page image

CHAPTER IV - What Are the Limits of General Purpose Spectrum?

As its second task, the Roundtable was asked to consider the practical limits of general purpose spectrum. Specifically, what, if any, socially beneficial services will not be provided by the market and thus will require a traditional allocation of (no-cost) single-use spectrum? The group concluded that, while the market will provide many of the services that the FCC traditionally ensured through command-and-control regulation of spectrum, some socially beneficial services will still require government support. That said, participants disagreed strongly about whether that support should ever take the form of a traditional spectrum allocation. The group also looked at technical issues related to command-and-control regulation and concluded that, from an engineering standpoint, the FCC would no longer need to have single-use allocations because shared-use bands could accommodate any and all spectrum-dependent applications.

Economic Analysis

There was broad agreement that, under a general purpose spectrum regime, the market will provide many of the kinds of services that the FCC traditionally ensured through command-and-control allocations of dedicated, single-use spectrum. In addition to the examples discussed earlier (BAS, CARS and FSS), participants pointed to “spectrum for schools and libraries” as an example of a single-use allocation for which the original “use case” has disappeared. In 1963, the FCC provided access to certain fixed microwave bands to eligible entities that offered Instructional Television Fixed Service (ITFS), now known as the Educational Broadcast Service (EBS). That allocation allowed educational institutions, including schools and libraries, to deliver live and pre-recorded instructional video to multiple sites and campuses. The technology has changed substantially over time, and most educational video is now transmitted over the Internet. Although the EBS allocation remains, licensees lease much of the spectrum in the secondary market to wireless broadband providers such as Sprint.

Participants also pointed to a recent case in which a group of railroads obtained spectrum to deploy positive train control (PTC), a communications-based technology for collision avoidance, through secondary market transactions. In 2008, following a series of accidents, Congress passed the Rail Safety Improvement Act, which mandates that all passenger railroads and certain freight railroads install PTC by December 31, 2015. Two of the largest U.S. freight railroads had formed a company (PTC-220 LLC) in 2007 to acquire and manage the spectrum needed to deploy PTC. Through a series of transactions in the secondary market, PTC-220, which is now owned by the seven largest U.S. freight railroads, acquired the rights to enough spectrum in the 220 MHz band to cover those carriers’ needs, and it leases some of it to smaller freight and public commuter railroads that are implementing a compatible PTC system.i

Although Roundtable participants cited the PTC case as evidence that, in the future, spectrum for safety-related communications will not necessarily have to come from no-cost FCC allocations, the case also illustrates why the FCC will continue to face pressure to make such allocations. Commuter railroads in the Northeast and parts of Amtrak’s intercity passenger operation are implementing a PTC system that is not compatible with that of the freight railroads. Thus, these entities cannot leverage the PTC-220 spectrum holdings and must acquire spectrum rights on their own. Moreover, as publicly funded entities, they are subject to acquisition rules that hinder their ability to collaborate in the purchase of such rights as the freight railroads did.ii Faced with funding and other constraints, the commuter and intercity passenger railroads are pressing Congress to direct the FCC to provide a no-cost allocation of spectrum for PTC implementation.iii

Despite the trend toward market provision of spectrum rights, Roundtable participants felt that there would be a limited number of socially beneficial spectrum uses for which the market on its own might not provide. These include public safety communications, vehicle-to-vehicle communications to ensure safety, and certain niche services such as radio astronomy and wireless medical telemetry. (Certain of the federal government’s spectrum needs provide other examples, but Roundtable participants focused exclusively on non-federal spectrum.)

Although participants agreed that the government would need to do something to provide for these socially beneficial spectrum uses, they disagreed sharply about what that “something” should be. Most participants felt that, so as not to distort spectrum usage decisions, the government should subsidize the desired social good (e.g., public safety) directly and let the relevant group acquire either spectrum or spectrum-based services in the market. However, a few participants argued that, under limited circumstances, the government should provide the subsidy in the form of dedicated spectrum.

The debate among Roundtable participants focused largely on public safety communications. The FCC allocates spectrum for state and local public safety and emergency radio services. As discussed earlier, public safety agencies such as police and fire departments are assigned licenses to use narrow slices of this dedicated land mobile spectrum. With some limited exceptions, public safety agencies cannot sell or lease the rights that these licenses confer.

Most participants believe this approach is doubly flawed. First, reserving spectrum exclusively for public safety is problematic because it is such a small market segment that equipment manufacturers lack the scale and competitive pressure to provide innovative technology. Moreover, this approach turns first responders into uncompetitive network providers. One participant, Thomas Hazlett, has written about the powerful local public safety radio chiefs who become vested in vintage technologies and oppose digitization as a threat to their authority.iv Second, the form of the spectrum subsidy to public safety compounds the problem. Because the public safety agencies are unable to sell or lease spectrum that they do not need, they have little motivation to use it efficiently—for example, by investing in newer, more spectrum-efficient communications equipment. Not surprisingly, many public safety agencies use older, bandwidth-hogging equipment, despite overcrowding on the public safety bands. Citing both of these problems, economists have argued that it would be preferable to give public safety agencies cash, with which they could purchase the specialized spectrum services they need on the market—just as they buy police cars from commercial automakers.

