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Unclog the Wireless Pipelines

August 17, 2001 |
Even if the military is amenable to a buyout, Congress should grab this opportunity to lay the foundation for a better long-term solution that would involve a very different kind of "deal."
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A century ago, great fortunes derived from private control over oil, coal and steel -- the essential inputs to mass industrial production. Today the American people collectively own the most valuable resource in the emerging information economy: the airwaves, also known as the electromagnetic spectrum.

Cellphone use is exploding, and wireless Internet access already is available in certain central city and campus locations. Later in this decade, devices providing anywhere, anytime access to e-mail, entertainment, video-conferencing and databases worldwide could be commonplace. The potential value of these "third generation" (3G) wireless applications is enormous. But there's a catch: The wireless pipelines are plugged by politics.

While Japan and much of Europe have doubled the airway space allocated to mobile wireless, the United States suffers from a policy-induced spectrum shortage: The prime frequencies that allow signals to penetrate buildings and bad weather have all been allocated to politically powerful clients.

Around our largest cities, the airwaves are already crowded with voice traffic. Unless current users give up spectrum, access to a host of high-speed mobile data applications may be either delayed or severely rationed by premium pricing. This spectrum squeeze became more pressing in June, when a federal appeals court nullified the record $17 billion auction of airwaves to wireless phone companies held last January.

In Washington, policymakers are desperately seeking a "deal" to free spectrum for 3G uses. Broadcasters, satellite services, the Pentagon, universities and even the Catholic Television Network are battling either to hold on to all of the licenses they received free or to capture for themselves the tens of billions of dollars in potential auction revenue that rightfully belongs to the public.

Republican Reps. Charles Pickering of Mississippi and Fred Upton of Michigan have proposed a politically appealing way to break this stalemate. Their legislation would pay the military, which has long used a band designated internationally for third-generation uses, to migrate to a less valuable set of frequencies. But the revenue from this auction -- unlike those from past ones -- would be earmarked for a trust fund designated strictly for military modernization. Recent auctions here and in Europe indicate that this military spectrum could generate between $50 billion and $90 billion. Since the Pentagon estimates it would cost less than $10 billion to relocate, the GOP leadership views the proposal as a win-win proposition: The wireless industry gets the spectrum it needs, the broadcasters get left alone, and the Pentagon finds a way to finance its weapons wish list despite the spending squeeze occasioned by the Bush tax cuts.

But even if the military is amenable to a buyout, Congress should grab this opportunity to lay the foundation for a better long-term solution that would involve a very different kind of "deal" in at least two respects.

First, Congress should replace its policy of rigidly "zoning" the spectrum with a more flexible, market-based approach. Broadcasters and other incumbents profit from an outdated "industrial policy" that doled out free spectrum but also rigidly defined exactly how much spectrum is allocated to each industry and for precisely what services. As technologies evolved, incumbent industries found themselves squatting on far more spectrum than they needed -- and far more than they would ever pay to use. Instead, all users should pay a market rate to rent space on the public airwaves, and receive in return flexibility to sublease their spectrum or offer whatever services yield the most profit.

Second, a substantial share of any revenue from licensing the airwaves should be earmarked to fulfill the "public interest obligations" that justified giving broadcasters free monopoly access to the airwaves in the first place. These unmet needs include high-quality children's and educational programming, expanded civic discourse and free media time for political candidates. A "digital opportunity fund" could also invest in the educational content and innovative software needed to make meaningful the federal E-Rate program that has been wiring the nation's public schools and libraries to the Internet.

One danger of the Pickering-Upton proposal is that it rests on the false premise that incumbent licensees "own" the airwaves and are therefore entitled to any revenue gained by "selling" them. Independent broadcasters assert a similar claim and are proposing private "band-clearing" auctions aimed at cashing in on spectrum they received for free.

In fact, since shortly after radio began in the early 1920s, Congress and the courts have repeatedly affirmed that there is no ownership interest in the airwaves, only temporary rentals. The airwaves are a common asset owned equally by all Americans.

Because spectrum incumbents are so politically potent, Congress will likely limit reform to the urgent task of opening new frequencies for wireless Internet services. But because each American owns an equal share of the airwaves, it's not enough to say that the economy overall will benefit from third-generation services. The nation also should take this opportunity to reinvest a portion of any auction windfall to update the noncommercial portion of our educational and civic infrastructure for the digital era.

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