Archive for the ‘Wireless Communications’ Category

« Older Entries

Wi-Fi? Wi-Not?

Thursday, February 18th, 2010

In the past several weeks, there have been several news articles and blog posts about the possibility of Wi-Fi being a solution to congested mobile networks.  There was a piece in Total Telecom, one by Maggie Reardon, and one by Stephen Rayment for the FT.

The argument is that the widespread adoption of smart phones and mobile Internet has congested mobile wireless networks to the breaking point.  In order to alleviate congestion on their 3G or 4G network, carriers could offload traffic onto Wi-Fi networks (including those of other operators).  This would free up the carriers’ limited spectrum resources which they obtained at auction through the licensing process.  And, it could be done more cheaply than upgrading existing cell sites. (Dana Blankenhorn at ZDNet correctly points out the inconsistency of giving more spectrum to wireless carriers if unlicensed operation is the solution. It was not so long ago that wireless carriers were crying foul that all Wi-Fi networks such as the now defunct Cometa presented unfair competition because they had not spent billions to acquire their licenses at auction.)

Insight:  Integrating mobile networks with Wi-Fi is a good idea.  It is, however, not a new one.  At a conference nearly eight years ago at Columbia University and in the ensuing paper, I suggested that wireless carriers consider incorporating Wi-Fi into their networks.  My reasoning was not so much about load balancing as it was about market segmentation.  Complementing existing 3G networks with Wi-Fi would enable carriers to offer tiered services – a best efforts service and a better than best efforts service – charging different prices for both and increasing profitability.  I also suggested it would be possible to use spectrum not licensed to the carrier such as the spectrum which has been allocated to CB Radio,  GMRS, or FRS.  A 2003 FCC rule change would allow handsets cable of operating both on mobile networks and in these bands. In this way, carriers could offer services like push-to-talk or walkie-talkies without encumbering their already burdened spectrum and networks. Users would be able to speak directly to others in their area, even users on other carriers’ networks.  Alas, there was not much economic incentive for carriers to sell such handsets because it would reduce the mobile termination revenues which carriers charge one another (and eventually their subscribers) for completing calls over their networks.  However, with the balance of market power tipping away from networks and in favor of handset providers recently, it might be possible that we would see such enabled handsets in the next few years.

Tags: , , , , , , , ,
Posted in Broadband, Cool Stuff, Wireless Communications | 2 Comments »

Next Generation Spectrum Regulation

Wednesday, December 9th, 2009
Spectrum band plan created by price-guided mechanisms

Spectrum band plan created by price-guided mechanisms

Winston Churchill famously said, “democracy is the worst form of government except all the others that have been tried.”  Perhaps the same can be said of spectrum auctions.  Auction mechanisms have been used starting in New Zealand in 1994 to award spectrum licenses to those who have the highest monetary value. Spectrum auctions have generally been highly effective, with the occasional failure.

Despite their success, auctions have some notable drawbacks such as the so-called winners curse and the fact the up-front license fees require spectrum users to raise capital beyond the princely sums necessary to build a wireless network – a barrier to entry.  However, auctions are far better than the administrative processes which have been used for nearly a century to determine spectrum assignments.  Administrative decisions tend not to be economically efficient because the regulator has limited access to information which market participants would be more able to amass and utilize. There are also problems of political independence and of regulatory capture.

While auctions have been used to determine who gets spectrum rights, they have not really been used to determine the contours of those rights.  These contours are still determined through administrative decisions.

I have just completed a major study on next generation spectrum regulation which can serve as the basis for removing certain barriers to spectrum access, allowing more effective sharing and efficient allocations.

