Sample Paper on The Economics of Spectrum Management

The Economics of Spectrum Management


Radio frequency spectrum just as other resources are restricted and insufficient in the supply of wireless telecommunications services. The search of enhanced application of these spectrum assets has become a critical concern. Traditionally, the distribution of spectrum resources has been rigorously controlled due to externalities in spectrum application, for instance, electromagnetic interference. Historically, the practice of spectrum allocation has been centralized, fixed, and wholesale form of spectrum allocation, such as the spectrum auction, in which administrations allocate exclusive rights to broadcast signals over certain spectrum, and this practice is perceived ineffective as it results in under-deployment of spectrum resources. The under-exploitation of spectrum has induced the engineering, economic, and regulatory agencies in looking for improved spectrum organization strategies and practices (Zhao & Sadler 2007).

Other major spectrum management models have complemented the current model used by the Federal Communications Commission (Levin 2013). These main frameworks encompass the dynamic spectrum market model, the frequency radio model, and the spectrum commons framework. The active spectrum market model necessitates the management conveying property rights to permit holders who can resell the unutilized spectrum whilst the cognitive radio framework enables certified-exempt utilization by secondary users of the frequency possessed by a certified primary user. The spectrum commons framework utilizes open sharing among peer users with an equivalent right of admission, as the grounds for running a spectral region. Nevertheless, it is important to mention that these models concentrate either on the full usage of the spectrum or the profit maximization of organizations or primary users as opposed to the resourceful (or collectively optimal) utilization of spectrum assets from an economic viewpoint.

Research Objectives

  • To typify spectrum as an economic asset and utilize this understanding to appraise spectrum management models, and their economic validation in theory and practice
  • To distinguish plausible alternatives to the three most argued policy choices (command and control, property rights and commons)

Research Questions

Utilizing this system, this study will address the following research questions:

  1. What are the performance benefits for a command and control in a wireless system compared to property rights and commons model in terms of spectral effectiveness and (immediate and long-standing) fairness?
  2. What technical challenges are related to the implementation of property rights and commons models?
  3. How much increase in utilization efficiency is caused by network re-associations for property rights and commons models compared to a command and control model?


  1. Efficient spectrum management- refers to the choice of a system governing the allocation of spectrum frequency bands to specific uses, the assignment of usage rights to different spectrum users (broadcasters, communications operators, and public agencies, clearance of bands for new applications and users’ relocation; and policy reactions to technological and business expansions (Zhao & Sadler 2007).
  2. Autonomous Wireless System- refers to an autonomous wireless network that is regulated by a solitary management influence, for instance, a cellphone operator.
  3. Heterogeneous wireless network- refers to a wireless arrangement that normally involves more than one autonomous wireless network. From the user device viewpoint, this paper will apply the term cognitive and cognitive device interchangeably. Each cognitive device can connect to, and support data broadcast in excess of one RAT.
  4. Cognitive device – this paper will define cognitive device as a radio frequency transceiver projected to sense automatically whether a certain part of the radio spectrum is being utilized, and to enter into the momentarily unutilized spectrum very quickly, without interfering with the broadcast of other authorized users.

Research Limitations/Implications

The study will not seek to tackle comprehensive technical issues, or concerns that are explicit to certain frequency bands. The prominence of this study will be based on the economic understanding of effectiveness and scarcity as opposed to scientific or operational understandings. Even though the relative advantages of the major approach to spectrum management and its setbacks have been the focus of wide-ranging appraisals, which are temporarily demonstrated and developed in this study, their prospective choices remain little identified. The study is generally associated with an organizational membership, occupational features (high tech resolutions versus economists – market resolutions), or even philosophical beliefs (private property lobby versus open source ideology). Currently, no printed material exists that broadly connects new strands in the spectrum management study and policies. Even though this would be helpful to determine the recurrent ambiguities introduced by the spectrum standard, the spectrum management theory and deliberations regarding policy design are not presently informed by a universal framework.


A Review of Literature

The application of the frequency spectrum has become a major tactical asset for the economies of wealthy nations. Radio spectrum is applied for a wide choice of business and consumer communication, research and development, and information technology functions, for instance, private and public telecommunication operations (for instance, cell phone networks, wireless internet communication, air travel, transport, military networks, and public safety), distribution, radiology studies, astronomy and a range of other uses comprising innumerable low-power wireless applications. Well-grounded and socially professional management of electromagnetic spectrum utilization is a major contribution in the performance of these markets.

