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Governing Global Electronic NetworksInternational Perspectives on Policy and Power$

William J. Drake and Ernest J. Wilson III

Print publication date: 2008

Print ISBN-13: 9780262042512

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262042512.001.0001

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Balancing Equity and Efficiency Issues in Global Spectrum Management

Balancing Equity and Efficiency Issues in Global Spectrum Management

Chapter:
(p.127) 3 Balancing Equity and Efficiency Issues in Global Spectrum Management
Source:
Governing Global Electronic Networks
Author(s):

Rob Frieden

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262042512.003.0075

Abstract and Keywords

This chapter focuses on the International Telecommunication Union’s (ITU) complex governance of international radio frequency spectrum and orbital slots for geostationary satellites. It shows that the ITU’s global governance framework generally favors first movers over latecomers. It considers current pressures on the framework and offers suggestions for enhancing the interests of non-dominant players. The chapter first examines spectrum uses that cross borders and how they raise equity and national sovereignty concerns. It then discusses conflict avoidance and conflict resolution through multilateral coordination, pooling investment in international satellites to promote access, the push for market resource allocation alternatives, and the strengths and weaknesses in the ITU spectrum management process. It also looks at issues concerning the registration of unviable “paper satellites,” the use of a block allocation method for allocating spectrum, property ownership, and problems in competitive bidding and spectrum congestion remedies. Finally, the chapter analyzes empowerment opportunities for developing countries with respect to addressing spectrum congestion and interference.

Keywords:   global governance, International Telecommunication Union, radio frequency spectrum, geostationary satellites, orbital slots, equity, developing countries, property ownership, spectrum management, competitive bidding

Radio communication spectrum can have great value1 when serving as the physical means for transmitting desirable content. For example, broadcasters of video programming via terrestrial and satellite networks have accrued hefty stock market valuations in light of their ability to deliver popular content to a large audience. On the other hand spectrum with less geographical reach and bandwidth along with shared accessibility may have little value particularly if a high potential for harmful interference exists.

Radio spectrum has an intangible characteristic much like the air, but also provides a delivery medium for content conferring measurable social and commercial benefits.2 For spectrum having great value National Regulatory Authorities (NRAs) must determine how best to achieve multiple, possibly conflicting goals3 that include

  • establishing criteria for allocating spectrum uses and deciding who can use spectrum;

  • considering whether and how market forces, instead of government decision making, can establish spectrum uses and users;

  • finding ways to capture for public benefit at least some of the intrinsic value of spectrum usage;

  • dividing spectrum into freely available, shared “commons”4 and allocations exclusively available to specific licensees; and

  • avoiding or resolving conflicts between spectrum users within a country and users in different countries.

Access to radio spectrum resources triggers both equity and efficiency concerns.5 On the equity side, arguably all citizens in a nation have an ownership interest in and right of access to the spectrum resource. Likewise, two or more nations seeking to use the same portion of the spectrum or the same orbital parking place for a communications satellite may have equally compelling access claims.6 Most nations consider radio spectrum and satellite orbital slots as resources obligating negotiated sharing arrangements that accommodate as many uses as possible without increasing the potential for interfering uses and higher operational costs.7

(p.128) Most nations have signed treaties foreclosing national ownership or the exercise of sovereignty8 over space resources,9 including orbital slots used by communications satellites.10 Likewise, most nations have signed treaties that bind them to administrative rules and regulations that allocate spectrum for specific uses, establish a process for nations to register uses, and help preempt or resolve disputes.

However, a nation’s equal right of ownership and access does not translate into an equivalent level of actual access, because developed nations have acted on their earlier needs for spectrum and satellite orbital slots and have locked up much of the best resources. A global consensus favors international rules that emphasize efficient use of shared radio communication resources by conferring a “first registered, first protected” priority status. This procedure provides a priori specificity about a pending spectrum use, so that even before actual usage private or public enterprises can have assurance that their near-term spectrum use can occur free of harmful interference caused by other existing or future spectrum uses. Developed nations disproportionately benefit in light of their typically earlier registrations, based on existing spectrum requirements and the financial wherewithal to construct and operate the facilities using the registered spectrum.11 Advocates for an a priori registration system believe that the earliest possible use for spectrum resources will lead to enhanced productivity and welfare.

Many less developed nations consider unfair a first-in-time, first-in-access priority system. These nations do not see optimal global benefits accruing when developed nations can lock up the best spectrum and satellite orbital slots well before less developed nations can generate the demand and financial resources needed to act on a spectrum registration.12

Policy makers at both national and multilateral levels need to forge a compromise between equity and efficiency. If they fail, stakeholders may lose patience in the process and resort to unilateral, self-help strategies that could include launching satellites and using spectrum without participating in the multilateral spectrum allocation and registration process. Likewise, individual nations may ignore global policies regarding the preferred uses for a specific frequency band and the procedure for registering and coordinating the launch of satellites into orbit. The absence of a consensus-driven spectrum allocation and orbital slot registration process would raise costs that telecommunication operators and their consumers must bear, because the potential for interference would increase drastically.

This chapter examines the merits of managing spectrum allocations and registrations through a multilateral process organized by the International Telecommunication Union (ITU), a specialized agency of the United Nations. The chapter covers the conflict avoidance and resolution capabilities of the current system and considers the prospect for greater efficiency when prospective spectrum users have to compete in auctions for the right to use spectrum and satellite orbital arcs. The chapter concludes that policy makers need to embrace best practices in spectrum management, including (p.129) compulsory conservation measures. However, the existing multilateral and intergovernmental coordination process remains a better option than resorting to a fully market-driven system lacking governmental involvement and safeguards.

