Pols and regulators complain that broadband deployment in the U.S. lags other developed nations. At the same time, they conspire to devise policies that hamstring the domestic broadband marketplace. A good example is Washington's approach to allocating wireless electromagnetic spectrum.

This past week the Federal Communications Commission finally got around to an auction of spectrum licenses for in-flight Internet service, which is already offered by foreign carriers like Lufthansa and Japan Airlines. Later this summer, the FCC will accept bids for so-called third-generation, or 3G, spectrum that can be used for high-speed Web access and video. Europe auctioned off 3G licenses more than five years ago.

Allocating spectrum via auction is certainly the most efficient way to go, and no one is suggesting a return to lotteries and competitive hearings. Rather, the problem is the infrequency of the auctions themselves and the fact that the government is dragging its feet in getting more spectrum into private hands.

According to a recent report by the Progress & Freedom Foundation, a free-market telecom think tank, "only 7% of the most valuable spectrum — between 300 MHz and 3GHz — is currently subject to market allocation. Another 14% is slated for market allocation at some point in the future. Seventy-five percent remains under a command-and-control regime, much of it reserved for federal government use."

Policy makers reason that by pushing auctions off they can starve the sector for some period, which creates scarcity and artificially inflates the costs of the licenses. The Congressional Budget Office expects the 3G spectrum auction scheduled for next month to raise about $15 billion for the U.S. Treasury, reflecting uncertainty about future auctions.

But the government's role here shouldn't be to maximize its revenue; the main objective is efficient allocation of an important resource for economic growth. "Congress is spending too much time looking at auction revenues and not enough time looking at the gains to the economy from having more productive use of spectrum," says Thomas Hazlett, a former FCC economist who now teaches law and economics at George Mason University.

Lack of spectrum has prevented T-Mobile from upgrading to high-speed Internet service. Nextel and Sprint opted to merge rather than continue waiting on Uncle Sam to auction off more frequencies. Ultimately, it's the U.S. consumer who loses out. The dearth of spectrum available for commercial use means less choice and price competition with respect to wireless broadband. More spectrum would mean more services and lower prices.

Regulators have tried to compensate for this stinginess by allowing some 2G license holders to offer 3G services, but this is at best a temporary fix. The better course is to stop distorting the market by pretending that spectrum is a scarce resource. Put as much spectrum as possible — as quickly as possible — on the market and remove unnecessary government controls for how it's used. Some incumbent wireless carriers will complain because they don't want any new competition. But the government has no more business protecting these incumbents than it has hoarding frequencies that the market could put to better use.