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Why Simply Selling Our Airwaves Will Cost Us in the Long Run

Plans to sell off TV band spectrum could undermine the future of wireless innovation.
November 18, 2011

The deficit super committee and congressional technology committees searching for new money are considering “incentive auctions” of the TV band spectrum. Versions of these plans that focus on simply selling as much spectrum as possible would threaten the future of wireless innovation in the U.S.

For starters, it would threaten what appears to be the next wave in wireless communications—a wave exemplified by two recently launched products. The first product is Amazon’s Kindle Fire, which came out as a purely Wi-Fi device from a company that only four years ago launched the Kindle as a cellular-only device with service baked into the device price. The second is a $19.99 unlimited voice, text, and data service from Republic Wireless, which uses Wi-Fi as baseline infrastructure, and cellular as its fallback. 

Just as packet switching and Internet protocol replaced circuit switching and the old telephone model, the two launches capture a fundamental switch in how wireless infrastructures are built. Open wireless models, like Wi-Fi, are becoming the basic infrastructure for wireless communications, while exclusively licensed services, like cellular, are becoming the (still critical) backup and supplement.

The U.S. Federal Communications Commission, under both Democratic and Republican leadership, has opened up some new spectrum to unlicensed use, including TV white spaces. But these changes, forward-thinking and transformative though they were, have always come in the gaps between and around what was always seen as the main event—auctioning as much spectrum for exclusive rights as possible.

And yet over 90 percent of tablet data is carried over Wi-Fi. For iPhones, the number is about 50 percent, and Android smart phones are catching up. It makes sense: only about a third of our usage is “on the move,” much of that in settings covered by hotspots. The rest is on our home or office Wi-Fi. Carriers know this as much as anyone else. AT&T’s network was practically saved by Wi-Fi when the iPhone’s introduction spiked usage. KDDI, Japan’s second-largest mobile broadband provider, signed a deal in July with a California firm, Ruckus Wireless, to deploy 100,000 hotspots in Japan at the heart of KDDI’s next-generation network. BT now has three million users in the U.K. who are members of its BT FON network: any one of them serves as a hotspot for the others.

The trend is even clearer in other fields. Eighty percent of wireless health care is delivered over a mélange of open wireless technologies—Wi-Fi, Bluetooth, ZigBee, RFID. Mobile payment systems like Mastercard’s PayPass, ExxonMobil’s SpeedPass, or EZ Pass, run on open wireless. Inventory management systems mostly use RFID. Other, yet-to-be-invented wireless technologies could be under threat if the super committee successfully pushes its idea to sell the unlicensed spectrum that those technologies would use.

The differences between European and North American smart grid meter communications markets help us understand the role that policy plays. Wireless smart electricity meter communications systems are vastly more prevalent in the U.S. than in Europe (97 percent of new meters shipped in the first quarter of 2011 in the U.S. were wireless; only 15 percent were in Europe). 

More importantly, the technological approaches are fundamentally different. In Europe, 100 percent of the wireless meters sold in the first quarter of 2011 were for exclusive licensed cellular service. In the U.S., 80 percent of wireless meters were mesh networks using unlicensed airwaves; only 2 percent were cellular (the rest was noncellular licensed).  

A major factor in the difference is the regulatory environment. Most smart grid communications systems in North America use 900 megahertz unlicensed spectrum. They can do that because, in 1985, the FCC took a chance on industrial, scientific, and medical “junk bands,” and deregulated a contiguous band (from 902 to 928 megahertz). That allowed anyone to deploy equipment and networks if they could build systems robust enough to live with the fact that anyone else could also deploy there.

European regulators have been more suspicious of open wireless environments, and imposed a much heavier hand. They have about one-tenth of the amount of spectrum open for unlicensed use below one gigahertz, and even that is at substantially more restricted power levels. The resulting difference in innovation paths, as we see in smart grid meter markets, is stark. The FCC, under both Democratic and Republican leadership, has opened up not only the original 900 megahertz and 2.4 gigahertz bands, but also the five gigahertz band. 

And there’s the rub. We know that the future is untethered ubiquitous computing. Our primary policy solution to dealing with that future is still licensed: we talk about “spectrum crunch” and try to auction as much spectrum as possible for licensed use. When the “spectrum crunch” meets the “debt crunch,” the urge to auction every sliver of spectrum in sight reaches feverish levels. Unfortunately, this gets the future of wireless exactly wrong; Wi-Fi is a primitive precursor to what a range of innovations in cognitive radios, dynamic frequency and power selection, mesh networks, and systems-level innovations are likely to make possible. Wi-Fi is today’s Gopher to what will become the HTML5 of wireless.

Open wireless systems are born messy, from dramatic improvements in computation and network architectures, and rapidly overtake the seemingly more reliable circuit-switched architecture of the past, with its predictable, incremental upgrade path. There will continue to be room for exclusive-use licensed spectrum approaches; but the basic wireless infrastructure of the future will be the inverse of what we believed necessary, natural, and inevitable in the first hundred years of radio. 

Policy needs to catch up. Short-sighted search for auction, limited understanding of the next switch, and lobbying are pushing legislators to auction more spectrum to exclusive licensed use, and makes them resistant to expanding the deregulation of wireless communications systems on the Wi-Fi and 900 megahertz model. Future open wireless is one area where the U.S. has an early mover advantage because of regulatory innovations from the 1980s and 1990s. We should not retreat from that position now that we can already see the next switch.

Yochai Benkler is the Berkman Professor of Entrepreneurial Legal Studies at Harvard University. The work underlying this article can be read in this white paper: Open Wireless V Licensed Spectrum Market Adoption.

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