Federal Communications Commission

Spectrum Policy Task Force

Report of the Spectrum Rights and Responsibilities Working Group

November 15, 2002

**Spectrum Rights and Responsibilities\
Working Group**

David Furth, Chair

Diane Conley

Lloyd Coward

Howard Griboff

Karl Kensinger

David Krech

Evan Kwerel

Arthur Lechtman

Sara Mechanic

Chris Murphy

Paul Murray

Bruce Romano

Priya Shrinivasan

Martha Stancill

Scot Stone

Doug Webbink

John Williams

Lori Kalani (intern)

*[Disclaimer]{.underline}*

*The findings and recommendations contained in this Report are those of
the Spectrum Rights and Responsibilities Working Group members, and do
not necessarily reflect the views of the Commission, Commission
management, or the Spectrum Policy Task Force.*

**Table of Contents**

[I. Introduction 1](#introduction)

[II. Spectrum Usage Models and Incentives for Efficient Use of Spectrum
2](#spectrum-usage-models-and-incentives-for-efficient-use-of-spectrum)

[A. Spectrum Usage Models: Advantages and Disadvantages
2](#spectrum-usage-models-advantages-and-disadvantages)

[1. "Command-and-Control" Model 3](#command-and-control-model)

[2. "Exclusive Use" Model 6](#exclusive-use-model)

[3. "Spectrum Commons" Model 8](#spectrum-commons-model)

[B. Application of the Three Models: The Story So Far
10](#application-of-the-three-models-the-story-so-far)

[C. Looking Ahead: Applying Spectrum Use Models to the Future
14](#looking-ahead-applying-spectrum-use-models-to-the-future)

[1. "One Size Does Not Fit All" 14](#one-size-does-not-fit-all)

[2. Greater Regulatory Flexibility 16](#greater-regulatory-flexibility)

[3. Balancing Exclusive Use and Commons Models
17](#balancing-exclusive-use-and-commons-models)

[a) Factors favoring exclusive use model
17](#factors-favoring-exclusive-use-model)

[b) Factors favoring commons model 19](#factors-favoring-commons-model)

[4. Limited Use of Command-and-Control
20](#limited-use-of-command-and-control)

[III. Defining Specific Rights and Obligations Within Spectrum Usage
Regimes: Existing and Optimal Approaches
21](#defining-specific-rights-and-obligations-within-spectrum-usage-regimes-existing-and-optimal-approaches)

[A. Flexibility 21](#flexibility)

[B. Regulatory Certainty 24](#regulatory-certainty)

[C. Interference Standards 26](#interference-standards)

[D. Secondary Market Arrangements and Commission-Granted Easements
29](#secondary-market-arrangements-and-commission-granted-easements)

[E. License Terms and Term Limits on Rules
33](#license-terms-and-term-limits-on-rules)

[IV. Other Considerations 35](#other-considerations)

[A. International Considerations 36](#international-considerations)

[B. Public Safety 38](#public-safety)

[C. Spectrum Allocated for Government Use (or Shared with
Non-Governmental Uses)
40](#spectrum-allocated-for-government-use-or-shared-with-non-governmental-uses)

[D. Broadcast Services 42](#broadcast-services)

[E. Rural vs. Urban Areas 44](#rural-vs.-urban-areas)

[V. Transition 46](#transition)

[A. General Transition Considerations
48](#general-transition-considerations)

[B. Available Transition Mechanisms
49](#available-transition-mechanisms)

[1. Expanded rights "overlay" licenses combined with mandatory
relocation of incumbents
50](#expanded-rights-overlay-licenses-combined-with-mandatory-relocation-of-incumbents)

[2. Expanded rights "overlay" licenses with grandfathering of incumbents
50](#expanded-rights-overlay-licenses-with-grandfathering-of-incumbents)

[3. Expanded rights "overlay" licenses combined with voluntary
band-clearing/restructuring incentives for incumbents
50](#expanded-rights-overlay-licenses-combined-with-voluntary-band-clearingrestructuring-incentives-for-incumbents)

[4. Expanded rights granted to incumbent licensees under existing
licenses
51](#expanded-rights-granted-to-incumbent-licensees-under-existing-licenses)

[C. Factors Affecting the Choice of Transition Mechanism
51](#factors-affecting-the-choice-of-transition-mechanism)

Acknowledgements

Appendix I

# Introduction

One of the missions of the Spectrum Policy Task Force has been to
examine the types of legal rights and responsibilities the FCC assigns
to licensees and other users of the spectrum it manages, and to identify
alternative approaches to the definition of such rights and
responsibilities that might better promote the most efficient and
productive use of this spectrum. In order to acquire a fuller
understanding of the issues involved, and the consequences of various
approaches to defining spectrum usage rights and responsibilities, the
Task Force created a Spectrum Rights and Responsibilities Working Group,
which undertook several inquiries.[^1]

First, the Working Group examined the comments filed in response to the
Public Notice issued by the Task Force on June 6, 2002.[^2] Second, the
Spectrum Policy Task Force held a Public Workshop on Spectrum Rights and
Responsibilities on August 9, 2002, in which attorneys, economists,
engineers, and other experts drawn from various segments of the
telecommunications industry and the academic community participated.[^3]
Panelists provided input regarding a number of topics, including
theoretical spectrum rights models and their application to the
practical realities of spectrum management; the advantages and
disadvantages of various licensed and unlicensed models; optimal
approaches to defining technical requirements; issues particular to
certain services and environments, including public safety and rural
areas; and mechanisms for transitioning from current spectrum usage
regimes to more efficient and beneficial systems. Third, the Working
Group analyzed certain frequency bands in different parts of the
spectrum and different types of services that it found to be
representative of the Commission's past practices with respect to
establishing usage rights. The group used these analyses to: (1)
understand in what circumstances and to what extent the Commission's
current rules are expressions of particular regulatory models; and (2)
examine how the use of these models has either promoted or deterred
spectrum efficiency and the development of new technologies and
services. Fourth, the Working Group reviewed numerous articles written
by a variety of experts to gain further insight into how the Commission
might best define spectrum rights and obligations in the future to
promote the most productive use of the radiofrequencies it manages.[^4]

This overview summarizes the Working Group's findings, conclusions, and
recommendations with respect to spectrum rights and responsibilities,
based on the input received from the commenters and participants in the
Public Workshop on Spectrum Rights and Responsibilities.

# Spectrum Usage Models and Incentives for Efficient Use of Spectrum

## Spectrum Usage Models: Advantages and Disadvantages 

The Working Group examined the Commission's spectrum policies and rules
defining spectrum usage rights in relation to three general models:

(1) ["Command-and-control" model]{.underline}. The traditional process
    of spectrum management in the United States, currently used for most
    spectrum within the Commission's jurisdiction, allocates and assigns
    frequencies to limited categories of spectrum users for specific
    government-defined uses. Service rules for the band specify
    eligibility and service restrictions, power limits, build-out
    requirements, and other rules.

(2) ["Exclusive use" model]{.underline}. A licensing model in which a
    licensee has exclusive and transferable rights to the use of
    specified spectrum within a defined geographic area, with flexible
    use rights that are governed primarily by technical rules to protect
    spectrum users against interference. Under this model, exclusive
    rights resemble property rights in spectrum, but this model does not
    imply or require creation of "full" private property rights in
    spectrum.

(3) ["Commons" or "open access" model]{.underline}. Allows unlimited
    numbers of unlicensed users to share frequencies, with usage rights
    that are governed by technical standards or etiquettes but with no
    right to protection from interference. Spectrum is available to all
    users that comply with established technical "etiquettes" or
    standards that set power limits and other criteria for operation of
    unlicensed devices to mitigate potential interference.

Commenters and participants in the Public Workshop gave significant
input with respect to each of the models. Most parties provided little
guidance regarding specific bands in which these models should be
applied, but rather, commented at length on the general advantages and
disadvantages of each model. There was not a consensus on which model is
best under all conditions, though many commenters observed that the
status quo -- which primarily relies on the "command-and-control" model
-- significantly limits efficiency in many cases.

Each of these models represents an ideal. In reality, the models involve
different levels of regulatory involvement, with the command-and-control
model being the most proscriptive. All licensees can and should benefit
from the lessons of the three basic models. In other words, for any
given licensee, the Commission could adopt greater interference
protection consistent with the command-and-control model, enhanced
flexibility consistent with the exclusive-use model, or enhanced access
to spectrum consistent with the commons model.

### "Command-and-Control" Model

The traditional process of spectrum management in the United States is
referred to by some as the "command-and-control" model because of the
strict control and oversight exercised by the government. The
command-and-control model process involves four steps: allocation,
adoption of service rules, assignment, and enforcement.[^5] In the
allocation process, the Commission decides what types of uses it will
permit in particular spectrum bands. Next, the Commission establishes
service rules that specify the power limits, build-out requirements, and
other rules for the service allocated in this band. The Commission then
assigns licenses for use of the spectrum to specific parties through
mechanisms such as first-come-first-served licensing, lotteries,
comparative hearings, or auctions. Finally, the Commission enforces its
allocations, service rules, and assignments against the licensees and
other users of the spectrum.

The Commission's task in applying the command-and-control model is
enormous. The Commission must continually decide and revisit difficult
technical questions concerning spectrum allocation, geographical
coverage, system configuration, channelization, power flux density,
coding, out-of-band emissions, and innumerable other technical criteria
at discrete points in time.[^6] For allocations that cross international
borders, the Commission must work with the National Telecommunications
and Information Administration (NTIA), the Department of State, and the
International Telecommunication Union (ITU) to coordinate domestic
commercial proposals with government and multi-national uses. Meanwhile,
rapid technological advances, changing consumer demands, and new market
developments steadily erode the utility of spectrum-management decisions
that the Commission made years prior to deployment.[^7]

Most commenters and workshop participants stressed the costs imposed by
the command-and-control approach on licensees and the public, and argued
that these costs could be substantially reduced by adopting a more
market-oriented approach. One of these commenters characterized the
traditional policy as "ultra-conservative," arguing that the Commission
gives too much weight to the potential for interference, which burdens
new entrants with restrictions and delays the introduction of new
technology and competition to the public.[^8] Some questioned the
Commission's ability to allocate resources efficiently even under the
best of circumstances.[^9] In addition, various parties argued that,
while the Commission has a process to consider transfers and
assignments, the current approach is overly burdensome and makes it
difficult for spectrum to move to its highest-valued use. These
commenters contended that a well-functioning market for resources offers
a level of efficiency that a centralized, bureaucratic approach can
never match.[^10]

Several commenters, however, argued in favor of retaining a
command-and-control approach to allocation for certain services on the
grounds that more market-based alternatives, such as the exclusive use
model, would undervalue or thwart the provision of some important
services.[^11] Advocates for public-safety organizations contended that
the benefits from providing their services cannot be measured in
economic terms -- arguing that one cannot put a price on safety or human
life -- and that the spectrum necessary for such services should not be
subject to market mechanisms.[^12] Some private radio operators argued
that they support the nation's industrial and commercial infrastructure,
and therefore they should not have to face the greater risk that would
accompany a move away from the status quo.[^13] Radio astronomy
advocates feared that an allocation mechanism that does not include a
significant government role will undervalue long-term scientific
research projects that may offer significant social benefits but also
require dedicated spectrum bands.[^14] Similarly, several satellite
operators argued that moving to an exclusive use model may give too
little weight to the public interest benefits of serving remote and
rural areas and providing an alternative communications infrastructure
for use in case of disasters.[^15] Broadcast commenters asserted that
statutory public interest considerations and the free over-the-air
nature of broadcasting service have limited applicability to
market-based spectrum licensing models.[^16]

In other cases, parties asserted that transaction costs associated with
assembling the spectrum for a communications network might make
providing service prohibitively expensive. Satellite interests, for
example, stated that the transaction costs of acquiring spectrum or
landing rights through hundreds of seriatim rounds of competitive
bidding around the globe would prevent the deployment of international
satellite systems.[^17] Other parties asserted that specific spectrum
bands are needed, and losing the rights to even a few bands could make
international harmonization difficult or impossible.[^18] These
commenters added that an exclusively market-based approach might create
perverse incentives to game the international regulatory processes by
encouraging nations to make disruptive "paper filings" for spectrum and
orbital resources at the International Telecommunications Union.[^19]
Accordingly, some of these commenters asserted the need for government
involvement in overcoming market failures and prohibitively high
transaction costs.

Finally, some have argued the physical properties of spectrum, combined
with the peculiarities of network industries in general and wireless
telecommunications in particular, may require a certain level of
"command-and-control" in any spectrum model to avoid inefficient
allocation.[^20] This argument maintained that characteristics such as
consumption externalities that require a critical mass before a
technology becomes useful, high switching costs that tend to "lock in"
consumers to existing technologies, and large economies of scale all
increase the potential for market failure and thus necessitate a higher
level of regulatory involvement.

### "Exclusive Use" Model 

The "exclusive use" model, as discussed in this report, refers to a
licensing model in which a licensee has rights that are exclusive,
flexible, and transferable, and has specific responsibilities that come
with this interest.[^21] Under an exclusive use model in its purest
form, licensees acquire an interest in a frequency band that is similar
to a fee simple interest in the spectrum, with the right granted being
exclusive and perpetual, or nearly so. Few or no restrictions exist on
the commodification of the spectrum, which allows for secondary market
trading, with the spectrum holder's rights transferring with the sale or
lease. In short, an exclusive use model provides that the licensee
obtains rights to do everything within its assigned frequencies not
expressly prohibited under the license. Finally, responsibilities also
accompany rights to the spectrum, including technical rules that
establish power and out-of-band emission limits. These responsibilities
are the flip side of rights, indicating the level of power and potential
interference licensees must tolerate from other operators, which
corresponds to the rights of these other parties.

Parties who advocated granting exclusive rights to licensees argue that
such an approach encourages investment. They indicated that business
enterprises view any potential for interference as a danger, and that
incumbents are deterred from investing in new technologies if they do
not have exclusive rights to spectrum and do not know who might
interfere with them in the future. Some economists favored the exclusive
use model because it is built on the assumption that there is scarcity
in the spectrum, at least at some times and some places.[^22] They
asserted that this scarcity may be the result of limited access, or an
excess of spectrum use relative to capacity. They explained that the
exclusive use model promotes economic efficiency because its key
characteristics -- clearly defined rights, exclusivity, flexibility and
transferability -- are necessary for efficiently allocating any scarce
resource among competing uses.

Participants representing parties interested in trading spectrum rights
noted that transferability of rights would be critical in order to
achieve efficient use of the spectrum.[^23] They claimed that the right
to trade this resource would allow it to be moved to its highest valued
use, which would help rectify the imbalance between spectrum shortages
in some areas and surpluses in others. Rural carriers make similar
arguments, noting that secondary markets may improve spectrum efficiency
and enable providers to gain access to spectrum for use in rural
markets.[^24]

Parties that opposed an exclusive use model argued that allocation based
on giving exclusive interests to licensees in particular bands may not
be the most efficient policy. These parties stressed the benefits of an
approach based on shared use under a commons approach, with less
emphasis on a purely exclusive use model. [^25] Other commenters argued
that an exclusive use approach deters innovation because technology
advances at least in part out of a need to make better use of resources,
and licensees with exclusive use rights have guaranteed access to the
spectrum resource. Several even challenged the assumption of scarcity,
upon which the exclusive use model is built.[^26] Some commenters
further opposed any creation of a quasi-property right in spectrum,
arguing that such a step would be contrary to the Communications Act,
detrimental to free speech, and a threat to economic competitiveness in
communications markets.[^27]

Finally, some parties raised concerns about market failure that could
accompany a strict application of an exclusive use model. Some feared
that such a model might encourage commercial hoarding of spectrum rights
that would exclude innovative, non-profit, public-service or other uses
of the spectrum that benefit society as a whole. Also, they asserted
that spectrum users who require immediate, but infrequent access to
spectrum, such as public safety agencies, might be unable or unwilling
to pay for commercially available services that could provide the same
level of reliability in times of peak demand that their current services
offer.[^28] In addition, they were concerned that spectrum users that
require simultaneous operation over global geographic areas, such as
satellite service providers, might not obtain internationally harmonized
spectrum due to holdout by individual spectrum owners.[^29]
Additionally, they observed that spectrum users that require the
simultaneous use of large segments of spectrum, such as ultra wideband
(UWB), or the short-term use of portions of a wide range of spectrum,
such as software-defined radio (SDR), might never overcome the
transaction costs necessary to gain access to spectrum to operate.[^30]
They argue that SDR and similar technologies shrink the
"frequency/time/space dimension that a user must occupy exclusively in
order to communicate without interference," which in turn creates units
"so small as to make the transaction costs involved in negotiating
allocation of exclusive property rights to them prohibitive."[^31]

### "Spectrum Commons" Model

In a spectrum commons model, spectrum is available to all users that
comply with established technical "etiquettes" or standards that set
power limits and other criteria for operation of unlicensed devices to
mitigate potential interference. Usage rights are flexible, with minimal
or no restrictions placed on the types of use of the spectrum. As is the
case under the regulatory regime currently governing unlicensed Part 15
spectrum, there are no licenses[^32] and the primary allocation method
for using the spectrum is akin to "first come, first served."

Supporters of the commons model argued that this approach leads to
greater technological innovation and spectral efficiency than exclusive
access: because no spectrum is exclusively held, spectrum commons users
have incentives to create spectrally efficient frequency-hopping
technologies, whereas licensed spectrum typically sits idle when the
license-holder is not transmitting.[^33] Commons supporters also
stressed that this model precludes warehousing of spectrum, which can
create artificial scarcity and is a potential disadvantage of an
exclusive use model. Furthermore, proponents of an open, commons
approach claimed that spectrum scarcity might actually be reduced under
such a regime because of the efficiency enhancing possibilities of new
technologies (e.g., ad hoc networks) and the fundamentally different
spectrum demands of architectures such as mesh networks.[^34]

Although there is some indication that a commons regime may not attract
the same level of investment as an exclusive rights system, proponents
also argued that the need for long-term capital investments in networks
is reduced with this model because the innovation cycle is faster.[^35]
In addition, attracting major amounts of financing may be less of an
issue for systems such as mesh networks[^36] because capital costs are
distributed among users (through smart receivers, for example) rather
than being concentrated at central points of transmission as in
traditional architectures. However, various parties noted that
industries that do require large fixed investments might have trouble
attracting capital or be hesitant to invest further because of the lack
of guarantees against future interference.[^37]

Parties that opposed a spectrum commons model, however, argued that some
of the supposed incentives for innovation do not work and that
significant disadvantages also accompany use of this model, including:
overuse, with resulting interference; service limitations due to
low-power requirements and a rising noise floor; and underinvestment due
to these overuse and service limitations.[^38] These parties argued that
a commons approach would result in a spectrum shortage.[^39] They
asserted that while the "tragedy of the commons"[^40] could be
ameliorated through rules on power levels, modulation, back-off schemes,
and other approaches,[^41] it would remain to the extent there is too
little spectrum relative to the communications demanded at a given time
and place.[^42] Commenters also expressed concern that a "pure" commons
model could lead to an unintelligible cacophony of mutually interfering
signals. Without some type of government-imposed restrictions on the use
of spectrum commons, commenters acknowledged that "a poorly designed
system, although economically more feasible for some, would only lead to
undue hardship\[\]" for other spectrum users.[^43] Some economists also
argued that many of the benefits of a commons model could be achieved
via private owners who allocate their spectrum for such purposes.[^44]

Other commenters argued that unlicensed spectrum should not be seen as a
replacement for licensed spectrum, but akin to a public park, free for
anyone to use.[^45] Under this approach, the Commission would use
market-based mechanisms to sell exclusive use licenses, but also
preserve some spectrum as an unlicensed spectrum commons for new or
emerging technologies. Many commenters supporting this balanced approach
also supported the allocation of additional unlicensed spectrum.[^46]
Other parties support maintaining a licensed regime with the right of
non-interfering technologies (such as spread spectrum, or UWB devices)
to operate within the same band, rather than allocating separate
unlicensed spectrum.[^47]

## Application of the Three Models: The Story So Far 

In most bands, the Commission has historically used variations of the
traditional command-and-control approach to defining rights, in which
spectrum is allocated and assigned for specific uses that are limited,
often very narrowly, by regulation. More recently, the Commission has
developed rules for certain bands that approximate the exclusive rights
model, and rules for other bands that approximate the commons model, but
it has not applied either model to significant portions of the spectrum,
and has not used either model in a pure form.

The command-and-control approach has taken different forms over time. In
many cases the Commission has arrived at a regulatory structure through
an ad hoc process of accretion over the years, while in other cases it
has used a less ad hoc process and has adopted an overall plan for all
services in a band at the same time. Moreover, some usage regimes that
have command-and-control features have allowed for considerably more
usage flexibility than others. And, many licensing regimes involve
"exclusive use" licenses of a more restricted form than the exclusive
use model involving flexible usage rights discussed in Section II.A
above.

For example, in the 902-928 MHz band, a block of spectrum in which a
number of licensed services as well as unlicensed users operate, the
Commission has made a series of specific regulatory decisions over time
that has resulted in a complex hierarchy of users subject to significant
restrictions.[^48] Thus, Federal Government radiolocation systems have
primary rights in the band. Next in order of priority are Industrial,
Scientific, and Medical (ISM) devices, and Federal Government fixed and
mobile and Location and Monitoring Systems (LMS) are secondary to these
uses. Licensed amateur radio operations and unlicensed Part 15
operations are secondary to all other uses of the band.

The 27.5-30.0 GHz band is another example of command-and-control
regulation of a specific band, though in this instance, the Commission
adopted an overall plan for all services in the band at the same time.
In the 1990s, the Commission concluded that this band, then occupied by
fixed point-to-point microwave service, was underutililized, and
therefore adopted a band segmentation plan that provided for use of the
band by Local Multipoint Distribution Service (LMDS), a terrestrial
service, and certain designated satellite uplinks and feeder links.
Co-frequency sharing between services or systems was allowed in band
segments where the Commission and parties concluded that it was
technically feasible. For the remaining parts of the band the Commission
created primary and secondary usage rights among the services.[^49]

From the Commission's experience with command-and-control regulation, it
is apparent that overregulation can deter both efficiency and
innovation. The highly regulated nature of certain services has tended
to discourage technological change because the means of providing
permissible services are narrowly defined in terms of current or
outdated technology. Moreover, in cases where licensees are limited in
what services they are permitted to offer, they have no incentive to
seek out a higher valued use for the spectrum.

One example of restrictive regulations having such effects may be found
in the 12.75-13.25 GHz band, which is shared by Broadcast Auxiliary
Services (BAS), Cable Antenna Relay Service (CARS), Fixed Microwave,
Geo-Stationary Orbit (GSO), and Non-Geostationary Orbit (NGSO) Fixed
Satellite Service (FSS). The Commission's rules have not permitted BAS
operators to use digital modulation techniques,[^50] even though the
broadcasting stations they serve are required to convert to digital
television, thus complicating the transition to DTV and precluding other
efficiencies. Other rules limit the use of the frequencies; for example,
CARS licensees are permitted to transmit only video signals (not voice
or data). In addition, some of the required procedures for limiting
potential interference between users of the band reduce the efficiency
gains that could be obtained from the use of technologically advanced
real time frequency coordination devices. Limitations on licensee
eligibility for BAS and CARS licenses have also contributed to the
inhibition of innovation in these fixed services. Only recently has the
Commission expanded eligibility for CARS licenses to include previously
non-eligible multichannel video programming distributors such as private
cable operators.[^51]

The Commission has begun to move away from command-and-control to more
flexible spectrum policies in recent years. In addition, the Commission
has amended a variety of service rules to increase the flexibility of
existing services. Among the many examples that could be cited are the
Paging and Radiotelephone Services rules. Early technological and
regulatory restrictions regarding the provision of one-way paging
service have been eliminated and paging licensees are free to develop
and implement new technologies and uses, including one-way messaging,
two-way messaging, mobile data, and fixed wireless services.[^52] The
Commission has also amended certain Part 15 rules several times in the
last fifteen years to accommodate technological developments in spread
spectrum technology.[^53] Nonetheless, broad applications of flexible
rights policies have been adopted for only relatively limited portions
of the spectrum.

To the extent that the Commission has adopted a flexible exclusive use
approach to spectrum licensing, there is general consensus that the
Commission's most successful application of this approach to date in
terms of deployment of service has been broadband Personal
Communications service (PCS), operating in the 1850-1910 MHz and
1930-1990 MHz bands. The PCS rules follow the exclusive use model quite
closely: the Commission granted PCS licensees rights to large blocks of
spectrum and allowed substantial flexibility in terms of technology and
usage rights, subject only to interference parameters to protect
neighboring geographic areas and adjacent spectrum blocks. There are no
other users of the band other than fixed microwave incumbents, which are
subject to mandatory relocation requirements. However, unlike the "pure"
exclusive use model, the PCS rules do not allow for unrestricted
flexibility of use, because the allocation precludes use of this
spectrum for broadcasting.

While the rapid proliferation of wireless services in the PCS band is
well-documented, the Commission's application of a flexible exclusive
use model in some other bands (e.g., Wireless Communications Service
(WCS)) has not been equally successful. Some parties have claimed that
the rules governing these services are "excessively" flexible and that,
as a result, manufacturers have not known what sort of equipment to
build.[^54] Nonetheless, this does not necessarily mean that the slower
development of certain services accorded flexible rights is attributable
to the flexible nature of the usage rights awarded by the Commission. In
some instances, prior allocation and licensing decisions by the
Commission have resulted in adjacent spectrum bands being used by
dissimilar services with different spectrum usage characteristics, which
in turn has created interference issues that impose practical
constraints on licensees even though their licenses give them nominal
flexibility. In other instances, spectrum use has been limited due to
lack of market demand for service. However, even in such instances, the
flexibility provided to licensees allows for more productive future
spectrum use when technology and market conditions improve, without the
need for additional regulatory intervention.

