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 FCCs 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

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

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 FCCs existing unlicensed regime. A spectrum commons for local area
devices could be created within the FCCs 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.
2

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

Nintendo Wii and Bluetooth, BLUETOOTH TOMORROW (Apr. 16, 2011), http://www.bluetomorrow.com/bluetoothproducts/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-powerconsumption.
13
NEC, ZIBBEE 4-5, available at
http://bwrc.eecs.berkeley.edu/People/Grad_Students/czhong/mot/ZigBee%20Master.ppt.
3

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 OSPOET 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.
4

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 forces 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 FCCs 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 Commissions 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: Tomorrows Vision, Not Todays Prescription, 41 J.L. & ECON.
(No. S2) 791, 792 (1998) [hereinafter Spectrum as Commons: Not Todays Prescription].
32
FCC Auctions Home, FCC (Apr. 18, 2011), http://wireless.fcc.gov/auctions/default.htm?job=auctions_home.
5

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 Coases 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.
6

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 wont it work for spectrum management? proponents of the spectrum commons ask: if
openness and decentralized intelligence work for the internet, why wont 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.
7

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 Coases 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.
8

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.).
9

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, la UWB as an
example) [hereinafter Case for Unlicensed Spectrum].
10

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).
11

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 Fordes 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).
12

transactions. If Coases 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 Todays Prescription at 1.

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.
61

13

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

14

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 Todays Prescription at 1.

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).
64

15

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 externalityusers 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 farmtheir 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.
16

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 externalitybenefits 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
69

Jerry Brito, The Spectrum Commons in Theory and Practice, 2007 STAN. TECH. L. REV. 1, 22-28 (2007).
Id. at 26.
17

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, capacitymaximizing 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 BitTorrents 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.
18

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 FCCs regulation of unlicensed spectrum is not unworkable.
The FCCs 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 overprovision 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, NONLICENSED TRANSMITTERS 3 (1993).
19

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.
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).
82

20

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 transmitonly 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 FCCs 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 Crowcrofts 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].
21

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 receiveonly 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 FCCs 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-tonoise 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 FCCs 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 Crowcrofts 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.
22

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 FCCs 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 FCCs 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.

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.
95

23

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.

24