Want More Efficient Spectrum Use? Don't Tax It

Efforts to repurpose spectrum (either using intra- or inter-firm transfers) face a number of significant hurdles, including primarily the need for government approval. That often means concessions that essentially are a tax on the process of moving spectrum from lower-value purposes to higher-value purposes.

In its Taxation by Condition:  Spectrum Repurposing at the FCC and the Prolonging of Spectrum Exhaust, Phoenix Center economists. discuss how the regulatory process often acts like a “tax” on private transactions in the form of value-extracting mandatory and voluntary conditions.  

Conditions are a form of a tax (or operate in the same manner as a tax) in that they reduce the value of the transaction to the parties involved.  

When viewed as a tax, the implications of the regulatory process become readily apparent.  When you tax something: (1) you get less of it; and (2) you can affect what types of transactions you get.  

“Taxing” efforts to move spectrum to higher-valued uses is a particular bad policy when facing a spectrum shortage, the  Phoenix Center argues.