Longstanding Issues

Efficiency Trumps Equity in the Current Reassessment

Current shortages of spectrum for specific uses, such as wireless access telephony, the Internet, and video program delivery, have prompted governments in both developed and developing nations to rethink how best to manage spectrum. Advocates for marketplace decision making have suggested that NRAs assign spectrum usage rights to the highest bidder, at least for services using frequency bands having limited geographical coverage that would not cross national boundaries. Market advocates point to the overall benefits to society when potential users of public resources have to bid competitively for ownership.13

Technological innovations have reduced the potential for harmful interference, making it possible for previously incompatible spectrum uses to occur in the same frequency band and in close geographical proximity.14 Digital transmissions can be compressed and coded in ways that reduce the amount of spectrum used and facilitate expanded, interference-free communications. Digital signal processing and software-defined radio also provide ways for more simultaneous uses without interference.

For spectrum uses that do not cross borders, marketplace initiatives have great appeal and plausibility, particularly in light of the ability of single nations to implement competitive bidding without adversely impacting spectrum uses and policies in other nations. Absent a cross-border impact, individual nations can choose to foster efficiency, generate revenues for the national treasury, and accrue value for all citizens instead of the lucky few who previously secured spectrum license grants without payment.15

Cross-Border Spectrum and Satellite Uses Amplify Equity Concerns

Spectrum uses that cross borders trigger a greater potential for interference and therefore raise more pressing equity and national sovereignty concerns. Stakeholders should agree that one nation cannot foreclose or adversely impact another nation’s spectrum access and use opportunities without offering compensation or affirmative efforts to ameliorate the harm. Most nations have signed treaty-level documents that recognize control over spectrum as an element of national sovereignty, but that relinquish some portion of national self-determination based on the view that a multilateral system of coordination will achieve a better outcome.16 For spectrum uses that routinely operate across borders, such as a communications satellite that can deliver video programming to as much as one-third of the earth’s surface, market countervailing equity concerns become more compelling.

(p.130) ITU rules require nations to share radio communications resources and to coordinate uses. Accordingly, no single nation or private venture can act unilaterally, because most nations have committed to a multilateral approach for shared access to radio communications resources. Any decision by one nation to launch a communications satellite, or to activate a new radio communication facility can have a direct and potentially adverse impact on other nations, particularly ones nearby.

The limitations of physics, politics, jurisdiction, and international treaties complicate the process for sharing. They refute the simple assumption of some analysts that shared global radio communications resources are identical to real estate such that treaties between governments should “extend the property rights system … into the international realm.”17 Simply analogizing radio communications resources to real estate ignores the fact that privatizing spectrum can foreclose access rights of others, including citizens in nearby countries. A nation can recognize private property ownership rights and can establish binding and effective rules for buying and selling real estate within the country. However, such a marketplace system for radio communications resources would involve the application of rules on an extraterritorial, cross-border basis.

Conflict Avoidance and Resolution through Multilateral Coordination

For radio spectrum and satellite orbital slots, nations collectively and individually have rejected either an absolute market-driven or an equity-driven model for allocating, coordinating, and registering usage. Nations cannot simply occupy spectrum on an as-needed basis, but neither can they expect to have spectrum reserved for their possible future use.

On a multilateral basis, nations look to the ITU18 to erect and administer mechanisms that balance the conflicting interests of developed and developing nations. While lacking an enforcement mechanism, the ITU provides a forum for both efficiency and equity arguments.19

ITU decisions typically occur without a formal vote because the forum seeks to build consensus. However consensus may not easily occur in light of developed countries’ disproportionately greater spectrum requirements and their reluctance to conserve bandwidth or to use expensive spectrum-conserving technologies based on speculative, future requirements of developing countries. Furthermore, developed nations may balk at the ITU’s system of prioritizing specific uses of spectrum based on a then-current assessment of which services can use which spectrum. With the onset of new sophisticated technologies, an increasing number of previously incompatible spectrum uses and a larger volume of users can operate without interference. Notwithstanding such innovation, the ITU typically allocates only a handful of services for any particular frequency band. Additionally the ITU specifies a primary use, followed by secondary and tertiary uses that must not cause interference even if registered before a primary use.

(p.131) Enlightened self-interest prompts nations to relinquish a degree of self-determination on spectrum matters. Reaching consensus typically will lower operating costs of transmitters and receivers, speed commercial rollout of new technologies, reduce confusion, and curb the potential for harmful interference. When nations fail to reach a consensus at the ITU, manufacturers may have to produce multiple equipment product lines and consumers may incur higher costs, as has occurred in mobile telephony where no single cellular telephone can operate at all locations. Each nation has to conform its domestic spectrum allocations and license grants to the ITU consensus. Absent an ITU-generated consensus, nations may grant licenses for incompatible uses of the same spectrum and thereby generate greater risk, cost, and congestion for any existing or prospective spectrum use.

