III. The Traditional Administrative Approach to Spectrum Management3

A. Allocations, Allotments, and Assignments

Traditionally, spectrum management in the United States--as elsewhere in the world--has been viewed as a system of frequency allocations, allotments, and assignments. In this system, the entire range of the useful spectrum is divided (in the frequency dimension) into blocks or bands of frequencies called allocations. These frequency allocations determine the type of use allowed within the block or band of frequencies. For example, separate allocations are made for broadcasting, land mobile radio, point-to-point microwave, and amateur radio services.

In some, but not all, cases, these allocations are further subdivided into allotments. Broadly, the term refers to the subdivision of bands already allocated to a particular service for specific user and/or provider groups within that service. Within an allocation for the land mobile radio service, for example, allotments might be made for public cellular mobile telephone, specialized mobile radio ("closed user group"), and public safety services.

An assignment, on the other hand, is a grant of authority--a license--for a specific party to operate a radio transmitter on a specific channel at a particular location under a specific set of conditions. The frequency or channel assignment is the final subdivision of the spectrum. Note that assignments may or may not be made on an exclusive basis. For example, because broadcast assignments are made on an exclusive basis, the licensee obtains some protection against interference from other users. On the other hand, certain types of private land mobile radio licenses are issued on a nonexclusive basis. In such cases, there is little or no protection against interference, and users must share the spectrum on an informal basis.

B. The Traditional Administrative Approach to Spectrum Allocation, Allotment, and Assignment

As noted above, the radio spectrum resource has traditionally been allocated, allotted, and assigned by the federal government through an administrative process, that is, by the issuance and enforcement of government regulations. Because there are both competing uses and users for scarce spectrum, the FCC must decide which uses and users best serve the public interest. According to the commission, in making allocation decisions in the public interest, it takes into account

  1. public needs and benefits,
  2. technical considerations, and
  3. apparatus limitations.
For example, under public needs and benefits, it considers such factors as the dependence of the service on radio rather than wires and the relative social and economic importance of the service. Under technical considerations, the FCC considers the service's need for a particular portion of the spectrum because of propagation characteristics or compatibility with existing services. Under apparatus limitations, it considers the upper, practical limit of the useful radio spectrum range and actual operating characteristics of transmitters, receivers, and antennas.4

In addition to allocating and allotting the spectrum in the public interest by reviewing the factors described above, the FCC must assign channels (or groups of channels) to individual licensees. As noted earlier, some channels in a geographic area may be assigned only to one party, that is, they are exclusive. If more than one person or entity applies for an exclusive channel, the applications are said to be mutually exclusive. Traditionally, the FCC chose (and in some services still chooses) from among mutually exclusive applications through a "comparative hearing."5 Comparative hearings are adjudicatory in nature. The FCC selects the winning applicant in a quasi-judicial hearing process using comparative criteria established by precedent or formal rulemaking.

C. Perceived Problems with the Traditional Administrative Approach

As described above, spectrum management can be divided into two distinct phases: the allocation-allotment phase and the assignment-licensing phase. Succinctly stated, in the United States, both the allocation-allotment and assignment-licensing phases involve centralized administrative processes. In the case of the former, the process involves formal rulemaking proceedings, and in the case of the latter, formal adjudicatory proceedings.

It is beyond the intended scope of this paper to delve into all the real or perceived problems with the traditional administrative approach to spectrum allocation and allotment. However, as indicated in section I, the most fundamental problem with the traditional approach is that it represents a centrally administered method of allocating a scarce resource. As many Communist-block countries with centrally managed economies found to their chagrin, it is extremely difficult to allocate resources without the benefit of marketplace pressures and signals. Consequently, it should come as no surprise that the centralized allocation of increasingly valuable radio spectrum suffers from the same defects, including excessive rigidity, delay, waste, and high regulatory costs for the government and the private sector. Perhaps the most publicized failure of the administrative process in allocating spectrum was the prolonged delay occasioned by the FCC's efforts to reallocate and license spectrum for the cellular mobile radio service. Many observers believe that the delay, almost 20 years by some accounts, seriously harmed the public by denying them a service that history, if nothing else, has demonstrated that they value highly, and by significantly diminishing American industry's initial lead in cellular radio technology in the international marketplace.4

The problems are compounded by the increasingly varied demands for radio spectrum because of

  1. the desire to transmit a larger quantity and a greater variety of information;
  2. the need for more diverse types of communications systems to meet specialized needs (for example, for space exploration);
  3. the falling costs and increased functionality of electronic equipment that make radio communications more attractive;
  4. the rapid overall changes in the technology and the marketplace;
  5. the desire to increase competition with incumbent wireline and wireless providers;
  6. the wider recognition of the potential value of radio licenses (for example, from the publicity surrounding the award of cellular radio licenses); and
  7. the pressures to reduce, or at least contain, increases in the costs of administering the process.

Significant difficulties have also been experienced with the assignment process. Basically, the Communications Act requires the FCC to award a license if it determines that doing so would serve the public interest, convenience, and necessity. In some services such as certain private land mobile radio services, where licenses are awarded on a nonexclusive basis, the process is relatively straightforward and routine. However, certain provisions of the Communications Act, coupled with an important Supreme Court decision interpreting the legislation, have created a situation wherein the FCC must hold a simultaneous hearing for all competing applications whenever they are mutually exclusive. As noted above, the FCC selects the applicant that would best serve the public interest by considering comparative criteria established in a rulemaking proceeding dealing with the service or by precedent established in earlier hearings.

The basic problems with comparative hearings, especially in nonbroadcast services where content and diversity are not an issue, is that often there are no significant differences among the applicants in terms of their technical and financial ability to provide the service. Moreover, even if the agency discerns some differences among applicants in making initial license awards in a service, pending or subsequent applicants can modify their licenses accordingly.7 Under the U.S. regulatory system it is very easy to do this because the FCC is required to produce a written, reasoned decision based upon the public record established in the hearing. Therefore, whenever the FCC is compelled to award a valuable license in the absence of significant differences among the competing applicants, the losers have the ability and the incentive to appeal the decision to the agency and, if unsuccessful there, to the federal court system.

Finally, although "antitrafficking" rules attempt to restrict the sale of licenses awarded through comparative hearings, licenses are easily transferred from one person or entity to another. In other words, the person or entity that finally holds the license may have evaded the comparative process altogether. Indeed, the relative freedom with which licenses may be transferred is often viewed favorably from a policy perspective because it implies that marketplace forces--the willingness to pay--ensure that the resource ultimately goes to the licensee who values it most highly.

From this brief description, it is clear that despite some superficial theoretical appeal, the comparative hearing process suffers from a host of practical problems that impose high costs on applicants, raise costs for the FCC and the courts administering the process, and create undue delays in the provision of service to the public--all for little practical benefit because the license often passes into the hands of some other person or entity.