Senators Call for Spectrum Handouts with Bureaucrat Written Rules

Congress’s return resumes the discussion on how best to auction more spectrum for wireless broadband, and differences between the House and Senate have yet to be resolved. This week, a small, bipartisan quartet of Senators wrote a letter expressing concern with the House plan, complaining that it restricts the Federal Communications Commission from imposing conditions on spectrum auctions and requires auctions for unlicensed spectrum.

Speaking to fellow Members of Congress, their letter states: “We must suppress our desire to be overly prescriptive to derive some predetermined outcome.” Yet, “overly prescriptive” rules to “derive a predetermined outcome” are exactly what they and the FCC want. An unconditional green light to the Commission to auction spectrum will result in restrictions on which companies can bid for spectrum, along with regulations and mandates on how the spectrum can be used. The FCC consistently pushes rules focused on achieving outcomes during spectrum auctions with mixed or failed results. This is exactly how Net Neutrality came to be, and how the FCC botched the D Block and devalued the C Block spectrum auctions in 2008.

Oddly enough, the Senators admit prescribing outcomes is their goal when they subsequently bash the idea of auctions open to all parties, stating it “could have a deterring effect on fostering competition and maximizing auction proceeds.” This both shows their anti-market hand and their myopic view of competition. Instead of more relevant metrics of competition, such as price wars, price drops, attrition rates, and wireless access, the Senators and their allies at the FCC look only at the number of companies holding spectrum.

They also take issue with House concerns that government should not purchase spectrum only to hand it over for unlicensed use. Unlicensed spectrum, which has led to the advent of technologies like WiFi and wireless microphones, can certainly facilitate new innovations and economic growth, in addition to bringing consumers great new products and Internet-based services. The House bill would authorize the FCC to auction new unlicensed spectrum, but the four Senators call such auctions a “rush to fill the Treasury’s coffers with revenue.”

The Senators argue handing out spectrum for free is the “truest form of ‘free markets’.” But, as any free-marketer knows, nothing in any market is ever truly free. Why should taxpayers in effect compensate broadcasters for their spectrum only to hand it out to other companies for “free”?

If there are innovations (like “Super WiFi”) that put unlicensed spectrum to use, surely this spectrum has enough value that benefiting companies or a consortium are willing to pay for it – even if the spectrum goes to use in the commons. Determining how much unlicensed spectrum to release requires knowing the value of spectrum to calculate demand – even if one believes that a “shared” good should be paid for by taxpayers.

The FCC previously suggested unlicensed spectrum should be auctioned to prevent this “free rider” problem, whereby each company waits for the other guy to pony up cash for the shared spectrum. The question is not whether unlicensed spectrum should be auctioned, but rather how to overcome these public good issues like companies not articulating exactly how much they would pay for unlicensed spectrum. Only then can we determine the true demand for licensed and unlicensed spectrum respectively in order to best meet our spectrum needs.

Finally, raising revenue for government is not the primary reason to auction spectrum, but it is a critically important factor. In a spectrum debate also mired in paying for a nationwide public safety network and shoring up the deficit, revenue could be the lynchpin to finally getting an auction. Blocking companies from bidding on spectrum won’t (as these Senators suggest) decrease auction proceeds. More buyers means higher priced bids and more revenue. And it’s hard for Senators pushing for a new spending program on public safety while banging on their desks over the deficit to pan the idea of raising revenue from an unlicensed spectrum auction. Unless they just hope taxpayers and deficit hawks won’t notice.