The Commission has also applied rules to several spectrum bands that
resemble the commons model. The 2.4 GHz band (2402-2450 MHz), for
example, is used on an open access, unlicensed basis by thousands of
unlicensed consumer and industrial devices, including cordless phones,
microwave ovens, and wireless LANs such as those using 802.11b and
Bluetooth technology.[^55] The proliferation of Wi-Fi and similar
technologies was not anticipated when the Commission's rules for
unlicensed devices were established, but the open access and technical
flexibility afforded by these rules (the primary constraint being the
limitation of Part 15 devices to very low power) has allowed significant
market-driven innovation. The popularity of the unlicensed 2.4 GHz band
makes it clear that there is demand for a commons-type usage model for
some spectrum, and that this model can work for several different sorts
of services. The parallel to the "pure" commons model is not perfect,
however, because the types of equipment used must be registered and
operate under certain rules such as those regarding primary use rights
and equipment standards.

Moreover, not all unlicensed bands have been as successful as 2.4 GHz.
In the unlicensed PCS band, for example, there has been very little
development of unlicensed technologies, in large part because of the
difficulty of establishing an effective mechanism to pay for the
relocation of licensed incumbents in the band. The FCC established UTAM
(Unlicensed PCS Ad Hoc Committee for 2 GHz Microwave Transition and
Management) to enable the transition from use by incumbent fixed
microwave licensees in the band to unlicensed use. The industry must
collect money from manufacturers of unlicensed devices to compensate
incumbent fixed microwave licensees for their relocation. Unlicensed PCS
products must only operate at UTAM-approved customer locations until
incumbents have moved out of 1910-1930 MHz. If a product moves away from
its coordinated location it may not be reactivated, until UTAM verifies
coordination at the new location.[^56] UTAM assesses a fee on each
unlicensed PCS product and directs the money toward the incumbent
relocation effort (\$20 in 2001). The economic non-viability of this
compensation mechanism plus the lack of development of equipment for use
in the unlicensed band have combined to inhibit development of a
narrowband PCS service.

An examination of the flexible exclusive use and commons models as they
have been applied to date suggests that each model has led to different
types of technical and economic efficiencies. In broadband PCS, for
example, licensees have developed centrally managed wireless networks
that cover large geographic areas and accommodate large numbers of
mobile customers. The licensing of multiple users has also led to
significant competitive benefits in the CMRS market. Parties that have
noted the success of PCS disagree about what has driven the innovations
that we have seen in that service; some think they have been driven by
investments in exclusive use, while others said that they had developed
because of competition. It seems likely that in fact both factors have
played an important role in the development of PCS. In any event, it
does not appear that flexible exclusive use models have deterred the
development of technologies and service in this instance. Although some
commenters argue that exclusive use will not lead to technical
innovations such as Wi-Fi, the PCS rules do not preclude licensees from
developing low power Wi-Fi networks if they choose to. The fact that PCS
licensees have not done so to date is likely due to the fact that (1)
the PCS rules provide for flexibility and interference protection that
enables licensees to develop higher-power system architectures, and (2)
licensees face a higher opportunity cost with respect to their spectrum
that makes such architectures a higher valued use.

In the Part 15 bands, where there are strict power limits and no
interference protection, the opportunity cost of spectrum is reduced to
a very low amount approaching zero,[^57] which forces spectrum users to
channel their investment exclusively into developing robust low power
technology that can function in this environment and continue to
function as the environment grows more congested. The initial
technologies that evolved in these bands were low power devices such as
cordless phones and garage door openers. More recently, the Part 15
bands have been host to the emergence of "smart" low power devices that
can support more sophisticated applications, including peer-to-peer
networking. This has resulted in a significant surge of economic
investment in these bands. However, the commons model may not offer
sufficient certainty or reliability for other types of spectrum uses.
For example, services requiring large upfront capital investments or
users promising a certain standard of service to paid subscribers may
not wish to take the risk of not knowing exactly where, when, and next
to whom on the spectrum they can operate. Therefore, it is unlikely that
a uniform approach to spectrum management can meet the very different
needs of all spectrum users.

## Looking Ahead: Applying Spectrum Use Models to the Future

### "One Size Does Not Fit All" 

The Working Group looked at the question of which of the above-described
spectrum use models the Commission should use in the future and what the
appropriate mix might be. While the Commission's experience with
existing bands provides some important lessons about the costs and
benefits of various models that have been applied, it would not be
reasonable to conclude from this experience that there is one particular
regulatory model that should be applied uniformly to all bands or all
services. It is also notable that, with few exceptions, participants in
the Public Workshop agreed with the principle that in spectrum policy,
"one size does not fit all."[^58] Thus, while there was a split among
commenters and panelists who advocated an exclusive use regime and those
who advocated a commons regime, most commenters and panelists appeared
to support the proposition that there is a place in the Commission's
spectrum policy for both models. Some also asserted that the two can be
complementary, and that grants of exclusive primary rights need not
constrain the development of innovative unlicensed technologies.

Commenters suggested that the FCC should seek to find a balance between
a commons model, which would allow for unlicensed innovation and enable
ad hoc open networks systems, and an exclusive use model, which would
give licensees sufficient predictability to stimulate long-term capital
investments. Commenters also urged the Commission to consider variations
and gradations of each model. For example, a number of commenters
suggested that granting flexible exclusive use rights to spectrum users
did not preclude the Commission from imposing some regulatory
limitations on use, analogous to zoning restrictions that are placed on
property owners by local governments. Any service not included in the
rights granted to the licensee would have to be considered through a
zoning-like hearing in which all interested parties could comment. Such
a model would in fact be a type of limited exclusive use model. A
different variation of a limited exclusive use model would be one in
which the licensee has exclusive rights to provide any service on its
assigned frequencies but other users are granted easements to use those
frequencies on a non-interference basis. Certain commenters, however,
were opposed to the creation of property rights, and particularly the
idea of rights in fee simple, in spectrum.

Participants in the Public Workshop focused a good deal of attention on
how different rights models would affect emerging "smart radio"
technologies, such as Software Defined Radio (SDR). They noted that SDR
will be in the marketplace soon and that there are significant
advantages from using SDR.[^59] One panelist indicated that the FCC
needs to come up with mechanisms for accommodating SDR and suggested
that it needs to consider the practicality of not only creating more
commons but also of setting up a simultaneous exchange for trading.[^60]
Another panelist observed that as communications ranges get shorter and
shorter in terms of distance (for example, with developments such as
Wi-Fi), the commons model becomes more appropriate because it entails
fewer regulatory requirements and allows parties to focus on technical
solutions for the delivery of data.

There was broad support among proponents of unlicensed spectrum use for
permitting greater access to unused portions of licensed bands, even
including broadcast, by smart radios on a non-interference basis.
However, as indicated above, advocates of exclusive use models and
incumbent licensees expressed skepticism about such an approach. It was
also pointed out that the Commission needs to be pragmatic in permitting
frequency agile radios too much access to licensed bands because
licensed users should be expected to implement new technologies and
thereby reduce the gaps available for frequency agile radios to use.

The issue of congestion was also raised in connection with unlicensed
use, and, as with many other matters, there was disagreement regarding
whether such congestion is "real" or an artifact of regulation.[^61]
Thus, one panelist stated that the FCC needs to ensure that swaths of
unlicensed spectrum do not become paralyzed by congestion, and one party
that filed comments on the Public Notice indicated that all use of
unlicensed spectrum should be regulated to provide clear rules regarding
an access etiquette, maximum power levels, and/or duty cycle
restrictions, among other technical considerations.[^62] However, one
panelist asserted that there was no real congestion in unlicensed
spectrum, only congestion caused by regulatory limits.[^63]

While considerable emphasis was placed on promoting innovation through
an expansion of unlicensed uses, at least one panelist argued that
licensing is of critical importance for the opposite reason, i.e.,
ensuring consumers that their equipment will continue to work with
existing infrastructure.[^64] Many agreed that this is the Commission's
role, but some also indicated that this goal can be achieved through the
use of band managers.[^65] Certain panelists also argued that the market
should decide which equipment is maintained as viable, that the
obsolescence of some existing equipment is an indication of progress,
and that the overall benefit to consumers of rival systems battling in
the marketplace outweighs the negative impact on those who are stranded
with obsolete equipment.[^66]

Finally, although participants in the Public Workshop generally
subscribed to the principle of "one size does not fit all," and appeared
to agree that there is a place for different spectrum usage models, they
did not supply many specifics as to how much spectrum should be
designated for exclusive use relative to shared or unlicensed uses.

The Working Group agrees with the consensus view expressed by
participants in this process that "one size does not fit all" in
spectrum policy. We also believe that there is considerable room to move
from the largely *ad hoc* approach to spectrum rights that has evolved
historically to a much smaller set of basic spectrum rights models that
can be applied more consistently and comprehensively across the radio
spectrum as a whole.

### Greater Regulatory Flexibility

In general, as the comments suggest, we recommend that the Commission
base its spectrum policy on a balance of the three basic spectrum rights
models outlined in Section II.A above: an exclusive use approach, a
commons approach, and a command-and-control approach. We further
recommend that the Commission fundamentally alter the existing balance
among these models -- which is dominated by legacy command-and-control
regulation -- by expanding the use of both the exclusive use and commons
models throughout the radio spectrum, and limiting the use of the
command-and-control model to those instances where there are compelling
public policy reasons to continue using it.

Ultimately, wherever there are competing uses for a resource -- that is,
wherever there is scarcity -- some mechanism must exist for allocating
that resource. A mechanism based on markets, such as an exclusive use
model, will be most efficient in most cases. However, reasonable
restrictions or rules will be necessary to overcome specific market
failures. Government may wish to employ such powers as eminent domain to
acquire appropriate bands for public safety use, for example. Similarly,
government may wish to promote the important efficiency and innovation
benefits of a spectrum commons by allocating spectrum bands for shared
use, much as it allocates land to public parks. Finally, for the reasons
stated above, the command-and-control model should be reserved only for
cases of significant market failure.

Thus, to the extent feasible, more spectrum should be identified for
both licensed and unlicensed uses under flexible rules, and existing
spectrum that is subject to more restrictive command-and-control
regulation should be transitioned to these models to the greatest extent
possible, as discussed below. If this approach is consistently applied
to Commission spectrum policy decisions, it has the potential to
significantly reduce the artificial scarcity of spectrum that currently
exists as a result of barriers to access. This will have the beneficial
effect of reducing the cost of obtaining exclusive spectrum rights where
an exclusive use approach is used, and will also help to alleviate
congestion of spectrum that is made available on a commons basis, thus
mitigating (though not eliminating) the risk of the tragedy of the
commons.

### Balancing Exclusive Use and Commons Models

The recommendation to move towards greater reliance on exclusive use and
commons models requires that the Commission also determine the
appropriate balance between these two models. There are a number of
variables that may be relevant to this determination with respect to any
particular band, but the Working Group believes that the key factors to
be considered are (1) [spectrum scarcity]{.underline} and (2)
[transaction costs]{.underline} associated with moving spectrum from
less efficient to more efficient use. By "spectrum scarcity," we mean
the degree to which competing demands to use particular spectrum exceed
the supply of spectrum available. By "transaction costs," we mean the
expenditure of time and resources required for a potential spectrum user
to obtain the spectrum access rights necessary to its proposed spectrum
use.

#### Factors favoring exclusive use model 

In general, where spectrum scarcity is high and the transaction costs of
transferring or dividing rights to the spectrum are low, these factors
tend to favor application of the exclusive use model. The exclusive use
model is appropriate because it gives the most incentives to efficiently
use scarce spectrum. Where rights and responsibilities are clearly
defined and effectively enforced, the characteristics of this model--
*e.g.*, exclusivity, flexibility, and transferability -- help move
resources to their highest valued use. When transaction costs are not so
high as to impede the transfer of spectrum among alternative users, the
exclusive use model allows market mechanisms to determine the most
efficient allocation of the scarce resource by providing a clear
framework for the assignment and negotiation of spectrum usage rights
between spectrum users.

Where both spectrum scarcity and transaction costs are high, the
exclusive use model still may be most appropriate, though this situation
is less clear. The presence of high transaction costs means that some
transfers of spectrum will not occur, and some valuable uses therefore
will not appear in the market. However, wherever scarcity exists, there
will be competing claims to the resource, and the exclusive use model is
most effective at balancing these competing claims. Moreover, the
greater the scarcity, the greater will be the incentive for parties to
find ways to overcome these high transaction costs. In contrast, a
spectrum commons would not be effective in cases of high scarcity,
despite its merits at addressing high transaction costs.

These variables suggest that in the lower portion of the radio spectrum,
particularly bands below 5 GHz, the Commission should focus primarily,
though not exclusively, on using the exclusive use model. The
propagation characteristics in this portion of the spectrum (which can
support a wide variety of high- and low-power, fixed and mobile uses),
combined with the high level of incumbent use (including government as
well as non-government uses), result in a large number of competing
demands for this spectrum relative to the amount of spectrum available.
These factors tend to weigh in favor of an exclusive use approach with
flexible rules because it provides a mechanism for spectrum users to
choose among the full range of technically feasible spectrum use options
based on market forces.

Application of the exclusive use model to these bands, however, does not
necessarily mean that all possible usage rights associated with
particular spectrum must be invested in the licensee. For example, with
private property in land, it is difficult, if not impossible, for the
government to build a highway if it must negotiate with individual
property owners without eminent domain powers. Similarly with spectrum,
it may be prohibitively burdensome for some potential spectrum users,
*e.g*., those with technologies like UWB that operate across a wide
range of spectrum, to negotiate for spectrum access with each licensee
in each band and in each geographic area that would be used. Where the
presence of many spectrum license holders with exclusive use rights
makes it difficult to pursue economically efficient projects because of
the high transaction costs associated with negotiating spectrum access
with each licensee, the potential exists to create a "tragedy of the
anticommons."[^67] To reduce this potential, the government may create
access rights for some types of spectrum uses even in spectrum that is
otherwise licensed on an exclusive basis. Options for creating such
access rights in an exclusive use model are presented in Section III.D
below in the discussion of secondary markets and government-granted
easements.

#### Factors favoring commons model 

Conversely, in spectrum bands where spectrum scarcity is low and the
transaction costs of transferring or dividing rights to the spectrum are
high, these factors tend to favor application of the commons model. The
commons model is most appropriate because it helps give access to the
spectrum to users who otherwise would be deterred by these substantial
negotiations costs. The commons approach makes this increased access
possible by replacing the negotiation of formal leasing and sale
contracts between users and rights holders with an agreement by the user
to abide by certain user protocols and etiquette. This promotes
efficiency through spectrum sharing; commons users generally operate at
low power for a short time in limited areas, which allows multiple users
to operate on the same spectrum. The commons approach also promotes
technological innovation by providing a spectrum environment in which to
develop new technologies.

Where both spectrum scarcity and transaction costs are low, the commons
model again may be the most appropriate, though this situation is less
clear. Under these circumstances, the presence of low transaction costs
would add to the efficiency-creating characteristics of the commons. On
the other hand, it also is possible that the exclusive use model would
provide comparable benefits, such as in instances in which the price
will be close to zero if spectrum is abundant and/or the burden of
negotiating with rights holders will also be low. With low transaction
costs as well as low price, interested users should have unrestricted
access to the spectrum they need.

An important caveat must accompany any recommendation for a commons
model: If scarcity appears in particular spectrum bands in the future,
then a commons model may no longer be appropriate for these bands. This
approach is only efficient when there is little or no scarcity, since
with a commons there is no price mechanism to use as a tool for
allocating scarce resources among competing users. The "price" of
spectrum is essentially zero. With free access, however, comes the risk
of interference and over-saturation, the classic problems of the
"tragedy of the commons." These problems can be overcome to some extent
through regulatory guidance, requirements such as power and emission
limits, and sharing etiquettes. But where actual spectrum scarcity
exists, the tragedy of the commons may be unavoidable because there are
insufficient incentives to avoid overuse. Therefore, a spectrum commons
approach may be useful for some, but not all, of the available spectrum.

The variables described above tend to tilt in favor of expanded use of
the commons model in higher spectrum bands, particularly above 40 GHz,
based on the physical characteristics of the spectrum itself. In these
bands, the propagation characteristics of spectrum preclude many of the
applications that are possible in lower bands (e.g., mobile service,
broadcasting), and instead favor short-distance line-of-sight operation
using narrow transmission beams. Thus, these bands are well-suited to
accommodate multiple devices operating within a small area without
interference. Moreover, administering these uses on an individualized
licensed basis would involve very high transaction costs. Thus, the
commons model may have broader applicability in this portion of the
spectrum.

This does not, however, mean that only higher band spectrum should be
subject to a commons approach. As many commenters point out, there is
also value in having some lower band spectrum dedicated for commons use,
much as there is benefit in having some land that could be developed
commercially dedicated entirely to public use, such as parks. The record
shows that the Commission's dedication of some lower band spectrum to
unlicensed uses, e.g., 2.4 GHz, is yielding significant technological
and economic benefits in the form of low-power short-distance
communications and emerging mesh network technologies that should be
further encouraged. We therefore recommend that the commons model
continue to be used selectively in other lower spectrum bands if
feasible.

We do not advocate the wholesale conversion of all spectrum to a commons
approach as some commenters appear to advocate. Although the commons
model is in many ways a highly deregulatory "Darwinian" approach, as its
proponents point out, productive use of spectrum commons by unlicensed
devices, particularly in lower spectrum bands, typically requires
significant regulatory limitations on device transmitter power that
preclude many other technically and economically feasible spectrum uses
that rely on higher-power signal propagation over longer distances, or
that require greater protection from interference. In addition, some
commons proponents themselves state that setting aside additional
spectrum for use on a commons basis is not essential to the continued
success of unlicensed technology because the technological capability
exists to prevent congestion from occurring in existing unlicensed
bands. Furthermore, supporters of mesh network architectures argue that
this technology actually *expands* the capacity of the spectrum
proportionately to demand.[^68]

To the extent that new technologies are capable of operating on a
non-interference basis with licensed uses, the proposal to create
easements "underneath" exclusive use licenses would provide additional
capacity to some types of users who otherwise would operate in spectrum
devoted to commons use.

### Limited Use of Command-and-Control 

With respect to the command-and-control model, as noted above, the
Working Group recognizes that continued use of this approach may be
required in situations where prescribing spectrum use by regulation is
necessary to accomplish compelling public interest objectives. However,
such objectives should be carefully defined, and the amount of spectrum
subject to a command-and-control regime should be limited to the minimum
amount necessary to ensure that those objectives are achieved. Many
spectrum users will claim that they warrant special consideration and
thus deserve exemption from any reform of their service allocation
rules. It is therefore critical to distinguish between special interest
and the public interest, establishing a high bar for any service to
clear prior to receiving an exemption.

In general, command-and-control regulation should be reserved only for
spectrum uses that provide clear non-market public interest benefits.
For example, radio astronomy may need to have dedicated, protected
spectrum bands for the foreseeable future, due to its highly sensitive
applications and the fact that its benefits accrue to society as a whole
and only over the long run. Public safety and critical infrastructure
may also require dedicated spectrum at particular times to ensure
priority access for emergency communications. Other examples where
limited use of command-and-control may be justified include spectrum
uses that require regulatory prescription to avoid market failure (e.g.,
satellite allocations to ensure global harmonization of satellite
frequency bands) or that have a non-market dependent public interest
basis articulated in the Communications Act (e.g., broadcasting). Some
of these instances are discussed in greater detail in Section IV below.

Subject to these exceptions, the Commission should eschew
command-and-control regulation, and legacy command-and-control bands
should be transitioned to more flexible rules and uses to the maximum
extent possible (whether under the exclusive rights or commons model).
The Working Group's recommendations with respect to transition
mechanisms are discussed in greater detail in Section V below.

# Defining Specific Rights and Obligations Within Spectrum Usage Regimes: Existing and Optimal Approaches 

## Flexibility

A theme implicit in much of the discussion in the Public Workshop and
submitted comments was the tension between licensees' desire for
certainty on the one hand and flexibility on the other. It was often
unclear exactly what type of flexibility parties wanted, but most agreed
on general principles, such as (1) rules should be flexible enough to
accommodate future uses and have just enough technical features to
define rights; and (2) increased flexibility is good, but interference
criteria have to be clear. Flexibility in three areas was discussed:
service or use flexibility, such as would enable licensees to move their
spectrum into higher valued uses; technical flexibility that would allow
service providers to determine how best to combine inputs (e.g., using
the newest or most cost effective technology); and the flexibility to
subdivide, lease or transfer spectrum rights to others, so that
compatible users are more likely to have access to the spectrum they
need.[^69]

The Working Group also posed the question of whether the Commission
should develop more market-oriented spectrum rules that provide
licensees with greater flexibility, and, if so, in which bands or
services and how. The Working Group also asked whether some limitations
should be imposed on particular bands or services in order to achieve
public interest objectives that would not be met under a purely
market-based approach.

There was general agreement that more spectrum should be subject to
market forces in order to encourage innovation and enhance productivity
through creative transactions with minimal transaction costs. For
example, such a system would facilitate the introduction of broadband
technologies by standardizing rules across spectrum blocks and making it
easier to coordinate use with multiple licensees. Some argued that the
Commission should analyze carefully why it is not generally in the
public interest to give all licensees much more flexibility. At the very
least, instances in which flexible rules are not adopted should be the
exception rather than the rule, should be tailored to meet specifically
defined public interest goals, and should be applied to the least amount
of spectrum necessary to achieve those goals.

Commenters state that in order to avoid uncertainty regarding the scope
of flexibility afforded by our rules, the rules should be presumptively
written (or re-written as necessary) to define spectrum rights in terms
of spectrum uses that are excluded, prohibited, or limited. Thus, the
Commission's approach should be that licensees and unlicensed users be
allowed to do anything not explicitly prohibited by the rules, rather
than the presumption being that anything not affirmatively authorized
needs a rule change or waiver before it can be done.

Commenters and participants expressed broad support for both the
development of secondary markets and greater implementation of the band
manager concept.[^70]

While the majority of commenters favored extending the current system of
auctioning spectrum rights valid for a number of years with a
presumption of renewal, several parties recommended that the government
instead lease spectrum for shorter periods, and that leases be
renewable.[^71] It was suggested that a market would develop in lease
rights, so that prices would accurately reflect short-term spectrum
values in a way that auctions for essentially perpetual rights cannot
do. Such a system would set a lower barrier to entry than certain
auctions, and would make it quicker and easier to reclaim unused
spectrum than current procedures permit. It was further argued that user
fees are a means of making licensees bear the opportunity costs of
inefficiency and of enabling the Treasury to receive revenue long-term
instead of just at the time of initial license assignment. It was also
acknowledged, however, that the FCC might face difficulties similar to
those it has encountered with installment payments if it were to rely on
periodic lease payments, rather than lump sum payments for spectrum
licenses.

Some parties suggested that the FCC should extend flexibility as far as
letting private parties develop interference standards, with the FCC
functioning in the role of mediator.[^72] Other panelists indicated,
however, that many carriers may prefer that the Commission establish
more universal standards so that more equipment is manufactured under
those criteria.[^73] Certain panelists also stated that as new
technologies such as SDR evolve, there should be less need for a fixed
standard because it will be easier to adjust to technology changes
through software, as opposed to having to redesign hardware.[^74]

Various parties indicated that a purely flexible/market-oriented
approach may not be appropriate for public safety and other critical
infrastructure users. They contended that market-based sharing regimes
might pose problems for such entities, which are required to meet strict
regulations with absolute reliability.[^75] They also asserted that it
may be more beneficial for these entities to operate their own systems
in order to comfortably be assured of meeting these standards. It was
pointed out many times that a pure market mechanism disadvantages those
providing public services. While the highest and best commercial uses
may adequately be measured in market terms, several commenters asserted
that the market fails to value public services appropriately.[^76] These
public goods include public safety communications systems (police, fire,
rescue, disaster coordination, etc.), and less visible uses such as
radio astronomy.[^77] Specific use allocations may still be necessary in
these cases, although no more spectrum than necessary should be devoted
to such regulated use. Such dedicated spectrum needs may be reduced if
public service providers are allowed to lease part of their requirements
on an as-needed basis. Public safety is discussed in more detail below.

Another situation in which the market fails to take important
considerations into account is when domestic spectrum uses must be
compatible with international uses, either for technical reasons, or in
order to conform to international agreements. A number of commenters
pointed out the importance of respecting those demands.[^78] Much of the
discussion was in the context of developing global satellite systems,
and the solution was generally assumed to be an arrangement of special
allocations. But in keeping with the general interest in more
flexibility, the Commission should also explore an approach in which
spectrum would be made available for satellite, terrestrial, or combined
use at the option of the user.

*Conclusions/recommendations.* The Working Group generally agrees with
commenters and workshop participants that, within "basic" parameters,
spectrum users should be given maximum possible flexibility to:

-   Choose the services they provide on their spectrum;

-   Determine the technology that is most appropriate for providing
    those services; and

-   Transfer, subdivide, or lease their spectrum rights.

In addition:

-   Rules generally should be written so as to permit anything not
    expressly prohibited; and

-   Exceptions to flexible rights licensing models should permit
    command-and-control restrictions only where absolutely necessary and
    involving the least amount of spectrum needed to accomplish public
    interest goals.