Elastic regulatory administrations and technologies that make spectrum utilization more reachable to startups and other small pioneering operators present important potential to minimize lead times from improvement to market for communication products (Chapin & Lehr 2007), and provide a competitive advantage to local producers in novel product markets. By contrast, existing control and command models in most nations depend on managerial certifying systems that assign blocks of spectrum to certain applications and organizations (often large organizations) as the want arises. Initially, control and command through certifying offered attractive properties in relation to interference, regulation, global synchronization of the frequency distribution, new products normalization, and global roaming. Nevertheless, as the need for spectrum rights developed enormously eventually, the difficulty of spectrum shortage became the main weakness of the present approach. Since it does not appraise spectrum assets anchored in standard supply and demand economic standards, this model presents the wrong incentives to spectrum retailers and results in the radio frequency bands remaining inoperative at any moment, leading to the shortage, overcrowding, and restrained economic operation in communication markets.

Policy disagreements are presently deadlocked on the issue of variety management. The essential liberalization involving regulative command as well as control stipulations presents a way to obtain policy intersection, but increased divergencies about which with the three choices (or that combination) effectively serves the general public interest, and each choice’s design or policy elaborations have got made these alternatives more challenging to select. Policy arguments are presently deadlocked on the issue of variety management. The essential liberalization involving regulative command as well as control stipulations presents a way to obtain policy intersection, but heightened variations regarding which with the three choices  effectively serves the general public interest, and each choice’s design or policy elaborations have got made these alternatives more challenging to select.It is easy to understand much concerning resourceful and desirable forms of spectrum management by exploring a larger dispersion of liberalization managements than the distinct alternatives presently on the administrator’s table (Bykowsky, Olson & Sharkey 2010). This literature review takes stock of a growing agency and educational-based literature on the issue of spectrum management in the last two decades. Standard economic models, hybrid models, respective advantages, and shortcomings are reviewed, and current trends underscored. In the recent past, four types of spectrum management have been presented up to now: command and control, comprehensive property rights, open access and common pools. However, the literature does not present other ideologies, but there are numerous secondary models worth citing.

In the original period of spectrum management, known as command and control, an administrator strictly assigns non-overlapping frequency bands to certain applications and allots application rights to licensees. Potential users register with the regulator to acquire a permit covering an explicit purpose, with no assurance of success. In the United States, for example, if there is over one contestant the regulator arranges public examinations, which conclude occasionally quite opaquely, the winning applicant. Generally, permit rights are given by impromptu means (for instance, on first-come-first served basis) and for small fees (typically just compensating administrative expenses). Receiving the permit offers no property rights to the licensee, but grants enforceable rights about the respect of fixed application relating to use, frequency band, broadcast power and locality, therefore, precluding dynamic applications and adjustments in the face of the technical adjustment (Niyato & Hossain 2008).

Command and control model usually does not allow license trading, which presents no inducements to licensees to capitalize on the value of their spectrum assets, resulting in spectrum hoarding, inoperative bandwidths, and legacy of rules, red tape, current opportunities and restraints to adjust to new market situations. There is near-undivided conformity that single dependence on command and control model does not lead to efficient results. Regimes, where regulators establish blocks of spectrum that are then randomly assigned to applications that do not automatically maximize social welfare, lack the elasticity to react to new spectrum-applying product advancements and their related technology (Niyato & Hossain 2008). Moreover, the difference between spectrum distribution (explicit amounts for certain applications) and task (explicit users in definite numbers) is synthetic and ineffective as it builds a wedge between the knowledge and its relevance (Liang et al. 2011). Separation between big, but often contented enjoy access and little, but inventive underprivileged operators created a market dissatisfaction typified by extending lead times from improvement in the market and the control of large incumbents with little vitality. With the heightened need for wireless products in previous years, the effects are overcrowding and huge welfare expenses in relation to public revenue lost, deferred efficiency developments and neglected chances in global markets, which ultimately resulted in demands for more resourceful ways to assign and administer spectrum (Hwang & Yoon 2009).

