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Perspective

Fortnightly Magazine - June 15 1996

Deregulation, competition, and marketplace practices have been spreading slowly across the communications business for decades. In their wake, they have left lower prices, faster innovation, and more services, jobs, profits, and productivity.

Among the proposals for still further change, one of the most shocking is the idea that radio rights should be bought and sold on the open market, just like land or any other commodity. Contrary to the general impression, I believe this idea is neither radical nor impracticable. It is founded on the same general principle that has worked elsewhere in our economy: Voluntary exchanges between intelligent adults will produce the greatest good for society. Most important, almost all of the necessary elements of such a system now exist within the Federal Communications Commission (FCC). One policy decision, followed by some implementation, and the free market becomes reality on the radio spectrum.

Define Property Rights

First, a clear definition of what the property consists of (em in this case, the right held by a certain person to use a certain part of the spectrum in a certain territory (em has existed for years. The issue of whether the rights granted in the free market should be absolute ownership rights (em like a clear title to land or a car (em or mere temporary licenses with the title retained by the government, is more theoretical than real. The FCC almost never revokes licenses. From the point of view of stability, a U.S. Government radio license is a clear title today. The FCC's power to revoke radio rights would be greatly reduced in a free-market system, but that power is so seldom exercised as to be virtually nonexistent.

A free market in radio rights would not weaken the government's ability to raise revenue. As a landlord of spectrum, the government can collect rent. Even if radio spectrum becomes private property, the government can levy taxes on it. So either way, the government can receive the funding it wants from holders of radio rights.

Also, the government can always take the spectrum back, either in the normal course of business at the end of the rental or license period, or in the case of private ownership, by invoking the power of eminent domain.

Finally, as a matter of paperwork, a shift from licenses to ownership requires only a few words in the Communications Act and on the license documents that the FCC and its predecessors have been issuing since 1913.

A genuine issue is whether the government should continue its historic practice of limiting the uses of spectrum. Today's intellectual consensus is that uses should be virtually unlimited. Time and again, limiting spectrum to one use has been exposed as a tool for oligopolists, who want to keep the number of their competitors low, and a drain of billions of dollars from the Treasury, the economy, and consumers.

If the government continues to limit uses of spectrum, much like a zoning board, its power might be confined to forbidding only technically incompatible uses. The FCC has, in fact, been moving in this direction

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