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I will agree that a major part of the problem is a "collective action problem". The failure to plan effectively. The lack of interoperability is not a market problem but an administrative problem.
Part of the blame for the lack of interoperablity actually belongs to private industry itself. One of the organizations I belong to received new radios, the radio technician responsible for setting up the communication system had nothing good to say about them because of their proprietary (DRM) nature which limited their functionality for interoperability and made existing radio equipment "obsolete".
Based on the trend for proprietary systems (locked cell phones), I doubt that a market approach would ever work. Basically this is an administrative issue that can be solved, if we had effective planning rather than analysis paralysis.
Furthermore, if a private company, such as a baby bell can build communication facilities, it logically follows that a public agency should also have the ability to build communication facilities. It seems to me that the owner of a communication system should have the right to implement the system as they see fit. If a market solution presents itself, fine. If not, it should not be mandated.
Steve R.: You also make a good point with your comment that "the lack of interoperability is not a market problem but an administrative problem".
However, I must respectfully disagree with your perception that the "spectrum is managed by the FCC". On paper, maybe; in reality, the spectrum has become just another commodity to help the government fund its economic development agenda,
among other things. IMHO, the FCC has proven itself to be relatively incapable of responsible management of this important natural resource over the last 15-20 years.
Just my .02 cents, for whatever it may be worth.
Nick Ruark
However, I must also add, that even if the government were truly acting in the public interest, the government should have a right to lease spectrum to corporations/individuals. After all it is an asset. Furthermore, the spectrum is held in trust by government and must not be privatized. Finally, it is not the role of government to "help" corporations, only to provide a level playing field.