## Regulatory Certainty 

While participants were vocal about their desire for more flexible
rights, they were equally interested in firmness and clarity in the
rules they are required to follow.[^79] Discussions at times seemed
paradoxical, with commenters apparently requesting both more definite
and more flexible rules, but an overarching principle eventually
emerged: providers of wireless services want clear rules governing their
interactions with the FCC and other spectrum users, but the freedom to
operate as they please within those boundaries. In other words, they
want certainty of access to a clearly specified bundle of spectrum use
rights with firmly defined limits on how much interference they have to
accept and can produce, but flexibility in their operations within those
parameters.

As in the discussions about flexibility, the commenters requesting more
certainty were not always talking about exactly the same types of
certainty. While most agreed that the Commission's rules are not
sufficiently clear, the examples they provided varied greatly. Some
pointed out that rights which are not exhaustively defined create "grey
areas" that can lead to conflict. With site-based licenses, for example,
the question of who should have access to the white space surrounding a
licensed site is often a source of dissension. Others argued for more
clarity in the rules on the grounds that equipment manufacturers do not
know what sort of equipment to build if service rules are not clearly
defined.

Advocates of the exclusive use model argued that instability in the
usage rights of licensees discourages investment, and further contended
that "exclusive" rights are not meaningful when the Commission, after
licensing, can tell a licensee that a new service may operate on the
same frequencies, through overlay or underlay licensing. Thus, they
maintained that the rules should explicitly prohibit other users from
interfering with incumbent systems.[^80] Proponents of commons-like
approaches disagreed with the proposition that exclusive rights are
necessary to investment, pointing out that uncertainty can inspire
innovation and the development of such devices as frequency agile
radios.[^81]

The suggestions that received the most attention were those dealing with
interference rights, which many parties asserted are important to
define.[^82] Specific suggestions dealt with different aspects of
interference, among them the need to clarify the definition of "harmful
interference" currently used by the Commission; how to define the
maximum level of "noise" that licensees must accept; and the rules on
how to resolve issues that arise when an incumbent's service is impaired
by a new user operating within its rights.[^83] Several participants
noted that the need to consider these points is well illustrated by
Nextel's conversion of SMR service to a cellular-type service, an
unintended consequence of which was interference with adjacent public
safety licensees.[^84] If the rights of the new service had been defined
more clearly at the outset, the problems may have been avoided. In
general, prospectively defining these rights is useful for avoiding
subsequent problems with incumbents, but unfortunately that is not
always possible. Transitional issues are discussed below.

Commenters frequently pointed out a need for more objective measures of
interference.[^85] Defining measures and setting them at an appropriate
level will require the Commission to have a better grasp of the science
involved prior to making rules, and to anticipate better the
consequences of different uses. This means that more engineers should be
involved in the rulemaking process.

Based on the many comments received and heard, the following basic
spectrum rights parameters must be clearly defined for both licensed and
unlicensed uses:

1.  Authorized frequency and bandwidth;

2.  Geographic scope of right to operate;

3.  Maximum RF output, both in-band and out-of-band; and

4.  Interference protection, i.e. maximum level of noise/interference
    that spectrum user must accept from other RF sources.

Parties often cited broadband PCS as an example of how flexible service
and technical rules can coexist with clearly defined spectrum rights and
responsibilities.[^86] In that regime, geographic licenses for a
particular frequency and bandwidth carry a construction requirement and
a renewal expectancy, which give licensees the certainty they need to
make major investments while still giving the Commission the ability to
reclaim the spectrum if the licensee acts improperly. The PCS rules
include maximum output levels at the geographic and spectrum borders of
each licensed spectrum block, so that each licensee knows in advance the
maximum output that it can produce and is required to accept from
co-channel and adjacent channel PCS licensees. This approach also
provides a clear common framework from which adjacent and co-channel
licensees can negotiate alternative consensual arrangements. Some
suggested that this approach can work for almost any technology.

The issue of enforcement also arose in connection with the clarification
of rights, with various panelists arguing that the FCC must do a better
job of enforcing licensee rights or else the licensee really does not
have those rights.[^87] Indeed, the point was made repeatedly that the
success of any rights regime depends on the enforcement of the rights.
It was suggested that the FCC needs a plan to speed up the resolution of
interference complaints, and that better enforcement could be achieved
by increasing technical expertise at the Commission.[^88]

*Conclusions/recommendations.* In sum, the Working Group generally
agrees that with regard to regulatory certainty:

-   Rights should be clearly and exhaustively defined;

-   Basic parameters to be determined are frequency, bandwidth and
    geographic scope, and how much interference a licensee is allowed to
    impose on others and how much he must accept; and

-   Once identified and assigned, rights should be protected through
    adequate enforcement efforts, and should not easily be modified.

## Interference Standards

Issues concerning interference were among the most widely discussed by
commenters and by participants in the Public Workshop. The specifics of
appropriate types of interference parameters and interference protection
schemes, and appropriate levels of desired and undesired signals and how
to best measure them, are discussed elsewhere in the reports of other
Working Groups. Here we discuss the impact of various approaches on
licensee rights and responsibilities.

The most common theme expressed was that as services proliferate and
more people try to do more things with spectrum in the future, the most
fundamental spectrum management problems will likely relate to
interference. As discussed above, it was noted that too often the
interference caused to adjacent channel licensees is not factored in
when a new service is authorized. Another concern expressed was the
preclusive effect of many licensees/operations in the absence of
predefined protections for future spectrum users.

Several parties also pointed out that the Commission's most difficult,
controversial, and unsatisfactorily resolved cases have resulted from
situations in which the extent of an incumbent's spectrum rights and
interference rights, and its limitation on impacting other bands or
users, were not clearly understood by the incumbent, by a new service
provider, and even by this Commission.

Several parties argued that the current definition of interference is
too vague and subjective, while others prefered to retain the
flexibility of interpretation that it allows.[^89] Various parties
stressed the need for regulatory certainty, both in terms of what kinds
of signals they would be permitted to transmit, within their bands and
into other bands, and what kinds of undesired signals they should plan
to tolerate as worst case from in-band operations (e.g., "underlay") and
out-of-band operations.[^90] To achieve this certainty, they maintain,
requires some objective technical standards that are concretely
measurable and predictable.

Participants that remarked on this issue generally suggested that the
Commission should take into account frequency/bandwidth, power,
co-channel and adjacent channel operations, out-of-band emissions,
background noise, and perhaps geographic location and scope. A few
parties insisted that the Commission must field test its assumptions
when determining interference consequences of its technical
determination.[^91]

Despite a desire for certainty regarding the operating environment that
they could create and in which they would be required to perform,
parties also expressed a compelling desire for flexibility. There was
some discussion of whether licensees' permissible operations should be
defined in terms of "inputs" -- permissible tower height and
transmission power -- or in terms of "outputs" -- how much signal
strength results on particular frequencies at particular locations.
Parameters based on the latter considerations would provide licensees
with greater flexibility in determining their system architecture to
meet customer density, geographic location and scope, and cost
considerations, while maintaining what should be the Commission's most
basic regulatory concern: the extent to which they impact the service of
other licensees and operations.

Any setting of such standards, of course, reduces the Commission's
flexibility in responding to changing technology and changing customer
and public needs. Nonetheless, the degree of certainty that can be
provided for both incumbent licensees and potential new entrants and the
increased opportunity for new entrants and services outweigh this
concern. This concern is further diminished if the Commission undertakes
periodic review of its technical parameters, as further discussed below
in the section regarding license terms and term limits on rules.

Various panelists agreed that it is critical to distinguish interference
from competition. Several complained that incumbent licensees claim that
a new service will cause "interference" when their primary concern is
direct or indirect competition provided by the new entrant. One
participant specifically remarked that regardless of whether the
standard is "harmful interference" or "meaningful interference," the
analysis will depend on one's point of view, *i.e.*, whether one is an
incumbent or a new entrant. New entrants often complain that incumbents
have no incentive to produce robust systems that are less affected by
potential interference and, in fact, have a disincentive to do so if the
Commission continues to protect legacy equipment that is not designed to
operate in a spectrally efficient manner.

At least one party proposed that the Commission let the courts determine
what constitutes harmful interference when parties have a conflict.[^92]
However, the more objective standards for determining interference that
we expect to develop would appear to obviate the basis for such a
proposal.

One idea that participants raised was that the Commission define the
amount of interference that a user can create and must accept, and let
industry set standards within those parameters. Participants also
suggested that the Commission should allow the private sector to develop
interference standards and present them to the FCC, which would then be
responsible for enforcement. The Commission has often been guided by or
given deference to industry-developed standards, and will continue to do
so when the participants reasonably represent all affected and
potentially affected interests. Sometimes, however, industry groups may
not adequately account for the interests of other affected entities,
such as those developing new technologies and nascent providers of
future services.

While there also was some call for receiver standards, these proposals
appeared to result primarily from concerns about the vulnerability of
many receivers designed by incumbent licensees in the context of our
current interference rules. We believe that if the interference
environment in which receivers must operate is adequately specified in
advance, licensees and receiver manufacturers would face strong economic
incentives to design equipment that will not be susceptible to potential
interference. In most cases it is best left to licensees and equipment
designers and manufacturers to determine how best to design equipment to
operate in this environment, and to make the various economic
evaluations and trade-offs involved in such determinations. The
Commission should carefully consider, however, whether it might be
appropriate to mandate receiver performance for consumer goods whose
design and manufacture are not controlled by a licensee.

*Conclusions/recommendations.* Given these considerations, the Working
Group concludes and recommends as follows:

-   The current definitions and rules for controlling interference do
    not always provide licensees with adequate notice regarding possible
    changes to the electromagnetic environment in which they may be
    required to operate in the future;

-   Inadequately defined interference rights can lead to extensive
    adversarial contests regarding the rights of incumbents when new
    services are proposed;

-   If the Commission determines to specify the maximum level of
    undesired signal to which licensees will subjected, licensees and
    equipment manufacturers can design systems that will provide for
    additional future uses by other users of the same spectrum and of
    adjacent spectrum;

-   Interference standards based on outputs provide desired flexibility
    while protecting the reasonable expectations of licensed and
    authorized service providers and the public; and

-   While there may be some situations in which it would be appropriate
    for the Commission to establish receiver performance requirements,
    in most cases licensees and manufacturers should retain that
    responsibility, assuming that they know in advance what their
    expected interference environment will be.

## Secondary Market Arrangements and Commission-Granted Easements 

Commenters and Public Workshop participants suggested that the
Commission needs to look for ways to improve access to licensed spectrum
by new entrants, and that technological advances using devices such as
frequency-agile radios have increased the potential for spectrum to
accommodate multiple non-interfering uses.[^93] Many strongly advocated
that the Commission move forward with its pending proceeding on
secondary markets.[^94]

Commenters generally suggested two alternative approaches to facilitate
access. Many advocated expanded use of a variety of market arrangements,
including secondary markets involving the lease of spectrum usage
rights.[^95] Under this approach, licensees would hold the rights
associated with determining which potential entrants could have access
to the spectrum and under what conditions. Others advocated allowing
open access on a non-interfering basis through expanded use of
easements.[^96] In the latter case, the Commission, and not the
licensee, would establish conditions for user access to the spectrum.
There was significant disagreement among commenters on how to balance
these approaches. However, it should be noted that the two approaches
are not necessarily mutually exclusive, and in fact could both be
applied to the same block of spectrum.

Proponents of secondary market arrangements asserted that the market can
solve these types of access problems if licensees have flexibility and
exclusive rights.[^97] Incumbents could determine, through privately
negotiated agreements, how other parties could use some fraction of the
spectrum bandwidth or some portion of the geographic area covered by the
license for some period of time, which could be for a few seconds or
minutes or for years. Many secondary markets proponents were also
skeptical of the easement approach, arguing that (1) "non-interfering"
operation tends to work better in theory than in practice, and (2) even
where spectrum is otherwise not being used by the licensee, creating
easements for third party access without the licensee's consent could
lead to squatter's rights problems.[^98] Several commenters also were
particularly adamant that the Commission not grant any easement rights
that would affect exclusive use licenses that had already been granted
by the Commission, contending that incumbent licensees have already
built out their systems and made other technical decisions in reliance
on there being no easement rights to third parties that could possibly
create harmful interference.[^99]

Proponents of easements asserted that the market would not facilitate,
and might even inhibit, access by the very technology that is
revolutionizing efficient spectrum use, i.e., smart, frequency-agile
devices. They pointed out that the Commission currently allows
unlicensed Part 15 low power devices including ultra wide band (UWB)
devices to operate in certain portions of the spectrum in which
incumbent licensees operate without the users of those devices obtaining
permission from the licensee. The FCC could also allow "opportunistic"
devices to search across licensed spectrum and then to operate in
licensed but unused spectrum without permission of the licensee, as long
as those devices did not cause interference to incumbent licensees and
instantly ceased transmitting whenever a licensee wished to use the
spectrum. Easement proponents contended that exclusive rights holders
will look for ways to block access by such devices to protect their
investment, and that the only way to open spectrum to new uses is to
vastly expand the use of the easement model from its currently limited
form. They also contended that new technology is sufficiently
sophisticated to overcome concerns regarding interference.[^100]

The Working Group believes that there is room to expand our use of
*both* market arrangements such as secondary markets and the easements
models. The Commission has already taken steps to initiate and expand
secondary markets, but this model has so far been applied on a limited
basis only. This is partly due to statutory issues, but also results
from usage rights in existing spectrum not being well-defined (as
discussed in prior sections). Allowing a variety of market arrangements
so that licensees would be able to authorize others to make use of
unused portions of their licensed spectrum could lead to substantially
greater access to and use of the spectrum. The Commission has used an
easement approach in cases such as UWB, but this is still a very limited
application compared to the kind of easement access that some commenters
advocate. Both low power underlay easement rights operating below the
noise temperature and easement rights that would allow the use of
non-interfering opportunistic devices in some situations could be
expanded.

New technology has transformed the access issue by making certain types
of access possible that were not technologically feasible in the past.
We must therefore develop access models that take the potential of this
new technology into account. We agree with commenters that the secondary
markets model and the easements model each offer certain distinct
advantages as well as disadvantages, but conclude that neither model
should be adopted to the exclusion of the other.

*Secondary markets model.* The secondary markets model takes advantage
of the flexibility and adaptability of the market to solve access
problems. Because licensees have economic incentives to use spectrum in
ways that will yield the highest return to them, they will often find it
advantageous to allow others to use unused portions of their spectrum if
they are adequately compensated. Because licensees have a strong
incentive to obtain the highest possible return on all their "assets"
including their spectrum, we do not agree with those who contend that
making an exclusive licensee the access "gatekeeper" (i.e., requiring
potential spectrum users to obtain licensee consent) will inhibit access
by new technology. In fact, exclusive licensees will often wish to
encourage and even develop new technologies in order to provide new
services, serve more customers, etc.

If the rights afforded to licensees are sufficiently well-defined and
flexible, and the secondary market mechanism is fast and efficient with
low transactions costs, licensees will have ample incentive to negotiate
with potential secondary users for access. As long as the transaction
costs of those negotiations are not too high, then many licensees will
find it in their self interest to allow access by secondary users. It is
also important to realize that a secondary markets approach doesn't
necessarily need to rely on individual negotiations with each licensee:
band managers and other intermediaries such as clearinghouses can
facilitate transactions. Thus, even if many individual transactions are
necessary in order for secondary markets to work, organizations are
likely to develop to handle those transactions just as American Society
of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc.
(BMI) were developed to handle the negotiations between holders of
copyrighted music and the thousands of radio stations and other
organizations wishing to play that music. On the other hand, there may
be instances where secondary markets work less well, such as in cases in
which they impose such significant transaction costs on parties that
negotiations will not occur. In that case, an easements model may be
appropriate.

*Easements model.* By definition, the easements model appears to allow
for highly efficient and low-cost access to spectrum, since a government
agency establishes overall rules and protocols under which any user
would be allowed access to the spectrum. Negotiations with individual
licensees is not required. As a number of commenters suggested, the
easements model bears greater consideration than in the past because the
increased sophistication of technology allows for the possibility of
enhanced spectrum use by third parties on a non-interfering basis with
the licensee.[^101] While it is true that potential interference
problems between licensees and easement users may arise in an easement
model, presumably those problems can be resolved through technical
protocols and coordination. Moreover, the concern about overcrowding and
the tragedy of the commons is greatly reduced when easements are applied
to high frequencies and the power levels in devices are limited so that
potentially interfering signals only travel relatively short distances
and thus the number of potentially interfering devices is limited.

At the same time, however, the easement model inherently limits the
flexibility afforded to the licensee to some degree, and relies on
government to define the scope of the easement. For example, currently
all Part 15 devices are limited to very low power levels in order to
minimize the possibility of interference. If opportunistic devices are
to be authorized in the future, there will have to be regulations or
protocols to ensure that they listen before they transmit and that they
do not transmit when to do so would cause interference to an incumbent
licensee. In addition, there is the concern that once unlicensed
entities begin to operate in an easement and then later create
interference to the incumbent licensee, it may be difficult legally or
politically to shut down those unlicensed operations. Thus the potential
for squatters is another potential downside of the easement model that
must be addressed.

*Balancing the two approaches*. In seeking to balance the two
approaches, we generally conclude that rights of licensed incumbent
users should be limited to some extent to create "easements" for
non-interfering uses below a defined interference temperature. There may
also be some limited situations in which it would be desirable to
establish easements for higher power opportunistic devices, but only in
circumstances where the transaction costs associated with negotiating
with incumbents for access to the spectrum would otherwise be
unreasonable.

To the extent that efficient market mechanisms can be developed that
would allow market arrangements at reasonable transactions costs,
however, then they should be left under the control of incumbent
licensees. That would be true of both individually negotiated secondary
market uses and opportunistic uses of licensed spectrum. Opportunistic
uses of spectrum may become feasible (especially by using technical
solutions such as agile-frequency-hopping radios, software defined
radios and adaptive antennas) at reasonable transaction costs. If such
uses become feasible either through direct negotiations with incumbents
or perhaps through royalty or rent mechanisms administered by private
band managers or clearinghouses, the right of access should remain
within the control of the licensed user rather than be the subject of an
FCC dedicated and mandated easement.

Using this balanced approach, certain technologies should probably be
allowed access to spectrum "holes" primarily on a secondary markets
basis, while others may be more amenable to access via easements. The
easement model appears particularly suitable for underlay technologies
that operate at very low power (i.e., below the "interference
temperature"[^102]), provided that the technical boundaries of the
easement are well-defined.

*Conclusions/recommendations.* In order to evaluate the options
involving secondary markets and easements, the Working Group recommends
to the Spectrum Policy Task Force that the Commission obtain more
information from the public (e.g., through an NOI) on:

-   Developing further analysis to distinguish those situations in which
    government granted easements may be appropriate compared to
    situations in which various secondary market arrangements between
    licensees and other users are appropriate; and

-   Analyzing the ability of new technologies (smart frequency-agile
    radios, software defined radios, adaptive antennas, spread spectrum
    etc.) to operate, even at higher power levels, without causing
    harmful interference.

Other actions that the Working Group recommends include the following
Commission actions:

-   Move forward with the existing "Secondary Markets" proceeding;[^103]

-   Address underlay/easement rights in transition bands on a
    going-forward basis;

-   In new allocations and assignments, consider including low power
    easements or underlay rights based on the "interference temperature"
    concept;

-   Clearly define access rights for opportunistic devices, whether
    based on secondary market uses, easements, or a combination of the
    two.

## License Terms and Term Limits on Rules 

Participants in the Public Workshop, as well as parties that commented
on the Public Notice, provided input regarding how long spectrum license
terms should be, as well as whether it would be useful to set some sort
of term limits on Commission rules so that rules would automatically be
revisited periodically. A few parties suggested various alternatives for
providing periodic modifications in our technical rules in order to
demand increasing spectrum efficiency from licensees as technology
advances.[^104]

License terms in various services differ. For instance, the term of
wireless telecommunications licenses is generally ten years, while
broadcast licenses have a term of eight years and CARS licenses are
awarded for a maximum of five years. Satellite licenses have in the past
generally been awarded for ten years, but in February of this year the
Commission adopted rules allowing it to issue such licenses with 15-year
license terms.

The practice of adopting individual rules with predetermined sunset
dates has long been used by the Commission in cases where it finds that
a rule would outlive its usefulness if allowed to remain indefinitely.
Under the Telecommunications Act of 1996, the Commission is also
required to determine in every even-numbered year whether any regulation
is no longer necessary in the public interest as the result of
meaningful economic competition between service providers, and to modify
or repeal such regulation. The Commission has undertaken numerous
proceedings to streamline its rules pursuant to this requirement.

With respect to license terms, certain public interest organizations
argued that the FCC should, in keeping with the fact that the airwaves
are a public asset owned collectively by all Americans, establish
relatively short license terms. They argued that the Commission should
not lengthen license terms or otherwise undermine the government's
ability to reorder spectrum rights and responsibilities as technologies
and social needs change. Incumbent licensees, on the other hand, argued
in this and other fora that consistency and certainty are necessary to
warrant significant investment, and most seemed to assume that the
current level of license renewal expectancy would remain an integral
part of our licensing scheme.

Commenting on the idea of term limits or sunsets for Commission rules,
one panelist said that different bands would require different term
limits and that it is impossible to determine what they should be (that
is, how quickly technology will change in each band), so the Commission
is better off with rules of infinite duration but a reservation of power
to intervene in the event of a market failure.

We believe that a predictable and structured format and timetable for
implementing rule changes that will periodically increase the efficiency
of spectrum usage is imperative. At this point, it is not apparent that
it matters whether such changes are implemented as a function of
periodic license renewal considerations or as a function of periodic
service rules review. What does matter is that the timing of such
potential changes is both reasonable and predictable, and that the
extent of change within any period of years is limited in some manner.

One proposal made at the Public Workshop was that all licenses should be
subject to a re-evaluation period that enables the Commission to prevent
old technologies from occupying spectrum in virtual perpetuity, but is
scheduled sufficiently into the future that it does not threaten the
stability of licensees' business plans. We continue to believe that a
level of certainty regarding one's ability to continue to occupy
spectrum at particular locations, at least for some foreseeable period,
is an essential prerequisite to investment, particularly in services
requiring significant infrastructure installation and lead time. A
periodic adjustment of operating parameters or requirements, however,
need not deter investment if limited to predictable and reasonable
outlines. While potentially disruptive, periodic revision of operating
parameters and protections is a necessary means to continue to mine the
spectrum with increasing efficiency as technology develops, to the
extent such efforts are economically viable. Any such assessment would
include, of course, an assessment of the economic/societal value of the
new or increased service capability being accommodated versus the costs
to incumbent licensees and to the public. This applies to "commons"
spectrum and exclusively used spectrum, including easements, with
respect to both internal operations and effects on geographic and
spectral neighbors.

Any evaluation of such periodic adjustments should be on a predictable
schedule, and any implementation of resulting new rules should be on a
schedule that is predetermined by rule. For instance, no change in
technical parameters, such as an increase in noise floor or in emission
masks or in edge of territory field strength, could be introduced in a
particular service until at least three years after a determination is
made to implement such a change. While some new technologies may develop
suddenly, and could sometimes be delayed by a guaranteed transition
period, the uncertain cost of this risk is outweighed by the need to
provide some level of certainty to develop and implement known
technologies and services. We do not propose that the timetable should
be the same for all services and spectrum bands, but can vary with both
service provider and customer investment requirements, apparent public
expectations, and anticipated speed of technological development. This
is one way in which to ensure continued innovation and continually
increasing efficiency in the use of spectrum.

*Conclusions/recommendations.* In sum, the Working Group proposes:

-   A periodic adjustment in technical requirements is imperative in
    order to continue to make increasing use of spectrum; and

-   Such adjustments must be predictable in both time and scope
    (although it is probably not significant whether such adjustments
    are effectuated in the context of service rules or periodic license
    renewals).

#  Other Considerations

While significant debate exists over the merits of the exclusive use
model versus the commons model, as noted above, the command-and-control
approach may be more appropriate for some allocations and services, such
as those having elements that may be given too little weight in the
market. Examples include satellite, public safety, spectrum shared with
the federal government, broadcast, and rural services. Moreover, each
service has distinct reasons why it may be more appropriately dealt with
in a command-and-control framework.

For example, satellite services require significant negotiations over
spectrum that must be harmonized across many countries. Significant
transaction costs accompany these efforts, and it may not be
economically feasible to pursue alternative spectrum bands. Most
notably, the benefits of such harmonized spectrum accrue to spectrum
users and society as a whole, not just to satellite services, while the
costs are incurred by satellite services alone. This type of public
benefit with a cost concentrated on one party or industry appears to be
a classic market failure problem that can be addressed via certain
regulatory interventions, such as government-mandated spectrum
allocations.

Public safety, which uses spectrum as an input, is another commonly
cited example of a service that may be given too little weight in the
market. In this case, however, the potential problem may be distinct
from that associated with satellite services. As opposed to satellite
services, which may need particular bands of spectrum set aside for
global harmonization, it may be possible to address concerns related to
public safety with less intrusive regulation, including some
market-oriented policies.

Other spectrum allocation decisions have traditionally reflected
considerations that may not be fully accommodated in an exclusively
market-based approach. For example, a significant amount of spectrum is
allocated to (and shared between) both Federal Government and
non-Federal Government users. In addition, broadcasters traditionally
have faced a set of rules that represent their unique history and
services. Similarly, rural interests have unique needs that may be
costly to meet, and there is strong support for public policy that will
address these needs. Similarly, radio astronomy has particular spectrum
needs and can provide important but very long-term benefits which market
mechanisms may not fully reflect.

