Working Paper No. 10-03:
Tragedy T.V.: Rights Fragmentation and the Junk Band Problem

Author(s):

Thomas Hazlett

Date Posted: January 2010

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Abstract:

Tragedy of the anti-commons occurs when property rules fail to enable efficient social coordination. In radio spectrum, rights issued to airwave users have traditionally been severely truncated, leaving gains from trade unexploited. The social losses that Ronald Coase (1959) asserted, appealing to basic theories of resource allocation, are now revealed via intense under-utilization of the TV Band.

Despite the end of analog TV transmissions in June 2009, vast spectrum continues to be allocated to terrestrial broadcasting. Broadcast video content could, however, inexpensively shift to cable and satellite. Making the TV Band (49 channels spanning 294 MHz) available for new services is worth $120 billion to service providers (at 2008 auction prices) and at least ten times more in consumer welfare.

Instead, U.S. regulators treat TV airwaves as a “junk band.” Analogizing to wi-fi radios accessing frequencies without exclusive licenses, the FCC seeks to permit government-approved devices to transmit in unoccupied TV Band “white spaces.” No radios have been approved in seven years of rule makings, reflecting regulatory difficulty in weighing economic trade-offs.

Yet common interest tragedy, already visible in the long under-utilized TV Band, predictably locks in once white space devices are approved. By pre-empting exclusive spectrum ownership, the opportunity for market reallocation of frequencies is lost. Specifically, fragmented and overlapping use rights cannot support investments to efficiently mitigate broadcast TV pollution, cleaning up the “junk band.” Were, alternatively, white spaces assigned via exclusive overlay rights, spectrum owners would contract with cable and satellite operators to guarantee broadcast video distribution, releasing valuable airwaves for new services. Gains from reducing airwave pollution would induce cooperation, replacing political gridlock.