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FCC Ponders Payment System for Signal Protection

A new way of determining allowable power levels and interference protections for radio frequency spectrum licensees may be in the works at the Federal Communications Commission.

This story originally appeared in TV Technology magazine.

A new way of determining allowable power levels and interference protections for radio frequency spectrum licensees may be in the works at the Federal Communications Commission. An FCC staff working paper suggesting a market-based approach to modifying service rules was released this week. Such modifications are now determined through an administrative process.

“Could a market be relied upon to approve a service-rule modification leading to a more efficient use of spectrum, and to reject modifications leading to a less efficient use of spectrum?” state the authors, Mark M. Bykowsky and William W. Sharkey, senior economists at the FCC.

The authors apply their approach in three scenarios. The first two involve one licensee who want to increase power, and two other adjacent licensees opposing the increase. The third examines a conflict in establishing service rules in Advanced Wireless Service-3 spectrum.

The first example involves licensees with no “enforceable property rights,” that is, no interference protection rights, as broadcasters now have for TV signals. Under a market-based approach, the parties involved would bid on the right to modify power levels, with the applicant bidding to increase the power and the adjacent licensees bidding against it.

“Consequently, depending on the market outcome, either the requesting licensee pays a third party—e.g., the U.S. Department of the Treasury—to acquire the authority to increase its transmitting power, or the [adjacent licensees] pay the same party for the right to prevent another licensee from subjecting them to greater signal interference,” Bykowsky and Sharkey state.

In the second scenario, the adjacent licensees have interference protection rights. In this case, “these owners are entitled to receive a payment in exchange for accepting additional signal interference,” they say.

The third situation involves allowable power levels in AWS-3 spectrum. T-Mobile, Verizon, ICG Global and a collection of AWS-3 gear makers favor a lower-power level than one proposed by M2Z Networks. The determination here depends on how much each of the parties are willing to pay for the licenses under three conditions—lower power, or “status quo;” higher power, or “enhanced;” and status quo with a prohibition on enhancement. The intention is to determine which of the conditions would derive the most revenue from the spectrum.

The authors’ foundation of each of the three scenarios is the Nash equilibrium, in which each participant has full knowledge of the others’ strategies and will therefore not gain from changing course.

“This and other assumptions… may not hold in a more realistic model setting,” they note. In the first scenario, for example, where no licensee enjoys interference protection rights, one of the two adjacent licensees could low-ball a bid and “free-ride” on the other party. In the second scenario where protection rights do exist, parties may have an “incentive to exaggerate the amount of its harm as much as possible,” they write.

“Participants may have to solve an important collective action problem in order for the market to achieve an efficient outcomes,” it says. “Such a problem can only be solved in parties avoid the temptation of acting in a more myopic, purely self-interested fashion.”

Bykowsky and Sharkey go on to say that “the challenge of myopic self-interest on the part of market participants is not restricted to the problem of the efficient assignment of signal interference rights.

“For example, the commission has recently proposed that incumbent television broadcasters, have the opportunity to voluntarily give up either some or all of their spectrum in exchange for a payment. Here, the efficient reallocation of spectrum to an alternative user may require that incumbent licensees within a given geographic area coordinate their interests in an attempt to release sufficient spectrum, at a sufficiently low price, to meet the needs of a prospective new licensee.”

~ Deborah D. McAdams, TV Technology