| In spite of the overwhelming victory of the market system around the world, the administrative licensing regime has been the dominant paradigm for spectrum governance until now. Behind this seeming anachronism is the belief that mutual interference can only be mitigated by means of administrative licensing and tight control. However, this once dominant perspective has faced increasing challenges recently. Mounting evidence of the inefficiencies under the administrative licensing regime has received much attention and a consensus for reform has formed among industry players, policymakers and scholars.; Notwithstanding the consensus for reform, proponents of spectrum policy reform are divided over two approaches: spectrum property rights and spectrum commons. Property rights proponents advocate the free market approach and call for privatization of spectrum. To the contrary, commons supporters argue against spectrum ownership and private control of the airwaves, championing the idea of open access to spectrum for the public. Although the intense policy debate between proponents for spectrum property rights and spectrum commons has been ongoing since the late 1990's, the arguments from both sides have been highly abstract and speculative. Through economic modeling of the characteristics of different governance regimes and network structures, this study provides a side-by-side comparisons of welfare outcomes under different regulatory and technological settings. Such comparisons allow us to more systematically evaluate the merits of competing regimes.; This study identifies three key policy instruments for spectrum governance regimes: entry conditions, transmission power and interference robustness stipulations. Based on these key policy instruments, the study builds a general model of demand for wireless services that reflects the engineering properties of wireless communications and the impact of these policy instruments. Since regimes differ in the configuration of policy instruments, the model allows us to predict the decisions of firms and consequent welfare outcomes under various regimes.; The analysis of welfare outcomes produces the following findings. First, government regulation on robustness is undesirable. Second, the potential benefit of power restrictions increases with the number of firms in the market. Third, when set inadequately, all three policy instruments can cause significant welfare loss. Moreover, comparison of a prototype property rights regime and a prototype commons regime suggests, given the same power restrictions, the property rights regime tends to outperform the commons regime as long as the number of firms is not significantly smaller (in relative terms) than the optimal number of firms, which itself is a small fraction of the open commons equilibrium number of firms. These observations on the effect of fundamental policy instruments and the theoretical framework are the major contribution of this study. |
