have been chosen over GSM and all of the benefits from the introduction and use of that technology would not have occurred. Ultimately, providers have been able to implement their own choice of technology and upgrade from 2G to 3G and now to 4G without FCC approval. And firms could offer voice, video, and data without having to apply for a change of service.

While the FCC has made great strides in flexibility, it has not adopted full flexibility and still specifies some spectrum for particular uses such as satellite or broadcast television. Incentive auctions are one way to facilitate the move to flexibility.

illustration by stuart bradford

current Bands for Reallocation Even with the reallocation of channels 50–69, additional valuable spectrum is currently allocated for broadcast television. Allocating a lot of spectrum to television may have been optimal in the 1950s, but with only approximately 10% of U.S. households watching free over-the-air, instead of subscription, television, it is unlikely to be optimal today.

At the same time, the last 25 years have seen an explosion in the usage of hand-held mobile wireless devices and the value of spectrum for such services has increased substantially relative to the value of spectrum for television.

The FCC relocated television broadcasters from channels 50–69 during the transition to digital television and has auctioned this 700MHz spectrum. Ve-rizon is already using some of the allocation that it purchased at auction for new LTE services that promise to pro-

There is debate
about how much
more spectrum
should be reallocated
from over-the-air
terrestrial television.

vide higher capacity and faster mobile broadband service.

There is debate about how much more spectrum should be reallocated from over-the-air terrestrial television. Current legislation targets up to 120MHz, but more or less may be socially optimal. One way to resolve this debate is to create an efficient marketplace where rights can be traded while minimizing transactions costs.

The leading contender as a method for facilitating this transition is an incentive auction. In such auctions broadcasters would put their transmission rights up for auction in combination with additional rights from the FCC. Each broadcaster would be able to set its own minimum price to cease over-the-air transmission. The auction would aggregate broadcaster rights and FCC rights (for example, rights for unused frequencies) into packages for which new providers would bid.

Incentive auctions are likely to be somewhat complex, but we know they must include a few crucial factors. First, broadcasters must be able to