Within the large House Reconciliation package are a few short pages of clarity about wireless spectrum. In language passed by the House Energy and Commerce Committee, the Federal Communications Commission would once again have authority to assign licenses by an auction.
The Congressional reconciliation process addresses federal budget matters. To be included in reconciliation, language must result in the federal government either raising more receipts or spending more funds. The wireless spectrum authority, according to the Congressional Budget Office, would result in an additional $88 billion over ten years. That value reflects both extended auction authority as well as a pipeline of 600 MHz of spectrum to be auctioned from federal inventory.
These steps are in the right direction. The House language is not perfect; legislative language rarely is. For passage, legislative compromises are often necessary. The compromises of federal spectrum that cannot be made available to the FCC in the House bill are self-evident: a carve-out of the Lower 3 GHz band for defense; a carve-out of the 6 GHz band for unlicensed; and a carve-out above 10 GHz for satellite.
The House should approve the spectrum language in the Reconciliation bill, but here are a few recommendations for better spectrum policy in the future:
Auctioning spectrum as an American concept. Congress should embrace spectrum auctions and good spectrum policy as American ideas that benefitted people around the world. Good ideas are the best American export.
The concept of auctioning spectrum rights was developed in the late 1950s in the United States by Nobel Laureate Ronald Coase. The United States through the FCC held the first spectrum auction in 1993. Since then, the FCC has held more than 100 auctions.
For several decades, governments around the world looked to the United States for the best ideas in spectrum policy: auctions, exclusive licenses, unlicensed spectrum, deregulation, private businesses, innovation, and competitive markets—all of these are the hallmarks of American spectrum policy.
American consumers—and consumers around the world--have benefitted profoundly with ubiquitous wireless services. World poverty rates have declined dramatically since the advent of these wireless services.
The eclipse of American leadership in spectrum policy. America no longer leads in spectrum policy. Practically every country in the world, except the United States, now uses auctions to assign spectrum licenses. Other countries no longer look to us for spectrum policy. Not having spectrum auction authority is source of ridicule, the wrong type of American exceptionalism.
The FCC should have permanent auction authority, but Congress only gives the FCC time-limited auction authority. It has become a budget gimmick, not a beacon of American greatness. Every few years Congress claims future auction receipts for budget purposes, as Congress now is doing. The FCC’s auction authority expired two years ago, and the FCC currently has no efficient legal method to assign licenses.
Today, American spectrum policy is plagued with self-doubt and a cancerous envy of central regulation. The cancer is not limited to government. American businesses once looked to themselves for innovation and competition. Too often now they look to the government to fend off competition and to subsidize investment. Lesser countries have governments that excel in regulation; America does not.
The federal government itself has become an inefficient and passive player in spectrum markets. Federal agencies do not receive much if any compensation from making spectrum available to commercial use. Of course, with no benefit and with substantial transaction costs in clearing spectrum, federal agencies are left in a posture of just saying “No.”
Making American spectrum policy great again. Federal spectrum policy should have a simple goal: putting spectrum to its most valuable use. The goal is not to raise funds for federal coffers, although that is a great side benefit. The mechanism for efficiency is obvious: markets. Those markets would allow those with interests in spectrum to transact those interests to put them to better and higher-valued uses.
The goal and the mechanism are consistent with any form of ownership or licensing structure and with any type of governmental activity and with any type of joint use established through market contracts. America has the most sophisticate legal structures in the world, more than capable of allowing for more efficient allocations of spectrum.
Regulations and transactions costs discourage more efficient uses of spectrum. For example, our regulatory system results in transactions being easily delayed if not blocked. The FCC assigns to itself outside of statutes the authority to block mergers. Lease arrangements are unnecessarily complicated. Businesses that might profitably buy, sell, and lease spectrum rarely engage in such transactions because, as Professor Coase would observe, the transaction costs are unnecessarily high.
Even worse, governmental entities sit idly—and angrily—on the sidelines. In a better America, federal spectrum auction authority would be paired with federal spectrum buying and leasing authority. Over the past 30 years, the federal government has sold at auction hundreds of billions of dollars worth of spectrum from the federal inventory to commercial users. During that time, despite the presence of vibrant markets to buy and sell commercial spectrum, the federal government has not attempted to purchase commercial spectrum for federal use.
Some federal agencies claim that they need more, not less, spectrum. The claim rings hollow when the same agencies have never attempted to purchase more spectrum. Perhaps the federal budget process does not allow federal agencies to purchase spectrum. That should change.
The beauty of markets is precisely that they assign assets to those parties that value them most. If some federal agencies valued spectrum more than commercial users, then surely those federal agencies would seek to purchase more spectrum. There is no evidence of that outcome. To the contrary, the evidence is that the federal government, rather than holding large inventories of spectrum, happily receives hundreds of billions of dollars in auction receipts.
Purchasing assets and services in the commercial sector is the norm, not the exception, for the federal government. In competitive markets, the federal government hires employees, purchases equipment and supplies, rents and leases office space, and buys land. There is no economic or legal reason that the federal government cannot purchase or lease spectrum.
Start with simple steps. There is much to improve in American spectrum policy. We once led the world. We no longer do. We can reclaim leadership. The House Reconciliation language is a good start. But it is only a start.
