Archives For Spectrum Scarcity

At today’s Open Commission Meeting, the FCC is set to consider two apparently forthcoming Notices of Proposed Rulemaking that will shape the mobile broadband sector for years to come.  It’s not hyperbole to say that the FCC’s approach to the two issues at hand — the design of spectrum auctions and the definition of the FCC’s spectrum screen — can make or break wireless broadband in this country.  The FCC stands at a crossroads with respect to its role in this future, and it’s not clear that it will choose wisely.

Chairman Genachowski has recently jumped on the “psychology of abundance” bandwagon, suggesting that the firms that provide broadband service must (be forced by the FCC to) act as if spectrum and bandwidth were abundant (they aren’t), and not to engage in activities that are sensible responses to broadband scarcity.  According to Genachowski, “Anything that depresses broadband usage is something that we need to be really concerned about. . . . We should all be concerned with anything that is incompatible with the psychology of abundance.”  This is the idea — popularized by non-economists and ideologues like Susan Crawford — that we should require networks to act as if we have “abundant” capacity, and enact regulations and restraints that prevent network operators from responding to actual scarcity with business structures, rational pricing or usage rules that could in any way deviate from this imaginary Nirvana.

This is rhetorical bunk.  The culprit here, if there is one, isn’t the firms that plow billions into expanding scarce capacity to meet abundant demand and struggle to manage their networks to maximize capacity within these constraints (dubbed “investment heroes” by the more reasonable lefties at the Progressive Policy Institute).  Firms act like there is scarcity because there is — and the FCC is largely to blame.  What we should be concerned about is not the psychology of abundance, but rather the sources of actual scarcity.

The FCC faces a stark choice—starting with tomorrow’s meeting.  The Commission can choose to continue to be the agency that micromanages scarcity as an activist intervenor in the market — screening-out some market participants as “too big,” and scrutinizing every scarcity-induced merger, deal, spectrum transfer, usage cap, pricing decision and content restriction for how much it deviates from a fanciful ideal.  Or it can position itself as the creator of true abundance and simply open the spectrum spigot that it has negligently blocked for years, delivering more bandwidth into the hands of everyone who wants it.

If the FCC chooses the latter course — if it designs effective auctions that attract sellers, permitting participation by all willing buyers — everyone benefits.  Firms won’t act like there is scarcity if there is no scarcity.  Investment in networks and the technology that maximizes their capacity will continue as long as those investments are secure and firms are allowed to realize a return — not lambasted every time they try to do so.

If, instead, the Commission remains in thrall to self-proclaimed consumer advocates (in truth, regulatory activists) who believe against all evidence that they can and should design industry’s structure (“big is bad!”) and second-guess every business decision (“psychology of abundance!”), everyone loses (except the activists, I suppose).  Firms won’t stop acting like there’s scarcity until there is no scarcity.  And investment will take a backseat to unpopular network management decisions that represent the only sensible responses to uncertain, over-regulated market conditions.