Subject: [NEXTEL-1] Spectrum Policy Costs Consumers $2.78 Billion Annually, Says Telecommunications Expert Thomas Hazlett

From: [email-masked]
Date: Thu, 16 Oct 2003 08:00:32 -0400

Spectrum Policy Costs Consumers $2.78 Billion Annually, Says Telecommunications
Expert Thomas Hazlett

FCC License Auctions Can Impede Competition, Hurt Consumers

WASHINGTON, Oct. 14 /PRNewswire/ -- According to Thomas Hazlett, a former
Chief Economist for the Federal Communications Commission, consumers are
losing billions of dollars each year due to policies blocking innovative
technologies from competing with cable and satellite TV operators.
"Federal budget number crunchers estimate that bids for licenses to share
satellite TV spectrum would bring in $60 million," said Dr. Hazlett, now
Senior Fellow at the Manhattan Institute. "But consumers are likely to be
losing $230 million each month due to delays and ill-conceived spectrum
policy."  Hazlett noted that entry by wireless land-based competitors such as
Northpoint Technology, the pioneering start-up firm that brought its
innovative spectrum sharing technology to the FCC in the mid-1990s, would
likely lower retail prices for subscription TV and high-speed Internet access
by about five percent.  "A 5% price decline for cable and satellite
subscribers results in consumer gains of about $2.78 billion annually,"
Hazlett noted.  "The goal of increasing broadband competition overwhelms any
other consideration."  Hazlett's numbers actually may be conservative, given
that the General Accounting Office recently reported to Congress that where
there is more than one cable TV company competing within a market prices are
fully 17% lower.

After taking nearly a decade to act on and approve the spectrum sharing
technology invented by Northpoint, the FCC now wants to hold an auction,
selling rights to the highest bidder.  Hazlett is critical of this approach.
"The goal should be to award licenses to innovators quickly, so that consumers
benefit from additional choices, and entrepreneurs have incentives to gain new
spectrum allocations."  The current approach by the FCC "appropriates upstart
competitors, seizing their business plans and demanding a ransom to sell them
back."

According to Dr. Hazlett, who has served as a consultant to Northpoint,
"the purpose of the satellite TV operators' campaign to force an auction is to
create a barrier to entry: Increased competition would force incumbents to
lower prices.  Blocking this pro-consumer rivalry costs consumers at least
tens of millions of dollars each month."

* "If new competition reduced multi-channel video subscription prices just
5%, consumers would save approximately $2.78 billion each year.  This
implies that each month competition is delayed costs consumers $230
million."

* "FCC license auctions are, in this case, an extremely inefficient way to
raise a trivial amount of revenue compared to the vast consumer gains
that are squandered."

* "Forcing innovative, land-based competitors like Northpoint Technology
to get in line for a federal auction protects incumbents and taxes
entrepreneurship, creating huge disincentives for investment and
competitive risk taking."

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/10-14-2003/0002035619&EDATE=

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