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WERBLIST -- Kevin Werbach's periodic email newsletter
March 12, 2003
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I was among the speakers at a fantastic conference March 1 at Stanford
Law School, entitled "Spectrum Policy: Property or Commons?"
. As you may know, I'm part of
a group arguing that wireless spectrum should be shared (the way WiFi
works) rather than sold as property to exclusive owners. My remarks at
the conference responded to two papers supporting the property rights
approach. Doc Searls was kind enough to transcribe my comments, and
I've reproduced them below.
As a reminder, I have a separate email list, The Supernova Report, for
essays and links related to decentralization. You can subscribe at
. Planning for
Supernova 2003 (July 8-9 in Washington DC) is coming along well, with
confirmed speakers already including the Bush administration's point
person on tech policy, Sun's top software executive, Japan's leading
VC rebel, and a former FCC Chairman. I hope some of you on this list
can join us there!
-k-
Kevin Werbach
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In this Issue:
- Benefits of a Spectrum Commons
- The Real Michael Powell
- Links of the Month
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REMARKS AT THE STANFORD SPECTRUM CONFERENCE
March 1, 2003
I'll start by making the point that several other people already have
-- that there are quite a few areas of agreement between the two camps
here -- and just try to quickly set out what I think those are.
The first one is, we all agree that the current system is horribly
flawed.
We agree that property and commons are not necessarily mutually
exclusive. Gerry [Faulhaber] makes an interesting move, saying,
"that's true, but because a perfect universal property system can
somehow accommodate commons, and a perfect universal common system
everywhere can't accommodate enough property, therefore we should
choose property."
But I think that's something of a distortion. We're not here talking
about whether any of us finds the writings of Ayn Rand or Karl Marx
more convincing. We're talking about the real world. And in the real
world, systems are mixed. The question is whether we need to choose
one of them as the overarching answer.
The third thing I think we agree on, and it's come up several times,
is that there is a great deal of uncertainty here. We don't know with
certainty in a property regime who is going to participate in an
auction, how the auction is going to go, or what's going to happen.
And though we have many speculations and intuitions and examples on
the commons side, we don't know with certainty how people are going to
behave, or certainly how technology is going to develop in a commons.
So that should lead us to be humble, to build room for experimentation
and reconfiguration into any system that we put into place.
And finally, I think we generally agree that scarcity and transaction
costs are two crucial variables in trying to make choices between
these systems. Those points are implicit in both the papers [presented
here]. The Farber/Faulhaber paper talks about scarcity and transaction
costs and the coexistence of the two models more explicitly.
So where do we disagree? Well, both of the papers, again Farber and
Faulhaber more explicitly, talk about this idea of property as the
overarching default regime, and suggest we can accommodate commons
within it, essentially the way we have public parks.
That's a nice thing. I really hope it will happen. I think it might.
But I don't think it is good enough to base a choice of regime on, for
a number of reasons.
First of all, if that makes sense, if a company, a manufacturer, an
Intel or a Microsoft, would find it valuable to buy up spectrum and
make it available as a commons, why haven't we seen it already? Why
hasn't a manufacturer licensed spectrum under the FCC's flexible use
auctions that have been going on the last few years, and done this?
Why in fact have the property proponents not come up with any real
example or analogies for why this might happen in the real world, as
opposed to in the realm of theory?
I think the reason is that there is an incentive problem here. And
again this has come up through some of the discussions, in David
Reed's comments and in particular Yochai [Benkler]'s comments. But the
problem is really a matter of ex ante vs. real-time decision making.
The notion in the property regime is that you need to, up-front, pay
the full value of the spectrum to the person who is selling it... or
what the person who is selling it will charge, which if there's a
holdout situation may even be more than what its value to them is. In
a property/exclusive rights situation, you can make that
determination. I want to do broadcast television on a frequency that
someone else is using for cellular [phone service], or on a frequency
that is now Channel 57 UHF TV, I can decide what the value is to me to
offer some other service. But in a commons it's hard to decide ahead
of time.
