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John A. Figliozzi (jfiglio1@xxxxxxxxxxxx) wants you to see this article on Economist.com.

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Very well written article in The Economist this week on the future of radio spectrum allocation.


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ON THE SAME WAVELENGTH
Aug 12th 2004  

Governments and industries are bracing themselves for the possibility
that radio interference will become a thing of the past

MOST people do not worry much about physics or politics when, for
example, they look at the colours of a rainbow. Nor do they pause much
when they use a remote control for their TV set, talk on a mobile
phone, listen to the radio, cook food in their microwave oven, open
their car door from a distance, or surf the internet without wires. Yet
these are all phenomena of electromagnetic radiation. How humans
harness electromagnetic waves--and specifically those in the
radio-frequency part of the spectrum--has become so important that old
and new ways of thinking are now lining up for a tense confrontation
that will affect numerous businesses and billions of consumers. 

The old mindset, supported by over a century of technological
experience and 70 years of regulatory habit, views spectrum--the range
of frequencies, or wavelengths, at which electromagnetic waves
vibrate--as a scarce resource that must be allocated by governments or
bought and sold like property. The new school, pointing to cutting-edge
technologies, says that spectrum is by nature abundant and that
allocating, buying or selling parts of it will one day seem as
illogical as, say, apportioning or selling sound waves to people who
would like to have a conversation.

The traditional mindsets were colourfully on display this week when
full details were announced of a complicated spectrum swap arranged by
America's telecom and media regulator, the Federal Communications
Commission (FCC). First announced on July 8th, the swap gave Nextel,
America's sixth-largest mobile-phone carrier, new slices of spectrum in
return for vacating other bands where it was causing interference with
the radios of firemen, police and hospital workers. If it wins final
approval, the deal will cost Nextel $3.25 billion. It follows years of
what Michael Powell, the FCC's chairman, called "ruthless lobbying".
Nextel's rivals threaten to contest the decision, screaming that Nextel
got a windfall of public property. Verizon Wireless, America's largest
carrier, recently bought another piece of spectrum, in New York, for
$930m. 

A glimpse of the new mindsets, by contrast, can be had in any Starbucks
coffee-shop where patrons connect to the internet through Wi-Fi, a
technical standard (officially called 802.11) that does not have a
government licence but operates in "unlicensed" bands of spectrum in
the 2.4GHz or 5.8GHz range. These are bands which governments have
deliberately set aside as, in effect, an experiment for new
technologies such as Wi-Fi. Almost anything goes in these bands, and
any interference--between Wi-Fi base-stations and cordless phones,
say--is for vendors, not the government, to sort out. 

On one side, therefore, are notions of radio frequencies as scarce
resources that can be used by only one transmitter at a time and are
worth lobbying and paying billions for; on the other side is the idea
that any number of transmitters and receivers can peacefully co-exist
on the airwaves and that spectrum should therefore be open to all--not
individual property, but rather a commons. To understand this debate,
one must look back at history; to understand its importance, at
economics.

SLICING UP THE AIRWAVES
For decades after Guglielmo Marconi invented the radio in 1897, the
only way to send multiple radio signals at the same time was by
transmitting them at different wavelengths. Radio receivers were dumb
devices--copper coils, essentially--and if two signals came in on the
same wavelength, the result was noise. So when America passed the Radio
Act in 1927 and the Communications Act in 1934, and other countries
followed with similar legislation, the reigning wisdom was that
governments had to chop up the radio-frequency spectrum and give
exclusive privileges in each band to avoid chaos: radio required
central planning.

The next major change in this understanding came in 1959, when Ronald
Coase, later a Nobel laureate in economics, argued that the market was
far better than governments at allocating the scarce resource of
electromagnetic spectrum, and that auctioning spectrum to the highest
bidder was therefore superior to simply giving licences away. This
fitted well with the ZEITGEIST of the following decades, when
economists such as Milton Friedman and Friedrich von Hayek won Nobel
prizes for similar arguments in other areas of life. Starting in 1995,
governments in America and Europe began selling spectrum by auction.
Telecoms companies were the biggest buyers, mortgaging their balance
sheets to get airwaves for a new generation of cellular services.

The underlying assumptions about the physics of electromagnetism had
not changed, however. Devices were still assumed to be dumb,
interference a fact of life and exclusive-usage rights a necessity. The
only change is that today most governments run mixed regimes, doling
out some licences for free and auctioning others. Not all that mixed,
however: auctions account for only 2% of the radio-frequency spectrum
(up to 300GHz or so) in America. Central planning, in other words,
still accounts for 98% of the usable airwaves. Most of the spectrum is
given to television broadcasting, military communications and other
forms of dedicated content.

This dispensation represents a huge loss to society. James Snider at
the New America Foundation, a think-tank in Washington, DC, estimates
that America's airwaves would have been worth $771 billion in 2001
(when he last did the sums) if every licensee were to use his bandwidth
for the service in most demand by the public. But licensees do not do
this, or cannot because of regulations. This means that about half of
the total value of the airwaves is wasted on uneconomic uses--on extra
broadcasting capacity, say, instead of more cellular communications. 

