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The Regulatory Challenges of Local Area Wireless Technology

Rayiner Hashem

1. Introduction

The explosive increase in use of wireless technology over the last two decades has put the

FCC, as gatekeeper of the spectrum, in the hot seat. The agency has been charged with

anticipating demand for new uses of spectrum and regulating accordingly. If it acts too slowly,

or without foresight, the regulatory framework can impede innovation and create artificial

scarcity. One area in which the agency has struggled to keep up with rapid technological change

is local area wireless, the domain of wireless networks that span from a single person to a single

building using technology like Bluetooth and Wi-Fi. Integration of local area wireless

technology has become almost pervasive in consumer electronics, but this innovation is

threatened by an impending shortage of spectrum in the unlicensed band used by these devices.1

The limitations of the FCC’s existing approach to spectrum management have been widely

recognized. Many have proposed new approaches that promise to allocate spectrum more

quickly and efficiently in response to changing demand. One of the leading alternatives is the

property rights approach, which calls for market solutions to spectrum allocation based on the

creation of tradable rights in spectrum. The other major alternative is the spectrum commons

approach, which calls for the creation of a spectrum commons governed by social protocols.

Comparing these two approaches is difficult because they are couched in real estate abstractions

that bear little resemblance to the physical realities of wireless communications. A different

abstraction, bearing more resemblance to the law of tort than to the law of property, is useful for

analyzing the alternative approaches. Applying the property rights approach to local area

1 Steven Schwankert, Wireless Spectrum Gets Crowded, PCWORLD (Apr. 16, 2007), http://www.pcworld.com/article/130753/wireless_spectrum_gets_crowded.html.

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wireless suggests that market allocation of spectrum will not lead to optimal outcomes in

situations where the goal of high spectrum utilization necessitates fine-grained, dynamic

spectrum rights that create high transaction costs. The spectrum commons model, on the other

hand, seems very workable for local area wireless and has the advantage of exhibiting greater

continuity with the FCC’s existing unlicensed regime. A spectrum commons for local area

devices could be created within the FCC’s existing framework, and could be governed by rules

that would attempt to maximize the utilization of the assigned spectrum.

2. Local Area Wireless

Local area wireless has become a tremendously valuable industry, and its growth will

create substantial new regulatory challenges for the FCC. Last year the consumer electronics

industry shipped one billion Wi-Fi chipsets.2 Similarly, sources estimate that the industry will

ship 2 billion Bluetooth chipsets in 2014.3 The total economic value of local area wireless

technologies is enormous. One study estimates that the value of just home and hospital uses of

Wi-Fi along with in-store uses of RFID could be $16-37 billion per year over the next 15 years.4

The same study predicts that the total value of unlicensed use may, over the next decade, become

comparable to the total value of licensed use.5

The local area wireless industry is posed to grow significantly over the next decade.

Growth will come on two fronts: from increased penetration of existing technologies, and from

development of new technologies for currently unaddressed uses.

Existing technologies like Wi-Fi and Bluetooth will find their way into more devices. One 2 Wi-Fi Chipsets Shipped Will Pass One Billion Units per Year by 2012, MOBILETECH NEWS, (Sept. 21, 2010), http://www.mobiletechnews.com/info/2010/09/21/110518.html. 3 Nearly Two Billion Bluetooth Chipsets to Ship in 2014, ABIRESEARCH (Dec. 4, 2009), http://www.abiresearch.com/press/1559-Nearly+Two+Billion+Bluetooth+Chipsets+to+Ship+in+2014. 4 INGENIOUS CONSULTING NETWORK, THE ECONOMIC VALUE GENERATED BY CURRENT AND FUTURE ALLOCATIONS OF UNLICENSED SPECTRUM 6 (2009), available at http://www.ingeniousmedia.co.uk/websitefiles/Value_of_unlicensed_-_website_-_FINAL.pdf. 5 Id. at 43.

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characteristic of local area wireless technology is that it is often integrated into non-portable or

semi-portable, non-consolidatable devices. Thus, it has a greater potential for multiplication than

other kinds of wireless technology. For example, the Sony Playstation 3 uses Bluetooth as does

the Nintendo Wii.6 Bluetooth is becoming a common choice for connecting home entertainment

remotes,7 cars,8 and TVs.9 Cellphones, which are the client endpoints of the cellular telephony

network, are in fact the master of their Bluetooth piconets,10 serving as hosts for devices such as

headsets and laptops. Even appliances may soon be connected to the household Wi-Fi

network.11 Overall, as Wi-Fi and Bluetooth chips come down in price, and as increasing levels

of processor integration make it cheaper to put a small amount of computing power and a

wireless network connection on a device, the number of endpoints connected to local area

wireless networks will increase dramatically.

New technologies will come into the market because there are many uses for which Wi-Fi

and Bluetooth are unsuitable. First, both use relatively large amounts of power.12 There are

potential applications in home automation, health monitoring, and industrial settings that require

devices that can last on a small battery for months or even years.13 Two upcoming technologies

6 Nintendo Wii and Bluetooth, BLUETOOTH TOMORROW (Apr. 16, 2011), http://www.bluetomorrow.com/bluetooth-products/gaming-products/nintendo-wii-bluetooth.html. 7 Tim Conneally, Up Close with TiVo's new Bluetooth QWERTY remote, BETANEWS (Mar. 2, 2010), http://www.betanews.com/article/Up-Close-with-TiVos-new-Bluetooth-QWERTY-remote/1267587505. Remotes, of course, are famous for their stalwart resistance to consolidation. 8 BLUETOOTH SIG, BLUETOOTH TECHNOLOGY AND THE CAR (2007), available at http://www.telematicsupdate.com/naveurope2007/presentations/AndersEdlund_Bluetooth.pdf. 9 Alessondra Springmann, New WiFi-enabled TV From Toshiba Sports LED Backlight, PC WORLD (Mar. 2010), http://www.pcworld.com/article/192042/new_wifienabled_tv_from_toshiba_sports_led_backlight_1080p.html. 10 David Blankenbeckler, An Introduction to Bluetooth, WIRELESS DEVELOPER NETWORK (Apr. 16, 2011), http://www.wirelessdevnet.com/channels/bluetooth/features/bluetooth.html. 11 Chris Davies, Samsung Zipel WiFi refrigerator packs DLNA streaming & Google Calendar, SLASHGEAR (Mar. 4, 2010), http://www.slashgear.com/samsung-zipel-wifi-refrigerator-packs-dlna-streaming-google-calendar-0476706. 12 Gadi Shor, How Bluetooth, UWB, and 802.11 stack up on power consumption, EETIMES 2 (Apr. 15, 2008), http://www.eetimes.com/design/automotive-design/4012962/How-Bluetooth-UWB-and-802-11-stack-up-on-power-consumption. 13 NEC, ZIBBEE 4-5, available at http://bwrc.eecs.berkeley.edu/People/Grad_Students/czhong/mot/ZigBee%20Master.ppt.