The ITU has established shared “rules of the road” with nations generally agreeing on what services shall receive preferential registration rights for particular slivers of allocated spectrum and which nation’s satellite has the right to occupy a particular orbital slot. The ITU model provides an effective administrative vehicle to register spectrum and orbital slot usage and to mediate disputes. However it may not prevent “warehousing” of spectrum, that is, registering unneeded uses that can foreclose others, who have near-term requirements, from achieving conflict-free registrations. Also the ITU administrative process cannot foreclose attempts to register “paper satellites,” that is, securing orbital slots for satellites with no realistic probability of launch.20 The ITU has attempted to create impediments to unneeded registrations by imposing financial filing fees and time deadlines for using registered spectrum and orbital slots.21 However, with the rare exception of prospective satellites offering direct to home video programming in developing nations, the ITU does not deviate from the first-filed, first-registered model by reserving spectrum and orbital slots for future use by operators in developing nations.22

Pooling Investment in International Satellites to Promote Access

A possible solution to the inferior, delayed access problem encountered by developing nations may lie in regional coordination by several nations to aggregate funds and telecommunications service demand so that spectrum and orbital slot registrations may proceed earlier than if a single nation sought to construct and operate a costly network.23 Such pooling of investment helped commercialize satellite technology by making it affordable for civilian use soon after deployment for military, space exploration, and intelligence gathering applications. Multilateralism promoted widespread access to satellite technology, including the opportunities for developing nations to participate in the ownership and management of a global satellite carrier. The pooling of investment among nations helped spread technological and financial risk across a larger group of participants.

(p.132) Satellite investment pooling by many nations began through the application of a cooperative model similar to one frequently used in agriculture. Where one unit of a product has little if any difference from another unit, as is generally the case with satellite transponder bandwidth, this fungible characteristic supports demand and supply aggregation by numerous producers. For example, all the dairy or wheat farmers in a region can pool their investment and establish a local processing and storage facility for handling all of the farmers’ output. This facility helps the farmers fetch the best possible prices for their products and also creates the possibility for some degree of value-adding processing, such as milling the wheat and pasteurizing the milk.

Satellite cooperatives likewise aggregated demand, making it possible to reach efficient scale and scope and to offer a large inventory of transponder capacity. The International Satellite Organization (INTELSAT),24 European Satellite Organization (Eutelsat), and International Maritime Satellite Organization (Inmarsat) helped expedite the commercialization of space radio communications and made it possible for developing nations to participate with a small initial investment.25 The satellite cooperatives had charters, negotiating on a multilateral, intergovernmental basis that emphasized the promotion of world peace and understanding through widespread access and use of satellites. These cooperatives operated as businesses, but had missions that emphasized access and service instead of profit maximization.

The global and regional satellite ownership model helped make it possible for developing nations to afford satellite network access. Even the poorest and smallest nations could connect to a global satellite constellation with a minor investment in the cooperative. Expanding membership to include large numbers of developing nations accrued political benefits for the cooperative, but it also made it possible for these nations to acquire satellite capacity at an affordable rate.

However, this model lost most of its financial and policy support as satellite technology evolved and as a competitive marketplace for satellite services developed. Over time the cost of constructing, launching, and operating a satellite network dropped substantially as demand grew for satellite services, particularly delivery of video content to broadcast and cable television networks. Private entrepreneurs saw an opportunity to enter the market. However, incumbent satellite operators, such as INTELSAT, sought to thwart such competition on the grounds that it would cause economic harm and hinder the cooperatives’ ability to serve high-cost, rural locations and to facilitate investment and participation by developing nations.

Facing the prospect of facilities-based competition, the satellite cooperatives acted much like cartels intent on preserving their market dominance. Nations with government or private carrier investors in satellite cooperatives executed treatylike documents designed to confer special privileges and immunities so that the cooperatives could achieve their mixed business and political mission. This special status helped reduce the cost of setting up and operating the cooperative, but it also created a semidiplomatic (p.133) organization insulated from many marketplace forces. For example, the creators of INTELSAT sought to ensure that the cooperative would capture most of the global telecommunications traffic by agreeing not to authorize separate international satellite operators that collectively would cause economic harm to the cooperative. Additionally, the cooperatives and their employees enjoyed special exemptions from tax and other domestic charges imposed by the nation where the cooperatives had their headquarters and where they acquired and launched satellites.

In the mid-1980s, the United States, followed by other nations, permitted commercial satellite alternatives.26 These systems have achieved marketplace success without adversely affecting the ability of satellite cooperatives to achieve their mission. Management of these cooperatives, having failed in their bid to block competition, turned their attention to finding ways to compete more effectively. In the spirit of “if you can’t beat them, join them,” the managers of INTELSAT, Inmarsat, and Eutelsat sought to privatize and to become commercial ventures.27 Efforts were undertaken to ensure “lifeline” access by nations unlikely to benefit from competitive satellite markets.28

Current Issues

To understand the reasons behind the push for market resource allocation alternatives, one should consider the strengths and weaknesses in the ITU spectrum management process. At its best, the ITU has balanced equity and efficiency considerations with shared “rules of the road” that have reduced costs by coming up with a global consensus on spectrum allocations and mostly conflict-free spectrum and satellite orbital slot registrations. At its worse, the ITU has forestalled introduction of new technologies and services, helped extend developed nation domination of spectrum and orbital slots, and failed to prevent gaming and manipulation of the registration process.

Paper Satellites

The ITU has not completely closed the loophole that permits the registration of unviable “paper satellites.” Another loophole permits a venture in one nation, for example, the United States with its long queue of pending registrations, to secure a favorable and earlier satellite orbital arc registration by using another nation that offers a “flag of convenience” and has no registration backlog. ITU rules do not authorize member nations and their public or private ventures to negotiate financial inducements as a way to resolve more speedily interference and access conflicts. Additionally, the ITU still locks in assumptions about existing technology and the ability of spectrum to accommodate multiple uses by allocating spectrum in service-specific blocks.

