee’s advantage. TV and radio broadcasters, for
example, have strenuously opposed any FCC
attempt to mandate more selective receivers so that
the huge amount of guard band spectrum surround-
ing their licenses could be
productively used.
Once large amounts of
white space are polluted,
the incumbent licensee can
then go to the FCC and say
that in exchange for solving
this pollution problem, it
should be granted the white
space. The public benefits
from this because valuable
new spectrum is opened up
for productive use. The
incumbents benefit by
receiving the right to pro-
vide those services without
payment. In this way, for
example, the AM and FM broadcasters acquired use
of the adjacent channels to their licensed channels.
More recently, satellite licensees have used the strat-
egy to acquire “tweener” orbital slots between their
existing slots.
Closely related to the Pollution Strategy is the
Reband Efficiency Strategy. In this strategy, a
license is acquired in a band that is inefficiently allo-
cated. The incumbent then promises to reorganize
the band moreefficiently if given additional spec-
trum and spectrum rights. As new technology makes
guard band spectrum more economical to use than
ever before, the opportunities for this rebanding
strategy have increased. Incumbent licensee Access
Spectrum has proposed such a plan in the 700 MHz
band that will be auctioned as part of the digital TV
transition. Access Spectrum acquired guard band
spectrum for a dirt cheap price because of its limited
functionality.Now it has proposed a moreefficient
Once large amounts of
white space are polluted,
the incumbent licensee
can then go to the FCC
and say that in exchange
for solving this pollution
problem, it should be
granted the white space.
band plan for the 700 MHz auction that will simul-
taneously enhance its spectrum rights and put more
spectrum to productive use for consumers.lxxvi
Louisiana Purchase Strategy. When the United
States acquired the Louisiana Territories from
France, the property lines of the territory were not
precisely defined. The United States later exploited
that ambiguity to its advantage when Napoleon was
distracted with wars in Europe. The U.S. claimed
territory that could reasonably but not definitively
be characterized as outside the contractually defined
Louisiana Territory. Similarly, contrary to what most
incumbent licensees have said in congressional testi-
mony and FCC comments,lxxvii strategic ambiguity
works to their advantage in the license modification
phase of their lobbying efforts. In general, incum-
bents like ambiguity when it offers them the possi-
bility of acquiring more spectrum usage rights. Con-
versely, they dislike clarity when it comes at the
expense of rights they hope to win.
For example, broadcasters have opposed efforts to
clarify their protected license contours when that
clarity involves making a choice between giving up
viewers that can receive their signals but areoutside
their Grade B contour and giving up viewers that
are within their Grade B contour but cannot receive
their signals. That is because the broadcasters’ best
strategy in this case is to argue that the rules are
ambiguous, so they should receive both types of
spectrum usage rights. In contrast, when it wasn’t
clear whether a broadcast license provided rights to
transmit 1) a single standard definition TV channel,
or 2) whatever programming would fit within a 6
MHz channel (e.g., ten or morestandard definition
TV channels), the broadcasters supported clarifica-
tion of rights as long as the result was a more gener-
ous definition of their rights. If the FCC had
decided that the broadcasters only had rights to pre-
serve their existing level of service—a definition of
service that could have resulted in the FCC reducing
abroadcast license from 6 MHz to 1 MHz—the
broadcasters would have strenuously opposed the
effort at clarity. In the United Kingdom, the govern-
ment decided to define a broadcast license in terms
of the spectrum needed to provide a service rather
than in terms of the original amount of resources
28
The Art of Spectrum Lobbying
31962 TXT R1.qxd 8/7/07 2:44 PM Page 28
(i.e., spectrum) used to provide that service using the
older, less efficient (analog) technology.lxxviii In the
U.S., the FCC has often defined license rights in the
same restrictive way for incumbent licensees lacking
holdup power. In such cases, it is never rational for
incumbent licensees to prefer clearly defined spec-
trum usage rights.
Case-by-Case Waiver Strategy. The Administrative
Procedures Act requires a formal and public notice
and comment system to create more flexible spec-
trum allocations. This relatively public process can
be skirted by seeking special “temporary” authoriza-
tions for an experimental license modification or a
case-by-case permanent waiver of the allocation
rules that would otherwise apply to a licensee. Once
hundreds of these temporary or permanent excep-
tions have been granted below the public radar,it is
almost impossible not to grant the requested license
modification when it finally comes under review via
the Administrative Procedures Act. That is because
by then manufacturers and licensees may have
already invested substantial sums in highly special-
ized equipment to produce the new service and tens
of thousands of consumers may have already pur-
chased equally specialized equipment to use the new
service (see “asset specificity” strategy just above).
Radio broadcasters, for example, employed such a
strategy when acquiring multicasting rights on their
new digital spectrum. These rights were highly valu-
able and there was pressure on the FCC to ask for
something in return for granting such valuable
rights. By using special “temporary” authoriza-
tions—which were issued without any public
notice—to put morethan 800 multicasting radio sta-
tions in operation beforethe FCC finally got around
to completing a formal rulemaking, the incumbents’
negotiating position was greatly strengthened.lxxix
Political Communication Strategies
Spectrum giveaways, of course, are a political
embarrassment, so incumbent licensees have a great
incentive to minimize any perception of a giveaway.
To the extent possible, this means operating below
the public radar,keeping in mind that in affairs like
this the least publicity is the best publicity. As one
former FCC insider explained the political logic, “If
The Art of Spectrum Lobbying
people asked for something and no one objects, we
gave it to them.”
However, it is not enough to keep things below
the public radar. It is also necessary to have a store
of arguments that can be used for political cover
when anyone seeks to point out the giveaway taking
place. We’ll start by looking at strategies incumbents
use to keep giveaways below the public radar. Then
we’ll look at some ways they seek to frame giveaways
as something other than a giveaway.
The Go-Slow Strategy. By asking for new spectrum
usage rights in small pieces over time, no individual
ask makes it worth the effort for the public and its
advocates to mobilize in opposition. If a group of
incumbent licensees ask for billions of dollars of
spectrum rights all at once, it is a much more news-
worthy request than if the same giveaway is incre-
mentally asked for over several decades and in
dozens of different FCC proceedings.lxxx This go-
slow approach also works to the advantage of spec-
trum lobbyists who want to keep their jobs and
would lose them if they succeeded in getting a give-
away all at once; that is, from their perspective, it
may be better to get $100 million a year for ten
years than $1 billion all at once the first year.Over
the decades, TV and radio broadcasters have played
the go-slow strategy brilliantly, transforming a
three-year license with substantial public interest
obligations and a high risk of non-renewal into an
eight-year license with minimal public interest obli-
gations and almost no risk of non-renewal. At the
same time, they have greatly expanded their service
areas and the types of services they can provide.
Anoteworthy variant of the Go-Slow Strategy is the
Create-Red-Tape Strategy. In this strategy, an
incumbent licensee’spublic interest obligation is
attacked in two steps. In the first step, the substance
is quietly eviscerated. In the second step, the paper-
work associated with enforcing the public interest
obligations is ridiculed for being without substance.
This “red tape” is then eliminated. Both the radio
and TV broadcasters played this strategy brilliantly
from the 1960s through the 1980s. Originally,
broadcasters were supposed to renew their licenses
based on a rigorous competitive process—just like
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the process used to win their original license. The
competition was based on what were perceived to be
credible commitments to provide public interest
programming, such as local, objective news. Over
the years, however, broadcasters gradually eviscer-
ated the substance of the comparative renewal
process without attacking either the principle behind
it (that if they received free use of the public air-
waves, they would have to give something back to
the public) or the paperwork associated with the
principle’s implementation. By the 1980s, the paper-
work had become a farce because it became clear
that license renewal had become automatic except
for gross misconduct. It then became easy to attack
the paperwork—which had been the centerpiece of
the FCC’ssystem for verifying the broadcasters’
public interest claims—as “red tape” serving no use-
ful public purpose.
Yet another variant of the Go-Slow Strategy is the
Wait-For-The-Next-Government Strategy. Govern-
ment leaders and priorities come and go with
remarkable frequency in Washington, D.C. Incum-
bent licensees know that they can use that change to
renegotiate morefavorable license terms because
with a change of government can come a change in
priorities and a blissful ignorance of and lack of
responsibility for what has come before. One presi-
dential administration, for example, may believe that
it is an urgent national priority to allow TV broad-
casters to transition from fixed standard to fixed
high definition TV service and thus be willing to
grant broadcasters the additional rights to spectrum
necessary to allow that to happen. The next admin-
istration may come in and believe that fixed HDTV
isn’t a high priority so broadcasters should be
allowed to provide ten or more fixed SDTV chan-
nels in the spectrum granted to them for the HDTV
service. The next administration may come along
and say neither fixed SDTV nor fixed HDTV serv-
ice is critical: broadcasters should be allowed to pro-
vide TV of whatever resolution they want and shift
from site-based licensing to mobile telephone style
geographic licensing so that broadcasters can pro-
vide mobile TV service. The next administration
may then come in arguing that broadband is the
futureand drop the requirement for one way com-
munications. What is constant throughout this
process is that the incumbent licensee is increasing
his or her spectrum usage rights.
The One-Hand-Not-Knowing-What-the-Other-Hand-
is-Doing Strategy. By asking for new spectrum
rights in different FCC proceedings that are not
apparently linked to each other, the size of a particu-
lar incumbent’s campaign for a rights giveaways may
not be noticed even if it all happens at the same
time. In recent years, for example, TV broadcasters
have exploited this strategy to seek rights over white
space in a half dozen different and obscure proceed-
ings, each one of which to the lay person might
seem unrelated and which the FCC usually treats as
wholly unrelated, placing the entire burden on the
public to find a linkage. An especially nice feature of
this strategy is that it can mask inconsistencies in
policy rationales. For example, in the FCC’s white
spaces proceeding, the TV broadcasters argue that
using the white space will inevitably result in harm-
ful interference to incumbent licensees.lxxxi But in
the distributed transmission system technologies
(DTS) proceeding, they argue that those incumbent
licensees should be given access to those white
spaces because they can operate on those white
spaces without causing harmful interference to exist-
ing viewers. lxxxii
Technobabble Strategy. All requests for license
modifications must be subject to some type of public
notice. But there is no requirement that the request
for a modification has to be in a form that anyone
without a Ph.D. in spectrum technology can under-
stand. Even trade reporters who make a career out
of reporting on the FCC may have only a minimal
understanding of the economic significance of a par-
ticular license modification. Thus, it is quite possible
for a license modification to be “public” in a literal
sense but completely private in a practical sense.
The Information Logrolling Strategy. The public
depends on conflicts among elites with inside knowl-
edge for much of their policy information. But if
those elites have moreto gain by playing a game of
you’ll-scratch-my-back-if-I’ll-scratch-yours, then the
public will be deprived of essential information. This
30
The Art of Spectrum Lobbying
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strategy works especially well for issues, such as
spectrum policy, which are viewed as non-partisan,
meaning the political parties choose not to differen-
tiate themselves on this issue. Traditionally, this
strategy is how Congress manages telecom policy,
including spectrum policy. It asks the stakeholders to
meet in a back room and work out a deal that Con-
gress will then approve. A classic example is the
Telecommunications Act of 1996, where the mobile
telephone and broadcasting interests decided not to
go against each other because both had more to gain
by quietly cooperating than openly fighting.
When an incumbent licensee is challenged about a
particular giveaway, it often responds with a stock
set of arguments that seek to minimize the size of
the giveaway and shift the topic to another subject.
Here are a handful of those arguments, each of
which may seem reasonable in the context of a par-
ticular request for a license modification but seen
over time and across countless license modifications
appear in their true light.
Spilled Milk Strategy. With this strategy, incum-
bents argue that the great majority of any possible
giveaway has already taken place and it does no good
to cryover spilled milk.lxxxiii This strategy focuses on
the observation that many incumbent licensees paid
for their licenses in the market and it would be unfair
to penalize them for giveaways given to others. It also
contrasts the large giveaway that has already occurred
with the very modest license modification currently
being sought. The fact that the same argument has
been used for decades while huge license modifica-
tions have accumulated is not noted. Nor is it noted
that the current license modification is not the end of
the giveaway sequence but merely one point in a long
series of giveaways that may occur for decades into
the future. A related strategy is the Two-Wrongs-
Make-a-Right Strategy. According to this argument,
if so much injustice has already occurred, it is only
fair that it continue so that spectrum lobbyists’ rea-
sonable expectations of the FCC are not disturbed. As
one former FCC chief of staff explained this mindset
(without necessarily agreeing with it), “The FCC has
on so many occasions engaged in unjust enrichment,
it’s too late to stop now.”lxxxiv
The Art of Spectrum Lobbying
Political Inevitability Strategy. Incumbent licensees
and their advocates point to the fact that Congress
and the FCC have no political willpower to prevent
spectrum giveaways. Thus, no rational person would
seek to oppose a particular giveaway because the
result would simply be wasted resources. It is rarely
pointed out that this argument is undemocratic and
aclassic argument favored by despots.