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address these needs: Zigbee (IEEE 802.15.4),14 and Bluetooth Low Energy.15 Second, even the

latest IEEE 802.11n standard is not fast enough for many media applications. These applications

require high bandwidth and have the power budgets to afford high speed wireless links. Several

upcoming standards address these needs. Wireless USB is a high-bandwidth short-range

standard for peripheral devices that operates in the UWB bands between 3.1-10.6 GHz.16

Wireless HD is an even higher-bandwidth, short-range standard intended to connect televisions

wirelessly that operates in the EHF bands between 57-64 GHz.17

3. The Unlicensed Band

The genesis of the unlicensed band was in a 1985 order which allowed spread-spectrum

devices to operate unlicensed,18 subject to certain relatively liberal constraints, in the 900 MHz,

2.4 GHz, and 5.8 GHz bands.19 Over the years, the Part 15 regulations have steadily evolved to

respond to new technology. For example in 1995 the FCC made available the Extremely High

Frequency (EHF) spectrum from 57-64 GHz for use by unlicensed devices.20 The line of sight

restrictions and limited range of these devices,21 drastically limit their interference potential

making them appropriate for unlicensed operation.22 In 2002, the FCC amended Part 15 to allow

14 PATRICE OEHEN, ZIGBEE: AN OVERVIEW OF THE UPCOMING STANDARD, available at http://www.dcg.ethz.ch/lectures/ws0506/seminar/materials/zb_slides.pdf. 15 NOKIA, BLUETOOTH LOW ENERGY TECHNOLOGY, available at http://www.bluetooth.com/SiteCollectionDocuments/BluetoothLowEnergyTechnology_Nokia_Fitness.pdf. 16 WIRELESS USB PROMOTER GROUP, WIRELESS USB 1.1 SPECIFICATION NOW AVAILABLE, available at http://www.usb.org/press/USB-IF_Press_Releases/WirelessUSB_1.1_TechBulletin_Spec_FINAL.pdf. 17 LG ELECTRONICS ET. AL., WIRELESSHD SPECIFICATION VERSION 1.0 OVERVIEW 3 (2007), available at http://www.wirelesshd.org/pdfs/WirelessHD_Full_Overview_071009.pdf. 18 47 C.F.R. § 15. 19 A Brief History of Wi-Fi, THE ECONOMIST (JUN. 10, 2004), http://www.economist.com/node/2724397; FCC OFFICE OF STRATEGIC PLANNING AND POLICY ANALYSIS, UNLICENSED AND UNSHACKLED: A JOINT OSP-OET WHITE PAPER ON UNLICENSED DEVICES AND THEIR REGULATORY ISSUES 7 (2003), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-234741A1.pdf. 20 FCC OFFICE OF STRATEGIC PLANNING AND POLICY ANALYSIS, UNLICENSED AND UNSHACKLED: A JOINT OSP-OET WHITE PAPER ON UNLICENSED DEVICES AND THEIR REGULATORY ISSUES 8 (2003), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-234741A1.pdf. 21 SIBEAM CORP., BENEFITS OF 60 GHZ RIGHT FREQUENCY, RIGHT TIME 2 (2005), available at http://www.sibeam.com/whtpapers/60_GHz_Benefits_White_Paper_11_05.pdf. 22 Id. at 3.

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the operation of Ultra Wide Band (UWB) devices in the 3.1-10.6 GHz range.23 These devices

limit their interference potential by transmitting at a very low power density over a large

bandwidth,24 enabling them to underlay existing networks on the same frequencies.

The FCC has not been complacent in the face of possible spectrum shortage.25 In 2002, it

formed the Spectrum Policy Task Force (SPTF), a group charged with “keep[ing] pace with the

ever increasing demand for spectrum…”26 Recently, much of the task force’s work has been

focused on wireless broadband issues,27 but in 2002 the task force set up a working group to

study the issue of unlicensed devices.28 The group concluded that there was great interest in

making available additional unlicensed spectrum.29 The working group proposed to make more

spectrum available for wireless devices by clearing spectrum and allowing unlicensed devices to

underlay and overlay existing users through new interference avoidance mechanisms.30

4. Property Rights Model

The property rights approach has emerged as a leading alternative to the FCC’s widely

criticized,31 “command and control” management of spectrum. It has even made some inroads at

the agency. Since 1994 the FCC has gravitated towards using auctions to allocate spectrum,

selling spectrum licenses to the highest bidder.32 At least some at the FCC have expressed

23 Revision of Part 15 of the Commission’s Rules Regarding Ultra-Wideband Transmission Systems, First Report and Order, 17 F.C.C.R. 7435, 7438 (2004). 24 INTEL CORP., ULTRA-WIDEBAND (UWB) TECHNOLOGY 4 (2004), available at http://www.3g4g.co.uk/Other/Uwb/Wp/Ultra-Wideband.pdf. 25 Eliza Krigman, FCC Forecasts Major Spectrum Shortage, NATIONAL JOURNAL (Oct. 21, 2010), http://techdailydose.nationaljournal.com/2010/10/fcc-forecasts-major-spectrum-s.php. 26 FCC, FCC CHAIRMAN MICHAEL K. POWELL ANNOUNCES FORMATION OF SPECTRUM POLICY TASK FORCE (2002), http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-223142A1.pdf. 27 Spectrum Policy Task Force, FCC (Apr. 18, 2011), http://www.fcc.gov/sptf. 28 FCC SPECTRUM POLICY TASK FORCE, REPORT OF THE UNLICENSED DEVICES AND EXPERIMENTAL LICENSES WORKING GROUP (2002), available at http://www.fcc.gov/sptf/files/E&UWGFinalReport.pdf. 29 Id. at 12-13. 30 Id. at 15. 31 Timothy J. Brennan, The Spectrum as Commons: Tomorrow’s Vision, Not Today’s Prescription, 41 J.L. & ECON. (No. S2) 791, 792 (1998) [hereinafter Spectrum as Commons: Not Today’s Prescription]. 32 FCC Auctions Home, FCC (Apr. 18, 2011), http://wireless.fcc.gov/auctions/default.htm?job=auctions_home.