## International Considerations

A number of parties stressed that the United States should make a better
effort to harmonize its spectrum management policies and allocations
with those of the rest of the world, when possible.[^105] According to
these commenters, to the extent domestic policies and allocations
complement international decisions, U.S. consumers and businesses will
reap important benefits such as more international roaming and better
economies of scale with regard to equipment manufacturing. Commenters
also pointed out that while the satellite, maritime, aeronautical,
public safety and radio astronomy services have long required and
benefited from extensive international coordination, terrestrial
services like third generation wireless and radio local area network
(e.g., Wi-Fi) services are also becoming increasingly ubiquitous
requiring the same level of international coordination.[^106]

The commenters explained that the United States needs to eliminate any
credibility concerns that are raised when it advocates for an
international allocation only to later allocate the same spectrum for
different uses domestically.[^107] Various parties asserted that the
United States should formulate more effective and forward-looking
international positions to take to the International Telecommunication
Union's (ITU) World Radiocommunication Conferences (WRC) through the
regional Organization of American States (OAS) telecommunications
process administered by CITEL.[^108] It was suggested that the
Commission make it a priority to advocate for an increase in the speed
and efficiency of the ITU spectrum decision-making process.[^109] It was
also suggested that the United States appoint a professional WRC
ambassador to provide continuity of expertise between and for
WRCs.[^110]

Other parties commented on the importance of the Commission considering
how spectrum-based services are affected by spectrum use models. It was
stated, for example, that the Commission should take account of the
effect that interference caused by licensees offering newly flexible
services would have on existing cross-border interference agreements
with Canada and Mexico.[^111] Commenters asserted that a broader
regional perspective on spectrum management by the Commission could
speed deployment of services to U.S. consumers by resolving cross-border
coordination and regional policy issues earlier.[^112]

*Conclusions/recommendations.* International considerations must be
taken into account in two ways:

-   First, because regional and world-wide harmonization of band use can
    have significant advantages both in terms of truly ubiquitous
    services and economies of scale, in developing domestic spectrum
    policies and allocations, the Commission should always carefully
    consider the potential impact on international objectives.

-   Second, U.S. consumers could benefit from improved spectrum
    management coordination with our regional neighbors, especially
    Canada and Mexico.

## Public Safety 

The Working Group sought information regarding what spectrum use models
the Commission should use to ensure the provision of public safety
services and other public service uses of spectrum.

A number of commenters and participants in Public Workshop who addressed
this issue opposed applying an exclusive use model to public
safety.[^113] Although they recognized the need to encourage efficiency
on the part of public safety providers, many agreed that it is not
appropriate to make them compete for spectrum against entities that
measure spectrum value monetarily. These parties agreed that there is a
fundamental difference between commercial systems and public safety
systems, which have different funding mechanisms, are inherently
slow-moving and budget-constrained, and need very reliable
communications rather than cutting-edge equipment. In addition, they
cited public safety's need for longer equipment cycles (e.g., 25-year
cycles). For these and other reasons, they indicated that a commercial
model has limited applicability to public safety.[^114] One participant
also added that making state and local government users acquire spectrum
in the marketplace would in effect impose a federal tax on such
entities. The principal concern expressed by government and public
safety spectrum users was that they not be required to compete with
commercial users for spectrum.[^115] Some of the same concerns were
expressed with respect to non-public safety licensees whose operations
nonetheless impact public safety, such as critical infrastructure
industries (*e.g.*, electric utilities).[^116]

Not all commenters or participants in the Public Workshop thought,
however, that it is necessarily a bad idea to require government
entities to compete with commercial entities for spectrum. Martin Cave,
the one non-American who participated in the August 9 Public Workshop,
stated that he had recently recommended different regimes for public
safety and non-public safety entities in Great Britain, but only because
he did not think his audience was ready yet for competition between
government and commercial entities. He indicated that he hopes to move
to such a competitive regime in 10 to 15 years.[^117] Another panelist
advocated spectrum fees for state and local governments, saying that
such fees would encourage efficiency and that governments will not spend
the money for more efficient equipment unless they are compelled to do
so by the FCC.[^118]

When asked whether public safety and other public service uses of
spectrum can be combined with commercial uses through sharing or other
mechanisms, certain commenters indicated that such a combination is not
advisable, again stressing the different needs of public safety and
commercial entities.[^119] Parties with a particular interest in public
safety also stated that the Commission should not try to set uniform
interference standards across all bands because of public safety
services' inability to tolerate interference.[^120] Certain parties
suggested that the FCC consider segregating public safety bands (and
related rules) from other bands.[^121] One commenter proposed the
relocation of public safety to its own contiguous spectrum and that this
relocation be paid for by auctioning licenses for current public safety
spectrum at 400, 500, and 800 MHz.[^122]

One panelist advocated allowing unlicensed users to operate in bands
used by public safety at the end of a 10-year grace period.[^123] He and
at least one other panelist noted that some public safety entities are
moving to commercial spectrum (for example, operating in the 2.4 GHz
band) because that is where the newer, cheaper equipment is.
Nonetheless, other panelists opposed allowing unlicensed underlays on
public safety channels because of the potentially dire consequences of
interference with public safety operations.[^124]

One panelist noted that public safety agencies are becoming more
innovative through creative licensing schemes, such as forming
partnerships between state and local agencies and utilities and federal
agencies. By sharing costs and spectrum with others, public safety
entities are able to obtain more technologically advanced wide-area
systems than they could afford on their own.[^125]

*Conclusions/recommendations.*

-   Spectrum that is currently set aside for public safety and critical
    infrastructure use should remain so. Going forward, the Commission
    should set aside no more additional spectrum than is necessary to
    achieve goals related to public safety and critical infrastructure
    services.

-   There is considerable potential for market-oriented policies to help
    rather than burden public safety, and that would allow for more
    efficient use of spectrum to meet both public safety and commercial
    spectrum needs. The Commission should explore mechanisms for meeting
    public safety needs other than simply through dedication of spectrum
    on a command-and-control basis.

-   Public safety users should have flexibility to lease spectrum
    capacity that is available during lower-use periods to commercial
    users with a "take-back" mechanism when public safety use increases.
    Public safety use of spectrum typically is highly variable, with
    periods of low traffic and occasional usage that "spike" during
    certain times of the day or week during emergencies. Accordingly,
    there is benefit to be gained from permitting public safety entities
    to lease some of their spectrum capacity to commercial users during
    low-use periods under an arrangement whereby the spectrum can be
    reclaimed immediately when needed for public safety use. The
    potential for this type of shared use will increase as smart
    transmitters and receivers are developed that can be shut down
    immediately upon command.

-   For major regional or national emergencies, additional public safety
    spectrum needs potentially could be addressed through enhanced
    easement rights to non-public safety spectrum. In extraordinary
    national or regional emergencies (e.g., terrorist attack, major
    natural disaster), public safety may require access to spectrum
    resources significantly beyond the amount of spectrum required to
    handle their normal emergency workload. Because of the extraordinary
    nature of these events, permanent dedication of spectrum to public
    safety to meet these contingencies is likely to be highly
    inefficient. An alternative would be to address these needs through
    an "easement" mechanism that would enable public safety users to
    operate on non-public safety spectrum in such extraordinary
    emergencies, but to revert to operations on public safety spectrum
    when the emergency subsided.

## Spectrum Allocated for Government Use (or Shared with Non-Governmental Uses)

Federal users of spectrum, like public safety users, need spectrum to
provide many critical services such as national defense. By law, NTIA
and the FCC share responsibility for management of the spectrum, with
NTIA responsible for spectrum allocated for government operations and
the FCC responsible for spectrum allocated for non-government
operations. As government and non-government needs and concerns are
often quite different, this separation provides an appropriate expertise
and advocacy.

A few participants argued, however, that long-range planning has been
impeded by the split in responsibilities between the FCC and NTIA. They
claimed that the bifurcated management process results in the absence of
a comprehensive national spectrum policy, a dearth of spectrum for
numerous services that in turn drives up the cost of spectrum at
auction, and inadequate harmonization of spectrum use with other parts
of the world. Some commenters specifically argued for better
coordination with NTIA and the removal of barriers between government
and non-government spectrum.[^126] Several participants noted a loss of
efficiency and the slowness to react that results from this shared
responsibility. They pointed out significant sources of conflict that
arise from operations in adjacent bands exclusively allotted to Federal
and non-Federal use, where spurious or harmonic emissions impact
adjacent bands, and from operations in shared bands.

There are various policy options that potentially could address these
problems. For instance, more Federal users could be required to share
frequencies with each other instead of with non-Federal users, and more
non-Federal users to share spectrum with each other rather than with
Federal users. Conflict would also be reduced if there was less
interleaving between Federal and non-Federal allocations. This would
reduce the occasions requiring coordination and agreement between the
agencies. However, only a modest level of improvement could be so
achieved. The reason for the development of extensive blocks of shared
spectrum is the complementary nature of many Federal and non-Federal
uses, in location, architecture, and nature of use. The greatest
efficiency may come from accommodating complementary services wherever
possible.

Significantly, the FCC and NTIA should coordinate, to the extent
possible, the policy prerogatives resulting from this Task Force,
particularly as regards interference, licensee rights and
responsibilities, and periodic reassessments of efficiency, and adopt
them to the fullest extent possible. The effects of any FCC actions in
these regards will be severely limited if non-Federal users are
hamstrung by legacy rules that are overly protective, in light of new
technology, of shared and adjacent channel Federal users. For instance,
a FCC policy of requiring periodic increases in equipment capability
such as transmission innocuousness or receiver selectivity or
discrimination will be significantly diminished if Federal users in
spectrum that is impacted by non-Federal users are not migrating to
similarly enhanced equipment. The Commission and NTIA should work
together to minimize the indirect, as well as the direct, impact of
inefficient Federal uses on non-Federal uses and the citizenry at large,
and to adopt those principles and policies that they agree will lead to
increasing efficiency of use of the spectrum while preserving other
significant Federal interests of security and reliability. Where there
is a divergence of financial incentives or means, improved
relocation/compensation legislation and rules should be adopted to
facilitate migration of Federal users to new spectrum or to new
equipment where economically justified.

The Commission should also explore whether certain secondary market
mechanisms can promote efficiency by Federal users of spectrum. For
instance, such mechanisms could give the Federal government the right to
lease to commercial users while maintaining priority in use.
Significantly, technology has advanced to provide the option of strict
priorities of service and high degrees of security and reliability, thus
greatly enhancing the utility of non-Federal spectrum for many Federal
uses. To the extent such arrangements are utilized, the Federal
government might be able to enjoy significant cost savings, both direct
and indirect, by reducing the amount of spectrum encumbered to only that
used in space, time, and specific frequency. Additionally, such Federal
uses would necessarily keep pace with advancements in technology.

*Conclusions/recommendations.* The Working Group recommends to the
Spectrum Policy Task Force that the Commission work closely with NTIA to
consider the following issues:

-   Whether the amount of spectrum shared between the Federal Government
    and Non-Federal users can be reduced and whether there could be
    increased coordination with respect to interference, spectrum rights
    and responsibilities, and periodic reassessment of spectrum use.

-   Whether Federal users should be allowed to engage in secondary
    market transactions with non-Federal users, perhaps while retaining
    priority in access.

-   How to improve coordination in adopting technical standards and
    policies for both Federal and non-Federal spectrum and services.

-   Whether to create a third-party board of scientific experts that can
    be consulted to arbitrate, on either a binding or non-binding basis,
    conflicts that arise from a disagreement in engineering opinions
    that cannot be resolved to the mutual satisfaction of both agencies.

## Broadcast Services

The Commission has traditionally allocated spectrum specifically for
broadcast use, based on statutory public interest considerations and the
free over-the-air nature of broadcast service. Many commenters argued
that these characteristics distinguish broadcasting from other
market-based uses of spectrum, and that the Commission should therefore
continue to dedicate some spectrum specifically for broadcast use on a
command-and-control basis.[^127] One commenter analogized the setting
aside of spectrum for public service use by broadcasters to setting
aside space for public parks, libraries, museums, and other public
facilities and institutions.[^128] Another commenter stressed the
importance of setting aside spectrum for non-commercial educational
broadcasting, noting that "\[s\]ince 1952, Congress . . . has
consistently supported the policy goal of a reserved space in the
spectrum for noncommercial educational purposes through federal
financing and access to multiple distribution platforms."[^129]

Other parties, however, contended that the continued dedication of
spectrum for broadcasting, and particularly for commercial broadcasting,
is increasingly anachronistic as the public gains access to alternative
sources of programming and information from cable television, satellite
services, the Internet, and other outlets.[^130] These parties argued
that the original rationale for command-and-control regulation of
broadcasting, which is based on spectrum scarcity, is undermined by the
proliferation of digital technology that has vastly increased the actual
and potential efficiency of spectrum use to meet consumer needs.

The Working Group concludes that for the time being, there are valid
reasons to continue applying the "command-and-control" model to existing
broadcast spectrum, although there are also alternatives that should be
considered for introducing greater flexibility into broadcast spectrum
regulation in the short term, and transitioning away from the
command-and-control model, with limited exceptions, over the long term.
Broadcasting has consistently been a central focus of Congress and the
Communications Act, which regulates broadcast content and behavior by
placing certain public interest obligations on broadcast licensees.
These include requirements that broadcasters provide "reasonable access"
to candidates for federal elective office and afford "equal
opportunities" to candidates for any public office,[^131] children's
educational programming requirements,[^132] restrictions on airing of
indecent programming,[^133] and provisions relating to the rating of
video programming,[^134] equal employment opportunities rules,[^135] and
other "behavioral" rules that mandate accountability.[^136] While not
exhaustive, this list demonstrates that "command-and-control" regulation
of broadcasting has a significant statutory basis.

In addition to the statutory public interest obligations on
broadcasters, there are other characteristics of broadcasting that
potentially affect broadcast spectrum policy considerations.[^137]
Broadcast service is traditionally not subscriber-based -- it is a
"universal" service that is widely accessible to the general
public.[^138] In addition, localism and diversity of ownership are two
important public interest objectives that have been associated with
broadcasting to a greater degree than other spectrum uses.[^139]
Finally, the broadcaster's relative lack of control over its signal
reception equipment is another component that differentiates broadcast
from its wireless counterparts.[^140] In cellular or PCS systems, for
example, licensees have the ability to replace or modify the equipment
used by their customers, whereas in broadcasting, consumers and third
party manufacturers play the primary role in the replacement of
receivers. This affects the rapidity with which technological advances
in equipment can be introduced into the marketplace and assimilated by
consumers -- a factor that has affected the pace of the DTV transition.

The transition of broadcast to a digital world, which is already under
way, should help to alleviate concerns regarding inefficient and
inflexible use of broadcast spectrum. As broadcasters convert to
digital, some broadcast spectrum can be recovered for reallocation and
reassignment to more flexible uses, as in the case of the 700 MHz band.
The Commission has also allowed for some flexible use of broadcast
spectrum,[^141] and should consider additional ways to allow greater
flexibility consistent with broadcasters continuing to meet their core
public interest responsibilities. In addition, the Commission should
consider whether it is feasible to make "white space" in the broadcast
bands available for other uses.

Over the longer term, the Commission should periodically reevaluate its
broadcast spectrum policies to determine whether they remain necessary
to accomplish the public interest objectives they are intended to
promote. In particular, such reevaluation should consider the extent to
which the public interest benefits provided by dedication of spectrum to
broadcasting under a command-and-control regime can be provided through
the application of more flexible, market-oriented spectrum policies. It
is likely that there will be a continued need to set aside some spectrum
for non-market based broadcast uses, such as non-commercial and
educational broadcasting. But assuming that technological advances
continue to occur and that scarcity of access to spectrum resources
decreases, it is equally likely that the continued application of
command-and-control policies to commercial broadcasting can be
substantially relaxed, or may not be needed at all, to ensure the public
availability of the information and programming provided by commercial
broadcasting outlets.

*Conclusions/recommendations:*

-   For the time being, broadcast spectrum should continue to be subject
    to the command-and-control model due to the public interest
    obligations placed on broadcasters and the free over-the-air nature
    of broadcast service.

-   The ongoing transition to digital television, upon completion, will
    allow for more efficient and flexible use of broadcast spectrum. The
    Commission has allowed for some flexible use of broadcast spectrum
    and, over time, should continue to consider ways to increase
    flexibility and encourage additional introduction of efficient
    technology for broadcasting.

## Rural vs. Urban Areas 

The Working Group addressed the issue of whether the Commission's
approach to spectrum management should vary in different portions of the
spectrum, in different geographic areas, or for different types of uses.
Many commenters focused considerable discussion on the issue of rural
areas, where spectrum is almost uniformly uncongested even in the most
heavily used bands below 3 GHz.[^142] Although some parties indicated
that the Commission should not adopt different spectrum allocation and
assignment policies for different portions of the spectrum or different
geographic regions, there is some support in the record for applying
different rules to spectrum usage in urban and rural areas, and it was
generally recognized that the economic and technical considerations in
rural areas can be different than in urban areas.[^143]

*Access to spectrum.* Many advocates for rural interests asserted that
rural carriers have difficulty gaining access to rural spectrum, even
though it is not scarce. Specifically, rural carriers indicated that the
Commission's tendency to adopt large geographic service areas that
include both urban and rural areas prevents rural carriers from
competing at auction for an entire license area.[^144] In addition,
rural carriers commented that the Commission's partitioning and
disaggregation rules do not benefit rural providers because they must
incur significant transaction costs by negotiating access to rural
spectrum with multiple large carriers that may opt to retain such
spectrum for future use. It was further stated that impediments to
secondary markets arrangements that would enable providers to gain
access to spectrum, and the Commission's build-out rules, which require
coverage on a population basis, result in hoarding of rural spectrum and
contribute to build-out only in urban areas.[^145]

*Interference and other technical considerations.* Commenters also
discussed whether there should be different interference standards for
rural and urban areas. Certain parties advocated different permissible
power levels for rural areas on the theory that where there is less
congestion, higher permissible power levels would allow for fuller usage
of spectrum.[^146] Others objected to this idea, arguing that having
different rural and urban regimes is impractical because it is not a
simple matter to define urban versus rural, as many areas fall somewhere
in between and problems may arise when formerly rural areas undergo
development.[^147] Thus, there was a difference of opinion as to whether
different technical rules for rural areas are feasible or desirable. For
instance, one participant in the Public Workshop indicated that unusual
rural conditions have been dealt with satisfactorily through the waiver
process,[^148] and another thought that it will be possible in the
future for transmitters to determine if they are operating in a rural or
urban area and adjust power accordingly.[^149]

*Conclusions/Recommendations.* The Working Group recommends to the
Spectrum Policy Task Force as follows:

-   The Commission should explore the option of taking different
    approaches with regard to rural and urban spectrum, while
    recognizing, that the distinction between high- and low-congestion
    areas does not necessarily require non-uniform rules where the rules
    do not artificially cause spectrum congestion or constrain the use
    of uncongested spectrum.

-   When licensing by geographic area, the Commission should explore
    using licensing areas that distinguish between rural and urban
    areas, so that rural bidders can bid directly for rural spectrum
    without having to bid against entities seeking urban spectrum; it
    should note, however, that new, rural licensing areas may not be the
    optimal solution for all bands because it would significantly
    increase the number of overall licenses and drive up the
    administrative and transaction costs of aggregation.

-   To improve rural providers' ability to gain access to spectrum, the
    Commission should promote the development of an efficient and
    flexible secondary markets regime that, in addition to partitioning,
    facilitates the leasing of spectrum usage rights in rural areas.

-   The Commission should consider expanding "easements" on licensed
    spectrum (as discussed above) in rural areas to allow access, on a
    non-interference basis, by other spectrum users.

-   In general, interference and other technical rules should be
    calibrated to situations where spectrum is likely to be in the
    greatest demand and the most congested, *i.e*. urban areas. Thus,
    the rights of spectrum users to emit RF energy and the obligation to
    accept interference from others should be set at levels suitable for
    such areas, as this will increase spectrum efficiency.

-   While interference rules should not necessarily prevent licensees
    from operating at higher power on a non-interference basis in less
    congested areas, licensees should not have expanded interference
    protection rights or reduced obligations to avoid interference under
    the rules. Thus, if two spectrum users come into conflict in an
    otherwise uncongested area, the "default" rules would prevail and be
    the basis for any negotiations between them.

-   The Commission should explore setting technical rules for unlicensed
    spectrum that allow for higher-power operation in less populated
    areas, as power limits may be less necessary in low-population areas
    where fewer devices operate and interference is less likely.

# Transition

As discussed above, this report recommends that the Commission move
towards assigning flexible usage rights in spectrum within its
jurisdiction, whether under an exclusive rights or a commons model.
However, the practical reality is that most spectrum within the
Commission's jurisdiction is already occupied by incumbent spectrum
users. Moreover, most of these incumbents are governed by legacy
command-and-control regulations that substantially limit allowable uses
of the spectrum. Therefore, successful implementation of the
recommendations in this report requires the Commission to consider how
to migrate away from these restrictive legacy licensing regimes to more
flexible rights models that create opportunities for new, more efficient
and beneficial uses. Specifically, the Commission must determine which
bands should be transitioned to expanded flexible rights models and how
the transition should be accomplished.

Several parties discussed methods that the Commission might employ to
determine which bands should be transitioned to more flexible rights
models. Certain parties indicated that the Commission should inventory
spectrum needs on a regular basis to forecast demand, and that it should
work to identify inefficiently used spectrum.[^150] As discussed above,
several parties made the point that there is a large amount of
significantly underutilized spectrum.[^151] Some parties suggested
setting up an independent review commission to find blocks of
inefficiently used spectrum (e.g., a mechanism similar to the Base
Realignment and Closure Commission process as a means of facilitating
reallocation decisions and overcoming any political difficulties), or
drawing upon independent consulting firms or technical advisory
committees to develop technical analyses for reallocation
decisions.[^152] Some commenters suggested that the Commission should
develop a rigorous cost-benefit analysis to be completed with any
reallocation decision, examining both technical and financial
ramifications.[^153] And, as discussed above, several commenters
suggested that special considerations should be given when determining
whether and how to transition certain bands of spectrum, such as those
used for public safety or broadcasting, to an expanded flexible rights
model.

There also was considerable discussion about whether the Commission
should reallocate and assign the underutilized legacy spectrum to new
licensees or, instead, simply expand the rights of incumbents to use the
spectrum in more flexible ways. Several commenters proposed that the
Commission reallocate and reassign underutilized spectrum to more
flexible use through an auction process.[^154] These commenters objected
to granting expanded flexibility to incumbents on the grounds that such
a course would serve to prop up faltering businesses and might give
incumbents, most of whom did not obtain their spectrum through auction,
an inequitable windfall. For instance, some incumbent wireless service
licensees objected to granting other incumbent licensees the flexibility
to provide commercial mobile services even though they had not competed
at auction.[^155] These commenters claimed that this policy would create
less of an incentive for them to invest in their networks. In addition,
several commenters contended that a substantial grant of flexibility was
equivalent to assigning a new license, and that the Commission is
required to make such new licenses available through a competitive
bidding process.[^156]

Other commenters, however, contended that granting expanded rights to
incumbents would be the best means of transitioning spectrum to the most
efficient uses, maintaining that the benefits to be reaped from allowing
spectrum to be put to its highest and best use immediately -- in the
form of new services and spectral efficiency -- would outweigh the costs
of windfalls to incumbents.[^157] For instance, MSS providers stated
that efficiency gains would follow from a policy that allowed them to
conduct terrestrial mobile operations in spectrum that MSS would
otherwise render useless for traditional terrestrial mobile
purposes.[^158] They asserted that granting regulatory flexibility may
lower costs and eliminate inefficiencies by allowing MSS operators to
extend their addressable markets to urban and suburban areas, increase
the number of subscribers by offering a ubiquitous and previously
unavailable mobile service, and lower costs by increasing the number of
handsets produced.

To the extent that the Commission determined that the appropriate avenue
would be to clear a band of incumbents and reallocate it to more
flexible use, several parties recommended that the Commission create a
"trust fund" from auction proceeds in order to pay for relocation costs
involved in the band clearing.[^159] In addition, some commenters
advocated using incentives, such as user fees, to encourage licensees to
more efficiently use spectrum that was underutilized.[^160]

As also discussed above, various parties focused on the need for
long-term planning on the part of the Commission.[^161] For instance,
parties suggested that the Commission should devise a comprehensive
spectrum management plan for the next several years by anticipating
future rulemakings. As noted above, a three- and ten-year plan were
suggested.[^162] Another commenter proposed that the Commission take a
20-year view to assist investment, spur innovation, and focus on ways to
transition bands to digital technologies. Among the other ideas
suggested was that of using the expiration of licenses as a time to
transition to new spectrum management approaches.[^163]

## General Transition Considerations

In determining whether and how to transition legacy command-and-control
bands to more flexible rights models, the Commission should focus first
on initiating transition in those bands where additional flexibility
will provide the greatest benefits at the least cost. In general, the
greatest benefits will be realized in those bands in which the current
regulatory regime has led to significant underutilization or inefficient
use of the spectrum. However, the Commission must also weigh the
potential cost of transition, both in terms of its impact on incumbents
and on the public. Assessing these potential costs and benefits, the
Working Group concludes that there are some spectrum bands in which
introducing fundamental regulatory changes in the near term may not be
necessary, appropriate, or practical. These include:

-   Bands licensed under flexible use rules or currently allocated for
    such use;

-   Bands dedicated for use by unlicensed devices;

-   Public safety spectrum;

-   Broadcast spectrum, including DTV spectrum that is subject to
    ongoing rulemakings;

-   Spectrum bands currently shared with the Federal Government; and

-   Bands licensed on a shared or non-exclusive basis.

