Who could argue against better allocation of the radio spectrum?

Jerry Brito
February 28th, 2010
Economics, Politics

Tom Hazlett’s work on radio spectrum gets a much deserved airing in Richard Thaler’s latest NYT column. Given the looming deficit crisis, and the fact that less than 10 percent of households get their TV over the air, you’d think it’d be a no-brainer to auction off the malallocated TV band to the highest bidders.

Professor Hazlett estimates that selling off this spectrum could raise at least $100 billion for the government and, more important, create roughly $1 trillion worth of value to users of the resulting services. Those services would include ultrahigh-speed wireless Internet access (including access for schools, of course) much improved cellphone coverage and fewer ugly cell towers. And they would include other new things we can’t imagine any more than we could have imagined an iPhone just 10 years ago.

Off the top of my head I can think of three powerful groups who are likely not thrilled at the prospect of such auctions.

1. Broadcasters – As the article states, they’re occupying the bands right now and they will fight tooth and nail to keep them. One proposal now circulating at the FCC would give them a portion of the auction proceeds to compensate them for their loss. Not sure they’ll be easily mollified, though. Their special status as ‘local broadcaster’ likely allows them to reap more benefit than we imagine.
2. Wireless Carriers – These are the folks who are supposed to be starving for spectrum and who would be the buyers of any new frequencies. The problem is that they just spent billions to acquire new spectrum in the FCC’s last auction a year ago. If the TV bands are auctioned, and new supply is placed on the market, the value of the spectrum they just bought will decrease. More supply at lower prices also means that new entry will be easier, which won’t make them happy.
3. The Commonists – Just because we take away spectrum from broadcasters in favor of wireless broadband, doesn’t mean that the spectrum must be sold at auction. Instead, a large movement of academics and technologists suggest that spectrum should be treated as a commons, free to be used by anyone as long as they don’t interfere with anyone else’s use. The concept can be debated on technical and economic grounds, but I’ll just make the point here that a commons approach means no revenue for the treasury.

Each of these groups has a well-heeled lobby, so here’s hoping that fiscal crisis can overcome the dynamic that to date has kept the radio spectrum as one of the last nationalized natural resources.