I can think of no reason why a properly designed auction could not determine not only who gets the spectrum rights, but what those rights are.  (Think of it this way: an auction on eBay for a car could determine not just who gets the car, but the color of the car and whether it comes with, say, leather seats or alloy wheels.)  I built a mathematical model of a next-generation spectrum auction using the Shannon-Hartley Theorem as a means modeling behavior by valuing the spectrum when considering the actions of other would-be users.  In my model bidders could express their demands for not just bandwidth, but power, modulation, underlay/interference, and other characteristics.  When I ran an MS Excel-based version of the model, the result was a mix of high and low power uses in the winning bids.  The low power bidders (similar to UWB spectral densities) could in a second round be aggregated into some form of licensed commons with the coordination protocol determined in that part of the auction.  The outcome would resemble a shared use or common arrangement where no one party controlled the spectrum.  However, the most interesting thing was that because bidders could obtain spectrum allocations that more closely fit their needs, more than 40% of the spectrum bandwidth available in the auction was left unsold.  This spectrum was valued by the market to be best allocated to either public sector use or even low- to mid-power unlicensed use.

Insight:  You cannot see, touch, taste, smell, or hear radio spectrum.  Spectrum is not a thing; it is an idea – a legal and engineering construct that explains a physical phenomenon and helps us arrange our behavior accordingly.  That fundamental physical phenomenon is the fact that when electromagnetic waves are: (1) harmonic in frequency; (2) incident in time; and (3) alight on the same reception device, the ability of those waves to be used as information carriers is degraded.  This deleterious effect is known to us as interference.  Without some form of intervention, it is impossible to exclude or limit the use of a common resource such as spectrum. Without exclusion, users consume the spectrum without regard to fact that their usage causes the deleterious effect of interference for other would-be users.  Policies which help to mitigate inference with the least amount of effort will be the most socially beneficial.

Tags: , , , , , , ,
Posted in Broadband, Cool Stuff, Wireless Communications | 2 Comments »

Japan Communications’ New Business Model

Wednesday, October 28th, 2009

On my October business trip to Tokyo, I took time to meet with Japan Communications‘ CEO Frank Sanda.  I know Frank from my work on the Eamon Ryan’s Advisory Forum on Broadband.  I wanted to see Frank and his team because they just launched a new product for Hewlett-Packard.  HP will now sell netbooks in Japan which come with 100 minutes of mobile wireless connectivity. Consumers can buy connectivity on a pay-as-you-go basis from Japan Communications, but branded as an HP service.

Japan Communications built a really cool billing system to handle payment and authentication.  But, Japan Communications does not have a wireless network.  That it gets from the leading carrier NTT DoCoMo. Japan Communications leases capacity on DoCoMo’s network nationwide, and has the ability to purchase more capacity as this business grows. HP gets to determine which devices are sold and can sell the connectivity as its own.  Furthermore, Japan Communications could set up such a system to sell anyone else’s networked devices.  Say, how about a Carterfone?

While Japan Communications negotiated with DoCoMo to get on its network, it was able to do so because the Japanese Ministry for Communications and Information created which rules opened the networks of three largest wireless operators DoCoMo, KDDI, and SoftBank to wholesale. There was apparently a three-year battle at the Ministry in which Japan Communications was at the center. Japan’s policy to require wholesale access to wireless networks goes further than the US FCC’s rules for its 700 MHz auction which mandated these open these networks to foreign devices and handsets.

Insight: This seems like a really cool business model with implications for carriers, devices manufacturers, and application service providers around the world. I have said in a previous Cool Stuff, it is not a questions of whether wireless networks should be open or closed. Rather, there is some optimal level of openness which will maximize the carrier’s return.  A privately determined level of openness will no doubt diverge from a level of openness which represents a public optimal. However, this begs the question whether opening networks to wholesale in this way is good policy and whether the Europe and the US should follow suit.  The answer is far more complex than can be addressed in a humble blog entry.  Nonetheless, I am curious see how this market will develop.

Tags: , , , , , , , , ,
Posted in Broadband, Cool Stuff, Network Neutrality, Optimal Regulation, Wireless Communications | No Comments »

International Perspective – Allocating Blue and Amber Light Spectrum

Wednesday, June 17th, 2009

Westminster eForum Keynote Seminar: Emergency Services & Public Safety Spectrum
11 June 2009
Remarks as edited.

