spectrum markets are robust, when you remember to feed them thomas w. hazlett professor of law &...
TRANSCRIPT
Spectrum Markets are Robust, When You Remember to Feed Them
Thomas W. Hazlett
Professor of Law & EconomicsGeorge Mason University
Spectrum Markets: Challenges AheadConference @ the Kellogg School of
ManagementNorthwestern University
June 2-3, 2011
Killer App of 2007
June 2, 2011Kellogg Conf. * Spectrum Markets 2
Steve Buys Spectrum• contracts with carriers
• carriers’ liberal control rights in CMRS enable
• not “exclusive use” but intensely shared • right to exclude protects network
investment
• purchase spectrum + network access• efficient bundles• vertical integration of tight complements• naked license sales - tip of the iceberg
June 2, 2011Kellogg Conf. * Spectrum Markets 3
Spectrum Secondary Markets
Nascent?• Spectrum an input into network
services
• Wireless services two-sided output market• subscribers• vendors (devices, services, apps)• piggyback networks (MVNO, M2M)
June 2, 2011Kellogg Conf. * Spectrum Markets 4
Robust Secondary Markets
June 2, 2011Kellogg Conf. * Spectrum Markets 5
Exhaustive Rights for Markets?
• FCC: yes, rights need to be clearly and exhaustively defined for markets to work
• FCC: we have never defined “harmful interference,” the key border condition
• FCC: mobile markets work great, bring innovation & growth to the economy
June 2, 2011Kellogg Conf. * Spectrum Markets 6
Rights Definition Minimalism
• TUFs (titulo de usufructo de frecuencia) in Guatemala specify
• (1) frequency band • (2) hours of operation • (3) maximum power transmitted • (4) maximum power emitted at the border
of adjacent frequencies • (5) geographic territory • (6) duration of right (beginning and ending) • the market works
June 2, 2011Kellogg Conf. * Spectrum Markets 7
3G Coverage in Central America
(courtesy of Amazon Kindle)
http://client0.cellmaps.com/viewer.html?cov=1
October 20102G coverage light purple3G coverage dark purple
Great Advantages
• liberal use rights let parties bargain
• free entry
• quick adjudication of border issues • time limits and arbitration procedures
specified
• transparency
June 2, 2011Kellogg Conf. * Spectrum Markets 10
Spectrum Contours “Hard”?
• stochastic emissions
• uncertainty in identifying conflicts
• like land, IP, water, fish or oil deposits?
• irrelevant claim• difficult line drawing for administrators,
too• Coase 1959 • costs of the “price system” vs. regulation
June 2, 2011Kellogg Conf. * Spectrum Markets 11
Simple Rights (C. Jackson
2005)
June 2, 2011Kellogg Conf. * Spectrum Markets 12
Difficult (overlapping complements)
June 2, 2011Kellogg Conf. * Spectrum Markets 13
Anti-commons Tragedy
• a rights assignment failure
• fragmentation produces excessive t-costs
• can be solved ex ante by regulators
June 2, 2011Kellogg Conf. * Spectrum Markets 14
Ownership Integration
June 2, 2011Kellogg Conf. * Spectrum Markets 15
Alternatively, Administrative Restrictions
June 2, 2011Kellogg Conf. * Spectrum Markets 16
Canadian White Space
June 2, 2011Kellogg Conf. * Spectrum Markets 17
Killer App of 1952
June 2, 201118Kellogg Conf. * Spectrum Markets
Anti-commons Tragedies
June 2, 2011Kellogg Conf. * Spectrum Markets 19
2.5 GHz (ITFS/MMDS
EBs/BRS)
June 2, 2011Kellogg Conf. * Spectrum Markets 20
XM-WCS (2006)
June 2, 2011Kellogg Conf. * Spectrum Markets 21
XM buys WCS licenses
• July 14, 2005
• NAB letter• The proposed transaction is part of a
longstanding pattern of deception by the satellite radio industry. In 2003, while publicly claiming it had no plans to insert local content on its network of terrestrial repeaters, XM spent months seeking a patent for technology to do just that.
• FCC blocked merger
June 2, 2011Kellogg Conf. * Spectrum Markets 22
Efficient Rights• standard templates – e.g., CMRS
• don’t worry about exhaustive perfection
• large band allocations• combinatorial auctions help efficient
aggregation
• no service, technology, business restrictions
• overlays for bands littered with incumbents and white spaces
June 2, 2011Kellogg Conf. * Spectrum Markets 23
T-costs and the Nirvana Fallacy
• hold-outs and bargaining costs are positive
• everywhere
• analysis: overlays v. gov’t reallocation
• remembering: market t-costs highly sensitive to policy rules
June 2, 2011Kellogg Conf. * Spectrum Markets 24
U.S. CMRS
• 50,866 licenses (2003)
• 1,122 (AWS 2006)
• 1,099 (700 MHz)
• 734 cellular markets
• 493 BTAs
• 51 MTAs
June 2, 2011Kellogg Conf. * Spectrum Markets 25
50,000+ deals later (Stifel Nicolaus 4.15.08)
June 2, 2011Kellogg Conf. * Spectrum Markets 26
Emptying the Spectrum (TV Band) Warehouse One Box at a Time • 1953
• 81 channels (486 MHz)
• 1982 needed bandwidth for cellular• 67 channels (402 MHz)
• 2009 needed bandwidth for 3G/4G licenses• 49 channels (294 MHz)
• 2015 need bandwidth for ‘mobile data tsunami’• 29 channels (174 MHz)
June 2, 2011Kellogg Conf. * Spectrum Markets 27
Case-by-Case is a Long March
June 2, 2011Kellogg Conf. * Spectrum Markets 28
FCC, National Broadband Plan (March 2010), Chapter 5.
Standardized Overlays
•auction secondary rights using liberal template •vest incumbents•buy-outs, partnerships eliminate border wars •rights enable capex to create band clearing
•side payments for alternative solutions•cable/satellite carriage to move TV stations
•overlay licensees internalize cost of delay•efficient alternative to administrative process
June 2, 2011Kellogg Conf. * Spectrum Markets 29