You missed step 0: Regulate RF spectrum such that setting up a new provider is almost impossible but spectrum is extremely valuable so big providers will have incentives to buy smaller ones to stop competition.
Here is the deal with that though. Spectrum is finite. There is only so much to go around. There absolutely needs to be regulation, as it cannot be a free for all. Just look at wifi in large hotels or apparment/office complex to see what happens if there are too many devices talking over the air at once.
Sure, but it doesn't mean that the method of regulating it that's used is best - should spectrum be transfered on sale of a company? Is selling spectrum to the highest bidder the best thing for a competitive market? Perhaps larger portions of spectrum could be reserved for smaller players and bigger players could be left to make the existing spectrum used more efficiently?
Additionally, in any given location most of the spectrum is unused but reserved, smarter devices could take advantage of this, but current regulations prohibit this from becoming a reality. With certain portions of cellular spectrum in particular this could be hugely advantageous to consumers, at the cost of governments who wouldn't be able to make money selling that spectrum.
Yes, we want to utilize spectrum as efficiently as possible. But do we have any better mechanisms to efficiently allocate resources than markets? I'm sure we could improve the spectrum market. Maybe renting for a limited time instead of owning would work better and make squatting more expensive. But that kinda should have been priced in at the sale and I'd not be surprised if that would create perverse incentives in some way as well. I just don't see easy fixes...
Governments are both creating and enforcing a monopoly here, that doesn't sound like any efficient market I've ever heard of. You wouldn't call it efficient if a government came in and decided that they're going to sell the rights to be the only company that can sell cars tomorrow. Yes, cars don't suffer from interference, but the basic point still stands - the way the current regulatory system works leads directly to government enforced monopolies.
There are alternative solutions - like opening up wide swaths of spectrum to smarter devices that are able to share that spectrum broadly.
Government enforced monopolies present the worst of both corporate and regulatory worlds - a disaster for the consumer. Shouldn't we care more about the market for services the consumers get than the market for spectrum that providers buy?
> You wouldn't call it efficient if a government came in and decided
That is what happens for every natural resource. Your gov establishes rules for land and ground water just like that. Actually, even for IP and patents...
I don't see how you get from "gov regulated process of resource allocation" to "gov enforced monopolies". Yes, we should care about the value generated to consumers. The theory is that companies use exactly this money from consumers to get the spectrum.
> There are alternative solutions - like opening up wide swaths of spectrum to smarter devices that are able to share that spectrum broadly.
That only works with strong regulation (I'd guess you don't want gov involved in details?) or in situations were cooperation will always win out. Otherwise you'd usually end up with with some kind of Tragedy of the commons / Prisoner's dilemma like situation. Like every neighbor here upping their WLAN power...
I didn't mean to suggest that no regulation was the superior option - just that the market isn't efficient because it can't be operated efficiently. The limitations on distribution of spectrum makes it an inherently inefficient market. Unlike with another natural resource like say, tree pulp or oil, I can't just import some cell service if I don't like your prices, that's why I call this a government enforced monopoly. If government decide to distribute an immovable resource in a way unfriendly to competition it results in a broken market.
Patents and copyrights are an intentional breaking of this market to encourage innovation - explicitly with the intention of creating a temporary monopoly. One can hope that government doesn't go out with the goal of creating a monopoly on cell service.
However there is good and there is bad regulation. During the UMTS frequency auction the German finance minister joked about UMTS meaning "Unerwartete Mehreinnahmen zur Tilgung von Schulden" (unexpected additional income to repay debt) and tried to maximize financial gain.
A good regulation would be one which ensures competition, for instance by ensuring infrastructure in rural areas can be used by multiple companies isntead of making entry into the market expensive.
The ITU bands (e.g. 900MHz, 2.4 GHz) are way too small. If we had larger, national or global, unregulated bands, it would drive wireless innovation to even greater heights.
As it is now we have "innovators" who have access to private bands, and should know better (the cellular telecoms) threatening to trash the ITU bands with 5G coverage. It's a travesty since the result will be cellular Big Co basically squashing your Wi-Fi and the smaller players who can't afford private spectrum.