Introduction

Good morning. I would like to begin by thanking David Happy and the Tetra Association for inviting me here to speak to you.  I would also like to thank Thomas Raynsford for doing everything in his power to get me here today.  I would like to not thank the London Underground for doing everything in its power to not get me here today.

My name is Kenneth Carter.  I am an American who works for WIK-Consult in Bonn, Germany.  Our firm advises both public- and private-sector clients on issues related to network economics, strategy and policy. Previously, I was Senior Counsel in the Office of Strategic Planning at the US Federal Communications Commission and the Deputy Director of the Columbia Institute for Tele-Information at Columbia University.  I hold both juris doctorate and a master’s of business administration degrees.

It is a great pleasure for me to be here in London today to talk about amber light and blue light spectrum.  To be absolutely honest this is my second choice.  I wanted to go to Amsterdam to talk about “red light” spectrum.  I can assure you they would be talking about a different type of “siren call” at the other event.

I am here to talk to you about the US experience in trying to create a dedicated band for public safety networks and its attempt to auction that spectrum to the highest bidder.

Background

In 2007, the US Federal Communications Commission commenced proceedings to create an auction for the spectrum in the 700 MHz band for use in a nation-wide network public safety.  This part of the auction was called the D Block.  The spectrum was being released as part of the US transition to digital terrestrial television.  The FCC paired a single 10 MHz wide license with an adjacent 12 MHz wide public safety block in the band.  The auction rules specified a $1.3 billion reserve price for the auction based on 110% of the estimated cost of relocating incumbent federal users of the spectrum in order to clear the band.  The commercial winner of the license at auction would be required to negotiate with a Public Safety Spectrum Trust organization to build such a network in a private-public partnership. The commercial licensee would be permitted to use the 12 MHz of public safety spectrum on a preemptable basis.  The license came with a build out requirement to provide coverage of 75%, 95%, and 99.3% of the population in four, seven and ten years respectively.

Two prime potential candidates for this license emerged.  One was named Cyren Call, the other Frontline Wireless.  Shortly before the auction, Frontline lost the backing of its investors and was forced to withdraw. The auction proceeded and a single bid of $472 million was placed by Qualcomm.  This bid was only 35% of the $1.3 billion reserve price set by the FCC.  The auction concluded without a license being assigned.

The auction was immediately decried as a failure by the industry and the blogisphere.

Analysis

Well, what went wrong?  We don’t know for sure, since we cannot really ask Frontline’s investors.  However, at least four reasons have been put forth.

1.  Writing on the blog Wetmachine, Harold Feld lays out the case that the head of Cyren Call Morgan O’Brien may have tried to scuttle the plans with Frontline’s investors.  Cyren Call had become an advisor to the Public Safety Spectrum Trust.  This presented a certain conflict of interest.  Mr. O’Brien is alleged to have informed Frontline’s investors that the Public Safety Spectrum Trust would charge the commercial licensee $500 million in spectrum usage fees for the preemptable spectrum, over the course of the license.  These fees would be over and above what Frontline would have to pay in terms of spectrum license fees and the costs of constructing and maintaining the network.

2.  Under the FCC’s rules, there was a certain amount of ambiguity regarding the rights and responsibilities of commercial licensee vis-à-vis the Public Safety Spectrum Trust.  In the event of a disagreement in negotiations between the commercial licensee and the Public Safety Spectrum Trust, the FCC had the power to intervene and determine the outcome of that disagreement.  In the wake of the September 11th Terrorist Attacks, no public official, either elected or appointed, can be painted to look weak on public safety. So, if the Public Safety Spectrum Trust were to request something which is perhaps unnecessary and unprofitable, but not irrational, it is likely that Commission officials would side with the Trust and against the commercial licensee.

3.  This problem may have been compounded by issues of personality.  FCC Chairman Kevin Martin’s pick to lead the newly formed Public Safety Homeland Security Bureau was Derek Poarch.  Chief Poarch was previously head of the police department of the University of North Carolina, Chairman Martin’s undergraduate alma mater.  Given, that Chief Poarch had no track record in Washington spectrum policy matters, Frontline’s investors had no means to anticipate whether he would handle matters equitably in regard to the negotiations with the Public Safety Spectrum Trust.

