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    SPECTRUM MARKETS

    DySPAN Conference, Aachen, Germany

    1

    May 2011

    Randall Berry, Michael HonigDepartment of EECSNorthwestern University

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    Spectrum Management2

    Policy

    Economics

    CommunicationsEngineering

    May 2011Spectrum Markets Tutorial, DySPAN Conference

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    Spectrum Management3

    Policy

    Economics

    CommunicationsEngineering

    R. Berry, MLHEECS

    Rakesh VohraKellogg MEDS

    May 2011Spectrum Markets Tutorial, DySPAN Conference

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    High Profile Issue

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    Chicago TribuneApril 15, 2011

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    Why This Tutorial?

    Timely and relevant

    New policies are needed for spectrum allocation.

    Markets are natural policy candidates.

    Markets for spectrum pose uniquechallenges/questions.

    Definition of property rights, interference externalities

    Efficiency, incentives, wireless system design

    Interplay between economics and engineering issues

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    This Tutorial

    Is NOT about

    Large-scale spectrum auctions

    Related policy issues

    Analytical methodology

    IS about

    Fundamental technical and micro-economic issues andapproaches to defining spectrum rights, markets

    Impact on wireless systems and servicesMay 2011Spectrum Markets Tutorial, DySPAN Conference

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    Objectives

    Put spectrum markets into policy context (US-centric)

    Explain technical challenges and tradeoffs with

    defining spectrum property rights

    Illustrate with basic models

    Describe different types of market structures

    Contrast spectrum markets with other spectrumsharing models (commons/white space)

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    Background and Motivation (MH)

    Spectrum Market Design (RB)Market Organization (MH)

    Concluding Remarks (MH)

    Outline

    May 2011

    8

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    History

    Spectrum sharing modelsMotivation for spectrum markets

    Background and Motivation

    May 2011

    9

    Spectrum Markets Tutorial, DySPAN Conference

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    Limited Supply of Spectrum

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    good for cellular(300 MHz to 3 GHz)

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    Spectrum Crunch

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    Pe

    tabytespermon

    th

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    Regulation Prior to 1927: Open to All

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    Earliest uses of wireless forship-to-ship, ship-to-shorecommunications.

    Broadcast radio begins in 1921.

    Licenses issued by theDepartment of Commerce.

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    Two Landmark Cases

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    Hoover vs Intercity Radio, 1923United States vs Zenith Radio, 1926

    Herbert Hoover,US Sec. of Commerce

    Department of Commerce has noauthority to regulate licenses.

    Broadcasting boom:200 new stations appeared in < 6 months.

    Interference created chaotic radioenvironment.

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    Spectrum Property Rights: A False Start

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    Congress subsequently passed legislation

    prohibiting spectrum property rights

    Licenses issued for 90 days.

    Tribune vs Oak Leaves

    Broadcasting, 1926

    Property right allowed basedon homesteading

    Interfering stations could be fined.

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    Regulation since 1927: Command and Control

    Federal Radio Commission (FRC)

    established in 1927.

    Federal Communications Commission (FCC)

    established in 1934.

    Maintains authority to

    Grant / renew / deny licenses for spectrum use. Assign applications to particular frequencies.

    Police content and use

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    May 2011

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    Regulation since 1927: Command and Control

    Federal Radio Commission (FRC)

    established in 1927.

    Federal Communications Commission (FCC)

    established in 1934.

    Maintains authority to

    Grant / renew / deny licenses for spectrum use. Assign applications to particular frequencies.

    Police content and use

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    Wise old man approach to spectrum allocation

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    The Spectrum Paradox

    Spectrum is a scarce resource

    Spectrum is underutilized

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    May 2011

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    Spectrum is a Scarce Resource

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    beachfrontpropertyNearly $20B netted for 700 MHz auctions in 2008.

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    Spectrum is Underutilized

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    Spectrum measurements in New York City and Chicago conducted by Shared Spectrum Co.

