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13 Duke L. & Tech. Rev. 1 (2014-2015)

handle is hein.journals/dltr13 and id is 1 raw text is: 






TRAGEDY OF THE REGULATORY COMMONS:
        LIGHTSQUARED AND THE MISSING
                   SPECTRUM RIGHTS

              THOMAS W. HAZLETTT AND BRENT SKORUPTT

                           ABSTRACT
       The endemic underuse of radio spectrum constitutes a tragedy
    of the regulatory commons. Like other common interest tragedies,
    the outcome resultsfrom a legal or market structure that prevents
    economic actors from executing socially efficient bargains. In
    wireless markets, innovative applications often provoke claims by
    incumbent radio users that the new traffic will interfere with
    existing services. Sometimes these concerns are mitigated via
    market transactions, a la Coasian bargaining. Other times,
    however, solutions cannot be found even when social gains
    dominate the cost of spillovers. In the recent LightSquared
    debacle,  such spectrum allocation failure played out. GPS
    interests that access frequencies adjacent to the band hosting
    LightSquared's new nationwide mobile network complained that
    the wireless entrant would harm the operation of locational
    devices. Based on these complaints, regulators then killed
    LightSquared's planned 4G network. Conservative estimates
    placed the prospective 4G consumer gains at least an order of
    magnitude above GPS losses. Win win bargains were
    theoretically available, fixing GPS vulnerabilities while welcoming
    the highly valuable wireless innovation. Yet transaction costs
    largely caused by policy choices to issue limited and highly
    fragmented spectrum usage rights (here in the GPS band) proved
    prohibitive. This episode provides a template for understanding
    market and non-market failure in radio spectrum allocation.







t H.H. Macaulay Endowed Professor of Economics, Clemson University; Professor
of Law and Economics, George Mason University (on leave). PhD. (Economics),
UCLA; former Chief Economist, Federal Communications Commission. Contact:
hazlett @clemson.edu.
t Research Fellow, Mercatus Center at George Mason University. J.D., George
Mason University School of Law. Contact: bskorup@mercatus.gmu.edu.

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