Sweeten the Deal: Transfer of Federal Spectrum Through Overlay Licenses

The explosion in consumer demand for wireless services that began in the 1990s caught policymakers off guard. Demand for wireless services has only accelerated, as new cellular wireless technologies-such as broadband Internet via 3G and 4G LTE-permit services such as web browsing, video streaming, the Internet of things, and gaming, necessitating a steady influx of spectrum as an input

Drones, Airspace Design, and Aerial Law in States and Cities

Federal and state governments have embraced drone technology in recent years to stimulate a domestic industry for new jobs and long-distance delivery services. However, the federal-state breakdown about who manages drone airspace and surface air rights has not been resolved, which, as the Government Accountability Office recently reported to Congress, threatens the progress of the U.S. drone industry. What is clear is that landowners, whether public or private, own low-altitude airspace and air rights. This article traces the legal treatment of surface airspace as real property back to Anglo-American legal treatises and court decisions in the mid-19th century. Therefore, absent a revolution in property and government takings law, state and city authorities will play a major role in demarcating drone highways, as well as creating time, place, and manner restrictions such as time-of-day rules, noise maximums, and privacy protections. This paper proposes a cooperative federalism system of airspace leasing above public roads to avoid most nuisance, trespass, and takings lawsuits from residents. Finally, this paper proposes a legal presumption for courts, establishing an altitude where private air rights end and federally managed airspace begins

Auctioning Airspace

The commercialization of air taxis and autonomous passenger drones will one day congest urban airspace. Operators expect that, once flights are autonomous and the cost of service falls, high-traffic urban “vertiports” could see hundreds of air taxi takeoffs and landings per hour. Low-altitude airspace—between 200 feet and 5,000 feet above ground level—offers a relatively blank slate to explore new regulatory models for air traffic management and avoid command-and-control mistakes made in the past in aviation. Regulators’ current proposals would centralize air taxi traffic management into a single system to coordinate air taxi traffic, but this approach likely creates technology lock-in and unduly benefits the initial operators at the expense of later innovators. To facilitate the development of the air taxi market, regulators should consider demarcating aerial travel corridors and auctioning exclusive-use licenses to operators for use of those corridors, much like regulators auction radio spectrum licenses and offshore wind energy sites. Exclusive rights to routes would allow transfer and sale to more efficient operators and would also give operators the certainty they need to finance the substantial capital investments

Tragedy of the Regulatory Commons: LightSquared and the Missing Spectrum Rights

The endemic underuse of radio spectrum constitutes a tragedy of the regulatory commons. Like other common interest tragedies, the outcome results from a legal or market structure that prevents economic actors from executing socially efficient bargains. In wireless markets, innovative applications often provoke claims by incumbent radio users that the new traffic will interfere with existing services. Sometimes these concerns are mitigated via market transactions, a la “Coasian bargaining.” Other times, however, solutions cannot be found even when social gains dominate the cost of spillovers. In the recent “LightSquared debacle,” such spectrum allocation failure played out. GPS interests that access frequencies adjacent to the band hosting LightSquared’s new nationwide mobile network complained that the wireless entrant would harm the operation of locational devices. Based on these complaints, regulators then killed LightSquared’s planned 4G network. Conservative estimates placed the prospective 4G consumer gains at least an order of magnitude above GPS losses. “Win win” bargains were theoretically available, fixing GPS vulnerabilities while welcoming the highly valuable wireless innovation. Yet transaction costs—largely caused by policy choices to issue limited and highly fragmented spectrum usage rights (here in the GPS band)—proved prohibitive. This episode provides a template for understanding market and non-market failure in radio spectrum allocation

Natural Experiments in Mobile Phone Regulation: Estimated Effects of Prohibiting Handset Bundling in Finland and Belgium

Vertical restrictions have theoretically ambiguous efficiency effects. Marketplace evidence is therefore required to reveal the presence of anti-competitive foreclosure. The bundling of mobile phones with cellular network service offers one such market test. Two European nations—Finland and Belgium— prohibited tying arrangements for mobile service and mobile devices (handsets) in wireless broadband (3G) markets. These rules were abandoned in 2006 and 2010, respectively, creating natural experiments. This article compares 3G subscribership in European countries from 2003 through 2012. Finland and Belgium, while banning bundles, exhibited 3G penetration levels only about a third of the EU 15 average. Following their respective regime switches, relative 3G penetration levels improved markedly in these countries—Finland, in fact, became an EU leader. Regressions adjusting for market specific factors quantify the effects. The data are consistent with the view that carrier handset subsidies, which are strongly supported by bundling services with hardware, help internalize network effects that, if unsupported by the network carriers, may go unrealized. Vertical integration here appears to assist in productive ecosystem creation, not anti-competitive foreclosure. Keywords: Mobile Phone Regulation, 3G Wireless, Handset Subsidies JEL Codes: K23, L14, L50, L9

Auctioning Airspace

The commercialization of air taxis and autonomous passenger drones will one day congest urban airspace. Operators expect that, once flights are autonomous and the cost of service falls, high-traffic urban “vertiports” could see hundreds of air taxi takeoffs and landings per hour. Low-altitude airspace—between 200 feet and 5,000 feet above ground level—offers a relatively blank slate to explore new regulatory models for air traffic management and avoid command-and-control mistakes made in the past in aviation. Regulators’ current proposals would centralize air taxi traffic management into a single system to coordinate air taxi traffic, but this approach likely creates technology lock-in and unduly benefits the initial operators at the expense of later innovators. To facilitate the development of the air taxi market, regulators should consider demarcating aerial travel corridors and auctioning exclusive-use licenses to operators for use of those corridors, much like regulators auction radio spectrum licenses and offshore wind energy sites. Exclusive rights to routes would allow transfer and sale to more efficient operators and would also give operators the certainty they need to finance the substantial capital investments