Page 83 - ITUJournal Future and evolving technologies Volume 2 (2021), Issue 1

ITU Journal on Future and Evolving Technologies, Volume 2 (2021), Issue 1

ECONOMIC EFFICIENCY OF SPECTRUM ALLOCATION
Vadim Nozdrin, PhD.,
International Telecommunication Union , Place des Nations, Geneva, Switzerland, vadim.nozdrin@itu.int
*

Abstract – Spectrum demand is rapidly expanding, driven by the developments of incumbent radio systems, as
well as with the requirements of new technologies and market players to get spectrum access. In this regard, one
of the fundamental functions of the state spectrum regulator is to create an enabling administrative and legal
environment to ensure efficient spectrum use and to mitigate scarcity of this valuable natural resource. This
paper analyses the economic value of spectrum use and suggests an extension of the spectrum’s traditional
technical boundaries, in order to take into consideration energy, environmental, sanitary and bio-geotechnical
limits. The study reviews the phenomena of increasing transaction costs and negative externalities of spectrum
access requiring economic criteria and assessment to achieve optimum resource allocation with a spectrum’s
demand growth. Results develop an input-output matrix as an allocation instrument to achieve spectrum
efficiency and optimum equilibrium based on analysis of the economic effects from different band utilization
scenarios, supplemented by currently used technical criteria. Practical application of proposed economic methods
should improve the existing spectrum management system.

Keywords – Input-output matrix, spectrum efficiency, spectrum externalities, spectrum management

rather than by administrative decisions, leading to
1. INTRODUCTION
zero transaction costs and coping with any
Satisfying the ever-growing material, physical and externalities [1]. Later on his idea was developed in
social needs of humanity under conditions of more detail, advocating for the implementation of
limited resources, places the implementation of an alternative spectrum management instruments
overall strategy for sustainable development at the including spectrum privatization, secondary
heart of contemporary economic, political, trading and auctioning [2]. Several fundamental
environmental, social, and technical research. studies designated the introduction of a spectrum
Invention of data transmission by means of fee, deregulation of management systems, and
electromagnetic waves gave humanity a new delegation of some administrative functions to the
invisible resource: radiofrequency spectrum. Every private sector as the basic economic methods to
single radio system uses artificially-produced or improve spectrum management systems [3].
naturally-emitted electromagnetic waves as a In 1996, International Telecommunication Union
carrier of data. Radiofrequency spectrum is defined (ITU) initiated studies aimed to develop a guidance
as the electromagnetic frequency continuum for Member States in applying economic methods to
ranging from 3 kHz to 3 000 GHz. Originating from improve their spectrum management systems [4].
maritime applications in the past, nowadays In 2001, 37 world famous American economists,
spectrum plays an essential role in all areas of including four Nobel laureates, addressed the US
human activity. For the time being, spectrum is Federal Communications Commission with the
primarily utilized based on an exhaustive approach, need to implement radical changes in the principles
relying predominantly on technical limits defined governing spectrum usage that would be required
by Shannon theorem and absence of mutual to ensure the harmonious development of
harmful interference between the growing number telecommunications [5]. Their proposals included
of space and terrestrial radio systems. modifying users’ rights to allow spectrum trading
and, accordingly, implementing auctions and
The growing problem of spectrum scarcity requires
spectrum efficiency evaluation and introduction of market mechanisms for the resource allocation.
modern methods for its improvement. Nobel However, the problem of spectrum efficiency is still
laureate Prof. R. Coase emphasized that spectrum vital. Conflicts of interests between different
allocation should be determined by market forces spectrum users, newcomers and incumbents, public

* The ideas expressed in this paper are those of its author and they do not necessarily represent those of the International
Telecommunication Union, the Radiocommunication Bureau or any known institution.

© International Telecommunication Union, 2021 67