Certainly the airwaves need a steward who will maintain adherence to technical parameters, allocate the spectrum such that it remains usable and, secondarily, promote the efficient and effective use of the spectrum. This could be achieved by a free market consortium or the government. It's been done by the government since they took over during World War I.
We've seen abuses of power by the FCC in content regulation, favoring heritage constituencies (AM over FM, radio over TV, TV over cable, cable over satellite, terrestrial over satellite and internet, etc....) and governance over business models (satellite radio) that go far beyond spectrum maintenance. This has been done in the name of the "public good" (whatever that is and however you determine it) and national security. We're currently watching the FCC attempt to regulate the business models of internet providers. The argument of scarcity of resources that the government used to regulate beyond frequency management has long since evaporated. Many radio people who grew up under the government control model don't want to let go of it whether due to familiarity, employment issues or a vague sense that the public somehow benefits from this overlording.
We have an electorate that either doesn't understand or doesn't care how this affects them. So the overregulation continues.
All that said, the regulation of rampant and blatant (high-power) piracy falls clearly under spectrum management. Through efficient use of law enforcement resources and partnering with state authorities, the FCC could engage in a selected number of high profile 'take downs' in states with the toughest statutes. That would go a long way toward reducing the magnitude of a problem that, admittedly, is never going to go away entirely. The guy running a 1-watt FM in his neighborhood isn't the problem. The guy spraying several kW into an improperly tuned antenna is. Use the limited resources to take him out, and publicize it.
For an historical overview on how the airwaves first came under government control, read the first couple of chapters of Jesse Walker's Rebels On the Air (2001 NYU Press).