“In some baby-talk versions of reality, you can have government or innovation, but not both”

February 17th, 2012

The WSJ editorializes about the FCC’s revocation of Lightsquared spectrum due to it’s alleged interference with GPS. This seems to be a good ‘ol case of rent-seeking.

Mr. Falcone’s radio bands are adjacent to those used by GPS receivers, and the GPS industry complained of potential interference. Mr. Falcone blamed makers of GPS gear for not shielding their devices, as if those bands would remain fallow forever. He complains that a federal study championed by the GPS interests exaggerates the problem. A maker of filters that would protect GPS devices complained, “It was a testing process where political influence trumped objective engineering.”

Laypersons will not find the technical issue easy to judge, especially if the testing data aren’t released for examination by outside experts. But understand this: Mr. Falcone and his company LightSquared, recognizing what they were up against, were prepared to compromise, compromise, compromise in order to move ahead. The global-positioning industry had no incentive to do anything but go for a win.

Not now and not ever does it want the expense of redesigning its devices to withstand interference from adjacent channels. At almost no cost to themselves, the GPS interests—which includes the military and commercial aviation—have now taken effective ownership of those adjacent bands, at least to the extent of denying their use to others. They were helped, by the way, in typical Faustian fashion by lobbyists for AT&T and Verizon, which didn’t relish competition from Mr. Falcone yet will one day presumably be eyeing the same spectrum for their own use.

We don’t know if there is a direct parallel in the career of Cornelius Vanderbilt, but one thing is clear: In FCC Chief Julius Genachowski, Mr. Falcone didn’t exactly pick an ally you’d want at your side in a knife fight. In one respect, Mr. Grassley speaks for all parties to the ugly brawl. He says the real question isn’t the various peccadilloes alleged against Mr. Falcone, including tactless lobbying and highhanded treatment of his fund’s investors. The real question is why the FCC authorized a spectrum use that it wasn’t prepared to defend.

In some baby-talk versions of reality, you can have government or innovation, but not both. In the real world, innovation is necessarily disruptive of the status quo, and if government is not actively for change, it’s usually mobilized against it. Mancur Olson, the late economist, wrote of how political systems become congealed over time with interest groups bent on protecting the status quo. Such states are more and more hostile to innovation. America, in case you haven’t noticed, is one of the world’s oldest continuous political systems. Maybe that explains why a government that once facilitated the building of railroads now can’t get out of its own way to help private business solve the spectrum crisis that the government itself keeps shrieking about.

This story is right out of Tim Wu’s The Master Switch, which tells how AT&T and RCA stifled the early television market in the United States by convincing the FCC that the TV signals would interfere with radio.
The phrase creative destruction by  Joseph Schumpeter (not Marx) lends itself well to disrupting technologies that are met by opposition by the state.