Using Broadband Spectrum Auctions to Reduce the Deficit | Citizens Against Government Waste

Using Broadband Spectrum Auctions to Reduce the Deficit

The WasteWatcher

As the White House, Congress and particularly the Joint Select Committee on Deficit Reduction look for ways to reduce spending and enhance revenues, close scrutiny is being given to both the allocation of broadband spectrum and the use of voluntary spectrum auctions to raise revenue for deficit reduction.

The Federal Communications Commission (FCC) allocates and manages spectrum bandwidth, which is the wave length, measured in hertz (Hz), over which communication travels. Although invisible to the naked eye, spectrum is a valuable resource. Every time someone connects to a wireless device, uses a wireless telephone, makes a call using a cellular phone, turns on the radio, or watches television, spectrum is being used.

As more people access mobile technology and broadband, spectrum has evolved into a critical component for communication all over the world. However, with the ever-expanding spectrum needs of the broadband and wireless industries, the current supply is reaching its limits, and additional licensed spectrum needs to be allocated for commercial use. According to the CTIA, a wireless telecommunications industry association, there are approximately 302.9 million wireless subscribers in the United States.

The nation’s first responders also use spectrum to communicate. The terrorist attacks on September 11, 2001 made it clear that public safety personnel and first responders must be able to communicate to each other in a heightened state of emergency. The Bipartisan Policy Center’s National Security Preparedness Group’s Tenth Anniversary Report Card: The Status of the 9/11Commission Recommendations listed nine critical recommendations of the 9/11 Commission that have not been addressed, including the availability of radio spectrum and interoperability for first responders. While many suggestions have been made since September 11 to set aside a portion of spectrum for public safety first responders to allow them to communicate more effectively during an emergency, the issue has not been resolved.

In an effort to address the nation’s critical broadband communications needs, the FCC and Congress are looking at options for additional spectrum auctions. On March 17, 2010, the FCC submitted to Congress the National Broadband Plan (NBP), setting a goal of making 500 MHz of spectrum available for broadband use over the next 10 years. The NBP designated that 300 MHz of the total 500 MHz would be available within the next three years. Since that time, much debate has ensued on how this spectrum would be made available for commercial use, including which bandwidths would be available, and how the spectrum would be allocated.

In the 1980s, the FCC gave away portions of the spectrum through a lottery system. For the chance to win the rights to broadcast on spectrum, participants were asked to fill out a complicated application and hand over a $155 fee. Those who won the spectrum often resold their winnings for millions of dollars. This was money that could have gone into the federal coffers and used to reduce the deficit, lower taxes or provide additional public services. Instead, it went to people with enough time and legal expertise to complete the complex lottery application.

In 1993, the FCC decided to auction off portions of spectrum instead of giving it away through the lottery system. During the mid-1990s, the government raised $15 billion through the auction of the 800 MHz bandwidth. Not only did government gain revenues from the sale, but consumers also benefited from the development of new innovations which enhanced communications.

Legislation has been introduced in Congress to provide both new spectrum auction authorities as well as address the issues related to public safety communications. However, the President’s American Jobs Act, which would provide spectrum auction authority to the FCC, also includes the imposition of spectrum license user fees, which could create a disincentive to the auction process by tacking on additional fees to initial licenses and construction permits through fiscal year 2021. Questions remain on how the final package will look, particularly with respect to these fee proposals which could eventually be passed along to the consumer either through higher service fees or as a hidden tax, much like the Universal Service Fund fee on telephone bills.

On October 7, 2011, four members of the Joint Select Committee on Deficit Reduction sent a letter to President Obama asking him to review the broadband spectrum currently used by the federal government. They felt that the 500 MHz of spectrum recommended for auction by the NBP was insufficient to meet the growing broadband needs of the nation. The members recommended that the government make more efficient use of government-owned spectrum and reallocate some of it for commercial use and make available paired, internationally harmonized spectrum below 3 GHz in sufficient block sizes to support mobile broadband services for the next 10 years.

As the debate continues, both Congress and FCC should consider the following: 1) the government should review its spectrum needs and reallocate some of its unused spectrum into the auction process; 2) any legislation should include an open bidding clause for the spectrum auctions allowing all parties to participate equally in the process; 3) a review of how much spectrum is currently allocated for unlicensed use should be performed in order to determine whether additional spectrum allocation for this purpose is necessary; and, 4) spectrum user fees should not be established due to the harmful consequences to consumers.

Using these guidelines, Congress and the administration should work together in evaluating the spectrum auctions in order to increase revenue and reduce the deficit.

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