The US Needs A New Spectrum Policy

I have written before about open spectrum and the need for a new spectrum policy in the US. Spectrum policy is back in the news because the federal government is soon going to make a bunch of decisions about spectrum that is coming back from the broadcast TV operators.

Our policy for the past thirty years has been to sell the spectrum to the highest bidder and let the goverment pocket the money. This is short term thinking of the worst kind. The incumbent duopolist carriers are always the ones who can afford to pay the most money for the spectrum and they have no incentive to innovate on what they do with the spectrum. So it goes mostly underutilized while the demand for wireless broadband increases exponentially.

All you have to do is look at the massive innovation and performance curves in the rare unlicensed bands (wifi and bluetooth) to see that an open spectrum approach with captialist style competition will create the fastest performance improvements over time.

The President appointed an advisory committee to study our spectrum policy and make some recommendations. That committee reported last year that making more spectrum unlicensed would be the best policy.

The report's authors cited a European study:

freeing 400 megahertz of radio spectrum to be shared using new technologies would be equivalent to an economic financial stimulus of 800 billion euros

This points out the most pernicious aspect of our current spectrum policy. And that is that the spectrum being auctioned off is being priced based on its current value not its potential value that can only be unlocked by the kind of permissionless innovation we see in the unlicensed spectrum. So we not only are we giving the incumbent duopolist carriers more control over our spectrum but we are also selling it at a fraction of what it could be and should be worth.

We need a new spectrum policy in this country and we need it now.


Comments (Archived):

  1. jason wright

    who are the duopolist carriers?

    1. BenDoernberg

      Verizon and AT&T

    2. fredwilson

      depends on the market you live inin nyc it is verizon and twc

      1. jason wright


        1. fredwilson

          time warner cable. most of the action has been in the wireless carriers (att, verizon, sprint) but i think the cable companies are waking up now.

  2. Rodolfo Rosini

    The problem of every spectrum discussion is that it’s the collective against Verizon and AT&T. They thrive in a closed system where they have to compete against just a couple of companies and a level playing field would erode their business. I expect them to fight tooth and nail against any sort of openness in the spectrum.

    1. fredwilson

      yup and society must fight back or we will be at their mercy

  3. Amol Sarva

    Yes I agree. But we have to ask Google, Facebook, MSFT to make it happen. In 2007 when we had a chance called “C Block” Google went rogue and did a deal with T-Mobile. That was GOOGLE. They betrayed.

    1. fredwilson

      i think they learned their lesson

      1. Amol Sarva

        Well ask them to call me in that case. But having spent a lot of time on it then I don’t trust them now. Goog, Fb, Tw, Msft, Ebay, Amzn need to show up in washington and counter-balance VZ/Cmcst/ATT who run the place. Startups can help by adding sizzle but can’t spend time/money sitting at the Capitol

        1. fredwilson

          i think there is a third way we can make a difference…

          1. Amol Sarva

            The spectrum stuff gets spun. We can spin back (we did on C-Block see Senate hearings, CSPAN shows…) but fatal when Facebook/Google/etc are against you

  4. Aaron Klein

    This is a great example of how Big Government + Big Business work together to squelch competition and consumer choice. I’m with you, Fred…opening up spectrum for innovation would be a huge step forward.Nothing would stop AT&T and Verizon from innovating with that spectrum, too.

    1. Prokofy

      I’m not getting it though. He doesn’t want to have the highest bidder win the auction. So that means socialist distribution?

      1. Aaron Klein

        It’s not socialist to not auction something off.

  5. ErikSchwartz

    The final nail in the coffin of broadcast radio.

    1. fredwilson

      it will take a long time to go away. but i agree that it is doomed

      1. ErikSchwartz

        The spectrum arbitrage game for the broadcast industry ended in the 1990s. Soon the spectrum owners will figure out they can generate more cash flow in other ways.The question is will the government grandfather the current spectrum license owner to a new use?

      2. mikenolan99

        Having sold my radio stations in 2000, I think I have had an equal number of “OH, man, did I sell just in time” moments as I have had, “Damn, I miss that business.” Today is an “Oh, man” kind of day.

    2. ShanaC

      probably. I have to wonder (yet again) about the future of music, since currently indie artists need a lot more exposure and don’t get very much back from streaming revenue

    3. JamesHRH

      Can you expand on that?

      1. ErikSchwartz

        The spectrum will generate more revenue if used for things other than programming interspersed with advertisements.

        1. JamesHRH

          They have strong local community benefit argument – way stronger than local TV. I bet broadcast radio hangs on longerbthan people think – it is still a major communication channel in smalller centres.

