Action 73. Adopt a Spectrum Auction Process to Escape “Spectrum Socialism” and Promote Privatization and Marketing of the Spectrum!

Radio waves are now an indispensable feature of life. They are used not only in television and radio but also in cell phones, the internet, and driving, as well as when paying at the supermarket cash register. The common property of the Japanese people, radio waves generate huge economic value and are the core infrastructure of information and communications technology (ICT). A shift from the socialist allocation of the spectrum, which is still applied in Japan, to market allocation should be made as soon as possible.
 
1. Introduce the Market Principle to Spectrum Allocation!
Radio waves generate the equivalent of 14.2 trillion yen in the communications industry, which includes cell phones, and the equivalent of 3.1 trillion yen in the broadcasting industry, including television broadcasting. The market size of the entire information and communications industry has reached 81.8 trillion yen (as of 2012). Despite such a high market value, radio wave usage fees collected by the Japanese government are around just 75 billion yen per year.
 
The disadvantages of the current system are: 1) lack of market principles regarding allocation methods, that is, no system available to allocate spectrum to users who can use radio waves effectively; and 2) lack of market principles regarding radio wave usage fees, that is, excessively low fees for radio wave usage giving no incentive to inefficient users to vacate the market.
 
The television broadcasting industry, worth three trillion yen, is concentrated in just a few companies while the cell phone industry, worth nearly 11 trillion yen, is concentrated in only three companies. This is because the current exclusive system, which is not based on market principles, has protected vested interests.
 
The solution is obvious: the “marketing” of radio waves. It is necessary to introduce a “spectrum auction” process to leave purchases to market principles and, as in the case of land, differentiate radio wave usage fees in such a way that users of high-value spectrum pay high rents. If market principles are introduced, inefficient users will have no choice but to withdraw and users who can use radio waves in the most efficient way will be able to use them at fair prices, significantly contributing to economic revitalization.
 
2. Introduce Spectrum Auctioning!
During the dot-com bubble, bid prices during the early phase of the introduction of a spectrum auctioning system in Europe and the United States reached several trillion yen. Due to subsequent cases of bankruptcy among the winning bidders, such high bid prices have sometimes been used as grounds for an argument against the introduction of spectrum auctioning. These cases, however, were only observed during the early phase of the introduction of the system and, in recent years, numerous examples of auctions have produced few cases of such high bid prices. The winners of the adoption of the auction system are the taxpayers. Even if a new entrant company goes bankrupt, the only losers will be risk-taking investors. As a result, if the public purse can earn an income of as much as several trillion yen, the adoption of the system would help stop the deterioration of public finances. Spectrum auctioning should be adopted at the earliest possible time, with reference to precedent examples in Europe and the United States.
 
3. Set Fees for Radio Wave Usage According to the Added Value of Each Spectrum!
Under the current Japanese system, radio wave usage fees are determined based on the number of radio stations and other factors, without taking into account the market value of spectrums at all. With virtually no restrictions on the period of use, markets for television broadcasting and cell phones are oligopolies, and casual users with a low frequency of use remain in the high value-added spectrum. Radio wave usage fees should be differentiated between spectrums. Firstly, calculate the added value for each spectrum by taking into account such factors as the utility value of each spectrum and the status of real-world use. Secondly, set high usage fees for high value-added spectrums, mainly UHF, VHF, and SHF, and low usage fees for low value-added peripheral spectrums. If fees are determined in this way, inefficient users who cannot generate added value will vacate high value-added spectrums without being forced out and will move to a spectrum with a lower usage fee. If market principles are introduced, the reorganization of spectrums along rational lines should be achieved.

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