Prepared Remarks of Janice Obuchowski, WSRD Workshop VII “Federal-Commercial Spectrum Sharing: Models, Application, and Impacts of Incentives for Sharing”, March 19, 2015
“Spectrum Sharing for the 21st Century: Moving from Fear to Opportunity-based Incentives”
Thank you to the Wireless Spectrum Research and Development Senior Steering Group for organizing today’s workshop and for inviting me to participate in this important dialogue. As this forum’s agenda rightfully recognizes, meaningful incentives for sharing in the era of 21st century spectrum policy pose a host of new policy, legal, economic, operational and international regulatory issues that this group is well positioned to address.
My remarks today are based on a fundamental premise that while incentives for sharing may vary between Federal and commercial stakeholders, the desired outcome is the same – more access to spectrum. At the same time, dynamic forms of sharing, advanced technologies and new breakthroughs in trust and collaboration are increasing opportunities – and altering the policy equation – for what constitutes incentives for both Federal and non-Federal users.
A rebalanced policy equation is a critical starting point for today’s discussions. From where I sit – and as often reflected in the rhetoric from commercial wireless users and some on the Hill – the current conversation about spectrum incentives for government users is based on a very outmoded idea of how Federal spectrum management actually works. Government users, in parallel with commercial wireless broadband services, have both experienced major changes in how and why they require spectrum access, driven by data-intensive applications such as video-based requirements.
At the same time, sharing provides key incentives in terms of how national security users can and must operate in an era of cyberwarfare. Cyberspace and the electromagnetic spectrum are coming together to create one continuous environment that is critical to military operations (and increasingly other government users, as well). So when national security users can access non-Federal spectrum on a shared basis, bi-directional sharing increases the overall amount of spectrum in which the military and other government users can operate and maneuver. This added flexibility represents a major “operational” incentive for spectrum sharing. At the same time, added flexibility – including the ability to operate across more bands and different kinds of bands, including non-Federal – decreases the risk of government systems being relegated to smaller and smaller spectrum “neighborhoods,” which make it easier for adversaries to detect, defend, and deceive within the electromagnetic spectrum environment.
More broadly, for new forms of sharing to continue transitioning from concept to reality, the incentives that Federal and commercial users have for sharing must be aligned. This does not mean incentives have to be identical. After all, commercial users rely on revenue-based business models for which market-based economic incentives clearly make sense. Federal spectrum users, on the other hand, rely on spectrum to meet critical missions that serve the public at large and for which there is no ability to recoup revenue from end users, so pure economic incentives typically fall short.
True incentives for most government users have to be both operationally and financially focused. Once incentives are aligned to meet the operating requirements and planning needs of both commercial and Federal users, the outcomes of new sharing solutions should result in increased spectrum access for both sets of users. (For Federal users, for example, this should lead to opportunities for shared access to non-Federal bands.)
It’s time to break of out of the non-productive ruts that have characterized much of this discussion to date. Aligning incentives inevitably means that “old” ways of thinking about increased access based on fear – fees or clearing and relocation – must give way to a new sharing landscape based on opportunity. This requires transitioning from a zero-sum game of spectrum winners and losers divided between those who relinquish spectrum altogether and those who gain new capacity for exclusive use. Under this legacy thinking, one party’s fear of loss is inextricably linked to another’s opportunity for gain.
Before the FCC held its blockbuster AWS-3 auction a few short months ago, there were concerns that transitional – and in some limited cases permanent sharing – between Federal incumbents and new mobile broadband entrants would depress auction revenue. Nearly $45 billion later, it is clear that sharing conditions – worked out under terms of trust and collaboration – had the opposite effect, helping to increase the value of the spectrum to be auctioned. The extent to which a “rising tide lifts all boats” is usually ascribed to macroeconomic problems but it is particularly relevant to the potential net gains of spectrum sharing solutions if we get these incentives right.
- How Did We Get Here
Sharing is nothing new, even as the challenges and technology opportunities around it continue to evolve. Technology advances, policy improvements and “attitude adjustments” by key players are creating a historically unique inflection point to enter a new chapter of wider and better shared uses.
