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How Deregulation Gave Us FM Radio, HBO, and the iPhone

The FCC is designed to protect incumbents, enrich politicians, and screw consumers, says economist Thomas Hazlett.

"We've gone to a modern [broadcast] system that has a lot of places where stuff can happen without permission," says Thomas W. Hazlett, who's the FCC's former chief economist, a professor at Clemson University, and author of the new book The Political Spectrum: The Tumultuous Liberation of Wireless Technology, from Herbert Hoover to the Smartphone. "And we have seen that the smartphone revolution and some other great stuff in the wireless space has really burgeoned...That comes from deregulation."

So-called net neutrality rules are designed to solve a non-existent problem and threaten to restrict consumer choice, Hazlett tells Reason's Nick Gillespie. "The travesty is there's already a regulatory scheme [to address anti-competitive behavior]—it's called antitrust law."

Greater autonomy and consumer freedom led to the development of cable television, the smartphone revolution, and the modern internet. While we've come a long way from the old days of mother-may-I pleading with the FCC to grant licenses for new technology, Hazlett says, "there's a lot farther to go and there's a lot of stuff out there that's being suppressed."

He points to the history of radio and television. Herbert Hoover and Lyndon Johnson exercised extraordinary control over spectrum allocation, which they used for their own political and financial gain. With liberalization, we now have hundreds of hours of varied television programming as compared to the big three broadcast networks of the '60s, an abundance of choices in smartphone providers and networks as compared to the Ma Bell monopoly, and more to come.

Hazlett also discusses his views on current FCC Chairman Ajit Pai, how the FCC delayed the arrival of cable television to protect incumbent broadcasters, and "the most infamous statement ever made by an FCC regulator" in a 1981 Q&A with Reason magazine.

Interview by Nick Gillespie. Edited by Justin Monticello. Cameras by Todd Krainin and Mark McDaniel. Music by RW Smith.

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This is a rush transcript—check all quotes against the audio for accuracy.

Nick Gillespie: HI. I'm Nick Gillespie for Reason. Today, we're talking with Thomas Winslow Hazlett, an economics professor at Clemson, a long-time Reason contributor, former chief economist at the Federal Communications Commission, and author most recently of the epic new book, The Political Spectrum: The Tumultuous Liberation of Wireless Technology, from Herbert Hoover to the Smartphone.

Tom, thanks for talking to us.

Thomas Hazlett: Thanks for having me, Nick.

Nick Gillespie: Your book is a masterful counterblast, I think, to the intellectual status quo when it comes to broadcasting, cable, Internet, especially related to things like spectrum auctions and net neutrality and whatnot. Your large argument is that government inhibits innovation rather than encourages it. Is that accurate?

Thomas Hazlett: Yeah, that's the starting point, but I certainly go farther, a lot farther in this book, because there has been significant liberalization, and we learn a lot from the directions we've gone. We see the suppression through administrative allocations of spectrum, which just means that we have this Mother-may-I system where the government's in charge of who does what in wireless and has to give explicit permission. We've gone from a system like that to a modern system that has a lot of places where stuff can happen without permission.

Nick Gillespie: Right.

Thomas Hazlett: We have seen that what we call perhaps the smartphone revolution and some other great stuff in the wireless space has really burgeoned. We have these emerging networks and these ecosystems. That comes from deregulation.

Nick Gillespie: Is it deregulation or is it government ... I guess and different examples, and we'll talk about those, but sometimes it's explicit deregulation, or the government saying, "We're going to get out of this. We're not going to do anything." Other times, is it benign neglect or innovators and entrepreneurs doing what some people call permissionless innovation, where they don't really care too much and they just go ahead and do something, then figure out how to explain it later and justify it?

Thomas Hazlett: Right. Yeah, great question. I think one of the problems we've had in spectrum is that you can't really have benign neglect. There are rules, and if you have an innovation that needs access to radio spectrum because it's a wireless device, you have to go and ask for some kind of authorization. We've had to make a lot of explicit rules, and some of them have been in the right direction. That's very important to state. It's not just, "Yeah, the government did this wrong and, boy, it's even worse over here. They did this wrong." It's not just bad, worse, worst. We have gone in some directions much better. There's a lot farther to go, though, and there's a lot of stuff out there that's being suppressed. We don't know what most of that is, but there's a lot of innovation that could come if we lowered those barriers still more.

Nick Gillespie: Tell us the story about Herbert Hoover and the creation of the Federal Radio Commission in 1927 and how that kind of undergirds ... Obviously, it's the starting point of your book, but it's also the concept that spectrum is politicized in ways that are problematic.

