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Reason Foundation

Spectrum Privatization

Removing the Barriers to Telecommunications Competition

David Colton
July 1, 1996

Executive Summary

Spectrum management must be modernized for the 21st century. This paper offers a detailed plan for aligning spectrum management with the bedrock principle of the digital eraCa bit of information is the same, regardless which spectrum frequency is used for transmission. The cornerstone of the plan is the privatization technique used by over 100 nations world-wide to return nationalized assets to the market. An interdepartmental Steering Committee (FCC, NTIA, OMB and Treasury) should be charged to oversee the 10 year de-zoning and mass transfer of spectrum to the private market. The plan is technologically neutral: it simply creates a level playing field, permitting the market to determine what technologies are available.

In Phase One, spectrum will be "de-zoned." Service classifications, block allocation and technical use restrictions will be phased out in an orderly and sequenced process. Spectrum holders will be freed to use the spectrum that best serves their customers, business plan, and shareholders. De-zoned spectrum will be coordinated and managed by expanded use of existing private frequency coordinators (PFCs).

In Phase Two, the Steering Committee will return the now de-zoned spectrum to the market and public through mass privatization. The goal is to remove the government as the arbiter of its use. Based on lessons from New Zealand's spectrum privatization experience, the plan goes beyond proposals for government to permit Aflexible use. Specifically, bandwidth not reserved for public safety, national defense, emergency services and limited civilian governmental use will be made available to the market in a sequenced Aroll out. Title to spectrum will be granted in fee simple to applicants. Spectrum auctioned since 1994 will be quick-deeded and transferred to the bidder. Should competing applications be tendered for a portion of de-zoned spectrum, auctions will be held.

Finally, in Phase Three, a property-based spectrum management system for the de-zoned and privatized spectrum will be created. Owners will obtain the ability to sell or transfer spectrum as with any other property right, subject to a title filing with a newly created spectrum registry. Title holders to spectrum will be subject to the current propertybased common law systems, including the right to quiet enjoyment, protection from trespass/interference, etc. Coordination and initial resolution of interference issues should be resolvedCas they are currentlyCat first instance through the PFCs and arbitration. Should litigation be necessary, the PFCs will be able to assist the courts as the ultimate arbiters of the property rights.

Mass privatization of all the nation's spectrum could generate long-term revenues to the federal government of between $100 billion and $300 billion, which could be applied to reducing the national debt. Such revenue is at best a secondary benefit from spectrum reform. The long-term benefits from job creation and new products and services will eclipse these sums.


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