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    Problems with Command and Control

    An economists critique

    Requires excessive information overhead Difficult to estimate value (utility) of a frequency

    assignment

    Encourages rent-seeking and facilitates entry barriers

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    An Economists Proposal

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    Ronald Coase,

    1991 Nobel Laureate in Economics

    Introduce spectrum property rights, sell to highestbidders, do not restrict use.

    R. Coase, The federal communications commission,

    J. Law and Economics, pp. 140, 1959.

    Coases Theorem: In the absence of transactioncosts, spectrum owners will trade rights so that theoutcome allocates spectrum to best use.

    Role of government should be to minimize transaction costs.

    May 2011

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    An Economists Proposal

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    Ronald Coase,

    1991 Nobel Laureate in Economics

    Introduce spectrum property rights, sell to highestbidders, do not restrict use.

    R. Coase, The federal communications commission,

    J. Law and Economics, pp. 140, 1959.

    Spectrum auctions finally introduced in the 1990s.Restrictions on use remain.

    Coases Theorem: In the absence of transactioncosts, spectrum owners will trade rights so that theoutcome allocates spectrum to best use.

    May 2011

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    Problems with Command and Control

    An economists critique:

    Requires excessive information overhead

    Difficult to estimate value (utility) of a frequency assignment

    Encourages rent-seeking and facilitates entry barriers

    An engineers critique:

    Demand for different applications varies over time andgeographic locations.

    Static assignments cannot exploit statistical multiplexing.

    New technologies can facilitate more efficient spectrumsharing.

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    May 2011

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    Engineering Approach to Spectrum Crunch

    Add intelligence to mobiledevices Frequency agility

    Wideband sensing

    Interference avoidance

    Adaptive quality of service(context aware)

    Enables spectrum scavengingCognitive Radio

    Mitola and Maguire (1999)

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    History

    Spectrum sharing models

    Motivation for spectrum markets

    Background and Motivation

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    Spectrum Markets Tutorial, DySPAN Conference

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    Spectrum Sharing Models

    Exclusive use

    Commons

    Hierarchical

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    May 2011

    30 Exclusive Use

    Spectrum Markets Tutorial, DySPAN Conference

    Spectrum owned by government

    Licensed to particular application,service provider

    Rigid use rules

    Spectrum is private property

    Applications, technical constraintsdecided by markets

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    May 2011

    31 Exclusive Use

    Liberal licenses Spectrum publicly owned, but licenses can be transferred,

    liberal use rules

    Secondary markets (2003)

    Spectrum Markets Tutorial, DySPAN Conference

    Spectrum owned by government

    Licensed to particular application,service provider

    Rigid use rules

    Spectrum is private property

    Applications, technical constraintsdecided by markets

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    May 2011

    32 Spectrum Commons

    State-regulated Spectrum owned by government

    Etiquette rules part of industry standard (802.11)

    Privately owned Owner sets rules, polices band Revenue from selling approved equipment

    Unlicensed Requires etiquette rules

    for sharing

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    May 2011

    33 Hierarchical

    State-regulated Spectrum owned by government Use rules for secondary users part of standard (802.22)

    Private contracts with spectrum scavengers Interference levels/payments set by mutual agreement

    Primary and secondary users

    Secondary users must notdisrupt primary users

    Relies on cognitive radio

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    May 2011

    34 Hierarchical: Technologies

    Underlay: low-power, spread spectrum forsecondary users

    Overlay: exploit white spaces left by primary users

    Primary and secondary users

    Secondary users must notdisrupt primary users

    Relies on cognitive radio

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    May 2011

    35 Hybrid Models

    Spectrum designated for exclusive use could beoperated as a commons and/or with secondaryusers.

    Underlay/overlay can be used to facilitate furthersharing.

    Spectrum scavenging can increase utilization.

