Spectrum Management: Property Rights, Markets, and The Commons
Gerald R. Faulhaber and David J. Farber
Working Paper 02-12 December 2002
[FAC: An Excerpt from this paper written by theAEI-BROOKINGS JOINT CENTER
FOR REGULATORY STUDIES follows. Note, during the early parts of this paper a good,
concise history of spectrum management is also discussed.]
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From:
aei-brookings.org
5. New Technology and Property Rights
While the new technology opens up new opportunities for efficient use of
spectrum, using either of these technologies appears to violate the license rights of
current licensees. It also appears to be incompatible with a property rights market
regime. Proponents of these technologies claim that they should be deployed in the
context of a commons model, in which all can use the spectrum whenever they want, as
long as we adopt simple rules to keep out of each other’s way. In this view, property
rights are the problem, not the solution; “building fences” of property rights violates the
commons principle.
It is understandable that the developers of these new technologies hold the view
that these innovations are likely to deploy most quickly and effectively in a commons
regime. After all, much of the research was conducted within the Part 15 unlicensed
spectrum, which is a commons regime. Further, the new technologies appear to use
spectrum in new ways that don’t easily fit into the legacy business model of highpowered
dedicated frequency broadcasting. Why adopt a legacy-driven property rights
model when the new technologies promise an end to scarcity? In this view, the commons
model is best suited to the new technologies.28
Central to the choice between a property right regime and a commons regime are
(i) scarcity and (ii) transaction costs. If a resource is scarce in that many people contend
for its use, then a commons regime will be afflicted with the “tragedy of the commons,”
in which the resource is overused; in spectrum terms, we experience interference. In the
face of scarcity, a property rights regime will function to ration the scarce resource; the
resource will have a positive price and contention for it is resolved in the market.
However, if the resource isn’t scarce, then a commons regime works quite well without
incurring the cost of a property rights regime. Further, if a property rights regime is
imposed where scarcity is not present, the price of the resource at the margin falls to
zero.29
The structure and magnitude of transaction costs determine the boundary between
efficient regimes. If transactions costs of a property rights regime are quite high, then the
costs of the tragedy of the commons must be quite high indeed to justify using a market
regime. If the costs of a property rights regime are relatively low, then it is likely more
efficient than a commons regime even at low levels of contention costs.30
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FAC
frank@fttx.org |
