Why The Proposed "Unlicensed Auction" Is Such A Phenomenally Bad Idea -- The Economics

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[Commentary] To call the discussion draft on spectrum reform circulated by House Commerce Committee Republicans “flawed” understates the matter almost to the point of absurdity.

But chief among its many problems is the provision to auction any future allocation of unlicensed spectrum, such as the TV white spaces, aka “Super WiFi.” One practical problem with this approach — the beneficiaries of new technologies like TV white spaces don't actually exist yet to bid against the existing firms like Verizon (which, no surprise loooooves the discussion draft). Also, I'm old-fashioned enough to think that auctioning off the right to make rules for spectrum (rather than auctioning off licenses once rules are set by a public process) is rather gauche. Yes, I know, everyone loves to talk about how the Federal Communications Commission and spectrum rules are up for sale, so I suppose we ought to make it official. But I am rather appalled that we have reached the point where we will explicitly auction off to “industry” the right to do their own rulemaking.

But setting aside my residual qualms about simply selling the rules, the proposal is fundamentally flawed from an economic standpoint. Even if you accept the basic premise that auctions are the best way to allocate licenses among competing users, it does not follow logically that auctions are the best way to determine whether or not to designate spectrum for unlicensed access in the first place. To the contrary, this is rather like deciding that since radiation therapy is sometimes the best way to treat cancer, it must also be the best way to diagnose cancer.


Why The Proposed "Unlicensed Auction" Is Such A Phenomenally Bad Idea -- The Economics