Free Markets Hold Great Promise for Communications Issues

One of the most pressing issues confronting policymakers today is ensuring there is enough wireless spectrum available to meet our communications needs for the future. Wireless spectrum is the backbone of the U.S. communications industry, the invisible medium that carries through the air the digital signals that enable the sending and receiving of voice calls, text messages, photos, and video on our many consumer electronic devices. Just as a larger water pipe means more water can be delivered, more spectrum means more capacity for a better signal and better service. As more Americans demand better, higher-quality voice and video services (including mobile broadband) on more devices, there must be a way to allocate spectrum according to its greatest needs. The only question is, how do we allocate efficiently and fairly? One possible solution is to look to the incredible power of the free market to determine how to allocate spectrum.

Spectrum auctions, a market-based mechanism whereby willing buyers bid on spectrum from willing sellers, are a politically neutral and effective way of addressing critical spectrum needs. As technology researcher Richard Bennett correctly notes, “When the right to use spectrum is offered to bidders on equal terms, the market expresses itself in the form of bids that represent expert judgments of spectrum’s economic value to application providers.”

Market-based solutions are the most efficient mechanism for allocating goods, which is the primary reason why the American Legislative Exchange Council (ALEC) endorsed such a mechanism in the early 1990s for addressing spectrum allocation. Our policy calls for market-based mechanism like spectrum auctions and resolves that these auctions should:

• Reduce regulation and rules to encourage flexible use of all assigned frequencies, while maintaining broad requirements for compatibility and interference protection, thereby encouraging development of new innovations in services and ensuring more efficient use of all assigned spectrum;
• Ensure that allocation and frequency assignments carefully and fairly balance the competing demands of new, proposed services and the rights of existing users of more mature technologies and services;
• Promote the continued development of a national public switched network as the ultimate backbone for an integrated, national communications system, encompassing both wire and radio-based telecommunications service;

ALEC is not the only one to look to the market for solutions to the spectrum crunch. In fact, Congress, as part of its payroll tax cut extension authorized the Federal Communications Commission to conduct spectrum auctions to make more spectrum available, very similar to what ALEC endorsed more than 20 years ago. These spectrum auctions have drawn praise as a sensible policy solution to a major policy issue from organizations as diverse as government agencies like the FCC, industry associations like CTIA-the Wireless Association, and policy groups from across the political spectrum such as the Public Safety Alliance and Public Knowledge. Given the widespread praise for spectrum auctions, it is strange that more is not being done to let the market work its magic in communications. As spectrum auctions demonstrate, market-based solutions hold great promise for addressing issues in communications.