Subject: [NEXTEL-1] Spectrum licensing and broadband

From: [email-masked]
Date: Mon, 28 Jul 2003 02:28:18 -0400

Spectrum licensing and broadband
By Randolph J. May
July 27, 2003

Back in 1927 when Congress established the Federal Radio Commission, the
predecessor to today's Fedral Communications Commission, it precluded a
full property rights regime in the radio spectrum by declaring its purpose
to maintain government control of the airwaves. Today, almost seventy years
later, the Communications Act continues to bar private ownership of the
spectrum.

At the same time, it generally grants the FCC authority to allocate the use
of frequency bands for whatever services the agency deems appropriate and to
issue licenses to particular applicants for use of the allocated
frequencies.

You don't have to be steeped in either 17th century Enlightenment property
rights philosophy or contemporary public choice theory to understand that
this scheme of managing the overall spectrum resource and assigning valuable
licenses is an open invitation to rent-seeking and political maneuvering par
excellence.

It is not surprising that over the years controversies have erupted when
politicians ranging from Lyndon Johnson to Richard Nixon have attempted to
influence FCC licensing decisions for their own benefit.

While we are stuck with a regime that precludes private ownership of the
spectrum, there nevertheless is some flexibility consistent with the
Communications Act for movement in the direction of a property rights
approach to spectrum licensing. Making licenses more easily transferable in
secondary markets and giving licensees more leeway in deciding what kinds of
services they want to offer over their assigned frequencies are two steps
recently taken by the FCC to implement a more market-oriented, property
rights-like approach.

Another important step, explicitly authorized by Congress, has been the use
of auctions as the default means of assigning licenses when more than one
applicant requests the same spectrum.

Now a company called Northpoint, in a furious lobbying campaign, is asking
Congress to reverse an FCC decision requiring that spectrum it wants to use
to provide land-based wireless broadband services be put up for auction
among competing bidders.

In a May 2002 decision, Northpoint failed to persuade the FCC that it should
be awarded this spectrum on an exclusive basis by administrative fiat, and
it filed a court appeal that remains pending. If Northpoint convinces
Congress to intervene, the movement toward a more market-oriented
approach--one less dependent on the skills of politically connected lawyers
and lobbyists--will be set back considerably.

Northpoint's claims
Northpoint makes several points in arguing that it should not have to bid at
auction for the desired frequencies.

. It claims it pioneered the development of new technology that allows its
proposed terrestrial service to share spectrum with satellite services like
EchoStar Communications's Dish Network and Hughes' DirecTV.

. And it claims that if it gets its service up and running it will provide
competition not only to the satellite firms, but to the telephone and cable
companies as well, by making available a package of video, telephony and
Internet services.

. And, to add further spice to its congressional entreaties, Northpoint
suggests its service especially will be a boon in rural areas.

While Northpoint's arguments may be superficially appealing, they are not
ultimately persuasive. First, although for a brief period the FCC did have a
policy authorizing the award of spectrum auction-free based on claims of
innovative technology, Congress abolished this so-called pioneer's
preference because it encouraged interminable litigation concerning
preferences entitlements. Making licensing decisions turn on bureaucratic
judgments concerning innovativeness proved to be a real roadblock toward the
quick assignment of spectrum.

It is true that Northpoint -- and other companies that propose to use
similar technologies to share the same satellite spectrum Northpoint
wants -- may provide additional broadband competition. The more competition
for video, telephony and Internet access services the better. But the
direct-to-home satellite providers with which Northpoint wishes to compete,
as well as the terrestrial mobile wireless companies that compete in some of
the same market segments, already have paid many millions of dollars at
auction for their spectrum. And both of these types of "wireless" services
have brought new services to underserved rural areas.

Some argue that the primary benefit of spectrum auctions is that, as opposed
to, say, a lottery, they raise millions of dollars for the U.S. Treasury.
While this may be true, it is not the primary rationale supporting auctions.
Rather, as the FCC stated in denying Northpoint's request for spectrum on an
exclusive no-bid basis, assigning licenses "through competitive bidding also
promotes efficient and intensive use of the spectrum...because (the winning)
bidders are more likely to rapidly introduce new and valuable services and
deploy those services quickly."

Even though spectrum auctions may not always be appropriate, for example,
for frequencies reserved for public safety functions, and do not -- absent
other changes in law and policy -- create a fully functioning property
rights regime, they are useful in moving in a free market direction. The
prime reason: They are ways to place spectrum in the hands of those entities
that value it most highly.

As long as the government takes the position that it owns the spectrum and
private parties use it only at its sufferance through limited licenses,
spectrum allocation and assignment decisions will be subject to a certain
degree of political maneuvering. But if Congress accepts Northpoint's pleas
to overturn legislatively the FCC's decision, it will deal an unfortunate
blow to the FCC's efforts to move toward a more market-oriented and flexible
spectrum regime that benefits the public at large.

biography
Randolph J. May is senior fellow and director of communications policy
studies at the Progress & Freedom Foundation
http://www.pff.org/what_we_do.htm in Washington, D.C. The views expressed
here are his own.

http://rss.com.com/2010-1071_3-5055625.html?type=pt&part=rss&tag=feed&subj=news

Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/