Acorollary argument is the Economic Efficiency
Strategy. According to a popular economic theory,
the initial distribution of assets has nothing to do
with their long-term efficient allocation in a market
where those assets can be
freely traded. Thus,
whether or not spectrum
usage rights are given away
to incumbent licensees has
no efficiency implications.
If we now assume that the
only way to get spectrum
usage rights into the market
is to give them to incum-
bents (because the FCC has
no practical political way to
charge for them), then the
rational economic course of
action is to give the spec-
trum rights to the incum-
bents.lxxxv But the assump-
tion of political inevitability
should be controversial. If
applied to the management
of other public resources—
such as whether oil companies should be given free
access to exploit oil on public lands because the pub-
lic would benefit from the resulting oil in the mar-
ketplace—the argument appears simply ludicrous.
Yet somehow, when it is applied to spectrum, it is
accepted as a synthesis of conventional political and
economic wisdom.
Save-By-Killing-It-Strategy. Tosave what they argue
is an uneconomical service, incumbent licensees may
argue that they need the flexibility to provide a more
profitable service. They will then use the profits
from the moreprofitable service to subsidize the less
31
All requests for license
modifications must be
subject to some type of
public notice. But there is
no requirement that the
request for a modification
has to be in a form that
anyone without a Ph.D. in
spectrum technology can
understand.
31962 TXT R1.qxd 8/7/07 2:44 PM Page 31
profitable service. The incumbent keeps making this
ask until eventually the service for which spectrum
flexibility was granted no longer exists. In other
words, what is saved is the incumbent’s valuable
license rights, and what is killed is the reason the
licensee got his license in the first place. A classic
example of this occurred in the ITFS band, where
the incumbent educational services kept asking for
more commercial usage rights to subsidize their
education services until they no longer provided
those services and just collected commercial rents
from their licenses. TV broadcasters have also
employed this strategy with brilliant effect in their
efforts to save free TV by gradually killing it.lxxxvi
Two-Option Strategy. In this strategy,incumbent
licensees invest heavily in one option favorable to its
interests. This option is then only contrasted with
the status quo. The FCC, partly because it is expen-
sive and requires some foresight to develop addi-
tional options, then makes its decision not by com-
paring all the possible options but only the option
favored by the incumbent in comparison to the sta-
tus quo. A classic example is the set of options the
FCC considered in managing the digital TV transi-
tion. A single channel transition, as advocated by
John Nickel at Los Alamos Labs, would have freed
up the TV white spaces for productive use more
than a decade ago.lxxxvii But the broadcasters wanted
that white space for themselves and so didn’t invest
in a single channel option. The public was then told
that the only efficient way to transition to terrestrial
broadcast TV required granting broadcasters a sec-
ond channel.
Aclose variant of the Two-Option strategy is the
Standards Body Strategy. Often industry domi-
nated and unaccountable standards bodies will take
on the role of artificially restricting options in the
guise of a standard. The problem occurs when the
FCC then endorses the standard in a rulemaking.
The Advanced Television Systems Committee
(ATSC) has taken on this role for broadcast digital
television standards, and an IEEE working group
(802.16) has taken on this role for allocating TV
broadcast guard band spectrum.lxxxviii
Ten Illustrative Spectrum Giveaways
The following ten spectrum giveaways are only a
small subset of the spectrum giveaways that have
occurred during the past two decades. Most spectrum
giveaways occur in many obscure dribs and drabs over
many years. For example, the giveaway of spectrum
usage rights to high power TV broadcasters since
1993 has occurred in more than a dozen different
rulemakings, the great majority of which received no
mass media news coverage.lxxxix Often licenses are
held by spectrum speculators willing to wait many
years for the right opportunities to win additional
spectrum flexibility. The examples below were chosen
for their diversity and relatively large size. Most
received at least some mass media news coverage.
1) Metro TV Broadcasters (broadcast TV band).
Beginning in the 1940s, the FCC granted free
licenses to high power terrestrial TV broadcasters
who promised to provide TV service in the public
interest. Each license consisted of the right to pro-
vide a single standarddefinition TV channel for
three years, whereupon the FCC was supposed to
renew the license on a competitive basis known as
“comparative renewal.” As of 2006, therewere1,756
licensed high power TV stations in the U.S.
In 1996, high power terrestrial TV broadcasters
operating in the 210 metropolitan area TV markets
won digital flexibility,which allowed each broad-
caster to provide ten times as many standard defini-
tion programming streams plus new services such as
HDTV and computer data; an indefinite, interest
free loan of a second channel, which they were able
to leverage into many more subsidies; and a greater
presumption of automatic license renewal, including
an increase in license duration from five to eight
years and abandonment of the last vestiges of com-
parative renewal.xc
2) Rural TV Broadcasters (broadcast TV band).
The FCC envisaged that local TV broadcast pro-
gramming would originate in 210 local markets cen-
tered in metropolitan areas. To rebroadcast that pro-
gramming in rural areas, a system of TV translators
was established. By 2006, therewere 4,518 TV
translators re-broadcasting programming from the
nearest local TV market.
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In 2004, TV translators serving areas outside of
the 210 metropolitan area TV markets won the set
of rights high power TV broadcasters won in 1996
plus an additional set of rights, including no fixed
date to return their analog TV channel and the right
to cluster all their public interest obligations on the
channel of a single broadcast licensee within a mar-
ket.xci For example, if there were 12 licensed TV
translator stations in a TV market, they could agree
to get together to broadcast their mandated one,
“free” (ad-supported) standard definition TV chan-
nel on the channel of a single licensee, thus freeing
the 11 other channels to provide more profitable
non-broadcast services.
3) AM and FM Radio Broadcasters (broadcast
radio bands). Beginning in the 1920s, the FCC
granted free licenses to AM broadcasters who prom-
ised to provide radio service in the public interest.
The license consisted of the right to provide a single
standard definition audio channel for a limited num-
ber of years, whereupon the FCC was supposed to
renew the license on a competitive basis known as
“comparative renewal.” The FCC created a similar
licensing system for FM broadcasting in the 1950s.
As of 2006, therewere 13,837 licensed high power
AM and FM stations in the U.S.
In 2002, AM and FM broadcasters won rights to
double their licensed bandwidth by acquiring rights
to half the adjacent guard band channel on each side
of their licensed channel.xcii This would allow each
radio broadcaster to eventually provide as many as
20 standard definition audio programming streams
plus HD audio and computer data.
4) Mobile Satellite Operators(MSS band). In the
1990s, the FCC allocated spectrum for mobile satel-
lite service, which was to provide mobile telephone
service to areas not covered by terrestrial mobile serv-
ice. Fearing that if the U.S. auctioned satellite rights
other countries might do the same, the award of satel-
lite licenses was exempted from the auction rules. As
terrestrial mobile telephone service spread faster than
had been expected and provided a superior service at
lower cost,xciii satellite operators found they couldn’t
provide a profitable mobile telephone service.
The Art of Spectrum Lobbying
In 2003, mobile satellite operators won rights to
provide terrestrial as well as satellite service on their
spectrum.xciv Unlike satellite operators who use
higher frequencies suitable only for fixed, line-of-
sight communications, the mobile satellite operators
use frequencies below 3 GHz suitable for mobile
communications.
5) Wireless Cable TV Operators (MMDS band). In
the 1970s, the FCC was worried about an emerging
cable monopoly on subscription TV service. There-
fore, it allocated a large swath of lower frequency
spectrum for terrestrial wireless cable TV service.
Satellite TV proved to be a much more efficient
delivery vehicle for such wireless subscription TV
service, and the terrestrial wireless cable TV opera-
tors failed. Most of the wireless cable TV operators
subsequently sold out to spectrum speculators such
as Nextel and Sprint with an eye for winning spec-
trum flexibility.
In 2004, building on a decade long run of small
victories, wireless cable operators won flexibility to
provide mobile broadband service.xcv
6) Instructional Wireless Cable TVOperators
(ITFS band). In the late 1950s and early 1960s, the
FCC was worried about what was perceived to be
the superior educational system of the Soviet Union.
The evidence for this apparent superiority was that
the Soviet Union, beginning in 1957, launched a
series of manned rockets into space years before the
U.S. would be able to do so. At the time, TV was
perceived to be a new technology that could greatly
improve the quality of American education. Conse-
quently,the FCC granted a large swath of spectrum
to the so-called Instructional Television Fixed Ser-
vice. This TV service required the purchase of spe-
cialized transmitters and receivers; the tuner on a
regular TV could not pick up the educational pro-
gramming. A relatively small group of colleges, K12
parochial schools, and non-profits (set up specifically
to use this spectrum) were the primary beneficiaries
of this allocation. The hopes for the ITFS spectrum
were never realized, and a decade after it was first
granted almost half of it was taken back and reallo-
cated for wireless cable TV service, which techni-
cally was verysimilar to the instructional service.
33
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In 2004, instructional television fixed service
operators won the same flexibility as the wireless
cable TV operators (see above).xcvi They further won
the right to lease their spectrum to the wireless cable
operators, effectively turning their spectrum licenses
into cash cows divorced from their original educa-
tional purpose.
7) Dispatch Service Operators (800 MHz band).
In the mid-20th century, the FCC granted dispatch
services, such as fleets of locally licensed taxis, audio
channels to coordinate their internal operations.
Each channel used a single transmitter that would
cover a large geographic area such as a metropolitan
market. By the late 1980s, spectrum speculators
began acquiring dispatch licenses in the hope that
they could later be transformed into flexible use
licenses.
In 1991 dispatch service operators won the right
to provide cellular, mobile telephone service.xcvii
This allowed them to expand the service capacity of
their licenses by multiple orders of magnitude and
expand their market from a narrow set of occupa-
tions to the general public.
8) Electronic News Gathering Operators (2 GHz
band). Each licensed high power broadcaster is
given rights to not only broadcast on a retail channel
(a channel from 2-69 in a given local TV market)
but also use of an additional set of frequencies for
electronic news gathering and other so-called auxil-
iary services. The electronic news gathering spec-
trum allows a reporter in the field to transmit raw
footage back to the TV station. The electronic news
gathering spectrum is shared with the other TV sta-
tions in a local TV market and allocated with the
help of a local frequency coordinator, usually an
engineer from one of the local TV stations. As part
of the DTV transition, the FCC expected the broad-
casters to migrate from analog to digital technology
and give back a small fraction of their electronic
newsgathering spectrum, which occupied beachfront
spectrum. This spectrum was widely perceived to be
inefficiently used because it was only used a small
fraction of the time and provided point to point
communications while consuming a vast geographic
expanse of spectrum.
In 2004, the federal government granted high
power TV broadcasters a minimum of $512 million
to upgrade their electronic newsgathering technol-
ogy from analog to digital service. This technology
upgrade made it possible to free up a small portion
of the broadcasters’ electronic news gathering spec-
trum while greatly increasing the capacity of the
broadcasters’ electronic news gathering service.xcviii
9) TV Auction Speculators (700 MHz band). In
2002, the FCC auctioned TV spectrum in the DTV
band at a huge discount to the market value of simi-
lar unencumbered spectrum because the bidders had
little idea when, if ever, they would be able to use
the spectrum they had bid upon.xcix In 2005, the
federal government unexpectedly committed to
spend at least $1.5 billion to speed the digital TV
transition, thus freeing up the winning bidders’
spectrum by 2009 and increasing the value of their
spectrum manifold.c
10) Mobile Telephone Auction Speculators (PCS
band). In 1996, the FCC auctioned spectrum with
minority owned and small business bidders paying
for the spectrum on an installment basis. However,
winning bidders (most notoriously, a company called
NextWave Communications, Inc.) were able to keep
their licenses even if they didn’t pay by seeking
bankruptcy protection from creditors, including the
U.S. government. In 2001, the FCC re-auctioned
the licenses from the 1996 auction that hadn’tbeen
paid for. Winning bids totaled more than $16 billion
but the FCC had to returnthe auction receipts
when the Supreme Court ruled that the licenses auc-
tioned in 1996 continued to be the property of the
original bidders who had protected the licenses in
bankruptcy court.ci
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Public Policy
Recommendations
PART III
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31962 TXT R1.qxd 8/7/07 2:44 PM Page 36
Reduce the Informational Sources of
Incumbents’ Holdup Power
1) Improve Accounting Rules for Tracking Rights
toSpectrum Assets and Changes to those Rights
The total value of spectrum assets in the U.S. has
been estimated by a former chief of the National
Telecommunications and Information Administra-
tion (NTIA) to be worth as much as $2 trillion. The
government’s accounting for that asset is abysmal
and needs to be reformed. Just as Congress is cur-
rently considering a Broadband Data Improvement
Act to improve the quality of federal broadband
data, it needs to create a Spectrum Data Improve-
ments Act to improve the quality of federal spec-
trum data. Here are some specific proposals:
The government needs to create a central data-
base including the details of everyspectrum assign-
ment in the United States. Currently, government
spectrum databases are divided between the NTIA,
part of the Department of Commerce (which tracks
use of spectrum by the 58 federal entities, such as
the U.S. Army, Capitol Police, and Department of
Transportation, with their own spectrum alloca-
tions), and the FCC (which tracks all other spectrum
allocations). Within the NTIA and FCC, the data is
also fragmented. At the NTIA, most of the data is
treated as confidential for reasons of national secu-
rity and not disclosed publicly. And at the FCC, the
data is fragmented among the different bureaus with
responsibility for spectrum management. All this
data needs to be integrated into a single database
and much if not most of the NTIA spectrum data
currently withheld from public scrutiny needs to be
publicly released. In 2006, Representative Jay Inslee
introduced an amendment in the House Commerce
The Art of Spectrum Lobbying
Committee to create an inventory of federal spec-
trum, but it was defeated.
