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Working Paper

A Market-Based Approach to Establishing Licensing Rules: Licensed versus Unlicensed Use of Spectrum

Mark Bykowsky, Mark Olson, and William Sharkey. 

OSP Working Paper 43 (February 2008) addresses the issue of how best to identify the most desirable allocation rules for spectrum. This paper focuses on issues associated with licensed use and unlicensed operations. Spectrum designated to unlicensed use is made freely available for uses that comply with appropriate technical standards. Spectrum allocated to licensed use is typically assigned to license owners through an auction.

Moreover, winners of the auction are granted the right to exclude non-payers from using their spectrum. The allocation between licensed and unlicensed use, however, is based on the FCC’s judgment, which in turn relies on information provided by interested parties seeking to use the spectrum.

The authors examine the feasibility of using a “clock auction” to determine, based on the bids submitted by market participants for the corresponding licensing rules, the efficient allocation of a given amount of spectrum between licensed and unlicensed spectrum use. Analysis indicates that market forces, in the form of a clock auction, can be used to determine the efficient assignment of license rules to spectrum.

Issued: February 2008
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