WASHINGTON-Congress last week was set to pass a new budget that embraces President Bush’s plan to delay two auctions of valuable radio spectrum but rejects an administration proposal to impose fees on TV broadcasters in order to encourage the clearing of frequencies sought by mobile- phone carriers for third-generation wireless systems.
The House-Senate budget agreement, which provides guidance to appropriators in spending decisions on the Federal Communications Commission and other government agencies, is not binding. The FCC’s budget will be taken up by House and Senate appropriations subcommittees in coming weeks.
Under the 2002 budget agreement, the FCC would postpone the auction of TV spectrum in the 747-762 MHz and 777-792 MHz bands from 2001 to 2004 and push back the sale of broadcast frequencies in the 698-746 MHz band from 2002 to 2006. The changes would require new legislation. The date for auctioning some of that spectrum already has been delayed to this September.
While mobile-phone operators would have to wait a little longer to get 3G spectrum, a delay could provide more clarity on the extent to which the 700 MHz band has been vacated by broadcasters as the date of the auction nears.
Greater certainty about the status of the 700 MHz band will aid business planning for wireless firms and ultimately could result in higher auction receipts for the U.S. Treasury.
With Congress sidestepping the combustible issue of broadcast lease fees, an issue lawmakers have dodged repeatedly in recent years, policy makers will have to come up with new ideas on how to move TV broadcasters off the 700 MHz band. The idea of spectrum fees was to discourage TV broadcasters from continuing to hold analog frequencies and encourage them to complete the transition to digital technology.
But with consumers spending disposable income on mobile phones and personal computers instead of on digital TVs, the broadcast transition plan has been thrown off course. The situation makes it difficult for the mobile- phone industry because executives do not know exactly when broadcast channels will go on the auction block.
In addition to the 700 MHz band, mobile-phone firms are trying secure spectrum in the 1710-1885 MHz and 2500 MHz-2690 MHz bands. Those frequencies are occupied by the Pentagon, schools, churches and broadband Internet carriers.
Elsewhere on Capitol Hill last week, key Senate Judiciary Committee members voiced the harshest assessment of the 1996 telecom act to date and suggested the landmark legislation may have to be revisited.
“Candidly, after five years, growth in competition among local carriers has been disappointing. Though no one expected immediate miracles upon the act’s implementation, competition is far from where it should be,” said Sen. Mike DeWine (R-Ohio), chairman of the Senate Judiciary subcommittee on antitrust, business rights and competition.
Indeed, fixed wireless carriers and others that were supposed to challenge the Baby Bells and other local landline telephone companies have severe financial problems. Teligent Inc., Winstar Communications Inc. Advanced Radio Telecom Corp. XO Communications Inc., all in that situation to varying degrees, have had to battle to get access to buildings and utility poles that Baby Bells dominate. Making matters worse for fixed wireless carriers is FCC Chairman Michael Powell’s noninterventionist approach to competition and deregulation, a posture not necessarily conducive to stimulating Wall Street investment in startups.
Last week, FCC Commissioner Harold Furchtgott-Roth defended Powell. “Broad failure of that [technology] sector cannot be attributed to this commission or to any government agency,” Furchtgott-Roth told reporters at a Thursday briefing. “The telecom act, if properly interpreted, was largely about removing government barriers … In a competitive market, it is very tough. Companies fail all of the time … On balance, the act has worked pretty well. I think it has gotten a bad rap because of a lot of political positioning that goes on in this town. The success or failure is a topic inside the Beltway.”
While mobile phones offer one alternative for local service, they are not yet a substitute for landline telephone service. Indeed, new telecom competitors have managed to grab only a fraction of local market share from a family of Baby Bells that has been reduced from seven to four-via mergers-since the passage of the 1996 telecom act.
“No one can claim that the act has been a roaring success. We’ve been waiting for local phone competition for five years, and we are still being kept on hold,” said Herb Kohl (D-Wis.), ranking minority member of the Senate Judiciary antitrust panel. “With AT&T [Corp.] about to break into three companies and most of the potential competitors to the regional Bells in serious financial trouble, the biggest lesson seems to be this: Congress cannot mandate competition, and if competition doesn’t make business sense, laws like the telecom act won’t really work.
On Thursday, the Senate Judiciary Committee abruptly scrapped a scheduled vote on Bush nominees Charles James to head the Justice Department’s antitrust division and Theodore Olson to be U.S. solicitor general. The postponement of the vote appeared tied to a clash between Democrats and Republicans over judicial nominees appointed by Bush.
Olson represented NextWave Telecom Inc. in an appeal of an FCC decision negatively impacting the firm’s many mobile-phone licenses.
Renewed congressional attention on lackluster competition and increased industry consolidation could impact current debates on whether the spectrum cap should be lifted and whether Baby Bells should be permitted to offer unrestricted broadband Internet service as proposed by Reps. Billy Tauzin (R-La.) and John Dingell (D-Mich.). Critics claim the latter proposal is tantamount to letting landline telecom monopolies into the long-distance business before the local markets have been sufficiently opened to competition.
On Thursday, Reps. John Conyers (D-Mich.) and Chris Cannon (R-Utah) introduced legislation that would counter the Tauzin-Dingell bill by blocking unfettered Bell entry into the broadband Internet business until local networks are opened to competitors. Earlier last week, House Judiciary Committee Chairman James Sensenbrenner (R-Wis.) asked House Speaker Dennis Hastert (R-Ill.) to refer the Tauzin-Dingell bill-currently moving through Tauzin’s Commerce Committee-to the Judiciary panel.
The Senate Commerce Committee, meanwhile, put off a vote on an Internet commerce tax bill because a compromise had not been reached on competing measures authored by Sens. Byron Dorgan (D-N.D.) and Ron Wyden (D-Ore.). The moratorium on e-commerce ends this October. Local governments and brick-and-mortar retailers support Dorgan’s bill, while Internet-driven firms back Wyden. The issue takes on greater importance as cellular telephone operators position themselves to bring mobile commerce to the nation’s 112 wireless subscribers.
The committee has scheduled a confirmation hearing next Thursday on Bush FCC nominees Kevin Martin (Republican), Kathleen Abernathy (Republican) and Michael Copps (Democrat). It is unclear whether FCC Chairman Powell, recently appointed by Bush to a second five-year term, will join the others or have a separate hearing.
Reporter Heather Forsgren Weaver contributed to this report.
