Overcoming Overcoming Agoraphobia: Agoraphobia: Building the Building the

Commons of the Commons of the Digitally Digitally

Networked Networked EnvironmentEnvironmentYochai Benkler, 1997Yochai Benkler, 1997

SummarySummary Spectrum is a not a “resource”Spectrum is a not a “resource”

““Spectrum management” is equipment managementSpectrum management” is equipment management ““Spectrum allocation” is one particular methodSpectrum allocation” is one particular method

Current system based on outdated ideasCurrent system based on outdated ideas ““Broadcast” - one-to-many downstream linkBroadcast” - one-to-many downstream link Private property analogyPrivate property analogy

UL spectrum allows more flexibility and UL spectrum allows more flexibility and innovationinnovation

No evidence that licensing is more efficientNo evidence that licensing is more efficient UL spectrum will not arise from a licensed UL spectrum will not arise from a licensed

marketmarket FCC must take steps to prevent current system FCC must take steps to prevent current system

from becoming too entrenchedfrom becoming too entrenched

Paper OutlinePaper Outline

History of radio industryHistory of radio industry Critique of licensingCritique of licensing Benefits of unlicensed spectrumBenefits of unlicensed spectrum U-NII Band (5.15-5.35 and 5.725-U-NII Band (5.15-5.35 and 5.725-

5.825 GHz)5.825 GHz) Licensed vs. UnlicensedLicensed vs. Unlicensed

Neoclassical economics viewpointNeoclassical economics viewpoint Industrial economics viewpointIndustrial economics viewpoint Societal valuesSocietal values

Suggestions for FCCSuggestions for FCC

History of spectrum History of spectrum allocationallocation

““Breakdown of the Law”Breakdown of the Law” 1926 – Hoover declares he will not regulate radio1926 – Hoover declares he will not regulate radio Chaos ensuesChaos ensues Radio Act of 1927Radio Act of 1927

Real story:Real story: Hoover uses radio regulation as his public forumHoover uses radio regulation as his public forum 1926 is just an excuse1926 is just an excuse ““Hoover consistently reserved clear channels and Hoover consistently reserved clear channels and

high power licenses to commercial high power licenses to commercial broadcasters.” (p.21)broadcasters.” (p.21)

Regulatory system fashioned around needs Regulatory system fashioned around needs of broadcast industryof broadcast industry

Critique of licensingCritique of licensing

LicensingLicensing ““Interference makes spectrum an economic good” Interference makes spectrum an economic good”

(p.25)(p.25) Current question is how to define property rightsCurrent question is how to define property rights However, FCC still makes the important allocation However, FCC still makes the important allocation

decisionsdecisions FCC wants to move from licensing to private FCC wants to move from licensing to private

property (p.31)property (p.31) ““Both approaches assume that to avoid Both approaches assume that to avoid

interference only one person may transmit in interference only one person may transmit in a given frequency/time/space dimension.” a given frequency/time/space dimension.” (p.32)(p.32)

New AssumptionsNew Assumptions

““these [new] technologies…shrink the unit these [new] technologies…shrink the unit size of the most efficient size of the most efficient frequency/time/space dimension that a frequency/time/space dimension that a user must occupy exclusively” (p.35)user must occupy exclusively” (p.35)

Units are small enough to make Units are small enough to make transaction costs of negotiating allocation transaction costs of negotiating allocation of exclusive property rights prohibitiveof exclusive property rights prohibitive

Processing power and network Processing power and network management (rather than transmit power) management (rather than transmit power) can overcome interferencecan overcome interference

Business ModelsBusiness Models

““The second type of conflict is the conflict between two The second type of conflict is the conflict between two business models: business models: a model based on owned a model based on owned infrastructure whose owners capture the value of their infrastructure whose owners capture the value of their investment through service fees over timeinvestment through service fees over time, on the one , on the one hand, and hand, and a system based on end-user equipment a system based on end-user equipment ownershipownership, on the other hand. This is the conflict made , on the other hand. This is the conflict made clear by the objections of AT&T, PacTel, and the point-clear by the objections of AT&T, PacTel, and the point-to-point microwave link licensees. The NSF field to-point microwave link licensees. The NSF field studies indicate that the latter model may be more cost studies indicate that the latter model may be more cost effective. effective. Incumbents who have invested large sums of Incumbents who have invested large sums of money in infrastructure, hoping to recoup their money in infrastructure, hoping to recoup their investment through service fees over time, have much investment through service fees over time, have much to fearto fear from the development of a competing business from the development of a competing business model based on relatively high-priced end-user owned model based on relatively high-priced end-user owned equipment and free infrastructure.” (p.51)equipment and free infrastructure.” (p.51)

Neoclassical economic Neoclassical economic analysisanalysis

““whether there are systematic whether there are systematic reasons…to think that decisions reasons…to think that decisions about wireless transmissions make about wireless transmissions make by a single identifiable entity…will by a single identifiable entity…will have a clear advantage in have a clear advantage in maximizing the value of maximizing the value of communications to users of wireless communications to users of wireless equipmentequipment.” (p.54).” (p.54)