It would be bad enough if most of the spectrum were being wasted on the
wrong uses; in fact, much of it is not being used at all. According to
one study, only four of 18 ultra-high frequency TV channels in urban
Washington, DC, were actually in use when the study was done. In rural
areas, the "white spaces" of fallow spectrum are even more vast. An
official at America's National Telecommunications and Information
Administration, which manages all the spectrum used by the federal
government (as opposed to the FCC, which regulates all other uses),
once estimated that 95% of the government's spectrum is not being used
at any given time. 

COMMONS, MINUS THE TRAGEDY
The sheer waste of this system--the "opportunity cost" of services and
technologies not offered because entrenched interests are squatting on
the spectrum--is behind the third major intellectual current, after
central planning and property rights, in recent thinking about
spectrum. Starting in the 1980s and gathering steam in the 1990s, there
have been calls for "open spectrum", or a spectrum commons. These
initially met with scepticism, since economists and most other people
are familiar with "the tragedy of the commons"--the idea that a scarce
resource will be inefficiently over-exploited (as in the case of
over-fishing, the classic instance). For sceptics, the same fate would
await the airwaves.

But this is wrong, says Kevin Werbach at the University of
Pennsylvania's Wharton business school and founder of Supernova Group,
a consultancy. He argues that the assumption that public sharing of
spectrum would lead to chaos presumes that spectrum is scarce; but this
reflects a flawed understanding of the physics of electromagnetism. A
common myth about electromagnetic waves is that they bounce off one
another if they meet. They do not. Instead, they travel onwards through
other waves forever (even though they eventually attenuate to the point
where they become undetectable). Radio interference, in other words, is
not a physical phenomenon, but always and only a technological problem,
the result of dumb radios and dumb antennae mixing the waves up after
receiving them. 

If devices are smart enough to distinguish between signals, says Mr
Werbach, spectrum suddenly reveals itself to be not scarce, but
abundant. Mr Werbach draws an analogy to acoustics. A well-attended
cocktail party has a din of many voices speaking at once and on similar
frequencies. But it is still possible for party-goers to have
conversations and pick out individual voices--ie, sound waves--from the
din, because our brains are equipped with powerful software for this
task. There is no limitation in the spectrum of sound waves, only in
the refinement of the human ear. The same can be true in the
electromagnetic spectrum.

There are four broad categories of new technologies that could make
this idea a reality. The first is called "spread spectrum", or
"wideband". As both names imply, this is a way of spreading an
electromagnetic signal across wide bands of frequencies at low power,
instead of booming a high-power wave through a narrow band. Wi-Fi is
one good example of wideband technology--the large range of frequencies
and the low power allow it to co-exist with cordless phones and other
devices. Hopes are highest, however, for a new technology called
"ultra-wideband", which will communicate by whispering its signals so
softly across the frequency bands of other, higher-power transmitters,
such as broadcasters, that these will not even notice the presence of
another signal. 

Another approach is to use "smart" antennae. These are systems of
multiple antennae that can "aim" a signal in a particular direction
(instead of radiating it out indiscriminately) or pick out a particular
signal from background noise by calculating the wave's angle of arrival
(for example, from a satellite instead of a source on the ground). 

A third technology is "mesh networking". In a mesh, each receiver of a
signal also re-transmits it. Every meshed laptop computer, for
instance, in effect becomes a node or router on its network. This has
three advantages. One is that, as with spread spectrum, signals can be
sent at very low power, since they only have to travel to the next
user's node, which will be hundreds of metres, instead of kilometres,
away. Another is that each newcomer to the network not only uses, but
also adds, capacity. A third is that the network will be robust, since
traffic can be re-routed easily if nodes fail, the approach already
taken by the internet. 

Open-spectrum enthusiasts are most excited, however, about the day when
radios become software-powered computers, or so-called "cognitive
radios". This would end the limitations of dumb radios. "Moore's law
meets Marconi's transmitter," says Kevin Kahn, research boss for
communications at Intel, the world's largest semiconductor-maker,
referring to the prediction, so far correct, by Gordon Moore, one of
Intel's founders, that the number of transistors on a chip doubles
every 18 months. Radios would double their intelligence every year and
a half, in other words. They could learn to hop around on the spectrum
to find quiet bands for transmission, to encode digital information in
new wave forms, or to analyse incoming noise and pick out only the
relevant signal. "Communication is no longer a matter of frequency, but
of computation," says Mr Kahn. In effect, cognitive radios would play
the part of human brains at noisy cocktail parties. 

BACK IN THE REAL WORLD
A lot of breakthroughs still need to happen before these technologies
become widespread and reliable. Enthusiasts who predicted that there
would be Wi-Fi transmitters in every street lamp have backtracked.
"Hotspots" are mushrooming, and cities from Montpelier, Vermont, to
Hamburg, Germany, are now stringing networks of them into larger "hot
zones" that blanket downtown areas and entire neighbourhoods with
high-speed internet access, but this seems to be an option only for
dense urban areas. Mesh networks, too, are still rare. Police and
firemen and other city employees in Medford, Oregon, have this year
started using a mesh network to connect to the internet while on the
road, but very few ordinary consumers are meshers. Cognitive radios are
still in the lab.

