Last week the Phoenix Center released Policy Paper No. 46, Market Mechanisms and the Efficient Use and Management of Scarce Spectrum Resources, a study of the government spectrum reform effort. This paper considers some of the implications for public policy of the government’s admitted inefficiencies in the use and management of its spectrum. Over the next few weeks, I will be releasing a blog or two explaining the paper, which is admittedly a dense document. I also presented a brief review of the paper at the Phoenix Center’s Annual U.S. Telecoms Symposium last week, where I compared the overarching theme of the 2012 report prepared by the President’s Council of Advisors on Science and Technology on spectrum reform (hereinafter the PCAST Report) to another famous—though much older work—on economic reform. A number of colleagues asked for a blog on that comparison, so here it is.
For those of you that have not read the PCAST Report, it can be summarized as follows. The PCAST Report addresses the important issue of the government’s lack of incentive to use and manage spectrum efficiently, and the question of how to migrate government spectrum to the commercial sector to alleviate spectrum exhaust. The PCAST Report reached some startling conclusions—mainly, the PCAST Report proposes to end the practice of clearing government spectrum for auction to the private sector in the form of exclusive licenses, opting instead for the creation of a government-managed spectrum commons—starting with a 1,000 MHz-wide spectrum superhighway—that could be shared by all types of users, perhaps with some type of pay-for-prioritization scheme for congestion control. The PCAST Report mentions all sorts of new mechanisms necessary to implement the plan, but many if not most of the details were left unspecified, in part because the technologies for such a plan are not yet ripe.
What struck my attention in the executive summary of the PCAST Report was the enticing claim that the implementation of the Report’s proposals, made possible by new technologies, would transform spectrum scarcity to spectrum abundance. Scarcity-to-abundance is a nice theme; and a familiar one, as I will show below.
The essence of the PCAST Report’s take on the spectrum-shortage problem and solution can be summarized, using the Report’s own dicta, as follows:
… today’s apparent shortage of spectrum [is the result of] assigning exclusive rights to use a specific frequency in a specific location … into ever more finely divided exclusive frequency assignments. … [By using the t]echnology innovations of recent years … we can transform the availability of a precious national resource—spectrum—from scarcity to abundance. (PCAST Report at vi.)
So, the PCAST Report claims, spectrum exhaust is the consequence of “finely divided” exclusive licenses for spectrum. With new technology, however, the PCAST Report claims that we no longer need to assign exclusive licenses but can have everyone share the spectrum resource and thus eliminate the scarcity and transform it into abundance. Given my academic background in the History of Economic Thought, I was pretty sure that I have heard this style of argument before, and I was pretty certain I knew where. A short search confirmed my intuition. Here’s a quote from this prior work:
The same will be true of agriculture, which also suffers from the pressure of private property and is held back by the division of privately owned land into small parcels. Here, existing improvements and scientific procedures will be put into practice, with a resulting leap forward which will assure to society all the products it needs. In this way, such an abundance of goods will be able to satisfy the needs of all its members.
While addressing agriculture rather than spectrum, I think you will agree that the similarity between this quote and the statement from the PCAST Report is striking. In both statements, a problem arises by assigning property rights too “finely” into “small parcels.” In both, scarcity is replaced by abundance when abandoning private property in favor of applying new technology to a government-managed, communally-shared resource.
Perhaps it will be of little surprise, but the latter is quote is from the Principles of Communism, written by Frederick Engels in 1847. Engels (1820-1895) was a father of Marxist theory, a role he shared with Karl Marx (who Engels financially supported in his research). The Principles of Communism served as a template for the co-authored (with Marx) Communist Manifesto in 1848.
For expositional purposes, the quotes above are only a selective excerpt from the two sources. I would encourage you, however, to read pages vi-vii of the PCAST Report and Item 20 of the Principles of Communism for a more global comparison of the two documents. I believe you will see a general agreement in sentiment across the two, perhaps even more so than that exposed by in the two statements above. In many respects, the PCAST Report may be viewed as an application of the principles described in Engels seminal work. After reading Engels, I would encourage you to re-read the PCAST Report and see if you agree with my assessment.
So what does this mean? Different things to different people, I suspect. So I’ll leave it for you to decide the relevance of this bit of historical research. That said, I would note that this week the House Energy and Commerce Committee marked-up H.R. 3674, the Federal Spectrum Incentive Act, authored by Reps. Brett Guthrie (R-KY) and Doris Matsui (D-CA). Under this bi-partisan legislation, government spectrum users which relinquish spectrum for auction to the commercial sector would be allowed to receive a portion of the net auction revenues. As we note in our paper, this type of mechanism could prove a fruitful path to creating incentives at government agencies to use spectrum more efficiently. More importantly, it is a relief to see members from both sides of the aisle recognize that the PCAST Report’s proposal to end the clear-then-auction model is untenable and that if the country wants to truly improve the efficiency with which spectrum is used and managed, then the scarce resource needs to move into the hands of the properly-incented private sector.