GOODMAN.DOC 9/18/2019 1:30 PM Spectrum Rights in the Telecosm to Come ELLEN P. GOODMAN* TABLE OF CONTENTS I. INTRODUCTION .................................................................................................. 270 II. RESOURCE CONFLICTS IN SPECTRUM .................................................................. 278 A. Radio Basics ............................................................................................ 278 1. The Spectrum Resource .................................................................... 278 2. Federal Control of the Resource: Spectrum as Land ........................ 280 3. Uncontrolled Resource: Spectrum as Air ......................................... 285 B. Spectrum Use Conflicts ............................................................................ 288 1. Spectrum as Land ............................................................................. 289 2. Spectrum as Air................................................................................. 293 3. Tendencies and Trends ..................................................................... 296 C. Public Interest Principles of Conflict Resolution ..................................... 302 D. Critique of Spectrum Management Status Quo ........................................ 312 III. PROPOSED REGIME CHANGE TO PRIVATE PROPERTY RIGHTS .............................. 315 A. Mediate Scarcity with Fee Simple Deeds ................................................. 315 1. The Bundle of Spectrum Rights ......................................................... 315 2. From Licenses to Estates .................................................................. 320 B. Common Law Resolution of Spectrum Conflicts ...................................... 322 IV. FCC RESOLUTION OF SPECTRUM CONFLICT THROUGH THE LENS OF NUISANCE ............................................................................................ 326 A. Nuisance Versus Trespass Law ................................................................ 326 * Associate Professor, Rutgers University Law School, Camden. My thanks to Michael Carroll, Michael Chartier, David Driesen, Frank Goodman, Gerald Faulhaber, Jay Feinman, James Krier, Paul Schomburg, James Speta, Allan Stein, Victor Tawil, Phil Weiser, Kevin Werbach, the participants of the George Washington University Intellectual Property Colloquium, and the participants of the Penn-Temple-Wharton Colloquium for their insights. 269 GOODMAN.DOC 9/18/2019 1:30 PM B. Nuisance Law........................................................................................... 330 1. Common Law Standard of Liability .................................................. 331 2. Transaction Cost Theory of Entitlements .......................................... 334 C. FCC Resolution of Spectral Nuisance Cases ........................................... 337 1. Administrative Standard of Liability ................................................. 338 2. Transaction Cost Analysis of FCC Dispute Resolution .................... 339 a. Property Rule One ..................................................................... 340 b. Property Rule Three .................................................................. 346 c. Liability Rule Two ...................................................................... 349 d. Liability Rule Four .................................................................... 351 3. Measuring and Balancing Nuisance Costs in the Public Interest ................................................................................... 356 V. THE COMMONS ALTERNATIVE TO PRIVATE PROPERTY RIGHTS ........................... 359 A. The Commons Model ............................................................................... 359 1. Origins .............................................................................................. 359 2. The End of Scarcity ........................................................................... 364 a. Wideband Transmissions ........................................................... 365 b. Smart Radios .............................................................................. 366 c. Mesh Networks .......................................................................... 368 B. Conflict Resolution in the Commons ........................................................ 372 VI. A MIXED REGULATORY, COMMONS, PRIVATE PROPERTY RIGHTS APPROACH ............................................................................................ 379 A. Coexistence of Private Property and Commons Spectrum ....................... 380 B. The Regulatory Role in a Mixed Regime of Spectrum Management ............................................................................ 