Many stakeholders with whom we  spoke and panelists on our expert panel identified a number of weaknesses  with the command-and-control process. Although there is limited consensus about fully adopting  either alternative model in the future, many stakeholders and members of  our expert panel, as well as the Spectrum Policy Task Force, support  balanced approaches that would combine elements of all three models. In  addition, some panelists noted that the current allocation process leads to  underutilization of spectrum. FCC’s Spectrum Policy Task Force Identified Two Alternatives to the Command-and-Control Allocation Process but Recommends a Balanced Approach

The Spectrum Policy Task Force Report, a document produced by FCC  staff, identified two alternative spectrum management models to the  command-and-control model: the exclusive, flexible rights model, and the  open-access model. The open-access model allows an unlimited number of  unlicensed users to share frequencies, with usage rights governed by  technical standards. This is a licensed-based approach to spectrum  management that extends the existing allocation process by providing  greater flexibility regarding the use of spectrum and the ability to transfer  licenses or to lease spectrum usage rights. We found that FCC’s implementation of auctions has no negative impact on  end-user prices, infrastructure deployment, and competition; the evidence  on the impact on entry and participation of small businesses is less clear. FCC’s implementation of auctions mitigates a number of problems  associated with comparative hearings and lotteries. Auctions are a transparent process. Secondary Markets Provide an Additional Mechanism for Companies to Acquire Licenses and Gain Access to Spectrum

While FCC’s initial assignment mechanisms provide one means for  companies to acquire licenses, companies can also acquire licenses or  access to spectrum through secondary market transactions. In recent years, FCC has undertaken actions to facilitate secondary-market  transactions. Industry Stakeholders and Panelists Suggested Several Options to Improve Spectrum Management

Industry stakeholders and panelists on our expert panel offered a number  of options for improving spectrum management. The most frequently cited  options include (1) extending FCC’s auction authority, (2) reexamining the  distribution of spectrum—such as between commercial and government  use—to enhance the efficient and effective use of this important resource,  and (3) ensuring clearly defined rights and flexibility in commercially  licensed spectrum bands. While panelists on our expert panel overwhelmingly supported extending  FCC’s auction authority, a majority also suggested modifications to  enhance the use of auctions. However, there was little consensus on the  suggested modifications. Scope and Methodology

The Commercial Spectrum Enhancement Act required us to review the  Federal Communications Commission’s (FCC) commercial spectrum  licensing process. The objectives of our study included examining the (1)  characteristics of the current spectrum allocation process for commercial  uses; (2) impact of the assignment process—specifically the adoption of  auctions to assign spectrum licenses—on end-user prices, infrastructure  deployment, competition, and entry and participation of small businesses;  and (3) options for improving spectrum management.
Why GAO Did This Study

The radio-frequency spectrum is a natural resource used to provide an array of wireless communications services, such as television broadcasting, which are critical to the U.S. economy and national security. In 1993, the Congress gave the Federal Communications Commission (FCC) authority to use competitive bidding, or auctions, to assign spectrum licenses to commercial users. The Commercial Spectrum Enhancement Act required GAO to examine FCC's commercial spectrum licensing process. Specifically, GAO examined the (1) characteristics of the current spectrum allocation process for commercial uses; (2) impact of the assignment process--specifically the adoption of auctions to assign spectrum licenses--on end-user prices, infrastructure deployment, competition, and entry and participation of small businesses; and (3) options for improving spectrum management.

What GAO Found

The current spectrum allocation process is largely characterized as a "command-and-control" process, in which the government largely dictates how the spectrum is used. Many stakeholders we spoke with, along with panelists on our expert panel, identified a number of weaknesses of the existing spectrum allocation process, including that the current process is slow and leads to underutilization of the spectrum. FCC staff have identified two alternative allocation models: the "exclusive, flexible rights" model--which would extend the existing process by providing greater flexibility to spectrum license holders--and the "open-access" (or "commons") model--which would allow an unlimited number of unlicensed users to share spectrum. While little consensus exists about fully adopting either alternative model, FCC staff, as well as many stakeholders and panelists on our expert panel, recommend a balanced approach that would combine elements of the current process and the two alternative models. FCC's use of auctions to assign spectrum appears to have little to no negative impact on end-user prices, infrastructure deployment, and competition; evidence on how auctions impact the entry and participation of small businesses is less clear. Additionally, FCC's implementation of auctions has mitigated problems associated with comparative hearings and lotteries, which FCC previously used to assign licenses. In particular, auctions are quicker, less costly, and more transparent. Finally, secondary markets provide an additional mechanism for companies to acquire licenses and gain access to spectrum, and FCC has undertaken actions to facilitate secondary-market transactions, such as streamlining the approval process for leases. Industry stakeholders and panelists on our expert panel offered a number of options for improving spectrum management. The most frequently cited options include (1) extending FCC's auction authority, (2) reexamining the use and distribution of spectrum--such as between commercial and governmental use--to enhance the efficient and effective use of this important resource, and (3) ensuring flexibility in commercially licensed spectrum bands. Stakeholders and panelists on our expert panel overwhelmingly supported extending FCC's auction authority; however, there was little consensus on the other identified options for improvement.