The Pentagon’s public internet fantasy

By Bret Swanson

Inflation, COVID-19, and chaos on the southern border: Look around and you will see policy mistakes everywhere. If you had to choose one arena in which recent US policy has been mostly successful, however, you might quickly settle on internet infrastructure.

Even before the pandemic, massive private investment in US wired and wireless networks was the foundation upon which entrepreneurs built the world’s most valuable companies in the nation’s most successful industries — software, e-commerce, smartphones, social media, cloud computing, and more. The pandemic performance of the US internet only put this broadband policy success in starker relief.

Part of America’s broadband policy success has been rooted in a wireless spectrum approach that balances licensed and unlicensed airwaves. Finding, packaging, and auctioning off spectrum hasn’t always been easy or smooth. But in the last few years, the US has made major strides — especially in the “mid-band,” which is crucial for 5G mobile and beyond.

Early this year, the Federal Communications Commission (FCC) completed its largest ever auction: 280 megahertz (MHz) of prime radio waves known as the C-band, which fetched $82 billion for the US Treasury. Right now, the FCC is engaged in another auction of 100 MHz of mid-band spectrum situated at 3.45–3.55 gigahertz. To date, the auction has completed 59 rounds of bidding, and provisional gross proceeds total $19.99 billion. These two auctions alone will nearly double the existing deployed commercial spectrum in the US.

Source: FCC data

And yet not everyone is happy. For example, my AEI colleague Paul Wolfowitz, writing last month in the Wall Street Journal, argued that the auction approach hampers American technological advance. Wolfowitz implies that networks built and operated by the Pentagon or by states and municipalities would be more efficient. These entities wouldn’t have to pay for spectrum; they would share it. And government networks wouldn’t be “duplicative” like the major mobile carriers who must compete against one another. The suggestion is that we could plow more money into network infrastructure with a public, as opposed to a private, approach.

But where’s the dearth of network investment? With just 4 percent of the world’s population, the US makes 18 percent of all capital investments in wireless networks. It’s true that mid-band spectrum seems pricey. But why would anyone pay princely sums for these airwaves if they didn’t plan to build the advanced networks needed to recoup these large investments?

Source: CTIA and author’s calculations

Washington and the states already subsidize the building of otherwise uneconomical networks in sparsely populated rural areas. But that’s a targeted intervention to correct a narrow market failure. Turning over the bulk of the internet to government entities with little or no network experience seems foolhardy. Most of these bureaucracies are having a difficult time focusing on and accomplishing their primary missions. The internet, meanwhile, is one piece of infrastructure that is manifestly operating at a high level of performance under the policy of private-led investment and operation.

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