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    Current Allocations Mix of:

    restricted use bands (e.g., broadcast TV) liberalized licenses (cellular)

    state-regulated commons (WiFi)

    Active trading of liberalized licenses amongcommercial service providers About 10 billion MHz-pops annually since 2003

    [Mayo & Wallsten `10]

    US Policy trends have favored assignments of unlicensedspectrum over liberalized licenses 955 MHz unlicensed vs 422 MHz licensed in the US (2008)

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    May 2011

    37 Why Unlicensed Spectrum?

    Pushed by DARPA

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    May 2011

    38 Why Unlicensed Spectrum?

    Pushed by DARPA Military needs distributed, dynamic methods for

    spectrum sharing across military units

    Also by Google, Apple Facilitates 3rd-party software applications

    Success of WiFi Interference not a major issue for local coverage,

    light loads

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    May 2011

    40 Engineering Issues

    Difficult to guarantee Quality of Service Limits applications

    Problems with secondary user model Sensing problematic, constraints compromises utility

    WiFi does not scale; inappropriate for wide-area

    data in urban settings

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    May 2011

    41 Economic Issues

    No means for reallocating spectrum to applicationswith higher utility

    e.g., wide-area data with coordinated interferencemanagement

    No direct means to move incumbent applications toanother band/wireline service

    e.g., wireless mics, broadcast TV

    Congestion effects may adversely affect competitionamong licensed service providers (more later)

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    May 2011

    42

    The Case for Liberal Licenses

    Provides incentives for service providers to invest in

    infrastructure for wide-area coverage, interferencemanagement [Hazlett, 2010]

    Over $20B annual network capital expenditures

    Virtually no infrastructure investments for unlicensedbands (U-PCS, 3.5 GHz WiMax band)

    Previous issues substantial opportunity costs for

    unlicensed spectrum Liberal licenses allow private commons, scavenging

    So far, not economically attractive

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    Are Secondary Markets Active?

    Service providers are not issuing short-term leases.

    Companies with spectrum (e.g., Boeing) are notreselling.

    But There are active markets for:

    transferring large blocks of spectrum among

    service providers, wholesale use of spectrum and infrastructure

    (e.g., Kindle)

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    Current State of Affairs

    Large parts of the useful spectrum remain underutilized.

    Restricted supply of spectrum with liberalized licenses.

    Cellular spectrum is extremely expensive.

    Service providers encouraged to build out national footprint.

    Fosters the development of expensive (spectrally efficient)systems.

    Unlicensed spectrum is increasing.

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    May 2011

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    Do We Need Spectrum Markets?48

    NU, April 2009

    A more fundamental question:

    Is spectrum scarce or abundant?

    Spectrum is abundantuse Commons Model

    Spectrum is scarce:

    Commons modeltragedy of the commons

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    Rate Calculation

    Extensive spectrum sharing

    Roughly 1 GHz between 150 MHzand 3 GHz

    Cellular Infrastructure

    System Assumptions

    No intra-cell interference

    (time-division multiplexing)

    Limited inter-cell interference.

    All users are active all the time.

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    May 2011

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    S S Ab d ?

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    Is Spectrum Scarce or Abundant?

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    2 Mbps per user seems like a lot, but recall the

    assumptions:

    1 GHz of shared bandwidth, no fading

    Infrastructure of access points (200 m radius)

    Optimized frequency reuse

    Spectrally efficient modulation

    Also, less expensive spectrum encourages lower-cost,spectrally inefficient systems.

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    C M k

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    Commons vs Market

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    May 2011

    Spectrum price ($/Hz)

    cost of interference < market transactions costs Use commons model

    Quantityofspectrum(Hz

    )Spectrum marketCommons

    supply

    demand

    p*

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    Asset Design

    Market Mechanisms

    Examples

    Market Design

    May 2011

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    Spectrum Markets Tutorial, DySPAN Conference

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    Interference

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    Interference

    A key issue for spectrum is defining propertyrights regarding interference.

