The paradise of the commons or privileged private property: what direction should the FCC take on spectrum regulation?

AuthorJohnston, Jeremiah
PositionFederal Communications Commission - Report

Modern technology has fundamentally changed the nature and extent of spectrum use. So the real question is, how do we fundamentally alter our spectrum policy to adapt to this reality? The good news is that while the proliferation of technology strains the old paradigm, it is also technology that will ultimately free spectrum from its former shackles. (1)

  1. INTRODUCTION

    We stand at the verge of a technological revolution that could trigger a new age of ubiquitous communication. For this to happen, our current regulatory environment must adapt. Governments have long treated the airwaves like real estate to be licensed to favored operators or to be auctioned for huge sums. (2) The Federal Communications Commission ("FCC") is now considering proposals to alter or completely change their regulation policy. (3)

    For the better part of the 20th century, Congress has faced the dilemma of how to regulate the electromagnetic spectrum. (4) Before they could do that, however, they needed to decide which legal theory to base this regulation upon. (5) At the time, few understood completely either the nature or potential application of the invisible spectrum. (6) What they saw simply as a tool for wireless telegraphy had not begun to reach its potential. (7) Today the spectrum is used for everything from baby monitors to global communications to wireless networks. (8) Due to a failure to truly understand how the spectrum works and how it might be utilized, Congress acted to claim it as a resource for the good of the nation. (9)

    The 21st century finds technology quickly erasing assumptions once considered scientific laws. (10) Analog devices are fading into history as digital technologies show us how to manipulate the simple 1s and 0s of the digital language to transmit all means of communication. (11) The technological innovation that spawned from the discovery of the wireless spectrum has placed the regulation of this very spectrum in a quandary. (12) The rationale for the legal theory behind the Radio Act and its successors is now facing stiff criticism from opponents who claim it to be archaic and stifling. (13)

    Congress created the FCC with the purpose of regulating the spectrum to make it available "to all people of the United States." (14) The spectrum is therefore a public resource that must be managed in the public's interest. (15) This means that any spectrum policy should be aimed at providing U.S. citizens and the U.S. economy the benefit of less obstructed markets, improved innovation, increased competition, and a wealth of other side effects that come from open and free communication on a de-centralized and open source network. (16)

    With those goals in mind, this note will compare and contrast the two primary proposals for a new FCC regulatory model: an expanded auction system based on a property law theory of exclusive rights where the spectrum is parsed into proprietary slices or an open spectrum system based on treating the spectrum as a digital commons free for all to use. To fully understand both the implications and plausibility of these proposed regulatory frameworks, this note will begin by offering a brief definition of spectrum technology and discussing the history of spectrum regulation in the United States. In the process of describing the two frameworks, this note will discuss the potential consequence either system will have on public policy, technological innovation and competition in the respective markets.

    There are many opinions on how the FCC should regulate this public resource but regardless of their aim, each should find its foundation in the physical characteristics of the electromagnetic spectrum and not a set of outdated assumptions.

  2. HISTORY OF SPECTRUM REGULATION/DEFINITIONS

    When Guglielmo Marconi invented wireless communication in 189517 he could have never dreamt of the regulatory machine that would grow to control the progeny of his first simple transmitting and receiving antenna. Only eight years later, representatives from around the world would meet for the first international radio conference. (18) By 1910 the Wireless Ship Act was enacted to regulate the first wide-scale application of Marconi's device. (19) This first attempt at regulation would be short-lived, however, when the Radio Act of 1912 was enacted in the wake of the Titanic tragedy, giving the Secretary of Commerce and Labor the power to issue licenses and specify frequencies for use by licensors. (20) Full-scale domestic regulation had begun.