Decisional ElementsDecisional Elements

Physical LayerPhysical Layer Content Content LayerLayer

PrimarPrimary y

DecisioDecisionn

Definition of Definition of frequency/power/time frequency/power/time

(which frequencies (which frequencies available)available)Definition of Definition of transmission technology transmission technology and most basic protocol and most basic protocol requirements requirements (AM/FM/Digital vs. (AM/FM/Digital vs. Analog)Analog)

Medium; format Medium; format

(1-to-1 voice; (1-to-1 voice; one-to-many one-to-many video)video)

SecondSecondary ary

DecisioDecisionn

Standards and Standards and protocols (NTSC; AM protocols (NTSC; AM stereo; HDTV; CDMA)stereo; HDTV; CDMA)

Specific content Specific content transmittedtransmitted

(Seinfeld; “Hi (Seinfeld; “Hi mom, it’s me”)mom, it’s me”)

Decision MakersDecision MakersLicensing/ Licensing/ AuctioningAuctioning

PrivatizationPrivatization UnlicensedUnlicensed

Primary Primary Physical (2.4 Physical (2.4 GHz)GHz)

GovernmenGovernmentt

Initially govt, Initially govt, then owner, then owner, through through reconstitution reconstitution of rightsof rights

Government as to Government as to power; Equipment power; Equipment manufacturers manufacturers through protocolsthrough protocols

Secondary Secondary Physical Physical (NTSC/802.11(NTSC/802.11b)b)

Licensees/ Licensees/ Equipment Equipment ManufacturManufacturers/ ers/ GovernmenGovernmentt

Owners/ Owners/ Equipment Equipment ManufacturerManufacturers/ s/ GovernmentGovernment

Equipment Equipment ManufacturersManufacturers

Primary Primary Content Content (TV/mp3’s)(TV/mp3’s)

GovernmenGovernment/ Licenseest/ Licensees

OwnersOwners End usersEnd users

Secondary Secondary Content Content (“Seinfeld”/ (“Seinfeld”/ “Pianoman”)“Pianoman”)

Licensees; Licensees; can can delegate to delegate to usersusers

Owners; can Owners; can delegate to delegate to usersusers

End usersEnd users

Efficiency of Spectrum Efficiency of Spectrum UseUse

PrivatizationPrivatization

(Spectrum Owners)(Spectrum Owners)UnlicensedUnlicensed

(Equipment (Equipment Manufacturers)Manufacturers)

Want to Want to MaximizeMaximize

Internalizable value of Internalizable value of spectrum usespectrum use

Value of Value of communications communications their equipment their equipment enablesenables

InefficienInefficienciescies

Internalizable value Internalizable value may not reflect value may not reflect value to end usersto end usersCosts of collecting Costs of collecting informationinformationCosts of switching Costs of switching usesuses

Effort required Effort required to develop to develop standards/ standards/ protocolsprotocolsInefficient Inefficient standardsstandardsCosts of Costs of increasing increasing equipment equipment efficiencyefficiency

Content DecisionsContent DecisionsPrivatizationPrivatization

(Spectrum Owners)(Spectrum Owners)UnlicensedUnlicensed

(End Users)(End Users)

Choices Choices made on made on a…a…

Channel-by-channel Channel-by-channel basisbasis

Transmission-by-Transmission-by-transmission transmission basisbasis

ContentContent Fewer usersFewer usersHigher resolution Higher resolution (p.64)(p.64)

Optimize service to Optimize service to increase number of increase number of paying userspaying users““owned transmission owned transmission rights will tend to rights will tend to focus on higher quality focus on higher quality provided for a provided for a narrower range of narrower range of uses” (p.57)uses” (p.57)

More usersMore usersMore flexible More flexible (p.65)(p.65)

Allow use most Allow use most valuable to end valuable to end user at that user at that momentmoment

Micro-economic objections:Micro-economic objections:Tragedy of the CommonsTragedy of the Commons

Overused (and undermaintained)Overused (and undermaintained) ““Overuse…consists of that device using Overuse…consists of that device using

for a given transmission more spectrum for a given transmission more spectrum than necessary to transmit the than necessary to transmit the information it has to transmit” (p.71)information it has to transmit” (p.71)

Therefore, it is in everyone’s best Therefore, it is in everyone’s best interests to create a protocolinterests to create a protocol

Prevented with power limits and Prevented with power limits and transmission protocolstransmission protocols

Question: What about congestion?Question: What about congestion?

