Acquiring Real Estate in the Electromagnetic Spectrum

Designed by Crystal Nattoo

“What is the role of the government in regulating the frequency spectrum?”

In the early hours of April 15, 1912 a distress signal rang out across the Atlantic. This signal was sent from a radio operator aboard the RMS Titanic shortly after the ship struck an iceberg off the coast of Greenland. That radio communication was directly responsible for saving hundreds of lives. The RMS Carpathia, 60 miles away, was able to respond to the Titanic’s distress signal and rescue 700 passengers.  However, other ships nearby never received the message. 

At the time, no rules existed to prioritize emergency traffic on the airwaves. Amateur radio broadcasters clogged the airwaves, preventing the distress signal from being relayed quickly. There was no protocol to observe silence for distress calls, nor was there any standardization of what frequencies to transmit on or monitor. In response to the tragedy of the Titanic, President Taft signed the Radio Act of 1912, a bill which required radio stations to obtain government licenses that would allow them to broadcast at specific frequencies. This development marked the beginning of the regulation of US airwaves, a change that would ultimately standardize how Americans communicate and how information is shared. 

Federal regulation of the radio spectrum has fundamentally shaped the development of all technologies that use those airwaves such as radio, broadcast television, satellite communications, cellular phones and wireless internet. In recent years, demand for spectrum has erupted for mobile data and 5G applications, bringing new debate to the question: how does government control of the frequency marketplace affect innovation?

To approach this question, we must first understand the properties of the commodity at the center of this marketplace: the airwave. An airwave is a specific bandwidth, or range, of radio frequencies, usually constrained to a given geographic region (since radio signals diminish over long distances). A radio wave at a particular frequency can be modulated to encode and transmit information, producing a signal. Owning the license to an airwave gives you the exclusive right to transmit radio waves in that frequency band, hence allowing you to communicate information without interference. Radio frequency is only a small portion of the electromagnetic spectrum, making it a limited and highly contested commodity. You can imagine the communication range of the electromagnetic spectrum as a larger version of the radio dial you would find in a car. Rather than tuning from 87.7 FM to 107.9 FM, the dial now ranges from 3Hz to 300GHz. The operating principle is the same however. On the radio, multiple broadcasters share public airwaves by operating on adjacent frequencies, with a specific channel licensed to them. On the entire radio spectrum, FM radio competes with satellite communications and cellular companies for its share of the frequency spectrum. Parts of the radio spectrum are also reserved for example for weather satellites, space research and military use. 

Looking at the US frequency allocation chart below, we can see that the radio spectrum is crowded with many players. To better organize this web of competitors, the Federal Communications Commission (FCC) was formed in 1934 with the responsibility of allocating radio frequencies for non-federal use. In the decades since the federal agency’s inception frequency allocation has provided an instructive example of the side effects of government regulation on a public good.

Photo Credit: U.S. Department of Commerce

Frequency regulation under the FCC has been criticized for restricting broadcasted content, limiting development of new technologies and enabling the formations of monopolies.  Historically, the radio spectrum has been controlled by broadcast TV monopolies. In the early days of broadcasting, large commercial stations wanted to limit new entries into the spectrum market. The National Association of Broadcasters (NAB) soon became a well-funded, influential lobbying group on Capitol Hill. The NAB held the position that limiting the number of companies that owned parts of the frequency spectrum was necessary for efficient service. That pitch was very convincing for the majority of the 20th century, during which the broadcasting space was dominated by at most two or three companies. In the 1950s, only three companies controlled broadcast television: ABC, CBS and NBC. Community antenna television, better known as cable TV, was a relatively new product at this time and not widely available. Cable TV is not delivered over radio spectrum and hence, during its early years, the FCC determined there was no need to regulate it. 

However, as cable TV began to expand, the broadcast TV triopoly successfully lobbied for a series of rulings that expanded the FCC’s authority to regulate and preempt the expansion of cable TV. Regulators argued this was in the public’s interest; cable TV would siphon viewership from and potentially end broadcast television. To that end, broadcasters argued that cable TV would eliminate the only reliable information source for many Americans. The irony of this argument is, in the early 1960s, these three broadcast companies were delivering only 15 minutes of news programming per day.1 Deregulation of cable in later years would eventually lead to 24/7 news and public affairs networks and greatly enhance the cultural and political diversity of programming. Ultimately, denying the entrance of competitors shorts American consumers, leaving them with fewer choices and higher costs.

Beyond harming consumers, monopolization of the radio spectrum has also eroded free speech. By controlling access to public airwaves, the FCC has power analogous to holding the ability to regulate the use of a printing press. In the past, government actors have worked to exert this power, practicing extensive discretion on who got to broadcast and what was said. Broadcasted content has been restrained in various ways by laws argued as necessary by regulators to prevent the squandering of a precious resource. One of the most famous examples of this is the Fairness Doctrine, a policy first implemented in 1949. Until its repeal in 1987, the Fairness Doctrine dictated that broadcasters devote some airtime to discussing controversial topics of public interest as well as to present contrasting views on those topics. In today’s increasingly partisan landscape, such a policy seems advisable. However, the Fairness Doctrine did not include any standard rules on how, when, or to what degree contrasting viewpoints should be presented. Rather, the Fairness Doctrine stipulated that TV programming had to be honest and balanced.2 Considering that no similar rules exist for any other form of media, the Fairness Doctrine, rather than providing an equal platform for all voices, ultimately provided a pathway to overregulate the medium of television. In recent decades, much of these policies have been repealed, but it is still argued that a free press is not possible when government regulation of the medium exists.

