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Regulating the Use of the Spectrum

Electromagnetic waves propagate outward in all directions. A transmitter generally seeks to communicate with a particular receiver; the transmitting antenna directs the majority of the signal toward that receiver and the receiving antenna is most sensitive to signals coming from the direction of the transmitter. However, an antenna radiates signals at lower levels and can receive signals from all directions. An interfering signal will be amplified and detected just like the desired signal once it enters the receiver. If the interfering signal is sufficiently large, it can prevent the desired signal from being properly demodulated and understood.

People wishing to use radiocommunication devices in a given area must cooperate if they are to avoid interference problems. If they operate on the same frequencies, at the same time and in the same area, their transmissions will produce interference in each other's receivers. Each user, in effect, prevents other simultaneous, nearby uses of a portion of the spectrum while transmitting.

The electromagnetic spectrum exhibits some of the properties of what economists call a Common Good. Other than the cost of designing, building, and operating radio stations, its use is free. Each user has no incentive to individually use the spectrum efficiently since there is no savings; and is, in fact, motivated to secure for his own use the maximum amount of spectrum. However, uncoordinated, wasteful use can easily result in everyone suffering interference, that prevents satisfactory operation, and denies access to new users.

The electromagnetic spectrum is an unusual common good, or natural resource because, unlike iron, oil, or coal, it is not destroyed by use. When one user stops using a portion of the spectrum, another can readily use it. The spectrum is scarce, though, because at any given time and place one use of a portion of the spectrum precludes any other use of that portion.

The use of the radio spectrum is regulated, access is controlled and rules for its use enforced because of the possibilities of interference between uncoordinated uses. In the broadcasting service alone, the broadcaster must know where the station's signal can be received in order to meet the needs of advertisers. Interference is unacceptable because it unnaturally limits the broadcaster's market. Similarly, a taxi company or a police department must be able to reliably determine their coverage areas and know that they will be able to operate without interference in that area.