Increasing Wireless Value: Technology, Spectrum, and Incentives

Demand for wireless service has been growing rapidly. But while quantity of wireless service (measured in terms of bytes or minutes) has increased dramatically, price has increased little, if at all. This paper examines how supply of wireless capacity has increased and how it can continue to increase in the future. Given that there is little prospect for finding currently unused spectrum, the government should institute policies that promote the economically efficient use of spectrum currently in use, which in turn could make spectrum available for alternative uses. The best way for the government to promote spectrum efficiency is to ensure that users have flexibility and that they realize the opportunity cost of their use of spectrum. Two areas where users do not realize the opportunity cost of their use of spectrum are broadcasting and government and rules regarding those uses can be revised. In addition, the government should adopt market mechanisms to determine the opportunity cost of spectrum designated for unlicensed use.