Thune: Time To Update Federal Spectrum Policy For 5G

U.S. Sen. John Thune, R-S.D., chairman of the Subcommittee on Communications, Technology, Innovation, and the Internet, convened a hearing titled, “The State of U.S. Spectrum Policy,” on July 23, 2020. It examined the Federal Communications Commission (FCC)’s and National Telecommunications and Information Administration (NTIA)’s role in spectrum management and policymaking. Witnesses including Tom Power of CTIA, Mark Gibson of CommScope, Michael Calabrese of New America and myself discuss how the increased demand and competition for licensed and unlicensed spectrum resources have impacted spectrum policies in the United States. 

Over the year he Commerce Committee has driven reforms to liberalize commercial spectrum allocation at the FCC. These practices have become a model for countries around the world. Reforms include flexible use, competitive bidding, spectrum repackaging, and dynamic sharing. Without these reforms, our trillion-dollar wireless economy and the millions of jobs it powers would not be possible.

As the Committee has improved outcomes for commercial spectrum, the same can likely be done for the government. Today federal spectrum is managed by NTIA and IRAC, the latter founded in 1922. The management of federal spectrum is essentially unchanged for 98 years, and it’s time to review it.

In the 1920s, free market, common law property rights were alive and well for radio spectrum. The purpose of the 1927 Radio Act was to end free enterprise and enshrine bureaucratic control of the airwaves. The practical effect was to make spectrum allocation a political decision and to reward favored constituents.

By the time Nobel economist Ronald oase wrote his seminal articles on the FCC and IRAC, the US had some 40 years of administrative allocation. Coase laid the theoretical foundations for the market-based spectrum management. He described how the prevailing central planning of spectrum was wasteful and costly. He debunked the premise that government is needed to limit interference when this same function can be done through pricing.

Coase’s proposals were mocked in his day, but experience has proven him right. The FCC has held some 100 spectrum auctions and raised over $100 billion for the Treasury. Today there are millions of spectrum licenses, tens of thousands of licensees, and an ever-increasing number of uses. There is a robust secondary market. However, this optimization only occurs on one-third of the relevant spectrum. The rights to the other two-thirds are held by the government. And this spectrum has a limited set of users and uses.

Spectrum is no different than other resource. It is subject to supply and demand. It can be packaged and priced like other goods and services. Moreover, there is no reason why federal agencies, which purchases inputs from the market, should not pay for their use of spectrum.  

The “First Best” realization of Coase’s recommendation is to liberalize the underlying resource—privatize the spectrum itself. This would entail sunsetting administrative allocation. Privatizing federal spectrum would be worth at least half a trillion dollars, maybe more, to the Treasury. Like the incentive auction, proceeds from the sale of federal spectrum could be returned to the respective agencies to fund equipment upgrades.

Spectrum conflicts within and between industries and federal agencies are ongoing. This will likely continue. Even though there is liberalized allocation within certain spectrum bands, the overall designation of these bands is still a bureaucratic decision.

 “Second Best” would be the introduction of a pricing system for federal spectrum. This can be done without dismantling the regulatory authorities. For example, the FCC licenses commercial spectrum. NTIA could do this for federal spectrum.

While pricing is ideal, it may not be politically tenable. But there are ways to bring greater discipline and accountability. Chairman Wicker and Senators Schatz, Moran and Udall have this in mind with its SPECTRUM Now Act. This bill addresses the critical lack of mid-band spectrum for 5G with a feasibility study of federal efficiency, relocation, and sharing with commercial users.

Senator Wicker’s hearing on broadband during the pandemic highlighted that networks performed admirably under crisis. But these networks are needed even more. 100 million schoolchildren face the prospect of distance learning this fall, and yet, policy struggles to allow the purchase the mid-band spectrum rights to serve these children with 5G, the quickest, most cost-effective way to bring connectivity to all. It’s a valid policy question whether the federal government requires 2500 MHz of beachfront spectrum for radar and navigation when critical civilian needs at stake.

Indeed, many federal agencies have been reluctant to share, much less relinquish, their little used frequencies. They have resisted Congress’ reasonable requests for transparency. Maybe market actors will have more success. Seven firms have signed up as Spectrum Access System administrators for the 3.5 GHz proceeding. One or more of these firms should make a public dashboard so that we can see for ourselves how little federal spectrum is used. Federal agencies should be graded on their spectrum efficiency, and these report cards should be part of the appropriations and agency authorization process.

This should be helped by the Spectrum IT Modernization Act sponsored by Chairman Wicker and Senators Cantwell, Inhofe, and Reed. This bill allows for the modernizing of the IT infrastructure for federal spectrum.

Originally published in Forbes.