The Federal Communications Commission recently opened on high-frequency spectrum, above 24 GHz. High-frequency spectrum is arguably one of the last frontiers of human control over nature, and how America approaches spectrum matters.
Spectrum is similar to land, and the history of America is often told in terms of a westward push to develop land. The history of America can be told in terms of spectrum as well. And most assuredly our future will be.
The newly opened FCC proceeding addresses the zoning and uses of high-frequency spectrum. It focuses on mobile rather than fixed applications. It also highlights 5G, the next generation of mobile wireless technology.
The challenge for the FCC is to have some humility about what it knows and what it does not know. If America had zoned land permanently in 1776, we would likely today still be an agricultural country without superhighways and suburban development. Similarly, if America had zoned spectrum permanently in the 1920s, we would have much AM radio, but little else.
Taming spectrum has not long captured our imagination. The human voice is usually below 300 Hertz, a measure of spectrum frequency. The human ear can hear sound in the range up to 20 KiloHertz (KHz). Two centuries ago, the concepts of spectrum and radio waves were largely unknown. That spectrum was scarce and could be treated like property with its own set of privileges was beyond comprehension.
Even a century ago, “spectrum” was largely an esoteric concept of physics laboratories. Wireless telegraphy was a new-fangled and not entirely reliable device for ships such as the Titanic. A few radio broadcasters began operating not with exclusive licenses but with the simple logic of occupying the spectrum first. Courts recognized these first-to-occupy rights. Practically all uses of spectrum were below 30 MegaHertz (MHz).
In the Radio Act of 1927, the federal government, principally at the recommendation of the Secretary of Commerce Herbert Hoover, expropriated all spectrum and declared it federal property. No one knew it at the time, but Hoover’s action led to one of the most far-reaching expansions of socialism in American history. Previous court decisions recognizing private rights notwithstanding, spectrum became the exclusive province of the federal government.
An enterprising American might have asked to purchase from the federal government some or all spectrum above 300 MHz, largely thought worthless at the time, for what might have seemed like a princely sum at the time, say $100 million. That asset today would be worth countless billions, perhaps even trillions of dollars.
But no one approached the federal government in the 1920s, and it did not sell.
And no doubt, anyone in 1927 attempting to predict the future of spectrum would have guessed exactly wrong. Had the federal government decided in 1927 the use of spectrum for all future purposes, the result would have been disastrous. The major spectrum uses at the time were AM radio broadcasts, naval wireless telegraphy, and other point-to-point applications. The technological developments of the next several decades—broadcast television, satellite communications, mobile wireless communications, and short-range unlicensed devices—were well beyond the realm of science fiction in the 1920s.
Over the past 88 years, the federal government has exercised its power over spectrum to license some spectrum for commercial use, to enable some spectrum to be used for unlicensed purposes, and to reserve vast tracts for itself. Although federal spectrum allocation extends up to 275 GigaHertz (GHz) with each GHz equal to 1,000 MHz, most commercial applications are below 3 GHz. Commercialization of spectrum in higher frequencies has proved difficult.
Businesses tried. In 1998, the FCC held an auction for spectrum between 27 GHz and 31 GHz. More than 100 businesses participated and the auction raised more than $500 million, but most if not all of the commercial have long since disappeared, many without a trace. Another auction for 39 GHz spectrum was held in 2001 raising more than $400 million.
Large investments in high-frequency spectrum were not enough to ensure commercial success particularly with fixed wireless applications. Multi-billion-dollar enterprises such as Winstar, Advanced Radio Telecom, and Teligent all attempted to develop high-frequency spectrum between 1997 and 2001 they failed. Some would say they failed for poor business plans; others blame undeveloped technology; and still others fault FCC regulation. The remnants of the failed companies are held by IDT Wireless and FiberTower.
If an enterprising American came to the federal government today with a proposition of purchasing for a large sum the rights to all spectrum today thought to be effectively worthless—say above 6 GHz, the federal government would likely say “No.” The negative response reflects more an inability of the federal government to consider such a request rather than a carefully considered valuation of the spectrum.
Our federal government has spent much of the past two decades reallocating and reorganizing the spectrum bands that were misallocated in prior decades. The reallocations have been painful but unavoidable. We may mutter that our parents and grandparents did a poor job of allocating spectrum in the past. But at least we can reallocate today as technologies have changed. No matter how the FCC addresses high-frequency spectrum today, our children and grandchildren will no doubt mutter that we did a poor job. Our greatest legacy to them is to ensure that they can easily undo our mistakes. They need not only flexibility in use, but flexibility in changing future allocations.
Much as in 1927, no one today has the slightest idea about the potential long-term future use and value of high-frequency spectrum. Its option value is large but unknown. The challenge for the FCC is not to make decisions today that will encumber high-frequency spectrum in the future. It is the last frontier.