Assigning Property Rights to Radio Spectrum Users: Why Did Fcc License Auctions Take 67 Years?

While Leo Herzel (1951) and Ronald Coase (1959) persuasively argued for auctioning licenses issued by the Federal Communications Commission (FCC), not until 1993 did the U.S. Congress grant the FCC authority to assign wireless operating permits via competitive bidding. Why were auctions, with obvious efficiency and equity advantages, so long in coming? Why were comparative hearings in the “public interest” first abandoned as assignment tools in 1981 not for auctions, but for lotteries? And why were radio and TV licenses pointedly excluded from auctions? Four factors—the special interest of regulators in influencing broadcasting content, the limits placed on explicit program regulation by the U.S. Constitution, the recent increase in the relative economic importance of nonbroadcast wireless services, and the agency problem embedded in central planning—are used to explain both the political stability of economically inefficient licensing methods and recent reforms.