Cutting Holes in the Bottom
The age-old analogy describing a good salesman is “He can sell ice to Eskimos.” Let us now contemplate the opposite. What if someone has repeatedly screwed up so terribly – they could damage the sale of the hottest of commodities to a full panoply of desperate buyers? How could anyone hamstring a water auction – in the desert?
We face that possibility in March. And that incompetent, over-meddling salesman – is government. The auction in question is the latest wireless spectrum auction – and the auctioneer the Federal Communications Commission (FCC).
Spectrum is the airwaves we use for all things wireless. From your intercontinental cell phone – all the way down to your car key fob. The spectrum supply is finite – and not all spectrum is equally useful. Think of it as a Monopoly board. Some spectrum is Boardwalk and Park Place – some is Baltic and Mediterranean Avenues. And varying degrees in between.
Let us begin with the fact that government owns the lion’s share of spectrum – roughly 60%. Much of it is of high value – and very high value. And shocker – government isn’t using it efficiently.
To paraphrase former Republican FCC Commissioner Rob McDowell: The government has long stretches of beach front property – and it’s built nothing on much of it, and tiny buildings on more of it. When it should be consolidating – and building high-rise condominiums on what’s left. To make better use – and to make more available to the private sector.
The government doesn’t even have a map of what spectrum it possesses – which would make managing public and private spectrum policy a whole lot easier. The FCC has for years been charged with drafting said map – but hasn’t done so. Congress has also tried to get the government to consolidate, and sell some of its spectrum to the private sector – and been rebuffed by the bureaucrats.
Some of those bureaucrats – are Defense Department folks citing national security. Which is understandable – but doesn’t explain away all of the government’s 60% possession. There is undoubtedly much of the government’s wireless territory that can be safely cleared and sold. (They likely are hesitant to map it – because it would demonstrate just how poorly they are using it.)
Back to the looming auction. Which is not of any government spectrum – but of private spectrum, largely utilized by broadcasters. Pre-cable, over-the-air spectrum broadcast were the only television and radio games going. As a result, companies like NBC, ABC and CBS became behemoths. And the government gave them use of the spectrum – for free.
Then came the cellular phone revolution – and now available spectrum is getting terribly scarce. The cell phone companies are most of the aforementioned desert auction attendees – desperately ready to bid on water.
The government – rather than making some of its majority share available – has asked broadcasters to make available theirs. Not the optimal response – but ok. And March’s is not the first such auction – there have already been other private-to-private sales.
Except they aren’t private-to-private sales. The government (of course) had to way-over-involve itself. The FCC mandates it buy spectrum from broadcasters – and then auction it to the highest bidders.
But wait – the highest bidders don’t always win. Because the government rigs some of the auction: “Federal regulators…set aside a portion of choice spectrum for smaller wireless carriers at an auction of TV airwaves scheduled for next year.”
But as we know, the road to Hell is paved with regulations. Shocker – government meddling doesn’t work out the way government intended. In the last auction, Huge Company Dish Network (total assets: $22.1 billion) set up small front companies – to rig the set-aside. Which netted them $3 billion in savings on their purchases – while totally messing up the bidding for much of the auction.
A rarity then occurred – government acknowledged it messed up. And made Dish pay the full freight. Which was something – but didn’t come close to rectifying the entirety of the damage done to the auction process.
But did government learn from its admitted mistake? Of course not. They are having the exact same type of set-asides in March’s auction. Which will almost certainly dampen this sale – just as it dampened the last.
Then you have to factor in the oppressive, all-encompassing government ridiculousness that is Network Neutrality – which makes any prospective Internet investment exponentially more risky. And there are (of course) even more anti-free-market impositions on the sector. Because it’s government – and that’s what government does.
All of which starts making the government’s water – look a whole lot less appealing to the desert bidders.
The private sector badly needs spectrum. The government should do more to make more of theirs available. And do much less micromanaging of the current private efforts to address the shortage.
The less government involvement in spectrum – in any and every way, shape, matter and/or form – the better things will be for all of us.
This first appeared in Red State.