October 20, 2002
Open Spectrum

It seems to be pretty important to figure out whether Kevin Werbach, David Reed, Bob Frankston, and company are right...


Werbach Open Spectrum Paper

Spectrum Series Working Paper #6 October 2002

Open Spectrum: The New Wireless Paradigm

By Kevin Werbach*

Almost everything you think you know about spectrum is wrong.

For nearly a century, radio frequency spectrum has been treated as a scarce resource that the government must parcel out through exclusive licenses. Spectrum licensing brought us radio, television, cellular telephones and vital public safety services. Along the way, the licensing model became an unquestioned paradigm, pervading our views. We simply can’t imagine doing anything else.

The assumptions underlying the dominant paradigm for spectrum management no longer hold. Today’s digital technologies are smart enough to distinguish between signals, allowing users to share the airwaves without exclusive licensing. Instead of treating spectrum as a scarce physical resource, we could make it available to all as a commons, an approach known as “open spectrum.” Open spectrum would allow for more efficient and creative use of the precious resource of the airwaves. It could enable innovative services, reduce prices, foster competition, create new business opportunities, and bring our communications policies in line with our democratic ideals.

Despite its radical implications, open spectrum can coexist with traditional exclusive licensing. There are two mechanisms to facilitate spectrum sharing: unlicensed parks and underlay. The first involves familiar allocated frequency bands, but with no user given the exclusive right to transmit. A very limited set of frequencies have already been designated for unlicensed consumer devices, such as cordless phones and wireless local area networks, but more is needed. The second approach allows unlicensed users to coexist in licensed bands, by making their signals invisible and non-intrusive to other users. Both open spectrum approaches have great value, with the specifics depending on how technology and markets develop. Both should be encouraged. The risks are minimal, while the potential benefits are extraordinary.

If the US Government wants to put in place the most pro-innovation, pro-investment, deregulatory, and democratic spectrum policy regime, it should do everything possible to promote open spectrum. Specifically, Congress and the FCC should take the following four steps:

• Develop rules to foster more effective cooperation among unlicensed users

• Set aside more spectrum for unlicensed uses

• Eliminate restrictions on non-intrusive underlay techniques across licensed bands

• Promote experimentation and research in unlicensed wireless technology

We can glimpse the possibilities of open spectrum in existing unlicensed bands. While most frequencies are licensed exclusively, a handful are open for anyone to transmit within technical parameters such as power limits. [1] The unlicensed bands are limited, congested, and devoid of any interference protection. Indeed, the most widely used, at 2.4 GHz, is so filled with devices such as microwave ovens, cordless telephones, and baby monitors that it is known as the “junk band.” Yet this is the site of the most explosive phenomenon in the wireless world: WiFi.

WiFi (IEEE 802.11) is a protocol for unlicensed wireless local area networks, allowing high-speed data connections anywhere within a few hundred feed of an access point. WiFi deployments are growing at fantastic rates, doubling in the last year. A market that did not exist three years ago now generates well over a billion dollars annually, continuing to expand despite a severe technology recession. There are thousands of public access points in the US, and hundreds of thousands more in homes and businesses. Several million laptops are equipped with WiFi cards, and most laptop vendors are building WiFi into their newer models. Investment and innovation run rampant. Venture-backed startups are springing up to improve WiFi technology and apply it to new markets, such as residential broadband access.

Posted by DeLong at October 20, 2002 01:11 PM | Trackback

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Comments

Well, I suppose one way of testing this matter would be to auction spectrum licenses on the open market. If the price is zero, Werbach's right. If it's > zero, then we're lucky we didn't immediately plunge into abolishing spectrum licensing.

If the price DOES turn out to be zero or infinitessemal, or segments of spectrum *don't* get auctioned off, it seems that then would be the right time to abolish the auctions, so as to get rid of the wasteful procedure of buying and selling an abundant commodity.

Is there any reason to think that price signals wouldn't work for broadcast rights, and that the price would remain high and all frequencies auctioned off even if there's enough for anyone who wants some?

Julian Elson

Posted by: Julian Elson on October 20, 2002 06:15 PM

Improvements in engine technology are impressive, but they will never give us perpetual motion machines. Likewise, improvements in radio technology are impressive, but they will never give us free spectrum.


