A Response to Ikeda's Spectrum Posting

Gerald Faulhaber (Professor, University of Pennsylvania)

It is a bit difficult to respond to Mr. Ikeda's posting (at http://www.glocom.org/spacial_topics/
glocom_colloquium/20020725_ikeda_property), as he attributes to Professor Farber's and my paper assertions that we do not make and do not agree with. Perhaps some clarification is in order.

We absolutely do not view auctions as focused on wireless, nor are we champions of 3G, 2G or any other G. We are enthusiastic supporters of WiFi and wish it the best, and we certainly embrace the use of commons where appropriate. Mr. Ikeda is prepared to acclaim 802.11b as the winner over 3G; we think this is a likely outcome but by no means certain, and our proposal really has nothing to do with this "battle."

We are far more skeptical of claims that spectrum will never be scarce, so we should go immediately to a commons model. History has shown that resources which are not scarce can quickly become so, and it is either technology or demand (usually both together) that leads to scarcity. Land, clean air and clean water are three obvious examples. We would not be surprised if the projected popularity of WiFi leads to congestion in this band (similar to CB radio), in which case we would return to a world of scarcity. On the other hand, we would not be surprised if this did not happen! Essentially, the fate of WiFi vs. 3G really has nothing to do with our paper.

As Mr. Ikeda correctly notes, we propose a "non-interference easement" be included as part of the proposed property rights package. This is designed explicitly to accommodate commons-type uses within the property rights context. But Mr. Ikeda does not acknowledge that this proposal is designed to institutionalize the concept of the commons which Mr. Ikeda and others champion. Indeed, Mr. Ikeda makes the economically self-contradictory statement that "...because such open usage makes the spectrum worthless, its owner will raise the price..." Well, if it's worthless, then how can the owner raise the price? Mr. Ikeda also claims that the FCC would enforce this easement. We are quite explicit: the enforcement of property rights is by private parties through the courts, not through an administrative agency. History has shown that the former is vastly superior to the latter, which Mr. Ikeda quite correctly call "spectrum socialism."

His statement that "There is no need to reconcile the "economists' view" that favors property rights and the "engineers' view" for commons, because the latter is far superior..." is a very rude statement; does Mr. Ikeda see attempts at compromise unnecessary because he believes so strongly that he is right and that there is no other way?

Mr. Ikeda believes his public auction buyback solution superior to a private auction, because then the spectrum is "free." Based on this, I can only surmise that Mr. Ikeda's proposal is really based on price: he doesn't want to pay anything. The specious economic arguments all boil down to this: I want free spectrum. Well, lots of us would like free stuff; but that doesn't make it good public policy.

Mr. Ikeda also references "cognitive radio," implying that this is not covered in our paper. In fact, it is a fundamental feature of our paper (although we use the name "agile radio") and our paper deals extensively with it.

In conclusion, Professor Farber and myself are agnostic about scarcity; our proposal sets up a dual system, in which property rights and commons can coexist. We envision the amount of spectrum devoted to each will change over time, responding to political and to market pressures, and that our proposal encourages that dynamic adjustment. We do not insist that we must choose one or the other model to the exclusion of the other, as some have done (such as Mr. Ikeda). We argue for a consistent legal and economic framework in which both models can flourish, without the heavy hand of government regulation, "GOSPLAN", or spectrum socialism. We invite Mr. Ikeda to join us in this effort.