Limited reforms started in the mid 1990s and continue limited to a minority group of mainly Anglo-Saxon nations. Auctioning of spectrum assets rights was initiated in New Zealand since 1988 (Chang & Chen 2010), then from 1995 in the United States and Australia (Gruber 2005). In 1996, Australia, shortly accompanied by the United Kingdom and the United States, as well started managerial spectrum pricing (regulatory pricing established on market data) and regulated spectrum, intellectual rights, which were enforced in 1998, creating a way for tertiary markets dealing (Chang & Chen 2010). Spectrum dealing has happened in low amounts in Australia and New Zealand, actually due to spectrum payments in these nations are mostly operated by limited operators attempting to build long-term networks (Gruber 2005). Even though intermediary spectrum dealing is much more accepted in the United States, it is as well, much less elastic, with the majority of the permits for commercially feasible spectrum enabling unchanging application only (Gruber 2005). For business users, the frequency spectrum is a rigid aspect of creation, with special, significantly reusable, and restricted replaceability aspects. Nevertheless, the prospective for mutuality among users is enormous (Le, Feng, Bourse & Zhang 2009) and for this rationale, it is not considerably accessible at any particular occasion, if it was the issue of pricing and social evaluation would create several challenges.

Although the number of radio bands was formerly considered big enough (contrasted with demand for their application) to send away any consideration of economic assessment, this is presently not the case. Competing applications for accessible radio frequencies make spectrum a limited product that currently lends itself obviously to fiscal examination. Fundamental microeconomics assumption ranks all publicly and commercially obtainable assets in a given community along two standards: exclusivity, which describes property rights and access; and rivalry, which studies synchronized application and exhaustion (Jabbari, Pickholtz & Norton 2010). Obviously, given the diverse economic aspects of the spectrum as an economic contribution, the growth of private spectrum markets is potentially uncovered to all these sources of market malfunction. There is modest in spectrum rights and authorization dealing, nor for that matter in any characteristic of the command and control framework, that ascertains against leading positions in downstream spectrum markets. Actually, Niyato and Hossain (2008) remarked that the market authority in spectrum markets is an inherent effect of the form of technologies that need spectrum as key, the personality of their particular product market, and the elaborations of spectrum shortage. For example, surveys of spectrum permit auctions and their results imply an uncertainty between antagonism for spectrum and rivalry in spectrum markets (Chang & Chen 2010).

Levin (2013) as well warns that because of transaction expenditures, markets will be far less proficient where the number of interacting parties is enormous. Therefore, even though market power is typically unappealing from an economic viewpoint, it may contain some advantages in this situation and may be inevitable. Spectrum hoarding and wrong pricing remains among the major problems of excessive market authority. As with most incorrectly competitive markets, the answer, if one is necessary, exists in adjusting spectrum ceilings and formulating rules, for instance, antitrust regulations, restricting the accrual of spectrum by one or few proprietors, when this is thought to have attained a threshold intimidating public interest. Certainly, some policy effort, for instance, Levin (2013) perceived this as the main role for managers in a spectrum-trading model. Moreover, the market model is almost certainly less helpful to monopolies and oligopolies compared to the pure directive model because it is clearer and comparatively less susceptible to rentseeking efforts. Moreover, it is not apparent that changing to a commons framework resolves this setback. In the commons model, there are certainly no obstacles to admission for small contestants, but there are as well, no regulations barring the entry of big institutions with economies of scale (Wright et al. 2004). Therefore, there are no grounds to believe a priori that small machinists can more productively contend with larger rivals in non-market based governments.

Signal interferences are brought about by broadcasts in a particular band. The main disparagement of the commons model discloses unsurprisingly from the comparison of the spectrum with other inadequate ordinary resources. The incidents called overcrowding and interference are other externality concerns that originate in a game-theoretic predicament recognized as the Prisoner’s Dilemma. It relates to overutilization of an inadequate common resource as advantages accumulate to private parties, and expenditures are borne by all contributors (Wright et al. 2004). Given that the spectrum resource belongs to nobody in particular, everybody has a right of utilizing it, and because the utilization of the resource is competition and commercial, shortage guarantees exhaustion. In the framework of the spectrum, exhaustion is providentially not a concern, but ever-rising spectrum demand has created overcrowding and the commons framework does not actually give assurances against interferences, particularly from novel unproven mechanisms. The universal reaction that comprises of imposing custom regulations concerning transmitter activities, power and release borders may or may not work in circumstances where inducements are uncertain and innumerable users desire to broadcast concurrently (Kim & Shin 2010). More rigid and more influential, enforceable regulations may clear the inducement trouble but would efficiently shift the commons’ management much nearer to the property rights and command and control models.

Research Gap

The spectrum management literature has up until now only been partly reexamined, with much concentration on three accessible forms of spectrum management, but very modest on potential different approaches, which are significant to decide policy uncertainties.


