Spectrum Markets for Wireless Services

It has been widely recognized that the current under-utilization of spectrum across many bands could be alleviated through the application of spectrum markets. So far, discussions of market mechanisms for spectrum allocations have focused primarily on secondary markets, which are managed by licensees. Here we explore the consequences of lifting current restrictions on allocations and ownership, and allowing more extensive markets for allocating spectrum across locations, times, and diverse sets of applications (e.g., broadcast, cellular, broadband data, emergency, etc). To motivate our discussion we first estimate the achievable rate per user that could be provided by sharing a large portion of the spectrum suitable for cellular and broadcast types of services. Our results suggest that in general the demand for spectrum may exceed supply implying that market mechanisms are needed to avoid a tragedy of the commons (i.e., associated with an alternative commons model). We then discuss a two- tier spectrum market structure for wireless services in which licenses for spectrum assets at particular locations are traded as commodities. Spectrum owners can choose to rent or lease their spectrum assets via spot markets at particular locations. Such an approach may lower barriers to entry into the wireless services market thereby facilitating competition and the introduction of new services.