Dismantle the FCC

In 1927, President Calvin Coolidge signed the Radio Act, following recommendations from Commerce Secretary Herbert Hoover, marking a significant shift in the regulation of radio frequencies in the United States. The legislation aimed to allocate frequencies based on the “public interest, convenience, or necessity,” as articulated by a U.S. Supreme Court decision in the case of Red Lion Broadcasting Co. v. FCC in 1969. Before the Act, the broadcasting landscape experienced a chaotic “first come, first served” approach to frequency allocation, which led to significant interference and a cacophony of competing signals. Proponents of the Act, including its author, Senator Clarence Dill, argued that a centralized control was essential not only to manage communication effectively but also to avoid conflicts that could jeopardize free speech. However, this perspective arguably overlooked the existing “orderly development” that had occurred prior to federal intervention and served to establish a regulatory framework that favored select incumbents over market competition.

As the Federal Radio Commission took over the regulatory landscape, rather than promoting innovation and active competition, it inadvertently created barriers that hindered new technologies and business models. Significant advancements in communication technology, such as FM radio and cellular telephone networks, faced long delays or outright suppression due to the rigid spectrum allocation processes that prioritized established players. This strategic regulatory framework often acted as a cartelization apparatus where incumbents enjoyed higher profits while new entrants struggled to secure necessary licenses. Such regulatory environments stifled growth in the sector, leading to missed opportunities for innovative wireless technologies and services.

The criticism of this regulatory approach paved the way for gradual liberalization in spectrum management over subsequent decades. Prominent economists, notably Ronald Coase, highlighted the inefficiencies of the regulatory system and advocated for a return to property rights over spectrum use. Through the 1970s, 1980s, and 1990s, policymakers began to shift away from heavy regulation, allowing property rights to reemerge in the management of spectrum use. This transition facilitated “flexible use” rights, fostering a climate of competition and innovation that had previously been stifled. The resultant explosion of rivalry among service providers demonstrated that the assumption of chaos necessitating strict government oversight was misguided; instead, a market-based approach proved capable of efficiently managing conflicts through property rights.

Today, the landscape of mobile communication reflects the triumph of market principles over regulatory restrictions. Rival service providers now autonomously decide how spectrum is utilized, leading to a vibrant ecosystem of applications and services that flourish without the oversight of a command-and-control authority. While these services naturally compete and occasionally interfere with one another, users experience a seamless integration of functionality on their devices. This restoration of market dynamics illustrates the greater effectiveness of allowing the invisible hand of the market to dictate the use of an ostensibly chaotic resource like spectrum rather than relying on a centralized regulatory framework.

Despite some enduring structures within the Federal Communications Commission (FCC), such as rights registration systems and formal dispute-resolution processes, the operational inefficiencies and delays associated with regulatory oversight have been criticized for hampering progress rather than promoting it. The FCC’s lengthy rulemaking processes tend to attract lobbying from entrenched interests, where favors are exchanged in a highly profitable regulatory environment. Stripping away excessive federal discretion could streamline these clerical functions, enabling a more agile and responsive marketplace that can adapt to technological advancements swiftly.

Overall, it has taken an unacceptably long time for society to embrace the potential of spectrum markets initially envisioned by regulators in the 1920s. The outdated framework established nearly a century ago has proven inadequate in accommodating the rapidly changing landscape of wireless communication. Moving forward, it is imperative to recognize and act upon the necessity of allowing market forces to drive innovation, thereby unleashing the full potential of spectrum as a valuable resource. Rather than prolonging the inertia resulting from historical regulatory oversight, a shift toward trusting the market to regulate itself can foster creativity and growth, ensuring that wireless technology continues to evolve and thrive in the modern age.