Trust in market mechanics—how spectrum policy differs in the US

US institutions and regulators have a deep trust in market mechanics and capitalism. The benefits of this can be debatable. The US spends nearly twice as much on healthcare as the average OECD country but has the lowest life expectancy compared to its peers.

In the spectrum policy world, however, free market policies are considered good practice. Proponents argue the market can find the most efficient use of spectrum without the regulator having to do too much.

The US regulator, the Federal Communications Commission (FCC), often takes a free market approach. In the latest iteration of this, the agency has decided to encourage spectrum sharing with a new initiative called the Enhanced Competition Incentive Programme (ECIP).

The ECIP rewards mobile operators for leasing spectrum to providers in rural or tribal nations. Rewards include up to five years of licence extensions and the relaxation of rollout requirements.

In theory, these new incentives will encourage more efficient spectrum use. Mobile operators rarely use the entirety of their spectrum and encouraging them to share it could help local providers and in return address the digital divide.

The programme highlights how spectrum policy differs from country to country. In the UK, for example, instead of trusting the market to optimise spectrum use, Ofcom requires mobile operators to share their unused spectrum with those who apply for local access licences.

The UK’s reliance on a rules-based system can create friction. Critics say the process of getting approval for shared licences can be time-consuming and involves too many meetings with the regulator. Others have lambasted the strict power limitations attached to shared licences.

Meanwhile, the US market-based solution also has its downsides. There is no requirement for mobile operators to share spectrum, so they may decide that keeping competition out is more valuable than the incentives on offer.

In some cases, the complexity and cost of setting up leasing arrangements may also be too high. These limitations have prompted some rural providers to urge the FCC to take a more radical approach and force mobile operators to share.

A truly “free” spectrum market doesn’t exist anywhere in the world. Even with the ECIP, there are rules and regulations that limit its use. For instance, operators will still need approval from the FCC for each individual leasing agreement. In truth, every spectrum management decision involves a delicate push and pull between the industry and the regulator. If successful, the ECIP may indicate that a more market-based spectrum solution really does result in more efficient spectrum use than a rules-based system.