January 1, 2014

Getting Away from Gosplan

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Describing the U.S. system of spectrum allocation, former Federal Communications Commission officials Gerald Faulhaber and David Farber have written, “[the] current system is similar to that of the former Soviet Union’s GOSPLAn agency, which allocated scarce resources by administrative fi at among factories and other producers in the Soviet economy.” the U.S. spectrum regulatory framework, still largely intact since 1927, severely distorts the 21st century technology industry and harms consumers with higher prices and lack of choice. As in many countries, the U.S. government possesses a majority of the most valuable radio spectrum and pays virtually nothing for this natural resource. Audits by the Government Accountability Office and independent groups have made clear that federal spectrum is used ineffectively and that reforms are long overdue. President Obama and his Federal Communications Commission appointees have, at some political risk, prioritized making substantial amounts of spectrum available for wireless broadband use, including spectrum currently used by federal agencies and the military.

The consumer demand in recent years for mobile broadband services—such as streaming netflix, Voice-over-internet Protocol, and Facebook use via smartphones and tablets—is unprecedented and strains the current capacity of wireless carriers. Building more cell towers and laying more cables will increase capacity, but increasing the supply of radio spectrum is also needed. For this reason, Congress and the Obama administration examined spectrum management at the national telecommunications and information Administration (NTIA), which oversees federal agencies’ spectrum, and the FCC, which regulates non-federal spectrum. A growing consensus among experts is that federally held spectrum is lightly used and much of it would be better redeployed for commercial uses that accommodate consumer demands and expand the U.S. economy.

Before repurposing federal spectrum can take place, however, Congress must address two major spectrum management problems. the first is that there exists no reliable process for repurposing federal spectrum and selling it for more productive commercial uses in the relatively short term (that is, the next five to 10 years). the second problem is that federal agencies receive almost no price signals that would encourage efficient use of this valuable input. the FCC and NTIA gave federal users spectrum for free, often decades ago, and from the agencies’ perspective it is a free resource. Predictably, overuse abounds and billions of dollars of social welfare are squandered annually as a result. in the short term, Congress should create a temporary independent spectrum commission that has the authority to relocate federal systems to other spectrum bands and transfer federal spectrum to the FCC for auction. in the long term, Congress should establish a permanent agency that possesses the remaining federal spectrum and leases it out at approximately market rates, imitating the GSA’s practice of leasing out real estate and buildings to federal agencies.

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