The Hindu Business Line : All about spectrum

GARBAGE (band) is an international rock group formed in 1993. Its Stupid Girl was a massive hit, and the latest album Bleed Like Me was released about a month ago, according to Wikipedia.

But `garbage band' belongs to spectrum (which encompasses all possible wavelengths of electromagnetic radiation or EM radiation), originally designed for unlicensed uses such as garage door openers, informs a recent research paper titled Policing the Spectrum Commons by Philip J. Weiser and Dale N. Hatfield of the University of Colorado.

Thus, the band of frequencies around 2.4 gigahertz (GHz) had almost been written off by industry experts because "the assorted unlicensed uses — mostly industrial, non-communications uses like microwave ovens — crowded the spectrum" and so the range was considered to be of no help in operating any reliable service, recount the authors.

However, the Institute of Electrical and Electronics Engineers (IEEE) went on to develop a standard for wireless broadband that would operate in the 2.4 GHz band of spectrum. This, the 802.11 standard, also known as Wi-Fi, spawned big business. Wi-Fi-related devices grossed $2.5 billion in 2003.

The authors cite a paper from the US Federal Communications Commission's Office of Strategic Planning and Policy Analysis titled, Unlicensed and Unshackled: A Joint OSP-OET White Paper on Unlicensed Devices and Their Regulatory Issues, by Kenneth R. Carter, Ahmed Lahjouji and Neal McNeil.

"Unlicensed wireless devices are permitted to emit radio frequency (RF) energy, without specific authorisation, registration, or grant of a license," it notes, and traces the origin of these devices to 1938. Don't omit reading `A Day in the Life of Unlicensed Devices', a sub-plot by McNeil introducing one to the many RF gadgets used in daily life.

Rewind to the 1920s, when radio communication was a veritable free-for-all, as the FCC's paper narrates. "Anyone possessing radio equipment was allowed to broadcast signals over the air," and the result was chaos because there was interference when several transmitters operated in near proximity.

The paper argues for "a well-considered and forward-looking approach to policy reform" so that people may reap `the benefit and promise of unlicensed devices'. Resuming the discussion of Weiser and Hatfield, the demand now is that the `commons access spectrum' be given more bands, including those for "a next-generation WiMAX technology". But there are loud whispers about WISPs or wireless Internet Service Providers who would like to provide commercial services using the commons spectrum. Meanwhile, economists caution that a tragedy of the commons may be in the making!

Good read to understand the happenings-on in the theatre of the spectrum.

Bandwidth to Beckham

SHAHZAD Ansari and Kamal Munir of the University of Cambridge ask, `How Valuable is a Piece of the Spectrum?' and proceed to examine how the value of a resource is determined through competitive and collaborative interaction. "The 3G case reveals fascinating dynamics associated with resource acquisition, creation and destruction of value in competitive environments," observes their paper.

3G licences meet the VRIN framework (this approach focuses on firm-internal resources, which should lead to competitive advantages if they are valuable, rare, inimitable and non-substitutable) for a resource as laid down by J.B. Barney, they cite.

That is, "valuable, as they enable firms to launch the next generation of mobile telephony; rare and physically unique; inimitable by definition; finally, these are not substitutable as technologies using unlicensed spectrum are unable to provide comparable service."

Ansari and Munir are confident that their research is applicable not only to the wireless market, but also to many other industries where quasi-tradable scarce resources form a significant constraint to firm performance. Examples they give are airport slots owned by airlines, landline owned by telecommunication operators, and also football players such as David Beckham who represent "a source of enormous rent creation for their clubs".

A broad spectrum of applications, one may say.

Fee paradox

ON the same topic, Harald Gruber of the European Investment Bank has written Spectrum Limits and Competition in Mobile Markets: The role of licence fees. A footnote in the paper cites G. Calhoun on how "the early mobile telecommunications industry was struggling to get any frequencies at all in the 100 MHz band during the 1950s and 1960s".

Analogue cellular technology also had to wait for a decade to be granted frequency spectrum in the 400 Mhz band at the beginning of the 1980s, one learns. It seems the economic cost of this regulatory delay was estimated at $50 billion for the US alone.

The authors find it paradoxical that "the more the industry seemed to move away from monopoly rents, the more the idea of extracting rents through license fees became pervasive." Interestingly, "Licences for digital cellular such as for GSM were allocated principally through beauty contests in Europe."

Beauty contests

AND that brings me to the last paper for study, D. Daniel Sokol's work that appeared in Virginia Journal of Law and Technology. The article was titled, `The European Mobile 3G UMTS Process: Lessons From the Spectrum Auctions and Beauty Contests'.

In its conclusion, the author brings in Nash equilibrium and the `battle of the sexes' in which both man and woman would like to do something together but disagree on the preferred outcome.

"The man may want to go to the country, while the woman may want to go to the beach," as explained through a grid, to show how each player would hold out for the equilibrium that they preferred most. And "the result would be an outcome that neither player desired, where both were worse off than they needed to be."

Moral of the story is that "as 4G technology, a successor to 3G, becomes a reality, a new system must be put into place for a more efficient, European-wide allocation of spectrum through a simultaneous ascending auction."

Relevant research to be acquainted with, even if we're yet to grapple with 3G issues.

ITworks@TheHindu.co.in

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