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Optimal Abolition of FCC Spectrum Allocation

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  • Thomas W. Hazlett

Abstract

Ronald Coase based his 1959 call for spectrum markets on theoretical conjecture. Today abundant evidence supports his case. Targeted liberalization in cellular markets, as contrasted with regulatory planning of the digital TV transition and other traditional policies, suggest enormous efficiency gains are available from wider use of "the price system." With exclusive frequency rights assigned to owners, markets widely reconfigure spectrum use, coordinating complex spectrum sharing. Resulting social gains include increased consumer surplus from enhanced technological innovation and wireless service competition. A social bonus arrives in the benefits associated with wider scope for free speech. Yet, the administrative allocation system continues to distribute rents and garner political support. Liberal reforms, in contrast, produce large but broadly dispersed efficiency gains and are undersupplied. This paper proposes an incremental extension of property rights in spectrum to move beyond the current rent-seeking equilibrium, eliminating the Federal Communications Commission's centralized spectrum allocation process and, with it, an "attractive nuisance" generating anticonsumer outcomes.

Suggested Citation

  • Thomas W. Hazlett, 2008. "Optimal Abolition of FCC Spectrum Allocation," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 103-128, Winter.
  • Handle: RePEc:aea:jecper:v:22:y:2008:i:1:p:103-128
    Note: DOI: 10.1257/jep.22.1.103
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.22.1.103
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    References listed on IDEAS

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    1. Cramton, Peter & Kwerel, Evan & Williams, John, 1998. "Efficient Relocation of Spectrum Incumbents," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 647-675, October.
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    6. Hazlett Thomas W & Ibarguen Giancarlo & Leighton Wayne, 2007. "Property Rights to Radio Spectrum in Guatemala and El Salvador: An Experiment in Liberalization," Review of Law & Economics, De Gruyter, vol. 3(2), pages 437-484, December.
    7. repec:reg:rpubli:123 is not listed on IDEAS
    8. Coase, R H, 1998. "Comment on Thomas W. Hazlett: Assigning Property Rights to Radio Spectrum Users: Why Did FCC License Auctions Take 67 Years?," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 577-580, October.
    9. Peter Cramton, 2002. "Spectrum Auctions," Papers of Peter Cramton 01hte, University of Maryland, Department of Economics - Peter Cramton, revised 16 Jul 2001.
    10. anonymous, 1978. "Communication," Management Science, INFORMS, vol. 24(9), pages 919-919, May.
    11. R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
    12. Hazlett, Thomas W, 1998. "Assigning Property Rights to Radio Spectrum Users: Why Did FCC License Auctions Take 67 Years?," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 529-575, October.
    13. Melody, William H, 1980. "Radio Spectrum Allocation: Role of the Market," American Economic Review, American Economic Association, vol. 70(2), pages 393-397, May.
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    Citations

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    Cited by:

    1. Hazlett, Thomas W. & Muñoz, Roberto E., 2009. "Spectrum allocation in Latin America: An economic analysis," Information Economics and Policy, Elsevier, vol. 21(4), pages 261-278, November.
    2. Thomas W. Hazlett & Roberto E. Muñoz, 2009. "A welfare analysis of spectrum allocation policies," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 424-454.
    3. Amnon Levy & Benoit Freyens, 2011. "Optimal Control of Broadcasting Spectrum with a Variety-Reception Tradeoff and Consumers’ Income Sensitivity," Economics Working Papers wp11-03, School of Economics, University of Wollongong, NSW, Australia.
    4. Elizabeth Hoffman & Matthew L. Spitzer, 2011. "The Enduring Power of Coase," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 63-76.
    5. Gregory L. Rosston, 2013. "Increasing Wireless Value: Technology, Spectrum, and Incentives," Discussion Papers 12-015, Stanford Institute for Economic Policy Research.
    6. Minervini, Leo Fulvio, 2014. "Spectrum management reform: Rethinking practices," Telecommunications Policy, Elsevier, vol. 38(2), pages 136-146.
    7. Amnon Levy & Benoît Freyens, 2012. "Optimal Control of Broadcasting Spectrum with Variety-Reception Trade-off and Consumers’ Income Sensitivity," Economics Working Papers wp12-10, School of Economics, University of Wollongong, NSW, Australia.
    8. Cao, Xiaoyong & Gong, Jiong, 2017. "The tradeoff of the commons under stochastic use," Journal of Public Economics, Elsevier, vol. 145(C), pages 150-161.
    9. Amnon Levy & Michael R. Caputo & Benoît Pierre Freyens, 2013. "Royalties, Entry and Spectrum Allocation to Broadcasting," Economics Working Papers wp13-02, School of Economics, University of Wollongong, NSW, Australia.

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