Paper satellite filings provide an example of self-help retaliation against the real or perceived inequity in the ITU administrative process. Nations lacking the commercial demand or financial resources to construct, launch, and operate their own satellite (p.134) network nevertheless can exploit the ITU orbital slot registration system to extract compensation, or at least to vent their frustration by causing processing delays. For example, between 1988 and 1990 the nation of Tonga attempted to register sixteen orbital slots.29 The principals of Tongasat, the private venture for which the Tonga government filed the satellite registration applications, made several publicized overtures to incumbent satellite operators offering to relinquish some or all of the attempted registrations in exchange for financial compensation. One could easily infer that the consultant advising Tonga’s government knew that the ITU registration process lacked sufficient financial and procedural prerequisites, due diligence requirements, and benchmarking that might have stymied paper applications. Only recently has the ITU imposed registration fees to compensate it for the costs incurred in processing a proposed orbital slot registration.30 The ITU still lacks fully effective due diligence standards and a timetable of deliverables that would remove access rights from registrants who have not demonstrated progress toward a timely satellite launch and spectrum use. Absent these safeguards, even a nation with absolutely no ability to launch satellites could have representatives claim a right to coordinate future interference-free operation of these paper satellites with existing and future satellites operating in the region.

Arguably the instigators of Tonga’s satellite registrations had a mind to create a private auction. As a sovereign nation and member of the ITU, Tonga had the right to use the ITU’s registration services. While guilty of seeking to register satellites it most likely never would launch, Tonga violated only the spirit of the process. Under current conditions it would take only a few more such registration applications for the ITU administrative process to implode. However, as the first mover in this strategy Tonga staked out orbital slot claims and in effect tried to create a market to be bought out of these claims. In view of Tonga’s efforts to “monetize” its orbital stake claims, one can anticipate future scenarios in which more nations might try to extract sizeable nuisance payments or perhaps free or discounted satellite capacity in exchange for abandoning their claims. ITU member nations including Gibraltar and Papua New Guinea have offered to handle the ITU registration process for satellite network proposals based in the United States, but designed to provide services to many nations including the sponsoring registrant.

Spectrum Block Allocations

In addition to encouraging self-help and trafficking, the current ITU spectrum and orbital slot registration process can hamper the efficient, timely, and flexible use of radio communication resources. The ITU spectrum allocation process typically imposes an international template on spectrum uses and registration. The ITU uses a block allocation method for allocating spectrum that subdivides useable spectrum into service-specific slivers of priority use. While the international allocation constitutes a (p.135) recommendation without the force of a treaty, and nations may opt out by taking a “reservation” to any specific allocation, most domestic regulatory agencies implement the ITU consensus decision.31

Allocating spectrum in blocks limits user flexibility, because technological innovations enhance the ability of users to share spectrum even for different services.32 Heretofore, a consensus decision on spectrum uses reduced costs, promoted single equipment production lines, enhanced connectivity across borders, and supported single or compatible operating standards.33

Now the use of service-specific blocks of spectrum can reduce efficiency, flexibility, and the value of spectrum. For example, transceiver miniaturization now makes it possible to use the same satellite radiotelephone when on land, in an aircraft, and on the high seas. However, before the onset of this innovation, the ITU established separate spectrum allocations for land mobile, aeronautical, and maritime satellite mobile services based on the then-appropriate assumption that satellite terminals would remain fixed in only one of the three different locations. The ITU has not yet fully acknowledged the newly achieved ability to use a satellite handset across the three different operating environments, thereby maintaining an unnecessary limitation on the range of frequencies available.

Problems in Competitive Bidding and Spectrum Congestion Remedies

Despite having secured a nearly total national commitment to spectrum sharing, ITU rules do not foreclose individual nations from assigning spectrum based on competitive bidding. Even with glowing endorsements from economists, spectrum auctions and technological innovations do not completely remedy the deficiencies inherent in licensing spectrum for exclusive, private uses. Advocates for “propertizing” spectrum scoff at lofty but vague notions of the public interest and national security, claiming that the “public interest” with respect to the use of spectrum is a vague, ill-defined concept. In their view, under the “public interest” banner the U.S. Congress and the FCC have established far too many protectionist, anticompetitive, anti-innovative, inflexible, output-limiting regulatory regimes.34

However defective in implementation, serving the public interest can achieve desirable social outcomes. Put another way, implementation of a marketplace resource allocation can frustrate efforts to achieve social goals. Additionally, in this age of heightened concerns about terrorism and national security it comes across as rather cavalier35 to suggest that because everything is scarce, government defense, intelligence gathering, homeland security, and public safety agencies should pay for spectrum along with everyone else.36

Advocates for competitive bidding also have to recognize the mixed record generated so far. Because governments successfully tailored auctions to extract maximum revenues, in several instances winning bidders could not produce even partial payment, (p.136) thereby triggering a default and delayed use of heeded spectrum. Conflicts between bankruptcy law and communications law in the United States37 have resulted in uncertainty whether the defaulted spectrum awards remain in the bankruptcy estate, administered by a court of law, or become available for reauction by the FCC.

Competitive bidding for spectrum earmarked for third-generation mobile telephone and high-speed data services have generated astronomical amounts in the United States and EU nations. However, a change in the overall marketplace attractiveness of telecommunications and information processing ventures has jeopardized operators’ ability to recoup amounts bid for spectrum in a timely manner. Spectrum bidding has so raised debt exposure and risk that even blue-chip incumbent telecommunications ventures have incurred significant downgrades in the quality classification of their debt, thereby raising their cost of raising capital. Similarly the substantial near-term increase in debt and financial losses has a direct and substantial impact on the longterm tax liability incurred by these firms.