4.  Finally, the commercial licensee could potentially be exposed to unlimited liability for tort claims arising from the operation of its network.  During the September 11th Terrorist Attacks, the New York City firefighters inside the Twin Towers perished because they did not receive the evacuation order due to the fact that their radio equipment did not function properly inside the high-rise buildings.  Many police officers heard the call over their radio system and evacuated safely.  The prospect of that type of law suit and the associated liability is something that most investors would reasonably shy away from. This is especially true when coupled with the fact that there is some chance that the preemptable spectrum would not “fail safe”, allowing commercial uses to interfere with public safety uses.

In the D-Block auction, it is not necessarily the market which failed.  Rather the outcome was determined by the decisions of a few handfuls of investors in a single firm. Or maybe even the actions of a single individual.  In sum, there was probably too much uncertainty and too many restrictions for Frontline to conclude it could earn a positive return on its investment in order to bid for this spectrum.

The result is that today, June 11th,  is the last full day of analog terrestrial broadcasting in the United States and tomorrow, when the US switches to DTV and the analog frequencies become available, Americans will still be waiting for their national public safety network.

Conclusion

So, what are the lessons for the United Kingdom?  If a nation is to pursue market-based or price-informed spectrum policy for public safety, it must do so extremely judiciously.  It must be aware of how all incentives and uncertainty might affect or distort the outcome.

Generally, I am a proponent of price-guided spectrum policy.  Market forces are generally highly effective at allocating rights to their highest monetary value recipients. They can rationalize administrative determinations of who, what, and how much.  However, they do not work particularly well for public safety concerns.

In fact, markets run the risk of creating perverse incentives for public safety.  This is because, unlike other economic goods, there are no good substitutes for the inputs or outputs.  An actuarial can calculate a value of a lost life.  But, if it is your life, the value is infinite, perhaps a little more for your children.  Similarly, public safety can have no substitute for its radio communications.  You can really long telephone cord on the back of each fire truck, ambulance, and police car?!

Since we cannot leave it to the market to decide how much of the good ” public safety” to produce, we must address as a policy matter the trade-off between the possibility of administratively allocating a block of spectrum which is in some way too much or too little.  The cost of getting a determination which is “suboptimal” may pale in the face of the possibility of a failed allocation.  Thus, it may instead be more efficient to make an administrative determination about the spectrum assignment award it to a government entity which will take responsibility for construction and operation of the network.  Now, some part of that might be outsourced, but still the Government maintains the responsibility.

In the UK, you will soon have to make an allocation for the next generation public safety networks – the “son of Tetra”.  Ofcom will have to comment the production of a business case for that allocation.  Perhaps it is preferable not to let the perfect be the enemy of the good and may an acceptable, albeit suboptimal allocation.

A year ago, I coauthored a White Paper for Motorola and EADS urging the allocation of two additional 15 MHz wide blocks from the Digital Dividend to a pan-European, dedicated band for mission critical broadband networks for public safety.  This is inline with the US allocation from its Digital Dividend; however, the US already has 97.2 MHz nation-wide for public safety.  Europe, by comparison, has only 10 MHz.

It would seem to me that commonsense alone tells you that additional spectrum is needed since the principal duty of the State is the protection of its citizens, and for the UK to be at the very forefront of developments.

I thank you for your time and attention, and look forward to your questions.

Tags: ,
Posted in Broadband, DTV Transition, Wireless Communications | 1 Comment »

Highest use of spectrum

Thursday, May 7th, 2009

When I was at the FCC, one of its stated policy goals was to ensure that radio spectrum was put to its “highest use”.  It now appears that one carrier is going to do precisely that, albeit not in the United States.  According to a report by Reuters, Nepal Telecom plans to extend its mobile network coverage to the summit of Mount Everest in the Himalayas.  This network will allow climbers upto the 29,035 foot summit to have access to terrestrial-based communications, without having to rely on expensive satellite phones.  This use of spectrum is an even higher use than the unlicensed spectrum employed at the Wi-Fi hotspot which China Mobile built at the Mount Everest base camp.  That’s only at 17,000 feet above sea level.

