April 25, 2014

Letter to House Committee on Energy and Commerce Concerning Federal Spectrum Policy

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April 25, 2014

Dear Chairman Upton and Chairman Walden:

Thank you for the opportunity to respond to the committee’s questions on these important topics. The Technology Policy Program of the Mercatus Center at George Mason University is dedicated to advancing knowledge about the effects of regulation on society. As part of its mission, the program conducts careful and independent analyses that employ contemporary economic scholarship to assess legislation and regulation from the perspective of the public interest. Therefore, this response does not represent the views of any particular affected party but is designed to assist Congress as it explores these issues. 

Please find my responses to some of your spectrum policy questions attached below. The Mercatus Center has published scholarship on communications law reform for several years. The scholars in our Technology Policy Program and our affiliated scholars would be happy to elaborate on communications policy recommendations, should the opportunity arise. 

Thank you for initiating discussion about updating the Communications Act and United States spectrum policy. Policy reform can give America’s spectrum-dependent technology and telecommunications sectors a predictable and technology-neutral legal framework. When Congress replaces command-and-control rules with market forces, consumers will be the primary beneficiaries.

Sincerely,

Brent Skorup,
Research Fellow, Technology Policy Program
Mercatus Center at George Mason University

 

Federal Spectrum Policy

Former senior Federal Communications Commission (FCC) officials Gerald Faulhaber and David Farber noted without irony that US spectrum policy resembles GOSPLAN, the Soviet planning agency that distributed scarce inputs to producers in every sector of the Soviet economy. The woeful inefficiencies and waste resulting from the current system of regulatory allocation are predictable, yet avoidable.

It is unfortunate that Congress and the FCC have largely permitted the tremendous waste of spectrum resources for decades instead of freeing most spectrum for allocation via market processes. The US spectrum industrial policy, surviving mostly unevolved since 1927, severely distorts the 21st century technology industry and penalizes consumers with higher prices, less effective wireless competition, and fewer innovative devices.

Congress has made some efforts to liberalize spectrum allocation and has permitted auctions for some bands since 1993. The FCC, also, has permitted more so-called flexible use allocations, which allow licensees to use their wireless assets for essentially any commercially viable service. This liberalization, while welcome, is insufficient and incremental. Freeing most or all commercial spectrum would unleash waves of investment and technological innovation. There is no technical reason why the FCC needs to define, after years of deliberation and reams of rules, whether bands are used for, say, satellite television and not smartphones or GPS or taxi dispatch radios. The finite amount of spectrum does not necessitate government allocation any more than the finite amount of beef, wheat, and vegetables requires the government allocation of groceries. Spectrum is an input, just like any other, that firms can combine, lease, and sublease in incalculable and innovative ways to bring services to businesses and consumers. Liberalizing spectrum rules would allow businesses and consumers to enjoy these benefits. 

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