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  • Spectrum and the Specter of Central Planning

    As Mark Twain might have said if he followed spectrum policy: the reports of the death of central planning in Washington have been greatly exaggerated. As early as next week, the Federal Communications Commission may vote on a plan mooted by Chairman Kevin Martin to auction off 25 MHz of spectrum to the highest bidder, with a catch: Reportedly, the licensee will have to use the spectrum to offer free broadband service, with a network to be built out on a timetable specified by the FCC – and with content that doesn’t offend the regulators in Washington.

    For most of the last century, the FCC was in the business of defining how spectrum would be used – deciding not only who would get it, but what services they would use it for, and under what conditions. Over the past 20 years, however, the idea of central planning has fallen into disrepute, not only internationally (see Soviet Union) but in Washington. The idea that five individuals in Washington – no matter how intelligent and well-dressed – could know the proper uses and methods of providing wireless services for millions of people became increasingly hard to defend. After a disastrous start to the cell phone era – which was delayed by a decade or more do the FCC delays, the central planning model was largely replaced by markets, with licenses assigned by open auction, and (more importantly) uses and business models defined by consumer demand.

    By the turn of the 21st century, the FCC’s planning colossus had been effectively toppled, with some of the biggest tugs at the ropes by the Clinton era-FCC. The rest, as they say, is economic history. Over the last 20 years, the number of Americans with wireless has grown from two to 255 million, while the devices they use have transmogrified from brick phones to multipurpose units that do everything but the user’s laundry.

    Chairman Martin’s proposal would take a giant leap backward from this marketplace success. It isn’t the first attempt by the present FCC to try to direct spectrum use. In auctions earlier this year of former analog television spectrum, the FCC set aside blocks for “open access” uses, and for spectrum to be used in partnership with public safety users. The auctions were remarkably unsuccessful – with the one block failing to meet its reserve price, and the other fetching far less than similar, unencumbered, spectrum.

    Apparently undeterred, the latest plan goes even farther to displace market (and consumer) preferences with those of regulators. According to published reports, licensees of the newly-assigned spectrum will be required to use it to offer broadband service, free of charge — a politically popular business model but not necessarily the best way to finance an advanced network. The timetable: service to half the population in four years, and 95 percent by the end of the license term. And while the auction is open, the rules seem remarkably tailored to a plan put forth by one particular firm, M2Z.

    Lastly, content filters on the new broadband network would be required to keep minors from receiving any “obscene” or “pornographic” materials over the assigned frequencies. While a laudable goal, this would be a major — and constitutionally questionable — extension of the government’s power to control content. It would also be a nightmare of net neutrality proponents comes true: except that the restrictions would come not from a private company, but from the government itself.

    The FCC should reject this ill-conceived plan, and toss central planning back into the overstuffed dust heap of regulatory history.

    This is cross-posted at The Technology Liberation Front

    Posted in Economics [slideshow_deploy]

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