Posts Tagged ‘spectrum policy’

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Spectrum Auctions in Japan?!

Wednesday, September 22nd, 2010

I was not the first to advocate for spectrum auctions, only the most vociferous.

The Japanese wireless market must be for Evan Kwerel akin to what the Duck-billed Platypus is for Charles Darwin. The Platypus is an egg-laying, venomous, duck-billed, beaver-tailed, otter-footed mammal, and would seem defy evolutionary theory.

The Japanese wireless market is well developed, with at least 5 competitors offering some of the lowest priced, highest speed, and most advanced networks of anywhere in the world. Yet, according modern economic theory, this should not be. The Japanese government has never held an auction to assign spectrum licenses. Economic theory suggests that auctions are more efficient (see, Cool Stuff) at assigning spectrum rights to their highest monetary value use than other means such as comparative hearings (currently used in Japan) or lotteries. If you are interested in auctions in Tokyo have been in Tsukiji –  the 5 AM fish market – has traditionally been your best bet.

Charles Darwin

If it walks like a duck, and talks like a duck… this makes no sense, it can’t be a mammal.

I have head rumors that the reason the Japanese government has never held spectrum auctions was not for fear of creating distortions in the market but so as not to upset the balance of power among the various ministries (i.e. Finance, Industry, Posts and Telecommunications). The US Treasury and the FCC got along fine once the FCC started sending enormous checks.

That might all change as the government of Japan is considering how it might employ spectrum auctions. A friend in Tokyo sent me a recently published copy of the Cabinet’s decision on a new strategy for growth.  Item 35 on page reads as follows:

電波の有効利用のための制度の見直し （１）割り当て済みの電波について、より必要性の高い用途に利用できるよう、既存の利用者を他の周波数へ速やかに移行させ、迅速かつ円滑に周波数を再編するための方策について平成22年度に検討、結論を得、平成23年度に措置する。 （２）再編に要するコストについて、再編後の周波数を新たに利用する者が、市場原理を活用して負担する等、オークション制度の考え方も取り入れた措置について平成22年度に検討、結論を得、平成23年度に措置する。

Tsukiji

Maguro auctions at Tskiji.

My Japanese is not so strong, but if you read this in context as Kasumigaseki Bungaku (roughly, “Beltway Literature”), as I was admonished, you can interpret this mean that the Cabinet is directing the Ministry of Information and Communications to review how market forces can be employed to rapidly and efficiently reassign radio usage rights. According to my vague understanding of what is suggested, the MIC will pursue a limited use of auctions to reassign spectrum licenses. Auction prices will be limited to the costs of relocating the existing users from the band. The MIC will then auction participant’s bids as part of its analysis in some sort of comparative hearing. License winners will have to pay their bid eventually.

Auction Theory in Tsukiji

Ken, we want you to rework the Part 15 Rules for sashimi - we'll call it “Unlicensed and Uncooked.”

Insight: To be fair, I think this is a really clever idea, but am not convinced it will work. For my Next Generation Spectrum Policy study,  I considered a very similar idea, whereby the spectrum management authority would have access to pricing information to make band-planning determinations. This idea is, in fact, the origin of the term I coined for the study, “price-guided policy.” I eventually rejected the idea before concluding the study because I became convinced that as long as you are going through the trouble to hold the auction, you might as well have it do all of the hard work up to and including assignment. I am very curious to see how this develops. I am not sure whether auctions will make the Japanese wireless market more advanced, or whether they will simply screw things up. I will keep you posted.

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Report from ITS

Friday, July 9th, 2010

ITSEvery once in a while, one comes across something so trivial yet so flattering.  I was fortunate enough to attend the International Telecommunications Society 18th Biennial Conference in Tokyo last week.  I attended the panel on radio spectrum on the last day of the conference.  Two of the four papers presented on the spectrum panel were derived in some way from research I published in 2009.

The first paper was the History and Conceptual Development of Spectrum Commons in the USA by Nattawut Ard-Paru of the Chalmers University of Technology.  The historical treatment of her paper was taken from taken from Coase (1959), Hazlett (1998) and my Unlicensed to Kill: A brief history of the FCC’s Part 15 Rules.  Not bad company to be in!

