FCC Needs a “Hands Off” Approach to Selling Bandwidth

David Williams

August 27, 2012

The Federal Communications Commission (FCC) has made some extraordinarily questionable moves.  In 2008, the FCC spent $355,000 to sponsor a NASCAR driver, David Gilliland, for three races in order to raise awareness about an upcoming switch to digital television (DTV) with the slogan “Is Your TV ready for Digital?”  The brainchild behind the idea was then-FCC Chairman Kevin Martin.  In a fitting piece of irony, Gilliland’s FCC-sponsored car crashed into the wall during the first race of the sponsorship.  Current FCC Commissioner Julius Genochowski has not fared much better.  After ramming through Net Neutrality rules (see previous blog postings herehere, and here) Genochowski threatens to stifle innovation even more with a proposed tax on the Internet.  Despite these failings, Chairman Genochowski has an opportunity to make amends by facilitating the auctioning off of additional wireless spectrum.

Thanks to the government’s mostly hands-off approach and staying out of the way, the wireless sector has grown by leaps and bounds and continues to satisfy and meet consumers’ demands along the way.  As Congress and the FCC consider new policies that will affect the wireless industry and consumers, it must be careful to not do anything that would upset the apple cart.  

As popularity of mobile devices and their cool features have increased, so too has the amount of bandwidth these products must utilize.  Because more and more bandwidth is required at an increasing rate each day, some contend that this is a huge, possibly debilitating problem that could cripple the industry.  For example, Genochowski recently remarked that the “explosion in demand for mobile services places unsustainable demands on our invisible infrastructure — spectrum.”  There’s a crucial component of the debate that he left out.  And that’s the fact that the demands will only be “unsustainable” if government doesn’t act wisely.  To be clear, if it does not open more spectrum, then the government holds complete responsibility for the ramifications of its misguided policy.  This action would negatively impact the industry as well as others due to increased regulations and an unnecessary rationing of spectrum.

Genochowski is correct though in noting that great demands have been placed on spectrum and the amount of available bandwidth is being pushed to its limits.  However, that’s not to say this trend cannot be addressed and reversed.  Additionally, the remedy is not a difficult one to execute.  The FCC has the ability – and should – begin to auction off the spectrum that the government and/or some broadcast companies no longer need.

In fact, since 1994 the FCC has held spectrum auctions, which benefit all parties involved.  Not only do these actions produce revenue for the government, they also promote and facilitate healthy competition in the market – allowing companies to allocate the new spectrum in a way to best fulfill consumer demands. This situation is a unique one because unlike many cases, government has an opportunity to help out a thriving industry by ensuring it maintains an environment for it to prosper for years to come. But as with anything in life, there’s a right and wrong way to do it.

It’s a matter of whether the federal government will permit the industry to continue on a successful path or in the interest of leveling the playing field, whether the government will act to restrict the amount of spectrum allowed into the market. If it chooses the latter, no one wins. The government will loose out on hefty sums of revenue that could have come as a result of the auctions, and consumers will loose because the government’s decision to hold back the market will leave them with inferior products and services— not because the company cannot meet the consumers’ demands, but because the government will not allow it to do so.

While increased demand is a good thing for companies, flawed government policies could leave companies and consumers out in the cold.  There’s no question that more spectrum is readily available… if the government allows it to be. If Washington decides to refuse to open more spectrum, then we should question the motivations of its decision.  It has no place in choosing pet companies to protect, especially when doing so will punish successful companies and penalize consumers who will be forced to pay higher prices for inferior products.

As Hance Haney, a senior fellow at the Discovery Institute, wrote in The Aspen Times, “Wireless services have shown dramatic improvement and price reduction since 1993 in the near absence of any regulation…. There is certainly no market failure in wireless, and now is not the time to substitute regulated rivalry for the free market.”  Unlike the speculations and hypotheticals that many other debates require, the issue of a spectrum auction is cut and dry.  There’s absolutely no question that the market will work, the only question now is will the government let it.