Open Wireless vs. Licensed Spectrum: Evidence from Market Adoption

The paper reviews evidence from eight wireless markets -- mobile broadband; wireless healthcare; smart grid communications; inventory management; access control; mobile payments; fleet management; and secondary markets in spectrum -- and find that markets are adopting unlicensed wireless strategies in mission-critical applications, in many cases more so than they are building on licensed strategies.

Eighty percent of wireless healthcare; seventy percent of smart grid communications; and forty to ninety percent of mobile broadband data to smartphones and tablets use unlicensed strategies. Unlicensed technologies are entirely dominant in inventory management and access control. For mobile payments, current major applications use unlicensed, and early implementations of mobile phone payments suggest there is no particular benefit to licensed strategies in this space. Fleet management is the one area where licensed technologies are predominant. However, UPS, owner of the second largest commercial fleet in the U.S., has implemented its fleet management system purely with unlicensed wireless, suggesting that even here unlicensed may develop attractive alternatives. By contrast to these dynamic markets, secondary markets in licensed spectrum have been anemic. Market evidence suggests that unlicensed wireless strategies are becoming the primary approach for implementing wireless communications technology. Actual market deployments of wireless technologies suggests that unlicensed follows the innovation model of the Internet, applied to wireless communications. Licensed-spectrum, by contrast, replicates the telephone system model.

Future spectrum policy debates, in particular those surrounding TV band auctions and reallocation of federal spectrum, should secure an adequate development path for unlicensed technologies, devices, and services at least as much as they emphasize flexibly-licensed exclusive rights.