The fourth paper on the panel was Exclusive Spectrum Rights vs. Spectrum Commons by Dr. Kiyotaka Yuguchi of Sagami Women’s University.  Dr. Yuguchi reviews some of the recent literature in an attempt to synthesize commons and exclusive rights approaches.  He then develops certain extensions to my 2009 spectrum pricing model in my paper Next Generation Spectrum Regulation for Europe: Price-Guided Radio Policy.  Dr. Yuguchi looks at the marginal rate of substitution for technology for spectrum.  This is admittedly only implicit in my interference function.  He makes it explicit. However, this is what I had hoped people would do with the basic model – add complications and refinements which I did not have the resources to do in the original paper.

Insight:  I have been working in radio communications for nearly a decade.  It was so encouraging for me to see that my recent work is having such an important impact on the direction of current research.  If you work hard enough and long enough, you every once in a while you earn bragging rights.

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Twenty-Five Years of Unlicensed Spread Spectrum

Monday, May 10th, 2010
Telesystems' ARLAN

The first commercial spread spectrum product, Telesystems' ARLAN, a radio LAN introduced in 1988. Source: FCC.

Today, the Wi-Fi Alliance and the Wireless Gigabit Alliance announced an enhancement to the current suite of 802.11 standards (Wi-Fi) which promises multi-gigabit wireless networking, in the 60 GHz frequency band.  The two associations expect that devices which have the new enhancement will be tri-band, also able to operate in the 2.4 and 5.8 GHz bands where Wi-Fi currently operates.

However, I am not sure if the Wi-Fi Alliance or the Wireless Gigabit Alliance realize the auspiciousness of the occasion of their announcement.  The announcement comes twenty-five years and one day after a much ignored FCC decision.  On May 9, 1985, FCC adopted rules which permitted the operation of spread spectrum systems in the ISM bands (902-928 MHz, 2.4-2.48 GHz and 5.725-5.85 GHz).  This rule change enabled the commercial rise of Wi-Fi, as well as so many other products and technologies take for granted today, such as Bluetooth, cordless phones, and baby monitors.

The FCC took this decision on its own initiative, rather than relying on requests for rule changes from the industries it regulates.  (In fact, many of the companies which initially opposed the rule change now earn millions of dollars of revenue from selling products that operate in these bands.)  One important person diving the FCC proceeding was national treasure Mike Marcus.  Marcus published a terrific account of the FCC proceeding in the journal info last year.  (I published in the same issue, and beat him out for best paper).  For his vision and insight in pushing the rule change through, Marcus was rewarded with nine years of exile to the outer Bureaus of the FCC.

Insight:  It never ceases to amaze me that a well-made decision can have exponential implications down the line.  Relying on the industry to tell the regulator can be helpful; however, this approach does not always serve the public interest.  In all instances, the regulator should exercise independent judgment.

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Posted in Cool Stuff, Optimal Regulation, Wireless Communications | No Comments »

The Uncommon Unlicensed – A Licensed Commons

Wednesday, March 24th, 2010
My Marriage License

I received a license, and my property rights all turned to commons.

I recently read Kevin Werbach’s excellent article on the TV white spaces, The Wasteland (not to be confused with T.S. Eliot’s The Waste Land).   I shared some of my ideas on his article with Kevin, and after an email exchange I came to the conclusion that there is a significant challenge to the successful opening up of the TV white spaces.

Under the White Spaces order, any unlicensed device which will operate in the band has to query a database and obtain permission before it can start transmitting.  Kevin argues that the white spaces database is independent of spectrum policy.  While that might be true, the imposition of the database will certainly hold implications for spectrum policy.  When a white spaces device has to query a database and obtain permission before it can operate, it is, by definition, no longer an unlicensed device.  Rather, the regime is a licensed commons.  This grant of permission is in fact a form of a license, albeit a light one.

Let me digress for a second.  A license is a grant of permission to do something.  It affords the right to “verb a noun”.  With a license one may: drive a car, own a dog, (try to) catch a fish, marry the woman of his (or her, depending on the state) dreams, or emit radio energy into the ether.  A spectrum license is usually coupled with some expectation of interference protection, but not always. The FCC already has utilized a myriad of different license types, including license-by-rule, operator, class, station, and geographic.  (I detail several different license types in my 2004 TPRC paper, at pp. 9-16.)

In my 2006 law review on Personal Communications Services (PCS), I examine both the licensed and unlicensed version of PCS.   The licensed commons is one of the factors which killed the unlicensed version PCS.  For unlicensed PCS, the FCC created a regime under which unlicensed users had to get permission from a non-profit firm called UTAM before they could start using their unlicensed PCS devices.  In doing so, the FCC inadvertently delegated to UTAM the power to grant licenses.

