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. Assuming generously that promoting wireless competition is the proper objective—as opposed to promoting broadband competition in general—the FCC should determine whether smaller carriers would be impaired in their ability to compete effectively against the likes of AT&T and Verizon in the absence of “low-frequency spectrum” (defined as frequencies generally below 1 GHz). Clearly, smaller carriers would benefit from obtaining low-frequency spectrum at discounted prices, but that private benefit is not a sufficient basis for regulatory intervention. It would be a mistake to permit the narrow, self-interests of smaller carriers to dictate spectrum policy that has nationwide implications in broader product markets. For these reasons, we conclude that the FCC should not prevent current owners of low-frequency spectrum from competing in the upcoming incentive auction.