Spectrum Policy
International Telecommunications Union
Geneva, Switzerland
16 February, 2004
Thomas W. Hazlett
Manhattan Institute
Washington, D.C.
twhazlett@yahoo.com
Spectrum Policy
Thomas W. Hazlett
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Thomas W. Hazlett,
“Property Rights and
Wireless License Values”
twhazlett@yahoo.com
http://www.manhattan-institute.org/html/hazlett.htm
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Thomas W. Hazlett
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Spectrum v. Licenses
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Status quo: Operating Permits
Spectrum allocated administratively
Restrictions impose inefficiency
Cartel enforcement devices
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Thomas W. Hazlett
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37 Concerned Economists (Feb. 01)
• Full Liberalization
• Relax all use restrictions
– Services
– Technology
– Business models
• Exhaustively license spectrum
– Overlay rights (as in U.S. PCS)
– Entry via ‘cheap spectrum’ policy
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Thomas W. Hazlett
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Two Objections
• Windfalls not equitable
• A better way to allocate spectrum:
unlicensed
• Result: No substantial progress in USA
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Thomas W. Hazlett
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Windfalls vs. Efficiencies
• Flexible use => productive
– Analog cellular licensees awarded digital rights
– Voluntary reallocation of UHF TV spectrum
• Property rights = Windfalls
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Thomas W. Hazlett
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‘Which Way, Senator Fall?’
• Windfalls: positive or negative
– More efficient, more profitable
– More efficient rights, less exclusivity
• Rights are inter-related
– Incremental rights issued to license class
– Rights are implicit precedents
• License value changes are ambiguous
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Thomas W. Hazlett
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Empirical Test
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Value of Wireless Phone Licenses
42 license auctions in 27 countries (95-02)
1,438 licenses (1,080 USA)
Liberal Dummy with extensive wireless
property rights
– Australia
– El Salvador
– Guatemala
– New Zealand
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Thomas W. Hazlett
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Control Variables
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Income per capita
Population in licensed area
Density and Urbanization
NASDAQ Index @ auction close
Market concentration (HHI)
3G
Incumbent dummy
Bandwidth allocated to license
800/900 MHz dummy
License term
Auction type dummy (First price sealed bid = 1)
Fixed telco service rates
Economic liberty index
USA dummy
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Thomas W. Hazlett
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Log Log Results
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Income per capita +
Population in licensed area +
Density Urbanization +
NASDAQ Index @ auction close +
Market concentration (HHI) +
3G +
Incumbent dummy +
Bandwidth allocated to license +
800/900 MHz dummy
License term
Auction type dummy (First price sealed bid = 1) +
Fixed telco service rates + (connect)/ - (call)
Economic liberty index +
USA dummy +
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Thomas W. Hazlett
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Liberalization Effect
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Statistically significant
Negative
38% price difference
From standard allocation to “full”
liberalization reduces license rents
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Thomas W. Hazlett
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Mean price/MHz/pop v. income per capita
(values relative to the sample mean)
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UK
GER
ITA
NET
MOR
Price per MHz-pop / Mean
BRA
PAN
BUL
CAN
JAM
PER
GUA
NIG
BOL
AUS
ARG
BRA
A
AUS
CZ
MEX
1
US
NET
GRE AUS
GER
A
SWZ
0.1
ELS
NZ
AUS
0.01
A = Austria
AUS = Australia
Spectrum Policy
0.1
1
Income per capita / Mean
Thomas W. Hazlett
0.01
10
Non Liberal = 
Liberal =
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Implications
• Economic Theory:
– Helps explain regulatory capture
• Public policy:
– Equity issues “solved” by extensive
liberalization
– “Cheap spectrum” policy via property rights
– Social gains large, as lower license values
reflect that more efficient markets and lower
retail prices are anticipated
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Thomas W. Hazlett
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Look Busy… or Be Busy?
• Experiments in spectrum property rights
encouraging
– Even as momentum lost to “substitute”
policies in USA
• From Heresy to Passé Orthodoxy… all
without ever having been implemented
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Thomas W. Hazlett
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May 3, 2002
Spectrum Auction Delay Hits Fast
Track
By Roy Mark
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Thomas W. Hazlett
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