Spectrum Policies Need Flexibility for Growth

Posted February 21, 2003 at 9:28am

One of the biggest losers with respect to the whole NextWave bankruptcy trial is the American public. For more than five years this imbroglio has kept valuable spectrum from being used. This is spectrum that was not available to expand cellular service to provide for better quality and more advanced services.

The question of spectrum policy reform, particularly in the wake of the Supreme Court’s decision in the NextWave case, is a major issue for the 108th Congress, whether via legislation or oversight of the Federal Communications Commission. Spectrum policy will have a major impact on issues including bankruptcy, competition in the telecommunications industry, media regulation and homeland security. Also at issue is the fundamental question of whether the promise of spectrum auctions as a revenue source for the public treasury will ever be fully realized.

In 1996, NextWave successfully bid $4.7 billion for a block of licenses in the FCC’s electromagnetic-radio-frequency spectrum auction. The Supreme Court in January held that in conducting the auction the FCC had acted as a creditor and not a regulator and, therefore, NextWave was entitled to bankruptcy protection and the ability to retain the licenses, for which at that point they had paid only $500 million. Thus the FCC could not reclaim and re-auction the licenses, causing the government to lose a large amount of potential revenue.

Prior to the NextWave auction, former FCC Chairman Reid Hunt had advocated closing the “bankruptcy loophole.” Congress declined. Recently, current FCC Commissioner Jonathan Adelstein also recommended to the Senate Finance Committee that it modify the bankruptcy laws. If we are to keep the current auction approach to spectrum management, perhaps it is time to take up this issue.

But spectrum management reform goes far beyond the wreckage of NextWave. According to FCC Commissioner Michael Powell, our current 90-year-old spectrum-management regime is based on assumptions about chaos from radio interference, the scarcity of spectrum, the need for government command and control, and government determinations of the highest and best use of the spectrum. In many ways modern technology is proving these assumptions incorrect, irrelevant or both.

Last year, the FCC established a Spectrum Policy Task Force, including some of our nation’s foremost economists and wireless spectrum experts, to comprehensively review our nation’s wireless spectrum management policy. According to their report, the current model of spectrum management, the “command-and-control” model, in which the government allocates and strictly defines the criteria for using a particular block of spectrum, may not be the best model.

There are a wide range of views on how spectrum should be managed, including those who advocate selling spectrum to private entities, essentially a property rights model, where owners would have complete property rights. The FCC report considered a similar approach, which they term the “exclusive use” model. This market-based approach would allow private entities to lease out spectrum to other companies and to use spectrum with greater flexibility. Proponents of this model argue that when private entities control the spectrum, profit motive or economic efficiencies will ensure that spectrum is being used to its fullest. [IMGCAP(1)]

Another model being advanced, which the FCC terms the “common” model, calls for the government to create more unlicensed spectrum, similar to the unlicensed spectrum available today. In this model the electronics manufacturers and other innovators would figure out the technologies necessary to maximize the use of the spectrum. Again competition and innovation would lead to the best use of spectrum. Under this model, Wi-Fi devices that transmit across a range of frequencies at a low power could be used, and similarly technologies, like Software Defined Radios, which seek out available frequencies not in use, could utilize this unlicensed spectrum.

Ultimately, spectrum policy must be more flexible. The FCC’s Spectrum Policy Task Force recommendation of using a combination of the current command-and-control model, as well as the exclusive-rights model and the common model in a combination may lead to the best use of our nation’s spectrum.

While the FCC has authority to make changes to our nation’s spectrum policy, much debate will take place in Congress with respect to these various policy options. Many questions surround this complex issue. For instance, will companies want to participate in auctions and pay if others are able to use certain portions of the spectrum for free? What will be the effect on auctions of combining unlicensed spectrum with licensed spectrum? Will incumbents who have paid large sums to occupy certain bans of spectrum experience unanticipated interference from unlicensed devices?

Finally, as we attempt to answer these questions and develop a new generation of spectrum policy, Congress must be vigilant to carefully balance protecting public interests with rapid change in technology, and the demands of market forces.

Rep. Albert Wynn (D-Md.) is a member of the Energy and Commerce Committee.