Perhaps the biggest challenge to government regulation of the frequency spectrum is that imperfect government regulation limits scientific innovation. Historically, spectrum licenses have only been granted for specific uses, allowing no flexibility for companies to adapt technologies or incentives to innovate, as unproven technologies are unlikely to receive an allocation license. Allocation and attempting re-allocation is a bureaucratic and costly process; the system tends to favor incumbents and larger, better resourced corporations and block out entrepreneurial technologies. A classic example is frequency modulated (FM) radio. Edwin Howard Armstrong invented FM radio in 1933. FM radio had superior audio quality compared to existing AM radio at the time. However, it was not until 1939 that FM radio was allocated spectrum by the FCC, and the frequencies were much lower than what is commonly used today: 40-52 MHz. In the mid-1940s, broadcast television companies wanted these FM frequencies and successfully lobbied for this portion of the spectrum. FM radio was relocated to the more familiar 88-108 MHz that we use today. The decision made existing FM radio transmitters and receivers obsolete, proving to be a major setback for the adoption of FM radio. It would not be until 1960 that FM radio, a technology that was known to be technically superior, would be permitted to expand and become available to the American public.3 4 More recently, mobile phone operator Lightsquared, launched in 2010 with the goal of building a state of the art nationwide LTE network, originally intended to use airwaves set aside for satellite phone service that were hosting little traffic and had relatively little economic value. Opponents quickly emerged, however, alleging interference in neighboring GPS bands, and, by 2012, the FCC revoked Lightsquared’s license. Lightsquared went bankrupt and the American consumer lost a competitive network option.5 

In recent years, the FCC has moved to deregulate the frequency allocation process. In the 1990s, the FCC hosted its first frequency auctions. Auctioning parts of the radio spectrum shifts frequency allocation from a government-regulated process to a market regulated process, reducing the power of incumbent companies to monopolize. Spectrum auctions in combination with more flexible licensing (i.e. allowing adaptation of technologies being used) allows for rapid restructuring of frequency real estate, a trend that is largely responsible for the explosion and relatively speedy rise to dominance of cell phones. However, for this model to be successful, there must be real estate available to auction. Nowhere has the issue of available spectrum been more focused than in the recent development of 5G technologies.

5th Generation (5G) cellular technology promises faster network speeds, potentially 100 times faster than current network speeds, and lower latency (delay). This type of connection has the potential to support an explosion of “Internet of Things” devices, like smart home appliances or wearable health monitors. It also could facilitate technologies such as autonomous vehicles and remote surgical equipment. The value of 5G stems from its ability to use a wider spectrum and higher frequencies. Access to more frequency bands allows devices to transmit more information at once. Mid-band, or “Goldilocks,” frequencies between 1 and 6 GHz are some of the most coveted airwaves for 5G development, balancing the ability of lower frequencies to cover greater distances and the ability of higher frequencies to carry more information. 

Elsewhere in the world, developers have focused on mid-band frequencies to build their 5G infrastructure. However, in the US, the majority of this spectrum is already allocated for federal or military use or licensed to legacy technologies. For example, the stretch of frequency from 3.7 – 4.2 GHz, known as the C-band, had been licensed to large dish satellite television broadcasters. As traffic, and subsequently, economic value, through these applications have declined, there has been a major push to relocate these broadcast companies to free up this portion of the spectrum for 5G infrastructure.6 In the current allocation system, this relocation process is non-trivial. Steps first have to be taken to incentivize these broadcast companies to relinquish their frequency rights. Arrangements must be made to package new frequency bands for the broadcast company to relocate. The then newly available spectrum must be repackaged into new bands suitable for 5G applications and then auctioned to wireless companies.7 This regulatory procedure, currently playing out in the C-Band, has been a multiple year process, a process which means significant delays to bringing transformative technologies to the American public.

The frequency spectrum is a complicated real estate market exacerbated by over a century of expanding regulation. A more successful path forward can be found in adopting policies that shift authority over the spectrum away from the government and to the technologies that wish to utilize them. Moving towards spectrum auctions was an important first step in this process but additional changes will need to be made to make this system efficient. All new and existing wireless licenses should be made flexible and challenges to flexible licenses should only be considered in cases of interference or border disputes. Extensive re-evaluation of frequency bands earmarked for federal use should be considered. Overlay licenses, which allow legacy technologies to stay on the allocated spectrum as tenants while new companies are able to assume property rights to those frequencies, should be expanded. These arrangements encourage new licensees looking to increase the value of their acquired spectrum to facilitate transitions rather than waiting on government intervention. Incentive auctions where incumbent technologies and new licensees work directly together to propose repackaging and relocation of frequency bands should also be utilized.8 Each of these strategies work to both free up spectrum for reallocation and speed up the reallocation process, allowing spectrum reassignment to innovative technologies on an appropriate timeline.

We can revisit the question initially posed: what is the role of the government in regulating the frequency spectrum? The story of the RMS Titanic paints one viewpoint: a centralized system is needed to control how the radio spectrum is used. Successful use of the frequency spectrum is not possible otherwise. The central authority of the federal government makes it well suited for this role. However, as has been shown, this authority has been used to act beyond simply standardizing our airwaves. This authority is often politicized and misused, allowing monopolies to form and persist, harming consumers, free speech, and innovation.  

The federal government and government agencies still have a role to play in regulating the spectrum market. Ultimately, the FCC can and should serve as an arbitrator between parties in the frequency real estate market. They should not however continue as a central planner of this real estate. That power can be more effective if transitioned to the parties which occupy the real estate. Much like the Radio Act of 1912, the policy decisions we make today will revolutionize the development of new wireless technologies for the next century.

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