WiFi: The Great Communist Conspiracy?

from the evil,-I-tell-you...-eeeeeeeevil dept

Tue, May 16th 2006 12:21pm — Mike Masnick

The Progress and Freedom Foundation is a Washington DC-based think tank that we've discussed quite a bit recently, mostly because it's hard to match what they keep claiming back to reality. A few weeks ago, I noted that it seemed like a big part of the reason why they seemed to diverge from many others when it came to understanding free market economics was their failure to understand the concept of "zero." It sounds silly, but historically zero has been one of the most difficult concepts to grasp -- stunting the development of math and physics for thousands of years in some cases. Lately, it seems to be stunting PFF's understanding of economics. Basically, it appears that PFF believes that any time you enter a zero into an economic equation, the economics break down completely. This isn't that surprising if you think of economics solely as the study of resource allocation under conditions of scarcity. The "zero" takes away the scarcity, so you might think it's a problem. However, in many cases, that's not true at all. The zero means there's no scarcity, but it doesn't mean the basic economics fails (as we've shown repeatedly with intellectual property issues). This misunderstanding of zero seems to extend beyond just intellectual property at PFF, to another of their pet causes: spectrum allocation. Earlier this year, they came out with a report saying that unlicensed spectrum stunted innovation -- despite a variety of counter-examples of products (WiFi, cordless phones, etc.) that make use of unlicensed spectrum, and have clearly created huge, innovative, industries, while also aiding in innovation throughout many other industries (think of how much WiFi has contributed to increased productivity). Meanwhile, on the closed spectrum side of things, development and innovation has moved at a much slower pace. The folks at PFF are back beating this drum again, focusing on how the FCC shouldn't turn "white space" spectrum into open spectrum, but instead auction it off to the highest bidder. White space spectrum is (more or less) spectrum the TV broadcasters have been granted, but don't use, which the FCC is looking to get into the hands of those who might actually use it.

The article then goes into a discussion about just what a bad idea unlicensed spectrum is, again, suggesting that it somehow harms innovation by not effectively allocating the spectrum -- and repeatedly hinting at the fact unlicensed spectrum supporters are somehow socialists, talking about how it's supported by those who believe in the "commons" model, and saying that unlicensed spectrum is "just a new version of a centralized allocation system." In other words, WiFi is communism and central planning, whereas selling the spectrum to a few oligopolists is capitalism and free markets. Of course, for anyone who understands this stuff, such claims are ludicrous. Unlicensed spectrum is hardly a "centralized allocation system," and it's hard to see how anyone could make such a claim with a straight face. The level of competition and continued innovation within open spectrum should make that pretty clear. The problem, again, is the failure to understand zero. PFF is interpreting unlicensed spectrum to be a government hand out, and filling in that there must be scarcity issues, even when there aren't. Most existing open spectrum developments have been much more focused on applications where interference (scarcity) isn't an issue -- and there's no reason to believe that the same wouldn't be true with this spectrum as well. The real question is whether or not the spectrum will be put to good, and efficient, use. Whereas PFF believes it only gets put to good use when it's been paid for (giving incentives to those who paid for it to get the returns), what those who understand zero recognize, is that unlicensed spectrum turns spectrum into a free input, lowering the costs and allowing companies to provide products that serve the market at much more reasonable rates. It's not about socialism, communism, central planning or anything like that: but about making the inputs into the system less of a barrier to providing the market with products that they want.

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21 Comments

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Shawn Cartwright, 16 May 2006 @ 12:20pm

Spot On...
Nice Article. I couldn't agree with you more...
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JerseyRich, 16 May 2006 @ 12:39pm

Yay First Post!
Mike, I luv ya, man, but keep it to one paragraph, huh? :p
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JerseyRich, 16 May 2006 @ 12:39pm

Yay First Post!
Mike, I luv ya, man, but keep it to one paragraph, huh? :p
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Todd, 16 May 2006 @ 12:46pm

Right on
You've hit the nail on the head with this one -- PFF's misunderstanding of zero colors everything they write. DeLong is particularly unwilling to believe that something can be both free and valuable. Since this thesis is unchallengable in his little universe, it means that all sorts of realities have to be ignored or explained away, such as:

1. open source
2. open spectrum
3. products without patents
4. countries without strong patent monopoly regimes

All of the above, according to the PFF, must inherently suck. There is not need to examine any of them in detail to see if they measure up against "non-free" competitors. They can't, because they all use zero. So there is no need to try Linux out before dismissing it, no need to talk about 900Mhz cordless phones, no need to mention other frequencies which are already in the commons and well used. No need to look at countries that do well economically without oppressive patent systems. We can dismiss all of these out of hand, because they don't align with the "zero is bad" doctrine.

