Implications of dynamic spectrum management for regulation

• Dynamic Spectrum Management (DSM) technologies can effectively decrease transaction costs if property rights are defined on a detailed level.
• The Coase theorem suggests that these conditions induce an optimal outcome regardless of the initial spectrum assignment.
• This study quantifies the benefits associated with different regulatory schemes allowing transactions in a DSM context by employing agent-based simulations.
• The results show significant potential gains associated with a flexible spectrum regime such as pluralistic licensing.

The Coase theorem suggests that a regulatory scheme, which clearly defines spectrum property rights and allows transactions between participants, induces an optimal spectrum assignment. This paper argues that the conditions required by Coase are gradually achieved by the introduction of Dynamic Spectrum Management (DSM), which enables a dynamic reassignment of spectrum bands at different times and places. DSM reduces the costs associated with spectrum transactions and thus provides an opportunity to enhance efficiency through voluntary transactions. This study analyzes the factors affecting the benefits of a regulatory scheme allowing transactions, compares and quantifies the potential gains associated with different spectrum regimes by employing agent-based simulations and suggests policy implications for spectrum regulation.