Spectrum Allocation is Theft

Indian Government is set to receive Rs 39,300 Crore for allocating spectrum to telecom giants. The companies involved are all bidding really high to get permission from the government to broadcast at a certain frequency using the equipment they own. I think it’s high time we recognize this allocation act for what it is – corporate welfare.

What does the government do in this entire process? It does not help improve the transmission. It does not increase the bandwidth of the spectrum. All it does is allow certain companies to broadcast over the spectrum by shutting down all those who set up their own transmission outside the system. A case of Bihar community radio comes to mind – which was shut down even though it interfered with no other service.

Most people consider 2G spectrum scam as an issue of corruption. The problem they see is that government sold out its thuggee protection services to the corporates for lower than expected price. Kapil Sibal has defended this allocation forming a “zero loss” theory. Despite being a corruption apology, this theory raises many good points which the mainstream chooses to ignore.

When Bunty and Bubli sold the Taj Mahal at 250 million dollars, can they said to have made a loss if they could have sold it for 500 million dollars? Obviously when you sell something you do not own you cannot cry loss later on. On what basis does the government claim ownership of spectrum?

Where do people think this money comes from? Had the companies paid higher cost for “buying” spectrum, the services they would have provided would have been costlier. 2G license fees is an indirect tax on the consumers. Its the consumer who ends up paying for the license fees.

The companies go along with this plan as they benefit a lot. This spectrum auction keeps out any small and budding competition as they can’t afford to compete with giant corporates when it comes to “buying” spectrum from the government. If they start using a spectrum that they have not “bought” from the government, even if its unused, they will be forced to shut down and their investment will be wasted. Which is why we have large telecom corporates who charge exorbitant amount for their services and have pathetic customer satisfaction. The whole spectrum allocation scheme hinders competition and is just another form of corporate welfare.

This conclusion should be enough to condemn it but some people need more persuasion. These are people who can’t imagine how spectrum will get allocated without the government. This argument is, in my opinion, invalid. You cannot justify this massive theft by being afraid of freedom. The chaos that may come about by deregulating spectrum is purely conjectural but the corporatism that has developed around spectrum allocation is unethical once you understand private property and natural rights.

I have no doubt that these tech giants would be able to figure out how to co-operate and utilize spectrum if they did not have state protecting their investment with tax money. There are multiple ways in which a broadcast clash can be resolved. The involved parties can arbitrate using a third party arbitrator (preferably not the state). The matter can be settled by a simple matter of homesteading – who was there first. (Do read this link for in-depth analysis)

An interesting example can be found in the most unexpected place – Somaliland. Somalia had no central government auctioning out spectrum or protecting investments of telecom industries. Yet Somalia probably has a much better telecommunication network than India. Granted there are still issues between rival companies, but their price tariffs are in general very low. Don’t get me wrong Somalia’s spectrum allocation is not something that one can call a free market allocation, but its clearly an indication that state is not needed to allocate spectrum. Somalia’s central government, like every other government, has now taken steps to provide regulation and protection to the established telecom industries – which i think is a step in the wrong direction. The Somaliland Association of Telecom Operators (SATO) has now formed close ties with the government.

Even in the United States, before spectrum was declared “public property”, courts were able to handle spectrum clashes using common law. However this lasted only for a year.

“Both the political class and incumbent businesses in the form of Big Telecom have every incentive to maintain the status quo: they get to run the show, control it, and extract rents.” - Tim Swanson

All this is discounting the fact that technologies/protocols have been and are being developed that allow multiple users to collectively utilize spectrum without interfering with each other.

And lastly, let us not forget the freedom of speech argument. Declaring spectrum as “public property” allows the government to control what is being transmitted – a form of censorship. There is no free speech on public property.

Private ownership of spectrum threatens the established Television, Radio and ISP mafia with market uncertainty and competition. Which is why you will probably never hear them supporting it. Television industry has a lot of spectrum allocated to it, which it utilizes inefficiently. Market forces would have probably allocated a lot of this spectrum to Internet services, which is a more efficient utilization.