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  • esteve7||

    People, progs especially don't see it that way. That's why they are so quick to regulate everything, even the internet, and they are completely ungrateful for all the miracles around us.

    It takes a special kind of person to look at all the successes that things have brought us and think, yeah we should regulate that. Especially when pretty much everytime something is deregulated, cost goes down and quality goes up.

  • WakaWaka||

    So regulation is bad, unless it is regulation mandating the bathroom policies of private businesses?

  • timbo||

    Regulation is good when it attacks profits.
    Because rich people are scum, for some reason.

    Like all of those scummy rich people that employ everyone.

  • Sevo||

    "So regulation is bad, unless it is regulation mandating the bathroom policies of private businesses?"

    You should stop listening to those voices in your head.

  • Cynical Asshole||

    You should stop listening to those voices in your head.

    But then he wouldn't have any friends to talk to or tell him how awesome he is.

  • BYODB||

    Or reading articles on the front-page of Reason, apparently, although one could also keep those critiques limited to the article actually making those claims. Reason is not, in fact, a lock-step publication although why they feel obligated to essentially repost New York Times and Washington Post articles is a source of constant confusion for some of us.

  • timbo||

    So you're telling me that less government equals more freedom, better innovation, increased entrepreneurism, and progress?

    How can that be? Sanders and Clinton and brak O are really smart. They said that government is the greatest thing ever. Throngs of American zombie mentally handicapped believe that is so and further, they think the government should take stuff from smart people out of revenge.
    Who is fake news here?

  • Sevo||

    "How Deregulation Gave Us FM Radio, HBO, and the iPhone"

    And cheap air travel!

  • Aloysious||

    ...and moar beer.

  • Uncle Jay||

    RE: How Deregulation Gave Us FM Radio, HBO, and the iPhone

    Deregulation is a dangerous idea.
    It only leads to more competition, lower prices and better products.
    Our beloved socialist slave state would be better served with monopolies provided by The State.
    One only has to examine the wonderful benefits Social Security, Medicare and Medicaid provide to realize government monopolies are not only best for The State but for our ruling elitist filth suppressing us all.

  • KBeckman||

    If they're going to be getting rid of the old TV bandwidths anyway I hope they use some of it to open the citizens and amateur bands.

  • RobotSaysRawr||

    Yet the early internet was only really able to flourish under hefty telecom regulation forcing telecoms to share their telephone wires with anyone who wanted to use them. This allowed nearly everyone who wanted to start up their own dial-up internet services.

    And regulation allows the FDA to ensure proper health and safety practices. The FDA is also allowed to prevent homeopathic companies from advertising or selling their products as medical when they have zero evidence proving such claims.

    Regulations isn't inherently bad and deregulation isn't inherently good. This article only shows how deregulation helped the market, but refuses to point out the time regulation also helped.

  • Infostack||

    The history of networks if full of unintended consequences and asymmetries. Hazlett and others do not take this into account and want to believe that things happen(ed) for a reason. More often than not their conclusions run counter to the original set of circumstances the actors saw or perceived a priori to what actually occurred. To wit, wifi and how we got to this point where ~70% of all access is on unlicensed spectrum; yet they go on and on about licensing and auctions without truly understanding what has actually happened.

  • Infostack||

    Hazlett stands against asymmetrical regulation, yet his solutions end up asymmetric as he lacks basic understanding of network effects, how to achieve universal service & service stack biz models.

    His view of history is conformed to fit this asymmetric outcome. To wit the iPhone, where he, like most others, is flat out wrong. Without iOS having the independence to offload application traffic at layer 2 (Wifi), the smartphone revolution would never have been & the carriers would never have been pulled into 4G so quickly (& profitably). They followed & did not lead. Jobs created the revolution because of open or equal access (spectrum) policies sewn over 70 years prior (part 15) & pro-competitive licensing & interconnection policies of the 1980s-90s.

    Hazlett, like others on both sides of the farcical debates over net neutrality and whether regulation is necessary or not, overcomplicates things. The role of the regulator of public rights of way (spectrum & physical assets) should be twofold:
    a) ensure interconnection (sharing) as far out and down in the stack to remove the potential for monopoly bottlenecks and ensure a rich and vibrant ecosystem of applications above and towards the core
    b) foster and monitor market driven inter-actor/network settlements north-south and east-west in the service or information stack

    Instead of useless debates we should be seeking the answer for universally cheap access in generative, sustainable digital networked ecosystems.

  • swampwiz||

    I call BS. Allowing firms to block off use to others is anti-competitive. It seems that the investment value in the telecommunications business is predicated upon rents extracted by the owner of the "tubes", such as the way that Sprint charges a fee to "activate" a modem for use in its internet service. PURE BS!

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