Micro-economic objections:Micro-economic objections:UL operations will emerge from an UL operations will emerge from an

efficient marketefficient market Collective action problemsCollective action problems

FCC must break spectrum into small unitsFCC must break spectrum into small units Hard to amass a large block of contiguous Hard to amass a large block of contiguous

spectrumspectrum Difficulty leads to monopolyDifficulty leads to monopoly

Expensive to develop new equipment for a Expensive to develop new equipment for a competitor’s bandcompetitor’s band

Transaction costsTransaction costs Collecting informationCollecting information No maintenance or development costsNo maintenance or development costs Payments reflect “compensation solely for the Payments reflect “compensation solely for the

effort of identifying the need for spectrum for effort of identifying the need for spectrum for unlicensed operations, collecting that spectrum, unlicensed operations, collecting that spectrum, and making it available for unlicensed use” (p.76)and making it available for unlicensed use” (p.76)

Institutional Economic Institutional Economic AnalysisAnalysis

Asymmetric vs. symmetric constraints on Asymmetric vs. symmetric constraints on spectrum usespectrum use

““The likely outcome of the asymmetry is The likely outcome of the asymmetry is therefore that [spectrum] users will attempt to therefore that [spectrum] users will attempt to shift the initial costs of articulating the menu of shift the initial costs of articulating the menu of potential uses to of wireless communications to potential uses to of wireless communications to the owners of transmission rights, and will limit the owners of transmission rights, and will limit their expenditures to choosing from the menu their expenditures to choosing from the menu of options defined by owners.” (p.78)of options defined by owners.” (p.78)

UL shifts costs of identifying highest valued use UL shifts costs of identifying highest valued use of spectrum from owners to end-users (p.78)of spectrum from owners to end-users (p.78)

Asymmetry ImplicationsAsymmetry Implications

““adopting a distributed model of adopting a distributed model of communications should allow better communications should allow better articulation of end user preferences and articulation of end user preferences and better communication of those preferences to better communication of those preferences to producers” (p.80)producers” (p.80)

““The closer the production of information The closer the production of information about an individual’s needs is pushed toward about an individual’s needs is pushed toward the individual, the more it will tend to reflect the individual, the more it will tend to reflect that individual’s actual then-perceived utility that individual’s actual then-perceived utility function.” (p.82)function.” (p.82)

Lock-in of Regulatory Lock-in of Regulatory ModelModel

Institutional frameworkInstitutional framework Network externalitiesNetwork externalities High setup costsHigh setup costs Significant learning effects (time and resources spent Significant learning effects (time and resources spent

optimizing behavior)optimizing behavior) Cultural centralityCultural centrality

Property rightsProperty rights Broadcast modelBroadcast model

Shift to HDTV may prevent shift to UL(?) (p.85)Shift to HDTV may prevent shift to UL(?) (p.85) ““relying on market mechanisms to identify when relying on market mechanisms to identify when

an existing institutional framework is less an existing institutional framework is less efficient than a feasible alternative is unlikely to efficient than a feasible alternative is unlikely to be an effective strategy.” (p.86)be an effective strategy.” (p.86)

Societal valuesSocietal values

Institutional choices regulating communications Institutional choices regulating communications technology affect information flow patternstechnology affect information flow patterns insistence on reading vernacular biblesinsistence on reading vernacular bibles

Information flow patternsInformation flow patterns Develop differently with licensed vs UL spectrumDevelop differently with licensed vs UL spectrum Affect public discourse, personal autonomy, and community Affect public discourse, personal autonomy, and community

self-regulationself-regulation ““Technology, institutional framework, and Technology, institutional framework, and

organizational structure are not independent of each organizational structure are not independent of each other” (p.95)other” (p.95)

““The capacity to communicate or not as one wills… The capacity to communicate or not as one wills… [is] germane to a person’s ability to effectuate his or [is] germane to a person’s ability to effectuate his or her life plan”(p.98)her life plan”(p.98)

““there are good reasons to endorse unlicensed there are good reasons to endorse unlicensed wireless operations… in light of our democratic wireless operations… in light of our democratic values” (p.88)values” (p.88)

ConclusionsConclusions

““stop talking about wireless communications stop talking about wireless communications regulation in terms of resource management” regulation in terms of resource management” (p.103)(p.103)

Primary focus of present regulatory debates is Primary focus of present regulatory debates is misplacedmisplaced

Common micro-economic objections are ill-Common micro-economic objections are ill-foundedfounded

UL spectrum allows more content decisions by UL spectrum allows more content decisions by end usersend users

UL spectrum corresponds with our society’s UL spectrum corresponds with our society’s valuesvalues

FCC RecommendationsFCC Recommendations

Reopen U-NII proceedingsReopen U-NII proceedings Slow process of spectrum auctioningSlow process of spectrum auctioning Be clear that there is no guarantee Be clear that there is no guarantee

of renewal on spectrum licensesof renewal on spectrum licenses

QuestionsQuestions Can you have true broadcast in an UL regime?Can you have true broadcast in an UL regime?

Who makes content decisions?Who makes content decisions? How do we deal with the potential congestion How do we deal with the potential congestion

issues?issues? What is the scaling law for 1 to “lots but not all”?What is the scaling law for 1 to “lots but not all”? Can the fact that many people want to receive Can the fact that many people want to receive

increase the power constraint?increase the power constraint? Does the receiver have a right to receive?Does the receiver have a right to receive?

““Inversion” of licensing market argumentInversion” of licensing market argument What about a spectrum auction by receivers?What about a spectrum auction by receivers? Why isn’t this discussed?Why isn’t this discussed?

““timeshares”timeshares” Ownership “by many” vs. “by few” vs. “no Ownership “by many” vs. “by few” vs. “no

ownership”ownership” Congestion?Congestion?