Proposition/Proposal

Jordan McNeal

Alisha Geary

English 2010

11 July 2012

Spectrum Crunch

How to Solve it

What is the Spectrum Crunch?

The Spectrum Crunch is a term coined for the impending technological problem where many major cities will no longer have enough airspace for many electronic devices to communicate with each other. This will happen because of how technology communicates with each other wirelessly.

TV sets, radios, and cellular devices broadcast signals in the electromagnetic spectrum, which is a finite resource. This means that if this resource ever reaches its cap, there won’t be any more room in the spectrum to add in more TV broadcast channels, rates for phones will increase dramatically, and the technology industry will stop progressing. Figure 1 shows that if the demand for more spectrum space continues at the same rate as it has for the past couple of years, the United States will hit its cap on the resource by 2014.

 Figure 1

The spectrum crunch is a complicated issue that has been discussed for multiple decades. It’s difficult to pull out multiple sides of this issue, since no one wants the spectrum crunch to actually happen. However, there are multiple proposed idea’s to solve or slow down the spectrum crunch. Many mobile companies simply want more of the electromagnetic spectrum to be allocated to them, offering to push out other markets. The U.S. Government wants to auction off a large amount of their share of this valuable resource. Others believe that if the problem is left alone, the tech industry will find ways to solve it on their own.

These are short term solutions that create long term problems. Because this resource is finite, and the demand for spectrum has been consistently increasing, solutions need to be made to be long term, otherwise this problem will happen again.

The United States government needs to make a stronger claim that the spectrum is owned by the public and not large corporations. Tighter restrictions on how spectrum is allocated need to be made, such as having spectrum licenses made to last a shorter amount of time. These restrictions will then hopefully force large corporations that have large budgets and a need for a large amount of  spectrum to build their own network of short wave radio towers, allowing them to manage their share of the spectrum more appropriately.

Reallocate spectrum to larger businesses

Radio Act of 1927

The Radio Act of 1927 states that the spectrum is the property of the public, and no exclusive user may have property rights to the spectrum. However, the FCC still auctions off large amounts of the spectrum to companies. While these licenses don’t say that the company has ownership of the spectrum they were just allocated, they are able to renew the licenses and hold on to their share of the spectrum. If the company wants to, they can even sell their license to other companies. These licenses can last for many years, even decades. Its as if these large companies have found a loop hole to own spectrum space without actually owning it (Radio Act of 1927).

Pushing out the TV industry

The current most commonly proposed solution to the spectrum crunch is to reallocate spectrum space from small companies to larger companies. Because the mobile industry is booming the most currently, the mobile industry feels that they are entitled to more space than the TV or radio industries (Churchill).

The mobile market has pressured the Federal Communications Commission (FCC) to issue an “FCC grab”, where the FCC will claim 120 MHz worth of frequencies or 19 DTV stations. They will be taking these frequencies from TV stations who have already set up licenses with the FCC. The stations that are most likely to be hit with this FCC grab are likely the smaller TV stations that aren’t large enough to have their own dedicated news station (Nordahl).

This hasn’t been the first time the mobile market has taken spectrum from the TV industry. Figure 2 shows that since 1983 the TV industry has lost 75% of their share of the market, if the FCC grab commences that is. Its possible that in the near future, TV won’t be allowed to broadcast wirelessly (Nordahl).

Figure 2

Letting the Tech Industry Fix Itself

It is shocking how many people believe that if the problem is left alone by the government, that the problem will solve itself. People think that if the spectrum crunch is allowed to happen, tech businesses will search for new tech advancements to give them more space. Unfortunately, businesses have found a different incentive.

Along with taking spectrum from other industries, the mobile industry has waged war amongst itself to gain the most spectrum. Because of how allocating spectrum space is set up right now, large corporations are not as interested in finding new ways to strengthen their signals as they are to push their competitors out of the market. Spectrum auctions have become a battlefield between large mobile companies to buy as much space as they possibly can get. If there is no space left for their competition, then soon they will no longer have any competition (Portnow).

The Government Auctions

In February of 2012, President Obama signed the Payroll Tax Bill. The bill will allow the FCC to auction off some of the remaining white spaces in the spectrum to companies that need more spectrum. $22 billion worth of  spectrum space was given to the FCC to use for auction. $7 billion of proceeds were to go to funding the FCC, while the rest would go to tax cuts and unemployment benefits (Meckler).

The United States Government is auctioning off space to corporations. While this does give more room for the mobile industry to expand, because of how the licenses are currently set up, auctioning these long term contracts have long term problems. By auctioning long term licenses that can be renewed, it becomes more difficult to manage allocated spectrum. Some companies may just sit on their licenses, while others may create dead white spaces between the few frequencies that they choose to use (“Incentive Auctions”).

