Washington's Wireless Wars

Thomas W. Hazlett is a Senior Fellow at the Manhattan Institute's Center for the Digital Economy. His research focuses on law and economics, with particular emphasis on telecommunications policy. The following remarks were delivered by Dr. Hazlett at a recent Manhattan Institute forum in New York City.

Introduction

There has been a great deal of commentary in recent years about the Telecommunications Act of 1996. The news coverage spikes each February, on the anniversary of President Clinton’s signing of the measure, and is routine. "Intended to open local markets to competition, the act has done little more than encourage industry consolidation while deregulated phone and cable rates surge." The reports are laced with inaccuracies, supported by quotations from advocates or interests that exist to support such boilerplate: "Markets Fail—Film at 11."

The real news in telecommunications is that half the marketplace—wireless—was untouched by the deregulation of 1996. In fact, the basic rules governing our use of radio spectrum have been fixed since another February event—the signing of the Radio Act by President Calvin Coolidge exactly 75 years ago, February 23, 1927.

Socialism with a Wireless Interface

The airwaves were then emerging as a tremendously valuable natural resource in an amazingly influential new medium: AM radio. For the first time, words spoken by one person could simultaneously be heard by millions. The change in communications was so breathtaking that pundits had to come up with a new word for it. From agriculture they borrowed the term "broadcasting," which meant "throwing seeds far and wide."

Radio broadcasting took root, grew, and gave rise to powerful electronic media. But through it all, the 1927 Radio Act has stunted the emergence of an efficient competitive marketplace by outlawing property rights to radio waves.

The frequencies that make possible wireless communications are to be owned by no one. Access to the airwaves is a privilege, not a right. All decisions as to how bandwidth may be used reside in the federal government.

This command-and-control system—"socialism with a wireless interface"—combines the inefficiency of Soviet resource allocation with the bawdy ethics of the building-permit process in Chicago. Five commissioners dedicate wave band X to amateur radio, Y to satellite television, Z to fixed private relays. The standard used is "public interest, convenience, and necessity."

No one has ever been able to figure out what that phrase means, not in 75 years. Ten years ago, then-Federal Communications commissioner Ervin Duggan insisted that the standard could be clearly defined, saying that the Commission would soon do so. Patiently, we wait.

READ FULL REPORT