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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 dow

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.
    - davidf18 10y ago
      > How so? I was trying to communicate that the companies don't pay for the cost of the spectrum, the customers do. Basically, politics have made the cost of cellular communications to customers higher than it should be in a competitive market. Economist (and wealthy businessman) David Ricardo brought up the use of politics to artificially create higher prices using the "Corn Laws" in Britain. This was the case of putting restrictions and tariffs on imported grain which resulted in increased prices for land because of the politically increased scarcity of the grain by limiting imports made domestically grown grain have a higher price which basically means that more (marginal) land was brought into production raising the overall value of all land. Raising the cost of spectrum to consumers creates a regressive tax and increases inequality. https://en.wikipedia.org/wiki/Corn_Laws https://en.wikipedia.org/wiki/Corn_Laws "The Corn Laws enhanced the profits and political power associated with land ownership. Their abolition saw a significant increase of free trade."
      - pdabbadabba 10y ago
        I understand your view is that spectrum auctions increase costs for telecom providers, and that these costs are passed along to consumers. What I am challenging is your assertion that these prices are somehow higher than they would be in a competitive market. I've articulated three primary objections to this position, none of which you seem to have addressed: 1. Spectrum auctions can only be said to 'increase' costs relative to some other, preferable regime. But, as I and others have argued here, there is no preferable regime, for the reasons that I set forth above. 2. Spectrum auctions are a form of artificially/politically imposed scarcity. There is nothing "political" about the scarcity of spectrum. It would be scarce even if there were no FCC (in fact, it would arguably be scarcer due to increased interference). So the government must come up with some way to allocate it efficiently. Auctions are the most efficient choice yet identified because they do the best job of transferring the resources to those who value them the most, without requiring a lot of intermediate, inefficient secondary market transactions. 3. An auction results in higher prices than would a competitive market. The whole point of a spectrum auction is that it is a "competitive market" so I don't understand what you could mean when you say that it results in higher prices than would a competitive market. Is it your point that auctions result in higher initial prices than the market would otherwise find through secondary market transactions if the Commission were to give spectrum away like candy? If so, this is highly counterintuitive. Why should we believe this? The point of the auction, after all, is that is reduces the transaction costs required to find the market price, improving market efficiency, thus lowering prices.
pdabbadabba 10y ago
> the model which had been in place for allocating spectrum to television and radio (over the air) broadcasting. These are the models (beauty contests and lotteries) that I referred to in my comment. These both have the problem of failing to allocate spectrum where is will do the most good, and beauty contests have the problem of greatly advantaging applicants with close ties to the FCC. Your leasing idea is a little different, but doesn't solve the problem. How are these leases assigned in the face of mutually exclusive applications (which will be the norm for commercial wireless spectrum)? The options on the table so far are beauty contests, lotteries, or auctions.

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.
  - davidf18 10y ago
    > How so? I was trying to communicate that the companies don't pay for the cost of the spectrum, the customers do. Basically, politics have made the cost of cellular communications to customers higher than it should be in a competitive market. Economist (and wealthy businessman) David Ricardo brought up the use of politics to artificially create higher prices using the "Corn Laws" in Britain. This was the case of putting restrictions and tariffs on imported grain which resulted in increased prices for land because of the politically increased scarcity of the grain by limiting imports made domestically grown grain have a higher price which basically means that more (marginal) land was brought into production raising the overall value of all land. Raising the cost of spectrum to consumers creates a regressive tax and increases inequality. https://en.wikipedia.org/wiki/Corn_Laws https://en.wikipedia.org/wiki/Corn_Laws "The Corn Laws enhanced the profits and political power associated with land ownership. Their abolition saw a significant increase of free trade."
    - pdabbadabba 10y ago
      I understand your view is that spectrum auctions increase costs for telecom providers, and that these costs are passed along to consumers. What I am challenging is your assertion that these prices are somehow higher than they would be in a competitive market. I've articulated three primary objections to this position, none of which you seem to have addressed: 1. Spectrum auctions can only be said to 'increase' costs relative to some other, preferable regime. But, as I and others have argued here, there is no preferable regime, for the reasons that I set forth above. 2. Spectrum auctions are a form of artificially/politically imposed scarcity. There is nothing "political" about the scarcity of spectrum. It would be scarce even if there were no FCC (in fact, it would arguably be scarcer due to increased interference). So the government must come up with some way to allocate it efficiently. Auctions are the most efficient choice yet identified because they do the best job of transferring the resources to those who value them the most, without requiring a lot of intermediate, inefficient secondary market transactions. 3. An auction results in higher prices than would a competitive market. The whole point of a spectrum auction is that it is a "competitive market" so I don't understand what you could mean when you say that it results in higher prices than would a competitive market. Is it your point that auctions result in higher initial prices than the market would otherwise find through secondary market transactions if the Commission were to give spectrum away like candy? If so, this is highly counterintuitive. Why should we believe this? The point of the auction, after all, is that is reduces the transaction costs required to find the market price, improving market efficiency, thus lowering prices.

pdabbadabba 10y ago

> the model which had been in place for allocating spectrum to television and radio (over the air) broadcasting. These are the models (beauty contests and lotteries) that I referred to in my comment. These both have the problem of failing to allocate spectrum where is will do the most good, and beauty contests have the problem of greatly advantaging applicants with close ties to the FCC. Your leasing idea is a little different, but doesn't solve the problem. How are these leases assigned in the face of mutually exclusive applications (which will be the norm for commercial wireless spectrum)? The options on the table so far are beauty contests, lotteries, or auctions.