To underscore how long-standing these challenges are, the 1991 NTIA study, U.S. Spectrum Management Policy: Agenda for the Future, provides a case in point. The study set a road map for spectrum auctions in the U.S. and elsewhere in the world and made a series of recommendations that included “increased sharing of spectrum between private sector and government users” and NTIA’s plans to explore fees “to promote greater efficiency among federal agency spectrum users,” including through a shadow market price or as a cost recovery tool. Nearly 25 years later, the relative effectiveness of auctions and sharing vs. market-based fees as incentives are instructive for the next chapter of spectrum sharing policy.
On the one hand, dynamic spectrum access and database forms of sharing are helping to promote the potential for sharing between private sector and government users. Technological advances, the extent to which government users are “leaning forward” with regard to sharing the limited availability of bands that are both desired by commercial users and can be cleared feasibly by government users are important drivers.
The fear-based policy tool of market-based user fees for government spectrum has either not taken hold in many parts of the world or has not yet led to the hoped for large-scale reallocations via auctions of spectrum from public sector agencies. This gets to the dilemma of not only aligning incentives but outcomes. User fees may provide clear incentives – punitive measures – for government users to reduce their spectrum footprint (and thus the cost of access). But this only is useful if the intended outcome is reallocation of government users to make way for new commercial entrants, rather than a genuine focus on improved (i.e., more efficient and effective) spectrum use. And as auctions have shown in the U.S., relocation and clearing have been accomplished through protections for government users based on well-established statutory protections for comparable replacement spectrum and guaranteed relocation and sharing costs.
As PCAST has concluded, the practice of clearing government-held spectrum and auctioning it for commercial use is being overtaken by the equally important need to put underutilized spectrum to better shared use. Our spectrum future is likely to be governed by some iteration of both models, but the incentives for sharing are less well fully evolved than those for clearing and auctioning. This, of course, gets us back to why we are all here today.
- Where Are We Now
A nearly unprecedented number of spectrum policy changes based on sharing are in the regulatory “pipeline” right now in the U.S , including pending FCC 5 GHz sharing rules, the proposed framework for a Citizens Broadband Radio Service at 3.5 GHz, and the FCC’s broadcast incentive auction plans, which will incorporate sharing arrangements for unlicensed devices to access white spaces in the 600 MHz spectrum. National regulators are looking at higher bands for potential broadband access than previously envisioned, with the FCC’s millimeter wave proceeding assessing the possible use of bands above 24 GHz. Many of these bands already have important Federal incumbent operations – many of them satellite based – which will inherently require shared access solutions.
Sharing as a two-way street – in which Federal users can access non-Federal bands – is a necessary aspect of an evolved national sharing policy. As some of you know, I co-chair a group under the Commerce Spectrum Management Advisory Committee (CSMAC) that has been assessing bi-directional forms of sharing. The CSMAC work has shown that shared access for Federal users to non-Federal bands requires some frank conversations about needed regulatory changes and a resetting of expectations about how underutilized commercial bands could be used to help meet the needs of Federal users. However, as the good faith work of CSMAC members also has shown, this is a conversation worth having to evolve sharing policy toward more balanced approaches.
Ultimately, this requires Federal spectrum policy for government users moving toward the kind of flexible regulatory framework that commercial users have long enjoyed and that has led to the enormously innovative wireless broadband ecosystem in the U.S. The Commission has not been in the business of deciding what a band will be used for once it is made available for CMRS. Federal users ultimately deserve the same latitude of a flexibility framework – if the spectrum is made available for long-term requirements, agencies will be able to start incorporating it into longer-term planning cycles as an option, including as part of multi-band approaches.
Spectrum policy changes require partnerships, technology improvements and cultural changes that increase trust among relevant stakeholders. For example, the National Advanced Spectrum and Communications Test Network (NASCTN), which DoD is facilitating under the umbrella of the Commerce Department, is providing an important focal point for access to federally-owned, -operated or –funded spectrum test facilities. The intent is to improve spectrum management practices by exploiting spectrum sharing opportunities, technology R&D, partnership initiatives and related test and monitoring efforts. The aim is to create an environment of trust to support impartial testing and evaluation.
