Current News

Hazlett in Financial Times: Coase and the Radio Spectrum

In an op-ed appearing in the Financial Times, Professor Thomas Hazlett reviews the impact of Nobel Laureate Ronald Coase's thinking in helping to revolutionize the ways in which policy makers think about radio waves and other natural resources.

"Coase saw the potential for 'tragedy of the commons,' but also that the usage restrictions put in place by government might be greatly improved upon if firms were given permission to modify them," says Hazlett. "Competitive market forces, unleashed, would discover the most productive ways to supply wireless services."

Competitive bidding, Hazlett points out, has become a standard policy tool in over 30 countries, with the U.S. having raised more than twice that elsewhere.

But more than that, mobile carriers have invested heavily in wireless networks, increasing the value of airwaves, says Hazlett. "The incentives of private property and the constraints of competitive market forces push operators to organize complex transactions, ushering in generations of new technology and thousands of innovative applications."

Unfortunately, says Hazlett, many current communications policy experts have yet to see the light.

Ronald Coase and the Radio Spectrum, Financial Times, December 16, 2009. By Thomas Hazlett,

Excerpt:

"Compare the changes in the off-air TV broadcasting market over the past 50 years to the changes in mobile handset market over the past 50 months and you’ll begin to glimpse it.

"Alas, many of our current communications policy experts have yet to. Hence, the plea from Vint Cert, Google’s Internet Evangelist, to abandon Coase’s spectrum property vision. 'Technology is at a point,' he argues, 'where we should allow multiple parties to occupy the same spectral space.'

"But Cerf, on the cutting edge of science, has yet to catch up with the insight of 1959. The question is not whether 'multiple parties occupy the same spectral space,' but how we organize the sharing arrangements. Government does set aside unlicensed bands, but they have proven ineffective for the most valued wireless applications. In local uses where they attach to phone or cable networks built using privately owned 'spectrum in a tube,' wi-fi radios and cordless phones work. But the complexity of these plug-ins pales in comparison to the wide-area networks customers deem most productive.

"To provide those services, mobile carriers stack millions of 'multiple parties' into the same spaces – 4.6bn subscribers at last global count. The most intensively shared wireless bandwidth is found exactly here, in spaces allocated to what regulators call 'exclusive use' spectrum. That, too, is a most interesting error. But one, unlike Coase’s, we should aspire to correct."

Read the article