ADFITs: Not a Phantom
In his article, "Phantom Taxes: The Big Payback" (Courts and Commissions, 7/1/96, p. 41), David Wise argues that utility recovery of stranded facility costs...
regulatory body itself could have a healthy skepticism of such regulation.
Procompetitive Regulation. Most of the government's job of promoting competition is performed by the Department of Justice and the federal courts applying the antitrust laws. Certain kinds of procompetitive regulation, however, can come only from a centralized regulatory agency with the power to make rules on a prospective, nationwide basis. Two examples are the FCC's mobile radio Spectrum Caps and its Terminal Equipment Registration Program. The Spectrum Caps prevent commercial mobile service companies from controlling enough spectrum to impair competition in their services. The Terminal Program prevents telephone companies from limiting your choice of telephone and sets simple, uniform technical standards for all telephones connected to the network. Each program outlaws a practice that is (a) very likely to occur on a wide scale in the absence of regulation, (b) unquestionably anticompetitive, and (c) without countervailing benefits.
The Justice Department and the antitrust laws can only wait until a specific violation of law has occurred and then sue one malefactor at a time. For a widespread practice, the lawsuits will number in the hundreds and will consume the energies of hundreds of different legal staffs, juries, and judges, and will produce a pile of decisions and consent decrees, each slightly different from the other and each enforced by a different federal judge. The goal of competition may be achieved at vastly greater speed and less cost to the taxpayers by a sharply focused centralized government agency writing prospective rules. This agency already exists in the Competition Division of the FCC's Office of General Counsel.
This kind of regulation may prove rarely necessary in a free market of spectrum. The Spectrum Caps and the Terminal Program were necessitated by an extreme structural flaw in a communications market, namely duopoly or monopoly. In a free market, "ease of entry" into every service may break up any monopolies or oligopolies (or prevent them from forming in the first place) and thus render structural problems extremely rare. In this happy scenario, procompetitive regulation may be limited to writing anticollusion rules for spectrum auctions and prohibitions of anticompetitive covenants likely to appear in the secondary spectrum market. Or it may not be needed at all.
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No doubt, a free market in spectrum would be a change. Unfortunately, change usually attracts two kinds of rhetoric. Opponents of change, hoping to stir up fear, murmur about the terrible monsters that may lie in the uncharted seas ahead. The more rhetorically gifted advocates of change are sometimes guilty of the same excess, describing their schemes in terms of idol-smashing and righteous bloodletting. But calm examination shows that the transition to a free market in radio spectrum requires no major intellectual or institutional changes. If the policy choice is made, the basic ideas, systems, people, and bureaucratic structures are already in place, and of proven competence and efficiency. t
John W. Berresford is an attorney for the Federal Communications Commission in the Competition Division of the Office of General Counsel. The views expressed in this article are