Why are the airwaves — medium of so much potential commerce — so poorly managed in the U.S.? The rapidly growing demand for spectrum, or a range of frequencies, is creating tension between doing whats fair and doing whats economically efficient. Yet Congress, which is the arbiter of spectrum disputes, has never been very good at making difficult decisions.

The extent of the spectrum shortfall is a relatively new problem. In the past, a continuous stream of new technology expanded the range of usable spectrum into a wide open frontier of higher and higher frequencies. The frequencies at the bottom end of the spectrum were allocated to the most popular applications: radio and television. When higher frequencies became usable, they were allocated to new applications such as direct-broadcast satellite TV. Today, the spectrum allocation chart can be read as a chronologically organized living-history museum, displaying artifacts of applications from a bygone era.

With the spectrum frontier constantly expanding, Congress could avoid difficult political trade-offs between the interests of existing spectrum licensees (the “incumbents”) and those representing new services. Use all you want, the thinking went — well find more. This worked reasonably well as long as the frontier was open. Unfortunately, it has closed; and it has closed at a time when demand is skyrocketing.

This at first might not seem like a very big problem. By law, the spectrum belongs to the public, and most licenses are limited in duration and constrained to particular applications. Why not let the market sort things out by terminating those licenses and awarding new ones via auction? The answer is that spectrum incumbents are politically powerful (no member of Congress wants to take on his or her local broadcaster) and would strongly oppose such a proposal. The going rate for 1 MHz (a measure, like bits per second, of information-carrying capacity) of unencumbered low-frequency spectrum serving the entire U.S. public is about $1 billion. Local TV broadcasters alone have the rights to 402 MHz of such spectrum, which they wont give up without a fight. Even if Congress took bold steps, lawsuits filed by incumbents would drag out the re-allocation process for decades, defeating the purpose of reform.

Not wanting to take on incumbents, Congress faces a painful trade-off between efficiency (how much consumer welfare can be squeezed from the spectrum) and equity (equalizing benefits to different groups). For example, if demand for broadband Internet services greatly exceeds demand for HDTV, allowing broadcasters the flexibility to meet this demand would increase efficiency but harm fairness by making the companies the beneficiaries of unprecedented government largesse. No politician wants to be seen giving billions of dollars, even in the form of spectrum rights, to a bunch of fat cats.

Torn between efficiency and fairness, Congress has chosen to do nothing. As is often the case, breaking out of this gridlock will require an external shock.

Pressure is already mounting for legislators to address spectrum mismanagement. But only when the pressure reaches crisis levels will the configuration of political forces leading to the current catch-22 spectrum politics be overturned. A bipartisan congressional bill introduced last week, the so-called Internet Freedom and Broadband Deployment Act of 2001, purports to speed broadband Internet deployment. But it does not even mention spectrum. Such avoidance can last only so long.

Snider, J.H., Political Spectrum, Industry Standard, April 27, 2001.