The database also needs to include historical
information so that the modifications of any license
over time can be tracked. Every year the FCC’s
Wireless Bureau approves tens of thousands of
minor license modifications. Companies with a track
record of incessantly seeking minor modifications to
their licenses should be easy to identify. Similarly,
the query letters to the FCC by members of Con-
gress on behalf of incumbent licensees seeking
minor modifications should be linked to the license
modification database.
The government should require that all spectrum
license and allocation modifications that reach a
threshold valuation should be valued by an independ-
ent auditor and integrated
into the FCC’sand NTIA’s
rulemaking procedures,
including both formal rule-
makings and waivers of par-
ticular rules on a case-by-
case basis. OMB should
then review the costs and
benefits of such modifica-
tions with an expected eco-
nomic impact above a cer-
tain threshold.
Detailed valuations, as opposed to ballpark esti-
mates within an order of magnitude, may not be
necessary. For example, the proposed independent
auditor could be asked to mark a checkbox that a
proposed license or allocation modification has an
estimated value between 0 and $1,000, $1,000 and
$10,000, $10,000 and $100,000, $100,000 and $1
million, $1 million, and $10 million, $10 million and
$100 million, and so on. In addition, every year, the
FCC should issue a reportthat tallies the value of all
such modifications over the last year and the cumu-
lative value of such modifications for all allocated
services over the previous ten years.
Such valuations included as part of the rulemaking
procedure are analogous to the mandates Congress
has passed to estimate the financial impact of every
proposed rule on small businesses and to estimate
the time to fill out paperwork for every new regula-
tion requiring reporting to the federal government
37
[T]he visibility of
spectrum giveaways
needs to be increased so
spectrum lobbyists lose
their Ring of Gyges
Tostem the giveaway of public spectrum assets
to private interests without public compensa-
tion, two sets of public policy reforms must be
undertaken. First, the visibility of spectrum giveaways
needs to be increased so spectrum lobbyists lose their
Ring of Gyges. Second, the government’s rational
economic incentive for creating such giveaways—a
critical cause of incumbent licensees’ current holdup
power—needs to be reduced by eliminating the
unnecessary asset specificity currently associated with
spectrum investments.
31962 TXT R1.qxd 8/7/07 2:44 PM Page 37
It is also analogous to the President’s mandate under
Executive Order 12,866. that agencies notify the
Office of Management and Budget on rule changes
with an economic impact greater than $100 million.
To make such valuations possible, a coherent and
codified body of financial accounting standards for
spectrum valuations needs to be developed. Central to
such a set of standards should be the assumption that
any spectrum usage right not explicitly given away as
part of the Communications Act has not in fact been
given away. Basic metrics for valuing spectrum by
geography, frequency, service and other parameters
need to be developed. A basic geographic metric
should be the industry standard $/MHz-pop, which
should vary across frequency and service. Compared
to other accounting valuation tasks, such as valuing
stock options based on uncertain future events, valu-
ing spectrum rights is comparatively simple. The cur-
rent Financial Accounting Standards Board rules for
valuing FCC licenses, including the annual impair-
ment test, should be used as a starting point.
All license valuations should include a note assess-
ing the potential holdup power associated with a
modification. Many modifications aresmall in them-
selves but create great holdup power,which is useful
when acquiring additional spectrum rights in the
future. That is, the feasibility of a particular modifi-
cation isn’t independent of other modifications; one
modification may create great economic and politi-
cal pressure to later approve another modification.
The TV broadcasters’ current request for Distrib-
uted Transmission System (DTS) rights fits in that
category. The proposed switch from site-based to
flexible geographic area licensing may seem slight if
all the extra transmitters can only retransmit the
same signal as the original site-based transmitter.
But if the resulting network of transmitters greatly
enhances the broadcasters’ holdup power to later
convert to cellular licensing, this is an important
financial consideration that needs noting.
All this spectrum asset information should be
available in a highly structured format (e.g., with
XML tags such as the SEC uses) and be available for
free download from the FCC’s website. As a service
to the public, the FCC should also provide easily
usable visualization tools—such as the tools NTIA
uses internally to track classified spectrum assign-
ments and that ComSearch, a private company, sells
to well-heeled spectrum lobbyists.
The Congressional Budget Office and the Office
of Management and Budget should integrate all the
spectrum asset valuations into a single public assets
database and include this information in a compiled
balance sheet of U.S. public assets, which includes
changes in the value of assets over one or more pre-
ceding accounting periods. The government cur-
rently accounts for many other infrastructure assets
such as roadways, bridges, sewage facilities, and
dams.cii But spectrum assets have been exempt from
these public asset reporting requirements.
Current FCC rulemakings and rules waiver
requests relating to the same spectrum allocation or
assignment should cross reference each other and
the cross references should be automatically updated
as new information is added to the FCC’s rulemak-
ing databases. The FCC should also be required to
provide a note explaining how the passage of one
rulemaking might impact another. For example, if
the outcome of the FCC’sDTS, TV translator, and
TV allotment proceedings could seriously affect the
amount of white space still available in its white
space proceeding, this fact would have to be noted.
2) Reduce Conflicts of Interest among
FCC Employees
The problem of the conflict of interest created by
the revolving door between government workers and
the private organizations they regulate has been
widely observed. A conflict of interest occurs
because government regulators have an interest in
not alienating potential future sources of financial
supportin the form of salary or equity investment.
The conflict of interest causes regulators to write
rules that support private interests, not the public
interest. This problem is pervasive at the FCC. Its
spectrum rule writers often leave the FCC to work
for companies and industries directly affected by the
rules they were writing. A classic recent case is
Bruce Franca from the FCC’s Office of Engineering
and Technology. In the mid-2000s, he went directly
from writing the proposed rules concerning the
futureof the TV guard bands (white spaces) to
MSTV, the leading broadcast trade association lob-
bying on those rules.
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Public Policy Recommendations
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What distinguishes this conflict of interest at the
FCC from other agencies is not its existence but its
magnitude. FCC rulemakers have remarkable discre-
tion over “minor” license modifications and auction
designs that might result in the giveaway of billions
of dollars worth of wealth from the public to private
sector. Increasingly, too, former FCC employees are
given equity interests—some worth potentially hun-
dreds of millions of dollars—in telecommunications
companies seeking favorable treatment before the
FCC. Normally, public opinion in a democracy
would provide a check on this type of giveaway. But,
as we have seen, the remarkable ability of spectrum
lobbyists to win spectrum giveaways below the pub-
lic radar cripples this check.
Aclassic instance of the new scale of profits from
the revolving door is Janice Obuchowski. In the
1980s she went from being a senior aide to an FCC
Chairman to being head of the NTIA, where she
helped write the rules for the PCS (mobile tele-
phone) auctions that took place in the mid-1990s
(the role of the NTIA was to free up the spectrum
from federal users so the FCC could auction it).
Then she left office, and as president and a major
investor in NextWave, bid on that PCS spectrum,
with NextWave investors later walking away with a
multi-billion dollar windfall at taxpayer expense.
To reduce the conflict of interest stemming from
the revolving door,the ban on FCC workers with
spectrum management responsibilities from lobby-
ing the FCC and Congress should be increased. In
Anne Arundel County, Maryland (where this author
lives) the ethics law forbids former county employ-
ees from profiting from matters of which they had
intimate knowledge while employed in the public
sector.ciii This is probably too onerous a standardfor
former government spectrum managers, but increas-
ing the ban on the revolving door from one to three
years may be feasible. In addition, private companies
lobbying the FCC or Congress with former FCC
employees as stockholders should be required to dis-
close those equity interests, regardless of how long
ago the stockholders worked at the FCC. This latter
disclosure won’t directly stem the problem, but it
would provide a valuable indicator of its dimensions.
The Art of Spectrum Lobbying
3) Reduce the Current Number of Heterogeneous
Spectrum Bands
The FCC’s Spectrum Policy Task Force Report,
issued in November 2002, recommended that the
FCC reduce the number of spectrum bands managed
on a command and control basis and increase the
number managed on a flexible use basis.civ Since there
are countless discrete ways to manage spectrum on a
command and control basis but far fewer ways to
manage it on a flexible use basis—because the choice
of how to use the spectrum is left up to the licensee
rather than the government—the practical effect of
such a policy would be to radically simplify the FCC’s
band plan and rulemaking process. The Spectrum Pol-
icy Task Force Report focused on the economic
advantages of such a simplification of the FCC’sallo-
cation system, but the political advantages are equally
great. The complexity of the current system militates
against public involvement. Newspapers, for example,
won’t run articles on spectrum policies that are per-
ceived to be “inside baseball.” Similarly, public interest
groups won’t seek to mobilize the public on issues that
don’t in-and-of-themselves have significant impact on
the public. The result is that band-by-band rulemak-
ing is synonymous with special interest politics, with
politically powerful incumbent licensees making out
like bandits. By creating fewer different types of bands,
changes to any one band are more important and thus
can draw the interest of a larger fraction of the public.
4) Require Congress to Appropriate Spectrum
Usage Grants and Thus Be Accountable for Them
Verizon has been arguing that under the Anti-Defi-
ciency Act (“ADA”) and Miscellaneous Receipts Act
(“MRA”), the FCC cannot give away and receive
valuable assets, such as spectrum, without explicit
congressional approval.cv The principles behind
these rules arequite simple and uncontroversial. As
Verizon’s General Counsel explained:
Congress well understood that stewards of public
resources could be exposed to relentless pressures
to convert those resources to private gain. It
therefore took stern measures, and aimed them
directly at the officials themselves, to ensure that
they would not succumb to these pressures and
instead remain true to the public interest.cvi
39
31962 TXT R1.qxd 8/7/07 2:44 PM Page 39
Whether or not the FCC is currently required to
follow these rules in granting valuable spectrum
rightscvii has no bearing on whether it should be
required to follow them, which is the more funda-
mental question. And the answer to this question is a
resounding “yes”: Congress should be forced to take
public responsibility for the giveaway of billions of
dollars of spectrum assets to the private sector. One
approach to doing so would be to integrate spectrum
giveaways into the PAYGO rules, which require con-
gressional expenditures to
be offset with revenue.
Acynical reading of
Congress’ current role in
granting spectrum give-
aways would have it
focused on taking campaign
contributions and other
types of support from spec-
trum lobbyists in return for
avoiding public and embar-
rassing congressional over-
sight of the FCC’s license
modification and enforce-
ment policies. What over-
sight Congress does do is primarily surreptitious and
unaccountable; for example, working behind the
scenes to facilitate spectrum giveaways by appointing
quiescent FCC commissioners and structuring the
FCC rulemaking process to not include explicit con-
sideration of spectrum giveaways.
5) Re-characterize Licenses as Leases and
Integrate Spectrum Leasing into the Government
Contracting System
The current degree of exceptionalism in the man-
agement of spectrum assets and spectrum licensing
should be reduced. It should always be remembered
that a license is essentially just a government sanc-
tioned lease. The politics of government leasing may
be very different from the politics of private sector
leasing, but the underlying economic principles
involved arevery similar. Spectrum “leases,” for
example, should be included in the Federal Procure-
ment Data System and the terminology and concep-
tualization of spectrum leasing should more closely
parallel the moregeneral language of federal con-
tracting regulations. Basic principles of contracting,
such as competitive bidding and contract terms of
minimum necessary duration, should be applied to
spectrum leasing. For example, just as the practice of
not awarding government contracts on a competitive
basis (called “sole source contracting”) is universally
disparaged, except in rare circumstances, sole source
spectrum leasing should be disparaged in favor of
competitive bidding. At the FCC, even after the
advent of auctioning in the early 1990s, the great
majority of spectrum usage rights are still awarded
on a sole source basis to incumbent licensees. This
should be a red flag for the FCC’s inspector general
and the General Accounting Office that there is a
great likelihood of waste, fraud, and abuse in the
management of this vital public asset.