The doctrine is what really matters, after all. It doesn't matter how much evidence there is that contradicts the doctrine. The PFF is all about doctrine.
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JerseyRich, 16 May 2006 @ 12:46pm

Deja Vu
I'm having it.
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mmrtnt (profile), 16 May 2006 @ 12:55pm

All Right
It's time to compile the official TechDirt Enemies List!
- Telcos
- PFF
- Newspapers
- Television Networks
- Patent Trolls
- Major League Baseball
bastards...
MjM
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Aaron, 16 May 2006 @ 1:04pm

Common
PFF, BSA, RIAA, MPAA, etc.

I seriously doubt it's a 'misunderstanding.' It's more likely a deliberate twisting of the facts in order to reach a pre-determined conclusion. The only thing we don't know is, 'what are they trying to promote?'
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Joe Smith, 16 May 2006 @ 1:29pm

Economics
The source of all value is scarcity. Government monopolies (such as spectrum allocation) can artificially create monopolies where none naturally exist.

When you create property rights in spectrum you do one of two things:
1. you exclude every other potential innovator from that space; or
2. you impose transaction costs for a potential user in negotiating the use of the spectrum - that is there are costs of the negotiation itself, quite apart from any licencing fees which are agreed to be paid. The transaction costs become a hurdle for any new entrants.

It makes perfect economic sense to leave part of the spectum open for experimental products. If the product is a success and needs exclusive access to bandwidth then it can move over to a different, allocated, part of the spectrum.

In some ways innovators and small scale users are the 'long tail" of spectrum users and there has to be room for them.
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Mike (profile), 16 May 2006 @ 1:33pm

Re: All Right
Heh

It's time to compile the official TechDirt Enemies List!

While I know you're joking... this isn't accurate at all. Most of those on your list are companies that we think are making business mistakes. I wouldn't call them enemies, but those who are looking at things from a short-sighted viewpoint, which we actually believe will hurt them in the long run.

We're trying to *help* them, not destroy them.
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RF, 16 May 2006 @ 1:34pm

True but one point
I agree. However, "on the closed spectrum side of things, development and innovation has moved at a much slower pace" is a convoluted counterpoint. There are many reasons these frequencies are slower to develop. And the issue of it being closed is a very small issue. It is much easier in terms of engineering to develop at the lower frequencies which is where "White space" is. The higher in frequency you go, the more complex the physics behind all the technology. But I do agree with you that part of the problem is PFF control of it. And my communist upbringing has nothing to do with my opinion.
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Mike (profile), 16 May 2006 @ 1:37pm

Re: Economics
The source of all value is scarcity.

Hmm. The source of being able to charge for value is scarcity. That's not the same thing... A lack of scarcity could simply cheapen the inputs of other products, which can definitely be seen as having great value.

The rest of your comment, however, I agree with.
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Jamie, 16 May 2006 @ 2:22pm

Less government is regulation is communist?
How can the PFF claim that deregulating the spectrum is a communist/socialist concept? Capitalism in its purest form means no government regulation on an industry. Any time you remove government regulation over an industry you are encouraging capitalism. Capitalism is all about letting the market control the products and companies, socialism/communism are about government controlling the industries. When the FCC sells spectrum to individual companies, they are giving that company a government sponsored monopoly. If they leave the spectrum as unlicensed, then they are letting the market (you as the consumer) decide who will use it.
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Stalin, 16 May 2006 @ 3:13pm

NOOOO!
NOOOO! People have figured out my evil plan to spread communism!
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Robin, 16 May 2006 @ 4:02pm

