Solving America’s Spectrum Crisis,

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Although few history books mention it, and most Americans arenot aware of it, roughly 75 years ago, the federal governmentnationalized one of the most important natural resources inexistence. If this resource had been oil, coal, lumber, or steel,the American people would have been outraged and would not havestood for it. Yet this resource -- the electromagnetic wirelessspectrum -- was simply unknown to most Americans, so few knew orcared.

But times have changed, and America's apparent indifference tospectrum socialism may soon end. Whereas the airwaves wereprimarily used for television and radio broadcasting in the past,today consumers have come to rely on a panoply of wireless servicesand devices such as cell phones, pagers, satellite television, andpersonal digital assistants. And so-called Third Generation (3G)wireless systems, which promise ubiquitous high-speed data andInternet connections, are now on the horizon. But as the public'sseemingly insatiable appetite for such wireless gadgets andservices grows, many consumers are scratching their heads andwondering why more advanced wireless technologies are not gettingto market as quickly as promised.

The answer should not be surprising. The history of America'sseven-decade experiment with government management of the airwavesreads like a never-ending series of Soviet-style five-year plans.The Federal Communications Commission has basically doled outspectrum on a licensed basis for specific uses and then dictatedhow license holders can use or sell that spectrum allocation. Thishas resulted in two very serious problems: inflexible use policiesand artificial spectrum scarcity. The combined effect has been thecreation of a serious spectrum crisis in America.

Let's begin with inflexible use. Imagine that after youpurchased a piece of property the government told you what kind ofhouse you could build on it, restricted what you could plant inyour back yard, and then didn't let you sell it to someone else.That's essentially what the FCC does with wireless spectrum. Forexample, a company holding a broadcast television license can onlyoffer the public broadcast TV services. It is illegal for them touse their spectrum for any other purpose or to sell it to anothercompany to use it for a different purpose, even though that istechnically possible.

Needless to say, that is hardly a sensible way to manage animportant resource. It means that federal bureaucrats, notcompanies and consumers, dictate what the most highly valued use ofspectrum will be. Consequently, even though the vast majority ofAmericans watch TV through their cable or satellite systems,broadcasters still use massive chunks of spectrum to zap signals torabbit-ear antennas that few of us use anymore. If broadcasterswant to provide a different service with some of the spectrum theyhold, the FCC says tough luck.

This illogical "zoning" of the spectrum has given rise to thesecond dire spectrum problem: chronic shortages. When governmentsattempt to micromanage an important resource, they often end upcreating artificial scarcities. Just as government oil controlsgave America lines at the gas station, government spectrum controlshave led to ongoing spectrum shortages. Cellular phones would havebeen available to consumers a full decade earlier, for example, ifnot for deliberate attempts by the FCC to block the industry'sdevelopment. And after 10 years of promises, many Americans arestill wondering if high-definition digital television (DTV) is evergoing to materialize.

Third Generation wireless technologies may suffer a similar fateas federal regulators continue to mull over proposals to squeezesome extra spectrum out of the current system to accommodate theseservices. In fact, last October, the Clinton administration ordereda government wide review of spectrum management policies to achievethis goal. As a result of this directive, on March 30th of thisyear the FCC and the National Telecommunications and InformationAssociation issued reports outlining what were essentially band-aidsolutions to what has become a full-blown crisis.

This is not really surprising since it is unlikely thatregulators are going to do anything that puts their jobs in seriousrisk. And many bureaucrats view serious spectrum liberalization asan open invitation to a pink slip. If Congress gets serious aboutsolving America's spectrum crisis, however, the following checklistcan serve as a blueprint for reform:

  • Allow flexible use: Allow complete spectrumflexibility and discontinue any form of technological "zoning" orstandard-setting by the FCC.
  • Move toward a property rights regime: Grantcurrent spectrum licensees a full-fledged property right in theirallocation and grant all future spectrum holders the same titledeed for wireless properties.
  • End spectrum caps and ownership restrictions:Discontinue the caps the FCC currently places on the amount ofspectrum some companies can use in a given marketplace and end theownership restrictions other companies face.
  • Stop rigging auctions: Ongoing auctions formutually exclusive spectrum uses should not mandate specialtreatment for small or minority-owned businesses. And Congressshould not try to artificially boost spectrum auction values in anattempt to bring more money into the federal treasury. Juicing thespectrum for billions more than it is worth adversely impactsfuture industry investment.
  • Allow innovative new spectrum uses: Spectrumauctions are appropriate where there are competing claims for thesame spectrum allocation. In other cases, homesteading principlesand other forms of secondary spectrum rights (i.e., overlay,underlay, and re-use rights) may be appropriate in order toencourage innovation.
  • Disgorge more government-held spectrum: Offerto buy out federal agencies who are currently holding large chunksof spectrum and require the law enforcement community to pay fortheir future spectrum needs through their budget allocations.
  • Demand the full protection of the FirstAmendment: Spectrum socialism has also meant second-classFirst Amendment status for broadcasters. Wireless media deservesthe same free speech protections that are granted to its printcounterparts.

America does not find itself in the midst of a real estatecrisis precisely because markets are allowed to freely calibratethe forces of supply and demand. Property rights, privatecontracts, and the common law govern disputes over tangibleproperty in America. It's time to apply this same time-tested logicto the electromagnetic spectrum.