Efficient Allocation of Radio Spectrum
The paper benefited from discussions with (or helpful comments from) Geoffrey Brennan, Gerald Faulhaber, Martin Peitz, Martin Richardson, and participants at the 4th International Telecommunications Society (ITS) AAA conference and at the 1st conference of the Network for Economics Research on Electronic Communications (NEREC). The inspiration for this paper proceeds from a longstanding collaboration between one of the authors and the Australian Communications and Media Authority, and we are grateful to Mark Loney and Michael Poole for numerous conversations about the role and meaning of efficiency in spectrum allocation policy. However, the views and interpretations presented here are the authors’ own and should not be assumed to represent those of ACMA or of the persons mentioned above. We also thank the editor, an associate editor, and two anonymous referees for comments that improved the paper.
Legislative reforms in Anglo-American countries require governments to account for efficient spectrum usage subject to interference control. New spectrum governance regimes promote flexible and competitive usage but the broadcasting industry remains exempt from reforms, at a significant cost to society. The need to liberalize broadcast spectrum cannot be overstated, but how should we select among alternative deregulatory regimes? In a simple stylized model we formalize the welfare effects of allocating licenses for using bandwidth on broadcast spectrum. We provide optimality conditions for entry, spectrum usage, and congestion levels under different market conditions, which allows us to justify the selection of specific governance arrangements.