    Some possibilities:

    Limits on received power

    Limits on transmitted power Cognitive approaches

    Flexible limits negotiated via bargaining.

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    or

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    Asset Specifications

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    Asset Specifications

    Spatial/temporal scales Frequency scale

    Power allocation

    Amount of sharing Interference management

    Device or

    Technology

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    Asset Design

    Market Mechanisms

    Examples

    Market Design

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    Pathological Example?

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    g p

    No.

    Myerson-Satterthwaite theorem shows that withprivate information, under very general conditions

    there is no way for two parties to trade that is

    efficientand individually rational.

    Suggests market design matters.

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    Example: 2nd Price Auction

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    Mechanism:

    Users submit bids.Mechanism allocates good to highest bidder

    Users pay 2nd highest bid.

    Users can be viewed as playing a non-cooperativegame.

    Use equilibrium concepts from game theory to studyperformance.

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    Outcome

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    2nd Price

    Auction

    $4

    $2

    Pays $2

    Pays noting

    A Little Terminology

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    2nd price auction is a direct revelation mechanism.

    Ask agents to bid their valuation

    A direct revelation mechanism is incentive

    compatible if truth-telling is weakly dominant.

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    Revelation Principle

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    Loosely, an equilibrium obtained under anymechanism can be obtained by an incentivecompatible, direct revelation mechanisms.

    In terms of characterizing possible outcomes, wlogwe can consider only direct revelation, incentivecompatible mechanisms.

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    Vickrey-Clarke-Groves (VCG)

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    VCG mechanisms generalize 2nd price auction toarbitrary goods.

    Incentive compatible, direct revelation mechanism with the

    efficient outcome.

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    Dynamic Interference Free Allocation9595

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    Let agents bid on every asset.

    Allocate an interference free set of assets with thehighest bids.

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    2

    1 3

    4

    5

    $3, $5, $2

    $1, $2, $1

    $1, $1, $1

    $7, $5, $3

    $2, $1, $2

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    VCG payments9797

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    Consider Agent 1?

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    9797

    2

    1 3

    4

    5

    $3, $5, $2

    $1, $2, $1

    $1, $1, $1

    $7, $5, $3

    $2, $1, $2

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    VCG Payments9999

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    Consider Agent 1

    Remove Agent 1s bids

    Re-calculate allocation

    Payment = (6-2) + (2-0) = $6

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    1 3

    4

    5

    $5, $2

    $2, $1

    $1, $1

    $5, $3

    $1, $2

    Dynamic Interference Free Allocation100

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    Overhead: linear in number of assets.

    Complexity: NP-hard!

    Need to find multiple maximum weight independent sets.

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    1 3

    4

    5

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    Approximations102

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    Consider a greedy approximation:

    Order assets by bids and assign from highest to lowest

    if possible.

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    2

    1 3

    4

    5

    $3, $5, $2

    $1, $2, $1

    $7, $5, $3

    $2, $1, $2

    2

    $1, $1, $1

    5

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    Truthful Approximation104

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    Issue with previous algorithm is that VCG paymentsare not suitable for approximate allocations.

    For some cases can get truthful approximations by

    changing payments charged to each agent.

    E.g. VERITAS (Zhou,Gandhi,Sur,Zheng 08)

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    Costs110

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    Costs:

    Remains NP-hard even if interference costs are

    constrained to be no greater than an arbitrarily smallfraction of the revenue.

    Reduction from graph partitioning.

    Constraining the topology?

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    Linear Relaxation112

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    Prop. If G is a line, the LP is totally unimodular. Also can solve efficiently if G is a ring.

    Some Simple Approximations

    A 1/((G) +2) approximation

    113

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    A 1/( (G) +2)-approximation: Solve LP.

    Divide zjji

    variables into (G) +1 sets {Wi} so that adjacentedges are in different sets. Let W0 be set of all xij variables.

