I’m digging Holman Jenkins’ column in The Wall Street Journal about the allocation of spectrum. Mr. Jenkins makes the argument that politics should not be used to allocate a valuable resource like spectrum. The economics says that the resource should go to the entity that wants to put it to best use and is willing to pay for it. Groups like Free Press and Public Knowledge are too busy with their quixotic quests to realize that society, particularly the underserved, benefit when firms with the scale and willingness to use spectrum receive it.

Not only do the Don Quixote groups not advocate for the underserved, they advocate for an allocation system based on inefficiency. The FCC is allowing itself to be persuaded by a decision matrix not based on hearings. I get tired of notices of rulemaking that come out of nowhere; with just one more step to go before showing up as a final rule. Sure the FCC allows the public to comment, but public comment does not bring the rigorous economic and policy analysis necessary for determining the efficacy and feasibility of proposed rules or other actions that impact how spectrum will be allocated.

Instead the FCC relies on a behind the door, ex-parte approach of arm twisting and brow beating to help guide its policy meetings. They may as well make their decisions at some alumni picnic. The FCC-Free Press-Public Knowledge Triumverate doesn’t seek optimality. It doesn’t care about getting the most out of the use of spectrum. It’s focused too much on keeping the reins on all participants in the wireless broadband sector.

Jamal Simmons’ piece in today’s The Podium raises two important issues. First, we should not take for granted how much the private sector has invested in meeting the increasing demand for broadband services. According to his piece, broadband providers have invested tens of billions of dollars last year in broadband deployment. I remember when the fiber deployments of AT&T and Verizon started up back in 2005. The companies were investing upwards of $30 billion a year to compete with entrenched cable monopolies and provide the competition not only for cable programming but higher broadband speeds.

That was private investment. No government subsidies were being provided. No universal service. Ironically the impediment to broadband deployment was onerous franchise agreements that AT&T and Verizon, new to the cable franchise game, had to face. They could have slowed down or worse yet yanked their deployment plans off the board. Instead they marched ahead with the intent of meeting consumer demand, again without subsidies.

Second, there is the issue of flow of capital. Mr. Simmons’ piece is a reminder that as regulator of commerce, the federal government should be willing to avoid applying unnecessary regulations that would discourage investment in the private sector in general and the broadband sector in particular. I saw a number of cable firms that may have ended up providing competitive broadband services had not entry fees and other franchise requirements kept them out of certain markets.

These requirements didn’t even have anything to do with consumer protection, but more so with localities extracting onerous obligations such as cable TV studios and I-Nets; items that municipalities should have funded from their own general funds. Now these same municipalities complain about a lack of competition in their local franchise areas. Go figure.

At first blush I thought Federal Communications Commission Chairman Genachowski was starting the FCC’s first reality show. What he announced late last week was a competition to see which eligible telecommunications carriers could identify effective approaches to increasing broadband adoption and retention by low income consumers. At stake is a pot of subsidies worth $25 million with the winners receiving subsidies of up to $100,000 a year for three years to implement their broadband project.

The FCC made it a point that at least one of the submitted projects should address broadband adoption and retention on Tribal Lands. The FCC did not make that point for any of the U.S. insular territories.

It’s too bad. The FCC consistently talks about how broadband can spur economic development and job growth. It goes on and on about robust technology and job creating innovation, but when it comes to delivering subsidies to the U.S. Virgin Islands, the territory gets ignored.

If the FCC is interested in low income citizens adopting broadband, then the USVI provides an ideal laboratory. According to the U.S.V.I. Bureau of Economic Research, 11% of households in the U.S. Virgin Islands live on less than $10,000 a year. One-half of households in the U.S.V.I. live on less than $35,000 a year. Twenty-five percent of Virgin Islanders lived in poverty in 2008.

What is even more unbearable are children living in poverty. Twenty-three percent of families in the U.S.V.I. or 6,206 families were living in poverty, most of them with children in the household. Twenty-four percent of families with related children under the age of 18 live in poverty. Thirty-four percent of families headed by a female live in poverty in the U.S.V.I.

I guess America’s Paradise is just a vacation spot for the FCC. When it comes to making us a part of the policy landscape, it’s not a part of the FCC’s reality.

The Federal Communications Commission issued final rules for channel sharing. The rules are the result of the recently passed Jobs Act that provides for voluntary incentive auctions of broadcast spectrum.

The FCC stressed that channel sharing is voluntary and that broadcasters and other licensees of spectrum will determine whether they want to enter into sharing arrangements. The FCC expects channel sharing to free up spectrum for wireless broadband providers.

Channel sharing doesn’t mean that an over-the-air broadcaster’s only option is to give up its entire spectrum and go out of business. Broadcasters should be able to retain just enough spectrum for one standard definition program stream, while sharing the rest of its 6MHz channel.

Overall, sounds like a non-intrusive policy for freeing up some spectrum for the mobile types while keeping the over-the-air broadcasters operational.

I love this quote from Bruce Mehlman captured in a piece by Broadcast and Cable yesterday:

“Now more than ever we need more spectrum in the hands of those actually serving our entrepreneurs, to ensure robust and reliable Internet service,” said Internet Innovation Alliance co-chair Bruce Mehlman in a statement. “Policies that allow the markets to deploy these resources to their highest and best use, rather than politicians’ preferences, will lead to a stronger entrepreneurial ecosystem – that means more innovation, more jobs, more cost-savings for consumers and more start-up businesses in the United States.”

If we want to get our economy going again and incentivize the deployment of broadband into unserved areas, government needs to focus on one of its core responsibilities; moving natural resources into their most productive use, with the market setting the price for those resources.