In bands that fall outside these categories, however, the Working Group
recommends that the Commission initiate proceedings to begin the
transition of its spectrum regulations to allow more flexible uses.
Moreover, in the long term, the Commission should consider transitioning
to a flexible rights model in all bands throughout the spectrum where
such action would further the Commission's spectrum policy goals.

## Available Transition Mechanisms

Once the Commission identifies particular bands that are suitable for
transition, it will need to identify appropriate transition mechanisms.
Historically, the Commission has used a number of different transitional
mechanisms to move spectrum from narrowly-defined legacy uses to more
flexible new uses. In addition, other mechanisms that have not
previously been used are also available. Generally, the core issue for
all of these transition mechanisms is the treatment of incumbents: Do
they remain in the band or are they cleared or relocated? If incumbents
are cleared or relocated out of the band, what mechanisms are used? If
incumbents remain in the band, does the Commission grant them expanded
rights outright or does it use a new licensing vehicle to award expanded
rights?

Transition options generally fall into the following categories, though
variations and combinations of each are also possible: (1) reallocating
a particular band to the flexible rights model, with assignment of the
expanded rights to new licensees and the mandatory relocation of
incumbents to other bands; (2) allowing incumbents to remain as
licensees for those portions in a band that they currently occupy, while
assigning "overlay" licenses for additional rights and/or unoccupied
"white space" not assigned to incumbents; (3) reallocating and assigning
spectrum to new licensees under the flexible rights model, and using
voluntary market-based band-restructuring incentives, such as a
two-sided auction, to encourage incumbents to clear or restructure the
band; or (4) granting expanded, flexible rights to the incumbent
licensees already occupying the band. Each of these options is discussed
in general below.

### Expanded rights "overlay" licenses combined with mandatory relocation of incumbents

Under this option, the Commission reallocates a particular band of
spectrum to allow for more flexible uses, grants the expanded usage
rights under new licenses (generally via auctions) and requires
incumbent licensees and the services they provide to clear the band and
either cease operating or relocate to other bands. The Commission has
used this option in several instances, including broadband PCS.

There are several variations of this option, depending on the conditions
that must be met in order for mandatory relocation of incumbents to
occur. Under one approach (which was used for broadband PCS), new
spectrum licenses are issued under flexible rules while incumbents are
required to clear, relocate, or retune to alternative bands by a
specified date. In addition, the new licensees may be required to pay
the costs of relocating incumbents. Under a more conditional approach
(which was adopted for 700 MHz DTV spectrum), incumbents are required to
clear or relocate only if and when certain external conditions are met,
such that there is no fixed time frame for clearing and relocation.
Under this approach, while new licensees are not required to pay the
costs of clearing and relocating incumbents, they may pay for voluntary
early clearing by incumbents.

### Expanded rights "overlay" licenses with grandfathering of incumbents 

Under this option, the Commission grants expanded usage rights under new
licenses, which are "overlaid" on top of the incumbent licenses.
Incumbents retain their existing rights (including interference and
renewal rights) on a grandfathered basis, and are not subject to
mandatory band-clearing or relocation.

This overlay option has been used in services such as paging and SMR
where the Commission is converting from site-based to geographic-area
licensing, there is unlicensed "white space" (geographic areas where
incumbents are not currently authorized), and incumbent and potential
new uses are generally compatible. Under this option, incumbents can
only acquire expanded rights, including the ability to expand their
systems beyond their existing site-based contours, by obtaining overlay
licenses. Alternatively, new overlay licensees must protect incumbents'
existing systems unless they buy the incumbents out.

### Expanded rights "overlay" licenses combined with voluntary band-clearing/restructuring incentives for incumbents 

Under this option, the Commission reallocates restricted spectrum to
more flexible use, grants the expanded usage rights under new licenses,
and establishes a simultaneous market-based exchange mechanism to
encourage voluntary band-clearing or restructuring of the band by
incumbents. This mechanism is designed to create incentives for
incumbents either to relinquish their licenses and clear the band for
new users or to exchange their restricted-use licenses for the expanded
rights available under the new license.

The Commission has not employed this option to date, but a number of
potential mechanisms have been proposed that could facilitate this type
of exchange. For instance, one mechanism that has been suggested is a
"two-sided" auction, in which the Commission would auction expanded
usage rights to spectrum under new licenses, and incumbents would
voluntarily make their spectrum rights in the band available for auction
at the same time.[^164] Under this approach, incumbents would be
eligible to participate in the auction for expanded rights only if they
offered their own spectrum licenses for sale in the same auction.
Moreover, incumbents would be allowed to "bid" on their own spectrum in
addition to spectrum offered by other incumbents and by the FCC.
Incumbents who chose not to offer their licenses would retain their
incumbent rights, but would not be granted expanded rights. This
mechanism provides several incentives to incumbents to offer their
spectrum rights for possible exchange. First, if incumbents voluntarily
participate, they would immediately have their licenses converted to
expanded flexible rights licenses, thus increasing the value of their
spectrum usage rights. In addition, incumbents would not be forced to
sell their spectrum usage rights to others, although they would face the
opportunity cost of not doing so. Finally, incumbents would be able to
keep any proceeds from the sale of their rights to others, and could, as
well, potentially obtain rights to relocate to other parts of the
auctioned band (or other bands altogether) that might be more
advantageous to them.

### Expanded rights granted to incumbent licensees under existing licenses

Under this option, the Commission grants expanded flexible rights
directly to incumbents through modification of their existing licenses.
Potential new entrants are not able to bid for or otherwise obtain these
expanded rights, except by acquiring the licenses from incumbents
through the secondary market. This option has been used by the
Commission in several bands. For example, in the CMRS Flexibility
proceeding, the Commission granted CMRS providers the right to provide
fixed in addition to mobile services under their existing licenses.

## Factors Affecting the Choice of Transition Mechanism

The Commission must consider a number of factors when deciding which
transition mechanisms to implement. These factors may vary significantly
from band to band, suggesting possible advantages to taking different
approaches in different bands.

Major factors in the Commission's evaluation of options include:

-   The restrictive nature of licensee rights currently afforded
    incumbents in the band when compared with the flexibility that would
    be gained by transitioning to an expanded flexible rights model;

-   The types of services currently offered in the band and the
    potential consumer impact of transitioning to an expanded flexible
    rights model of licensing;

-   The number of incumbents in the band;

-   The likelihood that expanded flexibility would lead to rapid changes
    in the use of the band or instead would have only a gradual impact
    on existing systems and uses;

-   The practical effect on incumbent systems of providing expanded
    flexibility under a new licensing model (e.g., the potential for new
    users to co-exist in the band with incumbents);

-   The nature and extent of investments made by incumbents in their
    acquisition of licenses and the building of systems, including
    whether incumbents have had the opportunity to recoup their
    investments; and

-   The time and transaction costs associated with developing and
    implementing any particular transition mechanism in a particular
    band or bands, compared to other transition mechanisms.

[New licensing with mandatory relocation.]{.underline} As a preliminary
matter, consideration of this option depends on the availability of
alternative spectrum that would be suitable for use by incumbent
licensees required to relocate. Assuming that alternative spectrum is
available, this option may be preferred in cases where band-clearing is
likely to be critical because of the technical incompatibility between
existing uses by incumbents and prospective uses. However, it is
important that the benefits to be obtained through mandatory
band-clearing outweigh the costs and time required to complete the
relocation of incumbents, and that the relocation be consistent with the
Commission's broader spectrum goals for the relocation band.

In order to ensure maximum efficiency gains in the near term and avoid
holdout problems, it is preferable under this option for there to be a
fixed timetable for mandatory relocation. Furthermore, this option is
likely to work best when there are market incentives for new licensees
and incumbents to negotiate voluntary relocation agreements, although it
may also be appropriate to develop mandatory compensation mechanisms in
the event that the voluntary ones prove inadequate.

[New licensing with incumbent overlay.]{.underline} The "overlay option"
generally requires the presence of a significant amount of unlicensed
"white space" that would lend itself to an overlay licensing scheme.
This option also is likely to work best where there is a limited need to
relocate incumbents to other bands and where incumbents have incentives
to acquire rights to the surrounding white space, e.g., in bands that
are being converted from site-based to geographic area licensing and
where incumbent uses and potential new uses are generally compatible. In
considering use of this option, the Commission needs to assess the
degree of risk that incumbents will hold out against transitioning to
more flexible use, which could hinder the Commission's goal of enabling
more efficient use of the spectrum.

[New licensing with voluntary band-clearing/restructuring.]{.underline}
This option has potential advantages when (1) the new flexible rights
regime being implemented represents a significant increase in
flexibility over the legacy rules, and (2) this expanded flexibility is
likely to lead to rapid changes in the market value and the actual use
of the spectrum. In such cases, a simultaneous exchange mechanism may be
the fastest and most efficient means of enabling incumbents and
potential new spectrum users to restructure and reassign spectrum rights
within the band to facilitate new uses. In determining whether to employ
this option, the Commission should compare the administrative costs and
efficiency of implementing a simultaneous exchange mechanism with that
of employing other transition options, particularly the option of
granting expanded rights to incumbents discussed below.

[Expanded rights granted to incumbents.]{.underline} This option has
potential advantages where the practical impact of granting incumbents
additional flexibility is limited or is likely to be gradual rather than
immediate, in which case it is likely that the operation of secondary
markets over time can effectively distribute these flexible rights so
that efficiency gains can be achieved. As a practical matter, this
option also requires that there be no "white space," i.e., that all
spectrum in the band be previously assigned to incumbents (to avoid
ambiguity as to who is entitled to additional rights). While granting
incumbent licensees additional flexibility may allow for more immediate
expansion of the availability of flexible rights licensing models, it
also may raise equity issues relating to possible windfalls or unjust
enrichment. The larger issue is whether such a policy would encourage
parties to make future bids on presumably low-cost spectrum that is
allocated for low-value uses and that has no flexibility, then petition
for an expansion of those rights after acquiring the license.
Accordingly, in considering this option, these equity issues will need
to be balanced against the potential gains in administrative efficiency
and the potential public benefits of providing additional flexibility to
incumbents in the band.

*Conclusions/recommendations.* The Working Group recommends that the
Commission undertake the following:

-   Identify encumbered bands licensed under legacy command-and-control
    regimes that are suitable for transitioning to expanded flexible
    rights licensing models within the next five years --

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```
-   Set a goal of identifying 100 megahertz of spectrum below 3 GHz for
    this transition phase.

-   Develop processes for determining which bands provide greatest
    opportunity for improving efficient use through adoption of expanded
    flexible rights licensing schemes.

-   Look for band "defragmentation" opportunities (i.e., consolidating
    narrowband spectrum "slices").

