Arnold Kling  

If I Could Write the Lede

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My Question for Larry Summers... The Euro and Armageddon...

President Obama's economic coordinator Lawrence Summers today announced the President's intention to gradually reallocate radio spectrum. The long-outmoded command-and-control system will be updated over the next decade, using a new set of rules and auctions. An overflow audience consisting mostly of K Street lobbyists greeted the announcement enthusiastically, as it ensures continuation of the lucrative rent-seeking that surrounds telecommunications.

The problem is this: historically, the FCC has licensed spectrum for particular uses with particular levels of power. Thus, someone is allowed to operate a radio station on a certain frequency from a certain location with a certain limit of power. Same with television stations.

Now, instead of using channel 7 for TV towers in various cities, it probably would make more sense to have that spectrum available for a nationwide wireless data network, particularly since hardly anybody receives channel 7 over the air--most people have cable.

What the FCC could do is auction off channel 7 nationwide to the highest bidder, and give some or all of the proceeds to the current TV station owners. But however they go about doing it they have to redefine and allocate property rights in spectrum. The question is whether you do it quickly and cleanly or you drag out the process and keep government involved for as long as possible.

The Obama Administration is choosing the latter route. Summers' role is to tout the economic benefits of reallocating spectrum. That is easy. What is hard is to justify keeping our outmoded regulatory approach going for as long as possible. The answer is that the insiders know how to keep the rent-seeking game alive, and the outsiders don't know enough about what is going on to stop them.


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CATEGORIES: Public Choice Theory



COMMENTS (4 to date)
Ted Craig writes:

I'd much rather see the DoD give up some of its massive amount of spectrum before commercial users.

Paul writes:

This is at least a move in the right direction though, no?

libert writes:

Arnold:

FCC doesn't have the legal authority to do what you propose. In order to auction off spectrum, it would have to own it. You can't hold an auction if you don't have the right to sell the thing people are bidding on (for example, what if the auction price turns out below what broadcasters were willing to accept? Then either FCC would have to invalidate the auction contract or it would have to confiscate the spectrum from broadcasters. FCC can't legally do either of those.)

That means FCC would have to to buy the spectrum back from broadcasters prior to the auction, but it doesn't have the legal authority to spend money for that purpose. So the Obama administration cannot legally do what you're proposing.

He could kick the issue to Congress to deal with, but I'd be surprised if you thought was a good idea.

Arnold Kling writes:

libert,

I do not see how to get from here to there without changing the nature of property rights in spectrum. If that in turn requires new legislation, then at some point new legislation will be needed.

My point is that I think that we will get less overall rent-seeking and a better outcome the sooner we face up to the outmoded nature of our spectrum allocation system and the more completely we change it.

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