page image

CHAPTER IV - Licensed Versus Unlicensed Wireless Spectrum

In the century since Congress enacted “An Act to Regulate Radio Communication,” spectrum policy has tried to address the problems associated with allocating and governing the rights to use wireless spectrum.

Initially, the federal government employed a command-and-control model to regulate spectrum use. In 1959, Ronald Coase proposed that property rights—tradable licenses—be assigned to electromagnetic spectrum.[14] According to Coase, political pressures caused a misallocation (and under-deployment) of spectrum:

The real cause of the trouble was that no property rights were created in these scarce frequencies.[15]

Coase pointed out that the most efficient way to allocate spectrum is to give it to those users who value it most through property rights and secondary markets, employing market forces to allocate the scarce resource and deal with boundary (interference) problems. Although it was more than three decades before government policy (partially) adopted his recommendations, the Federal Communication Commission (FCC) has, since 1994, allocated some spectrum through auctions, gradually shifting from its command-and-control regime to one relying in part on markets to determine the best allocation of certain spectrum resources.

Although many aspects of the FCC’s spectrum policy still reflect its fundamental command-and-control regime, spectrum policy associated with personal communication services is increasingly market driven. This market-based approach has created efficiencies in the allocation and use of spectrum.[16]

Meanwhile, the FCC has also made available unlicensed spectrum (particularly in higher frequencies):

In 1985…the FCC…paved the way for widespread use of unlicensed devices in the so-called Industrial, Scientific and Medical (ISM) frequencies in the 900 MHz (26 MHz), 2.4 GHz (83.5 MHz), and 5.8 GHz (125 MHz) bands. In subsequent years, thousands of unlicensed devices were introduced under the Part 15 framework, including cordless phones and Wi-Fi radios connecting computers in local area networks. One of the lead FCC engineers that worked on the regulatory initiative recounts that such devices were neither planned nor anticipated.

In recent years, the FCC has moved aggressively to allocate more bandwidth to unlicensed (or “license-exempt”) spectrum…. By 2004, approximately 665 MHz of spectrum in the [ISM Bands] had been allocated to unlicensed use…. [T]he FCC ruled in December 2008 that the frequencies previously used by analog television broadcasts would be set-aside for the use of unlicensed devices. This decision set aside an estimated 240 MHz of UHF bandwidth in the median U.S. market, and brings the total unlicensed allocation to 955 MHz.[17]

The licensed/unlicensed question is a crucial issue for the future of wireless policy, its role in offering broadband to consumers, and its relationship to wired infrastructure:

The core question in wireless policy, broadly recognized for at least the last decade, has been how much of the future of wireless innovation will depend on exclusively-licensed spectrum—whether allocated under a command and control system or auction and secondary markets—and how much will be developed in bands where it is permissible to deploy open wireless systems.

* * *

We cannot escape some level of government regulation over wireless communications and therefore must bear the risks of control, corruption and error…. Open wireless strategies try to address the…problem by proposing minimal device-level rules, symmetrically applied to all devices and applications, with a privileged position for open standards-setting processes as a backstop against agency capture.[18]

Many have argued that unlicensed spectrum policy has enabled considerable innovation around this spectrum and increased access to broadband Internet services.[19] And both firms and advocates have pushed for further expansion of unlicensed spectrum:

An influential coalition composed of major technology firms such as Intel, Microsoft, Apple, Cisco, Google and other computer manufacturers, together with several academics, has been urging the FCC to expand the unlicensed “spectrum commons.”… [T]hese advocates claim [that] exclusive, property-like rights in spectrum are obstructive anachronisms.[20]

It is important to note, however, that despite generally widespread agreement over the benefits of unlicensed spectrum, the trade-off is not merely between regulated (licensed) use of scarce spectrum and unregulated (unlicensed) use of abundant spectrum. Rather, it is between regulation of the spectrum license and regulation of the standards governing the devices that connect to it:

The power limits and technology restrictions imposed by regulators protect some applications and users at the expense of others. Scarcity is not eliminated; indeed, the effort to advance what Benkler labels a “well regulated commons” is itself a rejection of open access. Allocating spectrum for unlicensed usage necessarily excludes certain wireless alternatives, implicating trade-offs that need not be made in the case of true resource abundance.[21]


[14] R. H. Coase, The Federal Communications Commission, 2 J. Law & Econ. 1 (1959), available at http://old.ccer.edu.cn/download/7874-1.pdf.

[15] Id.

[16] Thomas W. Hazlett & Roberto E. Munoz, A Welfare Analysis of Spectrum Allocation Policies, 40 RAND J. Econ. 424 (2009), available at http://mason.gmu.edu/~thazlett/pubs/Hazlett.Munoz.RandJournalofEconomics.pdf.

[17] Thomas W. Hazlett & Evan T. Leo, The Case for Liberal Spectrum Licenses: A Technical and Economic Perspective (Working Paper Mar. 23, 2010), available at http://www.law.gmu.edu/assets/files/publications/working_papers/1019CaseforLiberalSpectrumLicenses20100412.pdf.

[18] Yochai Benkler, Open Wireless vs. Licensed Spectrum: Evidence from Market Adoption, 26 Harv. J. Law & Tech. 69 (2012), available at http://jolt.law.harvard.edu/articles/pdf/v26/26HarvJLTech69.pdf.

[20] Hazlett & Leo, The Case for Liberal Spectrum Licenses, supra note 17.

[21] Id.

Share On