NYT: Share the Air - A Capital Idea

Our friends at the Prague Stock Exchange would agree that common ownership of property has been proven to limit innovation. So should our airwaves be publicly owned or privately controlled? Bet I surprise you with my view!

In less than two years, on February 17, 2009, that 27-inch Sony Trinitron with the rabbit ears antenna on top that your parents bought you for graduation will go dark. Well, sort of. That’s when a government mandated transition to digital television signals will be complete. That old analog broadcast signal blasting from the top of the Empire State Building and elsewhere is going the way of the typewriter. Sure, grandma is going to have to pony up for cable or a special digital adapter to watch “Fear Factor,” but wow, progress from a government bureaucracy —these are heady times.

Considered “beachfront property,” a twisted metaphor if there ever was one, some of the airwaves in the 700 MHz band used by UHF channels that once blasted “Gumby” reruns 24-7 are being given to public safety organizations and first responders. The rest are to be auctioned off by Uncle Sam for billions of dollars to existing or wannabe monopolists, including Reed Hundt, a former head of the Federal Communications Commission. Too bad. Electromagnetic spectrum coupled with innovative technology is one of the few examples where public use vs. private ownership has already been proven out. It should be made open to everyone.

My unsolicited advice: don’t run an auction, don’t give up control, don’t license it to anyone. Make it unlicensed and let entrepreneurs create new devices, services and applications.

Let’s take a step back. Today’s F.C.C. started out in 1927 as the Federal Radio Commission to allocate scarce electromagnetic spectrum to radio operators. Anyone with an antenna and a few vacuum tubes could broadcast and the thought was that the government should take control of the airwaves and avoid the chaos of individual actions, all, of course, in the name of the public interest. And this was the Roaring Twenties – radio stocks were hot, hot, hot!

At first it was just at kilohertz frequencies (thousands of cycles per second) because that’s all the technology of the day could handle. We all know AM radio numerology between 530 KHz and 1710 KHz. As technology improved we got megahertz (millions of cycles per second) — TV channels 2 to 13, at 54 MHz to 216 MHz. There was a channel 1, but there was too much interference from other stuff so it was dropped. FM radio is stuck in the gap between channels 6 and 7 (and in the 1960s and 70s). At about 40 MHz are garage door openers and alarms and at 915 MHz we have cordless phones and home security. Most cellphones use the 900 or 1800 MHz bands. And so on.

Even though our devices get smarter, the F.C.C. is stuck with the same regulatory mandate today — allocating supposed scarce spectrum for radio, TV stations, satellite, cellphones — even as technology moves faster than regulators can write laws. A license to a swatch of this spectrum is all a media mogul needs to create an empire. Inconveniently, regular folks also wanted to use the airwaves, like those ham radio operators who sit in dark rooms and speak in Morse code. So tiny pieces of unlicensed spectrum were set aside, affectionately known as “junk bands,” so they wouldn’t interfere with the big boys’ empires.

But thankfully, another twist, known as Part 15, was added. I love Part 15, it’s a brilliant backdoor that technologists drive a Mack truck through. Now a 155-page document, Part 15 basically says you can use any of these junk bands for anything you’d like, as long as you don’t interfere with anyone else using them, an inverse “Tragedy of the Commons.” And it works. Silicon Valley techies jumped into action and created Wi-Fi, which uses exotic technologies like spread spectrum and frequency hopping so you can surf the Web yet not interfere with baby monitors. Crazy. As you go to higher and higher frequencies, the amount of bandwidth is seemingly limitless — there are also junk bands at 2.4 and 5 gigahertz. Wi-Fi devices are pushing a billion units sold. My guess is that a trillion dollars and growing of productive (and taxable) commerce has been enabled by these set-asides.

But the telecomopolists can’t have some clown sitting in a Starbucks writing an opinion piece bypass their for-pay infrastructure, so they always insist on ownership of spectrum in separate licensed bands. For their use only. Ownership. Until the 1990s, most of the licenses were given away. But the F.C.C. and their European counterparts, thinking there might be a free market model of bandwidth management of the future, started auctioning off spectrum. Third generation, or 3G, licenses raised $150 billion or more for governments, that’s real money, and the auctions were considered a success.

But 3G ain’t free — the winners, AT&T, Verizon, Orange in the U.K., and the like just passed along the costs as higher prices to customers. It was just a game of having the deepest pockets to outbid mere mortals. Customers would eventually pay. It was hidden tax on us peons – damaging economic growth instead of promoting it. And not coincidentally, 3G uses spread spectrum technology so callers can share the airwaves without interfering. So why exactly does someone have to “own” this spectrum?

That’s why auctioning off this 700-MHz block is so last century. The lower the frequency, the further signals can travel without degrading, better to penetrate homes and offices. This is a desirable chunk of spectrum. But why not just make it an unlicensed band? Entrepreneurs will come up with more interesting services than cellphone operators who think text messaging is somehow worth 10 cents a pop.

F.C.C. Chairman Kevin Martin has asked for free market proposals for use of the spectrum. Recognizing that police and fire departments with 500,000 radios operable in this band are going to have an important say, one proposal from Hundt and his company, Frontline Wireless, offers a mixed use of the spectrum, with public safety getting priority during emergencies. This is the same guy who triggered the largest misallocation of capital in history with his Telecommunications Reform Act of 1996. Hundt has backers in uber-C.E.O. Jim Barksdale (Netscape, FedEx) and uber-venture capitalist John Doerr. An ex-bureaucrat may be clueless, but these Silicon Valley vets should know better. Owning this spectrum would be great for them and a Frontline I.P.O., but not for the economy.

And use by first responders? Easy. Engineer in an emergency switch, controlled by, heck, the same emergency broadcasting system screeching in our radios. During an actual emergency, it could throttle back data speeds for civilians. Downloads of “Fear Factor” can wait while the flood or fire rages.

Can this be true? An avowed free-market capitalist advocating a “let’s all own it together” approach to communications? That’s right. Despite their façade as public companies, telecom monopolists (that’s you, AT&T) are government blessed anti-competitive entities whose idea of innovation is call waiting. We, the people, can do so much better. In fact, Wi-Fi has already begun to unleash the creative chaos of entrepreneurs. We shouldn’t allow behemoths to bid on virtual shackles of our airwaves.

http://kessler.blogs.nytimes.com/2007/04/18/share-the-air-a-capital-idea

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