While competitive bidding advocates may emphasize the potential for scale economies in the ability of firms to aggregate spectrum, opponents note the likelihood for concentration of ownership and control, particularly if regulators waive or eliminate caps on the total amount of spectrum a single operator can control. Spectrum auction advocates note the potential that smaller parcels of spectrum property might become available on the market in the same manner that large parcels of real estate become subdivided.38 But for spectrum, and in particular highly contested spectrum such as that allocated for third-generation wireless services, the more likely outcome would be zealous consolidation of ownership to achieve a national coverage “footprint.” Economists may herald the potential for an up-to-the-minute “spot” market for spectrum, as well as a “secondary” resale market,39 but such marketplaces have not yet developed to any significant degree even for largely fungible minutes of long-distance calling capacity, or for broadband links between nations. Much of the technological innovations supporting flexible spectrum usage would have to be in place for a spectrum spot market to exist, because access would shift between and among many users in different locations.

The existing spectrum bidding regime in developed nations coupled with corporate mergers and acquisitions and the reluctance of some NRAs to cap the amount of spectrum availability to any single enterprise already have resulted in substantial consolidation and concentration in telecommunications markets. Economists might argue that under a property rights regime, ample spectrum might be converted to mobile radio use to abate allocational scarcity created by the previous ITU and NRA decisions. Again, this ease in conversion presupposes that frequency agile transceivers and other cutting-edge technological innovations will become standard equipment in the near term. This assumption might not prove true, particularly where a developed nation lies physically next to one or more developing countries.

(p.137) Spectrum auction advocates correctly note that completely domestic spectrum uses would not require coordination with or transfer payments to other nations. However, these advocates underestimate the percentage of spectrum uses that can cross borders. Likewise they do not seem to recognize that nearly all spectrum uses by satellite and all orbital slot occupancies could trigger claims of potential conflicting uses between nations. Arguably each and every nation lying under a satellite footprint might have an ownership claim, just as they now have a right to participate in ITU-administered spectrum and orbital slot coordination with a new usage registrant. Equatorial nations that failed in staking an ownership claim or grew weary of ITU coordination lacking a financial payoff, surely would have renewed vigor if they could extract compensation in exchange for relinquishing their ownership rights.

Extending the competitive bidding process on domestic spectrum to international satellite orbital arc usage has the potential to increase market entry costs substantially. It also could trigger delays in the launch of new satellites until each and every country possibly served by the satellite receives compensation, or otherwise abandons ownership claims to the spectrum used by the satellite as well as its orbital slot.40

Property Ownership Violates the Prohibition on National Appropriation of Shared Global Resources

Currently, nations secure priority access to spectrum and satellite orbital arc by successfully maneuvering through the ITU registration process. Priority access results from the voluntary acquiescence of nations without the abdication of possible future access. Furthermore, such access does not constitute an ownership claim, the assertion of jurisdiction over a shared global resource, or a usurpation of another nation’s equal right to secure priority access rights through the ITU registration process. The ITU has successfully brokered complex and conflicting spectrum and satellite orbital slot claims, albeit with delays and its increasing need for compensation to shore up its budget. Brokering ownership interests may shorten the time to resolution, even as it raises new complexities.

Empowerment Opportunities for Developing Nations

Notwithstanding increasing stress on multilateral policy making and conflict resolution, new but costly technological innovations offer ways to abate spectrum congestion and interference. Perhaps one way to balance efficiency and equity concerns would be to require developed nations to implement spectrum conservation technologies on an expedited basis, thereby freeing spectrum for use by operators in developed nations. In recognition of their limited access to capital, spectrum users in developing nations might receive a temporary waiver of the requirement to use costly spectrum conservation technologies.

(p.138) It should come as no surprise that stakeholders, regardless of national residence and wealth, seek access to spectrum at the lowest cost, but also with the greatest degree of certainty of noninterference. The ITU registration process, while not infallible, has provided a degree of certainty that all nations will respect a previously recorded spectrum use. Perhaps developing nations might forego access to spectrum and orbital slots, already in the ITU registration process, and use less desirable orbital slots and spectrum in exchange for compensation, or other types of accommodation.

Because they cannot readily vie for auctioned spectrum, operators in developing nations will seek to maintain the status quo ITU registration process, and possibly opportunities to extract compensation in exchange for not delaying other nations’ registrations. One should not underestimate the potential for developing nations to find their voice and extract concessions. They hold a voting majority at the ITU and while most matters do not result in a formal vote, these nations can shape the debate. In light of the fractious nature of previous debates on transborder data flow, and north/ south inequality, developed nations should take pains to avoid triggering another round of disputes by refraining from pressing too aggressively for market-based initiatives, or for mandatory use of spectrum conservation technologies.

The degree to which a national government has confidence in marketplace resource allocation constitutes a key factor in the nature of spectrum management for that nation. Nations having confidence in the ability of markets to operate and to maximize private and public benefits typically have a greater propensity to license spectrum through competitive bidding. Nations with less confidence in the utility of market-driven spectrum use, or those that have experienced dissatisfaction with their initial spectrum auction, appear more inclined to use older regulatory models highlighting government oversight.

Recommendations

Developing nations need to learn the best practices in spectrum management. To offset early-mover advantages, developing nations should seek to extract concessions from developed nations in ways that do not come across as extortion.41 Historically, developing nations have gained little from rhetoric, grand unilateral proclamations, or the private auction strategies of single nations such as Tonga. It does not appear that the ITU will expand the set of frequencies and services reserved for future use by developing nations in the face of compelling current demand by users in developed countries.

