Policy Documents

The Wireless Craze, The Unlimited Bandwidth Myth, The Spectrum Auction Faux Pas, and the Punchline to Ronald Coase's "Big Joke": An Essay on Airwave Allocation Policy

Thomas W. Hazlett –
January 1, 2001

In 1959 the Federal Communications Commission invited economist Ronald Coase to testify about his proposal for market allocation of radio spectrum rights. The FCC's first question: "Is this all a big joke?" Today, however, leading policy makers - including the current FCC Chair - decry the "spectrum drought" produced by administrative allocation and call for the creation of private bandwidth markets. This essay examines marketplace trends driving regulators' change of humor, and considers the path of spectrum policy liberalization in light of emerging technologies, theories of unlimited bandwidth, reforms such as FCC license auctions, and recent progress in deregulating wireless markets in the U.S. and around the globe.