Trading spectrum options

One such scheme is arbitrary assignment by political authorities. Another is to allow people to trade spectrum, as they would land. Creating trading rights generally ensures assets are transferred to owners who value them most, in contrast to non-market systems where political ties determine the custodian. The private property system out-performs the latter, because assets move to those who apply them most productively.

Sadly, this fact appears to have been ignored by the drafters of the new Convergence Bill. Our spectrum-masters have instead maintained the equivalent of a feudal system, allocating rights on a political basis; which is a shame, because wireless communication is increasingly important in digital communication, and promoting efficient use of this scarcer esource should have been a priority.

Allocation options

How would such a system work? Well, spectrum shares similar geographic properties with land and could therefore adopt most of the legal precedents. Imagine a map of South Africa.

Now imagine several hundred maps lying on top of each other, each one representing a frequency band. This three-dimensional image would be represented in a spectrum deeds office, where records are kept of who owns what frequencies over what territories.

Certain frequencies would be reserved for specific purposes, e.g. police and army use, as the Bill currently specifies. Other frequencies are reserved in treaties with the International Telecommunications Union (ITU), to which South Africa is a signatory. There could also be frequencies of `common` use, for such things as hand-held walkie-talkies, gate buzzers and network devices.

No one need own these frequencies. Instead, they would be the equivalent of national parks, where people are free to use the resource without charge (actually, unlike the national parks!). The rest would become privately owned, tradable assets.

The important point about trading rights is how it affects the psychology of the owner. Owners (and non-owners) of a particular frequency must now continually compare its current use to alternatives in the market and decide if it is well applied.

Some people might carve their spectrum into smaller portions, selling space (or time) plots. Some will hold on to that spectrum, speculating it will be worth more in the future. As bad a rap as speculators get, they provide an invaluable market service, distributing goods across time (where other traders distribute across space).

The consequence of all this trade will be more efficient use of the radio spectrum, which is crucially important as we extend the wireless networks relevant to South Africa`s dispersed communities and their varied needs.

The spin-offs

Let`s also not forget the opportunity to government from the transfer of spectrum into the private domain. Spectrum is worth a tremendous amount of money. The transfer from the public domain to the private should therefore be done in a manner that brings practical benefits to society.

For many South Africans the priorities are a roof over one`s head and the education of their children. Money raised from the sale of spectrum could be directly linked to the building of homes and schools, creating a tangible benefit from a very intangible resource.

Policy makers should re-visit the Convergence Bill and its chapter on spectrum, and consider the idea of creating tradable rights in radio frequency.

The excitement generated from such a development could be just the ticket for putting South Africa on the international investment radar screen.