A New Book Proves That In Wireless The Government Is Never There To Help

Forbes

You may or may not be looking for a book full of historical nuggets on the inventors, innovators, regulators, and politicians involved in all facets of the wireless telecom industry over its one hundred plus year existence, but you should be. Thomas Hazlett’s The Political Spectrum: The Tumultuous Liberation of Wireless Technology, from Herbert Hoover to the Smartphone (Yale University Press, 2017) is a perfect blend of economic insight, historical anecdotes, and lessons that present and future regulators in any industry can use to benefit citizens and society rather than being guided by their own aims, biases, or fears. Anybody interested in telecom, politics, regulation, or economics should read this book; they will learn much.
Workers perform contract maintenance work on a cellular phone mast in Cape Town, South Africa. Photographer: Dean Hutton/Bloomberg

 

The book opens with a technology overview, tracing the history of radio and television broadcasting through key regulatory changepoints. We see a perfect example of Say’s Law, as the increased supply of spectrum capacity leads, over and over again, to the development of new hardware and software that grows demand for bandwidth to absorb all the new capacity that technology has provided. Along with this clear economics lesson we also are treated to an early glimpse of the book’s central thesis: government regulation has repeatedly delayed, blocked, and shifted the advancement of wireless communication.

Hazlett’s thesis is that government identifies a problem but misdiagnoses the market failure involved and how to address it. Regulations are then promulgated in a political bargaining process, creating barriers to entry for new entities that don’t exist yet and, thus, are excluded from the political bargaining. Eventually, evidence that the resulting government regulations are stifling consumer-benefiting innovation becomes overwhelming and the government relaxes its regulation. The suddenly-freed market then succeeds, delivering massive consumer benefits, for which the government claims credit, thanks to its new regulatory environment.

Hazlett also makes clear that Coasian solutions are available to these problems. Currently the vast majority of spectrum is wasted, underutilized thanks to government regulation that has assigned it to users who do not take full advantage of its potential. Ronald Coase won a Nobel Prize in economics for the basic theory he developed for this exact situation. He showed that the inability to buy and sell spectrum capacity led to economic inefficiencies and that better defining the property rights to spectrum would lead to social welfare-increasing outcomes. This led him to favor spectrum auctions as well as the right for the auction winners to resell, rent, or otherwise make deals that let them reallocate spectrum to its highest and best use.

The book contains numerous humorous anecdotes of government regulations that make no economic or technological sense, but rather reflect either political power of interested parties or the whims of the regulator of the moment. Even such regulatory burdens as the Fairness Doctrine and must-carry content rules are covered along with descriptions of how these once-thought innocuous rules designed to uphold public benefits actually stifle innovation and restrict profitable businesses from forming.

At the end of the book, Hazlett concludes with some recommendations for a reform agenda. His policy prescriptions begin with auction overlay rights, for both traditional licensees and government agencies. He also recommends liberalizing wireless licenses, taking a lesson from land use planning. Subject to a few limits, license holders would have presumed approval for new uses.

The scope of this book is impressive and the insights it provides are considerable. Anyone interested or working in telecommunications should read this book. Government regulators should be required to read it, whether they are involved in telecom or not. Anybody who wants to learn more about public choice economics and political economy would be well served by reading The Political Spectrum. Whatever your motivation, everybody who reads this book will be glad they did and much better informed on public policy as a result.

Jeffrey Dorfman is a professor of economics at The University of Georgia. His last popular press book is an e-book, Ending the Era of the Free Lunch. You can follow him on Twitter @DorfmanJeffrey

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Brian Lamb Interviews Thomas Hazlett about “The Political Spectrum”

    (Yale 2017) Q&A with Thomas Hazlett Professor Thomas Hazlett talked about his book, The Political Spectrum: The Tumultuous Liberation of Wireless...

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