The multidisciplinary facet of spectrum management study (economic, authorized, engineering, and philosophical) has polarized the policy argument in relation to markets versus resources, social assets versus property, autonomy versus regulation. The key input of this research is to thread these approaches mutually and lay some establishments for a universal theory of spectrum administration.



The research will take stock of several inputs made accessible through peer-reviewed academic study, organization (or agency- sponsored) reports, think-tank and industry-funded policy documents, online resources and workshop papers. This research will enable the comparison of the major spectrum management administrations applied in practice with those presently tested or established at a conceptual stage. Spectrum management reforms have been the subject of a debate over the particular advantages of two modes of spectrum management liberalization: intellectual rights and resources. Uncertainties regarding what comprises a socially competent spectrum management system emanate from the polarization of the argument and the conceptual mechanisms taken from the literature. Empirical study will assist unchain the deadlock, but is presently hard to conduct given restricted policy testing. If deregulation continues to be discussed theoretically, policy formulation will benefit from a larger selection of spectrum management alternatives as opposed to the binary strategy alternatives presently studied.

Research Motivations and Direction

It is usually decided that current ‘control and command’ models (concentrated spectrum management by a regulator) in most nations assign spectrum in a suboptimal way, with commonly extra prominence on the supply side (technical, or production efficiency) and insufficient on demand deliberations (the social assessment of the services provided). The two choice systems presently regarded for transformation are spectrum markets with private property rights (an explanation, which tackles spectrum demand and evaluation deliberations) and a ‘commons’ model (which as well tackles demand crisis, but depends mostly on the supply side for its accomplishment). The economic propositions of spectrum misallocation (incorrect pricing, shortage, overcrowding) were identified early (Hossain, Niyato & Han 2009) but its expression only became apparent with latest changes from wireline to wireless systems in telecommunications markets. This fundamental shift in the spectrum user market significantly heightened demand for certain bands, varying, in different nations, the methods applied to allocate user rights (such as changing from fixed permit leases to market pricing systems, for instance, auctions) and introducing technological matters to unacknowledged prominence in deregulating arguments.

Appraising whether technological improvement can make new mechanisms to spectrum administration practicable is a controversial issue (Xie, Armbruster & Ye 2010), but there is a sense among organizations and intellectuals that suggestion and testing are required before far-reaching reorganizations of the old concentrated system are enforced (Wang, Krunz & Cui 2008). Particularly, there are substantial indications that competent spectrum management should not be organized with certain fixed strategies, and proposed similarities to the management of other natural resources usually present in the literature. Wireless networks are associated with is very diverse economics. Nevertheless, wireless operators charging excessive varying rates simply sabotage the rules. A main assumption motivating this research is that system support between wireless operators would help end users and consecutively present new economic chances for operators (Chang & Chen 2010). All through the research, there will be no demonstration on an increase in revenue for network operators, which frequently compel any resource sharing contracts. Instead, the research will evaluate the advantages of co-operation by presenting an increment in accomplishing performance in relation to network effectiveness measures of spectral effectiveness, immediate and long-standing equality, and general power utilization.


Improved demand and ineffective supply have lately made spectrum susceptible to this critique (through overcrowding as opposed to exhaustion) and several policy suggestions currently deliberated among communications controllers recommend improvement of spectrum management practice by allowing for different ideas of the spectrum as an economic resource. Particularly, there are proposals to resolve the shortage and interference challenges inherent to the general good environment of the spectrum by applying it as a private resource (the property rights strategy), a public resource (the open access strategy), or multi-faceted variations of an easement managements. The main issue for the policy-formulators is to establish under which grouping the spectrum best serves the community and what policies accomplish the required result. This study will analyze these proposals, which comprise of either specifying spectrum property rights in principal markets and expand the spectrum dealing in secondary markets, or handling the spectrum in less or non-restricted ways. These uncertainties introduce a high level of intricacy into policy deliberations over spectrum liberalization. Every policy suggestions talked about in the study entails shortcomings of diverse nature. The literature is exceedingly fractioned in its spectrum management suggestions. Uncertainties bring about the polarization of the main study contributions, from the conceptual model in which the greater part of the analysis has been performed. This paper characterized spectrum as an economic asset and will utilize this understanding to appraise spectrum management models and their economic validation in theory and practice. The spectrum models identified in this paper are intended to complement or to substitute the present command and control model.


Reference List

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