The best strategy for disenfranchised nations appears to combine active participation in the ITU process with resumption of cooperative investment pooling and extraction of financial and technological concessions from developed nations. Developing nations should take every opportunity to include equity issues in ITU deliberations, but in a way that does not block progress. Users in developed countries can conserve (p.139) spectrum and reduce the potential for interference by implementing technological remedies that users in developing nations cannot afford to implement immediately. Accordingly, the ITU might establish a recommendation that couples additional spectrum and satellite orbital slot registrations with an affirmative duty borne by developed nation stakeholders to expedite the use of spectrum conservation technologies.

Another option might involve the partial adoption of market resource allocation techniques. Instead of auctioning off spectrum, nations could engage in the trading of access rights. Pollution abatement strategies provide a helpful case study for spectrum management. Because developed nations cause the most pollution, their producers might pay for the right to exceed a pollution threshold in lieu of having to bear the expense in reducing harmful emissions. In the United States, some less developed states generate comparatively less pollution than other more industrialized states. The United States Environmental Protection Agency and several individual states allow manufacturers and other enterprises the opportunity to secure additional pollution “rights” from other enterprises that generate comparatively less pollution, whether through reduced production or pollution abatement investments.42 Perhaps a similar sort of transfer payment mechanism might flow from developed nations seeking more telecommunications resources to developing nations unable or lacking the need for spectrum.

Conclusion

When nations apply best practices in spectrum management they can achieve greater operating efficiencies, accommodate more users, and often generate significant new revenues from auctions and other fees. However, best practices also should consider public interest factors that militate against total reliance on marketplace forces to allocate and assign spectrum. New technologies make it possible to conserve spectrum and diversify the number and type of users, but long unresolved issues of fairness and cost persist.

Developed nations with earlier demand for spectrum also have the wealth to pay for spectrum conservation technologies. Compulsory application of spectrum conservation techniques can improve the odds that developing nations will have accessible spectrum at a later date. Similarly, developed nations should respect the sovereignty of nearby nations and make significant efforts to reduce the prospect of future interference caused by transborder spectrum uses.

Technological innovations offer better opportunities than ever for nations to enjoy robust, interference-free spectrum use. To achieve this outcome, developed nations must incur the cost of using spectrum conserving technologies and eschew the simplistic view that all spectrum and satellite orbital slots should flow to the highest bidder.

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Notes:

(1.) The fact that parties have bid billions of dollars for the privilege of using spectrum attests to its intrinsic value. The United States Federal Communications Commission has captured billions of dollars for the general treasury from the spectrum auctions it has administered. See United States Federal Communications Commission, undated.

(2.) Compare Goodman, “Spectrum Rights in the Telecosm to Come” with Hazlett, “Spectrum Tragedies.”

(3.) Benjamin, “Spectrum Abundance and the Choice Between Private and Public Control”; Faulhaber, “The Question of Spectrum”; Frischmann, “An Economic Theory of Infrastructure and Sustainable Infrastructure Commons.”

(4.) In light of technological innovations that make interference-free spectrum sharing feasible, advocates for spectrum commons support unlicensed usage. See Weiser and Hatfield, “Policing the Spectrum Commons”; Werbach, “Supercommons”; Benkler, “Overcoming Agoraphobia.”

(5.) For extensive background on spectrum management issues, see ITU, General Spectrum Management Resources; ITU, Spectrum Reform.

(6.) Most communications satellites appear to hover above the earth, thereby providing a fixed target to receive signals from earth and send them back down. Satellite services, including the direct-to-home delivery of video programming, can be provided more cheaply if earth-based antennas do not have to track a moving target. Satellites in a “geostationary” condition orbit the earth once every twenty-four hours. For more background on satellite technology and satellite-based businesses, see Parsons and Frieden, The Cable and Satellite Television Industries; and Frieden, Managing Internet-Driven Change in International Telecommunications.

(7.) Various treaties and other types of international agreements characterize outer space and radio communication resources located there and on earth as having a “common heritage” character or as being for the “common benefit of mankind.” Writes Jefferson H. Weaver: “This characterization of outer space would indicate that the heavens belonged to no one; any resource which could be mined or otherwise appropriated would be available for the taking. This sort of ‘first-come, first-served’ standard would give the so-called ‘spacefaring’ powers a powerful incentive to expand their efforts to develop space. At the same time, nations unable to afford attempting even to launch satellites into geosynchronous orbit would find themselves increasingly excluded from these resources. Such a characterization would, however, create a first-come, first-served legal regime. This result would certainly be at odds with the ‘common heritage’ principle.” “Illusion or Reality? State Sovereignty in Outer Space,” 221–222. See also Tannenwald, “Law versus Power on the High Frontier.”

(8.) United Nations, Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space. The UN’s Outer Space Treaty establishes basic principles of space law stating that the exploration and use of outer space shall be for the benefit of all mankind, that outer space is not subject to national appropriation by claim of sovereignty, and that each state party shall authorize, supervise, and be responsible for the space activities of its nationals. (p.141)

(9.) See United Nations, note 8. Article II of this treaty establishes that space “is not subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other means.”

(10.) As part of their commitment to nonappropriation of outer space, nations have agreed to register their space launches with the United Nations. See United Nations, Convention on Registration of Objects Launched into Outer Space.