    Find the set of variables that contribute the most to the objectiveof the LP.

    Round these to best integer solution & set other variables to anyconsistent values.

    A greedy approximation: give each asset j to agent with largest rij. gives (1+ 2) approx. where = max ratio of interference costs

    to rijs.

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    Secondary User Model115

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    Boundary region Zsupports only secondary usersthat must notinterfere with a different primary users in A or B.

    Agent igets revenue rij from assetj {A, B}

    Agent igets revenue ABi from cell boundary Z

    Agent igets additional revenue ZAi from owning both Zandneighboring asset A.

    Asset A Asset BBoun

    dary

    Z

    Spectrum Markets Tutorial, DySPAN Conference May 2011

    Secondary User Model116

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    In full network, create one

    boundary region for eachpair of assets.

    Secondary users occupyone or more boundaries.

    Allow users to be bothprimary or secondary.

    Again optimal allocation issolution to an integerprogram.

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    Another Alternative Model

    S f did t if h i t f d d

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    So far did not specify how interference reducedbetween assets.

    Suppose assets correspond to cells.

    Interference controlled by adapting the boundary ofcells.

    But this effects all neighbors.

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    Interference Region120

    L

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    L

    coverage radiusRiA [0, L/2]

    Agent can adjust coverage radius by changing the power.

    Value is proportional to area: riA = 4wiA RiA2 .

    Area reduced by interference footprint of neighbor.

    Cell A

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    Bit Pipe Model

    Wholesale contract with cellular provider

    129

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    p

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    Kindle

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    Bit Pipe Model: Properties

    Wide-area coverage, high mobility

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    Interference management

    Quality of Service guarantees

    Facilitates new wide-area wireless services

    Well-matched to lower frequency assignments

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Higher Frequencies

    Wide-area coverage becomes difficult

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    Interference management becomes easier

    Possibility for distributed, dynamic spectrum

    assignments

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    Owning vs Leasing135

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    Owned spectrum asset has

    unlimited time duration;traded as property (e.g., land).

    Leased spectrum asset has limited

    time duration;available through local spot market

    Spectrum Markets Tutorial, DySPAN Conference May 2011

    Owning vs Leasing136

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    Owned spectrum asset has

    unlimited time duration;traded as property (e.g., land).

    Leased spectrum asset has limited

    time duration;available through local spot market

    Owners can deploy services or rent / lease spectrum assets. Service providers need not be spectrum owners!

    Spectrum Markets Tutorial, DySPAN Conference May 2011

    Two-Tier Spectrum Market137

    location 3.5 GHz 3.7 GHz3.6 GHzband

    1

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    Owner A Owner B Owner A

    Owner A Owner B Owner A

    Owner A Owner C Owner C

    cell

    Owners A, B, C,

    Spectrum Broker

    Service providers(Acme Wireless)

    Service requests

    1

    5

    34

    2

    8

    67

    9

    10

    cell

    cell

    Spectrum Markets Tutorial, DySPAN Conference May 2011

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    Lower-Tier Spot Market: Properties139

    Spectrum Broker

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    Owners A, B, C,

    Spectrum Broker

    Service providers(Acme Wireless)

    Immediate access, rapid (automated) transactions

    Low transaction costs

    Facilitates local services No need to build out large footprint

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    Spectrum Contracts141

    Spectrum Broker

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    Owners A, B, C,

    p

    Service providers(Acme Wireless)

    Spectrum Markets Tutorial, DySPAN Conference May 2011

    Contracts can be arranged across: Frequency (spread spectrum, underlay)

    Locations (mesh networking)

    Time (time-of-day, futures, scavenging)

    Variable QoS guarantees (statistical)

    Integration142

    Spectrum Broker

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    Owners A, B, C,

    p

    Service providers(Acme Wireless)

    Spectrum Markets Tutorial, DySPAN Conference May 2011

    Broker may integrate allocation of Access points (property leases)

    Equipment

    Spectrum Lowers entry barriers for new service providers

    Commons versus Market143

    ) Spectrum marketCommons

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    Spectrum Markets Tutorial, DySPAN Conference

    Spectrum price ($/Hz)

    Commons/market boundary depends on associatedcosts.

