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Selling spectrum to cell phone providers such as Verizon simply results as a "hidden" tax as that cost is passed along to the pubic who uses cell phones (just a

Selling spectrum to cell phone providers such as Verizon simply results as a "hidden" tax as that cost is passed along to the pubic who uses cell phones (just about everyone). This implicit tax makes for an inefficient market as it makes cell phone use more expensive than it should be and thus limits the use for productive purposes while making it much more expensive for those with low incomes to be able to use this now essential technology.

chillydawg 10y ago
No, it means that the company most willing to exploit the spectrum will win and buy it. Ultimately, that's a win for the market as resources will be optimally allocated (assuming profit is what you want to optimise for).
pdabbadabba 10y ago
Do you have a good alternative to propose? The beauty-contest model didn't seem to work out too well, because regulators have a relatively poor ability to determine in advance who will best use the spectrum, and the process disproportionately rewarded those who were well represented at the FCC. The lottery system eliminates the latter problem, but greatly exacerbates the former. In either case, one could rely on secondary market transactions to reallocate spectrum to more optimal uses, but this would impose a 'hidden tax' at least as high as simply auctioning the spectrum in the first place.
- davidf18 10y ago
  I propose using the model which had been in place for allocating spectrum to television and radio (over the air) broadcasting. I'm not certain why this was down voted. "no taxation without representation." Implicit taxes should be made explicit. There are many resources such as mining leases for minerals, metals, oil & gas, coal, etc. that are leased out to firms at below market values. There are no auctions for the mining of public lands. Why make the distinction with spectrum, a new one at that, since as I have pointed out, TV stations and radio stations were given spectrum for free with caveats to report the news. Meanwhile this tax makes use of the spectrum far more expensive that it otherwise would be creating a politically induced scarcity and artificially raising prices -- a market inefficiency -- that makes it harder for the poor and elderly who might are generally on a fixed income to use data on smartphones and to use smartphones altogether.
  - bluedevil2k 10y ago
    Your proposal leads to great inefficiencies in the market though. What exactly are those TV stations using that VHF spectrum for right now? Nothing. They switched to digital broadcasts years ago. And it doesn't make using the spectrum (cell phone service) far more expensive than it would otherwise would be. It makes it the correct market rate by making the telecoms figure out how to properly spend the right price on spectrum and infrastructure to be profitable given the market price of cell phone service. You need no better example of that than the current cell phone wars in the US - Sprint and T-Mobile provide cut-rate prices to get customers, prices that AT&T and Verizon need to match.
    - davidf18 10y ago
      I am using market inefficiency in the microeconomics term. The auctioning of the scarce resource be it land or spectrum results in a politically induced scarcity (the power of scarcity) resulting in higher prices than in a competitive market. This politically induced scarcity, or "economic rent" means people are paying more money for the resource than they otherwise would. Money that would go towards other goods and services are spent on cell data instead. Others that at the lower rate without the auction who would marginally be able to afford the use of the cell phones and data would are no longer able to do so. This increases inequality.
      - pdabbadabba 10y ago
        > The auctioning of the scarce resource be it land or spectrum results in a politically induced scarcity (the power of scarcity)... Spectrum is naturally scarce. Many uses are mutually exclusive due to the potential for harmful interference. And today there is far more demand for commercially useful spectrum bands than there is supply. (That, after all, is a primary reason that this spectrum fetches such astronomical prices at auction.) Therefore, it is reasonable for the government to erect a legal regime for allocating this resource efficiently. > ...resulting in higher prices than in a competitive market. How so? The whole point of an auction is to approximate the 'free-market' value of a resource from the outset, thus minimizing the relatively inefficient secondary market transactions that would otherwise be needed in order for the asset to find its true price. An auction, after all, is a competitive market.
opo 10y ago
Firms will charge the most they can whether or not they paid money for the spectrum they use. It is the amount of competition (for that product and its substations) that will determine the ending price that can be charged. So no matter what the spectrum price was, if there was one company that bought all wireless spectrum, prices would be higher than if there were 5 companies that had rights to the spectrum.

chillydawg 10y ago

No, it means that the company most willing to exploit the spectrum will win and buy it. Ultimately, that's a win for the market as resources will be optimally allocated (assuming profit is what you want to optimise for).

pdabbadabba 10y ago

Do you have a good alternative to propose? The beauty-contest model didn't seem to work out too well, because regulators have a relatively poor ability to determine in advance who will best use the spectrum, and the process disproportionately rewarded those who were well represented at the FCC. The lottery system eliminates the latter problem, but greatly exacerbates the former. In either case, one could rely on secondary market transactions to reallocate spectrum to more optimal uses, but this would impose a 'hidden tax' at least as high as simply auctioning the spectrum in the first place.

davidf18 10y ago
I propose using the model which had been in place for allocating spectrum to television and radio (over the air) broadcasting. I'm not certain why this was down voted. "no taxation without representation." Implicit taxes should be made explicit. There are many resources such as mining leases for minerals, metals, oil & gas, coal, etc. that are leased out to firms at below market values. There are no auctions for the mining of public lands. Why make the distinction with spectrum, a new one at that, since as I have pointed out, TV stations and radio stations were given spectrum for free with caveats to report the news. Meanwhile this tax makes use of the spectrum far more expensive that it otherwise would be creating a politically induced scarcity and artificially raising prices -- a market inefficiency -- that makes it harder for the poor and elderly who might are generally on a fixed income to use data on smartphones and to use smartphones altogether.
- bluedevil2k 10y ago
  Your proposal leads to great inefficiencies in the market though. What exactly are those TV stations using that VHF spectrum for right now? Nothing. They switched to digital broadcasts years ago. And it doesn't make using the spectrum (cell phone service) far more expensive than it would otherwise would be. It makes it the correct market rate by making the telecoms figure out how to properly spend the right price on spectrum and infrastructure to be profitable given the market price of cell phone service. You need no better example of that than the current cell phone wars in the US - Sprint and T-Mobile provide cut-rate prices to get customers, prices that AT&T and Verizon need to match.
  - davidf18 10y ago
    I am using market inefficiency in the microeconomics term. The auctioning of the scarce resource be it land or spectrum results in a politically induced scarcity (the power of scarcity) resulting in higher prices than in a competitive market. This politically induced scarcity, or "economic rent" means people are paying more money for the resource than they otherwise would. Money that would go towards other goods and services are spent on cell data instead. Others that at the lower rate without the auction who would marginally be able to afford the use of the cell phones and data would are no longer able to do so. This increases inequality.
    - pdabbadabba 10y ago
      > The auctioning of the scarce resource be it land or spectrum results in a politically induced scarcity (the power of scarcity)... Spectrum is naturally scarce. Many uses are mutually exclusive due to the potential for harmful interference. And today there is far more demand for commercially useful spectrum bands than there is supply. (That, after all, is a primary reason that this spectrum fetches such astronomical prices at auction.) Therefore, it is reasonable for the government to erect a legal regime for allocating this resource efficiently. > ...resulting in higher prices than in a competitive market. How so? The whole point of an auction is to approximate the 'free-market' value of a resource from the outset, thus minimizing the relatively inefficient secondary market transactions that would otherwise be needed in order for the asset to find its true price. An auction, after all, is a competitive market.

opo 10y ago

Firms will charge the most they can whether or not they paid money for the spectrum they use. It is the amount of competition (for that product and its substations) that will determine the ending price that can be charged. So no matter what the spectrum price was, if there was one company that bought all wireless spectrum, prices would be higher than if there were 5 companies that had rights to the spectrum.