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strong interest in expanding the use of the property rights approach, calling for the development

of markets where spectrum can be freely traded,33 and for a comprehensive spectrum

inventory,34 which could facilitate the development of such markets by centrally cataloguing

existing rights.

The property rights model of spectrum management is best described by a quotation in

Ronald Coase’s seminal 1959 paper which introduced the concept: “If the problems faced in the

broadcasting industry are not out of the ordinary, it may be asked why was not the usual solution

(a mixture of transferable rights plus regulation) adopted for this industry?”35 Coase noted the

inefficiencies of the contemporary FCC regime. He argued that agencies lacked precise

measurements of benefit and cost and so had difficulty striking efficient balances, and that they

lacked good knowledge of demand and so tended to reach arbitrary results.36 Using an early

version of a theory that would ultimately be named after him, Coase argued that spectrum should

be auctioned to the highest bidder,37 and that market forces would take care of subdividing and

re-allocating spectrum rights to those who could derive the most value from them. Through

precise definition of rights,38 the same judicial actions that mediated between conflicting

between uses of real property could mediate between interfering uses of spectrum.39

33 Secondary Market Initiatives, FCC (Apr. 18, 2011), http://wireless.fcc.gov/licensing/index.htm?job=secondary_markets; Spectrum Leasing, FCC (Apr. 18, 2011), http://wireless.fcc.gov/licensing/index.htm?job=spectrum_leasing; The Opening of the Spectrum Market, SPECTRUM BRIDGE (Feb. 3, 2010), http://spectrumbridge.blogspot.com/2010/02/opening-of-secondary-spectrum-market.html. 34 Larry Downes, Snowe, Kerry Introduce Spectrum Inventory Bill, CNET NEWS (Mar. 2, 2011), http://news.cnet.com/8301-1035_3-20038572-94.html. 35 Ronald H. Coase, The Federal Communications Commission, 2 J.L & ECON. 1, 30 (1959) [hereinafter The Federal Communications Commission]. 36 Id. at 18. 37 Id. at 30. 38 Id. at 26. 39 Id. at 28.

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5. Spectrum Commons Model

Not everyone is convinced that a property rights regime is the proper way to manage

spectrum. Some argue that the spectrum should be treated as a freely accessible commons.

It is impossible to fully understand the spectrum commons model without understanding its

underlying value system. This value system can perhaps best be described in terms of its

greatest expression: the Internet. The Internet is open and technology-neutral. Any device can

connect to the Internet, as long as it follows a few basic ground rules. The Internet is

decentralized. That is not to say it is unmanaged, but rather the logic of management is

distributed throughout the fabric of the network.40 These characteristics are not merely design

decisions. They represent a set of values, an overall coherent sensibility about how large

systems should be organized. Those influenced by these values use the words “open” and

“distributed” in the same way as those influenced by Milton Friedman might use the phrase

“market mechanisms.”

Where Coase asked: “if property rights with some regulation works for every other market,

why won’t it work for spectrum management?” proponents of the spectrum commons ask: “if

openness and decentralized intelligence work for the internet, why won’t it work for spectrum

management?” Drawing on the values of openness and decentralization, proponents of the

spectrum commons argue that the premise of spectrum being a form of property that requires

individual allocation and exclusive access is incorrect.41 Rather, they see spectrum as a common

pool resource where shared usage can be facilitated by social protocols, not property rights.42

40 Congestion control, for example, is basic network management logic that might be centralized in a top-down design, but is implemented in the Internet using a distributed protocol. INTERNET ENGINEERING TASK FORCE, TCP CONGESTION CONTROL (1999), http://www.ietf.org/rfc/rfc2581.txt. 41 Stuart Buck, Replacing Spectrum Auctions with a Spectrum Commons, 2002 STAN. TECH. L. REV. 2, ¶ 5 (2002) [hereinafter Replacing Spectrum Auctions]. 42 Id. at ¶ 23.

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6. Conceptualizing Spectrum Without Land Analogies

The spectrum management models are often described using real estate abstractions. FCC

Regulation is a fiefdom, with the feudal lord parceling out spectrum to favored supplicants.

Property Rights is a capitalist state, with the market allocating spectrum to those who value it

most highly. Spectrum Commons is a post-capitalist anarchy, with access to spectrum fluidly

mediated by social convention. Whatever value these land abstractions may have had at a time

when spectrum management was the problem of mediating between AM radio broadcasts, they

are confusing and misleading in the world of modern radio technology.43 Spectrum is not land,44

it is not an input to production,45 and it is certainly not a train in a tunnel.46 It is not a thing at all.

The only things that exist are radios that interact with each other and the natural world via the

exchange of radio waves.

Within this reality the regulatory function is a singular one: the prevention of harmful

interactions (interference). This single function implicates two efficiency concerns: capacity

maximization and facilitation of highest value uses.47 These concerns are subsidiary to the

overall regulatory function: the first is only implicated to the extent that capacity is scarce, and

the second is only implicated to the extent that the mitigation of harmful interference requires the

curtailing of some uses. Because these threshold criteria may or may not hold in any given

context, the relative importance of these concerns is highly context-dependent.

