June 27, 2003
Finally read “Spectrum Abundance and the Choice Between Private and Public Control” by Stuart Benjamin. He’s pretty convincing, and, while not making me want to go to totally private control, does make me want a mixed policy at least at first. Here are my notes, with limited commentary:
-Doesn’t seem to be arguing that spectrum commons won’t work, although he is skeptical. He is arguing that a government created one would be less inefficient that providing large allotments to private owners, who would create a commons if it’s desired.
-Two points about commons, using spread spectrum. You need:
Smarter devices – strong computational abilities, can transmit at low power and still get through.
Cooperation gain – which means that devices act as retransmitters. Instead of having cell phone base stations installed throughout the city, you just have everyone’s device act as a mobile base station.
Problems: what if people choose to transmit at higher power? what if people do not share their devices (think of people turning off their shared folder on Napster – it was a drain on your machine’s resources)?
Commons advocates arguments against private property allotments (according to him)
1. Transaction costs – you’d have to buy up so many slices of the spectrum to create privately a commons network. And “holdout costs” – people waiting to sell to bid price up. Benjamin’s response: these are not inherent in private ownership, just in dividing spectrum into small pieces.
2. Large allotments will not lead to spectrum commons. They won’t be able to make money, so they won’t do it. Benjamin says: charge for access, or put fee on the device. If we’re in a competitive market, and these commons are really more efficient, someone will create them. (Makes an interesting point. If commons can carry more users, you can charge less per user.)
Government v. Private Control – how do we evaluate it?
1. Smart engineers – need to have access to people most up on the tech, best access to info. (Note: he’s speaking as an economist.) Governments are controlled by constituencies, many of which will want to see spectrum fail. Private = competition and profit motive to get best info.
2. Putting the engineers to work – need people who are going to want to make the best choices, continually innovated. Want to be able to make quick changes to adjust to new technology. Profit motive is key here, government doesn’t have it.
3. Anticompetitive concentration of power – inefficient uses and pricing. Benjamin wants restructuring of spectrum (opening more up to auction, including broadcast television’s and the military’s spectrum, approximating a “big bang” auction of all exiting rights) and then selling off enough to create many abundant networks. Not sure how he came up with his numbers here, or if the amount of abundant networks he thinks are sufficient will actually be so. It would be unlikely that any one company would buy all spectrum, and you could set limits just in case, or maybe a common-carrier sort of approach. Try to promote as much as healthy competition as possible. That’s good for reducing monopolies, but also for optimizing system capabilities. Systems will differentiate, try out new technologies. Also, less monopolies because interconnection will be desirable. Interesting idea: the only situtation where a monopolist is guaranteed is if you let the government handle everything. Then the question is, is that a beneficial monopoly? What happens when government has to work with private company and there’s rent-seeking?
I think he makes a good point here – if you consider the history of the FCC, you know how screwed up government spectrum regulation has been.
4. Value of a Free Network
a) Free of charge – Benjamin says you need to have a broader conception of cost. What about opportunity costs, the lost ability to create a different non-commons use? (What’s a specific use that won’t work?) Also, why should the government subsidize this? All communications networks seek this sort of subsidy in some wya.
b) Serve us as citizens and prevent filters – how is this really going to come about? why can’t this be created by private networks? Government will still be affected by private actors. Are these arguments simple paternalism? (I agree with him as far as any theory that treats everyone as too dumb to like commons networks is probably a bad theory. The concentration of power problems are more serious – it’s making sure that spectrum is distributed in a neutral fashion, in a truly competitive environment.)
Should government distribute in large bands?
If abundant networks not most efficient, giving large bands will be bad because hard to disaggregate. Need some way to balance.