Coase and the New Zealand Spectrum Reforms

A superb paper picked up from the conference given in honor of Prof Coase.

Via this paper I came to know NZ was the first economy to auction spectrum in 1989 (1989 was also the year when NZ adopted inflation targeting, another first). The paper is Charles Jackson who was part of the core team which managed this auction.

What is seen as an obvious thing now – allocation of spectrum to private parties using auctions – was just impossible a while ago. Coase’s paper in 1959 questioned this practice and suggested to auction  spectrum etc to private players.

In 1989, New Zealand’s Parliament enacted a new statute, the Radiocommunications Act 1989, that explicitly used a system of property rights to regulate the use of the radio spectrum.1 This statute resulted in the first ever spectrum auctions—and New  Zealand’s use of auctions has been copied around the globe. New Zealand’s adoption of a propertyrights regime, a more fundamental change than the introduction of spectrum auctions, has not had the same wide acceptance.2 How did New Zealand’s adoption of a propertyrights approach to spectrum come to pass? What role did Coase’s 1959 article play in the decision to adopt a property-rights approach  and in the design of the property-rights mechanisms? How does the New Zealand system (both in theory and in practice) differ from a naïve application of Coase’s insights?

It is my goal in this paper to address these questions. I was on the team that developed most of the system that is embodied in the New Zealand statute, and I participated in some of the drafting sessions for the statute.3 In recounting the background of  the New Zealand project, I also have to describe Coase’s influence on my own thinking. Although I conclude that the spectrum rights regime in New Zealand reflects Coase’s insights and, most probably, would not exist without his work, I indulge in some speculation about the benefits of broader and earlier implementation of a property-rights approach to spectrum management.

I did not understand the technology bit in the paper though. Nevertheless a nice read..

Hoping to read (can I write??) something on similar lines on auction of spectrum in India…

 

 

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