The FCC's trillion-dollar gambit

[Commentary] Soon smartphones, tablets and as-yet barely imagined gadgets will be ubiquitous — opening the door to a wireless future in which everything from professional sports to MRI scans will be available on demand anytime, anywhere. Or maybe not. Much depends on the current struggle between the Federal Communications Commission and the broadcast TV lobby.

Any coming wireless revolution depends on a huge expansion of transmission capacity — to support 4G wireless broadband service. While technology and oodles of cash make it possible to cram more data through the existing wireless telecom system, avoiding hopeless traffic jams means access to a lot more of what used to be called the “airwaves.” That’s why FCC Chairman Julius Genachowski made a smart move when he called for repurposing a broad swath of prime, underutilized spectrum now controlled by local TV stations. The big question is whether the broadcasters have the will and political clout to stop him. Genachowski’s approach is pragmatic. He would leave the broadcasters with enough spectrum to maintain over-the-air service, thereby finessing the populist argument that he was killing free TV. To mollify the broadcasters — who, after all, appropriated the spectrum from the taxpayers fair-and-square — he could share some of the auction proceeds with them. The Genachowski solution, however, sure beats the alternative: Waiting until the political cost of denying 4G service to the multitudes is higher than the cost of standing up to the broadcasting lobby. If and when a deal is reached, there’s going to be a lot of second-guessing about how much money is diverted from the Treasury to the broadcasters’ bank accounts. But it’s important to remember that the prize isn't just the tens of billions that the spectrum would likely fetch at auction. It’s the value-added from 4G service that consumers and telecoms can share – a figure that could approach $1 trillion!

[Robert Hahn is director of economics at the Smith School, Oxford, and a senior fellow at the Georgetown Center for Business and Public Policy. Peter Passell is a senior fellow at the Milken Institute]