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.