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CONTACT: Amy Smorodin
March 14, 2006
(202) 289-8928
Property Rights Would Lead to Efficient Spectrum Use
DACA Spectrum Working Group Co-Chair
Testifies On Capitol Hill

WASHINGTON D.C. - The current scheme of "command and control" spectrum regulation and licensing has led to inefficiency in spectrum use, impeding competition and innovation, stated Lawrence J. White in written testimony presented today at a Senate Commerce, Science and Transportation Committee hearing, "Wireless Issues/Spectrum Reform." White explained that policies should be altered to introduce property rights and market forces, or "propertization," in spectrum management, which would lead to increased efficiency of use and benefits for the U.S. economy.

White, Professor of Economics at the Stern School of Business, New York University, is Co-Chair of the Digital Age Communications Act (DACA) Working Group on New Spectrum Policy with PFF Senior Fellow and Vice President for Research Tom Lenard. White's testimony is based on the Working Group's Release 1.0 of its report on spectrum reform, released last week by The Progress & Freedom Foundation. In his testimony, White identified three potential ways spectrum management could be approached: the current command-and-control regulation and licensing, a commons or unlicensed spectrum approach, and "propertization" of the spectrum. White, mirroring conclusions made in the working group report, explained that only management based upon market forces would remove governmental regulatory presence and lead to the most efficient use of spectrum.

White presented the five options outlined in the Working Group report to move from the current system of spectrum management to one based on property rights, and noted the Working Group endorsed three:

  • Auction spectrum with rights to clear incumbents with compensation. Clearing would entail paying either relocation costs or, if the value of the incumbent's operations is less than relocation costs, paying the incumbent to cease operations.
  • Auction spectrum without rights to clear incumbents from the auction spectrum. Buyers of the spectrum would be required to negotiate with incumbents to change the configuration of the latter's rights.
  • A "Big Bang" auction with unassigned and encumbered spectrum. Incumbents would be encouraged to bring their spectrum voluntarily to auction. Incumbents could either be permitted to repurchase their existing rights at no net cost to themselves, or they could be given transferable vouchers to compensate them for mandatory clearing.

White also summarized measures contained in the report that would encourage efficient use of government-held spectrum. These include: public disclosure and Congressional monitoring of government spectrum usage; requiring that the government purchase additional spectrum rights as needed at market prices; and encouraging governments to purchase complete communications services in place of grants of spectrum.

Lawrence White's complete written testimony and the DACA Working Group report on spectrum reform are available on the PFF website.

The Digital Age Communication Act (DACA) Project was launched in early 2005 with the intent of providing guidance for regulators and legislators on how to address regulatory issues in an era of competing digital services and platforms. DACA consists of dozens of individuals, including PFF fellows, scholars at other think tanks and universities, and public policy officials from the last five presidential administrations. There are five working groups -- Regulatory Framework, Federal/State Framework, Universal Service, Spectrum Policy, and Institutional Reform.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation