Stanford's Greg Rosston on the Future of Broadband Accessibility

Episode Summary

Executive Summary: Greg Rosston discusses how FCC spectrum auctions transformed telecom policy, why auction design details mattered, and how economics increasingly shapes FCC decisions. The conversation also covers universal service inefficiencies, the limits of future-proofing, and the growing antitrust/regulatory scrutiny facing big tech mergers and acquisitions.

Main Topics: The origins and design of FCC spectrum auctions (Priority: 5/5): Rosston explains how the FCC moved from beauty contests and lotteries to auctions, and why early auction theory, especially Evan Kwerel’s footnotes and academic input, was crucial to success. Why auction details mattered more than the fact of auctioning (Priority: 5/5): The discussion emphasizes that auction rules, license size, ordering, simultaneity, and activity rules strongly affected outcomes and became foundational globally. Spectrum flexibility and transitions from legacy uses (Priority: 4/5): Auctions helped establish flexible licenses and enabled transitions away from incumbent uses like broadcasting and microwave through buyouts and relocation mechanisms. The role of economics at the FCC (Priority: 4/5): Rosston highlights the importance of strong chief economists, early economist involvement, and political relationships between chair and economists in shaping agency policy. Universal service, affordability, and subsidies (Priority: 5/5): He argues many rural subsidies miss low-income households and that future broadband policy should focus more on affordability and efficient targeting, including auctions and possibly vouchers. Cost-benefit analysis and future-proofing (Priority: 4/5): Rosston supports FCC cost-benefit analysis as a discipline and criticizes vague calls to future-proof networks, arguing decisions should be based on net benefits and uncertainty. Big Tech regulation, mergers, and antitrust (Priority: 4/5): The conversation turns to Google/Facebook-era regulation, startup exit incentives, and the challenges of using merger retrospectives or tougher review to curb anticompetitive behavior.

Key Arguments: Auction theory and design details were essential; simply ‘putting stuff up for sale’ was never enough to create effective spectrum policy. Evan Kwerel’s FCC footnotes helped pull top auction theorists into the process, materially improving auction design. Simultaneous multiple-round auctions and activity rules were key innovations because they revealed information and prevented last-second strategic bidding. Spectrum policy should prioritize flexibility so licenses can adapt over time rather than locking in rigid uses. Universal service programs often miss the intended beneficiaries; rural subsidies can disproportionately reach higher-income households. Affordability, not just availability, is a major reason households remain unconnected, especially in urban areas. Cost-benefit analysis should be embedded in FCC decision-making and reviewable by courts to reduce hidden policymaking. ‘Future-proofing’ is not a meaningful policy standard because technology and relative costs change, making present value calculations more appropriate. Merger enforcement faces a tradeoff between deterring anticompetitive behavior and preserving certainty for firms; changing the burden of proof may be more practical than retroactively undoing approved mergers.

Data Points: Date of episode: December 11, 2020 - Opening introduction to the podcast episode Telecommunications Act authorization for auctions: 1993 - Rosston notes the Omnibus Budget Reconciliation Act of 1993 authorized spectrum auctions Spectrum auction implementation milestone: First ever spectrum auction in the United States - Rosston helped design and implement the first U.S. spectrum auction FCC role start under chairman: Since Reed Hundt (described as starting in every FCC since Reed Hunt/Hundt) - Discussion of when auctions became routine at the FCC Universal service paper era: Late 1990s - Their study of rural universal service programs was conducted in the late 1990s Broadband / rural coverage promise: 97%-98% - Rosston cites 5G as promising coverage for most of the country Satellite coverage promise: 100% - He notes low-Earth-orbit satellite service could eventually cover the whole country FCC auction assistance period: 10 years - He references subsidy periods for rural buildout and hopes support would end after a decade FTC / Facebook acquisition notification burden: All acquisitions - Referenced as a proposed remedy in the Facebook suit AT&T–Time Warner FCC issue: 1 television station sold off - Mentioned as a way the firms avoided FCC review in that transaction

Pivotal Quotes: "It's not the details that matter, it's a fact that we're having auctions." — Scott Walston: He recalls an early draft comment that Greg Rosston criticized, setting up the importance of auction design "Read the law, study the economics, do the right thing." — Reed Hundt: Rosston cites the FCC chairman’s slogan to explain the agency’s pro-economics philosophy "I hate the concept of future-proofing. It doesn't make any sense to me." — Greg Rosston: He argues that policy should be based on expected net benefits and not vague claims about locking in technology

Implications: The episode suggests that smart rules, not just market mechanisms, determine telecom outcomes. For policymakers, better economics, targeted subsidies, and disciplined cost-benefit analysis may improve spectrum, broadband, and antitrust policy.