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Abstract

Accelerating demand for wireless broadband is accentuating the need to optimize use of limited spectrum resources that are susceptible to congestion. Recent technological innovations enable exclusive-use, licensed spectrum and open-access, unlicensed spectrum to serve as complementary goods. We present a game-theoretic model in which wireless broadband service providers engage in simultaneous pricing and service decisions for a heterogeneous consumer population. We demonstrate that for some unlicensed allocations, service providers may maximize profit by offloading some consumer traffic onto the unlicensed band. Consequently, adding unlicensed capacity can increase congestion in wireless spectrum bands in ways that harm social and consumer welfare. These effects are reminiscent of Braess’s Paradox, in which adding capacity counterintuitively leads to greater congestion. Notably, these effects emerge through supply-side differentiation strategies, rather than demand-side responses. We then utilize our framework to analyze recent high-profile decisions by the FCC and introduce a framework for identifying the appropriate balance between licensed and unlicensed allocations.

Grab a partner, find a group, and square up for Truth on the Market’s second Telecom Hootenanny. We’ve got spectrum auctions, broadband subsidies, and a European 5G tango.

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Abstract

Although most studies of major communications reform legislation focus on the merits of their substantive provisions, analyzing the political dynamics behind the legislation can yield important insights. An examination of the tradeoffs that led the major industry segments to support the Telecommunications Act of 1996 (the “1996 Act”) provides a useful illustration of a political bargain. Analyzing the current context identifies seven components that could form the basis for the next communications statute: (1) universal service; (2) pole attachments; (3) privacy; (4) intermediary immunity; (5) net neutrality; (6) spectrum policy; and (7) antitrust reform. Assessing where industry interests overlap and diverge and the ways that the political environment can hinder passing reform legislation provides insights into how these components might combine to support the enactment of the next Telecommunications Act of 1996.

Abstract

The battle over rules governing 5.9 GHz airwaves offers important lessons in both the creation of property rights and applied public choice. Set aside in 1999, the 75 MHz “Car Band” band was designated by the U.S. Federal Communications Commission (FCC) to support emerging vehicle telematics and computerized driving. Transportation regulators and automakers, including General Motors, Ford, and BMW, claimed this would efficiently promote road safety, fuel savings, and collision avoidance, as dedicated bandwidth would operate under a “spectrum commons” regime designed to favor such applications. While anticipated services gradually developed, the 5.9 GHz band did not. Spectrum inputs outside the “Car Band” accommodated driving applications, while the general development of wireless networks shifted social priorities. Eventually, Internet services companies such as Comcast, Google and Microsoft claimed the 75 MHz allocation was wastefully large and that switching access rules to favor WiFi would generate net benefits. Suggested for possible reallocation by the U.S. Department of Commerce since 2012, the FCC issued an order in 2020 to split the baby: 45 MHz of the band would be shifted to Wi-Fi, with 30 MHz remaining dedicated for Intelligent Transportation Systems. The FCC’s 2020 “Cost Benefit Analysis” purports to quantify the trade-offs involved, but upon scrutiny fails to plausibly value Wi-Fi services or to even consider the relevant opportunity costs. The costly, delay-intensive and ad hoc policy process (whose costs are additionally ignored by the FCC) begs for further development of auction mechanisms to rationalize alternative rights assignments.

What should a government do when it owns geese that lay golden eggs? Should it sell the geese to fund government programs? Or should it let them run wild so everyone can have a chance at a golden egg?

That’s the question facing Congress as it considers re-authorizing the Federal Communications Commission’s (FCC’s) authority to auction and license spectrum. Should the FCC auction spectrum to maximize government revenue? Or, should it allow large portions to remain unlicensed to foster innovation and development?

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These days, there isn’t a lot of harmony in the world of technology policy. But there is a bright spot of bipartisanship in a section of our airwaves: the 5.9 GHz band. In 2020, the FCC voted unanimously to modernize the rules in this spectrum to allow both Wi-Fi and automotive safety tech to operate. This win-win was celebrated by proponents of car safety and broadband alike. But today the Department of Transportation (DOT) is working on a study that may purposely have been designed to undo this decision. At a time when broadband is more important than ever, we should not undo this popular and bipartisan policy.

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In a turf war between federal agencies that could prove deeply disruptive to travelers, the Federal Aviation Administration is threatening to ground planes if the Federal Communications Commission allows wireless carriers to begin operating in the C-band spectrum this week.

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Policy is not settled quickly in communications law. The 1996 Telecommunications Act required incumbent telecommunications carriers to open their networks to competitors on regulated terms. It took more than a decade, two trips to the Supreme Court, and several trips to the Court of Appeals for the D.C. Circuit to ascertain the meaning of this statutory requirement. The story is similar to the Federal Communications Commission’s (FCC) efforts since 1998 to fit consumer internet service into the same Telecommunications Act’s statutory framework, resulting in repeated trips to the Courts of Appeals and the Supreme Court.

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ICLE Director of Innovation Policy Kristian Stout joined a digital panel organized by WifiForward and the Wi-Fi Alliance on the state of the Wi-Fi 6E market. The full video is embedded below.