Richard Thaler in the NYT: Here’s a list of national domestic priorities, in no particular order: Stimulate the economy, improve health care, offer fast Internet connections to all of our schools, foster development of advanced technology. Oh, and let’s not forget, we’d better do something about the budget deficit. … There [is] a way to deal effectively with all of those things at once, without hurting anyone. …
I think there is severe underestimation of the massive difficulties of gaming the system with direct handouts. Moreover, I suspect it's more often our outraged sense of unfairness (why should they get a handout) than the desire not to diss that causes a problem.
In particular the problem is that either handouts are insufficent to offset the imposed costs for many people and as a result there a pile of horrific stories in the media about people who were screwed over by this government program or the handouts must delibrately over estimate the cost they impose to avoid failing to cover the costs and causing significant harm.
However, when we give handouts that are highly utility positive to groups who we don't feel need them it tends to invoke our sense of outrage.
"we will throw away trillions in gains to avoid dissing them via direct handouts?"
Are you sure it's the recipients of the handouts whose feelings we're favouring? In my experience the people who complain most about handouts are the ones who aren't receiving them.
"The usable radio spectrum is limited and used inefficiently." NOT There are enormous parts of the usable spectrum that are simply off-limits because they are owned by the Federal government. http://www.ntia.doc.gov/osm...The Federal government is the only entity that actually owns the airwaves. Everyone else gets a license, and those licenses are not freely transferable . This, BTW, explains why the sale transactions for cellphone companies, satellite broadasters, and radio and TV stations involve some of the most wonderful legal fictions ever created. The deals have, at their core, the transfer of the rights to use certain frequencies; but the value of those rights is never, ever directly referred to in the transaction sale documents. They are never given a price, not even zero. (This is yet another reason why parents should encourage their children who insist on going to law school to become FCC lawyers.)
ABC's parent company switched off its signal to Cablevision's 3.1 million customers in New York at midnight Saturday in a dispute over payments that escalated just hours before the start of the Academy Awards.
Later in the same article:
The signal can still be pulled from the air for free with an antenna and a new TV or digital converter box.
Some of those who do this will notice an improvement in picture quality. They may not give up on cable just yet because the range of over-the-air programming is still quite limited, but they might start to wonder why they are paying so much for an inferior product.
"the fact many areas have failed to acquire the infrastructure to do so indicates a very serious market failure"
(Fell into your site from Maggie's Farm.) You're making a big assumption about the value of broadcast TV. I don't have TV and don't intend to acquire it. If this is a market failure, it's a result of of nothing worth watching.....
The Internet is a point-to-point communications protocol designed for duplex network connections. All messages have a source and destination IP address, and any IP address can send traffic to any other. Video broadcasting is a one-way multicast operation, so the technical requirements are fundamentally different.
I mean, really, IP is nothing more than a routing protocol. With radio broadcast, you're not doing any routing -- your recipients are whoever can pick up the message. So using IP doesn't make any sense. What would it gain?
Of course, you could avoid broadcasting, and actually just use it as a big wireless Internet service. But that's hideously inefficient. Why are TV shows are aired at particular times, and everyone has to watch at the same time? Because that way you broadcast one copy and ten thousand people can watch it. If everyone had to start up their own private connection, like how YouTube works, you'd have to be serving up ten thousand different copies, using ten thousand times the bandwidth at the edge of your data center.
That will always be the case if you're actually routing the data to separate addresses, and that's the only situation where you need IP. So there's no mileage in that.
Note: Broadcasters had to be forced to buy equipment necessary for HD broadcasts.
Also, I question the accuracy of Rajiv's assertion that broadcast TV is better quality than cable. Where I live, the basic Comcast package offers the same channels in HD that I could watch if I connected rabbit ears (plus lots of other channels that I would not be able to receive over the air).
should we really as a default prefer that zero-marginal cost of distribution products be given away for free?
If the fixed cost of producing such goods can be financed by other means (such as subsidizing TV broadcasters), then yes we should. To do otherwise would exclude some consumers from enjoying the good for no apparent reason.
The tax does not fall on consumers, it falls on the holders of de facto property rights on the spectrum. Yes, some of ths burden will be shifted onto consumers if these property rights are taxed, e.g. many non-profit TV stations may go out of business. But this is a separate issue.
Jim, I agree that in the long run most of the spectrum will be used for internet service, and that television will be part of this. As a bridge to this, I suspect that we'll see a few channels of over-the-air HD broadcasts for some time. This is why I made the prediction (see above) that traditional cable will be the first to go.
Robin, we currently have a default (for historical reasons) and the question is whether or not to change it and in what way. When folks talk about a trillion dollar free lunch who in their right mind would oppose that? I just wanted to point out that the "obsolete" and "dead" technology is very much alive, improved, and on the rise. Let's just pause for a minute before jumping on the free lunch bandwagon to see how much this lunch would cost. It shouldn't be too hard to figure this out. That's all I'm saying.
Radio frequency is benign priced below its marginal costs so hell yes it should be "taxed" by auctioning off the spectrum. Hell, Coase did this work back in the '70s, why are we still having this discussion?
My first thought with this is that it should be treated as an engineering problem, not an economics problem (though maybe that's just my background). It seems to me that all television ought to be going over the Internet by now, and most airwave bandwidth ought to be used for providing Internet service. Providing a few television streams' worth of Internet bandwidth to every home in the country at once isn't trivial, but it's not all that hard, either, and the fact many areas have failed to acquire the infrastructure to do so indicates a very serious market failure.
Rajiv, should we really as a default prefer that zero-marginal cost of distribution products be given away for free? Yes, that might be best, it is not "obvious" it isn't best, but that isn't the question.
