WASHINGTON (March 13) – All the wireless devices we use today rely on radio frequencies over which they send and receive data. Access to the radio spectrum is controlled by the Federal Communications Commission (FCC), which also licenses spectrum users. With the rise of new wireless technologies, such as 5G, the FCC will need to repurpose this radio spectrum and consider how current regulations may help or hinder conditions for an innovative and dynamic spectrum marketplace.

In a new policy report, R Street Technology and Innovation Policy Fellow Joe Kane examines the barriers to this marketplace and evaluates alternative allocation schemes in light of their transaction costs. In addition, he suggests concrete policy reforms that would reduce these costs, thereby enhancing the efficiency of markets for the benefit of everyone who uses wireless services.

Currently, the efficiency of spectrum markets is hampered by transaction costs that are often the result of overly restrictive FCC policy. However, these costs can be lowered by setting initial license areas that are relatively large and based on natural population centers. Innovative market designs can also decrease transaction costs by making it easier for potential spectrum buyers and sellers to find each other and agree on a price.

Regarding potential future FCC actions, the author adds, “the agency should approximate initial conditions that will create flexibility and lower transaction costs so that productive outcomes can prevail in the long run.”