INSIGHT: Stalling the Revolution—How an Old Law Thwarts Innovative Deployments

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By Thomas W. Hazlett

In March 2010 the government’s National Broadband Plan, aiming to fortify America’s tech economy, advised policy makers to free up idle radio spectrum. That clarion call was soon backed by a presidential edict. The Obama White House directed federal agencies to identify little-used frequencies, and then hold auctions, allowing broadband networks and advanced 4G (Fourth Generation) mobile ecosystems to soar.

In October 2010 the Department of Commerce marked key targets, including a swath of virtually fallow frequencies in the so-called “L Band” (including, technically, 1675-1680 MHz). The airwaves would nicely complement mobile networks being swamped by the “mobile data tsunami.” Commerce placed the airwaves on a “Fast Track” schedule to rush to market.

In July 2018 that “Fast Track” has proven a road to nowhere. While a slice of adjacent frequencies (1695-1710 MHz) was released for productive use, and (with other bands) invited winning bids of over $40 billion in a 2015 FCC license auction, other L Band frequencies were left listless. They are being squandered, throttling consumer interests by short-circuiting innovation—most recently, the creation of 5G networks.

Ligado is the current incarnation of the late Lightsquared, which spent $4 billion to create a nationwide wireless platform. Alas, it went under in 2012 when the FCC withdrew its permits to provide cellular service. After emerging as Ligado in 2015, the new company with billions of dollars of new investment are at significant risk given the regulatory uncertainty. Among their endeavors, they still wait for regulators to auction the wireless licenses “Fast-Tracked” in 2010.

The entrepreneurial vision is to turn neglected airwaves into a national terrestrial wireless network (focusing on the emerging Internet of Things). That is feasible with 21st Century technology, but it is mess of a problem under the 1927 Radio Act, the brainchild of then-Commerce Secretary Herbert Hoover and still the law of the land.

Under that statutory regime, competing economic interests get to complain about new competition for free, and without limit. Even when regulators ostensibly commit to making spectrum available, we’re still spinning our wheels due to NIMBYism in space. While Ligado could build a state-of-the-art broadband network within the frequency borders designated, rivals invoke “technical reasons” to oppose.

Such protests are part and parcel of a Washington game. With the L Band, it is alleged that the status quo is perfect, and that allowing tens of millions of consumers to gain highly valuable new services would be risky. But the benefits of continued silence are virtually zero, while the gains from more wireless broadband are enormous.

Take the loudest objections from companies selling GPS services. For years they alleged that a new mobile network would diminish locational services using adjacent frequencies—an argument that, stunningly, relies on the fact that GPS receivers were designed to tune into data flowing through the neighboring L Band despite no authorization to do so. As an FCC official, Mindel De La Torre, put it, GPS users had “had been driving in the left lane with impunity, but now it looks like the left lane might actually have some traffic in it, [so] the GPS community is yelling bloody murder.”

In fact, border disputes are routinely resolved elsewhere. If conflicts prove troublesome, an impartial referee is brought in to delineate who owns what; then efficient solutions, from better fences to improved technologies to interference-resistant business models, can be deployed. Benefits flow, society progresses.

In radio spectrum, however, the 1927 regime makes rights fuzzy. Disputes are easily manufactured, and can be cynically used to block upstart rivals. Countless parties can hold-out, waiting to be paid off—by competitors, in dollars, or regulators, in entry barriers. Stephen Wilkus, a wireless tech expert whose industry pedigree dates to Bell Labs (and who is financially independent of the current interference dispute) recently told the FCC that Ligado’s spectrum play is being squeezed by “anti-competitive strategery.”

“It is problematic; to say the least, that … GPS receivers can establish prior-use rights in bands that are not allocated to their use. In other contexts, this is referred to as ‘squatting,’ and is considered akin to theft.” Wilkus explains that modern, high-quality GPS receivers embed low-cost filters to screen out the noise from a busy, productive L Band, and that it is noxious to ban all new uses of spectrum because aging devices elsewhere may claim to be hard of hearing.

The sensational part of this story is that, notwithstanding the much too long and arduous path, Ligado has in fact crafted an array of neighborly solutions, settling with one after another of its antagonists. It has put money on the table to make peace with the GPS band users such as Garmin, Trimble and Deere. These bargains confirm that no insurmountable “interference” problem exists. Ligado has also agreed to set aside a wide swath of bandwidth as a quiet zone bordering GPS. This will be replaced by other frequency rights purchased by Ligado—why it needs to bid on the “Fast Track” band to launch its network.

The wireless ecosystem may be the Eighth Wonder of the Modern World, but the 1927 radio regime is a petrified relic. What is happening here to Ligado happens all over, stifling innovation. In 2014 a major research firm, Battelle, asked the FCC to access another patch of vacant frequencies. After two years of agency unresponsiveness, the organization axed the project. Michael Marcus, a former FCC Chief Engineer who assisted the company, told me that Battelle vowed never to again invest in any technology needing non-routine FCC approvals.

With red tape cumbersome and deadlines non-existent, it is much too easy to fend off enterprising change agents. If there are serious concerns about conflicting rights, herd the parties into Baseball Arbitration where each enters their best and final offer. The arbitrator then picks one. Call it a “Fast Track.” But make a decision.

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Author Information:

Thomas Hazlett is the H.H. Macaulay Endowed Professor of Economics at Clemson University, and formerly served as Chief Economist of the Federal Communications Commission. He is the author of The Political Spectrum: The Tumultuous Liberation of Wireless Technology, from Herbert Hoover to the Smartphone (Yale, 2017). The views expressed in this article are those of the author and not necessarily those of Bloomberg Law.

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