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Perhaps better than using the word competitive, is to use the word efficient market. Efficient markets increase wealth creation which leads to a better economy

Perhaps better than using the word competitive, is to use the word efficient market. Efficient markets increase wealth creation which leads to a better economy for all of us. Today, cellular data is an essential, not a luxury as it may have been in the past. Just as the low cost of money is important for wealth creation to encourage capital investment, cellular data is another input where taxing it makes for a market inefficiency thus impinging on wealth creation. Cell firms that pay billions of dollars for spectrum space (and repeatedly for new spectrum as technology advances) pass those billions of dollars they paid on to customers, just as they would the cost of any other input (eg, higher electric prices, more explicit taxes, higher health care costs for employees). From the point of view of wealth creation one should strive for efficient markets, especially in such essentials as cell phone data. A better solution is to simply give the spectrum away to firms such as Verizon, AT&T, Sprint, and T-mobile and other existing firms in their markets just as spectrum was given away to CBS, NBC, etc. for radio and later TV spectrum. Part of the agreement would be to tax cell firms for overly expensive customer charges and possibly to give the poor say, some free data.

pdabbadabba 10y ago
I'm at a loss. Either I'm hopelessly confused (and I don't think I am), or you still have not even tried to address a single one of the points I have raised. That's too bad, because I think this could have been an interesting conversation. I'll try one more time, this time coming from a slightly different angle: you say that the government should just give spectrum away to existing firms, but... 1. Which ones? You seem to take for granted that there are only a small number of firms interested in spectrum and that it will be easy to decide who gets what. But, in reality, there would be countless firms that would very much like access to the same spectrum, especially in the biggest markets. Our experience with spectrum auctions amply proves this. How does the government choose between these competing firms? How does a new competitor enter the market if the government always gives spectrum to the big four carriers? 2. Assuming that the government will not reliably select the firm that would use the spectrum best (history makes pretty clear that this is the case), wouldn't this gifted spectrum immediately come up for sale on the secondary market to be sold to an even more productive user? If so, wouldn't the secondary market price approximate the would-be auction price (plus the significant transaction costs that these secondary-market transactions entail)? If so, the cost of spectrum to the ultimate user would be the same (and maybe a little higher) than if the spectrum had been auctioned in the first place, plus a large windfall to the original licensee/seller. 3. More fundamentally, given that many other firms would also like to have received the gifted spectrum--and would have paid good money for it (as spectrum auctions prove)--shouldn't we regard this gift as a massive subsidy to the original licensee and not merely the absence of a tax?

pdabbadabba 10y ago

I'm at a loss. Either I'm hopelessly confused (and I don't think I am), or you still have not even tried to address a single one of the points I have raised. That's too bad, because I think this could have been an interesting conversation. I'll try one more time, this time coming from a slightly different angle: you say that the government should just give spectrum away to existing firms, but... 1. Which ones? You seem to take for granted that there are only a small number of firms interested in spectrum and that it will be easy to decide who gets what. But, in reality, there would be countless firms that would very much like access to the same spectrum, especially in the biggest markets. Our experience with spectrum auctions amply proves this. How does the government choose between these competing firms? How does a new competitor enter the market if the government always gives spectrum to the big four carriers? 2. Assuming that the government will not reliably select the firm that would use the spectrum best (history makes pretty clear that this is the case), wouldn't this gifted spectrum immediately come up for sale on the secondary market to be sold to an even more productive user? If so, wouldn't the secondary market price approximate the would-be auction price (plus the significant transaction costs that these secondary-market transactions entail)? If so, the cost of spectrum to the ultimate user would be the same (and maybe a little higher) than if the spectrum had been auctioned in the first place, plus a large windfall to the original licensee/seller. 3. More fundamentally, given that many other firms would also like to have received the gifted spectrum--and would have paid good money for it (as spectrum auctions prove)--shouldn't we regard this gift as a massive subsidy to the original licensee and not merely the absence of a tax?