6/9/2005 Question of Spectrum@ Marroquín Univ Slide 1

LIGHTING UP THE SPECTRUM: Wireless Communications in Developed and Developing

Economies

Gerald R. FaulhaberSpectrum Policy in Guatemala and Latin America

Francisco Marroquín UniversityGuatemala City, Guatemala

June 9, 2005

6/9/2005 Question of Spectrum@ Marroquín Univ Slide 2

Evolution of Spectrum Policy

• Wireless one of the great technologies to emerge in the 20th century

• But it’s potential for mass communication swept it up in the political turmoil of that century– Totalitarian regimes monopolized it as a means of

control– Democratic regimes did much the same– In the US, commercial interests held sway; post-

Depression anti-market sentiment ensured continued government management of spectrum

6/9/2005 Question of Spectrum@ Marroquín Univ Slide 3

Innovation• Promise of wireless largely unrealized;

innovation limited to large politically connected players

• Broadcasters, telephone companies

• Policy driven by well-intentioned but clueless regulators (encouraged by wonky academics)

– UHF experiment, suppression of cable TV, suppression of both terrestrial and satellite competitors to gov’t broadcasters, etc.

• Result: horribly wasteful use of spectrum, artificial scarcity

6/9/2005 Question of Spectrum@ Marroquín Univ Slide 4

Glacial Change• …in the last quarter of century

– West Europeans permit private broadcasters• ITV, Canal• Rupert Murdoch’s BSkyB

– New Zealand and US experiment with auctions for new mobile telephony service

• A wild success

– More unlicensed; also a success

• Finally, the promise of wireless begins to emerge in the new millennium

6/9/2005 Question of Spectrum@ Marroquín Univ Slide 5

The Pace of Change Quickens

• Wireless now the focus of great innovation

• And some are recognizing that regulation is the problem, not the solution…including the FCC

• How can we unlock the power of spectrum?– Property rights rather than “permission”

• Guatemala leads the way; yes, it can be done!

• Britain and the EU also moving quickly

• …while US dithers

– Commons (unlicensed) model a competitive view

6/9/2005 Question of Spectrum@ Marroquín Univ Slide 6

Which is the Better Model?• How Best to Light Up Spectrum?

– Establish property rights, encourage markets and let the private sector do what it does best

• Control for interference in the property right

• Gov’t can use spectrum for itself or as a commons, but as a license owner, not the Big Boss

– Establish a commons, with gov’t as the governance mechanism• Continued regulation likely to have the same outcome as the last 80 years:

gross inefficiency, rent seeking, favoring incumbents and those proficient at lobbying

– For centuries, property rights regimes have demonstrated their power for growth in both developed and developing economies.

• Requires independent judiciary, minimum corruption, competitive private sector