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Mobile Internet Access Devices and the FCC

(November 10, 2000) The technology to provide widely available and inexpensive broadband Internet access devices is being developed and deployed. One possible set back for this new technology could be the availability and efficient use of radio spectrum for these devices -- spectrum that is tightly managed by the FCC.

News Analysis

Radio spectrum for these devices, as well as for plain old cellular phones, PCS, MMDS, broadcast TV and radio, and other purposes, is not privately owned property. There is no exchange at which it is traded. Instead, it is a national resource managed by the government, and licensed to private and governmental entities, when the government determines that it is "in the public interest".

Licensees may seek to transfer their licenses to others, but the Federal Communications Commission (FCC) must approve these transfers. This makes up a large part of the work of the FCC. These license transfer matters can take as long as 18 months, and involve expensive, lengthy, and complicated regulatory proceedings, during which the FCC may demand many concessions, which are sometimes unrelated to the use of the license. Parties to these proceedings cannot always predict the outcomes. Indeed, the FCC reaches different results in substantially similar proceedings.

Hence, there is no market for spectrum, in the sense that there are markets for most commodities and services. If one wants to buy, sell, or lease spectrum, one must hire a team of Washington DC lawyers, and plead to the FCC.

Not only is it difficult to buy and sell spectrum, but this situation leads companies to acquire and hold more spectrum than they use. So, while most of the more desirable spectrum is already allocated, some of it is not being fully utilized.

This system did not prevent the old fashioned TV and radio industries from broadcasting their entertainment on a regular basis. But, in the rapidly growing and evolving areas of cellular communications and mobile Internet access, this approach to spectrum management could lead to a shortage of available spectrum.

Related Story: FCC Discusses Secondary Markets for Wireless Spectrum, 11/10/00.

FCC Chairman William Kennard called this looming shortage a "spectrum drought" at the November 9 meeting of the FCC. He also said that it is "the most serious challenge facing the wireless industry."

The FCC adopted two tentative measures at this meeting designed to start the process of moving towards a system of secondary markets for wireless spectrum rights, a Policy Statement, and a Notice of Proposed Rulemaking (NPRM).

There is some irony to this. The FCC's predecessor, the Federal Radio Commission, was created in 1927 to replace a free market radio industry with government ownership and licensing of radio spectrum. The courts were developing and defining, by case law, a property rights regime for the radio industry. However, commercial broadcasters and manufacturers went to Congress and the administration to ask for a government licensing regime. The main goal, and effect, was to prevent new market entrants from competing with existing commercial broadcasters.

The problem for the broadcasters was not a shortage of spectrum, but the desire to create an artificial shortage, by limited licensing. Over the years, the FCC and Congress have defended this spectrum licensing regime on the bogus rationale that spectrum is scarce, and hence warrants government ownership and management.

The irony is that now that the FCC is finally actually confronting a real scarcity, it is starting to move towards the conclusion the free market, not government management, is the more efficient way to address the scarcity.

Tom Sugrue, the Chief of the Wireless Telecommunications Bureau at the FCC, told Kennard and the four other Commissioners at the November 9 meeting that "demand is expected to continue to grow, given the dramatically growing interest in access to the Internet on a wireless basis. This demand necessitates an aggressive and innovative approach to spectrum management. I believe very strongly that an expanded system of secondary markets could held alleviate spectrum shortages, by making unused, or underutilized held by existing licensees more readily available to other users."

The actions taken by the FCC on November 9 are part of a wider range of efforts designed to avert a wireless spectrum shortage. The FCC, along with private industry, are studying new technologies that may alleviate spectrum shortages by providing for far more efficient use of spectrum currently allocated for wireless uses. These include software defined radio (SDR) and ultra wide band (UWB).

Related Documents
President Clinton's Memorandum for the Heads of Executive Departments and Agencies regarding 3G, 10/13/00.
Council of Economic Advisors' report titled The Economic Impact of Third-Generation Wireless Technology [PDF], 10/20/00.
NTIA's Plan to Select Spectrum for Third Generation Wireless Systems in the United States, 10/20/00.

The FCC is also examining, and will likely issue a NPRM, regarding identifying spectrum, and reallocating spectrum, for use by Third Generation (3G) Wireless technologies.

The FCC is not only being pressured by industry. The Clinton administration has taken an interest in spectrum for 3G technology. On October 13 President Clinton issued a memorandum to the heads of all executive agencies instructing them to work on finding and reallocating spectrum for 3G technology uses.

While Kennard stated at the November 9 meeting that "we are moving steadily to grant greater flexibility in our allocations and operating rules, so that providers can respond more easily to the demand for spectrum in the marketplace," he and staff members continued to talk about "Commission management" of this "scare national resource", and continuing application of volumes of FCC rules.


In contrast, Commissioner Harold Furchtgott-Roth, the lone Commissioner known for his fanatical devotion to deregulation and free markets, argued that while "this NPRM and the Policy Statement take important steps in the right direction, to make those markets a little less obscure, a little less complicated, a little bit more efficient," they are only "baby steps."

See, transcript of statement by Harold Furchtgott-Roth at November 9 FCC meeting.

He argued that "there is still a lot of underlying problems that need to be addressed. We must not kid ourselves. We are still going to be spending most of our time dealing with parties coming before this agency pleading, parties that are going to be continually frustrated with delay, parties that are going to continually be puzzled by the complexity of our rules, parties that are going to be mystified by the range of possible outcomes and unaware of any way of evaluating the likelihood of those, and parties that are going to be at the end of the day dismayed because there is no remedy."

All FCC employees contacted by Tech Law Journal regarding the topic of this news analysis either did not return phone calls, or declined to provide information.


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