The longer the licenses, the harder it becomes to manage the spectrum. One of the leading problems today is that many TV broadcast companies are sitting on their licenses granted to them before digital TV. These companies are waiting for the right time to sell them back to the government or large company for large profit. The government is only setting themselves up for this problem again in the future.

A better organized spectrum

Large corporations need to be reminded that the spectrum is owned by the public and not by them. Even by obtaining a license, they have no entitlement to sit on the allocated space wastefully. Current licenses last far too long, it leaves the structure vulnerable to not being able to react to quick change in the market. The spectrum needs to constantly be prepared for change.

What can be done

The goal is to try and get large companies to better allocate their own source of allocated spectrum. Figure 3 shows that by having a network of short wave radio towers, the same spectrum space can be used much more effectively. This is the kind of advancement that we need large corporations to invest in.

Figure 3

This has to be incentivized by tearing away some of the mobile industries feel of entitlement. Stricter restrictions on spectrum auctions need to be designed so that large corporations can’t just take as much space as possible to beat out the little guy. A cap on how much a corporation can hold would be most appropriate. Perhaps have the ruling be if a corporation is x% of the industry, the most spectrum they can have is y%.

Most importantly, licenses need to be made shorter, much shorter. Corporations should not be allowed to renew their licenses without it going through an auction again. Licenses should be given a set amount of time allocated to the company, and no more than that.

The cost of the license should be exponential, depending on how much time the company wants. Spectrum auctions should still persist, but have them only be for the first year of the license. Once the company has bought the first year, they can then decide how long they want the contract to last. However, the cost increases exponentially. So if a company bid one year of spectrum space for $5 billion and they wanted to extend that to 3 years, instead of paying $15 billion they’d pay something closer to $22.5 billion. Obviously these are theoretical calculations and equations, but the point is that each year would have an exponential increase in price. Year oen $5 billion, year two $7.5 billion, year three $10 billion, etc. This would pressure companies to have shorter licenses unless if they feel like they really need to hold on to that spectrum for a long time. It would be more profitable for them to rent a couple years at a time, and then go through the auction process again to try and keep rates low.

The root of the problem lies in how long a corporation is able to hold on to their license. By being able to hold on to the license for long periods of time and consistently renew it, corporations are not as interested in strengthening their signals as they are in beating out the little guy. If there is no action in getting the corporations to struggle more, they aren’t going to put enough effort into investing in new ways to use their own share of the spectrum appropriately.

If corporations don’t find new ways to effectively use their spectrum fast, then it will be the consumers that are hit the hardest. The corporations will be fine, they’ll be sitting on a valuable resource that only increases in value. It won’t matter to them if everyone else has to pay higher phone bills just to get the same quality of service that was available a decade ago. They’ll have the assets to cover the losses. Those assets need to be removed from them to effectively get them to invest in advancing the future.

Works Cited:

2012. Graphic. The Motley Fool. Web. 10 Jul 2012.

Alderfer, Rob. United States of America. Crunching the Numbers Behind the Spectrum Crunch. Federal Communications Commission. 2010. Web.

Churchill, Sam. “FCC Gets Unlicensed White Spaces in Payroll Tax Bill.”dailywireless.org. N.p., 17 Feb 2012. Web. 22 Jun 2012.

Donovan, John. “Wireless Data Volume on Our Network Continues to Double Annually.”attinnovationspace.com. AT&T, 04 Feb 2012. Web. 22 Jun 2012.

Marder, Andrew. “”Spectrum Crunch” Is a Lie.” Ye Olde Soapbox. N.p., 20 June 2012. Web. 12 Jul. 2012.

Meckler, Laura. “Obama Quietly Signs Payroll Tax Bill.” The Wall Street Journal. The Wall Street Journal, 22 Feb 2012. Web. 22 Jun. 2012.

Nordahl, Tore. “COUNTDOWN TO NAB 2011 — Issue 4.”usjvc.com. JVC, 04 Apr 2011. Web. 24 Jun 2012.

Portnow, James, writ. Spectrum Crunch. Perf. Daniel Floyd. Penny-Arcade, Web. 20 Jul 2012.

The Shrinking of TV Broadcasting OTA Spectrum. N.d. Graphic. 24 Jun 2012.

United States of America. Congress. Radio Act of 1927. 1927. Print.

United States of America. Federal Communications Commission. Web.

United States of America. Federal Communications Commission. Incentive Auctions. 2012. Web.

Wireless Data Growth Leads to Spectrum Deficit. 2012. Chart. Federal Communications CommissionWeb. 24 Jun 2012.

 

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