From: <ji2016@columbia.edu>
  To  : <CPC@emoglen.law.columbia.edu>
  Date: Sat, 12 Mar 2005 19:34:43 -0500

Paper 1: Municipal Wi-Fi as a Trigger for Unleashing Spectrum

Municipal Wi-Fi as a Trigger for Unleashing Spectrum
By Junichi IKEDA

Since the introduction of the Telecommunications Act of 1996, the US
saw series of M&As in communications industry. Now we are watching
the final stage of consolidation: SBC will buy AT&T, leading to
MCI’s potential merger by either Verizon or Quest. Cable industry
consolidated earlier. We could say that today’s local broadband
market has virtually become duopoly by cable and telecom.

Considering this reality, municipal Wi-Fi, like Philadelphia’s plan,
should be approved for promoting more competition in the philosophy
of original “deregulation” which dates back to the 1984 AT&T
divestiture. Originally, deregulation in the communications
industry, like other capital-intensive industries such as airline
and electricity, was justified and promoted by the “contestable
market theory,” the essence of which is that potential threats of
new entrants prevent incumbents from exploiting consumers with
monopolized higher prices and, rather, lead the prices to the
nearly market equilibrium levels. [FN1] In other words,
deregulation is not mere “privatization” but “regulated
competition” supported by several institutions.

Therefore, we can argue the case of Philadelphia Wi-Fi with respect
to this “deregulation” philosophy. Due to the fact that “virtual
duopoly” keeps broadband prices higher for ordinary citizens and
seemingly stymies the introduction of other innovative and
effective ways of broadband like Wi-Fi, the entrant of municipal
Wi-Fi will be justified by the contestable market theory because it
serve as the “potential” threat to incumbents. We should keep in
mind that market mechanisms in the real world would not function
without (explicit or implicit) institutions. [FN2] In a broader
perspective, the entrant would work as one of such institutions.
Philadelphia Wi-Fi, hence, has a sufficient justification even
within only economics perspective. Furthermore, we have a reason
with respect to the First Amendment. Freedom of speech has an
implicit assumptions that everybody can talk or write for his/her
own expressions. But we need physical “medium” to communicate our
expressions, i.e., convey our intentions, exchange critiques, and
make more plausible, more effective, or even more impressive
expressions. Human beings historically extended communications
medium: air as medium of voice, paper and pen as medium of writing,
and now computer and network as electronic voice/writing. Therefore,
the urgent, immediate deployment of the network connection to all
the citizens is required to secure fundamental rights to
“communicate.” Without the “physical” infrastructure, we cannot
even “talk,” or “write,” or “express” ourselves. Without
appropriate medium, we are constrained to the
communicatively-challenged situations. We lose equal opportunities
for speech and express ourselves. Therefore, there are enough
grounds for the entrant of municipality into the deployment of the
broadband services, just as the coexistence public and private
institutions in the education system.

In all, I completely support municipal Wi-Fi itself. More
importantly, however, we should position municipal Wi-Fi in more
strategic perspective: unleashing spectrum as commons. Why I come
up with this idea is because I doubt the social welfare of the use
of the spectrum freely allocated to incumbent broadcasters for
digital terrestrial broadcasting. Look at this fact. Thanks to the
proliferation of cable systems since the 1980’s, today, over the
90% of the US households watch terrestrial broadcasting via cable
(or satellite), not by directly receiving the electromagnetic
waves. [FN3] Plus, technically speaking, the broadcasting spectrum
is one of the most easy-to-use and efficient for public use
(therefore, broadcasters employed them in the early days of radio
and television). Nonetheless, the government still guarantees and
promotes them to deploy the digital terrestrial broadcasting. It
sounds ridiculous, doesn’t it?

