WASHINGTON-The Clinton administration, which now projects $30 billion from spectrum auctions during the next decade despite free-falling license prices, plans to seek legislation from Congress this year to sell 36 megahertz from TV channels 60-69 before 2002.
Under last year’s balanced budget agreement, the sale of that 36 megahertz was slated for 2002. The remaining 24 megahertz of the 60-69 block was set aside for public-safety communications.
The new auction initiative, which is vaguely referenced in the $1.73 trillion balanced budget proposal the White House unveiled last week, would, in the administration’s words, “facilitate the efficient deployment of the spectrum by the Federal Communications Commission which will maximize market value.”
However, a congressional budget source said the real reason for holding the auction sooner than 2002 has more to do with changing circumstances of balancing the federal budget by the end of fiscal 1999 instead of by 2002.
Whether pushing up the date of the 60-69 auction and unleashing at least another 234 megahertz (120 megahertz from reallocation, 78 megahertz from return analog TV channels and 36 megahertz from TV channels 60-69) will “maximize market value” of spectrum is suspect.
In addition to the 234 megahertz, other spectrum will be put up for sale this year in the 220 MHz, 900 MHz, 39 GHz and 800 MHz bands for a variety of wireless services.
As such, some believe the wireless market already is fully saturated with spectrum and service providers, owing in large part to the more than 120 megahertz for broadband personal communications services and other commercial wireless services licenses.
As a result, a shakeout has begun in the form of bankruptcies and dropping license prices in the mobile phone and paging sectors.
Start-up companies today face heavy financial burdens associated with buying licenses that can cost hundreds of millions of dollars, constructing networks and marketing new services in an increasingly competitive environment.
When all is said and done, small and large carriers are beginning to find the margins just aren’t there.
New wireless licensees that use frequencies reallocated from the federal government will have the added expense of reimbursing government agencies for the cost of relocating to new spectrum.
The infusion of yet more spectrum and the trend toward service flexibility could dramatically hurt or help-albeit indirectly-incumbent wireless carriers.
New wireless companies that can overcome financial hurdles would add to the competitive mix and cut into the bottom line of entrenched wireless carriers.
Wall Street is not fond of too much competition.
But the potential also exists that the helter skelter of so much competition at once will prove disastrous for wireless newcomers. The result could be that the industry landscape returns several years from now to where it was before all the new spectrum was dumped on the market; that is, to a loose oligopoly.
If the latter transpires, the U.S. Treasury is unlikely to see much of that $30 billion in 10 years.
In the meantime, the federal government continues to flood the wireless market with more spectrum.
Another questionable aspect of the Clinton administration auction proposal is its proposition of “maximizing market value” of spectrum.
That goal appears in direct conflict with the original 1993 auction law, which states “the Federal Communications Commission may not base a finding of public interest, convenience and necessity on the expectation of federal revenues from the use of a system of competitive bidding.”
It is precisely language like “maximizing market value” that has sparked friction between telecom lawmakers and White House and congressional budgeteers regarding the appropriate role of government in making wireless telecom policy.
Elsewhere, the Clinton budget seeks $213 million for the FCC in FY 1999, a $26.5 million increase compared with 1998.
Notably absent from the Clinton spending plan are spectrum fees. However, $172.5 million of the proposed $213 million FCC budget will come from telecom user fees. That means the FCC will need to assess an additional $10 million in new or increased fees in fiscal 1999.
The National Telecommunications and Information Administration would receive $10.9 million, some $5.5 million less than fiscal 1998. Some of that loss will be made up in the $9.3 million NTIA expects to charge federal agencies for spectrum management services.
The Justice Department is seeking $37 million to implement recommendations of the Presidential Commission on Critical Infrastructure Protection.