43 Kevin Werbach, Supercommons: Toward a Unified Theory of Wireless Communication, 82 TEX. L. REV. 863, 885 (2003) (“Comparing wireless communication to grazing sheep in a meadow suggests that a whole series of legal and economic constructs applied to meadows can usefully be applied to spectrum.”) [hereinafter SuperCommons]. 44 Contra Jerry Brito, The Spectrum Commons in Theory and Practice, 2007 STAN. TECH. L. REV. 1, ¶ 19 (2007). 45 Contra Thomas W. Hazlett, Optimal Abolition of FCC Spectrum Allocation, 22 J. ECON. PERSP. (No. 1) 103, 106 (2008); Robert W. Crandall, New Zealand Spectrum Policy: A Model for the United States? 41 J.L. & ECON. (No. S2) 821, 822 (1998). 46 The Federal Communications Commission at 33. 47 In an ideal world, there would be one concern that subsumed both: maximization of the total value of uses. However this metric presupposes the existence of conditions that make Coase’s Theorem applicable. Where such conditions do not exist, it cannot be taken for granted that rules focused on facilitating highest value uses will simultaneously maximize the capacity of the spectrum.

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As one commentator notes, this conceptualization of spectrum management resembles less

the law of real property and more the law of tort, particularly the law of nuisance.48 This

analogy is particularly apropos because of one important characteristic of modern radio

communications: concurrent use. Wireless transmissions can overlap in the spatial, temporal,

and frequency domains to a tremendous degree without harmful interaction. Wireless networks

can occupy the same physical area, transmit at the same time, and transmit on the same

frequency and can still communicate successfully using advanced signal processing techniques

to separate desired signals from undesired noise. The law of tort operates within a framework of

concurrent use, while the law of property largely avoids the problem of conflicting use by

limiting concurrency.49 For many systems, the former framework is more appropriate than the

latter. Imagine a system of traffic laws that was preoccupied with “allocating road” to the

highest value uses instead of with mediating harmful interactions, accidents, only in the

relatively uncommon cases when they occurred. Just as maximizing concurrent use is key to

maximizing the efficiency of the highway system, maximizing concurrent use is key to

maximizing the efficiency of spectrum.

The real estate analogy obscures some important issues in spectrum management because

many of those issues are difficult to model within the framework of real property. Adjacent

channel interference, hidden node problems, the robustness/throughput trade-offs between digital

modulation techniques, and inter-node cooperation are all issues with regulatory implications

48 SuperCommons at 882-914 (arguing that the pervasive conceptualization of spectrum as “a thing” obscures the issues and that it is better to analogize to legal domains, such as tort law, which do not presuppose ownership). 49 Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 433 (1982) (citing Kaiser Aetna v. U.S., 444 U.S. 164, 176 (1979)) (describing the right to exclusive use as “one of the most essential sticks in the bundle of rights that are commonly characterized as property.”).

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that cannot be easily expressed using the real estate analogy.50 At the same time, the tort

analogy suggests some new regulatory techniques obscured by the real estate analogy. For

example, the “least cost avoider” principle of tort law aims to avoid harmful interactions in the

real world by encouraging the cost-effective exercise of care. One can imagine an analogous

principle in spectrum management, requiring receivers to be reasonably robust in the face of low

levels of interference. Such a principle would render indefensible the design of analog and

digital television, which by being overly-sensitive to interference limits concurrent use of the

television spectrum, even though within the exclusive possession framework of real estate such a

design seems perfectly sensible.

7. Applying the Property Rights Model

Precise definition of property rights is central to the property rights model.51 Imprecision

in these definitions can lead to externalities that undermine economic efficiency,52 and in the

context of spectrum imprecision can manifest itself in either interference or wasted spectrum,

depending on the direction of the error. Yet, the characteristics of local area wireless networks

make it difficult to define spectrum rights in a way that maximizes capacity by facilitating

concurrent use. Their low power, short range, low duty-cycle, and resistance to co-channel

interference offer the potential for massive concurrency in the spatial, temporal, and frequency

domains. Within a property rights model, this concurrency cannot be harnessed unless the

property rights are defined in a way that allows fine-grained transactions over these domains.

For land, leases measured in months may be sufficient, but for spectrum transmission rights 50 See also SuperCommons at 888-889 (discussing various interference mitigation techniques not easily modeled within a real property framework), and SuperCommons at 901 (noting that use of the property abstraction results in a tendency to ignore concurrent use mechanisms that are difficult to model in a real property framework). 51 The Federal Communications Commission at 25. 52 William Lehr, Dedicated Lower-Frequency Unlicensed Spectrum: The Economic Case for Dedicated Unlicensed Spectrum Below 3 GHz, NEW AMERICA FOUNDATION SPECTRUM POLICY PROGRAM 23 (2004), available at http://www.newamerica.net/files/Doc_File_1899_working_paper.pdf (using underlay rights, å la UWB as an example) [hereinafter Case for Unlicensed Spectrum].

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measured in fractions of a second must be cognizable, tradable, and enforceable. Moreover,

because of the dynamic nature of local area wireless networks, any such rights must be traded

dynamically as demand changes and as networks move relative to each other.

Modeling spectrum property rights of such complexity is possible. Doyle and Forde

introduce a Frequency-Space-Time model, visualized as a multi-dimensional Rubix-cube

extended in the frequency, space, and time domains.53 They break up the multi-dimensional

space into blocks and treat transmission rights as subspaces enclosing some blocks.54 While this

model is a huge step forward from the essentially unidimensional spectrum allocation map used

by the FCC, and is valuable for modeling the sort of coarse-grained rights relevant to many

common uses of spectrum, it is insufficient to precisely represent the sort of fine-grained rights

that are necessary for local area wireless. The fatal shortcoming of the model is that it cannot

express the basic fact that interference is a bilateral phenomenon. A transmission right cannot be

rationally defined without reference, at least indirectly, to a receiver.55 While the authors are

unclear about what the block boundaries in their model represent, it must be the case that the

boundaries encode the authors’ tacit assumptions about receivers.56 The boundaries must signify

the spatial extent outside which the power from the transmitter is below some arbitrary threshold

such that the transmission will not interfere with some arbitrary receiver. If this threshold is

more generous than what a real receiver can manage then capacity is wasted because the

53 L. Doyle & T. Forde, Towards a Fluid Spectrum Market for Exclusive Usage Right, IEEE DYSPAN 2-3 (Apr. 2007), available at http://www.tara.tcd.ie/bitstream/2262/23959/1/TowardsAFluidSpectrumMarket.pdf. 54 Id. at 5. 55 The idea that a radio transmits at a certain frequency in a certain place is a physical approximation. A radio signal propagates an infinite distance and occupies an infinite set of frequencies. When we say that a radio transmits in some place we mean that its signal is below a certain threshold power level outside some spatial boundary, and when we say that a radio transmits on some frequency we mean that its signal is below a certain threshold outside a given frequency range. The selection of these thresholds necessarily requires reference to some real or abstract receiver with which we wish to avoid interfering. 56 L. Doyle & T. Forde, Towards a Fluid Spectrum Market for Exclusive Usage Right, IEEE DYSPAN 5 (Figure 6) (Apr. 2007).

