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If the FCC had never existed

Posted: March 12th, 2012 | Author: | Filed under: android, Apple, AT&T, Companies, Google, Verizon | Tags: , , , , , , | No Comments »

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Much of the tech media is thinking about the problem of wireless spectrum in the wrong way.  It is helpful to think about why the commission was created, and the problems that have been created in the market by its existence.

The FCC/FRC was created in response to complaints by large national carriers that smaller regional broadcasters of dubious quality were broadcasting on all available frequencies with such power that the national broadcasters couldn’t get a clear signal through. 

The government at the time thought it would be a good idea to control the broadcast frequencies so that they would have spectrum available for use with military equipment  domestically. 

So a deal of sorts was struck where in return for being regulated, national broadcasters would receive a monopoly on broadcast licenses.  This would later cause the breakup of these same broadcasters.

The spectrum was allocated by frequency with buffer zones between blocks.  Power output limits were also part of the regulation package, without which, the allocated frequency blocks would have been useless.  This represented a modern and efficient set of controls based on the technology of the era.

Skip ahead a hundred years and see what has happened.  The technology has improved, the regulatory framework is obviated by the technology. However, since we have an intruder in the market preventing normal forces from solving the problem, the same companies who were given the monopoly control which innovations consumers are allowed to buy.  These same companies set, fix prices, and collude to gouge both content companies and consumers to the tune of ridiculous profits.

Let’s spin back to the past and examine what would likely have happened if the FRC and subsequently the FCC had never been created.

In the late thirties, the first experiments with digital technology were beginning to be performed. At the same time, content companies were beginning to have difficulty broadcasting because of band saturation on radio and later television frequencies.

The war had and was driving incredible advances in communications technology, including experiments with digital broadcast technology.

What Bell would have done was to seek profit from all of the major broadcasters of the era. They would have said, “hey, we have this cool way of using digital transmission to allow us to send tremendous amounts of data from different sources to different destinations through the same frequency using codes to distinguish one broadcaster from another. Why don’t you all pay us a small fee to register yourselves with us, and we’ll build a network of general broadcast / receivers throughout the country.  We’ll use more frequencies as necessary, but since we can pack you in, we will always have plenty.”

This didn’t happen for many reasons, and has its own problems, but what would happen next would have been the rapid rise of bundlers.  Companies whose job it was to use the spectrum they chose as efficiently as possible to maximize their own profit. It would have sped the pace of innovation and prevented the mess we have now.

Eventually the government would have stepped in and mandated that these bundlers reserve spectrum for military and government use. The bundlers would have complied.

Fast-forward this system to today.  We would have hundreds of free market companies competing for the most efficient use of spectrum, with AT&T, T-Mobile, and hundreds if not thousands of competing Telecom and internet providers.  The barrier to entry for these providers would be very low since they would just need to pay the bundler of their choice which best suited their needs.

These bundlers would have built powerful networks of broadcast / receivers everywhere, on roadsides, inside buildings, etc.  There would be no lack of spectrum, and no need for excessive, heavy-handed regulation, as each advance in technology would allow the bundlers to use ever less spectrum and sell both the technology and license their spectrum to even more bundlers.

This didn’t happen, so where do we go from here?  There are few places where it is so obvious that regulatory interference has caused irrational behavior in the market as in wireless.  The FCC should embrace digital technology and require broadcasters to form independent corporations to act as the bundlers that I described.  These bundlers would manage the infrastructure for the broadcasters with the broadcasters riding on them.  Once the system was in place, the licensing system would be replaced by power output limits, and the FCC would assume a greatly reduced role.

There are many flaws to my proposal, but we have to get the FCC out of the spectrum licensing business.  Technology is sufficiently advanced that we do not need this frequency based system. It is causing more harm than good.  We need to let the market work to provide better access to everyone.  It is critical that the barriers to entry for wireless carriers to be lowered if we want real competition and innovation in wireless going forward.