The Political Spectrum by Thomas Winslow Hazlett

Author:Thomas Winslow Hazlett
Language: eng
Format: epub
Publisher: Yale University Press
Published: 2017-04-11T04:00:00+00:00

Source: John McMillan, Selling Spectrum Rights, 8 JOURNAL OF ECONOMIC PERSPECTIVES 145 (Summer 1994), 146.

Economists took pride in their efforts. “I find strong evidence that the auction design was successful,” wrote Peter Cramton in a 1997 assessment. “The information allowed arbitrage across similar licenses, so prices on similar licenses were close . . . [and the auction] enabled firms to piece together complementary licenses into efficient aggregations.”77 The FCC boasted in 1995 that the new competitive bidding procedures were “permitting the market, rather than lobbyists and Government regulators, to determine who gets valuable wireless licenses.”78 Chairman Reed Hundt proclaimed the PCS license sale “the greatest auction ever held” and created a large display of a $7.7 billion check to show to newspapers, many of which ran front-page photos of the financial prop, which was then mounted like a fishing trophy on Hundt’s office wall. The FCC received a Reinventing Government award from Vice President Al Gore. Wrote Hundt: “I told the press that the FCC had raised more money than its total budget for its 61-year history. We were, I said, the most profitable American business in terms of return on equity.”79

The slog had been long and hard. From its inception, wrote FCC attorney John Berresford, “every important decision about cellular was made not by businessmen and customers, but by lawyers—judges and regulators.”80 Yet under the pressure of time and technology, the rules loosened. Comparative hearings suffered from the inner contradictions of crony capitalism and the cringe-inducing reactions from those who observed the strategic use of “methods of dubious propriety.” Lotteries, a useful disaster, were abandoned because they “engendered rampant speculation; undermined the integrity of the FCC’s licensing process and, more importantly, frequently resulted in unqualified persons winning an FCC license,” as the U.S. House report on the 1993 federal budget put it.81 Regulatory forbearance was the last option.

Spectrum allocation reform had not yet crossed the Rubicon, but a revolutionary wireless technology had finally arrived in the market, and FCC license auctions had helped. This gave economic ideas, once dismissed as laughable, a new gravitas, and demonstrated what improvements might come with liberalization.

The smart money had been on the Bunny all along.

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