    From those humble beginnings the federal regulation of the invisible spectrum began with the hope of tying societal objectives with a framework built around an appropriate legal model. (21) The Titanic tragedy put the fear of interference in the minds of Congress. (22) Choosing the proper legal framework for regulating the electromagnetic spectrum means understanding the physical properties of spectrum technology itself. (23) The relatively simple devices developed by Marconi and his contemporaries were breaking ground by simply transmitting or receiving radio waves of different lengths and frequencies. (24) A major dilemma faced by early wireless inventors was this issue of interference. (25) The problem with using the term "interference" when describing this problem is that waves do not actually interfere with one another--waves simply pass through one another like multiple voices in a crowded room. (26)

    Yet the interference metaphor has led to the current regulatory framework that has stood in place since 1912.27 Before Congress had the chance to pass the Radio Act of 1927, granting the Federal Radio Commission (the early predecessor to the FCC) a wider range of power in issuing licenses, a court in Illinois declared that broadcasters had a property right against interference. (28) At the time such a decision made sense. Most viewed the electromagnetic spectrum with an eye toward scarcity. (29) They saw the spectrum in slices, with interference the necessary result of any two broadcasters trying to use the same slice. (30) Radio technology was at its infancy and the interference that resulted from multiple transmissions was deemed an intrinsic feature of the spectrum itself, not a result of the rudimentary devices used for transmitting and receiving the simple signals they produced and interpreted. (31)

    The fear of interference led to the assumption of scarcity, which in turn led to the Radio Act of 1927's treatment of the invisible spectrum as a resource to be held in the public trust that the government should manage in the public's interest. (32) This was first articulated by then-Secretary of Commerce Herbert Hoover:

    The ether is a public medium, and its use must be for public benefit. The use of a radio channel is justified only if there is public benefit. The dominant element for consideration in the radio field is, and always will be, the great body of the listening public, millions in number, countrywide in distribution. There is no proper line of conflict between the broadcaster and the listener, nor would I attempt to array one against the other. Their interests are mutual, for without the one the other could not exist. (33)

    When the Communications Act of 1934 was enacted, creating the FCC, the philosophy behind spectrum regulation went unchanged. (34) Scarcity became the dominant theme behind spectrum regulation, as the FCC could not meet market demand for bandwidth while at the same time ensure against interference. (35) This supplied the eventual rationale behind content regulation in Red Lion Broadcasting v. FCC. (36) The concept of scarcity has been taken so far as to justify a violation of the First Amendment that would be unthinkable in other mediums. (37)

    For the past 76 years the concepts of scarcity and interference have justified the federal government's control and allocation of the spectrum as a natural resource to be maintained as the property of the government and managed in the public interest. (38) Licenses were granted for free and given to those who could show their use would be in the public's best interest. (39) The weaknesses of this process emerged again in the 1980s when the FCC began issuing licenses for cellular phone networks and again found the demand overwhelming. (40) By 1996 Congress had changed the rules and allowed the FCC to first use lotteries and then auctions in the process of granting licenses. (41) In addition, the FCC were given a mandate to limit pervasive regulation only to where necessary to achieve its goals. (42)

    In 2003, the FCC found itself at a crossroads. Under fire to provide affordable communications access to poor and rural consumers and at the same time being told to de-regulate, the agency is faced with balancing somewhat conflicting agendas. (43) In June 2002, FCC Chairman Michael Powell formed the Spectrum Policy Task Force and directed it to provide recommendations for creating a spectrum policy that looks to a more "integrated and market-oriented approach" that provides "greater regulatory certainty, while minimizing regulatory intervention" than the current "command and control" approach. (44) Chairman Powell described the importance of the task at hand:

    The government has an almost impossible task trying to keep pace with the ever-increasing demand for spectrum and continuing advances in wireless technology and applications. In this fast-moving world, the Commission cannot rely on outmoded procedures and policies. We must establish new ways to support innovation and the efficient, flexible use of spectrum. (45)

    On June 6, 2002 the task force released a public notice seeking comment on existing spectrum policies and recommendations for possible improvements. (46) The recommendations ranged from treating the spectrum as real estate with fee simple exclusive and assignable ownership (47) to a free and open, unregulated commons, (48) and combinations thereof in...

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