Radio Spectrum and the Disruptive Clarity OF Ronald Coase.

In the Federal Communications Commission, Ronald Coase (1959) exposed deep foundations via normative argument buttressed by astute historical observation. The government controlled scarce frequencies, issuing sharply limited use rights. Spillovers were said to be otherwise endemic. Coase saw that Government limited conflicts by restricting uses; property owners perform an analogous function via the "price system." The government solution was inefficient unless the net benefits of the alternative property regime were lower. Coase augured that the price system would outperform the administrative allocation system. His spectrum auction proposal was mocked by communications policy experts, opposed by industry interests, and ridiculed by policy makers. Hence, it took until July 25, 1994 for FCC license sales to commence. Today, some 73 U.S. auctions have been held, 27,484 licenses sold, and $52.6 billion paid. The reform is a textbook example of economic policy success. We examine Coase‘s seminal 1959 paper on two levels. First, we note the importance of its analytical symmetry, comparing administrative to market mechanisms under the assumption of positive transaction costs. This fundamental insight has had enormous influence within the economics profession, yet is often lost in current analyses. This analytical insight had its beginning in his acclaimed early article on the firm (Coase 1937), and continued into his subsequent treatment of social cost (Coase 1960). Second, we investigate why spectrum policies have stopped well short of the property rights regime that Coase advocated, considering rent-seeking dynamics and the emergence of new theories challenging Coase‘s property framework. One conclusion is easily rendered: competitive bidding is now the default tool in wireless license awards. By rule of thumb, about$17 billion in U.S. welfare losses have been averted. Not bad for the first 50 years of this, or any, Article appearing in Volume II of the Journal of Law & Economics.

Radio Spectrum and the Disruptive Clarity of Ronald Coase

In the Federal Communications Commission, Ronald Coase exposed deep foundations via normative argument buttressed by astute historical observation. The government controlled scarce frequencies, issuing sharply limited use rights. Spillovers were said to be otherwise endemic. Coase saw that Government limited conflicts by restricting uses; property owners perform an analogous function via the “price system.” The government solution was inefficient unless the net benefits of the alternative property regime were lower. Coase augured that the price system would outperform. His spectrum auction proposal was mocked by communications policy experts, opposed by industry interests, and ridiculed by policy makers. Hence, it took until July 25, 1994 for FCC license sales to commence. Today, some 73 U.S. auctions have been held, 27,484 licenses sold, and $52.6 billion paid. The reform is a textbook example of economic policy success. Herein, we examine Coase’s seminal 1959 paper on two levels. First, we note its analytical symmetry, comparing administrative to market mechanisms under the assumption of positive transaction costs. This fundamental insight had its beginning in Coase’s acclaimed article on the firm, and continued with his subsequent treatment of social cost. Second, we investigate why spectrum policies have stopped well short of the property rights regime that Coase advocated, considering rent-seeking dynamics and the emergence of new theories challenging Coase’s property framework. One conclusion is easily rendered: competitive bidding is now the default tool in wireless license awards. By rule of thumb, about$17 billion in U.S. welfare losses have been averted. Not bad for the first 50 years of this, or any, Article appearing in Volume II of the Journal of Law & Economics

Socio-technical considerations for Spectrum Access System (SAS) design

Spectrum Access Systems (SAS) are emerging as a principal mechanism for managing the sharing of radio spectrum. The design of the SAS depends on the specification of spectrum property rights and the governance system by which those rights are enforced. Current perspectives on SAS design have been too limited, focusing narrowly on the technical components without adequate consideration of socio-technical factors that will impact the likely success of any SAS design. In this paper, we apply the social science literature on the management of common pool resources (CPR) to the design challenge for the SAS. Heretofore, too much of the discussion has focused on an overly simplistic characterization of the spectrum rights design space as a dichotomous choice between licensed v. unlicensed, markets v. government, and exclusive v. open. The CPR framework forces consideration of a wider class of design options, positioning the specifications of spectrum property rights more appropriately along a multi-dimensional continuum of rights bundles. The CPR framework highlights the importance of considering formal and informal, multi-layered institutional and market-based interactions among SAS stakeholders when designing a resource management system. We will explain how this leads one to view the SAS as a polycentric governance system (using the terminology in the CPR literature). By examining the economic and social context of spectrum sharing, we assert that these emerging systems must be sufficiently flexible to adapt to various forms of resource governance, which refers to the process by which rights are distributed among stakeholders, how those rights are enforced, and how the resource is managed. We illustrate how the insights from the CPR literature might be implemented in a prototype SAS architecture