          1. ErikSchwartz

            Very few radio stations are locally owned. Few are locally operated. There is no one in the building most of the time. The vast majority of them are entirely automated at this point. There’s a satellite downlink and some automation software running.

          2. JamesHRH

            CDN industry not quite there yet, but definitely see your point.Not adding much value with that structure…..

  6. MT

    The discussion is great… yes, a new spectrum policy could spark a lot of interesting innovations… but you simply bash the current process without really providing a good alternative. There are just as many problems with unlicensed spectrum as with licensed.

  7. Tom Labus

    Softbank brings Sprint a lot of spectrum.and new strength. It will interesting to see if Sprint can make a difference.

    1. fredwilson


  8. Avi Deitcher

    Well said… but the government looks at it as billions (or more) of dollars in revenue. It is hard to get them to walk away from it. They have incentives, just like the rest of us.Now if we could make a reasonable business case showing that the *government* (not society) direct financial benefit from an open spectrum policy is equal to or greater than the current auction method, then you can sell it and start to see some change.

    1. fredwilson

      agreed and we are working on that. but they will have to be patient to get the returns

      1. LE

        “but they will have to be patient to get the returns”The only way to sell this is to quantify the results so the people who are able to make the decisions can take credit for the current sum of the future gain. Same as is done with Olympic cities or when tax benefits are offered to companies opening in a region.. News stories are in advance and there is never any concrete evidence of the actual benefit after the fact. But the decision makers get to claim victory. Sell the sizzle not the steak as the saying goes.Bottom line: Reverse engineer a big number and as long as it’s much greater than the amount something can be auctioned for it’s a win (after all the money isn’t going into the pockets of anyone so they can afford to look the other way.)

      2. ShanaC

        i just think this is all a sign that we need to redo the tax code to be much simpler. The government shouldn’t be relying on these sorts of sales in the first place for revenue

    2. Abdallah Al-Hakim

      I think the quote from the article “freeing 400 megahertz of radio spectrum to be shared using new technologies would be equivalent to an economic financial stimulus of 800 billion euros” should be a pretty powerful financial incentives to the government. Perhaps it is a matter of how and who explains it to them.

  9. matthughes

    Amen.Related: Churches, NFL Fight to Save the Cordless Microphone (a battle for spectrum)…

    1. ShanaC

      this is fascinating. I wonder if deregulation could cause co-use? Also interesting in that these sorts of mikes exist everywhere, so if the space gets re adjusted, a huge market for new mikes will suddenly re-appear

      1. matthughes

        I was surprised to find out that the spectrum wireless mic’s use even makes a dent in the bigger scheme of things.And you’re right, a new market for mic’s is potentially emerging…

  10. Avi Deitcher

    You are? That is great! You seem to have good connections to get it in front of the people who care.Is the ROI case something you can open up? I, for one, would love to see it.

    1. fredwilson

      if we get something together that is cogent, we will open it up

  11. Avi Deitcher

    Great. Would be a great post in and of itself… and in selling ROI.

  12. jason wright

    can’t there be a ‘use it or lose it’ clause in any allocation of spectrum by GOV.

    1. fredwilson

      they are using it. just not very efficiently

      1. jason wright

        that’s what i’m driving at. conditions set to compel these dinosaurs to do or die.

        1. LE

          Further to this point same reason pornography can’t be defined.

    2. LE

      “can’t there be a ‘use it or lose it'”Things like that are always easily gamed.

  13. takingpitches

    Fred, so love this, especially when spectrum is increasingly our mode of broadband which is so important to the rest of the networked innovation ecosystem.Traditional economic theory and policy, including auction theory, focuses on a simple model of economic efficiency, undervaluing what happens at the edge, which is where disruptive potential emerges.On this blog, we note again and again, about the power of Professor Christensen’s conception of disruptive innovation in describing how game-changing customer value is created by companies jumping into markets that look already occupied, often with products that can be dismissed as toys or marginal when first introduced. We have also noted how policy often does not understand how important this innovative force is, and how policy must protect space for that innovative dynamic to take place.One way to think of this is making sure there are open “sandboxes” in which small entrepreneurs can play.

    1. pointsnfigures

      Not sure thats exactly true. Coase says if property rights are clearly allocated, and parties can bargain efficiently-whatever bargain they derive is best for everyone and will maximize GDP.I empathize with Fred. I think that we do need to figure out a way for entrepreneurs to bust up video/cellular monopolies.It may be that we increase the supply of spectrum available driving down the price-or that as oligopolies continue to buy it up, they have to pay an ever higher price where the cost to buy it doesn’t make sense in the business model.It could be Fred’s idea of “open source” spectrum as well. Best competitors win and the rest die. As long as everyone is ok with companies going broke. Congress wouldn’t let GM, Chrysler or the banks go under-why would they let digital companies go under?