Insight:  I am not sure that this is the meaning of ‘highest’ the FCC intended when it chose the term.  Perhaps what was meant was ‘highest value use’.  However, adding that one little word opens a messy intellectual can of worms.  Does this mean highest monetary value use or highest social value use?  Monetary value is easy to determine.  Just look at who is willing to spend the most money to use the spectrum.  Social value is much harder to determine.  If we forgo social value for a monetary determination, we might have to give up such intangibles as public safety and national defense.  Good thing the policy goal has since been restated to promoting the “efficient and effective use of non-federal spectrum”.

Tags: ,
Posted in Optimal Regulation, Proper English, Wireless Communications | 1 Comment »

T-Mobile’s G1 Android and Apple iPhone: market power or just marketing?

Friday, February 13th, 2009

T-Mobile recently introduced its G1 mobile phone in Germany, the first to use the open Android platform. The G1 joins the more proprietary iPhone which T-Mobile has sold in Germany under an exclusive agreement with Apple. The G1 is manufactured for T-Mobile by HTC in Taiwan and the Android platform is an open standards effort of the Open Handset Alliance – a consortium comprised of Google and several mobile phone manufacturers and networks. By contrast, the iPhone is a more closed platform where modifications may result in it being rendered inoperable. Given that T-Mobile is embracing open and proprietary strategies for the operating systems, begs questions on the efficacy a hybrid business strategy and whether this is unfair competition.

Both the Apple and Android approaches have had to grapple with the optimal level of openness. No pure strategy is viable: too restrictive, and the phone is of minimal value; too open, and it becomes unprofitable. Originally, the iPhone’s operating system was derided as being overly restrictive. Apple tried to harness the energy of individuals trying to improve the iPhone by launching the App Store in July 2008. It now boasts 15,000 third party applications for sale. At the same time, the Android platform is an open standard, not full open source. The source code carries an Apache license, so some extensions to the code may be proprietary. Further, Android’s Software Development Kit might allow Google to control an Android Market in a way which resembles the App Store.

Insight: It is not necessarily unfair competition for T-Mobile to be the exclusive source for both the G1 and the iPhone in Germany. Despite the 200 patents filed for the iPhone, it is not inherently irreproducible – save its cachet as a technocrati status symbol. Both Samsung’s Instinct and the RIM’s Blackberry Storm have already been launched to compete with the iPhone. Similarly, any other network could market a phone employing the Android platform. Whether these devices are better or worse is a matter of consumer preference. The fact that T-Mobile is now marketing phones based on both open and proprietary software suggests that neither approach is the Holy Grail of business models. T-Mobile initially launched the G1 in the US in order to compete with AT&T which is the exclusive sources for the iPhone there. The decision to sell the G1 in Germany probably embraces economies of scope and scale, more then the question of openness.

A German language version of this note, authored with Christian Wernick, will be published in Wirtschaftsdienst, available at: www.wirtschaftsdienst.eu.

Tags: , , ,
Posted in Cool Stuff, Wireless Communications | No Comments »

Some Thumbnail Economics on the DTV Transition

Sunday, February 1st, 2009

Source: New York Times, Robert LeSieur/Reuters

Source: New York Times, Robert LeSieur/Reuters

Last week the Senate unanimously voted to delay the up coming US transition to digital television by 4 months. Two days later, the House blocked the measure.

The debate over whether to delay the transition stems from the fact that a certain number of households are not able yet to receive digital broadcast television.  According to a report in the New York Times, the Nielsen Company estimates that more than 6.5 million homes are not able to receive digital broadcasts, down from 8 million, the previous month.

