Institutions, Spectrum, Institutions, Spectrum, and the Future of the and the Future of the InternetInternet

Ellen Goodman & Phil WeiserEllen Goodman & Phil WeiserTalk at Annenberg School of Talk at Annenberg School of CommunicationsCommunicationsDecember 6, 2006December 6, 2006

FCCFCC

Independent Agency – Creature of CongressIndependent Agency – Creature of Congress ““88thth Floor” – political Floor” – political Bureaus – risk of capture (public choice Bureaus – risk of capture (public choice

theory)theory) Players: Players:

– Industry: telecom.; software and hardware; Industry: telecom.; software and hardware; Hollywood; online Hollywood; online

– Public interestPublic interest– Federal governmentFederal government– States and localitiesStates and localities

Spectrum UseSpectrum Use

User petitions for spectrumUser petitions for spectrum FCC allocation proceedingsFCC allocation proceedings

– Value of existing use vs. new uses: Value of existing use vs. new uses: economic efficiency,economic efficiency, technical efficiency, technical efficiency, communications efficiencycommunications efficiency

– Communications values, e.g., diversity and Communications values, e.g., diversity and localismlocalism

FCC assignmentFCC assignment– AuctionsAuctions– First come, first servedFirst come, first served

Frequency AllocationsFrequency Allocations

Critique of Critique of Command and ControlCommand and Control

Exclusive Property TheoristsExclusive Property Theorists– Create property rights in spectrumCreate property rights in spectrum– Resolve disputes in spectrum “courts”Resolve disputes in spectrum “courts”

Commons TheoristsCommons Theorists– Open access to spectrum: mesh networksOpen access to spectrum: mesh networks– Resolve disputes Resolve disputes ex anteex ante through technical through technical

standardsstandards

Spectrum Conflicts: An Spectrum Conflicts: An Institutionalist Institutionalist PerspectivePerspective Role of courts, arbitratorsRole of courts, arbitrators

– Define and enforce property rights in Define and enforce property rights in neutral fashionneutral fashion

Role of FCCRole of FCC– Political as “dirty word” or necessity for Political as “dirty word” or necessity for

vital resourcevital resource Role of standards bodiesRole of standards bodies

– Lack of public accountabilityLack of public accountability– Commitment to technical integrityCommitment to technical integrity

The Coase TheoremThe Coase Theorem

Don’t Dictate Outcomes—define Don’t Dictate Outcomes—define property rights, allow bargaining (if property rights, allow bargaining (if transaction costs low), and welcome transaction costs low), and welcome economically efficient result.economically efficient result.

A Coasian Failure?—the enduring A Coasian Failure?—the enduring survival of UHF broadcastingsurvival of UHF broadcasting

Long Live TV broadcasting?—does over-Long Live TV broadcasting?—does over-the-air broadcasting serve social values the-air broadcasting serve social values not captured by the marketplace?not captured by the marketplace?

Property Rights and Property Rights and InstitutionsInstitutions Under NIE (new institutional economics), Under NIE (new institutional economics),

the general rule is that the market cannot the general rule is that the market cannot define and enforce property rights.define and enforce property rights.

How property rights are defined and How property rights are defined and enforced matters—a lot.enforced matters—a lot.

The exceptional situation is where social The exceptional situation is where social norms render property rights irrelevant—norms render property rights irrelevant—i.e., small groups like neighboring i.e., small groups like neighboring ranchers.ranchers.

Social Policies and the Social Policies and the Future of RegulationFuture of Regulation

– Current Content Regulation—which is Current Content Regulation—which is broadcast-centric—is less relevant in new broadcast-centric—is less relevant in new media environment.media environment.

– Self-regulation among media companies Self-regulation among media companies (e.g., a ratings system)(e.g., a ratings system)

– Public pressure (e.g., OJ episode and News Public pressure (e.g., OJ episode and News Corp)Corp)

– Regulation of Technology to Facilitate Regulation of Technology to Facilitate OversightOversight

Spam regulationSpam regulation ITU—Next Generation Network initiativeITU—Next Generation Network initiative

Concluding PointsConcluding Points

Spectrum policy provides an illustrative window Spectrum policy provides an illustrative window on telecommunications policy.on telecommunications policy.

The relevant institutions—the regulated firms; The relevant institutions—the regulated firms; the FCC; standard setting bodies; Congress; the FCC; standard setting bodies; Congress; courts; and public opinion—all can play different courts; and public opinion—all can play different roles.roles.

One critical set of roles revolve around the One critical set of roles revolve around the definition and enforcement of property rights definition and enforcement of property rights (often with an eye to economic efficiency goals).(often with an eye to economic efficiency goals).

Another critical set of roles revolve around Another critical set of roles revolve around social policy and content regulation (with an social policy and content regulation (with an eye on non-market-based values).eye on non-market-based values).