Think of the poster child for the unlicensed regime – Wi-Fi.  I can turn on my Wi-Fi anytime, anywhere, and leave it on until Ron Coase’s cows come home from grazing on the commons.  No grant of permission is required to access the spectrum (emit RF energy).  Now, consider a white spaces device.  When it turns on, it has to access a database somewhere and get the Okay to start emitting RF energy.  This is a grant of permission and is a form of a license, although the FCC has made Google or whoever is running the database is now the de facto licensor.

A licensed commons can be a very good thing.  Ham radio and the interstate highway system are both licensed commons and have both been very successful.  So, this type of arrangement can work in practice; however, when the alternative is less restrictive, the licensed system will not be desirable.  The FCC’s Part 15 rules are the international gold standard for unlicensed (and licensed-exempt) operation.  They are the one area where U.S. communications policy still clearly stands head and shoulders above the rest of the world.  The reason the Part 15 rules work so well is that it is spectrum policy without the spectrum (mathematically, spectrum policy – spectrum = Part 15).  The rules simply consider what is the maximum amount of irradiated power which can be emitted by a device without an unacceptable probability of causing harmful interference.  It is a classic efficiency approach and should be the basis of all radio operations.

In order for the White Spaces Order to be successful, it must offer device manufacturers and device users more benefit than they could achieve by using the existing Part 15 rules.  Device manufacturers can make devices to operate under the less restrictive parts of the Part 15 rules (the U-NII and spread spectrum rules).  So, they never made any successful products for U-PCS.   The same will be true for the White Space rules.  In order for the White Space database system to work, it will have to offer greater flexibility, more power, wider tuning ranges, more suitable frequency bands, etc. than the current Part 15 rules allow.

Insight:  Should the band not deliver on its promise, the punditocracy on the ‘property rights’ side of the spectrum policy debate will say: “I told you so – unlicensed never works.”  The sad irony is that if the White Spaces rules fail to deliver, it will not be because it is an unlicensed regime, but because it is truly a licensed regime.  I told you so, first.

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Posted in Optimal Regulation, TV White Spaces, Wireless Communications | 9 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.

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Posted in Broadband, Cool Stuff, Wireless Communications | 3 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 question 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.

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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”.

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Posted in Optimal Regulation, Proper English, Wireless Communications | 2 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.

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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.

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Next Generation Spectrum Policy

Wednesday, March 5th, 2008

I am very pleased to announce that the FCC has just published a suite of papers which I worked on while I was there. This work sought to tackle some of the intractable problems facing spectrum policy. For nearly a century, spectrum policy has focused on “scarcity” and resolving “harmful interference”. This was largely due to limits of the technology of the day. Now radios fueled by semi-conductor processing power, are enabling spectrum policy to evolve. We can now focus on a much more efficient principle of “use coordination”. The first paper in the series, OSP Working Paper #41, examines the Tragedy of the Commons and how economic protocols might be employed to alleviate this problem, while preserving the openness and innovation associated with unlicensed operation. It achieves this by coordinating competing demands on the spectrum. There are several different means for assigning priority to allocate use. However, allowing would-be users to express their willingness to pay seems to be the most economically efficient. Through an economic coordination protocol, usage at any given time is awarded to those with the highest value. OSP Working Paper #43, looks at how the set of rights which underlie this regime can be assigned through auctions.

Insight: Of all the work I have done in my professional career, this is the product of which I am most proud. The future of spectrum policy will be one of “use coordination”, where the “exclusiveness” of a license will be determined at an auction along with which entities are assigned the license. We are back to First Principles. This work holds the promise to wrestle the spectrum from the hands of a few powerful entities and put it back in our hands. In addition, it is likely to increase efficiency and hence the benefit we all receive from its use. The beauty of the system is that if the current spectrum arrangement is the most efficient, then it will emerge as such. At the very least, we will have exposed society to a huge upside with very little downside risk. It also would allow us to grant priorities to those whose ability to pay is diminished, such as public safety and financially disadvantaged users.

As a body of work, it has far reaching implications. At the recent FCC field hearing on network management (viz. Net Neutrality), there was much reasonable debate on what constitutes reasonable network management. There were many views as to how to handle competing demands on limited network resources. To my mind, the most efficient way will be some variation on willingness to pay, perhaps through an economic coordination protocol.

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Posted in Broadband, Network Neutrality, TV White Spaces, Wireless Communications | No Comments »

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