6) Integratethe Management of Spectrum
Assets into the Systems for Managing Other
Natural Resources
It is striking that both Congressional Research Ser-
vice and General Accounting reports for Congress
on the management of natural resources don’t even
mention spectrum.cviii This should be changed.
Indeed, spectrum may now be the most valuable nat-
ural resource the government manages. Although
the federal government is notorious for giving away
rights to use public resources at below market
rates,cix its track recordof giving away spectrum
assets appears to be even worse. Shifting at least
some control over spectrum management audits at
the General Accounting Office from the Physical
infrastructure Issues group to the Natural Resources
and Environment group would thus be a positive
step.cx Similarly,spectrum should be added to the
purview of the natural resource economists at the
Congressional Research Service.
7) Enforce Buildout Requirements Via
Automated Transparency
All over the world today, businesses are using
automation to reduce the cost of detecting contract
violations when the cost of manual detection would
be prohibitive. Insurers of homes in disaster prone
areas, for example, are using satellite images from
Google Earth to check on whether homeowners
have installed the fireproof roofs, storm-resistant
40
Public Policy Recommendations
[T]he terminology and
conceptualization of
spectrum leasing should
morecloselyparallel the
more general language
of federal contracting
regulations.
31962 TXT R1.qxd 8/7/07 2:44 PM Page 40
window shutters, and other disaster mitigation
equipment they claim to have installed.cxi However,
when it comes to the FCC—the agency that regu-
lates one of the most high tech industries on earth—
the enforcement mechanisms are stuck in long obso-
lete methods devised decades ago.
Consider the repeated pattern of spectrum lobby-
ists promising the FCC that they will quickly build
out their telecommunications facilities (a promise
that gives them special advantages under the Com-
munications Act) and then not doing so. To deal
with the build-out problem, FCC enforcement of
buildout rules should be highly automated with the
results made public in real time. Current enforce-
ment systems require that the FCC send out field
officers all across the country to inspect for buildout,
including testing particular frequencies in particular
areas to see whether they arein use. This enforce-
ment system is hugely expensive and difficult to
manage. With today’s technology, it could be
replaced with a simple remote monitoring system.
Each transmitter required for buildout could be
attached to the Internet via an FCC certified device
that would read all the relevant buildout parameters
from the transmitter and send them to a central,
real-time database. If there were a discrepancy
between the promises in the license and the auto-
mated readings from the field, an automated alarm
would sound that would be available for the public
to subscribe to and be posted on the FCC’s public
website as well. This proposed government man-
dated automated metric is akin to the Department of
Transportation-certified car odometer that insurance
companies rely on for certain discounts and con-
sumers rely on to plan maintenance and to value
used cars
This proposal is also akin to the FCC’s proposal
to requireunlicensed devices to use real-time geolo-
cation to protect incumbent TV broadcast licensees.
However, in this case, the technology is used to hold
the incumbent licensee to account rather than an
average consumer who might be infringing on the
incumbent’srights. The costs are also much lower
because for every incumbent base station—as in the
case of TV broadcast transmitters with their large
coverage areas—there may be millions of consumer
devices. If such inexpensive consumer equipment
The Art of Spectrum Lobbying
can be expected to have such equipment to automate
enforcement, surely the same can be expected of
incumbent licensees.
8) Make the FCC’s Inspector General Into a
True Inspector General Ferreting out Waste,
Fraud and Abuse
The FCC’s Inspector General, presumably picking
up cues from Congress and the FCC, has long had a
knack for ferreting out waste, fraud, and abuse
among the weak while giving the powerful carte
blanche to do what they want.
Nowhere is this more evident than in the Con-
gressional mandate to the FCC against unjust
enrichment. The Communications Act of 1934
states that the FCC shall “prevent the unjust enrich-
ment of recipients of licenses”cxii and then later
repeats that the FCC should avoid “unjust enrich-
ment through the methods employed to award uses
of [the spectrum] resource.”cxiii Another formulation
of the unjust enrichment clause, “the public interest,
convenience, and necessity” clause, also appears
repeatedly as an injunction against spectrum give-
aways.cxiv Through the clever hairsplitting of some
of the best paid and most talented legal minds, the
FCC has virtually completely ignored this mandate,
except for the politically weak.
It is striking that the largest case of fraud involv-
ing the acquisition of spectrum usage rights was not
identified by either the FCC’s inspector general or
anyone else at the FCC. It was a private lawsuit filed
in Manhattan’s Federal District Court under the fed-
eral False Claims Act, a Civil War statute. This
statute allows whistle blowers to receive a portion of
the money recovered. The suit alleged that money
manager Mario Gabelli defrauded the government
of approximately $90 million by using sham compa-
nies to buy spectrum licenses under an FCC pro-
gram to provide discounts for small and minority-
owned businesses. For his efforts, the attorney who
won the lawsuit personally won $32.2 million of the
$130 million total settlement.cxv
Toprevent unjust enrichment, the FCC’s Inspector
General, which currently has a staff of 17 permanent
employees, should appoint two new directors: A
Director of Public Interest Obligation Audits and a
Director of License Modification Audits. The first
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31962 TXT R1.qxd 8/7/07 2:44 PM Page 41
director would audit licensee’s clear and verifiable pub-
lic interest obligations, such as buildout requirements.
The second director would audit license modifications
to determine if any were unjustified windfalls.
Where the FCC’s Inspector General is unwilling or
unable to fulfill its duties to prevent waste, fraud, and
abuse, the job should be taken over by the General
Accounting Office. The GAO has carefully audited
such programs as the Universal Service Fund’s “E-
Rate” for waste, fraud, and abuse. But it has never
seriously investigated the claims made on behalf of
those incumbent licensees seeking government hand-
outs costing the taxpayers much larger sums of
money. For example, the TV and radio broadcasters
now routinely make claims on Capitol Hill and at the
FCC that they annually contribute vast sums to pub-
lic service.cxvi The last claim in 2006 was $10.3 billion
ayear in public service.cxvii This claim is invariably
made when broadcasters are lobbying for more favor-
able license terms. But to the best of this author’s
knowledge, neither the GAO nor any other govern-
ment entity has ever seriously examined the validity of
these claims. No one in the private sector can verify
the validity of these claims because the broadcast lob-
byists who compile the data have kept their sources
confidential. Common sense suggests the broadcast-
ers’ claims are ludicrous, if only because any corpo-
rate CEO who frittered away 50 percent or more of
his corporate profits in voluntarily and anonymously
contributing to such public service would be thrown
in jail for violating his fiduciary duty to shareholders.
Reduce the Economic Sources of Incumbents’
Holdup Power
As long as incumbent licensees continue to have
substantial holdup power—which occurs when one
party to a transaction has virtually all the negotiating
power—spectrum giveaways will continue much as
they have in the past. A major contributor to incum-
bent licensees’ holdup power is their disproportion-
ate political power, which makes it virtually impossi-
ble for the FCC not to renew or otherwise termi-
nate a license. The policy recommendations above,
by increasing the visibility of spectrum giveaways,
seek to reduce this political power.
But the tremendous negotiating power of incum-
bent licensees also rests on very real economic forces.
These economic forces stem from incumbent
licensees’ ability to link possession of rights to use a
particular frequency band with expensive and long-
term investments in equipment dedicated to the use of
that particular band. To the extent that spectrum using
equipment loses this asset specificity, incumbents’
negotiating power would be significantly weakened.
Akey insight is that the asset specificity of spec-
trum is not fixed by nature but is an artifact of tem-
porary technological forces and institutions tailor
made to enhance the bargaining power of incumbent
licensees. In contrast, the FCC has traditionally
viewed spectrum asset specificity as a fixed law of
nature, the degree of which, like the force of gravity,
is outside its regulatory purview.cxviii As radio tech-
nology becomes increasingly more versatile, incum-
bent licensees’ negotiating power should naturally
dissipate. But to the extent that current spectrum
management policies strengthen rather than weaken
the current regime of spectrum asset specificity,
these pro-competitive economic forces cannot take
hold. Consequently,it is also necessary to explore
public policies to reduce the unnecessary and
socially harmful negotiating power of incumbent
licensees. Tothe extent that the asset specificity of
spectrum using equipment declines, the power of
license holders to negotiate for favorable license
terms—including longer, automatically renewed, and
moreflexible license terms—should be lessened.
1) Minimize the Duration of Licenses and End the
Practice of Automatically Renewing Them
The major justification for long and automatically
renewable license terms is spectrum specificity of
radio equipment. Incumbent licensees can argue that
since they must invest in highly specific equipment to
utilize their licensed band, they need adequate time
to recoup that investment. Similarly,since users must
also invest in highly specific equipment to utilize the
spectrum in a particular band, they need to be pro-
tected from any government actions that would ren-
der that investment worthless. As the FCC’s Spec-
trum Policy Task Force concluded, “a level of cer-
tainty regarding one’s ability to continue to use spec-
trum… is an essential prerequisite of investments…
Thus, licensees in bands that are subject to periodic
review should nonetheless be entitled to a strong
42
Public Policy Recommendations
31962 TXT R1.qxd 8/7/07 2:44 PM Page 42
renewal expectancy.”cxix However, in a world where
spectrum equipment loses its asset specificity, the col-
lateral damage from requiring competitive bids for
license renewals is greatly reduced.
Of course, investments in a wireless business go
well beyond investment in particular spectrum equip-
ment. But the value of those assets is not tied to the
use of a specific FCC license. The assets are equally
valuable when used with other FCC licenses. Con-
sider brand awareness. A brand like AT&T is equally
valuable regardless of the frequencies with which it is
linked. Indeed, the AT&T brand has already been
carried across many frequencies, most recently when
Cingular acquired AT&T and shifted many of its
customers to Cingular licensed spectrum.
Presumably, if consumers and carriers know that
band specific spectrum equipment is more likely
than flexible spectrum equipment to become obso-
lete or otherwise become economically inefficient,
they would take constructive steps to deal with this
possibility. For a carrier, this could include getting
out of the equipment business altogether or paying a
small incremental amount upfront to acquire more
flexible equipment, which could be moreeasily sold
to another spectrum licensee or used by the same
licensee but on the frequency of another one of its
licenses. Similarly, consumers could choose to pay a
small incremental upfront cost so that if a particular
frequency no longer was usable therewould be oth-
ers they could easily substitute. In the case of mobile
telephone equipment, most handsets are already
manufactured to work on the spectrum of thousands
of different licenses worldwide. All that is needed is
to make it easy for consumers to unlock that flexibil-
ity—a step that carriers often make as difficult as
possible.cxx
An irony is that for the consumer equipment where
asset specificity is likely to remain a long-termcon-
cern—that is, for very inexpensive devices such as
RFID and Wi-Fi devices—the FCC grants consumers
the least investment protection. That is because those
devices use unlicensed spectrum and must accept any
interference they receive. But for the expensive
devices that already have or could easily have radio
smarts, the FCC acts as though asset specificity is a
universal law of nature the only rational response to
which is to automatically renew licenses.
The Art of Spectrum Lobbying
Aprecedent for this proposal is the FCC’s past
practice of clearing incumbent licensees from bands
when they were no longer making efficient use of
those bands.cxxi Even in the recent AWS auction,
certain commercial incumbents providing point-to-
point communications had to be cleared. But the
FCC has always drawn the line at clearing politically
powerful licensees with valuable licenses. And even
for incumbents with relatively little negotiating
power, it increasingly pays them high relocation fees
that amount to granting them a spectrum windfall.
Another precedent is the November 2002 plan of
Japan’s Ministry of Public Management, Home
Affairs, Posts, and Telecommunications (MPHPT)
not to engage in automatic license renewal for
incumbent licensees but rather to allow their
licenses to expire like other types of government
leases. An additional feature of the MPHPT plan
was to reimburse licensees for the remaining book
value of their depreciated equipment.cxxii
Yet another precedent is the Spectrum Account-
ability Act (H.R. 4715), a bill introduced by Repre-
sentative Nussle, the Chair of the House Budget
Committee, on June 25, 2005. The bill would have
required incumbent licensees to bid for major modi-
fications to their licenses.