For example, what's the value of the 2.4 GHz band? I'll give you a
hint. Before Wi-Fi came along, at the FCC we called it the junk band.
It had very little value. Suddenly, in the last three or four years,
which has been largely a period of terrible destruction of value and
lack of investment in telecom, it's exploded. It has become incredibly
valuable; probably much more valuable than it would have been to
someone had they had that band for exclusive use. How will we know
that ahead of time?
The reason that happened is because there was an open type of
environment. Not a perfect commons, but something along the lines of a
commons, that let people find it and go the innovator route; let
companies deploy technology, do experiments, and come up with
improvements. And we've just seen the beginning of what's going on in
that band so far.
So the problem with this notion that we can have public parks, or
private parks, or some other kinds of combinations, is that it assumes
too much about the information that someone would have ahead of time,
to get to a policy. And really at a deeper level this idea of parks is
the wrong analogy. Parks compete with private ownership for land. They
don't compete for use. You don't do the same thing in Central Park as
you do in the rest of Midtown Manhattan. That's the point. But with
spectrum we're competing to offer potentially the same services. And
any allocation to one model or the other, and this is certainly true
on both sides, facilitates for certain uses but it precludes certain
business models, certain market structures. For example, a market
that's based around competition for different kinds of equipment,
versus a market that's based on competition between different
exclusive service providers. Each choice facilitates certain models
and each choice precludes certain models.
I'll talk about this a little bit more in a minute in terms of what it
means for scarcity and transaction costs. But think about some other
analogies that have that property where there is contention for the
actual use. Not parks vs. real estate, but public parks vs. private
parks -- things like campgrounds and nature preserves. Public highways
vs. toll roads. Maybe Linux vs. Windows. I don't have time to go into
all of those. But if you think about it, the aspect that all of those
examples share is that either the commons regime is the dominant one
-- we have a lot more public roads than we have toll roads -- or there
is no choice made ahead of time by government. There is room for both
systems to coexist and operate and develop.
Scarcity. The trouble with the way both of these papers and many of
the property arguments look at scarcity is that it's done in a very
static way. The examples are all about something like the UHF
television situation -- a defined frequency block where spectrum is
either not being used, or it's being used for some sort of low-value
activity, and the idea is to transfer it to someone who can use it for
something of more value. Or maybe we can aggregate and change the
boundaries of those blocks a little bit. But the value of the spectrum
-- and again this was mentioned in the initial discussions by David
Reed and Yochai Benkler -- the value depends on the technical
architecture of the systems that operate in that spectrum. The
availability of the spectrum, how much there is, how much scarcity
there is, is a function of those architectural decisions. And the
choice of regime influences those architectures.
We don't have unlimited bandwidth under any regime tomorrow in the
sense that you can snap your fingers and suddenly have as much
spectrum as you want, at all times, for anything, for no cost. But we
might have unlimited bandwidth in a commons if you look at it
differently.
How long is the U.S. coastline? This is a famous example from the
field of fractals. Well, if you measure the coastline from a satellite
picture, you get one answer. If you measure it from airplane
reconnaissance photos, you'll see a lot more of the twists and turns
in the coastline, you'll get a much bigger number. If you walk along
the coastline with a ruler, and measure every single twist and turn,
and in and out, you'll get a much bigger number. The coastline is
infinite, depending on what scale you look at it from.
Now, of course, the coastline isn't infinite. It's not infinite in any
practical sense. But how big it is depends on how you look at it. How
big spectrum is depends on what kinds of systems are being used in
that spectrum. The advantage of a commons system is that it creates
incentives for the users of that spectrum to use it more efficiently.
To design their existing technologies to be robust for interference
that's there, and to design new kinds of technologies that squeeze
more capacity out of the system. The property regime forecloses some
of those alternatives by putting into place an exclusive use system.
The most obvious one is ultra wideband types of uses, where ultra
wideband needs a wide band, and therefore there is the anticommons
problem. There are a bunch of situations under a property regime where
that kind of technology may not exist. So we get, for example, the
easements alternative that's put forth in the Farber/Faulhaber paper.