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```
-   Choose appropriate transition mechanisms for the different bands
    being transitioned --

```{=html}
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```
-   Look for bands in which to test different transition mechanisms.

-   Promote policy and legislative changes to facilitate the conducting
    of two-sided auctions.

-   Encourage migration of compatible technologies into common band
    groupings.

    **Acknowledgements**

The Spectrum Rights and Responsibilities Working Group wishes to thank
the participants at the Public Workshop on Spectrum Rights and
Responsibilities held on August 9, 2002. We are grateful for the many
suggestions and insights which they shared with us. We would also like
to thank the many Commission Staff members in addition to the members of
our working group who helped to improve the quality of this report.

**Appendix I**

**Bibliography (with Summaries)**

### M. Calabrese, "Battle Over the Airwaves; Principles for Spectrum Policy Reform," New America Foundation, Sept. 2001. http://www.newamerica.net/Download_Docs/pdfs/Pub_File_610_1.pdf

The focus of this article is a discussion of the principles that
Calabrese believes should guide spectrum policy reform. Four principles
Calabrese considers to be important are: (1) the airwaves are a public
asset owned in common by all Americans; (2) all commercial licensees
should pay a market-based rent for the use of spectrum; (3) rigid zoning
of the airwaves should be replaced by more flexible, market-driven
allocation process; (4) revenue from licensing spectrum should be
reinvested in new public assets that benefit all Americans and be used
to update our educational technology and public media for the digital
age. Calabrese suggests that the immediate problem the FCC faces is the
shortage of spectrum caused by the rapid diffusion of wireless
communications. The short-term issue is how to reallocate spectrum from
existing licensees (who pay nothing) to emerging technologies
(particularly wireless broadband services) that promise both higher
value-added services and the payment of substantial public auction
revenue. Therefore, Calabrese suggests that auctions should occur as
soon as possible. Calabrese claims that the longer-term challenge is to
modernize spectrum policy in a way that combines more flexible and
market-oriented allocation rules with a level playing field that
requires all commercial users to pay a market rate to rent space on the
public airwaves. Charging all commercial licensees would result in more
efficient use of spectrum as well as in the formation of a private
secondary market. Calabrese also believes that the public should
maintain control of spectrum and that licenses should be for
strictly-defined periods. He suggests a transition method which: (1)
sets a date when incumbent licenses will be auctioned rather than
automatically renewed; (2) imposes an airway "right of way" fee similar
to a franchise fee typically paid by cable companies to local
governments for terrestrial rights of way; (3) combines the future
auction date with escalating interim fees. Calabrese also suggests that
lease fees could be an option where auctions are not practical (e.g. for
small business users and public sector users).

### R. Carlberg, "The Persistence of the *Dirigiste* Model: Wireless Spectrum Allocation in Europe, *a la Francaise*," 54 Fed. Comm. L.J. 129 (2001). http://www.law.indiana.edu/fclj/pubs/v54/no1/Carlberg.pdf

Carlberg examines spectrum allocation for 3G mobile wireless networks in
the European Union. He claims that the EC committed itself to a
schizophrenic policy when it allowed member states to devise their own
methods of allocating frequency spectrum. In particular, Carlberg
criticizes the French *dirigiste* policies where *dirigisme* refers to
the central government's role in directing the French economy. He claims
that the EC has erred in two crucial aspects of its spectrum policy. It
imposed short-term deadlines and pushed for the speedy creation of a 3G
market. This may have the effect of an over-commitment of resources by
telecom firms and financial institutions to a market where demand is
only speculative. In addition, the EC yielded to countries like France
that wanted to maintain substantial control over the selection of the
license and near-managerial control over the future market. Therefore,
the EC did not require free market auctions for 3G licenses, thus
undercutting the EC's policy of market liberalization and of greater
competition among European firms.

### R.H. Coase, "The Federal Communications Commission," 2 J.L. & Econ. 1 (1959). 

Coase begins this article with an overview of the development of
government regulation of spectrum in the United States. He then
discusses the debate over whether the FCC's consideration of programming
content when granting licenses is in violation of the First Amendment to
the Constitution which protects the freedom of the press. Finally, Coase
discusses the system used by the FCC (prior to 1960) to allocate
spectrum and whether or not spectrum should be treated as private
property. Coase argues that licensees should have to pay for spectrum
use and states that the aim of regulation should be to maximize output
as opposed to minimizing interference. Coase argues that it is not
necessarily optimal to completely eliminate interference, but that any
gain resulting in interference should more than offset the harm it
produces. He also makes an argument for the use of property rights but
also notes that when large numbers of people are involved, the argument
for the institution of property rights becomes weaker and that for
general regulations becomes stronger. He suggests that only practical
experience can answer the question of how far delimitation of rights
should come about as a result of strict regulation and how far as a
result of transactions on the market.

### R.H. Coase, "The Nature of the Firm," 4 Economica 398 (1937). 

Coase was responsible for the initial development of the theory of the
firm which he describes in this very influential paper. A firm can be
defined as a group of people who have organized themselves for the
purpose of transforming inputs into outputs. Coase develops a theory
explaining why these firms exist. That is, why do people organize in
this fashion? Why, if the market is the most efficient way of allocating
resources, do producers of different inputs (e.g. owners of capital and
workers with various skills) allow decision-making to be centralized? If
a market is better at allocating resources than a central planner then
why is the creation of a firm necessary? Within the firm, individual
bargains between the various co-operating factors of production are
eliminated and for a market transaction is substituted an administrative
decision. Coase notes that production could possibly be carried out in a
completely decentralized way by means of contracts between individuals.
But, if the costs of these transactions are very high or if short term
contracts would be unsatisfactory, firms will emerge to organize what
would otherwise have been market transactions. The limit to the size of
the firm is set where its costs of organizing a transaction become equal
to the cost of carrying it out through the market. These transaction
costs determine what the firm buys, produces, and sells. Coase notes
that a firm will tend to be larger: (1) the less the costs of organizing
and the slower these costs rise with an increase in the transactions
organized; (2) the less likely the entrepreneur is to make mistakes and
the smaller the increase in mistakes with an increase in the
transactions organized; (3) the greater the lowering in the supply price
of factors of production to firms of larger size; (4) the smaller the
spatial distribution of the transactions organized and the
dissimilarities of these transactions; (5) when inventions such as the
telephone reduce the costs of organizing spatially.

### R.H. Coase, "The Problem of Social Cost," 3 J.L. & Econ. 1 (1960). 

This very influential paper laid the groundwork for the development of
the Coase Theorem (for which the economist, Joseph E. Stiglitz, coined
the term). The Coase theorem asserts that an optimal allocation of
resources can always be achieved through market forces, irrespective of
the legal liability assignment, if information is perfect and
transactions are costless.[^165] Coase first advanced the proposition on
which this theorem is based in "The Federal Communications
Commission"[^166] and develops it in more depth here. In this article,
Coase examines the actions of businesses that have harmful effects on
others and examines how the assignment of property rights can
potentially mitigate these harmful effects. He also discusses the merits
of and costs to government regulation. Coase shows that if an initial
delineation of property rights is established, the ultimate allocation
of resources which maximizes the value of production is independent of
the legal position if the pricing system is assumed to work without
cost. In reality the pricing system does not work without cost. There
are transaction costs to carrying out market transactions which may
prevent many transactions that otherwise would have been carried out.
These costs include the costs of negotiating, drawing up contracts, and
enforcing these contracts. When transaction costs are taken into
consideration, the initial delimitation of rights does have an effect on
efficiency and the allocation of resources. In a situation in which
there exist high transaction costs, direct government regulation may be
necessary. Instead of instituting a legal system of rights which can be
modified by transactions on the market, the government may impose
regulations which state what people must or must not do and which must
be obeyed. But there are costs to government regulation as well which
include: (1) bad decisions made regarding restrictive and zoning
regulations; (2) political pressures; (3) operating without any
competitive check. Government regulation is useful when a large number
of people would need to be involved with the bargaining in a market
system because the costs of handling the problem through the market or a
firm would be high in this situation. Coase argues that when considering
regulation, the government must decide whether the gain from preventing
the harm is greater than the loss which could be suffered elsewhere as a
result of stopping the action which produced the harm.

### P. Cramton, E. Kwerel, and J. Williams, "Efficient Relocation of Spectrum Incumbents," 41 J.L. & Econ. 647 (1998). http://www.market-design.com/files/98jle-efficient-relocation.pdf

The authors examine the relative efficiencies of alternative rules for
relocating spectrum incumbents. They compare two alternative types of
property rights, the "right to stay" and the "right to move." Under the
right to stay rule, an incumbent is free to use the spectrum according
to the terms of the existing license. Under the right to move rule, the
entrant can unilaterally move the incumbent. There are two versions of
the right to move rule: the right to move with compensation to the
incumbent and the right to move without compensation. The authors find
that giving the new entrant the right to move the incumbent with
compensation can reduce negotiation costs and promote efficiency when
there is private information about spectrum values but good public
information about the cost of relocating the incumbent. They also note
that adopting an efficient relocation rule is especially important in a
setting like PCS, where the reallocation brings much needed competition.

### R. Crandall, J. Eisenach, J. Gattuso, T. Hazlett, P.W. Huber, G.A. Keyworth II, T.M. Lenard, W.C. Myers, P. Pitsch, K. Robinson, G. Sidak, and A. Thierer, "Privatizing the Electromagnetic Spectrum," *Future Insight* 3.1, May 1996. 

The authors give some very specific recommendations for managing
spectrum policy so a somewhat longer summary is presented here. The
authors state that the overarching goal should be to maximize the value
of spectrum to the American people. The current system is government-run
and centrally managed but the authors believe that the best means of
achieving efficient use of the spectrum is to rely principally on market
forces They state three problems with the current system: (1) the FCC
lacks the information necessary to make efficient decisions; (2) the
process has been used by special interests to delay competition and
innovation; (3) the current system has held fallow or underutilized a
substantial portion of the spectrum for government purposes.

The authors recommend that within its explicit or implied service area
and spectrum block, a licensee should be given: (1) service and
technical flexibility; (2) freedom to resell or sublease; (3) freedom to
pick regulatory classification. Specifically, the authors recommend that
the FCC prepare an overlay system of licenses that would permit the
exhaustive assignment of the 402 MHz of spectrum allocated for
television broadcasting services. In order to do this the FCC should
create licenses of 20 MHz and no smaller than the relevant ADI and
assign overlay licenses using simultaneous multiple round auctions. The
authors believe that the FCC should permit aggregation of overlay
licenses, subject only to competitive considerations and that existing
TV broadcast licensees be given flexibility in use. The authors
recommend that currently unassigned spectrum be made available in an
efficient manner and that the new assignments should be: (1) exclusive;
(2) have the same marketplace freedoms as existing licensees; (3)
assigned through simultaneous multiple round auctions where there are
mutually exclusive applicants. Existing licensees in these bands would
be protected and would gain flexibility in use and the FCC would define
interference radiation limits between new licensees. The FCC should
maximize the value of the spectrum licenses by auctioning broad,
low-frequency bands of contiguous spectrum that are not fully assigned.

Similar incentive-based reforms are recommended for the spectrum used by
the federal government and public safety community. The authors
recommend that: (1) any state may assume responsibility for managing the
spectrum currently allocated to public safety uses within its state
boundaries provided it notifies the FCC of its plans; (2) any state
government assuming spectrum management for public safety frequencies
may grant licensees the same flexibility in use available to private FCC
licensees; (3) interference disputes between states be resolved at the
FCC; (4) within one year the federal government make an additional 20%
of its exclusive or shared spectrum below 5 GHz available to the FCC for
allocation to private sector licensees using auctions. After two years,
the FCC should prepare a cost-benefit report on the effects of
implementing proposed legislation which would include: (1) an estimate
of the change in costs of accessing spectrum; (2) the net economic and
social benefits accruing from more flexible use of spectrum; (3) the
impact on low power users; (4) a discussion of how reforms affected the
international allocation of spectrum, the setting of technical
standards, the development of new uses of the spectrum, the availability
of advertiser-supported programming, and the use of spectrum by the
federal government and public safety community.

### A. De Vany, "Implementing a Market-Based Spectrum Policy," 41 J.L. & Econ. 627 (1998).

De Vany contends that the block allocation method results in a great
portion of the spectrum going unused and, since it fixes technical
standards for each block, technological innovation is prevented. De Vany
believes that spectrum should be unbundled from broadcast and
transmission facilities and that the "commoditization" of spectrum will
facilitate standardization, price discovery, and open access to diverse
users. He believes that a liquid secondary spectrum market will lower
transactions and entry cost, making telecommunications markets
contestable. De Vany contends that unbundled spectrum property rights,
commoditization, and open markets will give the public access to this
public resource. He suggests that the government hold 2-sided
simultaneous auctions with package bidding for interdependent licenses
which differ in frequency and scope. This, De Vany believes, would
result in voluntary spectrum clearing and reallocation. De Vany notes
that if the government wants to raise revenue as well, the government
could retain the difference between the bid and offer prices. The
present broadcast standard of licenses should be restated in terms of
the spectrum dimensions as they were in the WCS licenses and rights
should be defined with respect to transmitters.

### A. De Vany, R.D. Eckert, C.J. Meyers, D.J. O'Hara, and R.C. Scott, "A Property System for Market Allocation of the Electromagnetic Spectrum: A Legal-Economic-Engineering Study," 21 Stan. L. Rev. 1499 (1969).

The authors give some very specific recommendations for managing
spectrum policy, defining property rights, and defining the statutory
rules so a somewhat longer summary is presented here. The authors
believe that the goal for spectrum policy should be to maximize the
social value of production from the use of spectrum. In order to do that
they believe that property rights need to be established and that the
rule for choosing among definitions of property rights should be to
reduce the costs of exchange and enforcement relative to the value of
the rights. The authors recommend that rights should be defined with
respect to transmitter owners (because the authors believe that if
rights were given to owners of receivers there would be high exchange
and enforcement costs) and for frequencies between 50 and 1000 MHz.
Rights should be specified in terms of time, area, and frequencies.

The [time rights]{.underline} should be defined as rights to use
spectrum for 24 hours per day in perpetuity and these rights should be
transferable and divisible. The [area rights]{.underline} should be
defined in terms of the following three properties: (1) the exclusive
right to originate radiation subject to the constraint that the field
strength achieved by this radiation does not exceed a specified limit
expressed in volts per meter outside his area; (2) the right to be free,
above the same field strength, from radiation originating in any other
area; (3) straight-line boundaries. Note that there will be an area (low
quality service strip) between two licensees' areas where interference
will be a problem. The width of this strip is greater for transmissions
at lower frequencies. Therefore, the lower frequencies could be used for
transmitters serving large areas, while higher frequencies could serve
smaller areas. The [frequency rights]{.underline} should be defined in
terms of the following three properties: (1) the rights apply to a band
of frequencies bounded by upper and lower limits; (2) the exclusive
right to originate radiation, subject to the constraint that the field
strength achieved in any other unit band of frequencies not exceed a
certain limit; (3) the right to be free, above the same limit, from
radiation originated by other sources assigned to a different band of
frequencies. Note that there would be protection from multipath
propagation from other users. Since there would be economic incentives
to limit the height of the antenna, there should be no explicit
restrictions on antenna height.

The authors give detailed recommendations with respect to formulation of
the statutory rules regarding spectrum rights. The rules should state
that the general purpose of the property system is to create property
interests in a designated portion of the spectrum in order to promote
market allocation of this resource. The rules should include a
definition of the basic property interest in the spectrum and authority
should be delegated to a federal agency to create licenses for sale to
the public. The statute should state that licenses are private property
and fully transferable and specifically state: (1) license owners may
agree to changes in the boundaries of the license areas; (2) license
owners may transfer their rights to radiate on a time basis, by the
hour, day, month, or year or by any other denomination of time; (3)
license owners may agree to an increase or decrease of signal
field-strength limits; (4) license owners may transfer all or any part
of the band assigned to them; (5) license owners may transfer all or any
portion of their geographical areas of operation; (6) there shall be no
restrictions, either in the license owner's certificate of ownership or
by regulatory order, on transmitter power, or on antenna location and
height. The authors believe that there should be a strict liability
standard and that any unauthorized operator of radiation within an
assigned license is guilty of a breach of duty and can be shut down.
Injunctions should be granted as a matter of right to any complainant
who establishes that his rights have been violated. The statute should
specifically bar the acquisition of prescriptive rights in the spectrum
and there should not be criminal penalties.

The authors also recommend that the statute stipulate the time duration
of the rights created (the authors recommend creation of perpetual
rights). If the rights are not defined as perpetual, the auction for
re-lease of the license at the end of the lease term should be set for a
time somewhat earlier than the expiration of the term. The lease
arrangement might be accompanied by a system of rental payments instead
of a lump sum payment but the government should be able to terminate the
lease and re-lease the license if payments are not met. When transfers
create multiple subdivisions of license areas a strict priority rule
coupled with an expanded third-party-beneficiary doctrine will serve to
allocate liability efficiently. The liability of transferees for rental
payments could be dealt with by the adoption of rules similar to
landlord and tenant law. The authors recommend that the statute require
all agreements by license owners relating to the use of the spectrum be
recorded in a central registry. Penalties should be assessed for
noncompliance with the registration requirement, and unrecorded
transfers should be voidable at the instance of subsequent purchasers.
The authors believe that enforcement should be left to the federal and
state courts. Other questions not addressed here could be resolved under
state law.

The government could experiment with small portions of the spectrum to
allow the opportunity to evaluate the above proposals. The authors
recommend the following experiments: (1) in spectrum in which VHF and
UHF television operates, auction off the unassigned channels to other
radio services; (2) clear voice and UHF-television channels; (3) vest FM
rights (fully transferable and divisible license rights would replace
input specifications); (4) pack FM stations into the 94- to 108-MHz
bands to free up spectrum for auction.

### A. De Vany, "Property Rights in the Electromagnetic Spectrum," Palgrave Dictionary of Economics and Law p. 167.

This article argues that the decades old systems of spectrum management
in use around the world must be replaced by more open access to and
flexible use of the spectrum resource. The author originally proposed a
detailed model for privatization of spectrum in 1969. The article posits
that the concept of property rights is the central issue in spectrum
management. Propertization of spectrum would require a well-defined
physical space broken down into time, area and spectrum bandwidth.
Owners would be free to do with their spectrum as they desired. This
type of system would drastically reduce transaction costs and get
spectrum out to the public much faster.

### H. Demsetz, "Toward a Theory of Property Rights," *American Economic Review*, 1967, pp. 347-359.

Demsetz's goal was to fashion some of the elements of an economic theory
of property rights. Demsetz explains that property rights specify how
persons may be benefited and harmed, and, therefore, who must pay whom
to modify the actions taken by persons. He believes that the
disadvantage of communal property is that the effects of a person's
activities on his neighbors and on subsequent generations are not fully
taken into account. The advantage of private property is that the
concentration of benefits and costs on owners creates incentives to
utilize resources more efficiently and to achieve a greater
internalization of externalities.

Demsetz mentions three broad principles governing development of
property rights in communities oriented to private property: (1) an
increase in the number of owners is an increase in the communality of
property and leads, generally, to an increase in the cost of
internalizing; (2) if there are many externalities, a buy-out may be
cheaper than contractual agreements; (3) the greater the diseconomies of
scale to land ownership the more will contractual arrangement be used by
the interacting neighbors to settle differences. Demsetz also notes that
the emergence of property rights can best be understood by their
association with the emergence of new or different beneficial and
harmful effects (e.g. new technologies).

### W.L. Fishman, "Property Rights, Reliance, and Retroactivity Under the Communications Act of 1934," 50 Fed. Comm. L.J. 1 (1997). http://www.law.indiana.edu/fclj/pubs/v50/no1/fishman.html

Fishman focuses on legal interpretations of the rights of spectrum
licensees and explores the question of what is meant when we say that
government preserves its (assumed) right to regulate spectrum by law.
Fishman notes that although FCC approval is required for the transfer of
control of the licensee or assignment of the license, it is reasonably
clear (and the courts have recognized) that FCC licenses have some,
albeit limited, attributes of property. Also, although the FCC
discourages speculation in unbuilt facilities, the sale of bare licenses
resulting in a profit has been allowed in the past. Fishman believes
that a contractual provision for reversion but subject to FCC approval
would be consistent with law. In addition, the creation of a security
interest, albeit limited to the proceeds of an FCC-approved sale, should
be deemed valid and enforceable. Fishman notes that detrimental reliance
in some circumstances is a workable substitute for property rights and
that considerations of justifiable reliance appear to have had at least
some force in past court cases. Past court cases demonstrate that FCC
licensees have the right to be treated equitably by the FCC (even though
property rights are limited) and that the FCC can't disregard a
licensee's reliance on prior policy. The courts won't automatically
defer to FCC conclusions when there are claims of detrimental reliance.
Fishman suggests proposing that property rights as normally understood
are not a necessary precondition to careful judicial review of agency
policy changes. He believes that detrimental reliance may represent a
recognizable and legitimate basis on which to seek relief even when, in
the classical sense, there are no property rights as such.

### B.C. Fritts, "Private Property, Economic Efficiency, and Spectrum Policy in the Wake of the C Block Auction," 51 Fed. Comm. L.J. 849 (1999). http://law.indiana.edu/fclj/pubs/v51/no3/FritMac9.PDF

Fritts examines the C block auction, which took place in 1995, discusses
what went wrong, and suggests remedies. He mentions six factors which
contributed to the failure of the C block auctions to efficiently
distribute spectrum: (1) the C block licensees were mostly newcomers to
the industry and they didn't have the infrastructure necessary to make
efficient use of the spectrum; (2) the lenient terms of the license
drove up the bids (higher than their market value); (3) newcomers and
new technology made it difficult to determine the optimal bid; (4) most
C block bidders failed to arrange adequate financing before the auction
took place; (5) special payment plans for small businesses contributed
to inefficient allocation; (6) too many goals were given to the FCC and
efficiency was not primary. Fritts notes that the auction rules were
clear and objective and were not the cause of the problems discussed
above. Instead, the problems stemmed from the policy underlying the
rules of the auction.

Fritts believes that the primary focus of the FCC should be the
efficient distribution of property rights in spectrum. These property
rights should include the right to use the spectrum in whatever manner
the owner deems to be in his or her best interest. Fritts believes that
spectrum should be distributed to those that value it most and that
there should be sufficient competition in the market to ensure accurate
prices. The FCC should avoid dramatic changes in rules so that companies
can count on regulatory law to be predictable. The only goals of the FCC
should be to conduct auctions in an efficient manner and grant winners
an ownership interest equivalent to private property that will then be
enforced by the FCC. Fritts thinks that the best and most efficient
means of distributing spectrum is to hold an auction where payment is
required shortly after the winning bid is selected. The design of
spectrum auctions should: (1) allow for license aggregation and the
prevention of collusion in the bidding process; (2) not allow bidding
credits; (3) not allow installment plans. In addition, diversity and
increasing revenue for the government should not be significant goals.

### T.W. Hazlett, "Assigning Property Rights to Radio Spectrum Users: Why Did FCC License Auctions Take 67 Years?" 41(2) J.L. & Econ. 529 (1998). http://www.journals.uchicago.edu/JLE/abstracts/412haz.html

Hazlett discusses the development of the system for broadcast license
assignments in the United States. According to him, the system for
license assignment that developed was neither irrational nor a "accident
of history." Hazlett argues that political motivations resulted in the
"giveaway" of licenses for a long time in the United States. Zero-priced
licenses gave regulators much power to influence broadcast content which
would not have been feasible or legal under a market-based allocation
scheme and Hazlett argues that there is a clear link between method of
assignment and licensee performance. Hazlett believes that the special
interest of regulators in influencing broadcasting content, the limits
placed on explicit program regulation by the U.S. Constitution, and the
agency problem embedded in central planning explain the political
stability of economically inefficient licensing methods. Hazlett also
illustrates how the increase in the relative economic performance of
nonbroadcast wireless services explains recent reforms in spectrum
policy.

### T.W. Hazlett, "The Rationality of U.S. Regulation of the Broadcast Spectrum," 33 Journal of Law and Economics 133 (1990). http://www.aei.org/ra/rahazl10.pdf

This paper reviews Hazlett's interpretation of the early history of the
use and regulation of the spectrum in the 1910s, 1920s and 1930s
including passage of the Radio Act of 1912, actions by Commerce
Secretary Herbert Hoover, the establishment of the Federal Radio
Commission in 1927 and the Communications Act establishing the FCC in
1934. According to Hazlett, early problems with interference and "chaos
of the ether" imply that there was a need to define spectrum rights but
do not imply that there is (or was) a need for the government to assign
spectrum rights. In the 1920s it would have been possible to develop a
system of exclusive, transferable property rights in the spectrum and it
could have been done under the common law rather than through a Federal
regulatory agency. Hazlett asserts that in the 1920s major existing
broadcasters desired federal regulation as a method of restraining
competition and preserving their existing economic rents.

### T.W. Hazlett, "The Wireless Craze, The Unlimited Bandwidth Myth, The Spectrum Auction Faux Pas, and the Punchline to Ronald Coase's 'Big Joke:' an Essay on Airwave Allocation Policy," 15 Harvard Journal of Law and Technology (Spring 2001). http://www.aei.brookings.org/publications/working/working_01_02.pdf

In this long article (205 pages in the working paper format), Hazlett
argues strongly for establishing spectrum private property rights.
Hazlett asserts that FCC top down regulation (i.e. block allocations),
involves a variety of non-market failures because the FCC lacks the
information that competitive markets can provide, receives its
information from interested parties and not from the general public, and
because incumbents have incentives to favor underutilization of spectrum
in order to minimize interference to them and to exclude competitive
entry. (He points out that it is [not]{.underline} economically
efficient to minimize interference, but rather we should want an
[optimal]{.underline} level of interference). In his review of FCC
history, he provides examples of how incumbent licenses blocked or tried
to block the introduction of FM radio broadcasting, CATV, DARS, LPTV,
ultra-wideband systems, software defined radio, etc. Radio license
auctions work well because they reduce delays in licensing, increase the
efficiency of license distribution, make it easier to aggregate
licenses, reduce rent seeking behavior of applicants and help build the
intellectual case for liberalization of the licensing process. However,
high license auction prices and revenue can be a sign of policy failure,
not success, because they suggest that access to the spectrum has been
artificially restricted in order to maximize revenues or rents.

There are, potentially, serious problems with spectrum commons, because
there is likely to be congestion and thus a tragedy of the commons, just
as there is on the Internet. In both cases the problem is that a price
should be put on congestion. In the unlicensed bands, the FCC is likely
to impose either too strict or not strict enough restrictions (e.g.
power limits that are too low or too high). An advantage of unlicensed
operations is that entry by spectrum users is not constrained by the
barriers to entry of the FCC allocation and licensing process. It may be
possible to consider three classes of unlicensed bands: (a) bands
generally allocated to unlicensed use and controlled by a band manager;
(b) localized unlicensed low power use bands; and (c) long distance low
power unlicensed use bands.

With regard to the future of spectrum regulation, Hazlett offers small,
medium and large reform proposals. Small reforms include: (1)
establishment of a spectrum registry which would indicate occupied and
unoccupied spectrum, intensity of traffic, etc.; (2) privatization of
public safety communications so that public safety agencies would have
title to the spectrum they own; (3) creation of a federal spectrum
budget to show costs and benefits of spectrum used by each government
agency. Medium reforms include: (4) establishment of exhaustive overlay
rights in the TV bands so that every channel in every market would be
used. Also, grant existing wireless licensees complete flexibility. (5)
Granting of underlay rights and allow UWB and don't allow incumbent
operators to block UWB by claiming interference problems. Large reforms
include: (6) Abolishing the FCC and replacing it with a Spectrum Court;
(7) granting de novo entrants a presumptive right to use unoccupied