    Quan

    tityofspectrum

    (Hz Spectrum marketCommons

    supply

    demand

    p*

    May 2011

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    Commons versus Market145

    z) Spectrum marketCommons

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    Spectrum Markets Tutorial, DySPAN Conference

    Spectrum price ($/Hz)Quan

    tityofspectrum

    (Hz Spectrum marketCommons

    supply

    demand

    p*

    cost of interference < market transactions costs Use commons model

    May 2011

    Commons versus Market146

    z) Spectrum marketCommons

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    Spectrum Markets Tutorial, DySPAN Conference

    Can we shift the boundary to the right with distributedinterference management schemes?

    Spectrum price ($/Hz)Quan

    tityofspectrum

    (Hz p

    supply

    demand

    p*

    May 2011

    Local Transactions147

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    Routers use the same channel, cause little interference

    Spectrum Markets Tutorial, DySPAN Conference May 2011

    Local Transactions148

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    Would cause excessive interference.

    Spectrum Markets Tutorial, DySPAN Conference May 2011

    Deterence Price149

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    $ $

    Pay new user to not setupaccess point in exchange forsharing capacity.

    Spectrum Markets Tutorial, DySPAN Conference May 2011

    Usage Price150

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    $ $

    Set up community ofaccess points, charge fee forsharing capacity (Fonera).

    Spectrum Markets Tutorial, DySPAN Conference May 2011

    Pricing and Efficiency151

    $ ??? $

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    Deployment game: each user decides whether or not to setupan access point given a fixed deterrence price from neighbors.

    Deterrence pricing can substantially increase efficiency,

    mitigate interference [Bae et al, DySPAN `09] .

    Spectrum Markets Tutorial, DySPAN Conference

    $

    Setup access point or share?

    ??? $

    May 2011

    Competition with a Commons152

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    Analysis of white space policy

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    TV White Space

    FCC recently announcedrules for use as unlicensed

    153

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    u es o use as u ce sed

    commons Devices must check data

    base to see if spectrum is

    available before using.

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    TV White Space

    FCC recently announcedrules for use as unlicensed

    154

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    commons Devices must check data

    base to see if spectrum is

    available before using.

    Advocates: lowers entry barriers for new services

    Detractors: tragedy of the commons

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Observations

    Lower frequencies than WiFi longer propagation

    better coverage

    155

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    more interference

    Incumbents will compete with services in TV whitespace.

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Observations

    Lower frequencies than WiFi longer propagation

    better coverage

    156

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    more interference

    Incumbents will compete with services in TV whitespace.

    How will additional white space affect service

    providers and consumers?

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Scenario157

    SP 3SP 1 SP 2

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    May 2011Spectrum Markets Tutorial, DySPAN Conference

    frequency

    Incumbent service providers (SPs) have exclusivelicensed bands.

    Scenario158

    SP 3SP 1 SP 2 commons

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    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Incumbent service providers (SPs) have exclusivelicensed bands.

    All incumbents and new entrants have access to commons(unlicensed band).

    How does this additional spectrum affect total welfare?

    Analyze using framework for competition in congestedmarkets [Acemoglu, Ozdaglar `07]

    frequency

    Model: Summary159

    SP 3SP 1 SP 2 commons

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    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Each SP competes for pool of customers byannouncing prices for licensed and unlicensed

    services.

    Customers choose SP based on

    Total price = Announced price + Congestion cost

    frequency

    Results: Summary160

    SP 3SP 1 SP 2 commons

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    May 2011Spectrum Markets Tutorial, DySPAN Conference

    The equilibrium price of commons spectrum is zero.(Total price = congestion cost)

    Adding unlicensed spectrum can decrease totalwelfare (consumer + SP revenue).

