One of the common features of broadcast licences in the US is that they are just that, licences.  "Licence," in this context, carries the same meaning it does elsewhere in the law. It is the permission by an owner to let someone else enter his or her property on whatever terms and conditions the owner sets.  These licences take a variety of forms. Broadcast licences are for a term of years, whose renewal is conditioned on its owner's willingness to comply with the "nondelegable" duty to exercise "adequate control and supervision over the programming" of its station. After all, why shouldn't a licencee tend valuable property received courtesy of the government, free of charge.

        For lots of reasons, it turns out.  The key question is how would these stations perform if they were owned not licensed. The owner of the frequency has an incentive to maximise its profits, subject to any external constraints.  In an ideal world, the only constraints on the ownership interest would parallel the limitations now placed on the owners of real property.   Quite simply, the owner of a physical asset must not interfere with the activities that neighbours engage in on their own property. In ordinary nuisance cases, each owner need not act to prevent any noise or odour, however small, from reaching the neighbour's land.  Instead, a live-and-let-live rule makes all parties better off by requiring each to tolerate some low-level nuisances from the neighbours in exchange for greater freedom of action.  For the spectrum, this approach translates into a general prohibition against frequency interference subject to a similar toleration of low-level harms.

      But otherwise, what goes on within that band is no concern of anyone but the owner. That freedom of action allows for the redeployment of the owned band from lower to higher value uses, without prior state approval.  Within this framework, the owner could convert the frequency from broadcast to data transmission for cell phones in response to the weak demand in the former sector and strong demand in the latter.  As Tom Hazlett has shown, the differential utilisation rates are often enormous.

      It is, of course, possible to subject frequency use to restrictions similar to those in ordinary zoning laws.  Just as the zoning law can prohibit a shift in land use from residential to commercial, so the present spectrum zoning laws prohibit the shift of use from broadcast to data transmission - at the price of a huge loss in social value.  But even with this constraint firmly in place, ownership still offers major advantages over licensing for frequencies dedicated by state fiat to broadcast only.

            Exhibit A for this proposition is the 1981 decision of the District of Columbia Court of Appeals in Cosmopolitan Broadcast Co. v. FCC, which involved the revocation of the broadcast licence of Cosmopolitan for the fatal statutory sin of turning itself from station programmer into a "time broker."  A time broker is a licencee that turns itself into a common carrier, whereby it licenses, no questions asks, blocks of time to the highest bidder to use as they see fit.  In so doing, Cosmopolitan met one of the chronic challenges to broadcast licensees, which was to give voice to niche interests that had neither the capital nor the audience to support a full-time broadcast licence.  Thus, under this programme, the station became an organised Tower of Babel with shows in 25 different languages from Spanish to Bulgarian. The FCC did not bother to examine the quality of the shows, which would have been regarded rightly as an unwelcome form of censorship.  But it was able to brush aside Cosmopolitan's feeble argument that it exercised the requisite level of oversight by choosing the right sublicencees for each show component. So out Cosmopolitan went in a back-handed slap at broadcast innovation.

            Unfortunately, the eminent judges who lowered the boom never asked whether the licence revocation made any sense from a coherent social perspective.  No single broadcast licencee could ever assess shows in languages it did not speak. But why bother at all?  Time brokering effectively transmitted that function downstream to knowledgeable persons with the right financial incentives to make those programming judgments, without any assistance from the FCC.  Moving to the other side of the "rent or own" debate undoes Cosmopolitan's silly result.  The greater flexibility of ownership allows parties to tap new markets with maximal efficiency even under these unwise limits on use.

            The implications of this debate also touch on the hottest issue in telecommunications today - net neutrality.  In that context, the various broadband owners are not, by definition, licensees of the state.  But it is easy for the state to migrate back toward licencee status by imposing ever greater limitations on how broadband providers can use or charge for their networks.  Any aggressive initiatives here run the risk of imposing restrictions that destroy value as they do for today's broadcast licences. The moral of the story is, don't let the FCC get fancy in the broadband space.  Use the same rules of property and antitrust that apply elsewhere in order to free up network owners to maximise their network value via voluntary transactions.

Richard A. Epstein is the James Parker Hall Distinguished Service Professor of Law, The University of Chicago, the Peter and Kirsten Bedford Senior Fellow, The Hoover Institution, and a visiting professor at NYU Law School. He blogs Tuesdays on Forbes.com