And again, this is a good idea: Something that would be worth trying
and I hope will work. But how will we know that easements are going to
work?
First of all, again, property is the overarching regime. So the burden
of proof is all on the easement user to show that it's not
interfering. And how are we going to know that the easements are wide
enough, or robust enough, that someone can actually build something
realistic in the easement? It's sort of the excess capacity that we
throw out there and say "okay commons, go at it, you have it." That
may actually foreclose any practical use of the commons.
Similarly, in terms of transaction costs. The transaction costs of a
property regime increase as the system gets more dynamic. As you have
more degrees of flexibility, [there are] different ways to use the
system, different mechanisms where you have people relaying each
other's traffic, or cooperating and sharing -- some of the kinds of
technologies that David Reed talked about. And in a property system,
every time you do more flexibility, you need more transactions. You
need to price, you need to decide, you need to have someone buying and
selling. So that transaction cost grows.
It doesn't scale. And actually the Kwerel and Williams paper
inadvertently shows some of these transaction cost difficulties when
they go through this laundry list of aspects that they would want to
put into an auction. Things like combinatorial bidding. But they
probably can't be done, just because the auction software isn't
complex and sophisticated enough to support it today. And that's just
in the initial allocations.
On the other hand, commons creates this incentive for real-time
decision-making, which was brought up a little bit before. Think about
what happens in the Internet. Many experts like, for example, Bob
Metcalfe, the inventor of Ethernet, thought the Internet would
collapse. Why does the Internet not collapse? Because everyone has an
incentive not to go to a court, and not to go to a government when
someone is preventing their packet from getting from A to B. If their
packet doesn't get from A to B, they have an incentive to route around
it. The Internet treats these things as damage and routes around them.
If we decentralize the decision-making process to the participants in
the market in real time, as opposed to assuming that ahead of time
they can decide what the value is and transact.
So a commons that is failing one day may be successful tomorrow, as
people route around problems. A commons doesn't just address the
issues that we have today. It puts in place the facility to address
the issues of tomorrow. And that's the kind of regime we should be
looking for.
[Applause] (Editor's note: Doc wrote that, not me!)
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THE REAL MICHAEL POWELL:
The FCC chairman is Al Gore in Republican clothing.
(Originally published in Slate, February 19, 2003)
When Michael Powell was named chairman of the Federal Communications
Commission two years ago, Washington observers pegged him as an
ideological right-winger. The image has stuck. Yet the real Michael
Powell is something else entirely. He's an earnest technocrat, out of
place in the politically calculating Bush administration. In approach,
if not in style or politics, Powell is the closest thing to Al Gore in
official Washington today.
Granted, Powell's views are to the right of his predecessors, Reed
Hundt and Bill Kennard. He talks more about eliminating regulatory
requirements than about promoting fair competition and a diversity of
market participants. (Disclosure: I served as counsel for New
Technology Policy at the FCC during Hundt's and Kennard's terms.
Powell was named a commissioner shortly before I left.) But Powell's
not a fire-breathing conservative and shill for big business. Like
Gore, he's a wonk with an abiding interest in policy minutiae and a
deep faith in technology.
Starting Feb. 20, Powell's FCC will adopt a series of rule changes
that could reshape the telephone and media industries. To implement
the 1996 Telecommunications Act, Powell's predecessors adopted rules
that require local phone companies to share their networks with
competitors. Powell wants to scrap some of those so-called
"unbundling" requirements. As with most telecom policy battles, the
details are obscure, but the winners and losers are not. "Baby Bell"
phone companies like Verizon and SBC want to change the rules, and new
local competitors like AT&T and broadband provider Covad want to keep
them. Billions of dollars, and the fate of dozens of companies, hang
in the balance.
Powell is with the Baby Bells, but he's not really for them. The
companies say they are itching to build wondrous new networks, but
that doing so is counterproductive when their competitors can share
the benefits. They promise that scaling back unbundling will spur new
investment and help pull the telecom sector out of its doldrums.
