In the world of telecom, a spectrum used by private organizations can be regulated in various ways. Licensed spectrum refers to frequency bands that can be used exclusively by licensed operators for a set time period. TV broadcasting, commercial broadcast radio, and cellular voice and data services are examples of applications that utilize licensed spectrum.
Unlicensed spectrum refers to the frequency bands for which no exclusive licenses are granted and on which unregistered users potentially may operate wireless devices without specific user or device authorizations. There is no exclusivity and there might be interference from other users, although regulators typically restrict the transmission power in these bands to limit interference.
There is considerable evidence that such an unlicensed spectrum has huge economic value. Recent past estimates, which already look too conservative, place the value created by current applications of unlicensed spectrum at $16-37 billion dollars a year in US [Source: Richard Thanki, “The Economic Value Generated by Current and Future Allocations of Unlicensed Spectrum,” Final Report, Perspective Associates (2009) Link: https://ecfsapi.fcc.gov/file/7020039036.pdf, accessed on: 9th August, 2016].
[Source: Link: https://ecfsapi.fcc.gov/file/7020039036.pdf, accessed on: 9th August, 2016]
It is sometimes argued that a drawback of leaving bands of spectrum unlicensed is that governments might have to sacrifice the revenue that they could obtain by auctioning spectrum licenses. But it is not at all certain that leaving some spectrum unlicensed would reduce revenue; it might even increase it. The reason is that leaving some spectrum unlicensed reduces the supply of licensed spectrum and, encourages the development of complementary, demand-enhancing services that raise the economic value of the licensed spectrum networks.
Using licensed spectrum only can compromise individual rights to innovation and invention. An individual who invents a new mobile device or business model would need to convince the owner of a spectrum to allow the development of the new idea, and may have to share a large fraction of the value that is created with the spectrum owner. If the new development threatens the owner’s existing business, it could be disallowed. And, if the innovation requires the assent and coordination of multiple spectrum owners, it would be extremely difficult to get all the owners to agree. The potential for this type of coordination failure is sometimes referred to as the tragedy of the anticommons. [ Michael Heller, “Tragedy of the Anticommons: Property in the Transition from Marx to Markets,” Harvard Law Review, Link: http://repository.law.umich.edu/cgi/viewcontent.cgi?article=1608&context=articles, Accessed on: 9th August, 2016].
So what can be the solution to the debate between generating telecom revenue vs an individual’s right to innovate? Assigning exclusive rights to particular small bands to establish rules or regulations governing the utilization of bands as a common pool resource, that is, the managed commons approach can be a suitable proposition. From an economic perspective, this has a number of benefits that allow an unlicensed spectrum to be part of a platform for innovation and a source of services that are complementary to those created by licensed spectrum.
Governments should follow this approach to prevent the telecom giants from monopolizing the markets and preventing individuals or small organizations from innovating.