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Spectrum: To Auction or Not to Auction?

The FCC's recent call for unbounded spectrum auction authority spotlights an important debate over whether some of this scarce and extremely valuable wireless spectrum should be auctioned or not.

  • Ironically the FCC is asking Congress to give it spectrum auction authority to not auction spectrum.
  • In other words, the FCC is asking to be unilaterally empowered to decide not to auction some spectrum so it can deem it "unlicensed spectrum," like that used for WiFi and garage door openers.

There are huge fiscal problems with the FCC's position, given our nation's severe fiscal situation: a trillion dollar Federal budget deficit and a ballooning multi-trillion dollar public debt.

First, the real world effect of the FCC's gambit here is to try and get revenue-raising legislation to not raise many billions of dollars.

  • Article I Section 7 of the U.S. Constitution empowers only the House of Representatives to originate revenue-raising bills.
  • Given that the FCC apparently does not want to auction a major portion of this TV broadcast spectrum, the FCC is essentially asking that the FCC, not Congress, decide whether or not the nation raises billions of dollars for the taxpayer to improve our nation's dire fiscal situation.
  • If the FCC believes the nation should not auction some of this spectrum, the FCC and the Administration should formally request that Congress affirmatively authorize in law the forgoing of billions of dollars in revenues.

Second, forgoing billions of Federal revenues is de facto spending billions of dollars of the taxpayers’ money in an off-the-books scheme, outside of the checks and balances of the Constitutional Federal appropriations process.

  • In effect fiscally, the FCC is asking Congress to authorize a shadow Federal spending program, where the FCC alone would decide how to spend multi-billion dollars of forgone Federal revenues without any of the normal appropriations accountability or oversight.
  • This is not a trivial fiscal matter given the FCC's abysmal track record in fiscally mishandling spectrum auctions e.g. the extraordinarily high default rate of PCS auction licensees; the NextWave fiasco; the “D” Block fiasco for public safety; and the "C" block auction with open conditions that shortchanged the taxpayer of ~$7b by my estimate.

Third, in effect the FCC is angling for a fiscal spectrum earmark, so it could reward special interests with essentially billions of dollars in unauthorized Federal subsidies, outside of the normal public spending authorization and appropriations processes.

  • With many tens of billions in cash reserves, the tech interests behind the push for unlicensed spectrum in particular have more than enough financial wherewithal to pay top dollar for the taxpayers’ spectrum and then they could make it openly available to the public to spur the open innovation they envision and seek.
  • Open market auctions without economic regulatory conditions are the fairest and most effective mechanism for allocating spectrum, and the least prone to manipulation or abuse.

Fourth, the FCC has not explained who would pay the necessary financial incentive to TV broadcasters for them to allow auction of their prime spectrum.

  • It would seem logical that if the TV broadcasters need a financial incentive to auction their spectrum, and the FCC apparently would like to make some of that TV spectrum unlicensed and free of any cost or revenue raising, someone has to pay the broadcasters to vacate their licensed spectrum.
  • Does the FCC envision the taxpayer would somehow pay the incentive, or would the FCC or tech interests pushing for it pay for it?
  • And how would the Government account for, or not account for, the incentive payment, and forgone revenues in the Federal budget and appropriations processes?

In sum, the debate over fiscal matters needs to be decided in a fiscal context.

  • If there are good arguments for not auctioning spectrum, the FCC and those that agree with the FCC’s position should make them publicly to Congress.
  • When one cuts through all the rhetoric on this, it really comes down to the simple question of: to auction or not to auction wireless spectrum?