Incumbent licence-holders--and above all the telecoms firms that have
paid billions in spectrum auctions--naturally use the immaturity of
these technologies as their prime argument against a headlong rush away
from the property model and towards a commons approach. "Unlicensed
spectrum is sounding like crack cocaine: the ultimate high that solves
all your problems," says Brian Fontes, a lobbyist who works for
Cingular, America's second-largest mobile-phone company (and the
largest once its acquisition of AT&T Wireless, a rival, is complete).
But, "prove that you're not going to interfere; I mean prove it, don't
just say it," he insists.

The fact is, Mr Fontes says, that there is still no way to guarantee
quality of service in the unlicensed bands. Yet guarantees are needed,
if only for security. Such reminders are in the economic interests of
Mr Fontes's industry, but that does not make them wrong. Regulators
think it would be dangerous simply to embrace open spectrum and unleash
a free-for-all. Rather, they see their task as managing spectrum so
that it usage remains as efficient as technology allows. 

There are several ways to do this without adding new unlicensed bands.
One clear and obvious step is to allow "underlay". This is a way of
transmitting signals in somebody else's licensed band, but without
disturbing the licence-holder in any way--for the incumbent, a bit like
having a bird sitting in your garden. This could help to fill in the
huge white spaces of unused spectrum. It could also ease the politics,
since it will not be easy to persuade powerful and long-standing
licence-holders to vacate their bands. With underlay rights, says Vanu
Bose, the boss of Vanu, a firm that designs software-powered radios,
"the broadcasters don't even have to get off the spectrum they have
now, because they don't use most of it."

Another good measure for regulators is to make licences more flexible.
This is perhaps most urgent in Europe, where the European Commission
currently requires telephone operators to use a technology called
W-CDMA as they build third-generation (3G) mobile-phone networks. In
2000 the carriers paid more than EURO100 billion (then $125 billion)
for these licences, and are only now rolling out services after
experiencing technical flaws. Meanwhile, operators in South Korea,
America and Japan have been able to launch 3G services using a rival
technology, CDMA2000, that is more mature but is, in effect, banned in
Europe. But licence flexibility needs to go even further. Ultimately, a
mechanism for licence-holders to trade their rights on a secondary
market, similar to a bond or commodity market, could lead to more
efficient allocation. 

Nonetheless, the share of unlicensed spectrum should rise over time in
order to spur innovation. In America, where the FCC has been thinking
about the potential of open spectrum since 1981, this idea is no longer
controversial. Michael Powell, the FCC's chairman, has said that he
would like to see himself more as a speed cop than as a real-estate
agent, and makes clear his penchant for unlicensed bands. America's
spectrum regulator essentially agrees: the National Telecommunications
and Information Administration proposed on June 24th that both it and
the FCC identify an additional 10MHz of spectrum for this purpose. The
problem, in America as everywhere, is in the politics of choosing
someone to evict.

A few pioneers profess indifference to the debate. Dewayne Hendricks,
boss of Dandin Group, a wireless internet-access provider, does not
care whether governments open up more spectrum because, "all the
spectrum we need is already in play." He has already brought wireless
internet to "tall and uncut" places from Tonga to Ulan Bator, and says
he is now in talks in Armenia. Most industry participants, however, are
keen for more open spectrum. One opportunity that will present itself
in many countries is the migration from analogue to digital television,
which will reduce the bandwidth needed for traditional free-to-air
broadcasters. 

THE SWEET AND LOW DOWN
This is promising because broadcasters inhabit the best kind of
spectrum, the equivalent of beachfront property. The lower an
electromagnetic wave's frequency the better it is at penetrating rain,
trees and walls, which is why television and FM radio tend to work in
the basement, but why Wi-Fi signals have trouble with walls. According
to the New America Foundation, the 1% of frequencies below 3GHz are
worth more than the other 99% of spectrum between 3GHz and 300GHz.

Even a sliver of new unlicensed spectrum in the very low frequencies
could therefore make an enormous difference. It could, for example,
make possible a cheap alternative to cable and digital-subscriber line
modems (for which roads have to be dug up and trees uprooted) in
delivering high-speed internet access across "the last mile" to the
consumer. 

"Amazing things have been done with Wi-Fi in garbage spectrum," says
Tren Griffin, who is in charge of spectrum matters at Microsoft. "The
pregnant question is: what if we took a tiny amount of good spectrum
and repurposed it?" It might at last become feasible and economic to
begin bridging the world's digital divide. If low-frequency spectrum
became free for innovators, then business plans to bring connectivity
to villages in India and China, as well as rural Montana, would soon
follow. Lives in many places could one day be richer thanks to
vibrations in the air.
 

See this article with graphics and related items at http://www.economist.com/science/displayStory.cfm?story_id=3084475

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