WASHINGTON-Whether the nation is plagued with daunting deficits or buoyed by gushing surpluses, spectrum auctions remain a lightning rod for controversy as the revenue-generating wireless licensing tool becomes inextricably intertwined in national budget policy.
This was inevitable.
Spectrum auctions grew out of a 1993 budget bill crafted by a Democratic Congress and approved by a Democratic White House. The budget legislation was designed to eliminate the then-budget deficit over 10 years.
In 1997, Congress passed more spectrum-auction legislation in another budget bill, following a nasty spectrum fight between the wireless industry and the Department of Defense.
A big criticism of telecom lawmakers back then was spectrum auctions were being used to write down the deficit inappropriately and to pay for pet programs of the Clinton administration. Of course, the Pentagon had its own gripe. For DoD, the reallocation of 235 megahertz from the federal government to the private sector-another spectrum provision of the 1993 budget bill-amounted to a raid on the military’s spectrum inventory. The bad blood between the Pentagon and the wireless industry that was given life in 1993 exists to this day.
Nearly a decade later, spectrum auctions comprise a key component of the president’s 10-year, $1.6 billion tax cut plan. Times have changed. Now, Republicans control the White House and Congress and both are blessed with a budget surplus. As such, one criticism now being heard is spectrum auction dates are being manipulated to help pay for the huge tax cut passed by the House last week.
In its short history, spectrum auctions have had more in common with budget policy than with telecom policy. Some say telecom policy has been trashed in the process. For sure, there is still the hue and cry that spectrum auctions favor well-heeled wireless telecom carriers. The claim was loudly echoed again after the re-auction of C-block personal communications services licenses that ended in January.
Spectrum auctions have become an easy way for congressional and White House budgeteers to avoid hard choices, according to telecom lawmakers. That political reality has set off a power struggle between telecom lawmakers and congressional appropriators for control of spectrum-auction policy.
That debate continues to this day as evidenced by the mixed-and in part hostile-reaction to President Bush’s spectrum-auction proposal two weeks ago. The plan would postpone the auction of valuable broadcast spectrum and introduce incentives-like lease fees-to clear TV licensees off the 700 MHz band.
The latest controversy is testament to the high stakes the airwaves have come to command in the Great Budget Debate.
Indeed, there was little uniformity of response to Bush’s spectrum-auction proposal. Bush, as tightly scripted as he is unpredictable at times, did with spectrum auctions what he has done with words and ideas previously: He confounded Washington’s political establishment. Some liked it. Others didn’t. Most folks, though, were simply confused.
Some on Capitol Hill were caught off guard by the White House’s spectrum proposal, which was included in Bush’s $1.96 trillion fiscal 2002 budget.
White House budgeteers, intentionally or otherwise, did not give telecom lawmakers a heads-up on the spectrum-auction plan. That the White House might have overlooked time-honored protocol in this case is not surprising, since the Bush presidency is at least a month-and-a-half behind schedule.
“The idea of broadcast spectrum fees are DOA,” said Ken Johnson, a spokesman for Tauzin. “But,” he added, “there are other parts of the plan that appear to have merit, opening the door to further discussion with the White House.”
The mobile-phone industry, hungry for more third-generation wireless spectrum currently held by broadcasters, DoD, schools, churches and fixed broadband Internet carriers, took the Bush spectrum proposal in stride. The industry realizes Bush’s spectrum plan is only stating the obvious: Auction of broadcast spectrum will be delayed. If this White House can help move broadcasters off the 700 MHz band, the wireless industry is for it. In fact, the White House’s acknowledgement that there will be auction delays actually strengthens industry’s argument for lifting the spectrum cap now in order to provide immediate relief.
Previous administrations-Republican and Democratic alike-have been stymied by the powerful broadcast lobby in attempts to force broadcasters to pay lease fees as an incentive to return excess spectrum.
“We have consistently opposed spectrum fees,” said Dennis Wharton, a spokesman for the National Association of Broadcasters. Wharton said NAB was withholding comment on the White House’s proposal to delay two auctions of broadcast spectrum until there are more details. The White House plans to provide a detailed version of its FY 2002 budget proposal and send Congress spectrum-auction legislation next month.
TV broadcasters were given an extra six-megahertz channel for the transition from analog to digital technology. The idea was to avoid disenfranchising consumers who have not purchased DTVs.
Broadcasters are supposed to return loaned spectrum by the end of 2006. But the development of digital TV and consumer acceptance of it are going slowly. The auction of that spectrum is scheduled for 2002. Bush’s plan would delay it until 2006, closer to the time the frequencies are supposed to be returned.
Another chunk of broadcast spectrum, which is occupied nationwide by about 100 TV licensees, was due to be auctioned this September. The auction, which mobile-phone carriers want for 3G networks, has been delayed several times before. If Bush has his way, the auction could be postponed to as late as 2004. Most likely the 700 MHz auction will occur before then, according to congressional and administration sources.
By 2011, Bush’s budget envisions raising $7.5 billion from auctions and $1.4 billion from broadcast license fees.
One constant criticism in recent years-voiced loudly by Senate Commerce Committee Chairman John McCain (R-Ariz.) and former Senate Majority Leader Robert Dole (R-Kan.)-is that broadcasters are the beneficiaries of corporate welfare to the tune of $70 billion.
Truth is, the fight over broadcast spectrum goes back to the mid-1980s, when the circumstances were quite different than today. The Federal Communications Commission came within an eyelash of reallocating UHF-TV channels to the private wireless sector. But the FCC put the rule change on hold, owing to fears about Japan taking global leadership in high-definition television and concerns that dispatch radio licensees were not making efficient use of spectrum.
Two decades later, the world has changed. Private wireless spectrum needs are largely ignored and overshadowed by 3G mobile-phone frequency requirements. The United States still worries about Japan, even though it is not the feared economic juggernaut of the 1980s. America sees Japan’s one bright spot-the wild success of NTT DoCoMo’s Internet-friendly mobile phones-and worries about losing this market to Asia as well as Europe. It is now a global economy where battles between nations are won and lost at local shopping malls.
The 3G dynamic, which now looms large on the political-economic radar screen, possibly has more potential than any other factor to shape spectrum policy in coming years. 3G is quickly picking up momentum in Congress. If it leads this year to a critical mass of political will, the effort to locate spectrum for 3G may prove more powerful than the parochial interests of budgeteers and broadcasters combined.
President Bush is about to make his mark on national spectrum policy.
