Looking for our new site?

Issue Brief

Interlicense Competition

Spectrum Deregulation Without Confiscation or Giveaways
  • By Michael Rothkopf, Professor, Rutgers Business School; Coleman Bazelon, Vice President, Analysis Group, Inc.
August 1, 2003 |

The right to use US radio frequency spectrum is extremely valuable. Unlike most property rights, licenses to use radio spectrum are granted for limited terms and carry significant restrictions on how the radio spectrum is used. Economic efficiency suggests that existing license rights should be expanded to give users the flexibility to redeploy spectrum to its most valuable use and to trade licenses or unused capacity on secondary markets. Distributing these expanded rights to use radio spectrum raises questions of both efficiency and equity. This paper proposes an auction mechanism for distributing additional usage rights: interlicense competition. Derived from an auction procedure used by the Interior Department for the auction of mining leases, this mechanism grants license relaxation rights using competition, while ensuring that the government still obtains the fair value of the licenses it is granting. Interlicense competition overcomes the fact that the holders of existing usage rights have a strong competitive advantage over any challengers. This auction mechanism could be a useful addition to the arsenal of tools available to the FCC. Its availability means that it is not necessary to give away spectrum to incumbents to gain the advantages of fully flexible license rights.

To read the rest of this document, please reference the PDF file attached below.

Related Programs