Should Airwave Use Be Deregulated

Many utopian idealists promote the complete deregulation of US airwaves, saying that modern software-defined, cognitive radios will be able to coexist without interfering with one another in airwaves that are a complete free-for-all with respect to frequency, and usage. But another, more moderate camp advocates less extreme deregulation, suggesting only that spectrum licensees should be permitted to use the spectrum for any purpose the free market demands of them. In a recent paper published by two highly credentialed economists, Thomas Hazlett, a senior fellow at The Manhattan Institute, and Gregory Rosston, deputy director of the Stanford Institute for Economic Policy Research (SIEPR), the two gents argue that by regulating the use of specific frequencies to specific functions, the FCC is stifling progress, business, and tax revenues. This argument is not so far fetched: government intervention has a long history of reducing the optimal outcome of free markets. The two argue a scenario where an independent TV station operator for a little-watched TV station would make more money and better serve the public by killing their TV broadcasts and using their spectrum for providing Broadband Wireless Services instead. The problem is that many people (the FCC, some public, and especially existing wireless data carriers) think it very unfair. The reason: TV broadcasters, for the most part, did not ever pay for their spectrum licenses – some goofball administrations back in time gave them free perpetual use of massive swaths of the usable radio spectrum for $0. Allowing TV stations to use that huge spectrum to compete against companies like Verizon Wireless, who had to pay vast sums for their tiny spectrum, would be unfair. The FCC wants the TV guys to pay to do other communications services, which is more fair, and generates revenue for the FCC. So here’s the bind: Without the approval to use their frequencies for other profitable businesses, TV broadcasters have little incentive to change from analog to digital, and are dragging their feet on the transition to digital TV. Our two economists propose that we just get over it, and let licensees use spectrum any way they see fit. I disagree. That would provide an shock to the system, and an unfair windfall to the same companies that have been allowed a free ride on huge swaths of spectrum for decades. Unfortunately, we’ve regulated ourselves into this mess, so we’re going to have to regulate ourselves out of it. The FCC should FORCE the broadcasters to go digital, take back the excess spectrum, auction some for licensed use, and release some for unlicensed use to foster SDR, WiFi, etc.
Bonus: Wanna know why TV broadcasters play such an important role in spectrum reform? have a look at the very interesting chart of US Frequency Allocations. (slow-loading PDF). See the HUGE sections in blue? Now do you understand why the broadcasters would like to retain the rights to all that spectrum as they upgrade to digital and only use 1/5 of it for TV? It would leave them 4/5 to re-sell or use to compete with other companies with a huge cost advantage. Arguments like those by our two esteemed economists could certainly be valid unbiased opinions, but they are suspiciously closely aligned with the opinions of the TV broadcasters and their powerful lobby. I’m not accusing them of being in the broadcaster’s pocket, but they sure are singing from the same sheet music.

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