frequencies; (8) allowing unregulated low power local area wireless
devices; (9) Granting complete flexibility to existing licensees; (10)
abandoning administrative license authorizations and replacing them with
pure interference adjudications through a Spectrum Court; (11) Recasting
competition or antitrust policy to take into account spectrum ownership
in evaluating market concentration; and (12) making clear that Congress,
rather than a regulatory agency, should impose taxes and subsidies
related to spectrum utilization.

### T.W. Hazlett and B.E.L. Boliek, "Use of Designated Entity Procedures in Assigning Wireless Licenses," 51 Federal Communications Law Journal 639 (1999). http://www.aei.org/ra/rahazl9905.pdf

There was a significant loss in consumer surplus, i.e. so called
"deadweight loss," due to the use of subsidies to designated entities in
the PCS C block auction and the Regional narrowband PCS auction. The use
of the designated entities led to a delay in the provision of service to
consumers, slowed the entry of viable competitors and reduced the amount
of money initially payable to the Treasury for the auction by allowing
payment spread over a number of years with a below market rate of
interest on the future payments. On the other hand, Hazlett and Bolick
also suggest that because of the subsidies available to designated
entities, they may well have bid up auction prices to higher levels than
would have happened without their designated entity status.

### T.W. Hazlett, "Spectrum Flash Dance: Eli Noam\'s Proposal for 'Open Access' to Radio Waves," 41 J.L. & Econ. 805 (1998). 

This article challenges Eli Noam's property rights article, "Spectrum
Auctions: Yesterday's Hearsay, Today's Orthodox, Tomorrow's
Anachronism," published concurrently in The Journal of Law and Economics
(Oct. 1998). The article does so on the grounds that the Noam article
(i.e., analogizing spread spectrum technology or an "open spectrum
access" model for overall spectrum allocation to the Internet packet
switching) confuses defects in the auction allocation regime with the
innovative mechanism of auctioning assignments by failing to appreciate
the efficiencies gained by auctions and not defining useful remedies for
the problems. The author argues that the spectrum was originally
regulated, starting in 1927 under the Radio Act, not because of chaos
and lawlessness, as is the popular belief, but that the general
application of the common law "right of user" or "trespassing" solution
to the commons problem was to preempt development of such a general
legal regime in favor of political control in the form of a statutory
solution promoting the "public interest." The article challenges Noam's
assertion that auctions were favored as a method for raising revenues,
auctions as barriers to entry and property rights as free speech
infringement. The article suggests that Noam analogy to Internet packet
switching is misguided and that a better analogy would be competing
tollways, where access providers charge competitive rates for the use of
the road. The article concludes by criticizing Noam's opposition to
large spectrum auctions in favor of micro-auctions and contends that
Noam overstates the current state of technologic development and its
ability to arrange frictionless traffic. The article states that Noam's
clearinghouse approach would likely overdivide the spectrum creating
significant transaction costs to reassemble long-term rights.

### J.A. Hausman, "Valuing the Effect of Regulation on New Services in Telecommunications," *Brookings papers on Economic Activity, Microeconomics*, 1997, pp. 1-38. http://www.nextera.com/pdf/ValuingTheEffectOfRegulation.pdf

This article estimates that cost of regulatory delay in the provision of
new services, including voice messaging, and cellular telephone. Using
assumptions and estimates about consumer demand, pricing and welfare
loss, they estimate losses of about \$1.27 billion per year in consumer
welfare for voice messaging and about \$50 billion per year in consumer
welfare loss for cellular telephone due to regulatory delay in
authorizing these new services.

### R.E. Hundt and G.L. Rosston, "Spectrum Flexibility Will Promote Competition and the Public Interest," IEEE Communications Magazine, December, 1995, pp. 2-5.

The true significance of the PCS auctions was not that they raised \$7.7
billion for the treasury but that they led to the creation of 3 large
wireless communication firms. What led to the large wireless investment
boom was that the Commission allowed flexibility in the use of that
spectrum. Spectrum flexibility includes both service and technical
flexibility. We need to stop over-regulating commercial uses of
licenses. Interference restrictions are similar to land zoning
restrictions. The FCC should set initial interference restrictions and
then allow licenses to negotiate interference agreements between
themselves. Restrictions on allowable uses inhibit competition, and
cause delay in providing innovative services. Allowing flexibility means
that license will have incentives to invest in technology to increase
competition, to take advantage of any innovations they develop and they
will not need to reveal their ideas in advance to the FCC and thus to
competitors.

However, full flexibility may allow some market failures and thus may
not always be appropriate. The FCC should intervene to constrain
technical flexibility so many unlicensed low power devices can operate
without causing interference, to ensure sufficient educational
children's television programming, to coordinate cross-border satellite
operations, and to decide whether too much or too little over-the-air
television broadcasting is available in specific markets compared to
other uses of the spectrum. There may be other social goals where
flexibility will either help or hinder the accomplishment of those goals
such as minority and female ownership of businesses, provision of rural
telephone services, public interest obligations of broadcasters.

With respect to transitional issues, some believe that efficiency must
be balanced against equity. However, if a company obtains a windfall due
to flexibility, it is because it has provided a more attractive service
to consumers. Also, the Commission's public interest mandate should be
to maximize competition, not protect incumbents from competition.
Flexibility may cause some customers to be stranded without a service
provider, but overall it is likely to increase choices for consumers.

All future spectrum allocations should provide service and technology
flexibility. All remaining spectrum should be exhaustively licensed
using overlays. In general, users should be given exclusive rights.
Spectrum rights should be transferable. Finally, service and technical
restrictions on existing licensees should be reduced.

### H.J. Krent and N.S. Zeppos, "Monitoring Government Disposition of Assets: Fashioning Regulatory Substitutes for Market Controls," 52 Vanderbilt Law Review 1705 (1999). http://law.vanderbilt.edu/lawreview/vol526/zeppos.pdf

Most of this article discusses the sale or lease of Government assets
other than the frequency spectrum or radio licenses. Government sales
and leases of public assets such as oil rights, public land and mineral
rights, and even rights to use the electromagnetic spectrum, timber
sales, and the disposition of real estate have generally been deplorable
and sold at a fraction of the market price. Methods should be used, with
legislative changes where necessary, to allow the government to maximize
its return on assets sold or leased. However, the disposition of assets
can serve other goals such as helping to ensure that the public receives
the best service from the private use of the asset, or programmatic
goals such as giving licenses to broadcasting stations that best service
the public interest, or it can serve distributional goals such as
helping disadvantaged individuals, or social goals such as preserving a
valued way of life, etc. The Administrative Procedure Act excludes from
its provisions federal agency decisions involving the distribution of
public property.

The author's recommendations for reform include: all public property
disposition processes should be subject to notice and comment
rulemaking. Judicial review should continue to play an important role.
Greater OMB review and/or Congressional review may be appropriate. The
process of selling, leasing and giving away public property should be
more open and transparent.

### E.R. Kwerel and J.R. Williams, "Changing channels: Voluntary Reallocation of UHF Television Spectrum," Office of Plans and Policy Working Paper No. 27 (November 1992). http://www.fcc.gov/Bureaus/OPP/working_papers/oppwp27.pdf

Kwerel and Williams argue that the voluntary reallocation of a single
UHF channel in Los Angeles from television broadcasting to use as a
third cellular system would increase social welfare by \$1.0 billion.
Because the social value of a broadcasting service may exceed its
private value, the FCC may need to estimate whether it is desirable to
allow such a shift. However, subject to such a benefit-cost analysis,
one voluntary reallocation should be allowed in every TV market and
perhaps with respect to other spectrum uses as well. In their
calculation, they estimate the amount of spectrum that could be freed up
by such a move, the social cost of reducing the number of TV signals by
one in LA, and then compare that with the social benefit from the
reduced cellular prices that would likely take place from allowing a
third cellular competitor in LA. Much of the paper is devoted to
alternative calculations of the costs and benefits of such a voluntary
relocation. As the value of over-the-air broadcasting diminishes
compared to additional forms of personal communications, a properly
supervised voluntary reallocation policy for other non-TV uses might
have substantial benefits. Licenses for new services could be issued in
a band before the incumbent users left the band and new licensees could
negotiate with incumbents for access to additional spectrum.

### J.R. Minasian, "Property Rights in Radiation: An Alternative Approach to Radio Frequency Allocation," 18(1) J.L. & Econ. 221 (1975).

This article is based on a 1963 paper co-authored by Minasian, R.H.
Coase and W. Meckling. While consistent with Coase's economics papers,
it also addresses technological aspects of defining auctionable spectrum
licenses.

The current institutional arrangement for spectrum allocation (1975,
pre-auction) cannot provide the information needed to guide resources
into their highest valued use, and gives users no incentive to economize
on scarce resources. However, property rights can be defined in such a
way as to bring about technically efficient use and form the basis for
exchange in a market setting. A set of property rights in spectrum would
incorporate the following:

1.  Emission rights -- The right to operate on a particular bandwidth at
    a specific time and place, at a power level specified at its
    boundaries. In addition, the amount of spurious radiation emitted
    would be limited.

2.  Admission rights -- The rightholder has the right to exclude others
    from using that spectrum.

3.  Use -- The rightholder is free to choose among legal uses.

4.  Transferability -- Emission and admission rights would be
    transferable at the discretion of the rightholder.

Minasian also considers whether the inherent variability in radiation
outputs and the techniques used for enforcement are consistent with a
system of private property rights and a market mechanism, and concludes
that such a system would actually result in greater technical
efficiency.

Regardless of the initial distribution method, the market will
eventually reallocate the rights to their most valuable use. Initial
distribution should take political expediency into account, and to the
extent possible, minimize the transactions costs of further
redistribution.

When increases in value accrue to the owner of the spectrum, there are
incentives to innovate and update technology. "Like" services will tend
to cluster together because the value of their rights will be greater.
The public sector can exercise rights of eminent domain to repurchase
spectrum if there is a strong need. Monopoly will be discouraged if the
monopolist is not given the resource free of charge.

Any freedom to relax the current system of rigid input controls will
improve technical efficiency.

### E. Noam, "Beyond Spectrum Auctions: Taking the Next Step to Open Spectrum Access," Telecommunications Policy, Vol. 21, No. 5, Elsevier Science 1997, pp. 461-475.

Noam advocates a new post-auction paradigm for spectrum which he calls
"open access," which will soon be made possible by new technologies.
Users can enter spectrum without an exclusive use license by buying
access tokens, the price of which varies with congestion.

Licensing imposes restrictions on free speech, and to the extent
technology makes a less restrictive regime possible, the government is
obliged to move toward allowing greater freedoms.

Auctions of exclusive use licenses have other drawbacks. They are
primarily a revenue tool of the federal government, and therefore,
revenue needs will determine auction policy. They are used to fund
current consumption at the expense of long run asset management. Social
values are not reflected in auction bids. Auctions are a barrier to
entry and encourage bidding consortia and an oligopolistic market
structure.

The proposed open access system is not currently possible, although some
parts are feasible. Packets of transmitted information would carry with
them electronic tokens, which would be transferred (i.e., paid) at
various tollgates and access points. Spot and futures markets in access
tokens would exist. Such a system would convert upfront fixed costs to
marginal costs, reduce barriers to entry and encourage competition. The
current unlicensed system is similar in terms of non-exclusive access,
but because it relies on etiquette to manage congestion, it cannot
guarantee access when demand is high.

### E. Noam, "Taking the Next Step Beyond Spectrum Auctions: Open Spectrum Access," *IEEE Communications Magazine* (December 1995), pp. 66-73.

HREF=\"http://www.columbia.edu/dlc/wp/citi/citinoam21.html\"

Auctions are preferable to the spectrum allocation systems of the past,
but they may not be the best system for the future. This paper makes
essentially the same arguments for an open access system as #23, above.
In addition, Noam makes the following points:

-   Some argue that without exclusive spectrum licensing, there may be
    less investment, but the certainty of licensing should be balanced
    with the enhanced competitive environment of an open access system.

-   Investment takes place in other industries without ownership of all
    of the inputs. Certainty of supply can be addressed through the
    development of futures markets.

-   Couching the discussion in terms of property rights is not helpful,
    since transferable frequency access is just as much a property right
    as is fee simple ownership.

-   Auction winners are unlikely to become good managers of an open
    system because they will have interest in deterring competitors. The
    relatively small pieces they own will limit the benefits of
    frequency agility.

-   Noam makes clear that he departs from Paul Baran and George Gilder
    in advocating the use of a price mechanism to manage scarcity. They
    would rely on technology alone.

### G. Robinson, "Spectrum Property Law 101," 41 J.L. & Econ. 609 (1998).

HREF=\"http://www.journals.uchicago.edu/JLE/abstracts/412rob.html\"

Robinson expands on a paper by Shelanski and Huber (#32, below) who show
that, in practical terms if not in theory, spectrum licensees already
are in possession of most of the essential characteristics of property:
the rights to exclude, transfer, and use, and a renewal expectancy,
which protects "investment-backed expectations." Robinson points out
that as long as public interest obligations are upheld, licenses cannot
fully be treated as property and, therefore, cannot freely be traded.
This prevents efficiency enhancing reallocations. Significant public
interest obligations are still maintained only in broadcasting, although
even there they are largely symbolic. Broadcasters have a strong
interest in maintaining their public interest obligations, which
although trivial in practice, have allowed them to make lucrative deals
for spectrum access.

### G.L. Rosston, "The Long and Winding Road: The FCC Paves the Path with Good Intentions," Stanford Inst. For Econ. Policy Research (2001).

HREF=\"http://www.calit2.net/events/2002/Spectrum/presentations/Long_Winding_Road4-20-02.pdf\"

Although the FCC has indicated its intention to move to a more
market-based system of spectrum allocation, a number of recent examples
indicate that market failure exceptions are more frequently the rule.
The Commission should immediately make the move to a true market system
by selling flexible license rights to spectrum which has been held back
for various reasons. Incumbent interests and political interests are two
major roadblocks to increasing the usable amount of spectrum. Rosston
illustrates his point with the following case studies:

-   **700 MHz Guard Band** \-- Many politically motivated restrictions
    on use and technology may result in managers being unable to use the
    band profitably and efficiently, which will likely prompt them to
    petition the FCC for more flexible use.

-   **Satellite and Terrestrial Uses** -- Rosston points to the
    DBS/Northpoint case, and petitions for terrestrial rights in the 2
    GHz Band and for terrestrial repeaters by XM Radio as situations in
    which the FCC failed to define license rights fully ahead of time.

-   **DBS Satellites** -- A prohibition against allowing Canadian DBS
    providers to serve US customers exacerbates an already concentrated
    US DBS market.

-   **CARS Band** -- A very narrow definition of who may operate in the
    12 GHz CARS band has prompted a proposal to expand the definition
    slightly. It would be more efficient to open the band to more
    flexible use.

In order to facilitate getting unused spectrum rights out into the
market, Rosston proposes a licensing "nomination" process. Parties
identifying rights they are interested in would submit a nomination to
the FCC. Nominations would be kept secret during the filing window. If
no other party submitted a mutually exclusive nomination, the applicant
would be granted a license for that right. An auction would be held to
resolve competing applications.

In addition, the interference responsibilities of licensees should be
clarified and defined in terms of emissions rather than inputs.
Secondary trades should be allowed to take place efficiently. Spread
spectrum technologies should be allowed to operate "under" other
licensees, if possible.

### G.L. Rosston and J. Steinberg, "Using Market-Based Spectrum Policy to Promote the Public Interest," 50 Fed. Comm. L.J. 1 (1997). 

Rosston and Steinberg propose a set of principles to guide the FCC in
its mission to maximize the public interest value of the spectrum.
Because the Commission cannot fully know or predict how much consumers
value different services or what technologies are practical or possible,
it must leave these decisions on how best to use the spectrum to a
decentralized marketplace. It should make available to the market the
rights to as much spectrum as possible with as few restrictions as
possible on how it can be used. In order to minimize transactions costs,
the FCC should initially configure licenses optimally for the services
they will most likely be used for, but it should permit aggregations and
disaggregations as necessary. It should weigh the benefits of unlicensed
uses of spectrum with the cost of keeping those bands out of exclusive
use. The FCC should promote a competitive industry, and be prepared to
intervene when there is market power.

The Commission should permit maximum flexibility of four types: in
service use, in technology and equipment, in bandwidth and geographic
scope, and in implementation (when and where licensees build out). In
general, technical and use flexibility should be limited only by
interference concerns.

When the market fails, such as in providing the socially optimal amount
of public goods, the FCC may need to dedicate spectrum to those uses. In
many cases, however, the government can provide subsidies to facilitate
spectrum license purchases by the providers of those public services.
Public interest considerations may also prompt some restrictions on
services, such as requiring broadcasters to provide children's TV
programming, but the requirements should be as flexible as possible.

In most cases, competitive bidding is the fastest means of putting the
spectrum into the hands of those who will put it to its most valuable
use. In other cases, the Commission should seek to use fees
approximating opportunity costs as a means of allocating scarce spectrum
among competing users.

The Commission should promote certainty about the conditions of spectrum
use licenses by providing flexibility upfront, so that licensees do not
need to petition for changes. A reasonable expectation of renewal will
encourage investment. If public interest considerations require that the
FCC reallocate spectrum, incumbents should be fairly and efficiently
compensated.

The U.S. should help promote global networks by cooperating and
coordinating with international interests.

### H. Shelanski, "Competition and Deployment of New Technology in U.S. Telecommunications," 2000 U. Chi. Legal F. 85 (2000).

Shelanski examines how the introduction of new technology in U.S.
telecommunications has historically been related to market structure.
Theoretical and empirical evidence on the relationship between firm size
and innovation in the general economy is ambiguous. With respect to
industry concentration, there is suggestive evidence firms in neither
very competitive nor very concentrated industries are more innovative.
He examines ten cases of new technology development in the
telecommunications sector.

While innovation occurred under varying market structures, the
deployment times were fastest when firms were in the most competitive
environments. Shelanski draws the policy implication that while there
may be cases in which there are tradeoffs between innovation and
competition, the presumption should be in favor of preserving
competition.

### H. Shelanski, "Regulating at the Technological Edge: New Challenges for the FCC," 2000 L. Rev. Mich. St. U. Det. C.L. 3 (2000). 

HREF=\"http://www.dcl.edu/lawrev/2000-1/Shelanski_Revision.htm\"

This speech makes general points about how the FCC 's regulatory policy
should facilitate competition and foster innovation, and promote access
to new technology.

### H. Shelanski, "The Bending Line Between Conventional 'Broadcast' and Wireless 'Carriage'," 97 Colum. L. Rev. 1048 (1997). 

By permitting Direct Broadcast Satellite (DBS) operators to deliver
wireless services and programming, without requiring the public interest
obligations traditionally carried by broadcasters, the FCC has blurred
the traditional distinction between broadcasters and wireless carriers.

### H. Shelanski, "The Speed Gap: Broadband Infrastructure and Electronic Commerce," 14 Berkeley Tech. L.J. 721 (1999).

The growth of electronic commerce will depend in large part on the
capability of broadband and its availability to residential consumers.
However, regulation of advanced services may slow the deployment of
broadband and adversely affect prices faced by consumers.

### H. Shelanski and P. Huber, "Administrative Creation of Property Rights to Radio Spectrum," 41 J.L. & Econ. 581 (1998).

HREF=\"http://www.journals.uchicago.edu/JLE/abstracts/412she.html\"

Although the Communications Act of 1934 expressly prohibits private
ownership of spectrum, the FCC since the 1970's effectively has been
increasing the property rights that spectrum licensees hold. This has
been accomplished through substantive and procedural regulatory reform
of both the transmission and reception ends of licensee rights. The FCC
has increased the renewal expectancy and lowered the cost of renewing
licenses. It has reduced the ban on trafficking from 3 years to one
year, and reduced the criteria that must be considered in allowing
transfers. Broadcasters are allowed more leeway over public interest
concerns in leasing or subdividing their airtime. The FCC has given
providers more freedom over what use is made of their spectrum,
especially in exempting DBS and other subscription services from
broadcaster public interest responsibilities. At least in part, this
deregulation represents an ideological shift that occurred during the
1980's. Limited degrees of use flexibility are now permitted. The FCC
has moved away from strict content regulation of broadcasters, although
it retains some influence.

While these reforms generally involve giving licensees more control over
the transmission side of spectrum communications, a complete bundle of
rights would involve licensees controlling how their signals are
received, as well. Broadcasters traditionally have had little power to
protect their programs from unauthorized commercial retransmission, but
in recent years the courts, the FCC and Congress have moved in the
direction of granting broadcasters more rights in that area.

### H. Shelanski and P. Klein, "Empirical Research in Transaction Cost Economics: A Review and Assessment," 11 J.L. Econ. & Org. 335 (1995).

Transactions costs economics (TCE) deals with how trading partners
utilize contracts or governance arrangements to protect their interests
in exchange relationships. For example, partners investing in a specific
asset may want to merge in order to align their interests in using the
asset -- i.e., through vertical or horizontal integration. Implicit in
TCE is the idea that observed institutional arrangements have come about
as the result of minimizing some set of transactions costs among
parties. Shelanski and Klein examine some of the theoretical
implications of TCE and empirical studies which attempt to validate
them.

In general, these studies attempt to explain a governance structure for
a particular industry as a function of such features as asset
specificity, uncertainty about the relationship, the complexity of the
transaction and the frequency of trade. The authors look at a large
number of studies which focus on both formal and informal contracting
arrangements and conclude that overall, there is quite strong evidence
that transactions costs arguments are important in explaining the nature
of these relationships.

### J.H. Snider, "Who Owns the Airwaves? Four Theories of Spectrum Property Rights," New America Foundation, April 2002.

Snider emphasizes that policy analysts should lay out all valid policy
considerations, regardless of political considerations. He believes that
policy analysts should clearly distinguish between what are political
and public policy issues relating to the allocation of spectrum. Towards
this goal, Snider discusses four theories of spectrum property rights as
they would apply to local TV broadcasters. The License Theory suggests
that since license terms are currently limited (eight-year term for
broadcasters), all broadcast spectrum could eventually be returned to
the public and reallocated with no special compensation to the
broadcasters. The Service Theory would allow broadcasters to provide the
same service (e.g. the provision of one standard definition analog TV
signal) as technology changes but would force the broadcasters to return
excess spectrum resulting from improvements in technology. The Spectrum
Theory holds that incumbents have full rights in perpetuity to their
spectrum, including all residual rights, where the term residual means
all rights to provide services not explicitly granted in the license.
The Lebensraum Theory holds that incumbents have full rights not only to
their licensed spectrum, but to the guard bands surrounding the spectrum
that protects their signals from interference.

### P. Spiller and C. Cardillo, "Towards a Property Rights Approach to Communications Spectrum," 16 Yale J. of Reg. 1 (1999).

Spiller advocates a property rights approach to spectrum usage and
advocates the development of a market for unrestricted tradable permits
in spectrum. To implement this policy, Spiller believes that Congress
should enact legislation mandating that the FCC grant full property
rights for spectrum usage. Subsequently, the judicial branch would be
responsible for enforcement with regard to potential interference
problems. Spiller describes the structural foundation which he believes
would allow for a market in tradable spectrum permits. The licensee
would be granted the right to use the spectrum for any service that he
chooses and the right would be defined in terms of usage or outputs.
That is, the licensee would be granted the right to transmit over a
particular band and over a particular geographic location. This property
right would assume a maximum field strength at the boundary of the
coverage area and maximum levels of out-of-band emissions. Included is a
right to a minimal acceptable signal to noise ratio as long as the right
holder maintains a minimum field strength. Additionally, the right would
be transferable as well as partitionable.

Spiller's paper also includes a review of New Zealand's and Guatemala's
experiences with spectrum property rights. New Zealand's 1989
Radiocommunications Act authorized the Ministry of Commerce to introduce
tradable spectrum rights. New Zealand's experience thus far does not
appear to be very successful as only a small amount of spectrum has been
sold to individuals and much of the spectrum is not being used. Spiller
believes that New Zealand's lack of success has three possible
explanations. There may be a lack of demand for spectrum due to New
Zealand's low population density. Additionally, the system was only
implemented in certain limited bands. Finally, there were problems with
the second-price auction process that was implemented. Unlike New
Zealand, Guatemala was able to successfully implement a total property
rights approach to spectrum utilization. Spiller believes that the
situation in Guatemala more closely reflects the potential success that
the U.S. would experience if a property rights approach were to be
implemented.

### T. M. Valletti, "Spectrum Trading," *Telecommunications Policy*, 2001.

HREF=\"http://www.ms.ic.ac.uk/tommaso/spectrumtrading.pdf\"

Valletti's paper is based partly on work done for OFTEL, the UK
radiocommunications regulator, and focuses on UK and other European
spectrum management regimes. His primary point is that it is inefficient
to rigidly define spectrum allocations, even if spectrum is efficiently
assigned within those allocations. He recommends a system of spectrum
trading in which fully flexible transferable rights are given or sold to
licensees, who may then trade them. The regulator will have a role in
correcting market failures, but the presumption should be that the
market will resolve problems unless it is demonstrated otherwise. The
government role may include arbitrating interference disputes, enforcing
antitrust laws (although concentration should be less of a problem when
inputs of spectrum for an industry are not fixed by rigid allocation),
and licensing low power equipment for open access spectrum. Social
objectives should be dealt with using bidding credits, including for the
military, broadcasting and public service.

### J.M. Ward, "Secondary Markets In Spectrum,"10 CommLaw Conspectus 103 (2001).

The author contends that there is a spectrum drought that will impact
the market. The author explains that auctions only ensure that spectrum
is put to its highest valued use at the time of the initial assignment
and that post-auction efficiencies are being evaluated in the
Commission's secondary markets proceeding. He says that spectrum leasing
has been a tremendous success, but that it is hampered by cumbersome
regulations resulting in uncertainty. He hopes that eventually secondary
markets will evolve into spot markets or exchanges where spectrum is
bought and sold. The article analyzes the current Commission rulemaking
on secondary markets and predicts the Commission's likely course of
action and suggests regulatory and statutory changes to prepare for new
technologies and markets. The author concludes that the Commission's
secondary market proposal clings too closely to its administrative
control over spectrum by requiring licensees to retain control over
their spectrum, even though they may not have operational control. The
author believes that this model is a disincentive to leasing and that,
instead, the Commission should forebear from enforcing the traditional
control standards and assign responsibility for leased spectrum to the
entity operating in it.

### D.W. Webbink, "Frequency Spectrum Deregulation Alternatives," OPP Working Paper No. 2 (Oct. 1980). http://www.fcc.gov/Bureaus/OPP/working_papers/oppwp2.pdf

The author describes the concepts of "spectrum deregulation" or
"spectrum economics" as terms that encompass not only auctions and fees
but also less reliance on government decision making and greater freedom
for the licensee. The paper also describes the frequency management
system, problems associated with the existing system, deregulatory
proposals, and objections that have been raised. The paper concludes by
the author listing the most important proposals: (1) free license
transferability, (2) limiting petitions to deny, (3) allowance of
license sharing and resale, (4) allowance of greater technical
flexibility, (5) greater service flexibility, (6) clear but limited
property rights, and (7) reduction in the number of classes of
allocations. The paper also concludes by listing the most important but
controversial changes: use of auctions and lotteries instead of
comparative hearings and repeal of distinctions between broadcasting,
common carrier and private radio systems. The author notes that the most
difficult proposal to implement would be the institution of spectrum
fees.

### J.A. Eisenach and R.J. May, eds. " 'Propertyzing' The Electromagnetic Spectrum: Why It's Important, and How to Begin," Communications Deregulation and FCC Reform: What Comes Next? The Progress & Freedom Foundation (2001) (reprinted in 9 Media Law & Policy 19 (2000)).

The paper advocates changing the stewardship model of government
regulation of spectrum use to one of full ownership of spectrum by the
government and the private sector. The paper describes and critiques
government regulation of spectrum, the property rights approach and its
advantages and possible transition techniques. It also addresses
potential objections to the property rights model, and provides a
parable imagining Federal Government control of all real estate use. The
author concludes by urging the FCC to continue auctioning spectrum and
easing restrictions on auctioned spectrum, to move aggressively towards
establishing land-like property right in spectrum, and for Congress to
codify these changes in Title III of the Communications Act.

### J. M. Peha, "Spectrum Management Policy Options," ***IEEE Communications Surveys***, 1998.

This article examines spectrum management issues and policy options for
how spectrum can be used, determining which commercial entities can use
