Putting More Spectrum on the Market

The government needs a new plan for selling the radio spectrum.

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The "current system is similar to that of the former Soviet Union's GOSPLAN agency, which allocated scarce resources by administrative fiat among factories and other producers in the Soviet economy." So said scholars and Clinton-era Federal Communications Commission officials Gerald Faulhaber and David Farber about regulation of radio spectrum – the airwaves that provide us broadband and phone calls on our smartphones, send NFL games from satellites to our TVs, and connect our iPads via Wi-Fi to the Internet.

The problem stems from the U.S. spectrum regulatory framework, largely unchanged since the 1920s. The framework was devised at a time when broadcast radio was cutting-edge. Because it has failed to keep up with changing technology, those regulations severely distort the current technology industry and harm consumers with high prices, dropped calls and annoying mobile data limits.

As in many countries, the federal government hoards a majority of the most valuable radio spectrum and pays virtually nothing for the privilege. Not surprisingly, government audits have made it clear that federal spectrum is used ineffectively, and that reforms are long overdue to free up more spectrum for private sector use.

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Government agencies buy most things – like real estate, computer systems, aircraft and their employees' labor – at approximately the market price. Not so with spectrum, and it distorts the commercial spectrum market. Millions of consumer devices and government systems use the resource, thus spectrum is very expensive. But according to the National Telecommunications and Information Administration, agencies pay only $122 of "rent" annually per assignment of spectrum – a tiny fraction of the actual market value.

As a result, federal agencies don't have an incentive to accumulate and use spectrum efficiently, and the command-and-control apportioning of spectrum causes Soviet-style waste. A majority of it goes to the Department of Defense, and some federal spectrum is used for important tasks, like training exercises of military pilots. However, much of federal spectrum use is a mystery because of poor bookkeeping. Government auditors could not even begin to assess federal spectrum management capabilities due to antiquated data collection systems and significant inaccuracies. Certain agencies weren't using all of their assignments. Others didn't see fit to respond to government auditors at all.

Some policymakers are determined to end this waste and promote growth in one of the few bright spots in our economy – the wireless technology sector. To do that, federal agencies need to feel the pinch of paying for the resources they consume, because there is tremendous public need for more mobile broadband.

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One way to increase the rent agencies pay is to create a "GSA for spectrum." As Beltway-types know, the General Services Administration owns federal real estate and buildings around the country and acts as landlord to agencies; likewise, a spectrum GSA would charge agency and military users annual fees for their spectrum, thereby encouraging efficient use. Rep. Adam Kinzinger, R-Ill., and Sen. Mark Kirk, R-Ill., – both are combat veterans – have proposed an expert commission to expedite the process of identifying federal airwaves for auction. Their plan and the spectrum GSA would help ensure that spectrum is going for its most valuable use.

Any surplus spectrum identified or made available through economizing would be auctioned to commercial users. This would mean potentially raising tens of billions of dollars to fund the government and reduce deficits, creating jobs in the tech industries and reducing prices for phone plans. A trimmer, more efficient government would result as well. Spectrum regulation needs to move away from GOSPLAN and toward the markets – the sooner the better.

Brent Skorup is research fellow at the Mercatus Center at George Mason University and author of "Reclaiming Federal Spectrum: Proposals and Recommendations," a forthcoming article from the Columbia Science & Technology Law Review.

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