Re: Re: Economics
Nor does it take into account the system as a whole. Does artificially creating scarcity promote innovation? Sure, it promotes making the scarce resource irrelavant. Look at oil, the more tightly it is controled the more R and D money goes into alternatives. If they continue promoting monopolistic policies then the market with innovate around with the spectrum they do have. As Wifi becomes Ubiquitious what to stop people from routing around the "Valuable" i.e. costly spectrum the Mobile Opperators "own." Oh wait, that has already happened. And what is most interesting is this is being promoted by the carriers as a way to increase thier own capacity without having to license more spectrum in some obsurd bidding war, ultimately forcing carriers to compete on [gasp] qualtiy of service and applications.
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ccc, 17 May 2006 @ 3:09am

There's only one reason why industry organizations want auctions of spectrum... it's a freebie.

Basically what a spectrum auction is is the government selling off something that belongs to the people - selling it to someone so they can then sell it BACK to the people at a profit. As if they sold off Yellowstone to Disney, so that Disney could then charge everyone admission.

It's a license to print money, essentially.
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wow, 17 May 2006 @ 6:15am

you got cojones
Lecturing a PhD economist on economics -- man I admire your self-confidence! You tell this guy just how little he understands about his lifelong profession!
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Joe Smith, 17 May 2006 @ 7:38am

Re: you got cojones
Lecturing a PhD economist on economics -- man I admire your self-confidence!

If you laid all the economists in the world end to end, they wouldn't reach a conclusion.

The fact that the guy has a Ph.D. in economics doesn't stand for much if he is out there parrottng nonsense on behalf of a lobby group.
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Jerry Brito, 17 May 2006 @ 8:07am

I'm afraid a 'commons' does require central planni
Mike- In order to have a 'commons' that works, you need to have rules that govern how devices operate in the space so that they don't interfere with each other. For example, devices in the chunk of spectrum in which Wi-Fi operates, by regulation, cannot operate above 5 Watts EIRP. Therefore, the rules that govern the 'commons' we now have are centrally planned by the government. As I'm sure you would agree, central planning is inefficient because a planner cannot possibly have all the information about all possible competing uses of the spectrum. While there no doubt is a place for unlicensed devices, one has to admit that designating some spectrum as a commons with certain specific rules will prevent that spectrum from being used in another, perhaps more innovative way, that cannot operate within the commons' rules. In a market you could just by the spectrum and deploy your more innovative use; in a commons regime you would have to petition the central planner to change the rules (and we all know how well and how quickly that works.)
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Mike (profile), 17 May 2006 @ 10:19am

Re: I'm afraid a 'commons' does require central pl
in order to have a 'commons' that works, you need to have rules that govern how devices operate in the space so that they don't interfere with each other.

In some cases that's true, but it need not be in all.

Still, in the case of WiFi, I think you'd agree that it worked out quite well. They set a simple rule to minimize interference questions and then stayed pretty much out of it... and that's quite a success story. We weren't seeing anything like it in closed spectrum, were we?

Setting up a few simple boundary rules is hardly "central planning."

Also, when it comes to wide area networks, where interference is more of a concern, I'm still not convinced you're going to have so many entrants that they won't be able to work out interference issues through mutual agreements. In many cases the interference harms everyone (it's not a case of one company hurting another, but one company hurting everyone including themselves). So, there are incentives in place for companies to work out ways to play nicely together, without necessarily involving gov't "central planning."
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Mike (profile), 17 May 2006 @ 10:37am

Re: I'm afraid a 'commons' does require central pl
One more point on this... I'm not saying that auctioning off closed spectrum is a bad policy -- and I've made it clear in the past that I believe we'll see lots of good ideas come out of closed spectrum. However, it seems pretty clear that we have empirical proof that an awful lot of innovation can come out of open "commons" spectrum as well.
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anonymous coward, 18 May 2006 @ 10:21am

nothing can be free and valuable. If something appears to be free and valuable to you, it just means that you don't understand or recognize what the true value of that resource is.

For example, why should I be able to search massive amounts of Internet data via a third-party technology for free? It doesn't make sense. That company spent hundreds of millions on that technology, but I get to use it for free?

Inconceivable!
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