Weeks 3 and 4

Question 1

What is the regulatory issue for both segments (wired and wireless)?

Answer 1

Rollout and access to transmission capacity

Question 2

What is “noise”?

Answer 2

other signals that interfere with the distinction of intelligible signals.
To avoid:
-build devices that operate on same frequency
-develop common codes

Question 3

What is the most basic reason for regulating spectrum?

Answer 3

Eliminate interference between once device or signal and another.

Question 4

For communications systems, spectrum is a ____ and ___ concept. It is an _____ and ____ invention.

Answer 4

bounded, intellectual

administrative (creates electromagnetic real estate), technological (defined by capabilities of equipment used)

Question 5

Radio spectrum must be allocated by ___, ___, and ___

Answer 5

medium, use, and user (license necessary? etc.)

according to characteristics of different radio techs

Question 6

The current highest commercial value is in __ and __ frequency bands.

Answer 6

High and very high

Question 7

Radio spectrum bands are always a trade off between

Answer 7

distance, capacity, and cost

Question 8

What is the ITU?

Answer 8

International Telecomms Union: UN treaty organization that regulates telecom (and spectrum) internationally

Question 9

The “scarcity” doctrine entails that…

Answer 9

spectrum access must be regulated because in every frequency band there is a limit of how many signals can be carried

Question 10

Is the scarcity doctrine still valid?

Answer 10

created in the wired era, kind of non-sense now, used still to leverage the industry against regulators to restrict competition and control prices

Question 11

What are 3 methods of spectrum allocation?

Answer 11

1. Beauty contests (assessment of characteristics of service provider)
2. Lotteries (randomly selected qualified applicant, rarely used)
3. Auctions (finding max market price will equal the value of the service market and yield max welfare to users)

Question 12

What are the issues with spectrum auctions according to the heterodox econ model?

Answer 12

• require immense rules to prevent contamination of the process
• goes to deepest pockets
• use of spectrum not guaranteed (storage to keep out competitors, resale)
• commercial bidders advantaged over commons bidders by logic of definition of the auction

Question 13

What is Coase’s property rights theory?

Answer 13

When two parties share the same resource and one produces more value from it than the other, this party will have the incentive to pay the other party to not interfere (more in one’s interest to pay someone off to get out than compete)

Question 14

What is Coase’s transaction cost theory?

Answer 14

• Transaction costs are the “social costs” of buying and selling (info, bargaining, contracting etc.)
• The cost of procuring something in the market vs. producing it in the firm (low –> procure, high –>produce)

Question 15

How can we apply the Coase theorem to spectrum?

Answer 15

Well defined property rights + low transaction costs= efficient allocation of spectrum by the market

Role of gvmt in this scheme is to only define property rights

Question 16

Implications of the Coase theorem in spectrum?

Answer 16

• only matters who uses it to produce highest value , even if sold or redirected (resource more valuable to new buyer)
• Avoids lock-in to legacy spectrum use (ex. analogue TV spectrum as consumers switch to cable and Netflix)

Question 17

Criticisms of the Coase Framework include

Answer 17

• assumes all goals for the allocation of a resource are economic
• doesnt discriminate between commercial and public interest
• doesnt allow for fair allocation of resources where the public good conflicts with the private good
• assumes that all parties have comparable means for acquiring the spectrum they require