HOW MUCH MORE OBVIOUS DOES RETHINKING SPECTRUM POLICY HAVE TO BE?

Lynne Kiesling

Thanks to Stuart Benjamin at Volokh Conspiracy for his post on spectrum poicy, including a reference to this National Journal article on spectrum. The evidence keeps mounting that a spectrum policy that 1. is based on licensing and not ownership, 2. protects the fractured incumbency, and 3. is so clearly a political and not an economic process is failing us miserably even as we develop new, creative ways to use it more intensely and effectively.

The bottom line is that the war over the airwaves has continued to drag on because generations ago, the government handed out valuable frequencies to broadcasters for free, and other industries haven’t been able to buy these desirable frequencies. For the broadcasters as well as their competitors, the battle over spectrum space has been a lobbying game.

The article does a couple of things that I think are important. It points out that the politicization of spectrum is at the root of a lot of scarcity and security issues involving communications. I would also argue that it is at the root of some of the “media concentration” and obscenity controversies that enable the FCC to continue to nanny increasingly engaged media customers who are well-supplied with alternatives. The article also points out that before Marconi invented radio, “airwaves were only air”, meaning that technological change created a commodity that was scarce and had value where no such thing existed before.

Here’s the insidious political bargain that allows this regulatory arrangement to persist, even in the face of its increasing obsolescence:

The NAB’s [National Association of Broadcaster’s] clout in Washington stems from the fact that broadcasters operate in every congressional district, and they control what gets on the tube. The long-standing bargain with Capitol Hill legislators has been this: Broadcasters deliver free television to voters, make money by selling advertising time to sponsors, and make sure lawmakers get airtime and the ability to buy advertising time at the cheapest available rates. This arrangement helps most incumbents get re-elected. In return, broadcasters have the right to use the airwaves free of charge, and they are protected from anyone who wants to take away their exclusive right to the beachfront.

It’s a very good article, thoroughly covering a lot of political machinations that I frankly find disgusting but that reveal a lot about the potential value that we give up by not clearly, transparently and specifically treating airwaves as an economic resource and enabling users to buy *and sell* actual spectrum. Note, however, that I don’t mean that we should “privatize the commons” across the whole spectrum, but that we should have the right to buy and sell spectrum, and if we want to aggregate some section of it into a commons a la the 802.11 slice, so be it.

This “property rights in spectrum” is not a new idea; it was provocative, ahead of its time, and bang-on correct in 1959 and 1960 when Ronald Coase first proposed it to the FCC. As Tom Hazlett noted in 2001 (among other places),

In seminal papers written in 1959 and 1960, Ronald Coase began by pondering how society managed to waste hugely valuable radio spectrum. His discovery–that a lack of private ownership was the culprit–was an epiphany for Coase, who in 1991 became a Nobel Laureate in Economics for his theorizing on the matter.

Yet, federal policy continues to deny the market permission to trade spectrum. This made Kennard’s query a trick question. Indeed, just days after his challenge was issued, Commission staff commented to reporters that they wanted to move towards a “radical overhaul” of FCC policies to make wireless bandwidth markets possible. The story made the lead headline in the New York Times because trading radio spectrum like a commodity is largely illegal today.

Where it isn’t illegal–in bandwidth confined inside fiber optic cables–capacity exchanges are popping up everywhere. RateXchange, Arbinet, Enron, Pulver.com, and Bandwidth Market operate domestically, with international trading active at Band-X (London), Cape Saffron (London), and Interxion (Amsterdam). These markets materialize precisely because the airwaves are housed in wires–“spectrum in a tube.” While technically identical to wireless, wireline bandwidth is privately owned. Capacity can be sliced and diced, bought or sold, rented or leased as the tube owner sees fit. New users can easily get access to the communications grid, instead of being shut out while idle capacity is wasted.

Four years later, after FCC staff said they wanted a “radical overhaul” of spectrum policy, and we still find ourselves lacking one of the most important and valuable features that property rights in spectrum would provide: alienability. Yet another disappointing instance of the glacial pace of institutional change in the face of politically power entrenched special interests.


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