I think there is severe underestimation of the massive difficulties of gaming the system with direct handouts. Moreover, I suspect it's more often our outraged sense of unfairness (why should they get a handout) than the desire not to diss that causes a problem.
In particular the problem is that either handouts are insufficent to offset the imposed costs for many people and as a result there a pile of horrific stories in the media about people who were screwed over by this government program or the handouts must delibrately over estimate the cost they impose to avoid failing to cover the costs and causing significant harm.
However, when we give handouts that are highly utility positive to groups who we don't feel need them it tends to invoke our sense of outrage.
"we will throw away trillions in gains to avoid dissing them via direct handouts?"
Are you sure it's the recipients of the handouts whose feelings we're favouring? In my experience the people who complain most about handouts are the ones who aren't receiving them.
"The usable radio spectrum is limited and used inefficiently." NOT There are enormous parts of the usable spectrum that are simply off-limits because they are owned by the Federal government. http://www.ntia.doc.gov/osm...The Federal government is the only entity that actually owns the airwaves. Everyone else gets a license, and those licenses are not freely transferable . This, BTW, explains why the sale transactions for cellphone companies, satellite broadasters, and radio and TV stations involve some of the most wonderful legal fictions ever created. The deals have, at their core, the transfer of the rights to use certain frequencies; but the value of those rights is never, ever directly referred to in the transaction sale documents. They are never given a price, not even zero. (This is yet another reason why parents should encourage their children who insist on going to law school to become FCC lawyers.)
Cable Television obsolescence watch:
ABC's parent company switched off its signal to Cablevision's 3.1 million customers in New York at midnight Saturday in a dispute over payments that escalated just hours before the start of the Academy Awards.
Later in the same article:
The signal can still be pulled from the air for free with an antenna and a new TV or digital converter box.
Some of those who do this will notice an improvement in picture quality. They may not give up on cable just yet because the range of over-the-air programming is still quite limited, but they might start to wonder why they are paying so much for an inferior product.
"the fact many areas have failed to acquire the infrastructure to do so indicates a very serious market failure"
(Fell into your site from Maggie's Farm.) You're making a big assumption about the value of broadcast TV. I don't have TV and don't intend to acquire it. If this is a market failure, it's a result of of nothing worth watching.....
Susan Lee
Didn't we just spend several $billion to convert television broadcasting to digital format?
Dennis, I'm referring to picture quality, not number of channels. See my post for evidence on this.
The Internet is a point-to-point communications protocol designed for duplex network connections. All messages have a source and destination IP address, and any IP address can send traffic to any other. Video broadcasting is a one-way multicast operation, so the technical requirements are fundamentally different.
I mean, really, IP is nothing more than a routing protocol. With radio broadcast, you're not doing any routing -- your recipients are whoever can pick up the message. So using IP doesn't make any sense. What would it gain?
Of course, you could avoid broadcasting, and actually just use it as a big wireless Internet service. But that's hideously inefficient. Why are TV shows are aired at particular times, and everyone has to watch at the same time? Because that way you broadcast one copy and ten thousand people can watch it. If everyone had to start up their own private connection, like how YouTube works, you'd have to be serving up ten thousand different copies, using ten thousand times the bandwidth at the edge of your data center.
That will always be the case if you're actually routing the data to separate addresses, and that's the only situation where you need IP. So there's no mileage in that.
Note: Broadcasters had to be forced to buy equipment necessary for HD broadcasts.
Also, I question the accuracy of Rajiv's assertion that broadcast TV is better quality than cable. Where I live, the basic Comcast package offers the same channels in HD that I could watch if I connected rabbit ears (plus lots of other channels that I would not be able to receive over the air).
should we really as a default prefer that zero-marginal cost of distribution products be given away for free?
If the fixed cost of producing such goods can be financed by other means (such as subsidizing TV broadcasters), then yes we should. To do otherwise would exclude some consumers from enjoying the good for no apparent reason.
The tax does not fall on consumers, it falls on the holders of de facto property rights on the spectrum. Yes, some of ths burden will be shifted onto consumers if these property rights are taxed, e.g. many non-profit TV stations may go out of business. But this is a separate issue.
Jim, I agree that in the long run most of the spectrum will be used for internet service, and that television will be part of this. As a bridge to this, I suspect that we'll see a few channels of over-the-air HD broadcasts for some time. This is why I made the prediction (see above) that traditional cable will be the first to go.
Robin, we currently have a default (for historical reasons) and the question is whether or not to change it and in what way. When folks talk about a trillion dollar free lunch who in their right mind would oppose that? I just wanted to point out that the "obsolete" and "dead" technology is very much alive, improved, and on the rise. Let's just pause for a minute before jumping on the free lunch bandwagon to see how much this lunch would cost. It shouldn't be too hard to figure this out. That's all I'm saying.
Radio frequency is benign priced below its marginal costs so hell yes it should be "taxed" by auctioning off the spectrum. Hell, Coase did this work back in the '70s, why are we still having this discussion?
My first thought with this is that it should be treated as an engineering problem, not an economics problem (though maybe that's just my background). It seems to me that all television ought to be going over the Internet by now, and most airwave bandwidth ought to be used for providing Internet service. Providing a few television streams' worth of Internet bandwidth to every home in the country at once isn't trivial, but it's not all that hard, either, and the fact many areas have failed to acquire the infrastructure to do so indicates a very serious market failure.
Rajiv, should we really as a default prefer that zero-marginal cost of distribution products be given away for free? Yes, that might be best, it is not "obvious" it isn't best, but that isn't the question.