Spectrum auctions aren’t neutral

Spectrum allocation isn’t neutral regarding technology or services, even when there aren’t obvious strings attached. Even when it looks like regulators are not making technology bets, as in contemporary auctions, they are indeed doing so.

In the old days, radio licenses were issued via beauty contests, with stringent conditions on the kind of services and technology that a licensee could use. Television is a good example: the license limits use to TV broadcasts, and specifies the technology to be used (such as NTSC analog and ATSC digital in the US). Such “command and control” regulation has been much decried in recent years: industry is better placed to make technology decisions than the government, say the Right, and beauty contests lead to windfall profits, say the Left.

The Right favors the auction of flexible-use licenses which don’t specify the service to be offered or the technology to be used. This has been largely implemented in the cellular bands, where operators could choose whether and when to move from analog to digital technology, and which technology to use. [1] AT&T, for example, uses the TDMA technology, while Verizon uses CDMA.

However, even if conditions aren’t attached to the frequencies, the way in which frequencies are packaged into bands limits the technologies that can be used, and thus the services that can be offered. A current example is the debate in Europe about allocating spectrum for future wireless services. Unstrung reports:

. . . the CEPT working group will likely recommend two band plan options: one for frequency division duplex (FDD), which uses different frequencies to transmit and receive signals, and the other for time division duplex (TDD), which uses one channel and timed transmissions to send and receive. Cellular operators have traditionally favored FDD systems. [my italics]

Regulators will have to make a choice between FDD and TDD, which entails a choice between services and vendors. FDD is voice-oriented and aligned with the cellular industry (UMTS) and Qualcomm, while TDD is data-oriented and aligned with the WiMAX camp and Intel.

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[1] Some remnants of the old philosophy remain. The PCS rules, for example, allow licensees to provide any mobile communications service BUT broadcasting as defined in the Communications Act is prohibited.