(11.) “Though some obligation to accommodate remains when conflicts between early and later registrants arise, early registration affords a measure of legitimacy that supports the first registrant’s negotiating position. Because the notification process affords preferential treatment to early registrants, it is often characterized as ‘first-come, first-served.’” Roberts, “A Lost Connection,” 1112–1113.

(12.) One camp asserts that governments need to take aggressive steps to compensate for vast differences in access to shared radiocommunication resources: “The digital revolution has transformed the lives of many, but also has left untouched the lives of many others. As a result, a large segment of the world population misses out on the tremendous political, social, economic, educational, and career opportunities created by the digital revolution” (Yu, “Symposium”). Another camp emphasizes the efficiency and productivity gains in relying on marketplace forces to allocate access and use of spectrum: “The rationales for [government] stewardship and for all-encompassing regulation that were offered in 1927 [at the onset of radio broadcasting] were not strong then; they have not grown any stronger with age. There is a better way. I describe it with a new word: ‘propertyzing.’ By that I mean converting the current system of regulatory permits or licenses to use the spectrum into a full-fledged system of property rights ownership” (White, “ ‘Propertizing’ the Electromagnetic Spectrum”). The latest camp has an even more libertarian view and would rely on technological innovations to replace the government role of doling out property rights: “Thus, the auction solution to the problem of FCC regulation may be no better than the previous system of license allocation argue that the spectrum might be best governed, at least in part, as a commons,” that is, common property available for access by all (Noam, “Spectrum Auctions: Yesterday’s Heresy, Today’s Orthodoxy, Tomorrow’s Anachronism”).

(13.) Hazlett, “Assigning Property Rights to Radio Spectrum User”; Melody, “Spectrum Auctions and Efficient Resource Allocation”; Spiller and Cardilli, “Towards a Property Rights Approach to Communications Spectrum”; Cramton, “The Efficiency of the FCC Spectrum Auction.”

(14.) Hatfield, “The Current Status of Spectrum Management.”

(15.) Kwerel and Williams, A Proposal for a Rapid Transition to Market Allocation of Spectrum; Ward, “Secondary Markets in Spectrum.”

(16.) “Sovereignty is the situation of the state which has no political superior over it, but is nevertheless bound by international law.” Hoffmann, International Systems and International Law, 164.

(17.) White, “Propertizing,” 37. (p.142)

(18.) For background on the ITU organization structure and history, see Codding Jr., “The International Telecommunications Union”; White and Lauria, “The Impact of New Communication Technologies.”

(19.) Article 44 of the ITU Constitution states: Members shall endeavour to limit the number of frequencies and the spectrum used to the minimum essential to provide in a satisfactory manner the necessary services. To that end, they shall endeavour to apply the latest technical advances as soon as possible.

“In using frequency bands for radio services, Members shall bear in mind that radio frequencies and the geostationary-satellite orbit are limited natural resources and that they must be used rationally, efficiently and economically, in conformity with the provisions of the Radio Regulations, so that countries or groups of countries may have equitable access to both, taking into account the special needs of the developing countries and the geographical situation of particular countries.” See International Telecommunication Union, Use of the Radio-Frequency Spectrum. For background on the ITU spectrum allocation and satellite orbital slot registration process, see Frieden, Managing Internet Driven Change in International Telecommunications, chapter 6, “Players in International Telecommunications Policy Making.”

(20.) For background on the ITU satellite orbital slot registration process and the administrative difficulties resulting from paper satellite registration filings, see Tompson, “Space for Rent”; Delzeit and Beal, “The Vulnerability of the Pacific Rim Orbital Spectrum under International Space Law”; and Wong, “The Paper ‘Satellite’ Chase.”

(21.) International Telecommunication Union, “Processing Charges for Satellite Network Filings and Administrative Procedures”; International Telecommunication Union, “Scrambling for Space in Space.”

(22.) “The most successful application of equity principles to the geostationary orbit arose out of negotiations during the sessions of the Space World Administrative Radiocommunications Conference held in 1985 and 1988. The result was a compromise that produced a hybrid system which combined the ‘first-come, first-served’ system with an a priori allotment system. Under the plan, each ITU Member was granted an allotment consisting of a nominal orbital position which represented a center point around which to base a maximum ten degree arc on the geostationary orbit, eight hundred megahertz of bandwidth, and a designated service area roughly equivalent to each Member’s terrestrial borders. The allotments should not be confused with actual reserved assignments of positions and frequencies for fixed satellite service. They more closely resemble a right of coordination priority. The actual positions and frequencies remain available for use under the traditional allocation process; it is only when a Member begins the process of notification that the allotment plan becomes a factor in the distribution process.” Roberts, “A Lost Connection,” 1128.

(23.) Berger, “Proposed Legal Structure for the Silksat Consortium.”

(24.) For background on the formation of INTELSAT and its privatization, see Frieden, “Privatization of Satellite Cooperatives.” (p.143)

(25.) Additionally U.S. taxpayers and corporations benefited by the formation of INTELSAT as the cooperative established a U.S. headquarters and primarily used U.S.-manufactured and U.S.-launched satellites.

(26.) United States Federal Communications Commission, Establishment of Satellite Systems Providing International Communications.

(27.) Lyall, “On the Privatisation of INTELSAT.”

(28.) For example, the U.S. Congress enacted the Open-Market Reorganization for the Betterment of International Telecommunications Act (United States Congress 2000) to ensure that privatized cooperatives do not have the ability to leverage their previous status to secure anticompetitive advantages, but also to ensure that a small residual organization continue to provide core, lifeline services to developing nations, including those lacking access to submarine cable capacity.

