PolicyTracker Book review: 'The Political Spectrum' by Thomas W. Hazlett

Jul 24, 2017

By Kane Mumford

US spectrum guru Tom Hazlett, who was the chief economist at US regulator the Federal Communications Commission (FCC) in the early 1990s, has written a spectrum thriller.

One can just about, at a push, imagine people with no prior interest in spectrum picking up this Yale University Press imprint for its portentous title and sticking with it for its surprising content.

Hazlett tells us, for example, that wireless telephones were demonstrated as early as 1947 but were rejected by the FCC as a “luxury”. Cellular technology was ready for deployment by 1973. Cable TV and satellite radio experienced similar delays.

And there are plenty of interesting anecdotes. They include the story of John Walson, a lineman and part-time retailer of electronic goods who decided to start selling televisions. In a small city in the Appalachian Mountains, Walson had to demonstrate his new stock to customers by driving them and the set up a hill and plugging into the nearest antenna. He soon decided that running a line to his show room was a better idea and from there, one of the first US networks was started, as he split the line to his customers for a subscription of two dollars a month. Thus the cable industry was born. 

The book also includes the story of spectrum auctions, which should be instructive for all regulators. Nobel Laureate Ronald Coase’s study on the possibility of auctions belatedly revolutionised the spectrum world, but Hazlett does a good job of explaining how the weight of opinion at the time was against him. This included the FCC, which said only a few corrupt Latin American dictatorships would sell spectrum.

The Rand research organisation, which commissioned Coase’s study in the 1950s, suppressed it on the advice that it would be “asking for trouble in the Washington-Big Business maelstrom”. The first spectrum auction would not be held until decades later.

Great names are evoked: Ithiel de Sola Pool, who came up with the term “convergence”; Prussian statesman Otto von Bismarck; and German philosopher Friedrich Nietzsche, who said “what everybody believes is never true”. This could be one way to sum up Hazlett’s book, which offers a clearheaded revision of the regulatory history of spectrum.

Although a free market advocate (the book includes phrases like “the one regulatory action that can be implemented quickly is inaction” and “spectrum allocation by political means is the devil’s playground”), Hazlett’s view of the task of the regulator is a nuanced one. He is not bound by any doctrine, for that matter, and the strength of this book is in its well-researched and clearly related accounts of key points in the spectrum story, rather than Hazlett’s opinion.

That said, the book does have an overarching view which is the product of original thought and study. One 1920s politician is cited as saying “nobody can begin to imagine what radio may one day mean for the modern family”.

Hazlett says that it means a lot, "but replace it with television and then fixed and mobile broadband and later 'convergence' as understood by Ithiel de Sola Pool and we have this communicating spirit that must be bound”. The problem for the author is that this spirit is an Ariel repeatedly transformed into a Caliban.

"Bad regulation" arrived in the 1920s

Hazlett tells us about the early days of radio in the US. Far from being characterised by stations battling for the airwaves, he says, these days were a more or less self-regulating affair eventually brought under the ponderous yolk of bad regulation.

Before he became a one-term depression era president, secretary of commerce Herbert Hoover drove through the 1927 Radio Act, which still governs spectrum in the US. It was preceded by the common law-based 1912 Radio Act, which favoured “priority-in-use” access for stations that had broadcast longest on the basis that they were doing the most public good. Hazlett surprisingly lets this endorsement of a hereditary aristocracy for broadcasters enjoying a divine right to the airwaves pass without adverse comment, concluding that “these rules of the road allowed an impressive new industry to form”. 

But there was in Hazlett’s words a “brisk secondaries market” for spectrum. This is supported by a brief excerpt from a hearing in the US Senate which confirms that although licences technically had to be issued, transfers were completed and licence holders were able to conduct their business safely. This was backed up further by serious investments like that of the the Chicago Tribunenewspaper, which ploughed $250,000 into its broadcast licence, changing its call sign to WGN (world’s greatest newspaper) in the process.

The case of a Los Angeles evangelist and early radio adopter, the Reverend Aimee Semple McPherson, was something of a catalyst for tighter regulation. When high winds blew her church’s station out of its assigned frequency, she was ordered to do something about it. She reportedly responded with a telegram to Hoover imploring that he call off his “minions of Satan [and] leave my station alone. Stop. You cannot expect the Almighty to abide by your wave length nonsense. Stop. When I offer my prayers to Him I must fit into His reception".

Hoover ended up presiding over the creation of what appears to be a semi-regulated status quo, the result of annual radio conferences and gentlemen’s agreements. One early challenge to this status quo came from a broadcaster bucking the gentleman’s agreement and deliberately using a frequency not its own. The US Commerce Department launched legal action, the broadcaster refused to stand down and a federal court found the department was in fact powerless to enforce its own order.

Instead of challenging it by citing the case law that Hoover had at his fingertips that would surely have quashed the judgement, he abandoned his previous efforts and insisted that the Commerce Department was not able to keep up, bizarrely enlisting the supporting legal opinion of William J. “Wild Bill” Donovan (acting attorney general and director of what eventually became the CIA).

Thus was sabotaged the work of the early twenties, which to Hazlett was based on establishing a more genteel form of regulation. Hoover's admission prompted some 200 extra channels to join the airwaves.

What happened next is that technical reasons (i.e. the argument that consumers would be inconvenienced by having to buy new receivers, which Hazlitt says was not true) led to doing away with “small and unimportant stations” (in the words of one Department of Commerce representative). The policy “received little criticism”, apparently. Hazlett suggests that this was an example of vested interests being allowed to squeeze competitors of all stripes out of the market for good. Welcome to the "political spectrum".

There is so much more in the book and the FCC is often cast as the villain. Hazlett is clear about one thing: the FCC over the decades has been unable to keep up with technological development. This is true of radio in the 1920s and of the UHF versus VHF television war, through to restrictive mandates on Community Antenna Television systems (CATV), which began to appear between 1965 and 1970 as even the households in areas covered perfectly well by broadcast signals wanted cable. One of these mandates included a prohibition on showing “series programming of any type”.

Conversely, the strong arming, bribery and political manoeuvres that made the rise of cable TV possible is also laid bare and one is left feeling that the grubby denizens of twentieth century US business and politics deserved each other. But a real focus on the public good – and how it is often used to justify the most selfish acts – shines throughout Hazlett’s text and highlights its importance as a seminal work on spectrum policy.