This comes from the historical interdependence between broadcasters
and politicians: Local broadcasters need advertising spending from
local politicians while politicians need local broadcasters for
their election campaigns. [FN4]  In 1995, Sen. Bob Dole (R-KS),
then Majority Leader, tried to introduce the spectrum auction
regulation mandating the payment of spectrum usage, including
broadcasting. It shocked the broadcasters, inducing explicit
lobbying against the bill. Eventually Dole convincing few senators
to pass the bill. [FN5] Politicians are nervous of future of media
because several interest groups keep sharp eyes on them. [FN6]
Hence, digital terrestrial broadcasting is highly political agenda,
which is locked in the out-of-date societal equilibrium by
political, not economic, concerns. However, the deployment of
municipal Wi-Fi will give momentum to tackle with this
highly-politicized issue and to reach the new societal equilibrium.

First, the enlightenment of the possibility of “free” use of
spectrum as a commons. Since not all people are using spectrum for
communications, municipal Wi-Fi would ignite the public perception
of the potentiality of spectrum, and raise it to the public debate
that spectrum should be open to public. In other words, the
exclusive spectrum licenses would limit the people’s opportunities
to express. Second, municipal Wi-Fi could serve as facilitator of
innovations for more diversified personal usages because, unlike
the wired internet, Wi-Fi has more flexibility of time and space.
We can expect the same “innovative” effect of the publicly-financed
early-days Internet. Third, and most importantly, however,
(municipal) Wi-Fi’s attributes of facilitating innovations such as
video communications would address the concerns of locked-in local
journalism, if together with emerging “blog” sites. In this
respect, the bloggers should be granted journalism privileges
protected by the First Amendment because the proliferation of video
journalism in the local market would reduce politicians’ campaign
concerns. Plus, broadcasters who could not afford for dual
(analogue/digital) investments in the transition periods would
welcome this solution because they would still compete in local
news markets through cable and Wi-Fi despite the entry of new
“blogger” journalism. Of course, we have to establish appropriate
moral standards for the mixed journalism with bloggers and
traditional presses, but we do not have to worry about this now:
the US common law courts have sufficient flexibilities to
articulate those standards step by step through specific
litigations.

The introduction of municipal Wi-Fi will give us opportunities not
only to widen the user-base of broadband but also to make a public
consensus of reviewing spectrum policy comprehensively so that we
can avoid potential social loss of digital terrestrial
broadcasting. Then we can eventually unleash spectrum for our
communication just as air for our conversation.

******************************************
Footnotes

[FN1] Baumol W. J., Panzer J. C., and Willig R. D., Contestable
Markets and the Theory of Industrial Structure, Harcourt Brace and
Jovanovitch, 1984

[FN2] We can see how important the institutions are to function
market mechanisms in various fields, such as the detailed
“disclosures” in the securities market, or the government
“guarantee” in the mortgaged backed securities for the housing
market.

[FN3] Federal Communication Commission, Annual Assessment of the
Status of Competition in the Market for the Delivery of Video
Programming (MB Docket No. 04-227), January 14, 2005

[FN4] Dennis Johnson describes the campaign spending was
skyrocketing during 1990s. “… The cost of mounting an effective
race for Congress has increased dramatically during the past
decade. In the 1989-90 election cycle, U.S. House and Senate races
spent $128.2 million on polling and television and other media,
with an additional $85.5 million spent on fundraising. In 1996, a
record $499 million was spent by candidates for the House and $341
million by candidates for the Senate. The average cost of winning a
Senate seat in 1996 was $4.7 million; the average cost of winning a
House seat was $673,000, up 30% from 1994.” Johnson, Dennis W., No
Place for Amateurs – How Political Consultants Are Reshaping
American Democracy, Routledge, 2001.

[FN5] Hundt, Reed E., You Say You Want a Revolution – A Story of
Information Age Politics, Yale University Press, 2000.

[FN6] In the recent FCC’s Media Ownership Rule debate, potential
concentration of media ignites bipartisan controversy. The
Congress, regardless of Democrat or Republican, had to reduce the
terms of deregulation because of the huge pressure from their
supporting groups. The fact that all the groups from the left to
the right were against the rule implies that there was massively
prevailed fear that media consolidation would harm the equality of
the speech opportunities and produce biased reporting. See the
detailed explanation in McChesney, Robert W., The Problem of the
Media – U.S. Communication Politics in the 21st Century, Monthly
Review Press, 2004



J IKEDA Municpal Wi-Fi.doc

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