Code Breaking: Spectrum for All

A generation from now, when policy types look back to the first decade of the 21st Century, there is no doubt they will think of a “Powell” as one of the most important policy makers of our time. But I’m betting it will be Michael, not Colin, Powell. I’m a big fan of the balance and wisdom of the Secretary of State. Yet the more I see of his son, the chairman of the Federal Communications Commission, the more convinced I am that Michael Powell could shepherd us to perhaps the most important policy change to affect the technology industry, and hence the economy, in 50 years. Just as the former Soviets remember their Chairman Mikhail (Gorbachev) as the father of their latest revolution, so too, will we remember our Chairman Michael (Powell) as the father of the most important revolution that technology could begin—and for a similarly brilliant strategic reason.

The issue here is spectrum—that swath of electromagnetic radio frequencies that is used today for everything from AM radio to Wi-Fi networks. The FCC regulates this spectrum. How they do so is about to change. The command and control model of spectrum regulation that defined FCC policy for most of the 20th century will certainly crumble. The only question is what policy will take its place.
The dominant or “Party” view (to continue the Gorbachev riff) is that spectrum should be propertized—divided into lots and sold to the highest bidder. This is how we allocate access to just about all valuable resources. It’s the way we could allocate access to spectrum.

Chairman Powell has been a “Party” member for most of his (relatively short) career. His view has always been that the market is a better regulator than the FCC. Thus most believe he thinks the same way about spectrum and trust him to deliver a fully propertized spectrum market, soon.

But increasingly, there is dissent within the Party, as some are beginning to suggest a counter-revolutionary thought: Rather than property, spectrum should be left in a “commons”—or in a public space. Like a freeway, or a public park, use of a spectrum commons would neither be regulated nor propertized. Its use would, instead, be free for anyone, subject only to a few simple rules about devices. Just as you can go where you wish on Route 66, but not with a go-cart or with a tank, so too could you do what you wish with spectrum in a commons, so long as you would obey similarly minimal coordinating rules.

The passion behind this counter-revolution is not romanticism about sharing, or any opposition in principle to “property.” The push comes instead from the success of the most important spectrum commons so far—the “unlicensed” spectrum bands that have given us Wi-Fi networks. More fundamentally, the push comes from an increasing concern that the burdens of a property system could well outweigh any benefit.
The intuition is not hard to grasp. Property systems are not free. To make sense, their benefits must outweigh their costs. Party members count two sorts of benefits from a property regime. The first is coordination—making sure that users of the spectrum don’t conflict with each other. The second is allocation—making sure that the right to use a bit of spectrum is given to the highest valued user.

Both benefits are indeed important. Yet both come at a cost. And if we could achieve at least some of these benefits without suffering the worst of these costs, then the gain from propertizing spectrum becomes harder to justify.

The best example of just such a system—where technology coordinates use without a market controlling allocation—is the Internet itself. While the wires and computers that get connected to the Internet are mostly privately owned, Internet protocols create an effective commons for network communication. The protocols assure coordination. But nothing in that simple protocol can guarantee that Internet resources get devoted to the highest and best use.

Your urgent e-mail to your travel agent asking him to rebook you on the next flight competes with “Mrs. M. Sese-Seko’s” plea for her “URGENT BUSINESS PROPOSAL.” Nothing in the basic design enables anyone to prioritize over anyone else.

In principle, this “flaw” could be fixed. In principle, we could impose a property system on inter-networking resources generally. That property system could allocate Internet resources to the highest and best use. It could block users that failed to pay the price, or channel that use to the Internet slow lane. But the costs of such a system would likely outweigh any gains. To police and toll the Internet would be to exclude many new and experimental uses, not to mention uses that are non-commercial or educational. The “innovation commons” of the Internet freeway, these people believe, has produced more innovation and growth than a tollbooth network would have.

Counter-revolutionaries are the first to admit that we don’t know enough to be certain that the commons model would be better than property, either for now or forever. But we do know enough to know there’s a good shot it could be. And in the face of that knowledge, counter-revolutionaries argue that policy makers should not be locking us into one view of the future over the other—by, for example, auctioning spectrum in a way that defeats the opportunity for the commons to demonstrate its potential. They should instead be guiding us to a position where both can compete, and the dominant view, prevail.

My bet is that Chairman Powell gets this. And the evidence is a subtle but important ambiguity in the part of FCC policy that Powell gets to control. While the Chairman is, on the one hand, carrying out the pro-property vision of the Party, he is, on the other hand, simultaneously encouraging the work of the counter-revolution. The strategy comes directly from the playbook of Chairman Mikhail—defend the Party while sowing the seeds of its demise.

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