So you thought Congress may have learned its lesson about creating huge entities that will need to be bailed out at taxpayer expense? If you did, you were wrong.
From the same folks who brought you a global financial meltdown triggered by the institutions they created in an industry under heavy regulatory control, Congress is considering (as is the Federal Communications Commission) a proposal to hold a restricted auction on spectrum to establish one national wireless provider—a government-fashioned, government-favored firm in the tradition of Fannie Mae and Freddie Mac.
In IPI’s report entitled “Should the U.S. Favor a Free Nationwide Wireless Network Provider?” IPI adjunct fellow and communications policy specialist Solveig Singleton says, “This kind of company would not be allowed to fail and therefore sets up a future bailout at taxpayer expense.”
Granting the spectrum exclusively to one big provider unfairly undermines investments in networks currently under construction, including entrepreneur-driven services and regional start-ups.
But even worse, inherent risks in this kind of business model make the plan unlikely to speed the spread of broadband effectively. What risks? Just take a look around the country at the innumerable failures of attempted “municipal wi-fi.” Philadelphia is just one such example where the failure seemed to stem from broad based indifference.
Ultimately, the spectrum would be put to better use if supported by consumer demand expressed through the market.
Policy makers should auction the spectrum for flexible use, which would yield better returns and eliminate the opportunity costs of keeping spectrum away from uses supported by markets and consumer demand.
The risk of failure is substantial, and there will be little flexibility to change business models if this new government-fashioned entity finds itself in trouble. Policy makers should keep the federal thumb off the broadband-competition scales and stay out of the business of designing broadband business models.
You would think our politicians would have learned this lesson from its disastrous foray into government-run mortgage financing, but then again few people have ever accused Congress of being a quick study.