  14. William Mougayar

    I just clicked on the Zemanta Related articles and it seems that the FCC is going to do something about it by freeing-up 195MHz as a starting point.Isn’t that a step in the right direction?

    1. fredwilson

      yes, if that holds

      1. William Mougayar

        Does it need support from Congress or the Senate? If so, who are the politicians that (will) support it?Then, go after them to widen the support net around them.

      2. Dave W Baldwin

        Per @wmoug:disqus , I’d think (obviously) Senator Wyden would be aboard. Hopefully you’re thinking along the line of the PIPA/SOPA fight where it is a matter of putting together what can happen in an understandable way to the population and encourage the population to send e-mails to their Senators/Representatives. Then some advice on responding to their Sen/Rep’s intitial response which basically is garbage.

  15. jason wright

    we are all born clutching (metaphorically) a social shareholder certificate. How does conventional accountancy deal with that?

  16. ShanaC

    I don’t understand why the FCC is doing so much regulation anyway. Besides Air Safety and military channels, why is the FCC controlling spectrum on my behalf (it is my air too)

    1. pointsnfigures

      Because they can. It’s big government. Tell the President you voted for to unleash it. No chance, because he isn’t in the small government camp.

  17. Evan

    Interesting question Fred. Two other questions come to mind:(1) What can we learn from other countries about their spectrum allocation or lack thereof?(2) While money isn’t a perfect metric, it may be difficult to find another metric that truly measure potential economic value for spectrum resources? I wonder other allocation processes have been proposed?

  18. mikenolan99

    Interesting that, back in the day, broadcasters didn’t “pay” for spectrum. You had to prove that you would serve the public, apply and wish for the best. Often local frequency went uncontested. In fact, because even the big guys were limited to 7 AM and 7 FM stations in the entire US, new broadcasters were often at the front of the line.

  19. pointsnfigures

    How about a deliverable futures market on spectrum? Could be traded (and used) until delivery, at which point it would be owned. Could also list options on the spectrum to unleash more value.

  20. PhilipSugar

    Fixed price auctions for revenues in perpetuity are never a good idea.No different than our discussion on license fees versus subscription fees.No problem paying x percentage of revenue for y percentage of usage.On a side note I think of the same thing for the right to trade public stock. Why shouldn’t a company like Zynga or Facebook get a penny a share (or whatever) number for each share traded, It would offset all of the other costs of being public. What an incentive to go public instead of the dis-incentive.My one cent 🙂

    1. fredwilson

      what a great idea Phil!

  21. jason wright

    …not only the US…

  22. Guest

  23. Guest

    1. William Mougayar

      What spectrum range was that, or did you fall asleep on the keyboard?

  24. Prokofy

    So — have the Community-Organizer-in-Chief hand out some spectrums to his best friends. Socialism.

  25. kidmercury

    spectrum anarchy is the end result, it is the only solution for sustaining growth of the internet that we all know is coming (i.e. everyone connected, wearable computing, robots, computers everywhere, etc). spectrum must be completely unregulated with each computer filtering out what is not needed.the sooner we get there the better, though we’ll probably need a complete breakdown in the US first. this subject is one we’ll need to perpetually revisit. once the debt crisis is in full gear — meaning it can no longer be delayed because of civil unrest and/or pandemonium in financial markets — then it will be easier to speak freely about this topic and the drastic steps that are needed will be more appealing, if only because the alternatives are so much worse. perhaps by 2015.

  26. fredwilson

    we need to stop auctioning all together and make the spectrum open and unlicensedauctioning is the bad policy, not auctioning to the carriers

  27. fredwilson

    you are comparing something that exists to something that doesn’t exist. but from all the research i have read on this topic, the carriers are not being very efficient in their use of the spectrum.

  28. takingpitches

    One of my closest friends is a FCC commissioner. Just a guess, but I think something like that from someone like you would make a huge difference. The “innovation” they typically hear about is that “innovation” of the telcos/MSOs etc.

  29. gzino

    Is five 9s from one centralized solution the goal of tomorrow?I would prefer a distributed, diverse set of access options as part of an antifragile (Taleb) system. The type of set best developed in an open environment.Multiple dumb access options, none individually at five 9s, with smart, agile, continually evolving apps, platforms, glue and interfaces to stitch it together (behind the scenes) for me as a user, even on a per use case basis when sensible.

  30. fredwilson

    we have been down to see the FCC, but i am happy to go down any time to talk about this. it is obvious to me and i would like to make it obvious to others