2) Mandate Stricter Receiver Standards and
Transmitter Out-of-Band Emission Limits to Reduce
the Level of Spectrum Pollution and Incumbent
Licensees’ Holdup Power
The necessary amount of spectrum to transmit and
receive information depends on the quality of
receivers and transmitters. When receivers and
transmitters arebuilt strictly to minimize their cost,
their successful operation may requirethe use of
excessive amounts of guard band spectrum. Once
many such inferior transmitters and receivers arein
the marketplace, they contribute to an incumbent
licensee’s holdup power in negotiations over future
rights to use guard band spectrum.
The FCC has repeatedly tried to deal with this
problem by mandating stricter receiver standards
and transmitter out-of-band emission limits.cxxiii
However,incumbent licensees have opposed all such
attempts unless the stricter standards go along with
an initiative to grant them the newly cleaned up
43
31962 TXT R1.qxd 8/7/07 2:44 PM Page 43
spectrum. The NTIA’s recent set-top converter pro-
gram to facilitate the DTV transition is a classic
example.cxxiv The NTIA imposes tight receiver stan-
dards but only does so to the extent that the incum-
bent broadcasters can gain access to the resulting
white space.cxxv
As the FCC has requested, Congress should grant
the FCC explicit authority to reduce spectrum pol-
lution.cxxvi Additionally, that requirement should not
be attached to a second requirement that the FCC
give incumbent licensees the cleaned up spectrum.
3) Require the FCC to Periodically Report on the
Extent to which Changing Technology and
Economics is Changing the Asset Specificity of
Spectrum Equipment
Consumers are beginning to purchase “smart radios”
that can access many morebands of spectrum and
communication standards. A fully equipped state-of-
the-art high-end consumer laptop PC, for example,
can currently receive signals on the FM radio band
(20 MHz from 88 MHz to 108 MHz), the TV bands
(402 MHz from 54 MHz to 806 MHz), the
CDMA2000 1X EV-DO mobile telephone bands
(1700 MHz from 400 MHz to 2100 MHz), the unli-
censed Wi-Fi bands (more than 500 MHz from 2.4
GHz to 5.8 GHz), the unlicensed Bluetooth band
(83.5 MHz from 2.4 GHz to 2.4835 GHz), and the
GPS bands (at both 1,227.6 MHz and 1,575.42
MHz). Within a year, high end consumer PCs are
also expected to be able to receive signals on the
ultrawideband bands (7.5 GHz from 3.1 GHz. To
10.6 GHz) and WiMax bands (more than 600 MHz
from 1.7 GHz to 5.8 GHz).
According to Intel, once a chip has already been
designed to handle a set of radio standards and fre-
quencies, the marginal difference in the cost of pro-
ducing a chip with or without a particular functionality
is generally minimal. This means that the cost of pro-
ducing consumer equipment that isn’t tied to transmit-
ting and receiving information on particular bands is
likely to continue to plummet in the coming years.
Tosome extent, consumers already have a lot of
experience using such spectrum flexible devices. For
example, most TV sets currently in existence allow
consumers to receive any TV channel between 2 and
69. They don’thave to purchase a separate TV to
44
Public Policy Recommendations
1900
1920s
1940s
1950s
1980s
1930s
1990s
2000s
Radio
Morse Code
(telegraphy)
AM radio
Television
FM radio
Color
television
Mobile
telephones
Satellite TV,
global
positioning
systems
Wi-Fi
(wireless
Internet)
Future
Dates indicate approximate
commercial use
1960s
1970s
Radio
dispatch
Citizens
Band
radio (CB)
TIMELINE OF INNOVATIONS
Smart
radio
TAXI
FIGURE 4cxxvii DEPICTSTHE
EVOLUTION OF RADIOS FROM
DUMB TOSMARTDEVICES.
31962 TXT R1.qxd 8/7/07 2:44 PM Page 44
receive each one of those TV channels. Similarly,
when consumers travel, their mobile phones will typi-
cally switch frequencies and carriers depending on the
roaming agreements their primary carrier has. One
new wireless handset standard, just now being intro-
duced by T-Mobile to the market, allows consumers
to seamlessly roam between Wi-Fi (unlicensed) and
CMRS (commercial mobile) frequencies while mak-
ing telephone calls and transmitting data.cxxviii
Businesses are also purchasing flexible radios. For
example, in-building wireless networks are widely used
in office buildings, malls, sports stadiums, and other
public milieus. Customers don’t want to be restricted
to the use of only certain carriers and frequencies, so
the in-building networks include radios that can serv-
ice a variety of different carriers and frequencies.
The most flexible smart radios now in production
may be the Joint Tactical Radio System (JTRS)
radios used by the U.S. military. These radios can
receive and send signals from 2 MHz to 3,000 MHz
and have the computer power to interpret and trans-
mit many different radio standards. A related mili-
tary program called XG (for neXt Generation
radios), is developing flexible softwareto work with
the JTRS hardware.
Carriers are also increasingly unbundling spec-
trum equipment and frequencies. For example, cell
towers are increasingly owned by independent com-
panies that provide service to multiple carriers. Since
it costs essentially the same amount of money to
build a cell tower to service four carriers as one, this
separation of the tower and spectrum holding busi-
nesses greatly reduces the cost of building telecom
networks and encourages new entry.
The next step in this evolution may be to have the
tower companies provide a single flexible radio to
service all its carriers rather than multiple, essentially
redundant radios. In addition to the economies of
scale and scope associated with building flexible
radios, the placement of similar radio equipment close
to each other tends to reduce interference. That’s a
major reason that both mobile phone and terrestrial
broadcasters locate their base station radios as close to
each other as possible—preferably on the same tower.
Crown Castle, the largest tower company in the U.S.,
has already sought to vertically integrate by adding its
own radio equipment to its towers.
The Art of Spectrum Lobbying
Manufacturers are also unbundling the tight link-
age between spectrum equipment and frequencies.
WiMax, a wireless broadband standard developed by
Intel, NextWave Broadband, and other manufactur-
ers, potentially operates over more than a 10 GHz
band and is being incorporated in PC laptops and
other multipurpose consumer electronics equipment.
Increasingly, it is becoming easy to envisage a
world in which spectrum licensees can run a viable
business without owning any towers or spectrum
equipment, and consumers can purchase general
purpose radios that can easily switch among net-
works. An analogy might be a company that buys a
seat on a stock exchange and leases it out to another
company that staffs the seat and purchases any nec-
essaryequipment to fully utilize it. A current exam-
ple of such a system in practice is the ITFS spec-
trum. The educational companies that have leases to
this spectrum make no capital equipment invest-
ments and simply sublease the spectrum to other
carriers. The FCC, prodded by Incumbent license
holders, envisaged such a world in its Spectrum Pol-
icy Task Force Report and its subsequent Secondary
Markets proceeding.cxxix The idea was to set up a
general purpose wireless network and then sublease
in tiny increments the spectrum necessary to use it.
Cantor Fitzgerald, a prominent Wall Street trading
firm, endorsed the proposal in an FCC filing. Most
recently,Google has revived a variant of this idea as
part of a much more ambitious proposal for real-
time auctions.cxxx
4) Require the FCC to Study the Way Asset
Specificity Harms Spectrum Licensees with Small
Holdings and Minimal Market Power
Manufacturers do not like producing equipment for
single companies in narrow spectrum bands with few
existing customers. Not only is the market for such
products small but producing products with high
asset specificity puts them in a poor strategic situa-
tion because, as every introductory textbook on
industrial organization observes, it invites oppor-
tunistic behavior on the partof the buyer, in this
case the FCC licensee. In practice, the only way a
small licensee can get equipment for a new band is
to vertically integrate and either invest in a manufac-
turer or become a manufacturer itself. But this
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31962 TXT R1.qxd 8/7/07 2:44 PM Page 45
requires a lot of money and greatly increases the
economies of scale necessary to earn a profit with a
spectrum license. All these problems could be solved
by encouraging the development of smart radios.
The incremental cost of adding functionality for a
new licensee would be relatively insignificant and
consumers would be willing to take a greater risk on
anew service because its failure would not result in
their equipment becoming obsolete.
Reducing asset specificity to encourage small
spectrum-based wireless businesses is more efficient
than creating “designated entities” to receive auction
discounts to win licenses. The reason is that auction
discounts don’t change the fundamental economics
of the spectrum business. Virtually all designated
entities that win auctions either arefronts for much
larger companies seeking to win licenses at a dis-
count or flip their licenses to such companies as
soon as the FCC allows them to do so. Thus, the
Congressional Budget Office has demonstrated that
the FCC auction discounts have been a dismal fail-
ure.cxxxi The designated entities tend to inefficiently
warehouse spectrum while waiting for their opportu-
nity to flip their licenses. And then when they do
flip their licenses, they receive a windfall based on
the discount the government gave them at taxpayer
expense. To the extent that smart radios genuinely
change the economies of scale necessary to succeed
in the wireless business, such perverse incentives
don’t come into play because small industry players
can survive and thrive.
WiMax is the first commercial spectrum standard
designed to significantly reduce asset specificity. As
previously noted, WiMax provides an off-the-shelf
standardto provide wireless broadband service
across morethan 10 GHz of frequencies. With Intel
and other large vendors backing WiMax and plan-
ning to incorporate it into PC laptops and other
consumer electronics devices, small spectrum entre-
preneurs have latched onto this technology as a rela-
tively inexpensive way to launch a wireless broad-
band business on a previously unused FCC licensed
frequency.
5) Require the Department of Homeland
Security to study the way Asset Specificity
Harms Public Safety
In the wake of 9/11 and the 9/11 Commission
Report,cxxxii there has been great attention focused on
the need for interoperable public safety communica-
tions so that distinct first responder groups within
and across jurisdictions can communicate with each
other. During 9/11, for example, the police and fire
personnel at the World Trade Center each had
equipment that couldn’t communicate with each
other, thus leading to a tragic loss of life. But the
principle of “interoperability” need not stop there. It
could potentially include the ability to communicate
across all frequencies and standards. Indeed, as
already noted, the military’s smart radio initiatives,
including JTRS and XG, attempt to do just that.
The advantages of less asset-specific radios for
public safety could include lower long-term radio
equipment costs (through greater economies of scale
in production), greater reliability in a disaster
(through the ability to switch to a greater number of
alternative wireless telecommunications networks),
morebargaining power with commercial network
carriers and manufacturers (because of the ability to
credibly threaten to switch vendors), and greater
innovation (as a result of the greater competition
within both equipment and carrier markets).
6) Encourage the International Telecommunications
Union (ITU), FCC, and MunicipalTelecommunications
Officers to Propose and Implement Ways to Reduce
Asset Specificity in Radio Equipment
There are many different steps government agencies
at all levels of government could take to foster the
development of flexible, smartradios. One important
one would be to reduce the time and cost of getting
FCC authorizations to use equipment across multiple
radio bands. Currently, authorizations are band spe-
cific. For example, a device will be separately author-
ized to operate on the TV broadcasting, FM radio,
Wi-Fi, and mobile telephone bands. A hypothetical
device that could operate on all bands would cost a
small fortune in FCC authorization fees and proba-
bly significantly slow down the time it takes to get a
product to market. Moreover, a truly flexible device,
such as the military’sJTRS radio, would be illegal for
46
Public Policy Recommendations
31962 TXT R1.qxd 8/7/07 2:44 PM Page 46
acommercial entity to produce and make available
for consumer markets. This is because it is illegal for
acommercial entity to manufacture equipment that
would operate on restricted frequencies. An added
problem is that restricted bands vary across coun-
tries. Thus, it is hard to achieve economies of scale in
manufacturing a truly flexible smart radio because
each country or region requires that radios be crip-
pled in different ways.
Solving the authorization problem may require
completely rethinking the way both the FCC and
ITU approach the problem of managing interfer-
ence. A shift from ex ante to ex post regulation of
interference may be necessary to efficiently exploit
the emerging world of flexible, smart radios. This
shift would put management of electromagnetic
speech on a par with acoustic speech. The First
Amendment has always been held to favor ex post
over ex ante speech regulation. That’s a principle
that may be critical for fostering not only democracy
but also, as suggested here, economic efficiency.
Recently,the FCC has been seriously considering
applying Carterfone principles to wireless telecommu-
nications. The FCC’sCarterfone policy allows con-
sumers to attach any device to the wireline telecom-
munications network as long as the device doesn’t
harm the network.cxxxiii The proposal above essen-
tially says that this Carterfone principle should be
extended not only to conventional mobile phone
service but to all wireless networks. The particular
rationale suggested here for such an extension of
Carterfone principles is that they not only foster com-
petition and innovation in private markets, but also
reduce the power of spectrum holders when negoti-
ating with the government for spectrum giveaways.