Let’s consider that number in light of some others.  To speed the transition, Congress authorized the National Telecommunications Infrastructure Administration to give out $40 coupons to purchase, or defray the cost of, digital converter boxes which would let analogue TVs receive digital signals.  To date, this TV Converter Box Coupon Program has already reached its $1.34 billion ceiling.  At $40 a pop, the NTIA has given out some 33.5 million coupons.  (Granted, not all of the coupons have been used).  According the FCC’s most recent data, there are 109.6 million TV households in the US (in June 2005, I said most recent).  Then as many as 30.6% of TV households have gotten coupons (as little as 15.3% if each household took the two coupons they are entitled to).  However, the FCC statistics show that 85.98% were MVPD households (those that subscribe to cable or satellite).  That means that only 14.02% of households get their TV over the air.

So how can there be 6.5 million households not ready?  Well, I am using two different data sets, one of which is 4 years out of date and some MVPD households must have taken a coupon for the old TV in the guestroom.  So, the two numbers are not likely line up.  I can accept that there are a significant number of households which are not ready for the transition, but I find the 6.5 million figure to be high.  The FCC did not do a great job of informing the public of the transition.  The previous FCC Chairman spent $350,000 to sponsor a NASCAR to promote awareness of the digital TV transition.  The car crashed twice. FN1

Consequently, the poor and the elderly are not ready for the transition.  The New York Times also has a lovely piece about Ms. Vesta Clemmons, 77, of Houston, TX who is not ready for DTV.  (I am sure Ms. Clemmons has never seen NASCAR).  Ms. Clemmons has been unable to get a coupon from the NTIA’s program.

Insight:  Delaying this transition which has already dragged out for years will have a significant cost.  It would be cold and heartless to want to deprive the elderly and lower income families of over the air television.  But we have to consider just what the cost of “free TV” is.  As I have said in a previous Cool Stuff, the cost of delaying the digital TV transition is opportunity cost which the minority impose on the rest of us.  These opportunity costs include the majority of us not being able to use the spectrum for higher value uses.  There’s no question that the transition to digital television is going to be messy.  But, that is all the more reason to go and get it over with.

FN1 To the seasoned Washington insider, the choice of NASCAR makes perfect sense because just like an FCC proceeding.  In both events, everyone goes around and around at high speed until someone hits the wall.

Tags: ,
Posted in DTV Transition, Wireless Communications | No Comments »

John McCain Claims to have developed the policy creating Wi-Fi and mobile phone

Thursday, September 18th, 2008

It is not often that my work squarely lines up with Presidential politics; however, it seems that work I am currently doing relates to statements made by Sen. John McCain on the campaign trail. I am en route to the 19th European Regional International Telecommunications Society Conference in Rome. Of the two papers I am scheduled to present, one is a paper chronicling the history of the US FCC’s Part 15 rules. These are the set of rules which enable devices such as Wi-Fi in the United States. Based on my research for this paper, Sen. McCain’s recent statements from the campaign trail are demonstrably false.

In a written response to Science Debates 2008’s questionnaire for the two major party’s Presidential candidates, the McCain campaign stated:

I am the former chairman of the Senate Committee on Commerce, Science and Transportation. The Committee plays a major role in the development of technology policy, specifically any legislation affecting communications services, the Internet, cable television and other technologies. Under my guiding hand, Congress developed a wireless spectrum policy that spurred the rapid rise of mobile phones and Wi-Fi technology that enables Americans to surf the web while sitting at a coffee shop, airport lounge, or public park.

While the first two sentences are factually correct, the assertion that Sen. McCain’s “guiding hand” led to these policies is false. The policies which led to the creation of Wi-Fi (the IEEE’s 802.11 suite of standards) were a set of rules originally crafted in a 1985 FCC Report and Order. This rulemaking permitted low power, unlicensed use of spread spectrum radios in the 2.4 GHz band in which the standards 802.11 b & g currently operate.  (The 5.8 GHz band, which 802.11a uses, was opened by the Commission in a 1996 proceeding).  The first commercial spread spectrum product was a radio LAN which was introduced by Telesystems in 1988. The IEEE did not ratify the first 802.11 standard until 1999.

