04 Jul 2017

Political Spectrum

William Echikson

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Few issues could seem more dry and technical than how to divide up radio spectrum, the electromagnetic waves through which radio, television and telecommunication signals pass. But that impression would be mistaken. As we learn from Thomas Hazlett, former chief economist with the US Federal Communications Commission, few issues could be more politicised or disputed.

Hazlett’s new book, The Political Spectrum: The Tumultuous Liberation of Wireless Technology, from Herbert Hoover to the Smartphone, tells a thrilling, roller-coaster tale of how US regulators often blocked progress at the behest of incumbents, delaying the implementation of FM radio and cable television. Hazlett also explains how recent reforms helped liberate the radio spectrum and generate explosive progress, ushering in the ‘smartphone revolution’, ubiquitous social media and the amazing wireless world.

The author recently visited Brussels and gave a talk at CEPS. Although his focus was on the US experience, his history is relevant today in Europe. The European Parliament is considering a new EU telco proposal that takes an important crack at reform. It extends the length of licences to 25 years, which it hopes will be long enough to allow licensees to recoup investments in expensive new 5G connections.

But the EU reform is timid in encouraging continental-wide coordination on spectrum policy. By leaving national governments in control, Hazlett says Europe might fail to encourage telcos to invest in networks and end up behind the US in the race to install fast-speed mobile internet connections.

Spectrum policy always has been tricky. For more than a century, policymakers on both sides of the Atlantic have grappled with how to manage this valuable resource. Should they give it away? In his book (and his talk at CEPS), Hazlett detailed how, in the 1920s, the US Secretary of Commerce Herbert Hoover instituted a ‘priority in use’ policy, which allowed the first one who used the spectrum to keep it, free of charge.

Unfortunately, this created a series of vested interest holders. When a brilliant engineer, Edward Howard Armstrong, invented a new high-quality radio service called FM, existing AM license holders squashed it, keeping it off the market for two long decades. Later, the incumbent radio broadcasters slowed deployment of satellite radio. Meanwhile, incumbent television broadcasters blocked cable television and demanded giant sums to give up their broadcast frequencies, even as almost all of their viewers received their shows via cable or satellite. Hazlett, never one to mince words, describes the incumbent broadcasters – at least in the eyes of frustrated regulators – as “Dr Evil”.

In Europe, broadcasters have demanded giant sums to relinquish control of their spectrum. Another problem is government greed. In the first part of this century, Europe’s governments auctioned off spectrum, attracting huge prices that ended up starving investment.

Today, we seem to be learning from our historic errors. The US has managed to set up auctions that have freed spectrum at manageable (if still high) prices. During his talk in Brussels, Professor Hazlett celebrated the iphone’s tenth birthday. Without access to freed-up spectrum, he notes that Steve Job’s invention would not have had the opportunity to flourish.

How best then should we proceed? Hazlett proposes grandfathering existing licences – allowing the broadcasters to keep their spectrum, while setting up new rules for future cases. Instead of specific spectrum auctions, case by case, he prefers that governments auction cheap new overlay rights which would give new entrants immediate access to vacant channels and to negotiate for the re-use of frequencies already in play.

Digital technology allows us to send much more data through a piece of spectrum today than it did in the past. Newcomers could take little bits of unused spectrum from existing licensees, particularly existing public sector licensees. Hazlett calls these “overlay rights” and describes them as “hunting licensees”.

It’s a fascinating proposal that Europe should consider. At the meeting at CEPS in Brussels last week, both European Commission spectrum chief Anthony Whelan and the chief mobile phone expert on spectrum Daniel Gueorguiev were present. I hope they were listening and can work together to free up the precious resource of our airwaves. Much of Europe’s technological future depends on their success.

William Echikson is Associate Senior Research Fellow and Head of the Digital Forum at CEPS. He served for three decades as a foreign correspondent in Europe for a series of US publications including the Christian Science Monitor, Wall Street Journal, Fortune and BusinessWeek. From 2001 until 2007, he managed the Brussels bureau for Dow Jones as bureau chief.

© CEPS 2017