Placing a Dollar Value on Federal Spectrum Remains an Elusive Goal

Speaking during a Technology Policy Institute webinar, part of a series about the future of spectrum regulation, Paul LaFontaine, an FCC economist, said he would love to see market mechanisms for evaluating government-held spectrum. “I’m really doubtful that that’s going to happen, at least in the foreseeable future.” Economists at the FCC have considered the question for years, he said. Reallocating spectrum will always be “a very difficult thing to do” and will “inherently be a political process,” LaFontaine added.

FCC economists “are obviously very biased toward market-based solutions, and we have not come up with anything that we think would be workable,” he said.

It's unknown whether frequencies are allocated efficiently “because we don’t have market tests for the margin between government-owned spectrum” and spectrum in the private sector, said Coleman Bazelon, principal at the Brattle Group. The general feeling is that the federal government has more spectrum than it needs, “but I don’t think we have an objective test that tells us when and where … reallocations should take place,” he said.

There’s no legal mechanism under which federal agencies can benefit from “the effort it would take to give up spectrum,” Bazelon added. The main hope is for a “barter system,” where agencies could yield spectrum rights in exchange for better equipment and services from the private sector, “but that’s a pretty inefficient and ad hoc way” of addressing reallocation.

Jennifer Warren, Lockheed Martin's vice president-regulatory affairs and public policy, said federal agencies lack economic incentives to hold spectrum, instead they have “mission incentives.” The wireless industry is holding spectrum it’s yet to deploy, “at least based on Verizon’s and T-Mobile’s CEOs' statements over the last six months." Agencies are deploying “more and more modern technologies” with radars that require “wider and wider bandwidths.”

Federal agencies “have every incentive to figure out how to squeeze more out of what they already have,” Warren said. They don’t believe they will gain access to additional bands, and history has proven them right, she said.

LaFontaine agreed with Warren that it’s difficult to put a value on things like national defense. “The better question” is whether agencies are using “an optimal mix of spectrum,” he said. Under the current framework, if an agency gives up a band, “it’s gone,” and “there’s effectively no way to claw that back."

DOD spectrum isn’t the only concern, said Lawrence White, an economics professor at New York University’s Stern School of Business. “There are other federal agencies that have nontrivial amounts of spectrum that they may or may not be using efficiently,” White said. State and local governments also have access to spectrum that may not be optimally used, he added.

Little spectrum is available comparable to the citizens broadband radio service band, which would allow a similar sharing regime, LaFontaine said. The lower 3 GHz, a focus of carriers and the administration, is “a much more complicated band, much more heavily encumbered with federal systems." Sharing with the high-power mobile operations of carriers would be difficult in most bands, LaFontaine said, calling carriers “noisy neighbors.”

Warren noted that submissions were due at DOD on Feb. 28 for proposals on dynamic spectrum sharing. “I am certain they got numerous submissions, and it’ll be very interesting to see what’s being proposed.” The technology for sharing between federal operations and high-power mobile use is unlikely to be available anytime soon, she said.