Unleashing Market Forces for Spectrum Use in Space

During its upcoming meeting on April 30, 2026, the Federal Communications Commission (FCC) will consider updating rules on Equivalent Power Flux Density (EPFD) limits for satellite systems operating in non-geostationary orbit (NGSO). These rules were designed in the 1990s by the International Telecommunication Union (ITU) to protect geostationary orbit (GSO) satellite networks from interference. While EPFD limits serve this purpose, they do so inefficiently, imposing an opportunity cost and suppressing the economic potential of spectrum use. Enacting the changes under consideration by the FCC will improve the efficiency of spectrum used by both GSO and NGSO systems. However, a government-directed approach to spectrum assignment—the model used around the world—will struggle to match the efficiency of the market to optimize transactions and use of resources for economic productivity. Refactoring spectrum governance so that its foundations are built on legally strong property rights would be a giant shift and transcend any individual FCC rulemaking—but such a change should be considered if maximizing the efficient and productive use of spectrum resources is an important goal.

For just about any limited resource, such as land or oil, decisions about who gets to use a resource are guided by market-based transactions. The concept of property rights—a bundle of rights that define legal ownership, use, and transferability to someone else—underpins those transactions and optimizes the economic productivity of resource use. Worldwide, it is hard to identify another limited resource as important as spectrum, whose use is not governed by property rights. Even the Soviet constitution of 1936 defined property rights. Spectrum use is an outlier. Determinations about who gets to use spectrum and for what purpose are today made entirely by governmental processes, with band allocations agreed to at the ITU and frequency assignments made at the national level. In the United States, for nonfederal uses, those assignments are made by the FCC, whose main goal is arguably minimizing radio interference. Although the FCC aims to calibrate its decisions so as to encourage productivity and the efficient use of spectrum, in addition to minimizing interference, the commission is doing something—resource allocation to maximize productivity—that could be better done by the market. Strong legal protections for property rights also act to facilitate stable transactions and use of resources—for spectrum, this would translate to minimizing harmful interference.

It is important to understand the concept of radio interference, since it is the basis of the FCC’s statutory authority, which is anchored around the regulation of devices with “interference potential.” Interference happens when a receiver receives an unwanted signal and, at sufficient levels, disrupts the operations of a radio network. Interference experienced by a receiver is a function of the signal environment, which depends on externalities beyond the control of the receiver, as well as on the ability of the receiver to identify and make sense of the signal which it was designed to receive. This latter factor is dependent on the receiver itself, including how well the receiver is able to isolate the desired signal and filter out other unwanted signals—this speaks to the quality of the receiver. This is all to say that the transmitter of the unwanted signal (e.g., the interferer) and the receiver experiencing the interference share responsibility for minimizing the impact of interference on the performance of a radio network.

Today, FCC rules aimed at reducing the potential for interference, drawn from international processes at the ITU, are designed to make sure new uses of spectrum can coexist without causing harmful interference. This approach creates a hierarchy of protections that favor incumbent uses of spectrum and, thus, places the responsibility to prevent harmful interference—which directly translates to a financial cost—on innovative new uses. This regulatory arrangement not only tolerates but embeds inefficiency. Networks that have protections against certain levels of interference have little regulatory incentive to improve the interference tolerance of their own systems, and over time, as technology improves, they end up using their assigned spectrum less efficiently than they could be. Conversely, networks required to prevent their transmissions from causing certain levels of interference are essentially prohibited from using the spectrum assigned to them as efficiently as possible. From a productivity standpoint, this is a lose-lose for all parties.

In the case of space, the use of spectrum for applications in GSO is protected from interference from NGSO systems using, among other rules, EPFD limits. EPFD is a value intended to quantify the amount of radio energy originating from the operations of an NGSO system affecting GSO satellite systems. These rules were developed in the 1990s in response to concerns that future NGSO constellations would create enough interference to disrupt the operations of GSO satellite networks. EPFD rules are particularly inefficient, locking in assumptions about the potential for interference caused by modern NGSO networks but using technical parameters from 30-year-old technologies. At a time when many new commercial space innovations are happening in NGSO, specifically low Earth orbit, EPFD rules serve as a barrier to optimizing the use of spectrum resources and, thus, artificially suppress the growth of the space economy. These rules protect incumbents at the expense of new entrants and ideas.

Consider how the concept of interference would apply to the use of other limited resources, where existing uses of a resource were protected from new uses. Take aviation fuel, for example, which recent events have shown is sensitive to supply and demand considerations. What if legacy airlines could control how much fuel new entrants, such as low-cost carriers, could access? The legacy airlines could argue that the provision of fuel to the new entrants would jeopardize their operations, because more users would raise demand for fuel and, thus, the cost of fuel. Legacy carriers could pass on the higher fuel costs to their customers or figure out how to operate more efficiently—either action has a financial cost to the business, potentially in lost customers or development of new technologies. But it would be much easier—and cheaper—to simply throttle new entrants’ fuel access. This scenario may feel unrealistic, but this is precisely what happens with spectrum. The status quo governance system enables, even welcomes, such dynamics because of the way the process protects current uses from interference that could come from new ones. This approach stifles innovation and productivity—legacy users keep doing things exactly how they have always done them.

As the FCC looks to modernize its EPFD rules, it should recognize there is only so much that can be done to optimize spectrum use to its most productive purpose using a government-directed system oriented around a hierarchy of interference protections that favor incumbents. For other resources, market forces—and not government officials—typically make the same types of decisions made by the FCC about who gets to use spectrum and for what purpose. Truly optimizing spectrum use for its most productive purpose will require a fundamental rethinking of how spectrum use is governed, replacing the system whose roots date back to the early twentieth century, with something more suitable to the market-based world economy of the twenty-first century. But it also should be recognized that the EPFD rule changes under consideration by the FCC would improve the efficiency of spectrum use for space applications—they are a meaningful positive step forward toward increasing the efficiency of spectrum use for space applications.

Clayton Swope is the deputy director of the Aerospace Security Project and a senior fellow in the Defense and Security Department at the Center for Strategic and International Studies in Washington, D.C.