The Spectrum Crisis is Upon Us

Senators and panelists at the hearing cited concerns about the capacity constraints wireless companies currently face because of a lack of spectrum—the medium that wireless transmissions pass through.Spectrum is the important input that enables us to check Facebook on smartphones, use wifi-capable tablets to watch Hulu, and make cellphone calls to our dads on Father’s Day. Now that most Americans have smartphones and tablets, which consume dozens of times more wireless data than traditional cellphones, demand for spectrum is quickly outstripping supply, and many fear that consumers and our economy will soon suffer.

These capacity constraints—which precipitate slower downloads, dropped calls, and higher prices—are an artifact of decisions made decades ago, when regulators simply gave away valuable spectrum to government agencies and commercial users after comparative hearings—so-called “beauty contests.” While slivers of spectrum are now auctioned off or reclaimed from television broadcasters, most of it is licensed via command-and-control regulation, specifying which wireless services can be offered where.

To combat ever-expanding consumer demand for wireless, many scholars and policymakers are considering the ample spectrum possessed by federal agencies, which hold half of the most valuable bands.

Scholars and government auditors agree: Federal agencies use their spectrum poorly. Because agencies have no cost pressures and don’t economize spectrum use, President Obama directed regulators to find 500 MHz of spectrum for mobile broadband by 2020. Economist Coleman Bazelon estimates that much spectrum would fetch nearly $100 billion at auction, and experts point to ancillary benefits of over $1 trillion if we can make more federal airwaves available for commercial use.

There are two problems with reclaiming federal spectrum.

First, there is no effective process to compel federal agencies, like the Department of Defense, to relinquish spectrum. Second, federal users don’t pay market prices for spectrum, which results in inefficient use and billions of dollars of value wasted annually. Mere plans have not induced agencies to give up their gifted spectrum, and substantial value evaporates each year this situation persists unchanged. There are proposals out there, however, for freeing up spectrum that are worth considering.

To expedite the process of auctioning off federal spectrum, Sen. Mark Kirk (R-Ill.) and Rep. Adam Kinzinger (R-Ill.) have promoted a bill to “BRAC the spectrum.” BRAC, the Base Realignment and Closure procedure, is a 1988 law that accomplished the politically difficult task of closing hundreds of military bases. BRAC-ing the spectrum would entail the congressional creation of an independent commission of experts with the authority to clear federal users out of their spectrum. All spectrum-clearing decisions by this commission would stand, absent a disapproving joint resolution from Congress. That spectrum could be auctioned off within a few years, using proceeds to move the federal systems to other bands, with the remainder going to the Treasury.

There is also a proposal to create a GSA-like agency to control federal spectrum. The General Services Administration owns federal real estate and buildings, which it leases to agencies; likewise, a similar proposal would accomplish the second goal of making federal users pay fees for their spectrum and encourage smarter uses. The federal government pays market rates for many important inputs—tanks, aircraft carriers, IT equipment—so why should spectrum be free? Just as paying rent forces agencies to economize on building size and amenities, a “GSA for spectrum” would lease spectrum to agencies, discouraging the sort of waste currently seen in federal bands.

Other proposals exist for reclaiming this valuable resource from federal agencies, but few people are even aware of a wireless crisis. Perhaps “Spectrum Technology Day” will avert stymied growth in the sector by highlighting the benefits to quick action, including potentially smaller wireless bills for consumers, more innovation by technology companies, as well as the mitigation of regulatory waste.

As an FCC commissioner recently said, “Let the free market for wireless services and devices flourish. If the government gets out of the way, the wireless marketplace will continue to be an American success story.”