I am using an 802.11b network to connect from this laptop to my DSL connection. It works great ... except when it interferes with my wireless X10 system. And if everyone on my block set up their own 802.11b networks, broadcasting at the maximum power level that the FCC allows, my network would probably not be so useful to me, but my neighbors would be entirely within their legal rights. And the only reason my network is of any use to me at all is that I bought a wireless Ethernet card, my wife's employer bought her an AirPort base station, and I subscribe to an ISP's services--compare all that with the cost of an AM/FM radio.


We can now cut the electromagnetic-spectrum pie into microtome-thin slices, but we still have a finite-sized pie.

Posted by: on October 20, 2002 07:34 PM

Both the previous comments make a common error regarding the open spectrum argument. We're not claiming spectrum is infinite, either in theory or practice. (Though, intriguingly, the theory part is an open research question among radio engineers.) We're saying that a commons is, in most cases, a more efficient way to allocate spectrum than exclusive licensing.

The price wouldn't go to zero in an auction because the value in the spectrum depends on the model. If I pay for a license I have incentives to monetize that license, which works against opening it up for anyone to use freely. The most exciting open spectrum approaches are dynamic, using software-defined radio to hop to open frequencies. The transaction costs of negotiating each time with licensees/owners of spectrum would be prohibitive.

Posted by: Kevin Werbach on October 21, 2002 08:38 AM

See also my article http://www.econlib.org/library/Columns/Klingwireless.html
on the economics of the wireless last mile.

I also believe that the arguments for a spectrum commons make it sound as though the long-run equilibrium price of a spectrum license is zero.

Posted by: Arnold Kling on October 21, 2002 09:22 AM

'Likewise, improvements in radio technology are impressive, but they will never give us free spectrum.'

Of course not, but the vast majority (90%+, at any given time?) of spectrum in a local area is not in use. A grand switchover to smart devices capable of picking out free spectrum would be an incredibly productive change.

Posted by: Jason McCullough on October 21, 2002 11:09 AM

Arnold Kling: "I also believe that the arguments for a spectrum commons make it sound as though the long-run equilibrium price of a spectrum license is zero."

As they say: Content is King, but then I came across this saying that blogging doesn't pay: http://www.andrewsullivan.com/main_article.php?artnum=20021013

Posted by: Bob Briant on October 21, 2002 12:39 PM

The argument for wireless isn't free bandwidth, but rather a claim that a) consumer bandwidth prices could fall hugely, maybe as much as an order of magnitude, and b) the amount of competition in the communications industry could grow an awful lot. Not quite heaven on earth, but pretty close.

The reason for this is pretty simple. The optimal layout for a wired network is hierarchical -- you wire all of the rooms in a building, and then extend that out to a curb-side point. Then you collect all of the from each building on the block and collect them all together. Then you collect all of the neighborhoods blocks and push them together, and so on. This is the origin of the famous phrase "the last mile" -- because of the branching, hierarchical layout wiring the last mile to each house and office building is as expensive as all the rest combined. (This is also why the baby Bells survive despite having a bureacracy that could impress Brezhnev's bureacrats -- the barriers to entry are amazingly high.)

Now, even short-range wireless has the potential to dramatically cut costs, despite their short range, because they eliminate the need for the most expensive part of the infrastructure proposition. That means that prices for bandwidth can drop amazingly, both because of greatly reduced costs and because the barriers to entry into the market are sharply reduced. Note how cellular providers have taken over from state phone companies in third world nations -- the same effect could mercy-kill our RBOCs.

Posted by: Neel Krishnaswami on October 21, 2002 01:07 PM

You might also be interested in my Stanford Technology Law Review piece on creating a spectrum commons: http://stlr.stanford.edu/STLR/Articles/02_STLR_2/index.htm
It draws on the large body of literature describing successful commons around the world, and argues that a commons might work for at least some of the spectrum.

Posted by: Stuart Buck on October 21, 2002 08:33 PM

Julian Elson does the U of Chicago proud. Let's auction off rights to breath, and if nobody bids, price signals will tell us air should be free. If someone bids and then sells the rights to breath to others, then the magical martketplace will ensure that the deserving live and the undeserving don't.

Posted by: citizen k on October 23, 2002 12:32 PM
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