Moregenerally,any agency at any level of govern-
ment with responsibility for radio equipment on
public rights of way should commit to a gradual pro-
gram of installing flexible, smart radios as a way to
reduce asset specificity and enhance competition,
innovation, and public safety. This includes munici-
palities; federal, state, and local departments of
transportation; and the U.S. Department of Home-
land Security. To date, only the U.S. military has
committed to deploying such radios, and the deploy-
ment is primarily for overseas operations. Other
agencies need to encourage the deployment of such
The Art of Spectrum Lobbying
radios domestically. For example, the municipal light
post is rapidly becoming one of the most valuable
resources for building a wireless broadband network.
Municipalities have the option of leasing the light
posts to many different FCC licensees and creating
an inefficient wireless network with ugly, equipment
filled light posts on every street. Alternatively, they
can require the installation of JTRS-like flexible,
smart radios. To the extent technology and econom-
ics allow, they should require the latter. Similarly,
departments of transportation at all levels of govern-
ment plan to launch an “Intelligent Transportation
Network” using relatively inflexible radios (pejora-
tively known as “dumb radios”) at every intersection
and ultimately on every road in America. Perhaps
the greatest risk is not that government agencies will
invest in unnecessary equipment but that, in
response to the immense political pressurefrom the
incumbent carriers who fear that spectrum equip-
ment with low asset specificity would damage their
monopoly power, the installed radios will be artifi-
cially crippled to operate on only a narrow band of
frequencies and standards.
7) Shift the Responsibility from the Public
tothe Private Sector for Protecting Investors from the
Risk of Spectrum Asset Obsolescence, Including Non-
Renewal of Licenses
It is not the government’s role to insure the public
against all possible hardship. The government may
have a duty to post a sign on the edge of the Grand
Canyon that it is dangerous to walk over the edge,
but it is not the government’s responsibility to pay for
the consequences if someone does walk over the edge.
Similarly,when the government subleases office
space, it is not its responsibility to pay for relocating
or replacing the tenant’s furniture located in that
space when the lease expires. The presumption is
that tenants will know that their lease will one day
terminate and thus take reasonable care to invest in
furniture with minimal asset specificity.
By extension, it is not the government’s responsibil-
ity to pay for any spectrum equipment that could be
made obsolete by the termination of a license when
consumers and carriers could take reasonable steps to
purchase equipment that would prevent that obsoles-
cence. Consumers and carriers need to understand
47
31962 TXT R1.qxd 8/7/07 2:44 PM Page 47
that the equipment risk associated with the loss of an
FCC license is something they can and should be able
to manage on their own. It is in the public interest to
create such a mindset because it would reduce the
power of incumbent spectrum licensees to achieve
multibillion dollar windfalls at the public’s expense.
Presumably, this is a matter of common sense and
need not be incorporated into law. However, the fre-
quency and success with which incumbent licensees
have asserted that the government must protect their
own and consumers’ investments in band-specific
spectrum equipment suggests that a more formal pol-
icy statement that this is not the government’s
responsibility may be warranted.cxxxiv One option
might be to place a warning label on every FCC
authorized radio device, especially one that is nar-
rowly tied to a particular licensee, alerting its poten-
tial purchaser that the device could become obsolete
if the licensee chose not to pay to renew its license.
48
Public Policy Recommendations
31962 TXT R1.qxd 8/7/07 2:44 PM Page 48
Conclusion
Spectrum has rapidly become one of
the most valuable natural assets
managed by the federal govern-
ment, but the control procedures for
managing it have not kept pace with its
growing importance. This has allowed
tens of billions of dollars of spectrum
assets to be acquired without public com-
pensation by private interests who under-
stand and exploit the weaknesses in the
present spectrum management system.
These incentives need to be changed by
enhancing the visibility of spectrum give-
aways and reducing the reliance on asset
specific investments that provide the give-
aways with an economic justification.
Given the amount of money at stake and
the huge investment in the current system
by those who benefit from it, implement-
ing these reforms will be verydifficult and
requireleadership at the highest levels.
Those leaders must take a step back
from the frantic spectrum policy battles
of the moment—battles that have been
primarily shaped by the interests of
incumbent licensees—to see the big pic-
ture. This is rarely done because the
rewards for doing so are so slim. But
given the high stakes involved, it is
imperative that leaders be found with the
vision and courage to make it happen.
49
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31962 TXT R1.qxd 8/7/07 2:44 PM Page 50
Endnotes
iFor a history of spectrum lotteries, see James B. Murray,
Jr., “Wireless Nation: The Frenzied Launch of the
Cellular Revolution in America” (Cambridge,
Massachusetts: Perseus Publishing, 2001); Thomas W.
Hazlett and Robert J. Michaels, “The Cost of Rent-
Seeking: Evidence from Cellular Telephone License
Lotteries,Southern Economic Journal,Vol. 59, No. 3 (Jan.
1993), pp. 425-435.
ii Peter Passell, “Administration Seeks Profits in Plan to
Auction Airwaves,” New York Times,May 30, 1991, p. A1.
iii Murray, pp. 148-150, 172-174, 185-188, 302-303.
iv Edmund Andrews, “System to License Airwaves Needs
Reform, Critics Assert,” New York Times,September 7,
1991, p. A1.
vOmnibus Budget Reconciliation Act of 1993
(“OBRA ’93”).
vi See Appendix D in J.H. Snider, Speak Softly and Carry a
Big Stick: How Local TV Broadcasters ExertPolitical Power,
New York: iUniverse, 2005, pp. 578-580.
vii For a discussion of the economic advantages of
unlicensed spectrum, see J.H. Snider,“Reclaiming the
Vast Wasteland: The Economic Case for Re-Allocating
the Unused Spectrum (White Space) Between TV
Channels 2 and 51 to Unlicensed Service,” Washington,
D.C.: New America Foundation, February2006.
viii For recent examples of this gross omission, see FCC
Spectrum Policy Task Force (SPTF) Report, November
2002; and “Strong Support for Extending FCC’s Auction
Authority Exists, but Little Agreement on Other
Options to Improve Efficient Use of Spectrum,” GAO-
06-236, December 2006.
ix Opening Statement of Senator Frank Lautenberg,
U.S. Senate Committee on the Budget, Hearing on
Spectrum Auctions, Technology, and the Federal Budget,
February10, 2007.
xSnider, supra note 6.
xi Snider, supra note 6, pp. 346-347.
xii See 47 U.S.C. §301.
xiii Ibid., §304.
xiv Ibid., §309(j)(6)(D).
xv William L. Fishman, “Property Rights, Reliance, and
Retroactivity Under the Communications Act of 1934,”
Federal Communications Law Journal,Vol. 50, No. 1, pp.
2-3.
xvi Cited in Ibid.
xvii Ibid,footnote 33.
xviii Better Coordination and Enhanced Accountability
Needed to Improve Spectrum Management,” GAO-02-
906, September 2002, p. 6.
xix Keynote Speech of Donald Evans, Secretary,
Department of Commerce, NTIA Spectrum Summit,
April 4, 2002.
xx From J.H. Snider, “Explanation to the Citizen’s Guide
to the Airwaves,” New America Foundation, 2003, p. 16
(Graphics by Nigel Holmes).
xxi See FCC SPTF Report, supra note 8, p. 16.
xxii See,e.g., Spectrum Catalogue Spring 2005: Industry
and FCC Take Seasoned Approach, Legg Mason, March
16, 2005.
xxiii J.H. Snider,“Myth vs. Fact: The Rhetoric and
Reality of Progress in Allocating MoreSpectrum for
Unlicensed Use,” New America Foundation Fact Sheet,
February 2006. Total licensed flexible-use spectrum
under 3 GHz totals 753 MHz, according to the
aforementioned report. CMRS and PCS allocations
(190MHz), as well as the 700 MHz band spectrum,
which has not yet been auctioned (60 MHz), have been
subtracted to produce the total of 503 MHz.
xxiv In the Matter of Amendment of Parts 1, 21, 73, 74
and 101 of the Commission’s Rules to Facilitate the
Provision of Fixed and Mobile Broadband Access,
Educational and Other Advanced Services I nthe 2150-
2162 and 2500-2690 MHz Bands, WT Docket No. 06-
33. RM-10586 (released July 29, 2004).
xxv Commercial Spectrum Enhancement Act: Report to
Congress on Agency Plans for Spectrum Relocation
Funds,” Office of Management and Budget, February
16, 2007, pp. 3-7.
51
31962 TXT R1.qxd 8/7/07 2:44 PM Page 51
xxvi In the Matter of Flexibility for Delivery of
Communications by Mobile Satellite Service Providers
in the 2 GHz Band, the L-Band, and the 1.6/2.4 GHz
Bands, IB Docket No. 99081 (adopted January 28,
2003); In the Matter of Amendment of Part 2 of the
Commission’s Rules to Allocate Spectrum Below 3 GHz
for Mobile and Fixed Services to Support Introduction
of New Advanced Wireless Services, including Third
Generation Wireless Systems, ET Docket No. 00-258
(adopted January 28, 2003).
xxvii SPTF Report, supra note 8, p. 47.
xxviii Snider,supra note 6.
xxix Letter from Robert Pepper, Chief, FCC Office
of Plans and Policy, to Senator Joseph Lieberman,
May 5, 1995.
xxx Each station occupies 6 MHz, so 6 MHz * 13.3
stations = 80 MHz. The total amount of spectrum
allocated to broadcasting after the digital TV transition
is 294 MHz (down from the 402 MHz today), so 294
MHz – 80 MHz = 214 MHz.
xxxi Digital Audio Broadcasting Systems And Their
Impact On The Terrestrial Radio Broadcast Service,
First Reportand Order,17 FCC Rcd 19990, 2002.
xxxii See Snider,supra note 6, Appendix D.
xxxiii FCC ET Docket 04-186, Unlicensed Operation in
the TV Broadcast Bands.
xxxiv Digital Audio Broadcasting Systems And Their
Impact On The Terrestrial Radio Broadcast Service,
First Report and Order, 17 FCC Rcd 19990, 2002.
xxxv See Snider, supra note 6, Chapter 15.
xxxvi For an excellent example of the type of analysis that
can go into valuing flexible use spectrum, see
“Determination of the Fair Market Value of the Certain
Portions of FCC Licensed Wireless Spectrum Proposed
for Realignment by Nextel Communications, Inc. Under
FCC WT Docket No. 02-55, As of December 31,
2002,” study by Kane Reece Associates, Inc. for Verizon
Wireless, filed in Ex Parte of Verizon Wireless In the
Matter of Improving Public Safety Communications in
the 800 MHz Band, WT Docket No. 02-55, October
27, 2003.
xxxvii Data compiled by the New America Foundation’s
Naveen Lakshmipathy.
xxxviii Verizon Wireless bid $5.79/MHz-pop for a total of
$8.8 billion of winning bids, or the equivalent today of
$1.7 billion/MHz. See Stephen Labaton and Simon
Romero, “F.C.C. Auction Hit With Claim of Unfair
Bids,” New York Times,February 21, 2001, p. A1.
xxxix 47 U.S.C. §309(j)(7)(A).
xl Improving Public Safety Communications in the 800
MHz Band,” First Report and Order, FCC WT Docket
02-55, July 8, 2004, para. 85.
xli Molly M. Peterson, “House Panel Votes To Kill
Deadline For Airwaves Auction,” Technology Daily,
May 2, 2002.
xlii Letter to Representatives Joe Barton, John Dingell,
Fred Upton, and Edward Markey, April 27, 2005;
“Spectrum Valuation White Paper,” submitted to the
Subcommittee on Energy and Commerce in the U.S.
House of Representatives, April 18, 2007.
xliii Supra note 36.
xliv Ex Parte of Cellular Telecommunications & Internet
Association In the Matter of Matter of Improving Public
Safety Communications in the 800 MHz Band, FCC
WT Docket No. 02-55, December 4, 2003.
xlv Communications Daily,August 18, 2000; Stephen
Labaton, “Prized Spectrum Goes on the Block,” New
York Times,December 8, 2000, p. C1; “Evaluation of
Spectrum Valuation for Mobile Services in Other
Countries,” Lemay-Yates Associates Inc., March 2003, p.
16; J.H. Snider, Explanation to the Citizen’s Guide to the
Airwaves,New America Foundation, 2003.
xlvi Michael J. Copps, “The Price of Free Airwaves,” New
York Times, June 2, 2007.
xlvii “Commercial Spectrum Enhancement Act: Report to
Congress on Agency Plans for Spectrum Relocation
Funds,” Office of Management and Budget, February
16, 2007, pp. 6-7.
xlviii Ibid., p. 5
xlix “AWS Auction,” Telecom Update, Medley Global
Advisors, August 16, 2006, p. 3.
lCited in Dan Meyer, “AWS auction could spell windfall
for government, though analysts differ on value,” RCR
Wireless News,February 10, 2006. See also Jeffrey Silva,
“Relocating government spectrum users to take time,
money, aspirin,” RCR Wireless News,October 30, 2006,
p. 1.
