Sweeten the Deal: Transfer of Federal Spectrum Through Overlay Licenses

Abstract

The largest challenge in wireless telecommunications policy is transferring spectrum from inefficient legacy operators such as the federal government to bandwidth-hungry wireless broadband operators. Delay results in annual consumer welfare losses totaling hundreds of billions of dollars. One solution would be to auction overlay licenses to commercial bidders and give spectrum incumbents a clearing deadline. Overlay licenses reorder property rights and give incumbents the ability to sell the possessory rights to their frequencies. An alternative reform proposal from a 2012 President’s Council of Advisors on Science and Technology report recommends relying on complex spectrum-sharing technologies in order to avoid clearing agencies from their spectrum. Such a proposal would take decades to implement, would not encourage efficient government use of spectrum, and would likely degenerate into regulatory failure. In contrast, the PCS and AWS-1 auctions by the FCC show that overlay licenses permit commercial deployment of wireless technologies in encumbered spectrum within a few years.