FCC Paper Probes Market Approach to Interference Compromises

June 7, 2012
The FCC released a Working Paper this week that describes how a market-based auction approach to allocating interference rights could be used to identify the most efficient allocation of those rights.  
 
The approach outlined by Mark Bykowsky and William Sharkey in Using a Market to Obtain the Efficient Allocation of Signal Interference Rights – FCC Staff Working Paper 4 uses competing interests in its proceeding to set service rules for the Advanced Wireless Services 3 (AWS-3) licenses as an example of how it could work. If one of the approaches suggested in the Working Paper is adopted for AWS-3, I could see the FCC considering the same approach to interference between competing broadcasters, and between broadcasters and wireless operators, after the repacking. 
 
Here’s a short summary of two of those approaches. In one environment, two or more licensees with adjacent channel spectrum do not have the right to prevent the incumbent licensee from generating additional signal interference, and the requesting incumbent licensee does not have the right to generate additional interference.  The licensees place bids—one for the amount it would pay to prevent the interference, and the other for the amount it would pay for the right to interfere with the other licensee(s). Whoever bids the largest amount pays a third party—the U.S. Department of the Treasury, for example—and wins. If the licensee(s) that wanted interference protection did not bid enough, the licensee(s) would lose protection. 
 
In the second environment described, adjacent channel licensees own the right to prevent the requesting licensee from increasing transmission power unless it first purchases from them the right to do so. Ideally, the relative transmit powers of the adjacent licensees will settle at a point that results in the highest economic value for the rights. 
 
The Working Paper does a very good job explaining some complex economic theory and you’ll need to take the time to read through the arguments to see the pluses and minuses of these two approaches when it comes to finding the most efficient way of allocating interference rights. 

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