Principles of Spectrum Sharing: Understanding the Value of Shared Spectrum

As new spectrum based services come online, the demand for spectrum has increased significantly. At the same time, greenfield spectrum to meet these needs is becoming more scarce, and clearing government and other incumbent users from currently-allocated spectrum has become more challenging. For policymakers who have long sought to allocate spectrum to the most valuable uses, shared spectrum is an increasingly important tool for getting the most benefit from limited spectrum resources and maximizing both public and private returns.

In this paper, we develop a framework for accurately valuing a shared licensed regime. Our Principle of Spectrum Sharing suggests the rights to use spectrum should be granted based on a value maximizing principle, where the chosen set of rights maximizes the net aggregate value of spectrum. Policymakers should avoid a focus on auction revenues as a proxy for assessing a spectrum’s aggregate economic and social value.

CBRS-style sharing provides an attractive option when completely clearing incumbent users out of large blocks of spectrum imposes significant costs. For example, a large share of valuable midband spectrum has been reserved for federal use and would be costly to vacate due to the military’s reliance on those frequencies for mission-critical operations. Unlike an exclusive licensing regime, spectrum sharing offers a way to avoid these costs. Additionally, sharing adds significant non-private value from increased participation of non-traditional users and innovative uses of spectrum. Evidence suggests that, by opening spectrum to competition among a diverse group of operators, CBRS-style sharing fosters greater innovation and novel uses. These factors can lead to increases in economic value and consumer welfare. For example, sharing is particularly useful for private networks being used for manufacturing, automotive, agriculture, energy, retail, commercial real estate, communications, media, and supply chain industries, as well as schools and libraries. With sharing, these industries have many more options for investing in 5G applications as they look for innovative, purpose-built solutions to industrial needs, particularly in rural and remote areas that may not be served by traditional carriers.

Our Principle of Spectrum Sharing also illustrates the drawbacks of focusing on auction revenues as a proxy for assessing a spectrum’s aggregate economic and social value. Unlike with exclusive licensing, where only one user can operate in the band and incumbents must be cleared at a cost, shared licensing regimes can generate additive values from multiple shared users of the bands and can save costs by not needing to fully clear or relocate incumbents.

For the 3.1-3.45 GHz band, our analysis suggests that the potential public- and private-sector benefits of exclusive licensing would be eclipsed by the public costs, yielding $41.38 billion in net economic losses. In contrast, a spectrum sharing regime following the successful CBRS model would yield a net gain of at least $18.61 billion for new users.

When deciding between a shared licensing versus an exclusive licensing regime careful attention should be paid to all the benefits and costs and then the set of rights – disaggregated or exclusive – should be chosen depending on which has a higher overall net value. Exclusive licensing and shared licensing regimes are complementary strategies to make more 5G spectrum available in the U.S. The choice between them should be based on complete value and cost estimates.