The FCC's Incentive Auction : Getting Spectrum Policy Right

As the Federal Communications Commission (FCC) considers how to allocate the broadcasters' spectrum in the upcoming "incentive auction," it should be guided by economic principles designed to maximize social benefits. To date, the spectrum policy debate largely has been driven by considerations of the private benefits of carriers such as Sprint, T-Mobile/MetroPCS, U.S. Cellular, and other small carriers (collectively, the "smaller carriers."). In April, the Department of Justice (DOJ) weighed into this debate by advocating "rules that ensure the smaller nationwide networks, which currently lack substantial low-frequency spectrum, have an opportunity to acquire such spectrum. Although it is natural instinct to root for the little guy, ensuring the livelihood of smaller carriers is not an appropriate policy objective, as that would counsel a range of subsidies and tax credits for handpicked competitors. Indeed maximizing the number of wireless competitors is not the appropriate objective either; using spectrum allocation as a tool for reducing wireless concentration would require divvying up the spectrum in such thin slices as to render the resulting allocation virtually useless. The problem with these narrow objectives is that, if pursued to their logical extreme, the resulting policies would sacrifice massive (and growing) economies of scales associated with providing the capacity needed to support mobile video, tele-medicine, distance learning, and a host of other band-width-intensive applications that consumers and small businesses are demanding from their mobile devices