(29.) “From 1988 to 1990, when Tonga made the filings on behalf of Friendly Islands Communications (‘Tongasat’), the ITU system permitted a country to register a position for up to nine years before a satellite was launched. Tonga’s action ‘outraged’ the international community because it ‘lacked a genuine need’ for so many orbital allotments in the Pacific Rim portion of the GSO. Tonga eventually withdrew its request for ten of the sixteen allotments, and, in 1991, it acquired six allotments. But, Tongasat further angered the international community by leasing one allotment to Unicom, a Colorado company, and auctioning off the remaining five allotments.” Copiz, “Scarcity in Space,” 208.

(30.) International Telecommunication Union, Plenipotentiary Conference, Resolution 86, Advance Publication, Coordination, Notification and Recording Procedures for Frequency Assignments Pertaining to Satellite Networks (seeking simplification and cost savings in the registration process for satellite networks spectrum use); and International Telecommunication Union, Resolution 88, Processing Charges for Satellite Network Filings and Administrative Procedure (recommending cost-based processing charges for satellite filings).

(31.) United States Federal Communications Commission, Establishment of Policies and Service Rules (implementing frequency sharing arrangements among different types of satellite operators consistent with policies adopted by the ITU’s 2000 World Radiocommunication Conference).

(32.) Technological innovations also offer ways to reduce the potential for interference and to promote greater spectrum sharing. Digital signal processing, frequency-agile transceivers, and software-managed spectrum use provide unprecedented opportunities to abate spectrum scarcity and congestion. By converting signals into a coded, digital sequence, a format compatible to the language of computers, engineers provide a way to streamline content delivery. A compressed digital signal can fit in a smaller channel, making it possible for more content to be transmitted. Frequency-agile radios hop and skip across various frequencies to avoid interference and to accommodate many users. Software adds intelligence and computation capabilities to transmitters and receivers, expanding total content output and abating the potential for interference.

In an environment where virtually unlimited spectrum access is technologically possible, governments need not micromanage spectrum use, provided they establish technical standards for (p.144) the equipment and the transmission standards used by radio transmitting equipment. This approach considers spectrum a shared “commons” much like a public park where private ownership and property rights need not exist. For background on the concept of a commons as applied to spectrum use, see Buck, “Replacing Spectrum Auctions with a Spectrum Commons.”

(33.) In economic terms, spectrum allocations by consensus promote positive network externalities in terms of cross-border compatibility of equipment and services. For example, most nations have agreed to the consensus spectrum allocation for satellite frequencies. This means that all nations illuminated by a satellite footprint can access the same satellite having agreed on what frequencies the Satellite will operate and what technical parameters transmitting and receiving earth stations will use. When nations fail to reach such consensus, consumers face equipment and operating frequency incompatibility, as has occurred with cellular radiotelephone service. If the nations of the world had agreed on a single spectrum allocation for cellular radio service, there might have evolved a single transmission standard enabling a single transceiver to operate throughout the world.

(34.) White, “Propertizing,” 35.

(35.) “Under the property rights system… governments would still have the ability to own and use spectrum parcels in ways that taxpayers felt were worthwhile, including defense and public safety, public broadcasting, etc. in the same way (and subject to the same constraints) that public agencies can own and use other forms of property.” Ibid.

(36.) “In principal, we think that government users should acquire spectrum at market prices the same way they acquire other inputs such as oil, real estate and computer equipment. Paying market prices for these other inputs does not diminish the quality of government services.” Kwerel and Willams, “A Proposal,” 36.

(37.) “When a licensee goes bankrupt, tension arises if the FCC tries to use its position as a regulator to give it an advantage as a creditor. The question is whether courts should treat the FCC as a creditor or as a regulator in Chapter 11 bankruptcy proceedings involving electromagnetic spectrum licensees. The FCC’s dual role has led the Second, Fifth, and D.C. Circuits to reach different and conflicting conclusions regarding the scope of the FCC’s regulatory power in such proceedings. The courts’ efforts to reconcile the FCC’s roles are made difficult because of tension between a primary goal of bankruptcy and the Bankruptcy Code’s deference to governmental units acting in their regulatory capacities.” Patterson, “The Nature and Scope of the FCC’s Regulatory Power,” 1375.

(38.) “[A] system of spectrum property rights would cause spectrum to look much like real estate: Smaller units of spectrum would be available to anyone who could pay the market price.” White, “Propertizing,” 35.

(39.) The FCC has endorsed the development of secondary markets. See United States Federal Communications Commission, Promoting Efficient Use of the Spectrum.

(40.) For a comprehensive argument against satellite spectrum auctions, see Jackson et al., Public Harms. (p.145)

(41.) Nobuo and Ye, “Spectrum Buyouts.”

(42.) Under a pollution trading system, “a regulatory agency establishes a performance goal for an industry or area and then allocates increments of allowable pollution to each business unit in the industry or area. Because the cost of meeting their performance-based goals will differ among firms, firms with low pollution control costs should invest in a lot of pollution control, and firms with high pollution control costs should invest in less. Marketable permits allow firms to exchange increments of their performance-based goals so that the marginal cost of pollution control is equal across firms, with some firms exceeding their allocated pollution increment and others falling short. An added benefit to the tradable permit system is that it should stimulate investment in cost-effective pollution control technology because firms that can reduce the cost of pollution control can benefit by selling their allocated pollution increments.” Blais, “Beyond Cost/Benefit.”