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transmitter could increase its power without harming the receiver,57 and if that threshold is less

generous than what the actual receiver can manage harmful interference results. Without

reference to the real receiver, imprecision resulting in reduced concurrency is inevitable.

In the context of the two concerns of capacity maximization and the facilitation of highest

value uses, it would seem that the property rights model elevates the latter at the cost of the

former. Doyle and Forde’s conceptualization of spectrum rights would certainly be effective in

choosing higher value uses over lower value ones, but at the cost of hindering concurrency and

leaving a large amount of spectrum capacity on the table. This model is, of course, not the only

way of describing spectrum rights, although the example does suggest that spatial analogies,

because of their unsuitability for representing bilateral concerns, are probably not the right

approach for representing fine-grained rights.

Even to the extent that the necessary spectrum rights can be modeled precisely, the

necessary complexity of fine-grained rights creates difficulties. Coase observed that market

transactions will lead to an efficient allocation of property rights, regardless of their initial

allocation, only in the absence of transaction costs.58 His discussion in his paper on the FCC is

expressly conditional on this point. He argues that: “once the legal rights of parties are

established, negotiation is possible to modify the arrangements envisaged in the legal ruling, if

the likelihood of being able to do so makes it worthwhile to incur the costs involved in

negotiation” (emphasis added).59 Due to the complexity of the rights involved, and how often

those rights would have to be renegotiated in response to dynamic conditions, it is possible that

the costs of transacting in spectrum rights for local area wireless could dwarf the value of the

57 See generally Sennur Ulukus & Larry Greenstein, Throughput Maximization in CDMA Uplinks Using Adaptive Spreading and Power Control, IEEE 6TH INTL. SYMP. ON SPREAD-SPECTRUM TECH. 1 (Sept. 2000) (describing the interrelation between transmit power, signal to noise ratio, and network throughput). 58 Ronald H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1, 8 (1960). 59 Ronald H. Coase, The Nature of the Firm, 4 ECONOMICA 386, 393 (1937).

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transactions. If Coase’s Theorem is rendered inapplicable, not only do the allocative efficiency

benefits of the property rights approach disappear, but the two concerns of capacity

maximization and facilitation of highest value uses remain distinct, and the decision of which to

favor becomes important.

Some proponents of the property rights model take it for granted that it will lead to

efficient outcomes. A commentator defends the property rights model by arguing: “If the

benefits of open access ever exceed the costs, spectrum owners could carry out the necessary

subdivision, management, and congestion-based pricing.”60 Formulated more precisely, the

statement should be: “If the benefits of open access ever exceeded the costs, [and the transaction

costs incurred in the process were minimal compared to that benefit,] spectrum owners could

carry out the necessary subdivision, management, and congestion-based pricing.” It is possible,

at least for local area wireless, that the transaction costs of performing the necessary subdivision

and management would swamp the resulting benefits. Coase himself noted in his paper on the

FCC: “When large numbers of people are involved, the argument for the institution of property

rights is weakened and that for general regulations becomes stronger.”61

8. Beyond the Basic Property Rights Model

Some commentators have proposed a different tack on the property rights system, where

the government sells large blocks of spectrum to private entities, called band managers, who

have the power not only to subdivide and allocate rights within those blocks, but also to define

the rights attaching to each subdivision.62

60 Spectrum as Commons: Not Today’s Prescription at 1. 61 The Federal Communications Commission at 29. 62 Robert W. Crandall, New Zealand Spectrum Policy: A Model for the United States?, 41 J.L. & ECON. (No. S2) 821, 825 (1998); DOTECON & ANALYSIS MASON GROUP, ALLOCATION OPTIONS FOR SELECTED BANDS 30-31 (2005), available at http://www.dotecon.com/publications/selectedbands.pdf.

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Consider a scenario with a band manager who owns a block of spectrum for local area

wireless use and a number of users who have devices that need to be able to use that spectrum.

The first question that comes to mind is how the band manager can prevent interference amongst

the various users while maximizing the capacity of the spectrum. If it tries to use market

mechanisms to allocate spectrum within the band, it runs into the same problems as with the pure

property rights model. Alternatively, it can take a command and control approach, requiring the

use of certain wireless technologies or interference mitigation protocols. In this way it would act

like a cellular provider under the current regime, which buys a license to use a block of spectrum

for cellular services, but manages interference within the block with a carefully architected set of

technologies, protocols, and performance standards. This management approach would likely

maximize the capacity of the spectrum better than the pure property rights approach could in

practice, but without the optimality that the pure approach offers in theory.

The second question is whether, in managing interference amongst users of spectrum, the

private band manager can do so in a way that preserved the highest value uses. This question is

closely related to the issue of how the private band manager chooses to monetize its ownership

of the spectrum. For a cellular provider, monetization is easy. It is not only a band manager but

a service provider. Every use of a device in its spectrum creates traffic on its voice and data

network that can be metered. Customers can be charge directly for their use and market

mechanisms can ensure, at least to an approximation, that the limited bandwidth available on the

core network goes to the highest value uses. In contrast, monetization would be difficult for a

private band manager of local area wireless spectrum. Local area wireless devices do not

generally interact with any central network. One possible approach would be for the band

manager to license individuals to operate devices in its band. This approach has the advantage

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that users attaching different levels of value to their uses could be distinguished and licenses

priced accordingly. However, policing such licenses would be extremely difficult for the same

reason metering use would be difficult. A more practical approach would be for the band

manager to license devices to operate in its spectrum. To achieve price segregation, the band

manager might license various class of devices with various performance qualities. The relative

value of uses would then be reflected by proxy, based on how much individual users were

willing to pay for certain classes of device, and the interference management protocol could be

designed to give preference to higher value uses over lower value uses.