spectrum and any associated fees, and providing spectrum for government
use. The article explores the trade offs between policy decisions for
unlicensed, licensed spectrum, assignment mechanisms (comparative
hearings, lotteries and auctions), and government allocation and
assignment of spectrum. The article concludes by calling for additional
allocations for unlicensed spectrum, the introduction of more
market-based mechanisms for assignment of spectrum to commercial and
government (i.e., using spectrum fees paid through commercial auction
revenues based on commercial spectrum auction values for government
users) spectrum users. Finally, the article cautions against the use of
one-time spectrum auction revenue for annual expenditures by charging
auction winners annual fees.

### H. Salgado, M. Sirbu, and J.M. Peha, "Spectrum Sharing Through Dynamic Channel Assignment For Open Access To Personal Communications Services," ***IEEE ICC-95* (June 1995)**. 

This article focuses on a narrow band technical solution that uses
decentralized spectrum sharing to facilitate open access among competing
PCS operators. Specifically, the articles proposes using a system of
dynamic channel assignment (commons approach) with anonymous reuse
partitioning among multiple PCS operators with partially overlapping
networks and unequal traffic shares by limiting the maximum number of
channels assigned to one cell site as an incentive for operators to
build more cells rather than appropriating channels from competitors.
The article concludes that allowing a dynamic channel assignment
approach (through licensee sub-letting) could introduce an open access
market entry mechanism for potential PCS providers eliminating wasted
capacity without adjusting fixed spectrum assignments.

### D.P. Reed, "When Less is More," *Future Positive*, May 21, 2002.

This article argues that by cooperating we can find more spectrum
capacity. The article posits that cooperative networks, rather than
uncoordinated point-to-point channels, can be scaled so as to increase
the capacity of spectrum with increases in the number of spectrum users
eliminating the need for property-like rights in spectrum management.
The author suggests that we need a regime that allows spectrum based
networks to interoperate and cooperate in an open and experimental way,
just as the Internet did.

### A.D. Thierer, "A Policy Maker\'s Guide to Deregulating Telecommunications Part 6: A Free-Market Future for Spectrum," Heritage Talking Points No. 11. Washington, D.C.: Heritage Foundation, March 19, 1996. 

This paper argues that wireless spectrum is over-regulated and that
Congress should take the following steps: (1) grant a permanent and
absolute property right to current licensees with full flexibility, (2)
auction as much spectrum as possible, (3) provide First Amendment parity
between wireline and wireless spectrum use, and (4) transfer all
remaining spectrum authority from the FCC and NTIA to the courts,
private entities, and an independent body. The paper concludes by
arguing that seven decades of quasi-socialized federal spectrum
management have diminished efficient and innovative use and that the
creation of full property rights and ownership will result in a dramatic
transformation of spectrum.

### D.W. Webbink, "Property Rights, Flexible Spectrum Use and Satellite v. Terrestrial Uses and Users," Chapter 11 in Communications Policy and Information Technology: Promises, Problems, and Prospects, edited by L.F. Cramer and S. Greenstein, MIT Press (2002), pp. 277-295. (Also can be found at Federal Communications Commission, International Bureau, 29th TPRC Conference, 2001. http://arxiv.org/ftp/cs/papers/0109/0109016.pdf.)

This paper discusses policy questions raised by the proposals to provide
terrestrial services in satellite spectrum and the ORBIT Act which
forbids auctions to select among mutually exclusive applications to
provide international or global satellite services. The paper explores
the questions of the extent to which a government agency or spectrum
users should be permitted to make the determination of when spectrum
sharing is feasible and under what conditions and, on a related issue,
whether sharing should be analyzed differently depending on if the
satellite and terrestrial systems are under the control of a single or
separate parties. The paper also explores the possibility that the ORBIT
Act's prohibition on auctions for international or global satellite
service use may prejudice the allocation of spectrum away from
international satellite services in favor or auction revenue-generating
services. The author concludes by saying that wherever feasible, it
would be desirable to give companies maximum exclusive property-like
rights to make spectrum sharing decisions and that the anti-auction
provision of the ORBIT Act should be repealed because in the long run it
will harm satellite companies more than providing them with benefits.

###  {#section .unnumbered}

### D.W. Webbink, "Radio Licenses and Frequency Spectrum Use Property Rights," *Communications and the Law*, vol. 9, no. 3, (June, 1987), pp. 3-29.

This article argues for exclusive property rights in spectrum positing
that private property rights will lead to more efficient production and
use of the resource. It explains that private property rights require
three conditions: (1) the right to exclusive use, (2) the right to
receive income from the use of the resource, and (3) the right to
transfer the exclusive use right in whole or in part to others. The
article contends that common property rights, including for spectrum,
weaken the incentive to use the resource efficiently and to conserve
resources since users cannot capture the benefits of conservation. The
article describes changes that the Commission made to broadcast and
other spectrum service rules during the 1980s to allow for more flexible
services offerings, sharing an leasing, longer license terms for
non-broadcasting licenses, and relaxation of trafficking rules to permit
freer transferability of licenses. The article concludes by suggesting
that the Commission change its rules to increase property rights by: (1)
allowing secondary use on all private, broadcasting, and common carrier
frequencies, (2) allowing all system users the ability to earn profit
from the sharing, leasing or sale of their spectrum use rights, (3) the
Congress repeal section 310(d) (transferability of licenses) of the
Communications Act, (4) increasing the length of license terms to 15 or
20 years or in perpetuity, (5) the grant of exclusive licenses, (5) full
flexibility of use, (6) auctions for spectrum licenses, and (7) repeal
of sections 301 and 304 of the Communications Act (limits on
transferability of radio licenses).

[^1]: The findings and recommendations contained in this Report are
    those of the Spectrum Rights and Responsibilities Working Group
    members, and do not necessarily reflect the views of the Commission,
    Commission management, or the Spectrum Policy Task Force.

[^2]: The Spectrum Policy Task Force sought comment on issues related to
    the Commission's spectrum policies. *See* "Spectrum Policy Task
    Force Seeks Public Comment on Issues Related to Commission's
    Spectrum Policies," ET Docket No. 02-135, *Public Notice* (DA
    02-1311) (rel. June 6, 2002). The Commission received approximately
    200 comments and reply comments.

[^3]: The Public Workshop convened on Spectrum Rights and
    Responsibilities (*Public Workshop on Spectrum Rights and
    Responsibilities*) was held on August 9, 2002. *See* "Spectrum
    Policy Task Force Announces Panelists for the August 9^th^ Public
    Workshop on Spectrum Rights and Responsibilities," *Public Notice*
    (DA 02-1892) (rel. August 2, 2002). A transcript of the Public
    Workshop can be found at
    \<http://www.fcc.gov/sptf/files/0809fcc.pdf.\>

[^4]: A bibliography (with summaries) is attached as Appendix I.

[^5]: *See, e.g.,* Lawrence J. White, 9-Fall Media L. & Pol'y 19, 23-24
    (2000).

[^6]: *See generally* Principles for Reallocation of Spectrum to
    Encourage the Development of Telecommunications Technologies for the
    New Millennium, *Policy Statement*, 14 FCC Rcd 19868 (1999)
    (*Spectrum Policy Statement*).

[^7]: *Spectrum Policy Statement*, 14 FCC Rcd at 19868-69, ¶¶ 1-5.

[^8]: *See* Thomas Hazlett (Hazlett) Reply Comments at 1.

[^9]: *See* Gerald Faulhaber and David Farber (Faulhaber and Farber)
    Comments at 5; *see generally* Hazlett Comments.

[^10]: *See generally* Faulhaber and Farber Comments; Statements of
    Thomas Krattenmaker and Peter Pitsch at the *Public Workshop on
    Spectrum Rights and Responsibilities.*

[^11]: *See, e.g.,* Consumer Federation of America Comments at i ("The
    moment spectrum is auctioned, the private economic interests of the
    license holder comes into conflict with the citizen interest. Once
    the airwaves are sold-off -- "propertized" or "monetized" in current
    jargon -- the new owners will decide who gets to use it.").

    and how it is used. If you have enough money, you get to speak, if
    you do not, you are out of luck.").

[^12]: *See, e.g.,* Association of Public Safety Communications
    Officials-International (APCO) Comments at 3; Statements of Ron
    Haraseth and David Warner, respectively, at the August 5, 2002
    Public Workshop on Spectrum Efficiency (*Public Workshop on Spectrum
    Efficiency*) at 70, 73; *see also* Satellite Industry Association
    (SIA) Comments at 18 (noting that "\[s\]everal features of satellite
    systems offer advantages for public safety, law enforcement and
    emergency response organizations."); Bergen County Comments at 1-5
    (noting that "market oriented policies are but one" consideration
    for the Commission in executing its statutory public interest
    mandate).

[^13]: *See, e.g.*, Private Radio Commenters Comments at 2 (many
    businesses are inherently dangerous, and the licensees cannot afford
    the risk of loss of critical communications services from a
    commercial provider); Aeronautical Radio, Inc. (ARINC) Comments at 2
    ("Allocations will always be needed to provide for safety functions,
    especially where radio is the only means of communication.").

[^14]: *See*, *e.g.*, National Radio Astronomy Observatory Comments.

[^15]: *See, e.g.*, Boeing Comments at 8, 9-10 ("it would disserve the
    public interest if the Commission placed its goal of spectrum
    efficiency above its other equally important and statutorily
    mandated goals and obligations"); SIA Comments at 4 (noting that the
    Communications Act requires the Commission "to make available, so
    far as possible, to all the people of the United States, a rapid,
    efficient, Nation-wide, and world-wide wire and radio communication
    service with adequate facilities at reasonable charges . . .")
    (citation omitted); Statements of Michael Fitch at the *Public
    Workshop of Spectrum Efficiency* at 150 ("the safety implications
    \[of spectrum used for commercial aviation and navigation\] are very
    high"); Mobile Satellite Venture Comments at 15 (auctioning the
    right to flexibly use satellite spectrum would "thwart the
    Commission's goals of ensuring service to rural and underserved
    areas and would lead to decreased spectrum efficiency and
    utilization").

[^16]: *See generally* National Association of Broadcasters/Association
    for Maximum Service Television (NAB/MSTV) Joint Comments; Society of
    Broadcast Engineers (SBE) Comments; Association of Public Television
    Stations (APTS) Comments; National Public Radio (NPR) Comments.

[^17]: *See, e.g.*, Satellite Industry Association (SIA) Comments at
    5-6, 7-8; ("Sequential auctions \[in foreign countries\] would
    necessarily follow \[a U.S. auction for satellite spectrum\] and
    would deter investment in satellite systems \[not only\] by raising
    both the cost of such systems but also by adding an additional level
    of uncertainty as to the overall licensing, and thus deployment,
    costs associated with the system.").

[^18]: *See* Statements of David Weinrich, Stephen Blust, Stephen
    Gillig, and Michael Fitch at *Public Workshop on Spectrum
    Efficiency*; Hughes Network System (Hughes) Reply Comments at 14-15.

[^19]: *See, e.g.,* SIA Comments at 8 ("With the advent of auctions,
    however, other nations may try to stake their claim to prospective
    auction revenues by claiming slots that U.S. systems need through
    'paper filings' that are never actually built.").

[^20]: *See, e.g.*, Oz Shy, The Economics of Network Industries,
    Cambridge Univ. Press 1-6 (2001).

[^21]: The "exclusive use" model, as referenced herein, is presented as
    a theoretical model, as is the commons model that follows it. Their
    characteristics are described below. This exclusive use model is not
    equivalent to the many different variants of "exclusive use"
    licensing currently employed by the Commission in bands throughout
    the spectrum.

[^22]: *See, e.g.,* Faulhaber and Farber Comments; Hazlett Comments.

[^23]: *See* Statements of Brent Wilkins at the *Public Workshop on
    Spectrum Efficiency.*

[^24]: *See, e.g.,* National Telecommunications Cooperative Association
    (NTCA) Comments; Rural Telecommunications Group (RTG) Comments.

[^25]: *See, e.g.,* David Reed (Reed) Comments; Jon Peha (Peha)
    Comments; Statements of Preston Marshall at the *Public Workshop on
    Spectrum Efficiency*.

[^26]: *See, e.g.*, Werbach Comments; Reed Comments.

[^27]: *See, e.g.*, New America Foundation Reply Comments.

[^28]: *See, e.g.,* Bergen County Comments at 3 (noting "there are a
    range of national policy objectives, such as public safety, that
    simply cannot be accomplished through a market direction" and adding
    that many of these objectives "will not be achieved by awaiting a
    market solution"); Society of Broadcast Engineers Comments at 5
    ("SBE is at a loss to understand how a blanket market-driven
    allocations policy can do anything but cripple \[Broadcast Auxiliary
    Service\] use during emergencies").

[^29]: *See, e.g.,* Statements of David Weinrich, Stephen Blust, Stephen
    Gillig, and Michael Fitch at *Public Workshop on Spectrum
    Efficiency.*

[^30]: *See, e.g.,* XtremeSpectrum at 5 (supporting a non-exclusive
    "regulatory scheme that welcomes low-power, non-interfering devices
    in spectrum already allocated for other purposes").

[^31]: *See, e.g.*, Benkler, Yochai, "Overcoming Agoraphobia: Building
    the Commons of the Digitally Networked Environment," Harvard Journal
    of Law and Technology, Vol. 11 (1998), at 322.

[^32]: There is, however, some process for equipment certification or
    approval.

[^33]: *See, e.g.*, Kevin Werbach (Werbach) Comments at 7 ("In a
    spectrum commons, every user has incentives to use spectrum wisely
    and intelligently, because it has no guarantee of protection against
    competing uses").

[^34]: *See* Werbach Comments at 4; Benkler, Yochai (2002) "Some
    Economics of Wireless Communications," 15 Harvard Journal of Law and
    Technology, forthcoming 2002-3, at 19.

[^35]: *See, e.g.*, David Reed (Reed) Comments.

[^36]: Mesh networks are communications architectures in which each node
    is connected to every other node. They operate in contrast to ring
    networks in which every node is part of a closed loop, or
    point-to-multipoint networks, which rely on key transition points.

[^37]: *See, e.g.*, Cellular Telecommunications & Internet Association
    (CTIA) Comments; Cingular Wireless LLC (Cingular) Comments; Sprint
    Corporation (Sprint) Comments.

[^38]: *See, e.g.,* GPS Industry Council Comments at 3 ("The primary
    role of the FCC should be as steward of the nation's radiofrequency
    spectrum to ensure its availability for the most important and
    beneficial uses.").

[^39]: *See, e.g.*, Station Resource Group Comments at 4 ("The more
    speedily the Commission moves to making the spectrum a Commons,
    though, with all the policy shifts this implies, the more rapidly we
    will evolve from the current artificial scarcity construct to real
    scarcity. For the most part, the market is the most practical
    solution to a shake-out in the best interest of the public.").

[^40]: The tragedy of the commons occurs when too many parties have the
    right to use a resource, such that the resource is overused.

[^41]: *See, e.g.*, Jon Peha (Peha) Comments at 6; Reed Comments.

[^42]: *See, e.g.*, Faulhaber and Farber Comments; Statement of Peter
    Pitsch at the *Public Workshop on Spectrum Rights and
    Responsibilities.*

[^43]: *See* Part-15.ORG Comments at 8.

[^44]: *See, e.g.*, Hazlett Comments at 1-2; Faulhaber and Farber
    Comments.

[^45]: *See, e.g.*, Hazlett Comments; Faulhaber and Farber Comments.

[^46]: *See, e.g.*, New America Foundation et al. Reply Comments
    (asserting that over 20 commenters explicitly support additional
    unlicensed spectrum and only a handful actively oppose it); Consumer
    Electronics Association Reply Comments; Cisco Comments (advocating
    setting aside additional unlicensed spectrum to promote innovation
    in creating broadband devices, such as wireless LANs); Cingular
    Comments at 50-51 (supporting additional spectrum for unlicensed
    devices in unlicensed bands only, asserting that spectrum overlays
    in licensed bands cause too much interference); Citizens Media
    Corp/Allston-Brighton Free Radio Comments at 14 (asserting that
    spectral efficiency is contingent upon whether technical innovation
    is allowed to flourish through an increase in the amount of
    unlicensed spectrum or use of "holes" or underdeveloped areas in
    currently occupied areas of the spectrum); ShreveNet Comments at 2
    (asserting that more license-exempt spectrum should be set aside for
    rapid expansion of wireless Internet).

[^47]: *See, e.g*., XtremeSpectrum Comments at 5, 10 (advocating that
    certain shared spectrum technologies, such as ultra-wideband, are
    low-power, non-interfering devices that can operate efficiently in
    spectrum already allocated for other purposes).

[^48]: *See generally* 47 C.F.R. Part 15 -- Radio Frequency Devices;
    Part 18 -- Industrial, Scientific, and Medical Equipment; Part 90,
    Subpart M -- Intelligent Transportation Systems Radio Service; Part
    97 -- Amateur Radio Service.

[^49]: *See, e.g.,* Rulemaking To Amend Parts 1, 2, 21, and 25 of the
    Commission's Rules to Redesignate the 27.5-29.5 GHz Frequency Band,
    To Reallocate the 29.5-30.0 GHz Frequency Band, To Establish Rules
    and Policies for Local Multipoint Distribution Service and for Fixed
    Satellite Services; Petitions for Reconsideration of the Denial of
    Applications for Waiver of the Commission's Common Carrier
    Point-to-Point Microwave Radio Service Rules; Suite 12 Group
    Petition for Pioneer Preference, CC Docket No. 92-297, *Second
    Report and Order, Order on Reconsideration, and Fifth Notice of
    Proposed Rulemaking*, 12 FCC Rcd 12545 (1997); *Third Report and
    Order*, 12 FCC Rcd 22310 (1997); *Third Order on Reconsideration*,
    13 FCC Rcd 4856 (1998); 47 C.F.R. §§ 101.103, 101.1005.

[^50]: In the Matter of Revisions to Broadcast Auxiliary Service Rules
    in Part 74 and Conforming Technical Rules for Broadcast Auxiliary
    Service, Cable Television Relay Service and Fixed Services in Parts
    74, 78 and 101 of the Commission's Rules, ET Docket 01-75, *Report
    and Order* (FCC 02-298 (rel. Nov. 13, 2002).

[^51]: *See* Amendment of Eligibility Requirements in Part 78 Regarding
    12 GHz Cable Television Relay Service, CS Docket No. 99-250*,
    Report* *and Order*, 17 FCC Rcd 9930 (2002).

[^52]: *See generally* 47 C.F.R. Part 22, Subpart E -- Paging and
    Radiotelephone Service.

[^53]: *See, e.g*., Amendment of Part 15 of the Commission's Rules
    Regarding Spread Spectrum Devices, ET Docket No. 99-231, *Second
    Report and Order*, 17 FCC Rcd 10755 (2002).

[^54]: *See, e.g.*, Motorola Comments at 9; Nokia Inc. (Nokia) Comments
    at 2.

[^55]: *See generally* 47 C.F.R. Part 15 -- Frequency Devices; 47 C.F.R.
    Part 18 -- Industrial, Scientific, and Medical Equipment.

[^56]: *See* 47 C.F.R. § 15.307.

[^57]: The opportunity cost for using Part 15 spectrum is not actually
    zero because, although there is no interference protection and no
    limit on entry, any user can choose to use some part or all of a
    particular band for many different uses. Thus, for example, an
    individual user of Part 15 devices may not be limited in the number
    of Wi-Fi devices he or she may install in his/her home, but this
    individual may find that other devices operating on the same band
    (*e.g*., portable phones) may not function properly. The opportunity
    cost, while small, of using the WiFi devices is the inability to use
    a portable phone, even though users of the same frequencies a block
    away have no impact on the individual.

[^58]: *See, e.g.*, Statements of David Siddall and Michael Kurtis,
    respectively, at the *Public Workshop on Spectrum Rights and
    Responsibilities* at 119, 169; Motorola Comments at 8; Information
    Technology Industry Council Comments at 3.

[^59]: *See, e.g.*, Statement of Bruce Fette at the *Public Workshop on
    Spectrum Rights and Responsibilities* at 49, 67, 78; Hypres Comments
    at 4; Motorola Comments at 14-15.

[^60]: *See* Statement of Peter Pitsch at the *Public Workshop on
    Spectrum Rights and Responsibilities* at 90.

[^61]: *See* Statement of Peter Pitsch at the *Public Workshop on
    Spectrum Rights and Responsibilities* at 42.

[^62]: *See* Statement of Tom Hazlett at the *Public Workshop on
    Spectrum Rights and Responsibilities* at 185.

[^63]: *See* Statement of David Reed at the *Public Workshop on Spectrum
    Rights and Responsibilities* at 178, 204.

[^64]: *See* Statement of Gee Rittenhouse at the *Public Workshop on
    Spectrum Rights and Responsibilities* at 69.

[^65]: *See, e.g.*, Statement of Tom Hazlett at the *Public Workshop on
    Spectrum Rights and Responsibilities* at 186.

[^66]: *See, e.g.*, Statement of Tom Hazlett at the *Public Workshop on
    Spectrum Rights and Responsibilities* at 187.

[^67]: Heller, Michael (1998) "The Tragedy of the Anticommons: Property
    in the Transition from Marx to Markets," 111 Harvard Law Review,
    621, 622-25. The tragedy of the commons may occur when many parties
    have property-like rights for small slivers of spectrum so that a
    party wanting to use a block of spectrum may find it costly and
    complicated to negotiate with many separate holders of spectrum
    usage rights. In such a case, the spectrum may go unused and thus
    become a wasted resource.

[^68]: *See* Benkler, Yochai (2002) "Some Economics of Wireless
    Communications," 15 Harvard Journal of Law and Technology,
    forthcoming 2002-3, at 18.

[^69]: *See, e.g.,* Information Technology Industry Council Comments at
    8; Peha Comments at 2; CDMA Development Group Comments at 3-5; New
    America Foundation et al. Reply Comments at 11.

[^70]: *See, e.g.,* Cisco Comments at 9; Statement of Peter Pitsch at
    the *Public Workshop on Spectrum Rights and Responsibilities*;
    Statements of Mark Crosby and Nancy Jesuale at the *Public Workshop
    on Interference Protection*.

[^71]: *See, e.g.,* Statements of Michael Calabrese and Larry Miller at
    the *Public Workshop on Spectrum Rights and Responsibilities*; New
    America Foundation et al. Comments at 16-17; Wayne Longman (Longman)
    Comments and Reply Comments.

[^72]: *See, e.g.,* Ericsson Inc. (Ericsson) Comments at 5-6.

[^73]: *See, e.g.,* Statement of Michael Kurtis at the *Public Workshop
    on Spectrum Rights and Responsibilities*; Peha Comments at 4.

[^74]: Statement of Ray Pickholtz at the *Public Workshop of
    Interference Protection* at 124. *See also* Old Colorado
    Communications Comments at 3-4; License Exempt Alliance Comments at
    5.

[^75]: *See, e.g.,* New York State Office for Technology Comments at 11;
    Private Radio Commenters Reply Comments at 3-4.

[^76]: *See, e.g.,* Statements of Jennifer Warren and Joe Gatusso at the
    *Public Workshop on Spectrum Rights and Responsibilities*; AT&T
    Wireless Comments at 8-9; NPR Comments at 4-12.

[^77]: *See, e.g.,* NPR Comments at 4-12; Barnaby Rickett Comments at 2;
    Nickolaus Leggett Comments at 5-6.

[^78]: *See, e.g.,* SIA Comments at 7; Hughes Network Systems Comments
    at 10-14; New York State Office for Technology Comments at 11-12;
    Motorola Comments at 25-26.

[^79]: *See generally* Sprint Comments at 4; Statement of Steve Sharkey
    at the *Public Workshop on Spectrum Rights and Responsibilities.*

[^80]: *See, e.g.,* AT&T Wireless Comments at 14-15; Sprint Reply
    Comments at 7-8.

[^81]: *See, e.g.*, Statements of Bruce Fette and David Reed at the
    *Public Workshop on Spectrum Rights and Responsibilities*.

[^82]: *See, e.g.,* Statements of Victor Tawil and Peter Pitsch at the
    *Public Workshop on Spectrum Rights and Responsibilities*; Part 15
    Organization Comments at 5; CTIA Comments at iii, 12.

[^83]: *See, e.g.*, Statement of Steve Sharkey at the *Public Workshop
    on Spectrum Rights and Responsibilities*; Coleman Bazelon (Bazelon)
    Comments at 2-3.

[^84]: *See, e.g.,* Statements of Andrew Clegg and Nancy Jesuale at the
    *Public Workshop on Interference Protection*.

[^85]: *See, e.g.,* Sprint Comments at 13; Statement of Dewayne
    Hendricks at the *Unlicensed Spectrum and Experimental Licenses
    Public Workshop*, held at the Commission on August 1, 2002.

[^86]: *See* Statements of David Siddall and Michael Kurtis at the
    *Public Workshop on Spectrum Rights and Responsibilities*; Sprint
    Comments at 2-3.

[^87]: *See, e.g.,* Statements of Victor Tawil and David Wye at the
    *Public Workshop on Spectrum Rights and Responsibilities*; Bazelon
    Comments at 2.

[^88]: *See, e.g.,* Bazelon Comments at 2-3.

[^89]: *See, e.g.*, American Radio Relay League Comments at 10; Private
    Radio Commenters Comments at 15-19; Hughes Comments at 10.

[^90]: *See, e.g.*, Telecommunications Industry Association (TIA)
    Comments at 6; Information Technology Industry Council Comments at
    9; CTIA Comments at iii, 12; Bazelon Comments at 2; AT&T Wireless
    Comments at 14; Consumer Electronics Association at 6-7.

[^91]: *See, e.g.*, CTIA Comments.

[^92]: *See* David Rhodes Comments at 4.

[^93]: *See, e.g.*, Statements of David Farber at the *Public Workshop
    on Spectrum Rights and Responsibilities* at 61, 77.

[^94]: *See, e.g.*, Sprint Comments at 9; Cantor Fitzgerald Comments at
    3; AT&T Wireless Comments at 12; Winstar Comments at 3. *See
    generally* Promoting Efficient Use Of Spectrum Through Elimination
    of Barriers to the Development of Secondary Markets, WT Docket No.
    00-230, *Notice of Proposed Rulemaking*, 15 FCC Rcd 24203 (2000).

[^95]: *See* Sprint Comments at 9; AT&T Wireless Comments at 12; Winstar
    Comments at 3.

[^96]: *See* Statement of David Reed at the *Public Workshop on Spectrum
    Efficiency* at 60; Statements of Gerald Faulhaber at the *Public
    Workshop on Spectrum Efficiency* at 144, 222.

[^97]: *See generally* Cantor Fitzgerald Comments at 3-4.

[^98]: *See, e.g.*, Statement of Peter Pitsch at the *Public Workshop on
    Spectrum Rights and Responsibilities* at 68-69.

[^99]: *See, e.g.*, AT&T Wireless Comments at 14; Sprint Comments at 4.

[^100]: *See, e.g.*, Hypres Comments at 4.

[^101]: *See, e.g.*, Statements of Jennifer Warren and David Wye,
    respectively, at the *Public Workshop on Spectrum Rights and
    Responsibilities* at 253, 255.

[^102]: "Interference temperature" measures the RF power available at
    the receiving antenna per unit bandwidth and is a measure of the
    "noise" in a particular band and location.

[^103]: Promoting Efficient Use Of Spectrum Through Elimination of
    Barriers to the Development of Secondary Markets*,* WT Docket No.
    00-230, *Notice of Proposed Rulemaking*, 15 FCC Rcd 24203 (2000).

[^104]: *See, e.g.*, New America Foundation et al. Comments at 14;
    Consumer Federation of America Comments at 30-31.

[^105]: *See, e.g.*, CTIA Comments at 15-16; Association of American
    Railroads Comments at 25; SIA Comments at 20; Information Technology
    Industry Council at 5; AT&T Wireless Comments at 20; Nokia Comments
    at 4; Motorola Comments at 25-26.

[^106]: *See, e.g.*, Wireless Ethernet Compatibility Alliance Comments
    at 5-7.

[^107]: *See, e.g.*, Statement of Jennifer Warren at the *Public
    Workshop on Spectrum Rights and Responsibilities* at 243.

[^108]: *See, e.g.*, ArrayComm Comments at 6-8; Sky Tower Comments at
    11(identifying backward-looking preparatory process for
    international meetings and claiming that "new technologies are often
    shut-out altogether or compromises are reached causing a proposal
    for a new technology to be considered on less desirable frequencies,
    of limited bandwidth, and/or with severe interference criteria that
    make deployment of the new technology much more difficult").

[^109]: *See* SIA Comments at 19; Winstar Comments at 4.

[^110]: *See* CTIA Comments at 15-16.

[^111]: *See, e.g.*, Dominion Comments at 9; New York State Office of
    Technology Comments at 11-12.

[^112]: *See, e.g.*, Longman Comments at 27; Winstar Comments at 4; New
    York State Office of Technology Comments at 11-12.

[^113]: *See, e.g.*, David Staelin Comments at 1; Longman Comments at
    14.

[^114]: *See, e.g.*, APCO Comments at 3; Marsalis Comments at 5.

[^115]: *See* American Association of Railroads Comments at 21-22;
    BellSouth Comments at 1-2.

[^116]: *See, e.g.*, American Petroleum Institute (API) Comments at 13;
    Exelon Comments at 3.

[^117]: *See Public Workshop on Spectrum Rights and Responsibilities*.

[^118]: *See Public Workshop on Spectrum Rights and Responsibilities*.

[^119]: *See, e.g.*, Private Radio Commenters Comments at 3; New York
    State Office of Technology Comments at 9-11.

[^120]: *See, e.g.*, TIA Comments at 6; MAP/NAF Reply Comments at 7.

[^121]: *See, e.g.*, CTIA Comments at 13-15; Bergen County Comments at
    6-7.

[^122]: *See* Bergen County Comments at 6-7.

[^123]: *See Public Workshop on Spectrum Rights and Responsibilities*.

[^124]: *See Public Workshop on Spectrum Rights and Responsibilities*.

[^125]: *See* United Telecom Council (UTC) Comments at 4-5; Proxim
    Comments at 5 ("Market-oriented spectrum policies do not mean
    'taking away' from government or public safety spectrum users.
    Rather this approach means giving such entities flexibility to
    monetize such assets as they best see fit to achieve their
    missions.").

[^126]: *See, e.g.,*, Longman Comments at 25-26 and Reply Comments at 4;
    Nokia Comments at 2-3.

[^127]: *See generally* NAB/MSTV Joint Comments; SBE Comments; APTS
    Comments; NPR Comments.

[^128]: *See* NPR Comments.

[^129]: *See* APTS Comments at 4 n.11 (citing Educational Television
    Facilities Act of 1962, Public Broadcasting Act of 1967, Public
    Telecommunications Act of 1978, Public Telecommunications Act of
    1992, Cable Television Consumer Protection Act of 1992,
    Telecommunications Act of 1996, and Satellite Home Viewer
    Improvement Act of 1999).

[^130]: *See, e.g., Public Workshop on Spectrum Rights and
    Responsibilities.*

[^131]: *See* 47 U.S.C. § 312(a)(7), 47 C.F.R. §73.1944 (reasonable
    access); 47 U.S.C. § 315, 47 C.F.R. § 73.1941 (equal opportunities).

[^132]: 47 U.S.C. § 303(b), 47 C.F.R. §§ 73.671, 73.673, 73.3526.

[^133]: 18 U.S.C. § 1464; 47 U.S.C. § 303, 47 C.F.R. § 73.3999.

[^134]: 47 U.S.C. § 303(w).

[^135]: 47 C.F.R. § 73.2080.

[^136]: 47 C.F.R. § 73.4280.

[^137]: *See generally* NAB/MSTV Joint Comments; APTS Comments; NPR
    Comments; SBE Comments.

[^138]: *But see* 47 C.F.R. §§ 73.641-73.644.

[^139]: *See* NPR Comments.

[^140]: *See* Statement of Victor Tawil at the *Public Workshop on
    Spectrum Rights and Responsibilities* at 90-94.

[^141]: Broadcast spectrum can be used for ancillary or supplementary
    services that do not interfere with the primary broadcast signal,
    e.g., through use or leasing of the vertical blanking interval to
    provide telecommunications services. *See* 47 C.F.R. § 73.646. In
    the digital context, broadcasters may provide ancillary and
    supplementary services such as subscription television programming,
    computer software distribution, data transmission, teletext,
    interactive services, and audio signals so long as such services do
    not interfere with the required provision of free over-the-air
    programming. *See* In the matter of Advanced Television Systems and
    Their Impact upon the Existing Television Broadcast Service, *Fifth
    Report and Order*, 12 FCC Rcd 12810 (1997) at ¶ 29 (citations
    omitted). *See also* 47 U.S.C. § 336.

[^142]: *See, e.g.*, AT&T Wireless Comments; Blooston, Mordkofsky,
    Dickens, Duffy & Prendergast (Blooston) Comments; RTG Comments;
    Cantor Fitzgerald Comments; Internet Technology Consultants
    Comments; Longman Comments; Schafer Comments; Midcoast Internet
    Solutions Comments; NTCA Comments; Rural Cellular Association (RCA)
    Comments; Williams Comments; Matanuska Telephone Association
    Comments; Leggett Comments; Part -15 Organization Comments; Michener
    Comments.

[^143]: *See generally* Blooston Comments; RTG Comments; RCA Comments;
    NTCA Comments.

[^144]: *See, e.g.*, Blooston Comments at 4-5; RTG Comments at 3-6; NTCA
    Comments at 4; RCA Comments at 4; Matanuska Comments at 3.

[^145]: *See, e.g.*, Blooston Comments at 5-6; RTG Comments at 6-8; NTCA
    Comments at 3, 6; RCA Comments at 5; Matanuska Comments at 3-4.

[^146]: *See, e.g.*, ITC Comments at 1; Longman Comments at 12-13;
    Schafer Comments at 4-5; Williams Comments at 1; Part
    15-Organization Comments at 6; Michener Comments at 1.

[^147]: *See, e.g.*, AT&T Wireless Comments at 11-12; Leggett Comments
    at 5.

[^148]: *See* Statement of Larry Miller at the *Public Workshop on
    Spectrum Rights and Responsibilities.*

[^149]: *See* Statement of Steve Stroh at the *Public Workshop on
    Spectrum Rights and Responsibilities.*

[^150]: *See, e.g.*, Motorola Comments at 2-4.

[^151]: *See, e.g.*, Cantor Fitzgerald Comments at 3.

[^152]: *See, e.g.*, CTIA Comments at 3-10.

[^153]: *See, e.g.*, CTIA Comments at 3-6.

[^154]: *See, e.g.*, AT&T Wireless Comments at 8.

[^155]: *See, e.g.*, CTIA Comments at 6-9.

[^156]: *See, e.g.*, New America Foundation et al. Comments at 11-14;
    AT&T Wireless Comments at 5-8; CTIA Comments.

[^157]: *See, e.g.*, Mobile Satellite Ventures Comments at 8.

[^158]: *See, e.g.*, Mobile Satellite Ventures Comments at 14.

[^159]: *See, e.g.,* TIA Comments at 7; Nokia Comments at 3.

[^160]: *See, e.g.*, Comsearch Comments at 6.

[^161]: *See generally* Nokia Comments at 2; TIA Comments at 4-6.

[^162]: *See* CTIA Comments at 15-16.

[^163]: *See* Consumer Federation of America Comments at 30-31.

[^164]: *See* Evan Kwerel and John Williams, "A Proposal For a Rapid
    Transition to Market Allocation of Spectrum," OPP Working Paper 38
    (November 2002).

[^165]: Jean Tirole, [The Theory of Industrial
    Organization]{.underline}, The MIT Press, 1995, p. 113.

[^166]: R.H. Coase, "The Federal Communications Commission," 2 J.L. &
    Econ. 1 (1959).