The Federal Communications Commission has opened two dockets to consider petitions to reduce the property rights of EchoStar in wireless licenses. One docket examines whether EchoStar has met “buildout” requirements under its licenses. The other docket examines whether, as a result of purported lack of intensive usage of certain licenses, EchoStar should share those licenses with other businesses. Under the wise leadership of Chairman Brendan Carr who does not want to undermine the wireless sector and the national economy, the FCC will doubtlessly deny both petitions.
President Trump would want these petitions denied. He has repeatedly called for American leadership in wireless spectrum, including recently in supporting the spectrum language in the House reconciliation bill. Granting either of the petitions would undermine American spectrum leadership, and indeed threaten the entire wireless sector.
American leadership in wireless spectrum is largely based on property rights in spectrum, for licensed and even for unlicensed spectrum. American businesses can and do buy and sell wireless licenses because of the certainty associated with the long-term stability of those licenses. American businesses can and do invest in plant and equipment to develop both licensed and unlicensed bands because of the certainty associated wireless regulation. These American businesses provide a wide range of wireless services. In turn, American consumers can purchase wireless devices and use wireless services offered by businesses, all based on the stability and predictability of American spectrum policy.
Lesser countries use command-and-control systems to assign wireless spectrum—take wireless spectrum from political enemies and give wireless spectrum to political friends. Or decide who can use wireless spectrum and who cannot. The result is not just corruption but inefficiency as spectrum is not put to its best use.
America has a better method to assign spectrum: markets. In a free market with low transactions costs in which individuals can trade their assets, Nobel Laureate Ronald Coase demonstrated that assets will be put to their highest valued use independent of initial allocations. And individuals making trading their own assets are better off as a result. The result applies to wireless spectrum as well as any other tradeable asset.
Coase’s observation is an economic shorthand for the American Dream. Individuals left to their own judgment can make better decisions for themselves than can a government. Individual autonomy in a market economy, rather than government fiat in a command-and-control economy, is the yearning of people everywhere.
Only in the past few decades has America put the American Dream and the wisdom of Professor Coase to work on wireless spectrum. The results have been extraordinary. American wireless services, both licensed and unlicensed, benefitting from a market-based wireless policy leapt ahead of the rest of the world.
Imitation is the sincerest form of flattery, and the rest of the world imitated American market-oriented wireless policy. Of course, not all other countries are purely market-oriented. The petty corruption of giving licenses to political friends and the gross inefficiencies of limiting who may and may not use spectrum are hard to eradicate completely.
But the movement towards market-oriented spectrum policy has had profoundly beneficial results, not just for American businesses and consumers but for the poorest of the poor worldwide. Smart phones and wireless broadband and satellite broadband are now ubiquitous around the world accessible to even the poorest of the poor. Over the past forty years, the percentage of the world’s population living in abject subsistence poverty has declined from 40% to less than 10%. Almost certainly for the first time in human history, a large share of the world’s population moved from abject poverty to at least a notch above. Poverty has not been eliminated, but the worst forms are in retreat.
Some portion, perhaps a large portion, of this decline in abject poverty is the result of the global adoption of market-oriented spectrum policies. The near universal availability of wireless and broadband services could not have happened under old command-and-control policies.
All of which brings us back to EchoStar. The FCC licenses under review are ones that EchoStar purchased and that EchoStar could sell. Other companies could have purchased them in the past, and could purchase them today or tomorrow. Rather than buy the licenses from EchoStar, some companies seek to have the FCC share them or expropriate them.
No doubt, substantial costs, all too often of the FCC’s making, inhibit some transactions for FCC licenses. But the petitions before the FCC are not about failed private transactions; they instead are about efforts to have the government intervene and take assets away from a private company.
Defenders of FCC intervention will point to FCC conditions on certain EchoStar licenses for the buildout and intensity of use of those licenses. Yet for decades, the FCC has routinely granted extensions and waivers. Only when licensees lack candor does the FCC take away licenses. The EchoStar petitions appear to involve situations that would routinely lead to extensions and waivers. Of course, license conditions serve no economic purpose for licenses that can be bought and sold.
Some businesses are adept at nurturing political friends. EchoStar has a rare talent in collecting political foes. Some observers remark that EchoStar deserves to lose some or all of its licenses because of its tendency for political alienation.
Assigning licenses based on politics would be a sad day for America. Businesses and consumers should have security that spectrum usage and assignments will last beyond the next election. Lesser countries award spectrum based on political friendships. In such countries, investment in wireless technologies is limited. When wireless licenses and policy can change dramatically with each new government, businesses will invest more in corruption than technology.
Four decades ago, the combined market value of wireless spectrum in America was in the few tens of billions of dollars, largely in the broadcast sector. Today, wireless licenses are worth approximately a trillion dollars. Unlicensed spectrum and satellite spectrum are also used intensively by practically every American with an extraordinary consumer welfare value.
At least part of American economic growth in the past few decades can be traced to wireless services that have developed under market-oriented spectrum policy. President Trump rightly speaks about the importance of American leadership in technology, including wireless technology. Consequently, petitions to take licenses away from EchoStar or any FCC licensee should generally be denied. Lesser countries may pursue command-and-control policies to achieve technological leadership. They will fail.
Every country exports something of value. The most important export for some countries is petroleum; for others it is agricultural products. America’s greatest export is ideas, particularly ideas about the importance of relying on market forces to allow individuals to make decisions for themselves rather than having the government do it for them. That result is true for wireless spectrum policy as well. The American Dream—long may she live.
