Spectrum Shortage?

Governing the ether

Governing the ether

There is, we are told, insufficient space on the airwaves for wireless communication. "We are on the verge of a spectrum crisis," former Federal Communications Commission chairman Reed Hundt told Business 2.0 last spring. "When there is both a tremendous demand for spectrum and a tremendous shortfall, the price for spectrum goes sky-high and innovation goes down, because capitalists devote themselves to acquiring spectrum instead of innovative technology."

Broadcasters, meanwhile, have been claiming that we're out of spectrum for years. But they say this in a much different tone. Broadcasters want a shortage: If they can convince regulators that there's no room left for further stations, they can reduce potential competition. Businesses that facilitate point-to-point communication face a different set of economic incentives, and have eagerly exploited new ways to squeeze more signals onto the existing spectrum. When they talk about a spectrum shortage, they mean something entirely different: that regulators are dragging their feet.

The government has not yet allocated spectrum for the "third generation" wireless -- 3G for short -- that will speed up mobile communication, supposedly paving the way for the long-promised wireless Internet. One reason it has not done this is because so much of the spectrum is already in use; tossing in 3G increases the risk of interference.

One solution is to allow the people presently using the spectrum to decide whether they'd rather allocate it to its current use or to 3G. In other words, the government would stop zoning the spectrum and instead let it find its most valued use in the market. The regulators would step back, and the capitalists would have to engage in some capitalism.

Another approach is to free up the airwaves being hoarded by the government. Reps. Chip Pickering (R-Miss.) and Fred Upton (R-Mich.) have proposed a bill to auction off the military's spectrum to 3G companies, using part of the proceeds to shift the Pentagon's spectrum to another part of the ether. The military doesn't like this idea, and though it looked ready to back down in July, one suspects that in the present political environment, the Pentagon will get what it wants.

The best option may be to combine the two ideas, by reviving a proposal made by the economist Ronald Coase over four decades ago: Make the military -- and government agencies generally -- pay to use the radio band, just like everyone else does.