Phoenix Center Recommends Private Sector Manage Government-Owned Spectrum

The federal government should farm out management of its spectrum to the private sector “if the goal of spectrum use and management is economic efficiency,” said the Phoenix Center in a policy paper released Monday. It said the FCC National Broadband Plan’s proposal to increase the amount of spectrum available for commercial use by 300 MHz by 2015 “identified some arguably low-hanging fruit.” To achieve that goal will require reallocation of some of the 1,687 MHz of “beachfront” spectrum the government owns between 225 MHz and 3.7 GHz, said the Phoenix Center report.

Government users don’t have an incentive to use spectrum efficiently, said the report. “If the Government is demonstrably incapable of managing and using spectrum resources with efficiency in mind -- and most agree that this is historically the case -- then it should not manage spectrum,” the report said (http://bit.ly/1aq9Pcb). The FCC and NTIA declined to comment.

The President’s Council of Advisors on Science and Technology’s July 2012 spectrum sharing report (CD July 23/12 p1) clearly acknowledged the widely held view that the government “does not use its spectrum assets efficiently” and recommended market-based solutions to improve efficiency, said the Phoenix Center. However, various proposed solutions are unlikely to solve the problem, the report said. It said the possibility of imposing spectrum fees through a General Services Administration-style approach would only create a “ghost market” in which government sets the prices and would not provide any new incentives for an agency to become a more efficient spectrum user.

Setting spectrum appropriations based on the “efficient level” of spectrum use could be attractive, but “the agencies themselves, or more plausibly some oversight agency, would be charged with determining the cost-minimizing plans, an extremely difficult task,” and “some agencies might be confronted with very significant adjustments in their budgets,” the Phoenix Center report said. The logic behind the PCAST report’s suggestion that the government use “spectrum currency” rather than usage fees based on “actual dollars” is “defective,” said the center. “Absent some mechanism by which the private sector can bid for the right to use the Government’s spectrum, the Federal agency will not base its decision on the ’true social cost’ of that spectrum."

Free Press Policy Director Matt Wood said it’s important to note that the report focuses on government’s use of its own spectrum holdings rather than the FCC’s handling of spectrum allocation. Wood said in an interview he thought it was “curious that the paper doesn’t talk about unlicensed use very much since that’s a very pro-innovation and free-market way to allocate spectrum.” Phoenix Center is “missing the value of opening up spectrum for multiple users to use it and trusting the technology rather than getting hung up on the ultimate control of government spectrum, whether that resides in government hands or is exclusively licensed to private users,” he said. “That’s why we see such promise in the PCAST approach and in the sharing and unlicensed model rather than saying it has to flow through an auction and exclusive licensing to and by a commercial carrier.”

The center’s report was “on the right track,” said Richard Bennett, an American Enterprise Institute visiting fellow, in an interview. “The PCAST people didn’t seem to appreciate that to get the maximum efficiency out of spectrum, it needs to be closely coordinated by a single party.” The best way to meet the spectrum needs of the government and the private sector is for “the private sector to be the sole final manager of the spectrum and for government to be a” mobile virtual network operator, Bennett said. “If management of the spectrum is transferred to the private sector, the government can still have a privileged position in terms of its ability to get priority access to the spectrum -- but the management can be a lot more efficient.” The Phoenix Center report is an economic analysis of the government spectrum issue, but from a technical standpoint “you can’t really have too many cooks stirring the soup,” he said. “That’s where PCAST went wrong because they wanted to loosely coordinate two completely different managers of the spectrum.”