    Happens over a substantial range of unlicensed

    bandwidth.

    frequency

    Model: Revenue161

    SP 3SP 1 SP 2 commons

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    May 2011Spectrum Markets Tutorial, DySPAN Conference

    frequency

    Each SP i chooses prices to maximize revenue:

    i= p

    iq

    i+p

    i

    wqi

    w

    pi : price for licensed band

    piw : price for unlicensed band

    qi , qiw : quantity of customers served

    Model: Congestion162

    frequency

    SP 3SP 1 SP 2commons

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    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Customers in band i experience a congestion (latency)cost l(q

    i

    ), which is increasing convex.

    Customers in commons experience a congestion costlw(q

    w), where qw includes all unlicensed users.

    Total (delivered) price in band i:piw+ l(qi)

    frequency

    `(q3)`(q1) `(q2)`w(P

    i qwi )

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    Total Welfare: Monopoly SP164

    Demand curvePrice

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    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Quantity q(customers served)

    To

    talp

    rice

    *

    q*

    *maximizes revenue

    Total Welfare: Monopoly SP165

    Demand curvePrice

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    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Quantity q(customers served)

    To

    talp

    rice

    *

    q*

    `(q)

    `(q)

    *maximizes revenue

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    Total Welfare: Two SPs167

    Demand curvePrice

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    May 2011Spectrum Markets Tutorial, DySPAN Conference

    *maximizes revenue

    To

    talpr

    ice

    *

    P1*

    P2*

    q1* q2* Quantity q(customers served)

    consumersurplus

    `(q)

    SP 2s revenue

    Price of Unlicensed Spectrum

    In equilibrium announced price is zero.*

    Otherwise SP can increase revenue by lowering.

    168

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    Total price of unlicensed spectrum is congestion cost.

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    *Similar observation in [Maille, Tuffin, Vigne `10]

    Total Welfare: SPs Plus Commons169

    Demand curvePrice

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    May 2011Spectrum Markets Tutorial, DySPAN Conference

    *maximizes revenue

    To

    talpr

    ice

    *

    P1* P2*

    q1* q2*Quantity q(customers served)

    consumersurplus

    `w(q)

    SP 2s revenue

    qw*

    Total Welfare vs Commons Bandwidth170

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    Multiple identical incumbents

    Box-shape demand

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    commons bandwidth

    Tota

    lWe

    lfare

    Single Incumbent

    Box inverse demand

    171

    Demand curve`(q)

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    Linear latency

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    qw*q1*

    To

    talprice

    *

    `w(q)

    Single Incumbent

    Theorem: As the capacity C of the commons spectrum increases,there exists constants C1, C2 such that

    1. For C

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    12. For C1

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    The SP increases its revenue by raising itsannounced price:

    Extracts additional surplus from its remaining customers

    Increases congestion in the commons (zero welfare)

    For a single incumbent consumer welfare increaseswith bandwidth.

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Heterogenous Customers

    Customers may have different trade offs betweenannounced price and delay.

    C h ld h l diff i d l l

    174

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    Commons should help differentiate delay-tolerantfrom delay-sensitive customers.

    Does the previous scenario still occur?

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Heterogenous Customers

    Customers may have different trade offs betweenannounced price and delay.

    C h ld h l diff ti t d l t l t

    175

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    Commons should help differentiate delay-tolerantfrom delay-sensitive customers.

    Does the previous scenario still occur?

    Yes, SP may raise price to offload low-end customers towhite space (zero welfare), extract more surplus from

    high-end customers

    Here customer surplus can also decrease.

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Example: Total Welfare176

    Total welfare

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    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Capacity

    Single incumbent Box demands

    Observations

    Decrease in total welfare is analogous to Braesssparadox in transportation networks.

    T id t t i t t t i

    177

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    To avoid, must restrict entry to commons, or priceentry.