The discussion above still leaves a third question: how did the band manager come to

acquire its spectrum in the first place? In one scenario it might have bought a license for a

specific block of spectrum, just as cellular providers to today. In this scenario, the FCC, not the

market, still has to decide how to allocate spectrum amongst various uses, at least at a coarse

level of granularity. In the other scenario, it might have acquired it on the open market. That is

to say in a property rights model where the whole spectrum was being bought and sold, one

provider might have decided to go into the business of providing local area wireless service and

bought some spectrum to support that business. Though some commentators take for granted

that this scenario would occur spontaneously,63 that is not necessarily the case.64 Within the real

estate analogy, this claim is obvious enough to require little justification. If there is a use for

land more economically valuable than other uses, land owners will engage in that use.65

However, the potential difficulties of monetizing local area wireless spectrum might result in

63 Spectrum as Commons: Not Today’s Prescription at 1. 64 Case for Unlicensed Spectrum at 21-22 (noting various situations in which positive and negative externalities might result in failure of new technologies and services to emerge). 65 This claim is only approximately true even in a a land context. There might be a large net value in creating a public park, for example, but a private land owner will generally not do so because he would find it difficult to monetize all of the resultant benefits. John C. Weigher & Robert H. Zerbst, The Externalities of Neighborhood Parks: An Empirical Investigation, 49 LAND ECON. (No. 1) 99, 103 (1973).

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spectrum owners finding it more profitable to engage in alternative uses where they can monetize

a greater fraction of the net benefit of the use, even if the total economic benefit from local area

wireless use might be greater.

The open market case also has important natural monopoly implications.66 It is difficult to

imagine a competitive industry of local area wireless band managers. Suppose there existed two

local area wireless band managers, each managing a large block of spectrum. If a user were to

buy a device, he would have to pick one that worked on one block or the other.67 If a third party

wanted to enter the market, it would have to convince users to buy entirely new equipment.

There would also exist a network externality—users would buy devices that operated on the

same block as their existing devices, and device licensees would presumably follow suit.

Finally, selling a local area wireless band for a different use would incur a huge externalized

transaction cost: users’ devices would all stop working. This problem is not specific to local area

wireless, but would manifest itself any time ownership of devices using particular spectrum was

separated from ownership of the spectrum itself. Problems of this nature are under-appreciated

by proponents of the property rights model because they have no analogue in the world of real

property. When a landlord sells his farm for condominium use his farm hands can just go to

another farm—their plows do not just suddenly stop working.

9. Defending the Spectrum Commons Model

The fact that the property rights model may not be appropriate for local area wireless does

not mean that the spectrum commons model is appropriate. The claim that the model might lead 66 Case for Unlicensed Spectrum at 21 (noting that some licenses might effectively grant monopoly powers and such licensees would have incentives to suppress access to the spectrum even though it might be shared at zero cost). 67 It is expensive to build radios that work on a multitude of spectrum bands. For a device to operate on a handful of specific channels, a significant part of the analog front-end of the radio must be duplicated for each channel. For a device to operate within a continuous range of channels, a very expensive wide-band tuner is required. While radio prices overall have dropped dramatically in the past few decades, these cost reductions have come from advances in digital technology. The analog technology which allows radios to operate on multiple channels is mature, and has not been the subject of huge cost reductions.

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to a tragedy of the commons is still a compelling one.68 One author argues “Open access is not a

feasible regime for spectrum because, as a scarce resource, it will be subject to tragedy.”69 Still,

this particular argument fails to be persuasive, since it has two basic problems.

The first stems from use of the real estate analogy. In the tragedy of the commons scenario

presented by Hardin, the tragedy arises because each farmer captures nearly the full positive gain

of adding an additional head of cattle to the commons while he feels only a portion of the

negative cost of the long-term collapse of the productivity of the land. The tragedy arises from

an externality—benefits are internalized while costs are externalized. It is not clear whether the

same dynamics would hold true in a spectrum commons. In theory, a user could obtain an

internalized benefit by raising his transmission power which would give rise to the externalized

cost of a higher noise floor for everyone else. However in a modern network with radios running

power control loops, everyone else would instantaneously raise their own transmission power as

soon as their signal-to-interference ratio decreased. Thus the offending user would quickly see

the same rise in the noise floor that he imposed on others. One could then imagine an arms race,

involving bigger radios with more transmission power, but power output is severely constrained

by hard limitations such as battery life. This is not to say that there is no worry that a spectrum

commons might be susceptible to users trying to “shout each other down.” Rather, to the extent

such problems might exist they will not be illuminated in any way using an analogy to a system

with vastly different dynamics.

The second problem stems from extrapolating from an situation involving human actors to

a situation involving non-human actors. The theory of the tragedy of the commons is rooted in

the incentive structure that it creates for human actors and the predictable consequences of their

68 Jerry Brito, The Spectrum Commons in Theory and Practice, 2007 STAN. TECH. L. REV. 1, ¶¶ 22-28 (2007). 69 Id. at ¶ 26.

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rational behavior. Computers do not have human incentives or behaviors. They have only the

incentives and behaviors that they are programmed to have. By programming devices

appropriately, as envisioned in the spectrum commons model, tragedy can be averted.

The most powerful argument in favor of programmatic controls on “anti-social” behavior is

the fact that there are multiple examples of such protocols in existence, operating on shared

media without rigid centralized control. The Internet is a perfect example. One would think

there would be an incentive for each internet node to maximize its share of available capacity by

engaging in anti-social behavior. With a few exceptions,70 such behavior does not happen.

