The Unpredictable Certainty White Papers (1997) / Chapter Skim
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Estimating the Costs of Telecommunications Regulation
Estimating the Costs of Telecommunications Regulation
Pages 292-303
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From page 292... ...
It is, of course, impossible to measure precisely the total social cost of zoning restrictions. But conservative calculations of specific restrictions suggest that the costs are very high.
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From page 293... ...
No exclusive rights were assigned.4 By the mid-1920s, courts were beginning to affirm private property rights in spectrum.s The Radio Act of 1927, however, placed almost every aspect of radio broadcasting under the control of the newly created Federal Radio Commission (FRC) .6 Seven years later, the provisions of the 1927 act were rolled, largely intact, into the Communications Act of 1934.7 The FRC became the Federal Communications Commission.
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From page 294... ...
In 196S, the FCC declared that cable television was an "interstate" service and that telephone companies therefore needed FCC permission to build or operate cable networks.20 In 1970. We commission barred telephone companies from .
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From page 295... ...
Spectrum zoning, for example, makes it extremely difficult for a third cellular provider to enter most markets. The prohibition of video delivery by Bell operating companies stunts competition in cable television markets.
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From page 296... ...
faced no competitive disadvantage vis-a-vis incumbent cellular providers, the presence of a Bird competitor would likely increase competition and Hive down prices. Assuming unitary elasticity of demand for cellular services, the authors of the FCC study estimate that a reduction in cellular prices of 25 percent would [eadto an increase In total welfare in the Los Angeles cellular market of $799 million for 6 MHz of additional spectrum and $893 million for 12 MHz of spectrum.
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From page 297... ...
First, Bell cellular customers currently pay about 40 percent more for long~istance calls than customers of independent cellular compan~es.48 Second, in metropolitan service areas (MSAs) where neither cellular provider is a Bell company subject to inter-LATA restrictions, local cellular service is 7 percent cheaper (because of unrestricted competition)
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From page 298... ...
Relying on survey data on demand for advanced services that could be offered by Bell companies, WEFA estimated the loss In consumer welfare attributable to zoning restrictions for a number of serv~ces.57 We summarize below their estimates of foregone yearly consumer welfare for services that Bell companies can but may not provide under MFJ restrictions: Residential Customers I Advanced portable phony $~.6 billion 2.
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From page 299... ...
Even if the restrictions are eventually lift, the delay in the provision of socially desirable services imposes enormous costs to the economy.58 In 1985, an FCC OPP working paper estimated the costs of a comparative hearing for a cellular license application, breaking it down Into cost of Me delay in awarding the license, cost to We government, and cost to applicants.59 The paper found that the typical IS-month delay in awarding cellular licenses eroded the value of the license by $90,000 and cost Me government $20,000 per hearing and each applicant $130,000 per hearing.60 Finally, the possibly anticompetitive effects of lifting such restrictions must be weighed against the foregone welfare of consumers willing to purchase and of producers willing to provide such services. The net welfare effect may indeed be positive in many or most Instances where zoning is imposed because of alleged anticompetitive effects.
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From page 300... ...
The Australian Federal Specimen Management Agency recently auctioned 196 wireless cable licenses.72 The government w'll also receive yearly license fees on the auctioned spectrum.73 The Australian Broadcasting Authority plans to auction new television and radio licenses.74 New Zealand has auctioned off20-year rights to new radio spectrum and receives additional revenues Tom user fees.75 It has also auctioned off spectrum for cellular serviced and broadcast television.77 CONCLUSION The social cost of zoning the electromagnetic spectrum and vv~rel~ne media is extremely high. While it is Impossible to quantifSr exactly the total social cost of such zoning, Me welfare effects of specific restrictions suggest Mat zoning imposes large opportunity costs on society.
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From page 301... ...
27, Federal Communications Commission, Washington, D.C., November.
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From page 302... ...
Cable Television Industry," paper presented to the Western Economics Association 68th Annual Conference (22 June) ; Federal Communications Commission, FCC Cable Rate Survey Database (Feb.
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From page 303... ...
Rubin (June 14, 1994) , attached to Motion of Bell Atlantic Corporation, BellSouth Corporation, NYNEX Corporation, and Southwestern Bell Corporation to Vacate the Decree, United States v.
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