| A Private Windfall for Public Property |
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| By Norman J. Ornstein, Michael Calabrese |
| Posted: Tuesday, August 12, 2003 |
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| ARTICLES |
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Washington Post
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| Publications Date: August 12, 2003 |
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We're no fans of the attempt by the Federal Communications Commission to relax ownership requirements for TV stations and newspapers, but it would be a shame if the battle between FCC Chairman Michael Powell and Congress on this issue distracted attention from another harmful move being contemplated by the commission.
We're talking about the privatization of the airwaves, a public resource worth hundreds of billions of dollars in both market value and future federal revenue. The contemplated FCC action could result in the biggest special interest windfall at the expense of American taxpayers in history.
The rapid trend toward wireless communication has made access to the prime frequencies that pass easily through walls, trees and weather an increasingly valuable right. A recent study estimated the market value of this spectrum at $ 770 billion. These airwaves are owned by the public. For more than 75 years broadcasters, cellular phone companies and other commercial service providers have acquired exclusive access to scarce spectrum space only under temporary, renewable licenses; in return, they serve the public interest.
But if the FCC has its way, that social contract will be voided. In recent months, through a series of rule changes, the FCC has begun to implement a radical shift in the nation's spectrum allocation policy. Recently it adopted rules allowing licensees--whether or not they paid the public for their license--to sell or rent unused capacity to other firms. It also proposed to let universities and other holders of free licenses sell their spectrum to private firms, thus encouraging these hard-pressed nonprofit institutions to abandon their educational use of the airwaves in return for a quick buck on the new private spectrum markets.
The blueprint for this privatization of the public airwaves is a pair of FCC staff reports released last November. In essence, the FCC's Spectrum Policy Task Force proposes that incumbent licensees be granted permanent, private-property-like rights in the frequencies they currently borrow. The task force proposes that future licenses grant firms "maximum possible autonomy" to decide what services to offer, what technical standards to adopt or whether instead to sell or sublease their frequency assignments to other firms. In the future, access to the airwaves would be a commodity traded on secondary markets and free of virtually all public interest obligations.
This is not all bad. The FCC's outdated command-and-control approach--based on rigidly zoning the airwaves by service and assigning exclusive licenses at zero cost--has exacerbated the scarcity of wireless bandwidth, stifling competition, slowing innovation and restricting citizen access to the airwaves. The problem is not the stated goals of the task force but the means of achieving them.
The commission's senior economists have added a proposal that these new and valuable rights to sell and sublease frequencies be given away to incumbent licensees at no charge. The proposal is dressed up as an "auction," but it is one in which any incumbent opting to sell its license would be entitled to keep 100 percent of the revenue--money that under current law would flow into the public treasury. The logic of the proposal is that broadcasters and other spectrum incumbents have so much political clout that the only practical way to reduce scarcity is to bribe them to bring their spectrum to market.
But this approach confers a massive and undeserved financial windfall--up to $ 500 billion--on a few lucky industries. And freezing the old zoning system into permanent private property rights would forestall emerging "smart" radio technologies that can dynamically share today's underutilized spectrum space. Today the fastest-growing demand for telecommunications involves inexpensive WiFi--short for "wireless fidelity." College campuses and "hot spots" in airports and Starbucks offer this cheap and mobile Internet access by creating a wireless local area network on a small band of "unlicensed" frequencies shared with cordless phones, microwave ovens and baby monitors. Unfortunately, privatizing frequencies would turn this sharing into "trespassing," allowing licensees to demand payment for access to their airwaves.
Market-based spectrum reform can be achieved without a massive giveaway. The flexible new licenses proposed by the FCC task force could be rented for fixed terms. This would put all companies on a level playing field, permit property-like rights for limited periods, protect capital investment by incumbents and internalize incentives to use spectrum efficiently.
The good news is that the FCC cannot transfer a wireless windfall to special interests without additional authorization from Congress. Both the administration and some influential members of Congress have expressed support for spectrum user fees. The bad news is that Congress is not exactly trustworthy when it comes to protecting the public interest from broadcasters and other powerful license holders. The champions of the public, led by Sen. John McCain, have their work cut out for them.
Norman J. Ornstein is a resident scholar at the American Enterprise Institute. Michael Calabrese directs the Spectrum Policy Program at the New America Foundation. |
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| AEI Print Index No. 15619 |
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