Instead, internet devices operate according to a handful of protocols that ensure cooperative

behavior that maximizes the performance of the network.71 While there is a central body

devising these standards, the IETF, there is no central enforcement authority ensuring

conformant behavior.72 There are other examples of protocols that allow dynamic, capacity-

maximizing cooperation of devices at huge scales. The peer-to-peer networking technology

BitTorrent, for example, uses techniques in its protocol to encourage endpoints to behave in

ways that maximize the total throughput of the system.73

10. Fleshing Out the Spectrum Commons Model

The spectrum commons model is underdeveloped. Much of the literature to date has

focused on defending the approach.74 While it is widely acknowledged that the some set of rules

70 Understanding Denial-of-Service Attacks, UNITED STATES COMPUTER EMERGENCY READINESS TEAM, http://www.us-cert.gov/cas/tips/ST04-015.html. 71 M. Allman, et al., RFC 2581 TCP Congestion Control, IETF, http://www.ietf.org/rfc/rfc2581.txt. 72 While it is true that the Internet is a collection of private networks, Internet nodes are largely oblivious to this fact. The mechanisms used to control their behavior are independent of the underlying ownership structure, just as the mechanisms used to manage highway traffic are independent of the ownership structure of the roads. 73 Dave Levin et al., BitTorrent is an Auction: Analyzing and Improving BitTorrent’s Incentives, SIGCOMM ’08 243 (Aug. 2008), available at http://www.ccs.neu.edu/home/amislove/teaching/cs4700/fall09/lectures/lecture20.pdf. 74 Replacing Spectrum Auctions at ¶¶ 21-31.

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is required to ensure orderly use of the spectrum commons,75 most of the discussion of such rules

is very general.76 To the extent that optimal market allocation of local area wireless spectrum

may not be possible, these rules will determine how well the management regime can maximize

the capacity of the spectrum while facilitating the highest value uses. This section considers a

number of possible rules in the context of the former concern, under the assumption that

facilitation of the highest value uses only becomes relevant after capacity maximization has

failed to provide adequate spectrum.77

The first question is what party should be responsible for promulgation and enforcement of

rules governing the commons. This question is a tremendously important one, because there are

conflicting interests at stake. It would be desirable for a crucial public resource be managed in a

transparent, accountable way. This criterion argues for direct regulation by the FCC. On the

other hand, the resources should be managed efficiently so as to maximize capacity. This

criterion argues for some sort of private management.

While often criticized,78 the FCC’s regulation of unlicensed spectrum is not unworkable.

The FCC’s Part 15 regulations have facilitated the emergence a diverse set of technologies.79

The regulations have achieved this success using a (relatively) simple framework in which radios

must accept interference they receive,80 and in which interference is managed with a

75 Replacing Spectrum Auctions at ¶ 37; Phil Weiser & Dale Hatfield, Policing the Spectrum Commons, 74 Fordham L. Rev. 663, 674-681 (2005). 76 Id. at 664-665 n.10. 77 Case for Unlicensed Spectrum at 24 (noting that internet service providers have mostly found it cheaper to over-provision their networks than to try and extract marginal efficiencies using congestion-based pricing). 78 Jerry Brito, The Spectrum Commons in Theory and Practice, 2007 STAN. TECH. L. REV. 1, ¶ 3 (2007). 79 FCC SPECTRUM POLICY TASK FORCE, REPORT OF THE UNLICENSED DEVICES AND EXPERIMENTAL LICENSES WORKING GROUP 9 (2002). 80 FCC OFFICE OF ENGINEERING TECHNOLOGY, UNDERSTANDING THE FCC REGULATIONS FOR LOW-POWER, NON-LICENSED TRANSMITTERS 3 (1993).

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combination of antenna standards, power limits, and certification procedures.81 While the Part

15 regime is far from optimal it has characteristics worth replicating.

Private management of the spectrum commons would not be unthinkable. Private

management need not imply private ownership. The model used for management of the Internet

is illustrative. The Internet is a system of separately-owned devices and networks. Management

power over the system is not rooted in common ownership of the system. Internet standards are

promulgated by an open standards organization, the IETF, consisting of individuals funded by

public and private organizations.82 Authority over the most important centralized resources,

particularly the domain name system (DNS), remains vested in the Department of Commerce,

but is contractually delegated to a non-profit corporation, ICAAN.83 The actual infrastructure of

the DNS is operated by a combination of public and private entities.84 The beauty of this

organization is that while the government retains ultimate authority, the technically-challenging

issues of protocol design are entrusted to public and private entities that have an incentive,85 to

maximize the performance of the network and the technical expertise to do so. Such a system

could be applied to manage a spectrum commons for local area wireless. The FCC could

maintain final authority, but delegate management and certification to a private entity,86 and

industry consortia could define the relevant protocols for facilitating concurrent use.

81 Id. at 2, 7, 3. 82 Mark Atwood, Public Musing on the Nature of IETF Membership and Employment Status, (mailing list post), http://www.ietf.org/mail-archive/web/ietf/current/msg61270.html (noting that to a great degree IETF members act independently of the organizations that fund them). 83 Memorandum of Understanding Between The U.S. Department of Commerce and Internet Corporation for Assigned Names and Numbers, ICANN, http://www.icann.org/en/general/icann-mou-25nov98.htm. 84 Root nameserver, WIKIPEDIA, http://en.wikipedia.org/wiki/Root_nameserver#Root_server_addresses (last visited Apr. 29, 2011) (listing the DNS root name servers and the organizations that own them). 85 Equipment manufacturers may not have a direct stake in the Internet, to the extent that they do not own pieces of it, but they nonetheless have strong commercial incentives to ensure its performance and reliability. 86 It is important for some entity to have final say over the rules, to mediate conflicts. See e.g., Wi-Fi and Bluetooth Interference Issues, HEWLETT-PACKARD CORP., http://www.hp.com/rnd/library/pdf/WiFi_Bluetooth_coexistance.pdf (describing conflicts between Wi-Fi and Bluetooth when integrated into the same device).

