Current News

Hazlett Comments on Coase and the Spectrum Auction

With the passing of economist Ronald Coase, who had been the oldest living Nobel laureate, Professor Thomas Hazlett offers a reminder of Coase's influence in the area of telecommunications, as well as economics.

At a time in the mid-20th century when companies licensed radio waves for specific uses, more or less permanently, for small fees, Coase argued that the FCC should treat spectrum like property, auctioning it to the highest bidder and allowing the winner to determine its use or disposition. His ideas were presented in a paper, and he testified regarding his proposal before the Federal Communications Commission (FCC).

Hazlett remarks on the FCC's less-than-enthusiastic response, saying, "Coase's suggestion...was initially savaged by all the experts in the industry and indeed he went to the Federal Communications Commission to testify and the first question was, 'Tell us, Professor Coase, is this all a big joke?"

But in the 1990s, the spectrum auction became an important instrument for distribution of radio waves and a source of revenue for the government.

"The United States has actually generated over 50 billion dollars in revenue this way since 1994," says Hazlett. 

Ronald Coase, the 'father' of the spectrum auction, dies at 102, The Verge, September 3, 2013. By Dieter Bohn.

Read the article