From Volume 79, Number 6 (September 2006)
At 9:00 PM on April 7, 2003, Fox Broadcasting (“Fox”) aired the penultimate episode of Married by America, a reality television show that allowed the public to select potential spouses for its contestants. Six minutes of the episode detailed the remaining two couples’ bachelor and bachelorette parties, during which strippers attempted to “lure participants into sexual activities.” Of the five million people who watched the broadcast, ninety complaints were filed with the Federal Communications Commission (“FCC” or “Commission”), the government agency that regulates television communications. In October 2004, the FCC determined that the six-minute segment contained explicit and patently offensive depictions of sexual activities. It thus determined that the content was indecent and in violation of federal law. For this violation, the FCC penalized both Fox and 169 Fox affiliates by issuing a Notice of Apparent Liability for $1,183,000 in fines. At the time, this was the largest proposed fine, or “forfeiture,” in FCC history.
From Volume 79, Number 3 (March 2006)
Telecommunications services have always been a mix of wireline services, such as wireline telephone, cable television, and Internet access, and wireless services, such as AM/FM radio, broadcast television, and microwave-satellite transmission of electronic signals. Each mode of service has certain properties, both beneficial and detrimental. Wireline has the potential for almost unlimited capacity, such as the use of multigigabit fiber optics, but requires that the service be delivered to a particular location. Wireless frees the customer from being tied to a specific location, allowing service to be rendered wherever the customer is, but suffers from fading or nonexistent connections and possible privacy concerns. The mix between wireline mode and wireless mode is in constant flux; recently, however, the focus of the market has been shifting toward wireless. Cellular telephony has exploded worldwide, and after a slow start, the market penetration has increased dramatically. Meanwhile, the number of wired access lines in the United States has been declining, for the first time since the Great Depression.
The ability of engineers and innovative firms to bring new and compelling wireless telecommunications applications to an ever-communicating market is very impressive, and bodes well for even greater applications in the future. But even the cleverest of engineers cannot escape the one critical resource absolutely required for wireless services to be deployed: electromagnetic spectrum. Wireless services and devices are all radios, emitting electromagnetic radiation into free space and receiving such radiation. If other nearby transmitters are emitting radiation at the same frequency, the intended receivers will be unable to disentangle the signal they wish to receive from the spurious “interfering” signal. Fundamental to wireless technology is the need to solve this potential interference problem. Since the birth of radio in the 1920s, the interference problem has been solved by government licensing of transmission rights; each licensee is permitted to transmit from a particular place at a particular frequency at a maximum power for a particular application (for example, broadcast radio or police dispatch). Licensing has traditionally been a highly bureaucratic and political process. The outcome, all agree, has been a hugely inefficient use of spectrum resulting from this “command and control” regulatory allocation of a scarce resource.
From Volume 79, Number 3 (March 2006)
Municipal wireless is an important trend, but not for the reasons implied by much of the popular reporting that surrounds this topic. Cities are unlikely to dominate the roster of wireless broadband operators that directly serve the residential and business public. Municipalities, however, have been significant early adopters of innovative unlicensed wireless broadband technologies, providing both a market toehold to innovative products and services using those technologies, and an experimental testing ground for novel organizational models. Most cases of municipal wireless involve the use of unlicensed wireless broadband to meet the local government’s own needs for ubiquitous broadband services, or to construct public-private partnerships aimed at facilitating broadband wireless services to the business and residential public. These uses express local government interests long recognized as legitimate: provision of efficient city services, local economic development, and equity within the community. Thus, the concern for policymakers should not be whether cities should be involved in wireless broadband; there are legitimate reasons why they should, and why increasing numbers of them will be. Rather, the important public policy concern is how to ensure that, in the process of facilitating the first uses of wireless, city authority does not get subverted to create artificial limits on future broadband wireless competition. Doing so will require thoughtful melding of separate legal frameworks governing access to city property and public rights of way into a coherent policy that guides when exclusivity legitimately can or cannot feature in public-private partnership arrangements for communications services.
From Volume 79, Number 3 (March 2006)
The traditional U.S. spectrum allocation system has long been criticized – even by regulators – as overly rigid. To unleash innovative wireless technologies, the Federal Communications Commission (“FCC”) has gradually loosened government restrictions on airwave use. But the path to liberalization leads in alternative directions. One policy reform paradigm, championed by leading economists such as Ronald Coase, allows markets to allocate exclusively assigned spectrum use rights. A rival approach, advanced by advocates of an “open spectrum” such as Lawrence Lessig, favors allocating greater bandwidth for unlicensed use. In such bands, there is free entry by wireless users, provided they use regulator-approved devices that comply with protocols (including power limits) established by the government.
The FCC’s November 2002 Spectrum Policy Task Force Report called for greater reliance on both the exclusive and unlicensed models. Yet, considered in historical context, the FCC’s analysis veered decidedly toward more intense use of “spectrum commons,” abandoning previous agency goals to expand licensed allocations. Citing the “tremendous success” of unlicensed use of cordless phones and Wi-Fi access points, regulators have since argued that advanced wireless technologies create a new policy imperative. Because modern radios use sophisticated techniques for sorting out competing signals, “block allocations” are outdated.
The FCC sees the “spectrum commons” regulatory paradigm as suited to the new opportunities in wireless. In the wake of the spectrum report, it allocated additional 5 GHz bands for unlicensed use, and pursued several regulatory initiatives to dramatically expand bandwidth available for unlicensed devices. In contrast, new allocations for exclusively assigned, flexible-use spectrum rights (analogized as “property rights”) have stalled.
The FCC states that advanced wireless technologies yield valuable new opportunities to share radio spectrum on an unlicensed basis. Yet, the same advances increase opportunities for using exclusively assigned bands, where market data reveal that the most intense and complex frequency sharing actually occurs. Exclusive rights allow coordination of frequency use by competitive network operators; consumers generally find this a superior form of organization than that provided through regulated protocols, and overwhelmingly value marginal allocations of exclusively assigned rights more highly.
This Article examines tradeoffs in allocating spectrum for exclusive rights versus unlicensed use, focusing on an ongoing FCC rulemaking to create an “interference temperature.” This policy would permit unlicensed users to share bandwidth, including frequencies “exclusively” allocated to licensees, according to FCC rules. Our aim is to demonstrate that standard economic principles illuminate the path to proconsumer rules.