Pioneers Under Attack

[David Farber <farber () central cis upenn edu>]

Date: Fri, 17 Jun 1994 08:07:50 PDT
From: Mark Stahlman (via RadioMail) <stahlman () radiomail net>


Thanks.  This is the way I've heard the story (please correct any errors,
since I'm a storyteller who likes to get it straight):


The FCC worked hard over many years to find a better way to hand out
licenses than the free-for-all lottery system.  After the cellular phone
sweepstakes, other lotteries produced warehouses full of applications that
no one could figure out how to process.  The FCC was (and still is) divided
over the auction alternative with considerable opinion internally that
highest-bidder sales of spectrum would favor the least innovative dominant
players.  For IVDS (two 500KHz VHF licenses in each SMA for I-TV return
path) they devised a "constrained" lottery which required higher filing
fees and prohibited selling the license until the system was built out (you
also lost the license if you didn't meet a build-out schedule).  The courts
invalidated this appraoach as "discriminatory" (although the first nine
SMAs which had already been lotteried were awarded).


The Clinton budget bill swept all this debate aside and mandated spectrum
auctions for 10-year exclusive use in order to "reduce the deficit."
Commerce Secretary Ron Brown was very vocal about this provision and wild
numbers as high as $10 billion began to surface as potential pay-ins to the
federal coffers.  No important opposition was ever voiced (the Washington
Post rejected an Op-Ed I wrote and when I contacted EFF they said they had
"other priorities") and this provision passed intact.  The FCC has
scheduled an auction to complete IVDS with a $2500 filing fee and is
expected to release the rules for PCS on June 29th.  The FCC has just
realigned the PCS spectrum chunks to get higher bids in the auction and
Gore/Dingell are attacking pioneers preference awards.  Since auctions are
a new mechanism, it is widely expected that court challenges could tie up
the process for years.


If indeed spectrum licenses are neccessary at all (which I doubt), I would
favor some variant of the "constrained" lottery system the FCC was
struggling to implement.  But, very serious questions have been raised
about the need for exclusive licenses at all.  In the April 11 issue of
Forbes ASAP, George Gilder points to the broadband digital radio technology
called the MiniCell from Steinbrecher Corp. which obviates the need for
dedicating spectrum for particular services.  By employing broadband A/D
and DSP technology, Steinbrecher (now 10% owned by McCaw) can build
broadband mixers with spurious free wide dynamic range -- they can select
unused carrier frequencies on the fly.  Combind with spread-spectrum
technology which facilitates multiple users of the same spectrum, all the
old assumptions about exclusive spectrum use begin to crumble.


I've spent the last fifteen years as an analyst studying the ways that
technology leads to the formation of new industries.  While I learn more
every day, I have reached some conclusions as a result of this study.  If
semiconductor technology curves (Moore's Law, etc.) are crucial to the
business model of a new industry, then the chances are very high that
entreprenuers will build that industry -- not established corporate giants.
 Regulation is entirely inappropriate during the early stages when such an
industry is forming.  Attempts at such regulation can only hamstring the
innovators while favoring the dinosaurs who hire the lobbyists in
Washington.


This is not an ideological position on my part.  I support regulation, in
principle, for established industries.  I am a scientist by training and
this position is as close to a scientific judgement as I can make on these
issues.  Calls for a "free-market" in spectrum are specious because 10-year
exclusive-use licenses which have been bid up by "convergence fever" for
applications which haven't been invented yet hardly describes an "efficient
market".  My understanding of actual markets and the way finance and
government shape or interfere with their development makes it difficult for
me to adopt an ideological (or abstract) stance on these issues.  In fact,
I think events like the end of World War make ideology-in-general obsolete
(but that's another conversation).


There is a exciting explosion of creative innovation at work in our lives,
on our networks and in our garages which has the breakthrough potential to
invent new media industries.  I am opposed to anyone who wishes to devise
rules in Washington which will interfere with this process.  Attempts by
this administration and its *friends* to craft an Information Industrial
Policy reflect crass pork-barrel political motives and total ignorance of
the fragile economics of invention.


Mark Stahlman
New Media Associates
New York City
stahlman () radiomail net