How did we get here? The answer, according to “The Political Spectrum” (Yale University Press 2017), a remarkable new book by Clemson University economist Thomas Hazlett, is that the agency began life with a political agenda, one that continues to override its technical experts.
Hazlett, a former child actor who served as the FCC’s chief economist in the early 1990s, knows where the bodies are buried. He tells a chilling story of an agency that has always been both more and less than it appears to be.
On the outside, the commission’s charter is simple: to oversee the assignment of increasingly valuable swaths of radio frequencies, “as the public interest, convenience, or necessity” requires. But throughout the FCC’s nearly 100-year history, there have always been more ominous motives behind the agency’s action — or, in many cases, inaction.
With the skill of a TV detective, Hazlett reveals how the undefined “public interest” standard has proven itself a potent and malleable political weapon. As new information technologies are invented — from radio and TV to cable, satellite, cellular and now broadband — the FCC has wielded its power both intentionally and recklessly to benefit a changing cast of favored industries, restricting competition and all but the most mainstream content.
The result early on was both scarce and homogenized over-the-air content, almost entirely lacking in news or public affairs programming. In 1961, FCC Chairman Newton Minow famously complained that over-the-air broadcasting had become “a vast wasteland.”
What Minow didn’t say, however, was that the barren media landscape was an environmental disaster entirely of the FCC’s own making, aided and abetted by politically connected broadcasters and their friends in Congress. (Sometimes they were one and the same. While a senator, for example, Lyndon B. Johnson was allowed to monopolize Austin’s radio and TV market in exchange for securing the FCC’s budget.)
And where the “public interest” is used to limit who gets a license, the agency also exaggerates claims of spectrum scarcity and invents vague “technical reasons” to justify denying or delaying by decades the introduction of competing new services and new applications.
Often, as Hazlett details, the delays are manufactured by favored incumbents, worried that their technologies will be rendered obsolete and the frequencies assigned to them reallocated for better uses. (To help ungrease the wheels, the Federal Communications Bar Association has more than 2,000 members, mostly in Washington.)
Wireless telephones, for example, were demonstrated as early as 1947 but were rejected by the FCC as a “luxury.” Cellular technology, which vastly increased the capacity of wireless, was ready for deployment by 1973, but had to wait another decade. Cable TV and satellite radio experienced similar delays.
This was nothing new, however. Engineered scarcity and the corresponding need to micromanage both content and technology has poisoned the FCC’s operations from the beginning, Hazlett says, starting with then-Commerce Secretary Herbert Hoover.
Hoover deviously orchestrated a breakdown in federal oversight of AM radio licenses in 1926, launching “chaos” in interference and channel-jumping that undid the previous decade of orderly expansion.
The only solution to the “anarchy in the ether” Hoover had created was, conveniently, comprehensive new legislation he previously had been unable to advance. Congress duly enacted the Radio Act of 1927, which created a new regulatory agency that canonized Hoover’s belief that spectrum was a unique and limited public good, licensed only to applicants who proved their willingness to bow to the ever-changing “public interest.”
The age of permissionless innovation in radio was over, along with hundreds of stations — many nonprofits — that were forced to shut down. From then on, innovators hoping to introduce new technologies first must plead their case to the FCC, often waiting decades.
If Hoover, Minow and their congressional co-conspirators are the villains of Hazlett’s tale, its hero is economist Ronald Coase, who argued outrageously in 1959 that airwaves should simply be auctioned to the highest bidder, letting consumers decide the best uses rather than well-intentioned (or not) regulators bestowing “free” licenses with political strings firmly attached.
Hoover was simply wrong: Spectrum was no different from any other critical resource a business needed — and no scarcer. And although the market was far from perfect, Coase argued, allowing regulators to micromanage spectrum under the cover of the opaque “public interest” was worse, introducing vast inefficiencies and unintended consequences. For one thing, unlike the market, there was no accountability when the regulators failed, which they did repeatedly.
It took the FCC 30 more years to hold its first auction, by which time Coase’s work had earned him a Nobel Prize. In the interim, the agency’s parade of disasters plodded depressingly along. Hazlett shows how the FCC serially delayed or destroyed AM radio, and then FM, VHF, UHF, cable, satellite radio, wireless phones, pagers, low-power FM radio, digital TV and satellite Internet — filling what Hazlett calls “the FCC’s start-up cemetery.”
That trend was partly reversed with the remarkable success of smartphones, starting with the 2007 introduction of Apple’s iPhone. As mobile call volumes exploded with better and cheaper technology, the FCC finally gave in to demand for mass market wireless telephones, making new frequencies available beginning in the early 1980s.
The public interest-based application process, however, proved unwieldy. Buried in mountains of paper it had invited, an overwhelmed FCC was forced to conduct simple license lotteries, resulting in immediate license transfers at enormous profit to lucky winners who had no intention of building anything.
Congress, finally seeing how much money it was leaving on the table, authorized the FCC to begin auctioning airwaves to the highest bidder in the early 1990s.
That, Hazlett says, was the turning point in the mobile revolution, generating billions of dollars in consumer surplus and leading to rapid implementation of 3G, 4G and soon, 5G mixed networks, along with smartphones, app stores and emerging applications, including the Internet of Things, autonomous vehicles and virtual reality — all of which require more flexible spectrum licenses.
But despite that success, the FCC’s “command and control” strategy still reigns, as visible in the agency’s 2015 decision to “reclassify” ISPs as regulated utilities, as it was with Hoover’s radio purge. “The 1927 Radio Act continues to govern the allocation of radio spectrum,” Hazlett concludes grimly, leaving the vast bulk of wireless bandwidth “walled off, dedicated to legacy services planned decades ago, often moribund, never efficient.”
And now that the liberalization genie is partly out of the bottle, it’s unclear how or even whether the FCC can adapt to the pace of disruption in 21st-century technologies.
“I am optimistic,” Hazlett told me. “In 100 years, there will be no government agency centrally managing spectrum.”
But until then, the now-very-public debates about what constitutes the “public interest” are certain to get even uglier.