Spectrum Allocation and the Internet

The Internet is transforming communications around the world, even with the technology market downturn at the start of this century. This transformation permeates all forms of communications, but its success at realizing maximum consumer benefits is dependent, at least in part, on the flexibility of communications regulation. Regulation must not constrain firms responding to competitive incentives. Five years ago, the Internet was just beginning–it is mentioned by name only 10 times in the course of the 128 page Telecommunications Act of 1996. Allowing firms to react to dramatic opportunities like those the Internet has created in just five years is critical for smooth functioning of the market system and maximization of consumer benefits. Given the high cost of connecting homes and businesses by installing additional wires, the most promising avenue for new capacity - and new competition - is through the use of spectrum. Regulators traditionally have placed strict limits on the uses to which each portion of the spectrum can be put. Flexible use and a concern for antitrust and competition principles can help to realize greater benefits from wireless communications. This chapter focuses on spectrum policy and how changes in spectrum policy can affect the development of wireless communications. In some cases, wireless Internet access may be the perfect solution, but in other cases, setting up rules specifically to promote wireless Internet access may be precisely the wrong answer for consumers. The next section provides a brief review of the evolution of spectrum policy. Section II looks at the role of spectrum in communications. Section III lays out the fundamentals for increased flexibility in spectrum regulation and Section IV presents hopes for the future.