Hazlett’s Political Spectrum

I just read The Political Spectrum by Tom Hazlett, which took me back to my roots. Well over three decades ago, I was inspired by Technologies of Freedom by Ithiel de Sola Pool. He made the case both that great things were possible with tech, and that the FCC has mismanaged the spectrum. In grad school twenty years ago, I worked on FCC auctions, and saw mismanagement behind the scenes.

When I don’t look much at the details of regulation, I can sort of think that some of it goes too far, and some not far enough; what else should you expect from a noisy process? But reading Hazlett I’m just overwhelmed by just how consistently terrible is spectrum regulation. Not only would everything have been much better without FCC regulation, it actually was much better before the FCC! Herbert Hoover, who was head of the US Commerce Department at the time, broke the spectrum in order to then “save” it, a move that probably helped him rise to the presidency:

“Before 1927,” wrote the U.S. Supreme Court, “the allocation of frequencies was left entirely to the private sector . . . and the result was chaos.” The physics of radio frequencies and the dire consequences of interference in early broadcasts made an ordinary marketplace impossible, and radio regulation under central administrative direction was the only feasible path. “Without government control, the medium would be of little use because of the cacaphony [sic] of competing voices.”

This narrative has enabled the state to pervasively manage wireless markets, directing not only technology choices and business decisions but licensees’ speech. Yet it is not just the spelling of cacophony that the Supreme Court got wrong. Each of its assertions about the origins of broadcast regulation is demonstrably false. ..

The chaos and confusion that supposedly made strict regulation necessary were limited to a specific interval—July 9, 1926, to February 23, 1927. They were triggered by Hoover’s own actions and formed a key part of his legislative quest. In effect, he created a problem in order to solve it. ..

Radio broadcasting began its meteoric rise in 1920–1926 under common-law property rules .. defined and enforced by the U.S. Department of Commerce, operating under the Radio Act of 1912. They supported the creation of hundreds of stations, encouraged millions of households to buy (or build) expensive radio receivers. .. The Commerce Department .. designated bands for radio broadcasting. .. In 1923, .. [it] expanded the number of frequencies to seventy, and in 1924, to eighty-nine channels .. [Its] second policy was a priority-in-use rule for license assignments. The Commerce Department gave preference to stations that had been broadcasting the longest. This reflected a well-established principle of common law. ..

Hoover sought to leverage the government’s traffic cop role to obtain political control. .. In July 1926, .. Hoover announced that he would .. abandon Commerce’s powers. .. Commerce issued a well-publicized statement that it could no longer police the airwaves. .. The roughly 550 stations on the air were soon joined by 200 more. Many jumped channels. Conflicts spread, annoying listeners. Meanwhile, Commerce did nothing. ..

Now Congress acted. An emergency measure .. mandated that all wireless operators immediately waive any vested rights in frequencies ..  the Radio Act … provided for allocation of wireless licenses according to “public interest”.  .. With the advent of the Federal Radio Commission in 1927, the growth of radio stations—otherwise accommodated by the rush of technology and the wild embrace of a receptive public—was halted. The official determination was that less broadcasting competition was demanded, not more.

That was just the beginning. The book documents so so much more that has gone very wrong. Even today, vast valuable spectrum is wasted broadcasting TV signals that almost no one uses, as most everyone gets cable TV. In addition,

The White House estimates that nearly 60 percent of prime spectrum is set aside for federal government use .. [this] substantially understates the amount of spectrum it consumes.

Sometimes people argue that we need an FCC to say who can use which spectrum because some public uses are needed. After all, not all land can be private, as we need public parks. Hazlett says we don’t use a federal agency to tell everyone who gets which land. Instead the public buys general land to create parks. Similarly, if the government needs spectrum, it can buy it just like everyone else. Then we’d know a lot better how much any given government action that uses spectrum is actually costing us.

Is the terrible regulation of spectrum an unusual case, or is most regulation that bad? One plausible theory is that we are more willing to believe that a strange complex tech needs regulating, and so such things tend to be regulated worse. This fits with nuclear power and genetically modified food, as far as I understand them. Social media has so far escaped regulation because it doesn’t seem strange – it seems simple and easy to understand. It has complexities of course, but behind the scenes.

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  • It is disingenuous to call what happened before ‘rules’ and what happened after ‘regulations’ to make your case, nor is common law the market, or not enforcing common law not the market. You have to ask why the court no longer saw property rights as sacrosanct and sided with government.

    • Robin Hanson

      I can understand you might have different ways you prefer to use these words, but it isn’t “disingenuous” of me to use them differently, if I use them in common ways.

      • Chris Pine

        Maybe they prefer to use “disingenuous” differently, too.

      • I can see three lessons to take from this. First, property does not exist as an objective reality independent of our definitions and empowerment of it, second, that regulation is used to define, order, regularize, and protect our notions of property as much as anything else, and third, that this definition supports the large scale and long term investment in developing such property. Markets in licenses may be an improvement, but there really isn’t much difference between selling licenses and selling the owners of those licenses. The limitation of entry in new and reserved spectrum may have been unnecessary but would likely have to have been faced anyway due to limited spectrum frequencies.

  • Michael Marcus

    Two examples of creative successful US spectrum policies that impacted the world:
    The 1970s “open skies” satellite policy that created the C band satellite constellation that then enabled CATV as a major industry and major new US program producers such as HBO and CNN.

    1985 creation of unlicensed ISM bands that in turned spurred development of Wi-Fi and Bluetooth.

    1987 FCC decision NOT to pick a 2G cellular standard like the rest of the world. This suppressed the commercialization of CDMA, the formation of Qualcomm, the the technology that became a key component of 3G around the world.

  • Romeo Stevens

    If we take it as a given that it is in an organism’s best interest to become the gatekeeper to a valuable resource that was formerly a commons, how should that inform meta-policy (mostly legal precedent and legal philosophy?)

  • Darth

    The aggregate amount of spectrum “auctioned” or given away to commercial interest is 5-10X more than most other developed countries. Our regulators and senators via revolving doors manipulate this market and use the peoples spectrum without any real oversight. Foreclosure value is real and most of it is not used as all most of the time. Not legal use, real use. The FCC is releasing more unlicensed which helps but we need to stop “giving” spectrum to big companies who figure out how to extort the tax they pay to government on the American people via expensive phone, tv, internet etc. every month with data caps, terrible coverage, less choice via consolidation etc. We need more real independent analysis on this subject, we need the truth.

  • Steven Easley

    In a very pure sense, anything the FCC does that causes another to alter their communication is a form of censorship, no matter how slight. So yeah, dump the FCC. I was involved in this industry as a CFO and how long have they been talking about “Convergence”? Its a joke.

  • kurt9

    Allocation of a finite, limited resource like the electromagnetic spectrum made sense. However, other than allocating frequencies for wireless, FCC regulation of the internet itself makes no sense at all.