Large- scale sharing based on new technologies (i.e., dynamic spectrum access, cognitive radio technology) or techniques (databases) or geographic- or time-based arrangements are still a work in progress in many places around the world. Sharing holds the promise of promoting transparency in public sector and private sector spectrum use by facilitating the exchange of information about both commercial and government bands that are underutilized.
- Where Are We Going – Carrots Versus Sticks
One benefit of incentive-based instead of fear-based spectrum management is that it spreads the risks more evenly between public and private sector users. Under old regulatory models, there was an assumption that “highest and best use” of spectrum consisted of a default in which spectrum flowed to private sector uses (i.e., cleared bands for mobile broadband.) Fairly aligned incentives for improved spectrum access – for example, through bi-directional sharing frameworks – expand this definition beyond private sector use scenarios. A broader understanding of “highest and best use” with regard to who values spectrum most also will vary within the private sector itself, not just between commercial and government users, since the coming spectrum access demands of the Internet of things is evolving such considerations yet again and setting the stage for more contested and congested access.
Carrots also have to be meaningful. A share of incentive auction proceeds for Federal users does not create real incentives for sharing if current protections for government agencies that at a minimum cover relocation and sharing costs and guarantee comparable replacement spectrum cannot be met. In addition, intended outcomes should be transparent and balanced. If the intent of a spectrum management tool is reallocation of incumbent users rather than continued and improved use, that should be an upfront consideration. (In the past, so-called “incentives” such as fees have been cast as inducements to more efficient and effective spectrum use but largely focused on transitioning a band from one set of users to another, usually from the public to the private sector.)
With these suggested assumptions in mind for sharing incentives, I would offer several proposed “pre-conditions” for incentive-based instead of fear-based sharing that need to guide the policy discussion in the coming months to continue to evolve expectations by both public and private sector spectrum users:
- Continue to improve information transparency while protecting mission critical information for Federal users and proprietary information for commercial users. For Federal users, this often requires a need to respect the boundaries of sensitive and classified information, including on an aggregate basis and particularly as part of new database forms of sharing.
- Sharing solutions should be balanced between commercial and Federal user requirements and should assume that all forms of sharing carry new risks for incumbents, especially in light of the fact that large-scale forms of sharing are as yet largely untested. Sharing works because it’s not a zero sum game in which someone (often a Federal user) loses spectrum through relocation and someone else (e.g., a commercial broadband player) gains spectrum and the lines are permanently redrawn (spectrum access that is lost is lost forever). Bidirectional sharing is a relevant example of how sharing can create gains across multiple users (not just in one direction – which is the direction of mobile broadband.)
- The impacts of privatizing aspects of spectrum management must be clearly understood. This applies to how database approaches to sharing will assign roles and responsibilities to private sector-operated automation tools that have enforcement, interference management and cybersecurity protection implications.
- In sharing scenarios, incumbent users need room to innovate and evolve technology as operational requirements change, mission needs grow and technology capabilities advance. Sharing terms and conditions cannot be based on a static status quo that freezes government use at a single point in time while accounting for limitless future broadband growth.
- Enforcement tools should evolve to address issues such as aggregate levels of interference that may be created under new sharing capabilities and cause complicated enforcement scenarios if interference occurs even when all players are operating within the rules. This means a focus on both regulatory tools and adequate funding resources for FCC and NTIA.
- Lessons learned from past sharing scenarios must be applied. This means that realistically both interference to commercial users and interference that non-Federal services may see from incumbent government operations must be addressed. The garage door opener situation underscores that expectations change when mass market products are widely deployed to consumers. For garage door openers, the Part 15 limitations were not widely understood and instead blame was initially assigned to Federal operations operating within their proper limits.
Stephen Hawking has said that “intelligence is the ability to adapt to change.” As we evolve toward more intelligent national spectrum policies – for which U.S. policymakers are already well on the path – such change has to be based on the opportunities posed by new forms of sharing, not the fear-based regulatory regime for which incentives were more of a “winner takes all approach” with regard to relocation and clearing.