Seven years ago this month, Congress approved a new, market-based telecom licensing mechanism that would forever change the wireless industry. Spectrum auctions not only revolutionized licensing, but came to permeate a broad range of policy debates-from the budget to defense preparedness to affirmative action to bankruptcy law-throughout government.
Many have sought credit for spectrum auctions. Mark Fowler, former FCC chairman under President Reagan (and his GOP successors) prodded the then-Democratic Congress throughout the 1980s and into the early 1990s for authority to use competitive bidding in lieu of comparative hearings and lotteries.
Democrats at that time pooh-poohed the idea as a radical manifestation of zealous supply-side economists in the Reagan camp. Even under the moderately conservative GOP administration of George Bush, spectrum auctions were shot down by Democrats.
It was not until Bill Clinton, a New Democrat, embraced spectrum auctions after becoming president that Democrats fall in line. It was but a microcosm of how Clinton transformed the Democratic Party, pulling it closer to the center with his own policies and those artfully stolen from Republicans.
Once Clinton signed auction legislation into law on Aug. 10, 1993, as part of a sweeping budget package (“It’s the economy, stupid”), and after the FCC raked in $7 billion in a 1995 auction dominated by Bell partnerships (of questionable antitrust validity), AT&T Corp. and Sprint Corp., both Democrats and Republicans cheered and claimed credit for the money-making machine.
Truth is, a trio of academics arguably deserves credit for spectrum auctions and the wireless revolution that ensued. One of the three, John C. Harsanyi, a business professor at the University of California-Berkeley, passed away earlier this month.
In 1994, Harsanyi, a Hungarian Jew who dodged death after cleverly escaping from a labor camp in World War II, won (along with John F. Nash of Princeton University and Reinhard Selten of the University of Bonn) a Nobel Prize for their work on game theory. Auctioning spectrum is game theory in practice; it’s the stuff free-market economists live for.
Game theory is the foundation for the kind of multibillion-dollar spectrum auctions that first gained fame in the United States and that have since caught fire around the globe.
From the perspective of congressional and White House budgeteers, spectrum auctions have been wildly successful. For sure, taxpayers are getting compensated for a public resource-radio spectrum-and wireless licensing is faster than ever.
But beneath the surface, auctions have wreaked havoc and prompted some to assert that big money-rather than the public interest-has become the prime driver of wireless policy. Whatever. This much is true: Wireless is a game for the big boys.
