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Spectrum Abundance and the Choice Between Private and Public Control

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  • Benjamin, Stuart Minor
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    Abstract

    Prominent commentators have recently proposed that the government allocate significant portions of the radio spectrum as a wireless commons. The problem for commons proposals is that truly open access leads to interference, which renders a commons unattractive. Those advocating a commons assert, however, that a network comprising devices that operate at low power and repeat each other's messages can eliminate the interference problem. They contend that this possibility renders spectrum commons more efficient than privately owned spectrum, and in fact that private owners would not create these abundant networks (as I call them) in the first place. In this Article I argue that these assertions are not well-founded, and that efficiency considerations favor private ownership of the spectrum. Those advocating a commons do not propose a network in which anyone can transmit as she pleases. The abundant networks they envision involve significant control over the devices that will be allowed to transmit. On the question whether private entities will create these abundant networks, commons advocates emphasize the transaction costs of aggregating spectrum, but those costs can be avoided via allotment of spectrum in large swaths. The comparative question of the efficiency of private versus public control, meanwhile, entails an evaluation of the implications of the profit motive (enhanced ability and desire to devise the best networks, but also the desire to attain monopoly power) versus properties of government action (the avoidance of private monopoly, but also a cumbersome process than can be subject to rent-seeking). The deciding factor, in my view, is that these networks might not develop as planned, and so the flexibility entailed by private ownership, as well as the shifting of the risk of failure from taxpayers to shareholders, makes private ownership the better option. The unattractiveness of a commons in this context casts serious doubt on the desirability of commons more generally. Commons proponents have championed abundant networks because those networks avoid interference problems. If private ownership is a more efficient means of creating abundant networks, then the same would almost certainly be true for networks that run the risk of interference. Most uses of spectrum are subject to interference, so the failure of the commons advocates' arguments undermines the appeal of a commons for most potential uses of spectrum. (Updated December 2003.)

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    Bibliographic Info

    Paper provided by Regulation2point0 in its series Working paper with number 377.

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    Date of creation: Jun 2003
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    Handle: RePEc:reg:wpaper:377

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    Cited by:
    1. Thomas W. Hazlett, 2008. "Optimal Abolition of FCC Spectrum Allocation," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 103-128, Winter.
    2. Fulvio Minervini & Diego Piacentino, 2007. "Spectrum Management and Regulation: Towards a Full-Fledged Market for Spectrum Bands?," Working Papers 07-2007, Macerata University, Department of Studies on Economic Development (DiSSE), revised Nov 2008.

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