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While the formulation of rules to regulate the operation of radios in the local area wireless

commons is probably best left to industry,87 it is helpful to explore some of the contours of the

problem. William Lehr and John Crowcroft have outlined a set of features they believe to be

minimally necessary parts of usable ruleset. Among these are: 1) the prohibition of transmit-

only devices; 2) power restrictions; 3) a mechanism for handling congestion; 4) a mechanism to

support enforcement; 5) a mechanism to support reversibility of policy.88

Lehr and Crowcroft propose that transmit-only devices be prohibited and that receive-only

devices must accept whatever interference they experience, on the grounds that such devices

cannot participate fully in cooperative interference-avoidance protocols. Implicit in these

prohibitions is an arguably more valuable general idea: the commons should not allow devices

that prevent the use of effective techniques for leveraging concurrency. The presence of such

devices is a sore problem for the 2.4 GHz spectrum, in which devices must contend with all sorts

of unruly emitters, like microwave ovens. While the FCC may have been justified in trying to

push unlicensed devices into garbage spectrum in the past, that position is not defensible today.89

Yet, the problem seems to be recurring. The FCC’s White Spaces Order, while laudable for its

daring in allowing unlicensed operation in the TV bands, saddles unlicensed devices with the

need to protect unnecessarily sensitive digital TV receivers.90

Lehr and Crowcroft’s proposal that receive-only devices must accept any interference they

receive is a sound one, for reasons beyond those mentioned in their paper. Many promising

whitespace technologies use a “listen before talk” protocol where devices listen to make sure a 87 Some companies have already started. Draft Proposal for Comment Etiquette Rules and Procedures for Unlicensed Bands, MICROSOFT CORP., http://research.microsoft.com/en-us/projects/mesh/fcc_proposal_v12.pdf. 88 William Lehr & Jon Crowcroft, Managing Shared Access to a Spectrum Commons, FIRST IEEE INTERNATIONAL SYMPOSIUM ON NEW FRONTIERS IN DYNAMIC SPECTRUM ACCESS NETWORKS 420 (2005), available at http://cfp.mit.edu/docs/lehr-crowcroft-sept2005.pdf [hereinafter Managing Shared Access]. 89 Case for Unlicensed Spectrum 8-9. 90 Unlicensed Operation in the TV Broadcast Bands, Second Memorandum Opinion and Order, 25 F.C.C.R. 18661, 18669, 18671 (2010) [hereinafter White Spaces Order].

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channel is free before using it. These devices are susceptible to the hidden node problem, which

occurs when a transmit-only device, such as a wireless microphone,91 broadcasts to a receive-

only device, such as a speaker system. A whitespace device in the vicinity of the receiver may

not be able to “hear” the transmitter, decide the channel is available, and use it, causing

interference with the receiver. This particular problem has been very difficult to solve.92

As Lehr and Crowcroft note, and has been borne out in the FCC’s experience with

unlicensed devices, transmission power is one of the most important variables in a radio

system.93 From the point of view of interference management, reduction in transmission power

has effect of drastically decreasing the spatial footprint of a radio transmitter, facilitating

concurrent use in the spatial domain. At the same time, there is also a relationship between

transmission power and bandwidth, since a higher transmission power increases the signal-to-

noise ratio at the receiver, allowing the use of a more aggressive modulation that sends more bits

per hertz of channel width. Recognizing these two facts, one improvement on the FCC’s current

unlicensed regime would be to mandate transmission power control (TPC), a technique in which

transmitters use a feedback loop to maintain transmit power at the minimum level necessary to

maintain communication with their receivers. TPC improves concurrency by reducing the

spatial footprint of each local area wireless network to the minimum size necessary.

Implicit in several of Lehr and Crowcroft’s proposals is the requirement that all radios

participating in the commons must have substantial processing capability. For example, they

91 Nate Anderson, White Space Group: Amnesty for Illegal Wireless Mic Use, ARSTECHNICA, http://arstechnica.com/old/content/2008/06/white-space-group-amnesty-for-illegal-wireless-mic-use.ars (June 2008); Mark McHenry & Andrew Sterling, DSA Operational Parameters with Wireless Microphones, DYSPAN 2010 9 (Fig. 19), available at http://www.zsezse.com/pdfs/radio8.pdf (describing the problem wireless microphones pose for white space devices). 92 The technical problem has been exacerbated by the political problem posed by the fact that of the nearly 1 million wireless microphone systems estimated to be in use, less than 1,000 are being legally operated. Harold Feld, Of Wireless Microphones, Broadcast White Spaces, Field Testing, and Public Safety, PUBLIC KNOWLEDGE (July 21, 2008), http://www.publicknowledge.org/node/1665. 93 Managing Shared Access at § 3.2.2.

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argue that devices should have signaling capability in order to acquire and share information

about global network conditions.94 It is possible to go too far in this direction. While the state of

the art in whitespace technology derives from military radios that cost tens of thousand of dollars

each, it would be desirable to be able to use devices on the spectrum commons with limited

processing capability, both for cost reasons and for power use reasons. The FCC’s current

whitespace rules suffer from the problem of requiring too much of devices. Under the rules, all

non-client devices must incorporate a geo-location database which can locate the device using

GPS and connect to the internet to acquire information regarding networks in the area that must

be protected from interference.95 This requirement is a substantial burden on whitespace

devices. GPS and internet access capability substantially raise the price and complexity of

devices.96 While it is undoubtedly desirable to require devices operating on commons spectrum

to have some minimum intelligence to participate in the interference management protocol, it is

important to bear in mind that many devices, such as wireless sensors, must be cheap and battery

powered and cannot afford large amounts of complexity.

7. Conclusion

Local area wireless is an extremely valuable use of spectrum and is a breeding ground for

rapid innovation. While the FCC’s existing unlicensed regime has created a shortage of

spectrum for such devices, the alternative property rights approach may not be appropriate for

managing local area wireless spectrum. A spectrum commons, open to all devices on the

condition of their following basic interference management rules, and administered by a private

non-profit entity under authority delegated by the FCC, could be the solution to this shortage.

94 Managing Shared Access at § 3.2.3. 95 White Spaces Order at 18700. 96 This requirement is also a good example of why dedicated spectrum is necessary for unlicensed operation, in order to avoid herculean measures such as requiring each device to have GPS and internet access.

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Taking cues from the success of the management approach applied to the Internet, the commons

could provide sufficient spectrum to support innovation in the local area wireless sector.