Spectrum Tragedies

Abstract

Recent research into "common interest tragedies" helps clarify the costs and benefits of radio spectrum regulation. In traditional allocations involving licensed spectrum, regulators truncate licensee rights, which, while interdependent, are widely dispersed, often leading to a tragedy of the anticommons. With allocations for unlicensed spectrum, regulators impose open access rules, often leading to a tragedy of the commons. Both forms of market failure trigger anticipations that undercut investment incentives, deterring socially useful services-a common interest tragedy, redux. In contrast, liberalization of property rights in wireless telephony appears to avoid costly tragedies. Decentralized market incentives succeeded in bringing over $150 billion in financial capital to provide services over spectrum shared by more than 170 million subscribers; annual consumer surplus is conservatively estimated to exceed $80 billion. Marginal valuations appear to far exceed the social value of spectrum use under alternative forms of organization. This empirical reality is not well integrated into regulatory decision-making, however, as administrative rulemakings fail to properly consider the efficiency implications of common interest tragedies, even as stated rationales for spectrum rules reflect such tragedies