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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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J.H. Snider

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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

MERICA

FOUNDATION

TRADES COUNCIL

UNION

LABEL

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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

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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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.

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

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

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

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

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

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.

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-

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

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-

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

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.

***

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-

The Spectrum Giveaway

31962 TXT R1.qxd 8/7/07 2:44 PM Page 16

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

31962 TXT R1.qxd 8/7/07 2:44 PM Page 17

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.

31962 TXT R1.qxd 8/7/07 2:44 PM Page 19

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

[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.

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.

The rightsholder lobbies the government to

grant extended rights that include mining

and oil development.

The government grants limited grazing

rights at favorable sub-market rates.

Thegovernment owns undeveloped land.

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

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

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.

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

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

31962 TXT R1.qxd 8/7/07 2:44 PM Page 29

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

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

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.

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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

[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.

Public Policy Recommendations

31962 TXT R1.qxd 8/7/07 2:44 PM Page 38

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

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

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

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

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

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

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

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

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

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.

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.

31962 TXT R1.qxd 8/7/07 2:44 PM Page 49

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.

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.

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.

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.

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.

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.

Endnotes

31962 TXT R1.qxd 8/7/07 2:44 PM Page 56

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

MERICA

FOUNDATION

TRADES COUNCIL

UNION

LABEL

31962 CVR_spread.qxd 8/6/07 11:02 AM Page 1

How Much White-Space Capacity Is There?

Conference Paper

Full-text available

Apr 2010

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.

Geospatial Approach to Quantifying TV White Space in Nigeria in the UHF Band

Article

Full-text available

Nov 2015

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 %.

Geospatial Approach to Quantifying TV White Space in Nigeria in the UHF Band

Article

Nov 2015

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 %.

TV white space in Nigeria in UHF band: Geo-spatial approach

Conference Paper

Full-text available

Oct 2014

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.

Maximizing available spectrum for cognitive radios

Article

Full-text available

Shridhar Mubaraq Mishra

Can Unlicensed Bands Be Used by Unlicensed Usage?

Article

Mar 2013

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.

How much white space has the fcc opened up

Article

Jan 2010

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.

Using TV Receiver Information to Increase Cognitive White Space Spectrum

Article

Full-text available

Feb 2012

In this paper we investigate the usage of cognitive radio devices within the service area of TV broadcast stations. Until now the main approach for a cognitive radio to operate in the TV bands has been to register TV broadcast stations locations and thus protecting the broadcast stations service area. Through information about TV receivers location, we show that a cognitive radio should be able to operate within this service area without causing harmful interference to the TV receivers as defined by Ofcom and FCC. We provide simulations based on real statistics from Norway that show that especially in rural areas TV receiver registration can provide a substantial gain in terms of exploitable frequencies for a cognitive radio.

A Question of Scarcity: Spectrum and Canada's Urban Core

Article

Feb 2017

This article uses a case study of urban Canada to explore the contentious issue of spectrum scarcity. Drawing upon infrastructure studies, this article argues for more critical approaches to this essential element of contemporary communications. The first part of the article explores positions of various actors in the antagonistic debate regarding spectrum scarcity in the lead up to the Canadian 700 MHz spectrum auction, held in 2014. The second part of the article provides unique empirical data for spectrum traffic on licensed frequencies in a busy urban location. The article reaches an unanticipated conclusion that demonstrates shortcomings in current allocation methods.

A Question of Scarcity: Spectrum and Canada's Urban Core

Article

Feb 2017

How Mass Media Use Crisis Communications for Political Gain: The Broadcast Industry, 9/11, and Hurricane Katrina

Article

Full-text available

Sep 2015

J.H. Snider

It's a common observation that crises such as wars, recessions, stock market meltdowns, ethics scandals, and natural catastrophes often drive the public policymaking process. A crisis reveals a problem and then a public consensus emerges that policymakers must do something about it. The policy debate then centers on the best means to solve the problem. Interest groups well understand the political logic of such crisis moments. Accordingly, they reframe their own self-interested agendas to be in accord with the new crisis induced agendas. Although these reframed agendas may help solve the stated problem, they are likely to do so relatively inefficiently and ineffectively, and, when mere rationalizations, may aggravate the problem. Nevertheless, when backed by powerful interest groups and concerning relatively technical issues where the links between means and ends are not widely understood, their reframed agendas may be highly persuasive or at least provide political cover for actions that would otherwise be discredited as special interest politics. In this paper, I explore how local TV broadcasters framed the communications crisis revealed by 9/11 and Hurricane Katrina for their own political gain.

Reclaiming the Vast Wasteland THE ECONOMIC CASE FOR RE-ALLOCATING THE UNUSED SPECTRUM (WHITE SPACE ) BETWEEN TV CHANNELS 2 AND 51 TO UNLICENSED SERVICE