Lightsquared, LTE-U and the revenge of the ‘anti-commons’

September 25, 2015
By Scott Wallsten, contributor

Many have feared that unlicensed spectrum would suffer from a “tragedy of the commons,” in which the spectrum becomes congested as more users dive in without regard to their effects on other users. Engineers and others have worked hard to prevent that outcome.

But what was not anticipated was the “tragedy of the anti-commons,” which is the Bizarro-World version of the more familiar tragedy. Instead of more users piling in, the many and disparate users of an existing technology act as if they hold property rights but are unable to coordinate other than to block new technologies, potentially depriving society of large net benefits.

The anti-commons problem is at play in two of today’s big fights, one involving government spectrum and one involving unlicensed spectrum. The first is Lightsquared versus GPS, as Tom Hazlett and Brent Skorup noted in a 2013 paper. The second is LTE-U versus Wi-Fi, which is actually a struggle to avoid commons and anti-commons tragedies. Both disputes appear to be about interference, but that’s only a symptom of a deeper issue.

The difficulties they face in reaching solutions are not inherently technical, but rather institutional. The lack of clear property rights on one or both sides leaves the incumbents worrying about harm to their user base and the entrants with no clear way to mitigate those potential harms even if entry could yield net benefits.

Let’s first consider the Lightsquared-GPS fight.

By 2012, Lightsquared had spent $4 billion building a new wireless network using licensed spectrum. GPS users complained that this network, which would operate adjacent to the government spectrum band they use, would interfere with equipment that requires precise location data. GPS advocates included not just politically influential companies like John Deere and their customers, but also government agencies like the Defense Department and the Federal Aviation Administration. For these groups, the status quo worked perfectly well. Hence, an anti-commons tragedy.

Although the interference occurred in Lightsquared’s licensed spectrum, the GPS community has legitimate concerns: the huge installed base of GPS devices meant that interference could be costly. The benefits of a new wireless network, however, would have dwarfed those costs, meaning that, in principle, Lightsquared and GPS should have been able to reach a deal that would satisfy both while leaving consumers much better off.

But such a deal proved elusive, and the Federal Communications Commission (FCC) succumbed to political pressure and refused to allow Lightsquared to operate its network. Lightsquared finally threw in the towel and declared bankruptcy, leaving 40 megahertz (MHz) of spectrum unused and the U.S. with one fewer wireless provider than it would have had otherwise.

Lightsquared is now preparing to emerge from bankruptcy and finds itself fighting the same battle. Ostensibly, the fight is over the same interference concerns, but the anti-commons tragedy is blocking an easy resolution.

Meanwhile, up in higher frequency bands, another dispute — in many ways more complicated — is going full-steam.

A group of wireless companies, primarily Verizon and T-Mobile, want to start using a new technology, LTE-U (U for “unlicensed”), in the same unlicensed spectrum bands Wi-Fi uses. Wi-Fi advocates, including cable and Google, worry that LTE-U will interfere with Wi-Fi devices.

On the one hand, the rules on unlicensed spectrum are clear. Devices operating in unlicensed bands “must accept any interference received, including interference that may cause undesired operation.”

On the other hand, we have an enormous installed base of Wi-Fi devices, meaning that undue interference would be costly. Nobody wants to settle in to a night of binge-watching only to have their video fix interrupted because Wi-Fi and LTE-U won’t play nice together.

At a high level, this fight is a struggle not about interference, but about avoiding the tragedy of the commons on one side and the tragedy of the anti-commons on the other. In the world of the commons tragedy, other technologies would come charging in pell-mell, creating so much interference that the band becomes unusable. In the world of the anti-commons tragedy, a Wi-Fi interest group would use politics to protect its technology from competitors, putting a damper on innovation.

In licensed spectrum, interference disputes tend to get resolved without such loud, public fights. Lightsquared itself, for example, had little trouble working out interference problems with other L-band licensees like Inmarsat. That’s not to imply that licensed spectrum holders are always able to work out disputes on their own in easy Coasian bargains. Sometimes FCC intervention is necessary.

Deals are easier to reach when specific, identifiable parties are able to internalize the costs of the interference and the benefits of the new service. And in both of the current disputes, the presence of a large number of disparate users of existing technology and the lack of rights-holders make it difficult to work out bargains to accommodate the new service in ways that compensate existing users for potential harms.

So how can we resolve these disputes and avoid succumbing to the evil-twin tragedies?

In the case of LTE-U and Wi-Fi, some factors bode well for a positive outcome.

First, even though no single party has (or should have) a stronger claim to operate in unlicensed spectrum, each side is represented by identifiable organizations that face incentives to reach a solution.

Wi-Fi is represented not by a hodgepodge of disparate users, but by cable and Google, whose users would internalize a not-insignificant share of the potential costs. That gives LTE-U proponents clear negotiating partners. In other words, cable and Google may have taken on the defense of Wi-Fi to avoid the tragedy of the commons, but their presence also made it possible to avoid the tragedy of the anti-commons.

Second, despite the sound and the fury, the incentives of the two sides are not so different. T-Mobile and Verizon would surely like to one-up cable’s Wi-Fi network, but their customers also rely on Wi-Fi and would suffer from LTE-U interference. At the same time, cable would probably prefer that nobody else be able to offer a similarly comprehensive Wi-Fi network, especially if the new technology turned out to be better, but ultimately they could also use the new technology to improve their network once it is commercially available.

In short, the presence of specific protagonists whose interests are, if not completely aligned, at least not completely opposed, means that this dispute has a path towards resolution.

The Lightsquared dispute is trickier. Dueling technical studies will never win the day. The basic problems are the same as when Lightsquared declared bankruptcy. The net benefits of a new wireless network would be large, but the GPS lobby has little reason to care, the array of private GPS users is too large to coordinate an agreement easily, and government users see only potential risks and no benefits to themselves.

However, Lightsquared and the FCC are under new management, which, at the very least, provides an opportunity to try again. The company should redouble efforts to reach a deal with GPS interests or, more likely, with the FCC itself.

Ultimately, breaking through this logjam will require FCC action. The FCC, with its renewed concerns about the limited spectrum in “the pipeline,” must recognize the costs of allowing so much spectrum to lie fallow and that blocking entry in order to protect incumbents is a recipe for stagnation. If the FCC truly wants more spectrum and competition in the wireless market, it will grant Lightsquared permission to operate.

Defeating the anti-commons requires nothing less.

Wallsten is vice president for research and senior fellow at the Technology Policy Institute.

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