Getting Spectrum Auctions Right in the Debt Limit

As House and Senate leadership ponder including spectrum auction authority in the final debt limit package, Digital Liberty sent a letter to the U.S. Senate today urging reforms to the language currently in the plan offered by Senate Majority Leader Harry Reid (D-Nev.). We also endorsed Amendment #586 from Sen. Mark Kirk (R-Ill.) that would authorize spectrum auctions, curb spectrum regulatory conditions and restrictions, raise more revenue for debt elimination, and establish a Commission to release the federal government’s control over a majority of the nation’s spectrum. The latter is an idea we proposed back in January.

The Reid plan fails to curb the FCC from imposing regulatory conditions or restrictions on auctioned spectrum. This could mean setting rates, preventing parties from bidding on spectrum, or imposing network management rules. Recall that similar Net Neutrality rules were included in the last spectrum auction, setting precedent for the FCC’s rulemaking late last year. Since those rules will likely be challenged and shot down in court, this presents another opportunity for the FCC to impose them.

Spectrum licensing rules also devalue the spectrum, meaning revenue raised for debt elimination could be significantly less than the Congressional Budget Office (CBO) estimate. A worst-case scenario would be the FCC preventing some wireless companies from even participating; fewer buyers for spectrum means lower prices and less revenue.

Our letter also addresses the revenue/spending concerns:

"The Senate spectrum plan purports to net $13 billion for deficit reduction; less than the $25 billion the Congressional Budget Office (CBO) estimates would be gained from allowing the Federal Communications Commission (FCC) to conduct incentive auctions. This is because the Reid plan creates a new spending program for public safety that will exist well beyond the budget window and cost at least $4 billion more than the appropriated $7 billion."

An amendment from Sen. Kirk would likely raise over $25 billion (based on the current CBO estimate) for debt elimination by auctioning spectrum and preventing the FCC from devaluing the spectrum with conditions. It also creates a new Federal Spectrum Reallocation Commission to review and auction spectrum inefficiently held by federal agencies, an idea we proposed earlier this year. This will free even more spectrum to be auctioned for wireless service, potentially raise more money for Treasury, and help to relocate federal agencies onto other spectrum bands.

The Senate plan is not bad, but is imperfect. Done correctly, auction authority can provide much needed spectrum for wireless services, prevent new regulatory mandates or restrictions, and raise substantial revenue for the Treasury without raising taxes – a win across the board. Regardless, the time to auction spectrum was yesterday and we support including it in the debt limit package to finally get the ball rolling.

For a copy of the letter, click here.