Spectrum Allocation and Economic Factors in FCC Spectrum Management

In performing the functions of spectrum management, the U. S. Federal Communications Commission has traditionally been concerned with engineering and legal criteria, in addition to apparent social benefit. Economic factors in the form of opportunity cost or incentives to conserve the spectrum have not been explicitly included. This paper contains an analysis of the feasibility and merit of introducing such economic factors into the FCC spectrum management process. While maximum economic efficiency in spectrum allocation and use is considered to be an important objective, it is not adopted as a single overriding goal. Instead, the investigation is aimed at the more modest, but also the more practical, goal of introducing those economic techniques into spectrum management that will eventually result in some measure of increased efficiency in spectrum allocation and use. Three techniques-shadow pricing, user charges, and auctionsemerge as promising candidates. It is concluded that these three economic processes applied in combination as administrative tools would result in much more efficient allocation and use of the spectrum resource. Further investigation to develop the means for implementing these techniques is recommended.