Why We Should Stop Worrying and Learn to Love Spectrum Windfalls

Many attempts to increase the flexibility of wireless spectrum rights meet objections that the method of reallocation will result in a windfall for corporate license holders. Far from being objectionable, however, allowing windfalls in spectrum reallocation creates virtuous incentives. Past restrictions on the supply of flexible-use rights to the spectrum have resulted in a rigid system, which is not in the public interest because the most productive uses of the spectrum change rapidly. Nevertheless, this status quo is difficult to unravel. Processes that could increase the flexibility that is necessary for efficient spectrum use often produce “windfalls” by giving incumbents large paydays or valuable licenses. Many find these outcomes objectionable. Yet the prospect of a windfall creates the incentive to use one’s spectrum efficiently enough to free up all or part of it for other uses and to volunteer restrictive licenses for reallocation, both of which benefit the public. Though some legal maxims disfavor windfalls, the laws, and precedents applicable to spectrum reallocation permit spectrum arrangements that produce them. Ultimately, freeing up more spectrum for flexible use should be the central goal of modern spectrum allocation.