Magazine, March 2004)
The Bush Administration, eager to create new jobs, is overlooking a major
generator of economic growth and employment right at its fingertips: unused
from half to three-fourths of available spectrum goes unexploited each
week, and over 99.99 percent is underutilized. Yet by rigidly proscribing
both spectrum ownership and spectrum applications, government policy stifles
innovation and cuts off a substantial, recurring source of revenue and
to the Internet to recall how unlocking a closed, top-down communications
system to bottom-up entrepreneurship can open up massive economic activity.
This is no facile comparison. Indeed, its easy to forget just how
many in the telecom industry derided the Internet and its potential as
recently as a decade ago.
you need big-time lobbyists and billions of dollars to purchase a slice
of spectrum. This quashes any chance of experimentation, locks out the
small entrepreneur, and forces innovation to occur in tiny, over-crowded
and over-regulated unlicensed bands.
recognizes how television and cellular telephony changed the economic
and cultural communication landscape. But these two applications were
delayed by decades of study and are constrained by monopoly ownership
and outdated standards. Imagine a world filled with 10 times as many markets
as large as TV and telephony.
of unused spectrum and current technological capabilities offer a rare
opportunity for dynamic growth.
We need to
recognize that the arguments for tightly regulating spectrum have become
obsolete. Technological advances, such as thousands of inexpensive transmitters
replacing a few broadcast antennas and the ability to split signal spectrum
slices on demand, were undreamed of when the government began parceling
out spectrum in the 1930s. Incumbent spectrum applications have become
less valuable since cable replaced broadcast as the prime vehicle for
television transmission and MP3 players and Internet audio diminished
the value of traditional radio.
The argument for regulating spectrum as a public good has evaporated.
To be sure,
the FCC has recently shown a modest inclination to free up spectrum and
is now soliciting comments on proposals that would do just that. But these
proposals including transactions such as one-to-one spectrum swaps
between cellular companies still bear all the marks of the FCCs
traditional command-and-control mentality. A level playing field is the
only proven way to innovate and create value. The FCC process is too slow,
too little and too late. We need a spectrum-usage revolution today.
myself, believe auctions are the best way to free spectrum from a regulatory
deep-freeze. We should treat spectrum as the perishable commodity it really
could authorize a private NASDAQ-like spectrum exchange to trade spectrum
on a second-by-second basis. Or it could permit current spectrum owners
to auction it off to whomever the owner chooses, for whatever use they
choose. The auctioning of other public goods such as air rights and pollution
credits have demonstrated effective new ways to harness market forces
for increased efficiency. The important thing is to remove virtually all
our current restrictive regulations on spectrum use and give entrepreneurs
the opportunity to experiment.
object. One counter-argument is fairness. Purchasers who spent
billions of dollars on spectrum for 3G will want their money back. Fine.
Indeed, both purchasers and the government would benefit if license holders
were able to recover their lump-sum investments and offer the government,
instead, an indefinite 5 percent fee on all spectrum sales. Both sides
would profit enormously, and the market would continuously adjust the
value of the wireless asset to match its true, underlying value.
worry about the possibility of bedlam when thousands of highly varied
organizations compete in the same space. Central control is essential,
so the arguments will run, capacity will never grow, or quality
will be poor. If these arguments sound familiar, its because
they were once made about the Internet and with equal validity.
powerful objections, however, will be made quietly behind the scenes,
as current spectrum owners seek to maintain their position in what has
always been a highly political process.
best shot at influencing the current administration to free up spectrum
will arise with the confluence of free-market ideology and the interests
of large corporations. If just one corporate Bush supporter sees the potential
for faster growth and better returns by replacing its current business
model with the spectrum auction model, the floodgates could open. Sometimes
self-interest is the public interest in disguise.
formerly chief technical advisor to AT&T, is now a partner at Morgenthaler