384 1. Spectrum as Land: A New Nuisance Law ......................................... 385 a. Structuring Liability Standards .................................................. 387 b. Menu of Liability and Property Rules ........................................ 392 2. Spectrum as Air: Ambient Interference and the Commons .................................................................................... 398 a. Spectral Pollution ...................................................................... 398 b. Regulatory Oversight of Technology Controls ........................... 401 VII. CONCLUSION ..................................................................................................... 403 I. INTRODUCTION Fifty years ago, Ronald Coase blazed forth with what his University of Chicago colleague called “an insight more fundamental than we can use.”1 His radical idea was that the electromagnetic frequencies that carry our wireless communications should be treated like any other finite natural resource. That is, they should be allocated to users through market exchanges, with the government simply defining and enforcing private property rights in the resource.2 In the ensuing decades, a number of economists and legal scholars have followed Ronald Coase in 1. Harry Kalven, Jr., Broadcasting, Public Policy and the First Amendment, 10 J.L. & ECON. 15, 30 (1967). 2. R.H. Coase, The Federal Communications Commission, 2 J.L. & ECON. 1, 25– 26, 35–38 (1959). 270 GOODMAN.DOC 9/18/2019 1:30 PM [VOL. 41: 269, 2004] Spectrum Rights in the Telecosm to Come SAN DIEGO LAW REVIEW advocating a property rights regime for spectrum.3 These theorists accept the premise of government spectrum regulation: Because radio signals transmitted on the same or adjacent frequencies in the same area tend to interfere with each other, usable spectrum is a scarce resource whose exploitation must be controlled. What they reject is the notion that the control should lie with the government. As the demand for wireless devices has accelerated, along with pressures on the government to reform its management of spectrum, Coase’s insight has traveled from the fringe to the core of current policy debates. It has come to be accepted in the past several years, even by the Federal Communications Commission (FCC), that comprehensive governmental control over radio signal transmission is no longer appropriate. For each year that the speed of technological innovation outpaces administrative decisionmaking, the chances increase that there will be significant change in the way that spectrum is managed. Over the past decade, scholars and engineers who are deeply influenced by the open architecture of the Internet have challenged the Coasian critique of spectrum policy.4 These theorists too would liberate 3. See, e.g., Comments of 37 Concerned Economists, In re Promoting Efficient Use of Spectrum Through Elimination of Barriers to the Development of Secondary Markets, WT Docket No. 00-230, at 3–4 (F.C.C. filed Feb. 7, 2001); Arthur S. De Vany et al., A Property System for Market Allocation of the Electromagnetic Spectrum: A Legal-Economic-Engineering Study, 21 STAN. L. REV. 1499 (1969); Thomas W. Hazlett, The Wireless Craze, the Unlimited Bandwidth Myth, the Spectrum Auction Faux Pas, and the Punchline to Ronald Coase’s “Big Joke”: An Essay on Airwave Allocation Policy, 14 HARV. J.L. & TECH. 335 (2001) [hereinafter Hazlett, The Wireless Craze]; Jora R. Minasian, Property Rights in Radiation: An Alternative Approach to Radio Frequency Allocation, 18 J.L. & ECON. 221 (1975); Gregory L. Rosston & Jeffrey S. Steinberg, Using Market-Based Spectrum Policy to Promote the Public Interest, 50 FED. COMM. L.J. 87, 93 (1997); Pablo T. Spiller & Carlo Cardilli, Towards a Property Rights Approach to Communications Spectrum, 16 YALE J. ON REG. 53 (1999); Lawrence J. White, “Propertyzing” the Electromagnetic Spectrum: Why It’s Important, and How to Begin, 9 MEDIA L. & POL’Y 19 (2000); see also Thomas W. Hazlett, Assigning Property Rights to Radio Spectrum Users: Why Did FCC License Auctions Take 67 Years?, 41 J.L. & ECON. 529, 534 (1998) [hereinafter Hazlett, Assigning Property Rights] (listing proposals to privatize spectrum). Others have advocated property rights in the context of specific spectrum applications. See, e.g., Mark S. Fowler & Daniel L. Brenner, A Marketplace Approach to Broadcast Regulation, 60 TEX. L. REV. 207, 211–12 (1982). 4. See, e.g., LAWRENCE LESSIG, THE FUTURE OF IDEAS: THE FATE OF THE COMMONS IN A CONNECTED WORLD 221–22 (2001); Yochai Benkler, Some Economics of Wireless Communications, 16 HARV. J.L. & TECH. 25, 82–83 (2002); Stuart Buck, Replacing Spectrum Auctions with a Spectrum Commons, 2002 STAN. TECH. L. REV. 2, ¶ 26, at http://stlr.stanford.edu/stlr/articles/02_stlr_2;