The counterargument that a few participants made is that the FCC’s reservation of dedicated public safety bands has created a critical mass in terms of market demand for the specialized equipment that public safety agencies need. Motorola and a few other equipment manufacturers have responded to that demand, and it has proven to be a profitable niche market. Absent the dedicated bands, however, public safety agencies would not have been able to compete for spectrum against more popular uses, and their demand would have gone unmet. More broadly, according to this view, absent a “special purpose band,” the market will ignore or forego the profit to be made from certain socially beneficial services because there is even more profit to be made from other services that can be served with general purpose spectrum.

Although they could not resolve their differences regarding public safety, participants were struck by the extent of their agreement that, in the future, dedicated, single-use allocations will be unnecessary in many other areas. Two of the participants staged a symbolic “group hug” to mark their consensus that libraries no longer need their own spectrum. (One of the two would argue that they never did!) Moreover, there was a shared recognition that the provision of a dedicated allocation can be a disservice. As Jon Peha said, “We would like [for] our schools and libraries to have great broadband access, but if you create a band just for schools and libraries, their spectrum would be free but their equipment could be a hundred times as expensive. So you may in some cases make matters worse.”

Technical Analysis

The FCC’s decision to allocate spectrum to a particular use has traditionally reflected technical as well as economic considerations. The approach has been to “put like services with like services” so as to reduce the risk of harmful interference. Historically, the use of dedicated bands has also facilitated interoperability by allowing equipment owned by different entities to communicate.

At the Roundtable, a subset of technical experts looked at whether, in the future, the technical rationale for having bands of spectrum dedicated to particular uses will still apply. Stated differently, what (if any) kinds of applications will likely still require single-purpose spectrum on technical grounds? The group concluded that, purely from an engineering standpoint, no applications will require single-purpose spectrum in the future.

The technical experts’ logic was straightforward. In engineering terms, one spectrum use differs from another only in terms of its “operating rights,” referring to the amount of energy a device can transmit and the amount of protection from interference that a receiving system is entitled to have. However, under the conditions associated with spectrum sharing, a single band of spectrum will be able to accommodate multiple sets of operating rights. Thus, purely from an engineering standpoint, shared spectrum will be able accommodate any spectrum use, thus obviating the need for dedicated bands of spectrum.

That said, there may be circumstances where having dedicated bands of spectrum may be preferable because it allows for greater technical efficiency. The technical experts acknowledged that possibility but did not look at its implications.

Political Reality

In discussing the limits of general purpose spectrum, Roundtable participants focused heavily on economic and technical considerations. However, they acknowledged that political reality often trumps those considerations. A key reason is that a cash subsidy, the economist’s ideal, is simply not an option in many cases. Consider Congress’ action requiring deployment of PTC technology, a multi-billion dollar endeavor (spectrum is only one cost component) that many stakeholders in the rail industry view as an unfunded mandate because Congress provided no appropriations for it.

Even if they have the choice, most user groups would prefer to receive a subsidy in the form of spectrum than the equivalent amount of cash. A key reason is that a spectrum allocation is less transparent than a budget appropriation (cash). Lack of transparency makes a spectrum allocation less of a target for subsidy opponents. Moreover, unlike budget decisions, which get revisited annually, FCC allocations tend to endure.

ENDNOTES
i Communications with Henry McCreary, Director of PTC Communications at CSX and President of PTC-220 LLC, April 2015.
ii Ibid.
iii American Public Transportation Association, “Positive Train Control,” Legislative Issue Brief, March 8, 2015. Available online: http://www.apta.com/mc/legislative/previous/2014/program/Documents/Letterhead_PTC%20Issue%20Brief.pdf. Separately, the freight railroads are supporting legislation that would delay the statutory deadline for implementation of PTC. Jeff Berman, “AAR Welcomes Renewed Call for Positive Train Control Implementation Extension,” Logistics Management, March 5, 2015. Available online: http://www.logisticsmgmt.com/article/aar_welcomes_renewed_call_for_positive_train_control_implementation_extensi. One respected rail safety expert has criticized the freight rail industry’s system architecture for PTC, which will require the placement of a radio at the site of every existing wayside signal (40,000 sites). In his view—a view that others contest—this spectrum-intensive approach will raise the cost and reduce the operational benefits of PTC by tying it to outmoded, electro-mechanical signals rather than integrating it with other critical information systems. Communications with Steven Ditmeyer, Adjunct Professor, Michigan State University, April 2015.
iv Thomas W. Hazlett, “Katrina’s Radio Silence,” Financial Times, October 26, 2005. Available online: http://www.ft.com/intl/cms/s/2/8defb2f6-4486-11da-a5f0-00000e2511c8.html#axzz3UBL0Los1.
 
 
Title Goes Here
Close [X]