The FCC needs to implement a ‘rocket docket’ for wireless spectrum, and fast

Americans just love their wireless service. According to industry statistics, mobile wireless data use tripled between 2013 and 2015; there are now more active mobile devices than people in the United States; and nearly half of households are wireless only. But as wireless use continues to grow, the fuel that powers the mobile machine—electromagnetic radio spectrum—is rapidly becoming exhausted and new sources must be found. As spectrum is a finite resource already assigned to users and uses, finding more spectrum for commercial use is no easy task.

Many in Washington are looking at repurposing spectrum held by the United States government, which readily concedes that it uses spectrum inefficiently. Yet, despite this concession, the various federal agencies that control this valuable spectrum—e.g., the Federal Aviation Administration, the National Oceanic and Atmospheric Administration and the Department of Defense—are reluctant to part with even a megahertz going forward for fear that any reduced spectrum capability will impair their core public safety and national defense responsibilities. Although there are sporadic legislative efforts to incent these federal agencies to relinquish some spectrum in exchange for a portion of future auction revenues, because government agencies—unlike private actors—are not motivated by profits, it is unclear whether such efforts will ultimately prove successful. But, even taking the optimistic view and assuming such legislative efforts succeed, it will still take years to identify, clear and auction federal spectrum for commercial use.

Fortunately, there may be a more immediate solution.

{mosads}Newly-minted Federal Communications Commission Chairman Ajit Pai has repeatedly stated that one of his top priorities is to “increase infrastructure and innovation.” Taking the chairman at his word, developing an efficient, transparent and expedited process to allow existing license holders to convert their spectrum in underutilized bands to a higher-value use should be at the top of his “to do” list. In so doing, we short-circuit the laborious task of identifying, clearing and auctioning potential “greenfield” bands of government spectrum (although as spectrum is always in short supply, those efforts should certainly continue) and provide a powerful incentive for existing license holders to convert their spectrum through relatively quick regulatory changes for use in enterprise partnerships; consumer-focused commercial endeavors; or sold in the secondary market for other purposes. Under these scenarios, more high-value commercial spectrum would be available for advanced wireless services which, in turn, will lead to more investment, innovation and infrastructure deployment.

This modernization process need not be a complicated matter. The chairman can easily develop and implement a new, expedited “rocket docket” proceeding under which the commission would consider detailed proposals from existing license holders who can demonstrate that the public interest is served by the commission modifying their license and modernizing their band so that their spectrum can be put to a higher-value use. Assuming there are no intractable interference issues, the FCC can promise to complete this entire process within, say, a twelve-month period, thus providing a relatively immediate solution to a spectrum-starved industry.

However, as the old saying goes, no good deed goes unpunished. In this particular case, while converting spectrum from a low to high value use should be a bi-partisan policy objective everyone can get behind, history bears witness that there will be some who will no doubt complain that this spectrum modernization process will create an inappropriate financial windfall for license holders who participate.

Well, so what?

Again, the purpose of this “rocket docket” is to incent private sector license holders to develop business plans—again, plans that they have the burden ultimately to demonstrate to be in the public interest—to repurpose current licenses for a higher-value use. Economics 101 tells you that the best way to incent the right behavior is to hold out the potential to reap the reward of higher economic profits. This concept is nothing new to spectrum policy: indeed, we recently concluded a major incentive auction for broadcasters (who did not even pay for their spectrum) in which we encouraged voluntary participation in exchange for a cut of the auction proceeds. And, as the just-published results indicate, this profit incentive seemed to work out quite well for everybody—broadcasters voluntarily surrendered 70 MHz of spectrum for licensed commercial use in exchange for $10.05 billion. The economics behind a “rocket docket” to repurpose spectrum are similar.

It is also important to understand that this “windfall” argument is nothing new. Several years ago when the FCC was in the process of converting idle Mobile Satellite Service spectrum to much-needed terrestrial broadband use, public interest groups objected to the conversion, claiming that the license holders should not be entitled to a windfall from the FCC’s actions. As potential remedies, they proposed a gamut of conditions that would have rendered spectrum effectively useless. Fortunately, even a Democrat-controlled FCC rejected such arguments as nothing more than “taxation by condition.” There should be no reason why a Republican-led Commission should depart from precedent as it seeks to convert more spectrum to higher value use.

If Chairman Pai is truly serious about increasing infrastructure and innovation, then he needs to send a loud and clear signal that the FCC is “open for business” for repurposing spectrum from low to high value uses. The Commission has a unique opportunity to bring much-needed spectrum for commercial use on its own motion without having to deal with the bureaucracy of the rest of the federal government. It need only seize it.

Carpe diem, Mr. Chairman.

Lawrence J. Spiwak is the president of the Phoenix Center for Advanced Legal and Economic Public Policy Studies, a nonprofit 501(c)(3) research organization that studies broad public-policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of the digital age.

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