52
Endnotes
31962 TXT R1.qxd 8/7/07 2:44 PM Page 52
li Interview with Simon Wilkie, November 21, 2006.
lii Gregory Rose, “Spectrum Auction Breakdown: How
Incumbents Manipulate FCC Auction Rules to Block
Broadband Competition,” New America Foundation,
June 2007.
liii Of the 25 companies, 21 were public. See Paige
Albiniak, “Private Property: Broadcasting Moves Away
from Wall Street,” Broadcasting & Cable, April 16, 2007.
liv Total TV stations (1,756) and radio stations (13,837)
derived from FCC Media Bureau statistics as of
December 31, 2006. See http://hraunfoss.fcc.gov/
edocs_public/attachmatch/DOC-269784A1.doc.
lv Data compiled by the New America Foundation’s
Naveen Lakshmipathy and Jeff Meyer.
lvi Tom Wolzien, “Whose Bandwidth Is It Anyway?”
Bernstein Research, April 2001. Also presented as a
speech to the National Association of Broadcasters
Futures Summit, Monterey, California, March 25, 2001.
lvii Supra note 46.
lviii GAO, supra note 8, p. 10.
lix 2007 Annual Report of the FCC’s Wireless
Telecommunications Bureau Presented at the FCC’s
Open Meeting on January17, 2007.
lx Market value is defined as the discounted present value
of the anticipated income streams generated by the
minor modification.
lxi “Better Coordination and Enhanced Accountability
Needed to Improve Spectrum Management,” GAO-02-
906, September 2002, p. 3
lxii FY2008 Budget Estimates Submitted to Congress by
the Federal Communications Commission, February
2007.
lxiii See,e.g., Glen Dickson, “Spectrum Shift Sprints to
Finish Line,” Broadcasting & Cable,May 1, 2006.
lxiv During FY 2004, 2005, and 2006 Congress
appropriated $85 million each year to administer the
FCC’sauction program. From this it may be inferred
that from 1993 to 2007 the total cost of administering
the auction program was in the vicinity of $1 billion. See
FY2008 Budget Estimates Submitted to Congress by the
Federal Communications Commission, February 2007,
p. 33.
lxv Data compiled by the New America Foundation’s
Naveen Lakshmipathy and JeffMeyer.
The Art of Spectrum Lobbying
lxvi See http://www.opensecrets.org/industries/index.asp.
lxvii Harvey Levin, The Invisible Resource, Washington,
D.C.: RFF Press, 1971.
lxviii Plato, The Republic,Benjamin Jowett, translator,
New York: Vintage Books, 1991.
lxix From J.H. Snider, “Explanation to the Citizen’s
Guide to the Airwaves,” New America Foundation,
2003, p. 41 (Graphics by Nigel Holmes).
lxx For classic examples, see the following FCC
proceedings, 02-55 (Nextel), 01-185 (MSS), 06-49
(Progeny), 07-16 (M2Z).
lxxi For classic texts analyzing the causes and
consequences of holdup-like negotiating power, see
Michael Porter, Competitive Strategy: Techniques for
Analyzing Industries and Competitors,New York: Free
Press, 1998; and Oliver Williamson, The Economic
Institutions of Capitalism,New York: Free Press, 1985.
lxxii For a case study of these factors at work in the great
spectrum giveaway of 1996, see Snider, supra note 6.
lxxiii McGuinness, T. “Markets and Managerial
Hierarchies.” In G. Thompson, et al. (Eds.), Markets,
Hierarchies and Networks, Sage, London, England,
1994, pp. 66-81.
lxxiv See,e.g., Michael Porter,Competitive Strategy:
Techniques for Analyzing Industries and Competitors,New
York: Free Press, 1998.
lxxv See Thomas W.Hazlett, “The U.S. Digital TV
Transition: Time to Toss the Negroponte Switch,” AEI-
Brookings Joint Center for Regulatory Studies, 2001;
Nicholas Negroponte, Being Digital,1st ed., New York:
Knopf, 1995.
lxxvi Reply Comments of Access Spectrum, LLC
Dominion 700, Inc., Harbor Guardband, LLC, and
Pegasus Communications Corporation, FCC Docket
No. 06-150, June 4, 2007.
lxxvii See,e.g., SPTF Report, supra note 8, pp. 1, 18;
GAO, supra note 8, pp. 23, 27.
lxxviii See Hernan Galperin, New Television, Old Politics:
The Transition to DTV in the United States and Britain
(New York: Cambridge University Press, 2004).
lxxix “Digital Radio Data Disclosure Rules Part of 8th-
Floor Talks,” Communications Daily,January 8, 2007.
53
31962 TXT R1.qxd 8/7/07 2:44 PM Page 53
lxxx Avivid anecdote about what happens when an
unsophisticated licensee doesn’t know the rules of the
go-slow game involved a high school radio station.
When the school asked that the power of its licensed
transmitter be increased from 10 watts to 250 watts, the
FCC deemed it a “major modification” and put the
license up for bid, which caused the school to lose its
license. See “School Radio Station Fights for Survival,”
eSchoolNews,January 2006, p. 1.
lxxxi FCC Docket 04-186.
lxxxii FCC Docket 05-312.
lxxxiii See, e.g., GAO, supra note 8, p. 19; Lectureby FCC
Commissioner James H. Quello, “Broadcasting and the
First Amendment,” Michigan State University Club,
October 23, 1997;
lxxxiv Interview with Blair Levin, former FCC Chief of
Staff, April 26, 2006.
lxxxv See Comments of 37 Concerned Economists in the
Matter of Promoting Efficient Use of Spectrum
Through Elimination of Barriers to the Development of
SecondaryMarkets, WT Docket No. 00-230, February
7, 2001.
lxxxvi Snider,supra note 6, pp. 308-312.
lxxxvii See Snider,supra note 6, p. 316.
lxxxviii See, e.g., http://www.atsc.org and
http://standards.ieee.org/announcements/pr_80222.html.
lxxxix See Speak Softly and Carry a Big Stick, Chapter 3
and Appendix C
xc Ibid. See also the Telecommunications Act of 1996;
Balanced Budget Act of 1997 §3002 Public Law No.
105-33, 11 Stat.251, 259 (1997)
xci See FCC MB Docket No. 03-185, In the Matter of
Amendment of Parts 73 and 74 of the Commission’s
Rules to Establish Rules for Digital Low Power
Television, Television Translator, and Television Booster
Stations and to Amend Rules for Digital Class A
Television Stations, Reportand Order,September 9,
2004; See also NAF, et al. Petition for Reconsideration in
MB Docket No. 03-185, December 29, 2004.
xcii Digital Audio Broadcasting Systems and Their
Impact on the Terrestrial Radio Broadcast Service, First
Report and Order, 17 FCC Rcd 19990 (2002). For the
most recent giveaway in this band, see Digital Audio
Broadcasting Systems and Their Impact on the
Terrestrial Radio Broadcast Service, Second Report and
Order,May 31, 2007. See also J.H. Snider,“The FCC’s
Imminent Radio Multicasting Vote: Will it be another
broadcast industry giveaway?” March 26, 2006,
http://quixote.blogs.com/telecompolicy/2006/03/the_fcc
s_immine.html.
xciii Terrestrial handsets were much smaller and less
expensive than satellite handsets in part because they
served a much larger market and were much closer to
their base stations. Closer base stations require smaller
batteries for the same amount of service.
xciv In the Matter of Flexibility for Delivery of
Communications by Mobile Satellite Service Providers
in the 2 GHz Band, the L-Band, and the 1.6/2.4 GHz
Bands, IB Docket No. 01-185, released July 3, 2003. See
Jesse Drucker, “As Satellite Firms Move to Add Cellular
Service, Critics Cry Foul,” Wall Street Journal,February
9, 2006, p. A1.
xcv In the Matter of Amendment of Parts 1, 21, 73, 74
and 101 of the Commission’s Rules to Facilitate the
Provision of Fixed and Mobile Broadband Access,
Educational and Other Advanced Services I nthe 2150-
2162 and 2500-2690 MHz Bands, WT Docket No. 06-
33. RM-10586 (released July 29, 2004). See also In the
Matter of Amendment of Parts 21 and 74 to Enable
Multipoint Distribution Service and the Instructional
Television Fixed Service Amendment of Parts 21 and 74
to Engage in Fixed Two-Way Transmission, MM
Docket No. 97-217.
xcvi Ibid.
xcvii Murray, pp. 251-266.
xcviii See Joint Proposed BAS Relocation Plan in the
Matter of Improving Public Safety Communications in
the 800 MHz Band, WT Docket No. 02-55, May 3,
2004; and “Nextel, Broadcasters Strike Spectrum Deal,”
Communications Daily,May 5, 2004.
xcix See “Wireless,” Communications Daily,June 17, 2003.
cSee Digital Television Transition and Public Safety Act
of 2005.
ci Linda Greenhouse, “Supreme Court Rules F.C.C.
Took Licenses Away in Error,” New York Times,January
28, 2003.
cii See, e.g., Kris Middaugh, “The Great GASB:
Governmental Accounting Standards Board’s Statement
34 seeks to make state and local government financial
statements more comprehensive and comprehensible,”
Government Technology,October 2003, p. 50.
ciii Jeff Horseman, “County Ethics Case Argued Before
Court of Appeals,” Capital,June 6, 2007, p. B1.
54
Endnotes
31962 TXT R1.qxd 8/7/07 2:44 PM Page 54
civ SPTF Report, supra note 8.
cv See Verizon Wireless ex parte, supra note 36.
cvi “Verizon’s Barr Says Nextel Decision Could Break
Federal Laws,” Communications Daily,June 30, 2004.
cvii The GAO has determined that the FCC is not under
an obligation to do so. See Whether the Federal
Communications Commission’s Order on Improving
Public Safety Communications in the 800 MHz Band
Violates the Antideficiency Act or the Miscellaneous
Receipts Statute,” No. B-303413, November 8, 2004.
cviii See,e.g., Ross W. Gorte, “Federal Sales of Natural
Resources: Pricing and Allocation Mechanisms,”
Congressional Research Service, December 11, 1998.
cix See,e.g., Harold J. Krenf and Nicholas S Zeppos,
“Monitoring Governmental Disposition of Assets:
Fashioning Regulatory Substitutes for Market Controls”
(June 1999). Available at SSRN:
http://ssrn.com/abstract=178548.
cx See, e.g., GAO, supra note 8. The opening sentence of
the report summary starts: “The radio-frequency
spectrum is a natural resource…” But on the list of
experts consulted to help prepare the report, I did not
see a single natural resources expertfrom either the
GAO or outside the government. All the so-called
experts were narrowly focused on telecommunications.
cxi M.P. McQueen, “Bracing for Disaster: Insurers
RequireHomeowners to Make Expensive Upgrades to
Protect Property; Using Google Earch for Inspections,”
Wall Street Journal,June 7, 2007, p. D1.
cxii 47 U.S.C. §309(i)(4)(C).
cxiii 47 U.S.C. §309(j)(3)(C).
cxiv See, e.g., 47 U.S.C. §310(d).
cxv Brooke Masters, “Gabelli Settles FCC Auction
Charges,” Washington Post,July 14, 2006, p. D1; Julie
Creswell, “Gabelli to Pay $130 Million to Settle
Lawsuit,” New York Times,July 14, 2006.
cxvi See J.H. Snider,“How Mass Media Use Crisis
Communications for Political Gain,” New America
Foundation, presented at the 2006 Annual Meeting of
the American Political Science Association, August 30,
2006.
cxvii Serving Every Local Community: A National
Report on Broacasters’ Community Service
(Washington, DC: National Association of Broadcasters,
June 12, 2006).