    Possible enhancements of model:

    More general demand/latency functions

    Investment costs

    Deployment geometry

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Implications for wireless system design

    Concluding Remarks178

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    Implications for wireless system design

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Spectrum Management: Two Views

    Spectrum is abundant

    It is just poorly managed

    Previous computation:

    179

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    Previous computation:1 to 2 Mbps available in urban areas,

    but did not account for shrinking cell sizes,

    offloading traffic to WiFi, Femto-cells

    Unlicensed commons should meet future needs

    Latency in commons band will be small enough so that

    previous inefficiencies do not arise.

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Spectrum Management: Two Views

    Spectrum is abundant

    It is just poorly managed

    Unlicensed commons should meet future needs

    180

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    Unlicensed commons should meet future needs Latency in commons band will be small enough so that

    previous inefficiencies do not arise.

    Spectrum will remain scarce

    Applications will be generated to use new spectrum

    Shift to cheaper, spectrally inefficient technologies

    Unlicensed model is unsuitable for low frequencies

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Managing Spectrum Scarcity181

    Bit Pipe(< 1 GH ) Commons(> 3 GH )

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    Coordinatedinterferencemanagement

    Expensive

    infrastructure

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Bit Pipe(< 1 GHz) Commons(> 3 GHz)

    Distributedinterferencemanagement

    (random access)

    Inexpensive

    Frequency

    Managing Spectrum Scarcity182

    Bit Pipe(< 1 GH ) Dynamic SpectrumM k t Commons(> 3 GH )

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    Coordinatedinterferencemanagement

    Expensive

    infrastructure

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    Bit Pipe(< 1 GHz)

    Distributedinterferencemanagement

    (random access)

    Inexpensive

    Dynamic SpectrumMarkets

    Local interferencemanagement

    Spectrum servers

    Rapid transactions

    Frequency

    Commons(> 3 GHz)

    Managing Spectrum Scarcity183

    Bit Pipe

    (< 1 GH ) Dynamic SpectrumMarketsCommons

    (> 3 GH )

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    Macro-cells Wide-area

    coverage

    Expensiveservice plans

    May 2011Spectrum Markets Tutorial, DySPAN Conference

    (< 1 GHz)

    Local coverage Femto-cells/WiFi

    Inexpensive

    Dynamic SpectrumMarkets

    Micro-cells Limited coverage

    Local services

    Frequency

    (> 3 GHz)

    Spectral Efficiency Objective

    Wireless systems engineering has put a premium onspectral efficiency (bits/sec/Hz).

    Remarkable progress:

    184

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    Remarkable progress: Practical coding techniques that achieve close to the

    Shannon bound

    Creation and exploitation of degrees of freedom:frequency (OFDM), multiple antennas (MIMO),cooperative relays

    Opportunistic resource allocation

    Advances in signal processing capabilities

    Spectrum Markets Tutorial, DySPAN Conference May 2011

    Transition to Spectrum Abundance

    Tradeoff between spectrum efficiency and powerefficiency

    Shift emphasis towards low-power, inexpensive widebandi li h i

    185

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    p p , psignaling techniques

    Efficiency becomes limited by transaction costs

    Distributed interference management(pricing, auctions, local exchange)

    Transparent (standardized?) mechanism for spot markets

    Wireless devices: frequency agile, compatible with spotmarket mechanism, used by multiple service providers

    Spectrum Markets Tutorial, DySPAN Conference May 2011

    Many Remaining Challenges186

    Policy

    Economics

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    Spectrum Markets Tutorial, DySPAN Conference May 2011

    co o cs

    Engineering

    Interference managementIncentives, efficiencyMarket design

    Many Remaining Challenges187

    Policy

    Economics

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    Spectrum Markets Tutorial, DySPAN Conference May 2011

    Engineering

    Interference managementIncentives, efficiencyMarket design

    Transition to spectrum markets??