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Tavistock NJ

Another view - Defending highest bidder wins rules


Spectrum is scarce—that is, the amount of information that can be pushed through those metaphoric airwaves is limited by economics and the state of technology. So most economists support auctioning spectrum to the highest bidder in order to make sure it ends up in the hands of those who value it most. Indeed, many have favored it ever since Nobel laureate economist Ronald Coase came up with the idea a half-century ago.

But the market for wireless networks, while competitive, has two clear industry leaders—Verizon and AT&T. And some telecom analysts argue that consumers would be better off if the auctions were set up to favor smaller companies, perhaps keeping the two industry leaders out of the game entirely.

We think the potential costs of such discrimination against the giants outweigh any plausible benefits. In fact, it's hard to think of a market in which the old saw—don't fix it if it ain't broke—fits better. Usage on wireless networks has been exploding—including usage by low-income groups and minorities. At the same time, charges for both voice and data use have been falling even as reliability and geographic coverage have been improving.

The risk here is that freezing the industry leaders in place while giving competitors indirect subsidies (in the form of less-than-competitive prices for spectrum) would slow innovation. Indeed, both of the industry leaders are racing to acquire the spectrum to broaden access to "4G" service—the sort needed to watch video without hiccups and to seamlessly manage a host of other sophisticated smartphone and tablet functions.

But the Federal Communications Commission, which has the last word on most mobile regulation (unless Congress pulls rank), has other priorities. It is apparently inclined to throw sand in the gears of Verizon and AT&T in the name of increasing competition.

a bill that would limit the FCC's discretion on spectrum auctions, giving everybody equal opportunity to participate in any auction. That strikes us as a reasonable place to start, since it makes sense to place the burden of proof on those who think discrimination against large firms in spectrum auctions would do more good than harm.

The authors:
Robert Hahn is director of economics at Oxford's Smith School, chief economist at the Legatum Institute, and a senior fellow at the Georgetown Center for Business and Public Policy.

Peter Passell is a senior fellow at the Milken Institute in Santa Monica and the editor of its quarterly economic policy journal, The Milken Institute Review. They co-founded »Regulation2point0.org, a web portal on economic regulation.

The nine most terrifying words in the English language are, I'm from the government and I'm here to help.


Paid by AT&T and Verizon and company.

Sage of the light

Chester, IL
reply to FFH5
Yet if you look at actual history, AT&T and Verizon freeze out innovation. AT&T simply wants supply and competitors cut down to raise prices and stifle competition, which in turn stifles competition.

They simply want a return to the Old Monopoly days minus the pesky regulations they had pre-1984. In this regard Verizon aids them because it creates a proxy alternative that isn't really any different - OK, maybe they manage their spectrum better and roll out 4G services out quicker, albeit for a very high premium. Still, it's not actual competition.

Space Elf
Mullica Hill, NJ
reply to FFH5
It should go to the companies that are actually going to use it. IMO we need a hard deadline on usage* or the FCC simply takes it back, revokes the license and puts it up to auction again and the previous owner is not allowed to bid.

*Usage means on at least 75& of national population area to prevent them from putting up one tower in NYC and claim they are using it.
[65 Arcanist]Filan(High Elf) Zone: Broadband Reports

united state
reply to FFH5
I would agree to let Verizon auction but not att. Verizon would use their spectrum...