The Art of Spectrum Lobbying
cxviii See,e.g., SPTF Report, supra note 8, p. 50.
cxix SPTF Report, supra note 8, p. 23.
cxx Tim Wu, “Wireless Net Neutrality: Cellular
Carterfone and Consumer Choice in Mobile Broadband,”
New America Foundation, February 15, 2007.
cxxi See,e.g., SPTF Report, supra note 8, p. 48.
cxxii Ikeda, Nobuo, and Lixin Ye, “Spectrum Buyouts: A
Mechanism to Open Spectrum,” Paper Series 02-E-002,
Research Institute of Economy, Trade, and Industry:
Tokyo, Japan, December 2003, p. 12.
cxxiii See,e.g., SPTF Report, supra note 8, pp. 31-32;
Notice of InquiryIn the Matter of Interference
Immunity Performance Specifications for Radio
Receivers, ET Docket No. 03-65, 68 Fed. Reg. 23677,
May 5, 2003; Comments of Microsoft, July 21, 2003,
and the National Telecommunications and Information
Administration, November 13, 2003.
cxxiv NTIA Docket No. 06051 21 29-61 29-01.
cxxv See Comments of New America Foundation in
NTIA Docket No. 06051 21 29-61 29-01, September
26, 2006.
cxxvi See,SPTF Report, supra note 8, p. 31.
cxxvii From J.H. Snider,“Explanation to the Citizen’s
Guide to the Airwaves,” New America Foundation,
2003, p. 38 (Graphics by Nigel Holmes).
cxxviii See David Pogue, “Cellphone Surprise (iPhone
Aside),” New York Times,July 5, 2007, p. C1.
cxxix See,SPTF Report, supra note 8, p. 20.
cxxx “FCC to Consider Rule Changes to Foster
SecondaryMarkets,” Communications Daily,May 9, 2003;
Ex Parte Filing of Google In the Matter of Service Rules
for the 690-747, 747-762, and 777-792 MHz Bands,
WC Docket 06-150, May 21, 2007; See also Corey
Boles, “Google's Novel Idea for FCC Radio Spectrum
Auction,” Dow Jones Market Watch,May 23, 2007.
cxxxi “Small Bidders in License Auctions for Wireless
Personal Communications Services,” Congressional
Budget Office, October 2005.
cxxxii National Commission on Terrorist Attacks Upon
the United States, “9/11 Commission Report,” New
York: W.W. Norton & Company, 2004.
55
31962 TXT R1.qxd 8/7/07 2:44 PM Page 55
cxxxiii See Comments of Ad-Hoc Public Interest Spectrum
Coalition, FCC Docket No. 06-150, May 23, 2007; Wu,
supra note 120; Petition of Skype Communications
S.A.R.L. to Confirm a Consumer’s Right to Use Internet
Communications Software and Attach Devices to
Wireless Networks, February 20, 2007.
cxxxiv See Comments, August 11, 2004, and Reply
Comments, September 7, 2004, of the National
Association of Broadcasters, FCC MB Docket No. 04-
210, In the Matter of Over-The-Air Broadcast Television
Viewers.
56
Endnotes
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NEW AMERICA FOUNDATION
THE ART OF SPECTRUM LOBBYING
America’s $480 Billion Spectrum Giveaway,
How it Happened, and How to Prevent it
From Recurring
By J.H. Snider, MBA, Ph.D.
1630 Connecticut Ave., NW
7th Floor
Washington, DC 20009
Phone: 202-986-2700 • Fax: 202-986-3696
WWW.NEWAMERICA.NET
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... There is even variation among those that focus on protection. In [10], the author estimates that the average amount of white space available per person is 214MHz. This is based on the FCC's estimate that the average American can receive 13.3 channels and there are 49 total DTV channels of 6MHz each. ...
... This is because the FCC rules extend protection to adjacent channels and require a no-talk radius which is larger than the Grade-B protected contour [1]. Furthermore, low power TV stations and TV booster stations are ignored in [10], but these must also be protected. New America Foundation also has another estimate of the amount of white space available in major cities [12]. ...
Conference Paper
Full-text available
The November 2008 FCC ruling allowing access to the television white-spaces prompts a natural question. What is the magnitude and geographic distribution of the opportunity that has been opened up? This paper takes a semi-empirical perspective and uses the FCC's database of television transmitters, USA census data from 2000, and standard wireless propagation and information-theoretic capacity models to see the distribution of data-rates available on a per-person basis for wireless Internet access across the continental USA. To get a realistic evaluation of the potential public benefit, we need to examine more than just how many white-space channels have been made available. It is also important to consider the impact of wireless "pollution" from existing television stations, the self-interference among white-space devices themselves, the population distribution, and the expected transmission range of the white-space devices. The clear advantage of the white-space approach is revealed through a direct comparison of the Pareto frontier of the new white-space approach and that corresponding to the traditional approach of refarming bands between television and wireless data service. Finally, the critical importance of economic investment considerations is shown by considering the status of rural versus urban areas. Based on technical considerations alone, whether we consider long- or short-range white-space systems, people in rural areas would seem to be the main beneficiaries of white-space systems. A power-law distribution even appears that suggests that many rural customers could enjoy tremendous data-rates. However, the fundamental need to recover investments by wireless ISPs couples the range inversely to the population density. This clips the tail of the power-law and shows that urban and suburban areas can actually get significant benefit from the TV white-spaces. Overall, the opportunity provided by TV white-spaces is shown to be potentially of the same order a- - s the recent release of "beachfront" 700MHz spectrum for wireless data service.
... White space can also be defined as the area or location outside the TV coverage area. For instance, [25] considered white space as the number of channels that are not successfully received in a given location. For the fact that FCC estimated that an average of 13.3 (approximately 80 MHz) channels could be received by the Americans, it is estimated that the average amount of white space per inhabitant is 214 MHz, which is the remaining amount of white space available per location. ...
Article
Full-text available
A geospatial approach is used in this work to quantify the available television white space (TVWS) in the UHF band in Nigeria. Protection viewpoint to spectrum sharing, where secondary users (SUs) are only allowed to reuse the spectrum outside the keep-out distance from the broadcast transmission grade-B contour of the primary users was employed. The spatial data used include the administrative map of Nigeria showing the states’ boundary delineation and parameters for all the TV transmitters. Path loss and spectrum sharing models were developed and used in obtaining the broadcast range and protection contours of each UHF transmitter in Nigeria. To show the broadcast range, the transmitter’s coordinates which are represented by a point was subjected to GIS buffering operation using the analysis tools extension within the ArcGIS ToolBox. Kriging operation was then performed using the Spatial Analyst Tools extension within the ArcMap environment. The white spaces for each of the buffer zones were used as the Kriging parameter to predict for other locations from the transmitter’s base. The results were then displayed over the administrative map of Nigeria to show the spatial relationships that exist among the geographic entities. Results obtained show that the proposed method recovers more white spaces when compared with the traditional command-and-control spectrum model. The spectrum sharing model developed was validated and found to provide interference protection to the primary users with prediction accuracy of about 88% to 97 %.
... White space can also be defined as the area or location outside the TV coverage area. For instance, [25] considered white space as the number of channels that are not successfully received in a given location. For the fact that FCC estimated that an average of 13.3 (approximately 80 MHz) channels could be received by the Americans, it is estimated that the average amount of white space per inhabitant is 214 MHz, which is the remaining amount of white space available per location. ...
Article
A geospatial approach is used in this work to quantify the available television white space (TVWS) in the UHF band in Nigeria. Protection viewpoint to spectrum sharing, where secondary users (SUs) are only allowed to reuse the spectrum outside the keep-out distance from the broadcast transmission grade-B contour of the primary users was employed. The spatial data used include the administrative map of Nigeria showing the states' boundary delineation and parameters for all the TV transmitters. Path loss and spectrum sharing models were developed and used in obtaining the broadcast range and protection contours of each UHF transmitter in Nigeria. To show the broadcast range, the transmitter's coordinates which are represented by a point was subjected to GIS buffering operation using the analysis tools extension within the ArcGIS ToolBox. Kriging operation was then performed using the Spatial Analyst Tools extension within the ArcMap environment. The white spaces for each of the buffer zones were used as the Kriging parameter to predict for other locations from the transmitter's base. The results were then displayed over the administrative map of Nigeria to show the spatial relationships that exist among the geographic entities. Results obtained show that the proposed method recovers more white spaces when compared with the traditional command-and-control spectrum model. The spectrum sharing model developed was validated and found to provide interference protection to the primary users with prediction accuracy of about 88% to 97 %.
... White space can also be defined as the area or location outside the TV coverage area. For instance, [17] considered white space as the number of channels that are not successfully received in a given location. For the fact that FCC estimated that an average of 13.3 (approximately 80 MHz) channels could be received by the Americans, it is estimated that the average amount of white space per inhabitant is 214 MHz, which is the amount of remaining channels available per location. ...
Conference Paper
Full-text available
This research is focused on evaluating the amount of television white space (TVWS) in the UHF band in Nigeria. The work takes a new perspective called the Geo-spatial approach in quantifying the available TVWS. Spectrum sharing model was developed from the protection viewpoint where the secondary users (SUs) are only allowed to reuse the spectrum outside the keep-out distance from the broadcast transmission grade B contour of the primary users. The spatial data used include the administrative map of Nigeria showing the states' boundary delineation and parameters for all the TV transmitters, including their coordinates. The broadcast range of transmission and protection contour of each UHF transmitter in Nigeria was obtained using the developed models. To show the broadcast range, the transmitter position, represented by a point, was subjected to GIS Buffering operation using the Analysis Tools extension within the ArcGIS ArcToolbox. Results obtained show that the proposed method recovers more white spaces when compared with the traditional command-and-control spectrum model. The work also provides the channel occupancy distribution of Nigeria, United Kingdom and the USA for the purpose of comparison.
... The general problem is that both the language and methodology used by previous work does not properly distinguish between the pollution and protection viewpoints and this is the source of much confusion. In [28], the author estimates the average amount of white space available per person to be 214MHz. This is based on the fact that the FCC estimates that the average American can receive 13.3 channels (∼80MHz). ...
... If this number is averaged over population, 49% of the TV channel is available for unlicensed usage. (Snider, 2007) estimates the average amount of white-space per person is 214 MHz. This number is based on the FCC's estimation that " American can receive 13.3 channels and there are 49 total DTV channels of 6 MHz each " . ...
Article
Since their introduction, unlicensed ISM bands have resulted in a wide range of new wireless devices and services. It is fair to say that the success of ISM was an important factor in the opening of the TV white space for unlicensed access. Further bands (e.g., 3550-3650 MHz) are being studied to support unlicensed access. Expansion of the unlicensed bands may well address one of the principle disadvantages of unlicensed (variable quality of service) which could result in a vibrant new group companies providing innovative services and better prices. However, given that many commercial mobile telephone operators are relying heavily on the unlicensed bands to manage growth in data traffic through the “offloading” strategy, the promise of these bands may be more limited than might otherwise be expected (Musey, 2013). Wireless data traffic has exploded in the past several years due to more capable devices and faster network technologies. While there is some debate on the trajectory of data growth, some notable reports include AT&T, which reported data growth of over 5000% from 2008 to 2010 and Cisco, who predicted that mobile data traffic will grow to 6.3 exabytes per month in average by 2015 (Hu, 2012). Although the data traffic increased dramatically, relatively little new spectrum for mobile operators has come online in the last several years; further, the “flat-rate” pricing strategy has led to declining Average Revenue Per User (ARPU) for the mobile operators. Their challenge, then, is how to satisfy the service demand with acceptable additional expenditures on infrastructure and spectrum utilization. A common response to this challenge has been to offload data traffic onto unlicensed (usually WiFi) networks. This can be accomplished either by establishing infrastructure (WiFi hotspots) or to use existing private networks. This phenomenon leads to two potential risks for spectrum entrants: (1) the use of offloading may overwhelm unlicensed spectrum and leave little access opportunities for newcomers; (2) the intensity of the traffic may increase interference and degrade innovative services. Consequently, opening more unlicensed frequency bands alone may not necessarily lead to more unlicensed usage. In this paper, we will estimate spectrum that left for unlicensed usage and analyze risks for unlicensed users in unlicensed bands in terms of access opportunities and monetary gain. We will further provide recommendations that help foster unlicensed usage in unlicensed bands.
... There is even variation among those that focus on protection. In [11], Snider estimates that the average amount of white space available per person is 214MHz. This is based on the FCC's estimate that the average American can receive 13.3 channels and hence the remaining 35.7 (214 MHz) are deemed available for white space use. ...
Article
USA Census data from 2000 is used to estimate the white space available for cognitive radios in TV bands in the continental USA. The FCC's November 2008 ruling is analyzed to show there are roughly nine white-space channels available on average per person given the currently active television stations. The analysis also demonstrates the conservatism of fixed threshold sensing rules for white-space detection — the -114dBm rule for sensing ATSC signals is expected to recover less than one white-space channel on average per person.
... By also taking into account restrictions on adjacent channels the amount of available spectrum decreases to an average of 30 MHz. In the US, Snider estimated that the average amount of white space per person is 214 MHz[14]. This was based on estimates from the FCC that on the average each person can receive 13.3 MUXs of a total of 49 MUXs, where each MUX is 6 MHz. ...
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