WASHINGTON-The Clinton administration has overestimated by $12 billion the amount of revenue from spectrum auctions over the next five years, according to the Congressional Budget Office.
CBO’s numbers, prepared at the request of the Senate Appropriations Committee, appear to confirm growing suspicions about devaluation of the airwaves as the wireless marketplace becomes flooded with spectrum and new competitors that-being highly leveraged from having paid top dollar for digital paging and pocket telephone licenses-may be part of a major shakeout in coming years.
Overall, CBO, the nonpartisan number cruncher of Congress, says Clinton’s five-year balanced budget plan would leave a $69 billion deficit by 2002. House Budget Committee Chairman John Kasich (R-Ohio) said the White House budget is unworkable.
Despite the rhetoric, there are signs the GOP-led Congress and the administration are engaged in budget talks behind the scenes. While the balanced budget constitutional amendment was narrowly defeated in the Senate last week, lawmakers seem now to be pinning their balanced budget hopes on a downward revision to the consumer price index.
Some officials at the Federal Communications Commission, which has raised $22 billion largely from the sale of narrowband and broadband personal communications services licenses, have begun tempering auction enthusiasm with cautionary comments in light of criticism that the agency has not said enough about investor risk in connection with competitive bidding.
Even FCC Chairman Reed Hundt, an ardent advocate of spectrum auctions and license flexibility, predicted in a written speech for the cellular industry last week in San Francisco that “we may be disappointed by the number of bidders at the WCS (wireless communications service) auction next month.”
CBO, considering increased supply, flexibility and efficiency of spectrum, went with a more conservative projection of $24 billion from spectrum auction receipts over fiscal years 1998 to 2002. The Clinton administration is counting on $36 billion from wireless license sales over the same period.
CBO said the shortfall will require the administration to make up the difference by collecting at least $9 billion in broadcast license fees. The White House proposed broadcast fees as a backup plan if the sale of analog television licenses brings in less money than anticipated in the Clinton budget.
On the auction of 888 toll-free numbers, CBO and the administration estimate about $700 million. However, that auction faces fierce opposition by the paging and advertising industries.
“Many national advertisers have experienced the problem of `domain name piracy’ on the Internet,” said Dan Jaffe, executive vice president of the Association of National Advertisers.
“If their rights are not fully protected by the FCC, these companies could now have their toll-free telephone numbers hijacked by speculators,” he said.
CBO estimated $15.7 billion from expanded auctions by 2002 compared with the administration’s $17.1 billion.
The 36 megahertz in TV channels 60-69 are expected to bring in $3.5 billion by the White House, $2.5 billion by CBO’s estimate. Twenty-four megahertz of that TV band are reserved for public safety radio communications.
The sale of analog TV licenses, which will become available after broadcasters complete their transition to digital technology, accounts for the biggest disparity in spectrum auction revenue projections.
CBO believes $5.4 billion can be scored from TV license sales by 2002, while the administration pegs the number at $14.8 billion. The difference is explained not so much by divergent views on license value, but rather CBO’s view that the scheduling of the auction and the collection of proceeds will likely occur outside 2002.
In related matters, the FCC and the National Telecommunications and Information Administration go to Capitol Hill next week to seek support for $219 million and $18 million budgets, respectively, in fiscal 1998.
Meanwhile, the Overseas Private Investment Corp. will be fighting to survive without President Ruth Harkin. Harkin leaves OPIC at the end of this month. OPIC, which has provided long-term political risk insurance for U.S. wireless projects in Eastern Europe, is being targeted to be eliminated by Republicans, who say offering the insurance is a form of corporate welfare.
