Market Mechanisms and the Efficient Use and Management of Scarce Spectrum Resources

Today, the Federal Government has assignments for about half of what is considered to be “beachfront” spectrum. However, most agree that Government agencies, and the Government as a whole, use and manage spectrum resources inefficiently. As such, much attention is now focused on improving the Federal Government’s efficiency in the use and management of its spectrum resources with the aim of freeing up spectrum which can be repurposed for the spectrum-constrained commercial sector. In this Paper, we first tackle Government spectrum use and demonstrate that the “ghost market” approaches commonly proposed to enhance public sector efficiency in spectrum such as a General Services Administration-type model to the recent spectrum sharing proposal by the President’s Council of Advisors on Science and Technology use may not, in the long-term, be effective. Next, we turn to Government spectrum management and present a general equilibrium model addressing spectrum assignment between public and private users using either auctions or leasing. We find that Government management of spectrum resources is not desirable beyond some minimum level. In fact, any proposal that contemplates the leasing of Government-managed spectrum to the private sector may be presumed to include “too little” auctioning of Government spectrum to the private sector in the form of exclusive licenses. We conclude that if the goal of spectrum use and management is economic efficiency, then policymakers should expand the private sector’s management of the nation’s scarce spectrum resources