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Currently, the FCC assigns radio licences after making a determination of the public interest. Conflicting licence applications are resolved through comparative hearings. This mechanism is cumbersome and unreliable. This article analyses three alternatives: Increasing the available spectrum; an auction; or, lottery of radio licences. The analysis deals specifically with the Multipoint Distribution Service (MDS). The analysis suggests that increasing the spectrum allocation will create more assignments than will be demanded by MDS. Rough calculations suggest that auctions offer a more efficient selection mechanism. Lotteries with resale of the license are better than hearings, but not as good as auctions.

The Communications Act of 1934, which regulates the United States telecommunications industry, is becoming less able to deal with the changes brought by modern technology. Therefore, proposals are being made to restructure the industry. Breaking up AT&T into smaller firms would have only minor effects, since its ratio of R and D to sales has been near the median for large telephone companies. Restructuring AT&T into subsidiaries dealing at arms' length might cause a reordering of priorities toward more directly marketable and useful products, but too extensive a break-up could endanger Bell Labs' commitment to basic research. Regulation leads a firm to ignore true social value of possible products, expand into low profit markets, and favor capital-intensive over labor-intensive innovation. If regulatory lag occurs, a firm will produce cost-reducing innovation in order to increase its profit.