Wirelessnorth.ca

Anytime a vendor is granted a monopoly by the government, we should expect that vendor to manage their monopoly to maximize profits. When we license spectrum to mobile carriers, or TV networks, we are granting (or selling) them a monopoly over the management and use of a shared social resource. It is like giving the major oil companies an exclusive license to all of the oil in the US and expecting them to aggressively invest to increase the efficiency of extraction to drive down the price of gas at the pumps. The much more likely commercial reaction would be to extract slowly and manage the availability of the resource to keep the price and their profits high.

So, I for one am convinced that we do not use spectrum efficiently. Only a small portion of this important resource is in active use at any one time, and even when it is in use, most applications tie up a lot more spectrum than they need.

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I have heard a couple of reasonable arguments against increasing the amount of open spectrum. The first is that the government needs to grant a limited monopoly in spectrum in order to create an incentive for an operator to invest in the network that will operate in that spectrum. I am not an economist but I do know the cost of network infrastructure is coming down fast, and I suspect that it may already be low enough that network operators can create business plans that are attractive to private capital. More intriguing is the possibility that networks could be built in open spectrum as a series of interconnected networks like the Internet. This would radically reduce the capital requirements for any single network node, and likely lead to the creation of very efficient network back bones just as we have seen happen with the Internet.

A more subtle version of this argument is that a government granted monopoly creates the profits that fund the research and development spending needed to increase the efficiency of spectrum use. Advocates of licensed spectrum will likely point to the absolute size of their investment in R&D and argue that they will not be able to do that unless they have a monopoly that generates the profits needed to support that R&D. The problem with that argument is that there is no evidence that that R&D is creating real consumer benefit, and there is at least anecdotal evidence (I spent my early career poking around Bell Laboratories) that large, over-funded, research groups are an inefficient way to get innovation to market.

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The $7.2B the administration has committed to broadband infrastructure appears to be headed for shovel ready projects by established telecom carriers to deploy outdated and inefficient technology that will perpetuate their market dominance and dampen innovation. This is the wrong kind of government intervention into the market. It is not that it is not well intentioned, and I am not qualified to talk about it’s effectiveness as a stimulus, but it will not have nearly the lasting impact that it could have if it were targeted at disruptive innovation in open spectrum. Why? Because access to those dollars will be a highly politicized process that will result in the firms with the most access getting the most dollars. Those firms tend to be the incumbent telcos and cable companies who have an obligation to their shareholders to maximize their profits by defending their duopoly. They have no interest in more open spectrum that would create an incentive for private capital to finance wireless alternatives to the wires that they now control to the home.

If the administration were to create more open spectrum, they would be creating a vibrant market. They would actually be taking the politics out of the management of communications. It may be tough in these times to walk away from potential revenue from the auction of spectrum, but the administration can have a much more profound and lasting impact on the quality of life of all Americans by opening up spectrum than they every could by putting stimulus dollars in the hands of the incumbent duopoly.”

Think wifi. Wifi works one of two tiny bands of unlicensed “open” spectrum. You don’t need a license to set up a wifi network. It just works.

The world needs (a lot) more open spectrum. Unfortunately for Canada we don’t have a market big enough to go it alone, we need the US to go first to establish a large enough market for good standards, devices and markets to emerge based on open spectrum. Spread the word.

LINK: Open Spectrum is Good Policy