While it is true that the FCC is an independent regulator with delegated rulemaking authority from Congress, it is completely specious for Sen. McCain to claim credit for these rulemakings.  At the time of the 1985 rulemaking Sen. McCain was not Chairman of the Senate Committee on Commerce, Science and Transportation. Indeed, in 1985, Sen. McCain was serving in the House of Representatives.  Further, the 1985 Order was based on a 1979 consultant’s report commissioned by the FCC.  MITRE, the firm which drafted the report, recommended permitting the technologies which Wi-Fi uses in certain spectrum bands (the ISM band).  This was certainly not Sen. McCain’s idea, but Wallace C. Scales, the report’s author.

Similarly, Sen. McCain’s the claim that he guided the Congressional policy making which lead to the widespread adoption of cell phones is equally bogus.  The original cellular telephony spectrum licenses were allocated and assigned by the FCC in the early 1980s.  However, the true stimulus which, “spurred the rapid rise of mobile phones,” was the 1993 Omnibus Spending Act.  This law granted to the FCC the power to assign spectrum licenses by “comparative bidding” – auctions.  Through these first auctions the FCC allocated and assigned Personal Communications Services (PCS).  These licenses were designed to compete with the pre-existing cellular licenses and led to the fantastic success of mobile communications.  While this law was in fact drafted by Congress, it was done so by a Democratically controlled one.  Thus, in 1993 (and 1985) Sen. McCain was not the head of any Senate Committee.  (Just as a historical footnote, Sen. McCain was the only Republican in both the Senate and the House to vote against the 1996 Telecommunications Act).

Insight: Most candidates stretch the truth, embellishing their records or being one of the many fathers to success.  However, the absence of penalties for a candidate’s false statements distorts the electoral process – even those little tiny deceptions which go unnoticed by except by the wonkiest of policy wonks, like me.  The highest office comes with it the fiduciary duty.  Thus, we must hold candidates, “not to mere honesty alone, but a punctilio the honor most sensitive,” as Justice Cardozo admonishes us.   Allowing our candidates even the most minor of misstatements and misrepresentations creates a giant incentive for politicians to try to con us.  This leads to the “adverse election” of unqualified candidates who, once in office, establish bad policies.  We deserve better from our political process and should hold our candidates for elected office to the highest standards of “truthiness”.

Tags: , , , ,
Posted in Broadband, Wireless Communications | 1 Comment »

The Bandwidth Dipstick

Thursday, July 31st, 2008

Yesterday, Prof. Tim Wu of Columbia Law School published an Op-Ed in the New York Times on the subject of bandwidth.  In the article, he compares bandwidth to oil in terms of its percentage of the average household’s expenditures and in terms of the cartels which produce it.  He says:

Like energy, bandwidth is an essential economic input. You can’t run an engine without gas, or a cellphone without bandwidth. Both are also resources controlled by a tight group of producers, whether oil companies and Middle Eastern nations or communications companies like AT&T, Comcast and Vodafone. That’s why, as with energy, we need to develop alternative sources of bandwidth.

While Prof. Wu’s might be right in his conclusions, I have to take exception to some of the points he makes along the way, particularly regarding cost of bandwidth.

To begin with, the price of oil is based, to some large measure, on the cost of its production and not necessarily the cost of its consumption.  The cost of production includes the cost to pump the oil out of the ground, refine it, and distribute it.  The cost of consumption would include the societal cost of pollution such as global warming caused by greenhouse gasses.  Here in Europe where a gallon of gasoline exceeds $9, most of which is tax, the retail price may better reflect the cost to society not only production but consumption as well.  The cost of the production of bandwidth includes both network CapEx and OpEx.  The cost of its consumption includes the negative effects of congestion felt by competing would-be users at times of peak use.  It is effectively zero, when use is non-rivalrous.  The price of bandwidth, as well as other resources subject to high negative externalities, should reflect the cost its production and consumption.  This maximizes the benefits which society obtains from the resource.

