04 March 2010


Marginal Revolution | Alex Tabarrok | The High Cost of Free TV

Despite the fact that 91 percent of American households get their television via cable or satellite huge chunks of radio-spectrum are locked up in the dead technology of over-the-air television. In his Economic View column today Richard Thaler features the work of our GMU colleague Tom Hazlett who argues that auctioning off the spectrum to the high value users would generate at least $100 billion for the government and generate a trillion dollars of value to consumers. Thaler writes:
I KNOW that this proposal sounds too good to be true, but I think the opportunity is real. And unlike some gimmicks from state and local governments, like selling off proceeds from the state lottery to a private company, this doesn’t solve current problems simply by borrowing from future generations. Instead, by allowing scarce resources to be devoted to more productive uses, we can create real value for the economy.
It can sound too good to be true, but it's entirely accurate. We have enough spectrum reserved to broadcast DOZENS of TV channels in each market, despite the fact that only a few cities have more than a handful of broadcasters.

I have a minor quibble* with Thaler's assertion in a later paragraph that "the radio spectrum is looking as crowded as Times Square."  The fact is that certain neighborhoods of the spectrum are crowded, because the FCC isn't very good at allocating resources efficiently.  Other neighborhoods are vacant.  It's a little bit like real estate in Nevada, which happens to be something else that has gotten crowded in certain areas because big pieces are off limits due to federal decree.

(* Other quibbles:  I'd also say that invoking the promise of remote, telerobotic surgery is a red herring.  I've heard of no plans for robodocs that are waiting on very wide area, wireless IP hookups.  That's an app you're going to want to be wired end-to-end anyway.

Also, why would you possibly use "American Idol" as a stand-in for what programming is available through paid cable connection when Idol is made available on free broadcast?  As wretched as I may find it, don't use American Idol as a universal place-holder for "television program many people like but some people don't.")

Most of Tabarrok's commenters don't get it. The idea isn't that we need to sell off all the spectrum reserved for TV and make everybody pay for television, it's that we have tons and tons and tons of spectrum reserved by fiat based on antiquated FCC expectations, and all that valuable space is lying fallow. (You need to read all the way to the end of Thaler's column to figure that out though.)  Seriously, they carved all that out back in the post-WWII era and they have been glacially slow to realloc it.  We could auction off huge chunks of TV-earmarked spectrum without impacting current (or future) TV viewers at all.

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