Contrary to popular belief, Powell doesn't buy this argument. Asked at
a conference two weeks ago how he can trust the Baby Bells' promises,
Powell responded, "I have one rule: I don't trust any companies." He
explained that he was focused on the coming transition to digital
broadband networks and on pushing "facilities-based" competition. In
other words, Powell hopes competitors will build their own networks or
employ new platforms such as wireless, cable, and Internet telephony
(used by companies such as Vonage). He wants to allow the market to
move toward the technological transformation he foresees. The Bells
will benefit in the short run, but to Powell that's incidental.
Powell's efforts hit a snag last week when his fellow Republican FCC
commissioner, Kevin Martin, pushed an alternative plan. Opponents of
Powell and the Baby Bells cheered, but the dust-up reinforces Powell's
maverick status. Martin, who is politically well-connected to the
White House, wants to give state regulators more power to interpret
the unbundling rules. It's a classic conservative states' rights
argument. Powell is the one pushing for an energetic federal policy.
Since taking over at the FCC, Powell has shown that he's not a
libertarian true believer, hell-bent on dismantling regulation. In
October, the FCC blocked the proposed merger of direct broadcast
satellite competitors DirecTV and EchoStar, claiming it would harm
competition. It was the first time the FCC blocked a media deal in 30
years. And Powell did it with gusto, acting before the Justice
Department finished its review.
Rather than push to scale back the agency, Powell has done the
thankless work of reinventing it. He's beefed up the FCC's technical
and economic expertise by instituting training programs and hiring
more engineers in the past 18 months than the FCC hired over the
previous 20 years. He pushes FCC lawyers to craft their analyses to
hew closely to judicial and congressional mandates.
The unbundling battle shows that Powell isn't protecting monopolies
out of a belief that bigger is always better. He's looking to create a
market where those monopolies will die if they don't respond
aggressively to new kinds of competition. That's cold comfort to the
companies who will suffer. And Powell may be wrong. Absent the current
regulatory safeguards, the big players may indeed stomp out
competition and raise prices. Correct or not, though, Powell is making
a dramatic bet on new technology.
He's made similar bets in other areas. A year ago Powell's FCC
authorized ultra-wideband, a radical wireless technology that, because
is uses extremely low power, can coexist with existing services such
as cellular telephony and TV broadcasts. The military, public safety
groups, and broadcasters had delayed its approval for years. Powell
also convened a spectrum task force that recommended major changes in
the way the FCC regulates the airwaves, including greater support for
unlicensed wireless technologies like Wi-Fi.
Michael Powell and Al Gore have one other thing in common besides
their faith in the transforming effects of technology: Both are gadget
lovers. Where Gore had a Blackberry wireless e-mail device, Powell has
a Wi-Fi home wireless access point and TiVo digital video recorder.
The latter toy got him in trouble at this year's Consumer Electronics
Show, where Powell expressed his desire to swap shows with his sister.
The major media companies, who see TiVo and its competitors as threats
to their advertising revenues, were outraged.
The TiVo incident shows one reason why Powell is so misunderstood: He
says what he thinks. In a Washington dominated by message points and
poll-driven agendas, honesty is perplexing. "Deregulation" has become
a political code phrase to excite the faithful, like "tax relief."
When Powell points out, as he often does, that no implementation of
the scores of rules set out in the Telecommunications Act could
possibly be considered deregulation, he is met with blank stares. His
supporters hear what they want to hear. They should listen more
closely, or they are in for some surprises.
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LINKS OF THE MONTH
http://joi.ito.com/static/emergentdemocracy.html
Joi Ito's emergent democracy paper
http://werbach.com/blog/2003/02/21.html#a850
My comments on the February 20 FCC unbundling decision
http://shirky.com/writings/group_politics.html
Clay Shirky on social software and the politics of groups
http://www.alwayson-network.com/comments.php?id=246_0_2_0_C
Great interview with Sony's CEO by Tony Perkins of Always On
http://www.worldofends.com/
World of Ends: What the Internet Is and How to Stop Mistaking It
for Something Else, by Doc Searls and David Weinberger
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