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Assigning Spectrum Fairly: Managing Spectrum Using Long-Term Nationwide and Short-Term Local Spectrum Licenses

A new method is proposed to divide upcoming spectrum band allocations into two different spectrum licence / management right types. The first, a spectrum license, would allow successful auction bidders to roll out mobile radio networks on a long-term nationwide scale as normal. The second is a new concept called a licensed spectrum park (LSP) and would allow smaller operators to roll out specialized mobile radio networks on a short-term local site by site basis. LSPs would be assigned by applying for a license based on a site specific, fixed base station location for a short timeframe that could be renewed periodically. It has been noted that the key purpose of spectrum management is to maximize the value that society gains from the radio spectrum by allowing as many efficient users as possible while ensuring that the interference between different users remains manageable. The creation of LSPs means there is a net social benefit or a fair allocation of spectrum for two reasons. The first is that the use of LSPs allows specialist networks to be formed, effectively opening up the spectrum to more users and to potentially create more competition in the mobile radio market. The second is the fact that an LSP is licensed which creates a method to control interference between different users and allows interference to be managed.A regulator faces the issue of whether to allocate a fixed amount of spectrum for LSP use before auctioning the remaining spectrum, or alternatively auctioning the total spectrum and allocating any unsold spectrum to LSPs, if any is available. An operator’s strategy when bidding in the spectrum auction in response to these two alternative strategies are analysed using non-cooperative game models. The equilibria from both strategies are compared and it is shown that in the case where spectrum for LSP use is assigned post auction, if any is available, then all bidders face a collective action problem in that they may find it attractive to exhaust the pool of offered spectrum in the action leaving none for LSPs. To demonstrate how this theory could work in practice, we discuss how LSP creation could have worked in recent 700 MHz spectrum auctions. In particular we look at the 700 MHz auction in New Zealand as an illustrative example, by describing the auction process and the hypothetical effect if spectrum was assigned for LSP use. In addition we propose how the LSP spectrum could be priced. The price considers the population covered by the proposed base station, the amount of spectrum requested and length of the management right, against the normalised cost of the spectrum, for a given population and bandwidth, under the spectrum license auctions.Our analysis offers an important contribution for both spectrum regulators and private spectrum managers, and provides the framework for spectrum allocation to new market entrants enabling more competition in the mobile radio market.