This is precisely why, contrary to Prof. Wu’s assertions, the FCC is working on such ideas.  FCC: OSP Working Papers #41, #42, and #43, on which I am a proud coauthor/collaborator, look at precisely these issues.  We designed and tested a system which instead of assigning spectrum in static blocks, would co-ordinate use of the spectrum to an efficient optimum.  Beyond the overly simplistic bandwidth dipstick, the FCC work also modeled other dimensions of performance, such as latency, and could be extended to include jitter, reliability, robustness, etc.  Nonetheless, the economic congestion protocols we developed would allocate bandwidth in real-time based on willingness to pay when there is congestion and it would be free otherwise.

To be fair, a business model which relies solely on congestion-based prices for its economic logic would not be sustainable.  Imagine an airline which would allow its passengers to fly for free, unless more passengers show up than there are seats, in which case it will charge all the passengers based on their willingness to pay.  One would expect such an airline to have very small planes, or, more likely, very large seats in its planes.  Without a way to ensure rivalry among its passengers for its capacity (i.e., seats), such an airline would surely go out of business.  Thus, a sustainable price for bandwidth must reflect the cost of both production and consumption of the resource.

Insight: I continue to tout these papers in my blog because they are important, cutting-edge work.  We sought to lay the groundwork for a better system which incorporates the best of the licensed and unlicensed approaches to spectrum access.  This system would be, to use Eli Noam’s words, would be “open, but not necessarily free.” As such, it would maintain sufficiently low barriers to entry, which would make it sufficiently difficult to obtain monopoly rents.  It would be nice if Prof. Wu would put forward some of the available solutions to “alternative supplies of bandwidth” in addition to pointing out the problems.

Tags: , ,
Posted in Broadband, Wireless Communications | 5 Comments »

TV White Spaces and the Tragedy of the Commons

Tuesday, July 29th, 2008

For more than nine decades, lawyers, engineers, and economists have argued that radio spectrum regulation is needed due to the fact that without some form of intervention, it is impossible to exclude or limit the use of a common resource such as spectrum.  Without exclusion, users consume the spectrum without regard to their usage’s impact on the benefits obtained by other would-be users.  They, therefore, tend to overuse the spectrum, causing interference to other users.  This reduction in social welfare due to overuse is referred to as the Tragedy of the Commons.However, we can now observe from the debate surrounding the TV White Spaces that the ability to exclude certain users is not sufficient to remedy the Tragedy of the Commons. A relatively small number of over-the-air TV households are able to use these spectrum bands without regard to the costs their use imposes on the rest of Americans.  Indeed, according to the most recent FCC statistics, in 2005 only about 14% (See Appendix B, Table B-1) of US TV households receive their TV over-the-air. The remaining 86% get no direct benefit from this spectrum.

The National Association of Broadcasters is now opposing tests the FCC is currently conducting which will measure the impact of unlicensed use of the White Spaces on digital TV reception. In order to protect digital TV receivers, potential White Space users must be excluded, and the NAB is throwing its weight around to ensure that outcome.  According to a quote from NAB spokesman Dennis Wharton, “We’re not going to be engaging in threats or anything, but about 70 members of Congress have already sent letters in expressing concern.” Well, as I wrote in a previous entry on Cool Stuff, at least one of those 70 letters is total bunk. Nonetheless, the cost to all of society of affording interference protection to this minority must also be considered.

Insight: If the NAB’s argument is accepted without scrutiny, the 14% of TV households will prevent the other 86% of US TV households (plus the TV-less households) from using those radio frequencies for broadband Internet, baby monitors, new forms of low-power broadcast, and other RCS (really cool stuff).  This lost benefit will not be compensated.  The exclusion of certain competing uses is necessary but not sufficient to ensure that society reaps the maximum benefit from the radio spectrum.  A means through which spectrum users can bear the costs they impose on others by excluding them is also necessary.

Tags: , , ,
Posted in Broadband, Cool Stuff, TV White Spaces, Wireless Communications | No Comments »

« Older Entries