Spectrum is More Important than Middle Mile

By James Erwin

It has been 30 years since Congress granted the Federal Communications Commission (FCC) the authority to auction radiofrequency spectrum for commercial use, and Congress has carelessly allowed auction authority to lapse. Making matters worse, Congress’s failure to reach an agreement is due to the Department of Defense’s (DoD) refusal to evaluate its spectrum needs and one senator’s obsession with dumping more money where it is least needed: on middle mile broadband infrastructure.

First, a bit of background. Spectrum auctions replaced the arbitrary comparative hearing system in 1994. These hearings, often derided as “beauty contests” today, gave discretion to committees of bureaucrats to determine who could put frequencies to best use. As one of the largest government users of spectrum, DoD has been historically reluctant to relinquish any of it for commercial uses, even spectrum DoD is not utilizing or under-utilizing.

The auction system, by contrast, enables market forces to determine the best use of spectrum. The distribution of spectrum is now fast, efficient, and economically rational as a result. Since their inception, spectrum auctions have also raised over $230 billion for the Treasury, thus reducing the deficit and funding several of the government’s priorities while not having to raise taxes on the American people. Auctioning more spectrum for commercial use will also help the United States maintain its global leadership as a dynamic free market economy over China’s increasingly closed and state-run society. Continuing this process is vital for innovation, investment, and international competition.

Yet, as the FCC’s auction authority ran out in the fall of 2022, Senate Commerce Committee Chairwoman Maria Cantwell refused to bring a reauthorization bill to the floor. Her obstruction was in service of one irrelevant goal: more funding for middle mile broadband infrastructure. “Middle mile” refers to broadband infrastructure that carries service between population centers but does not connect directly to homes or businesses (that would be last mile).

The problem with this is the U.S. does not need more middle mile funding. While a disparity in internet access still exists between urban and rural Americans, the problem is a dearth of last-mile infrastructure, not middle mile. The bipartisan Infrastructure Investment and Jobs Act (IIJA), which Senator Cantwell supported, allocated a whopping $42.5 billion for last-mile builds. In contrast, the same law authorized $1 billion for the construction, improvement, or acquisition of middle mile infrastructure. Congress has recognized that the primary problem is with last-mile infrastructure and allocated resources accordingly.

Senator Cantwell argues that $1 billion is somehow insufficient for America’s middle mile needs, but she ignores that the IIJA also allows a portion of the $42.5 billion in last mile funding to be used for middle mile if it is necessary to reach unserved areas. Additionally, Cantwell supported President Biden’s $2 trillion COVID relief bill, the American Recovery and Reinvestment Act (ARPA), which included $350 billion for state and local governments. These funds may be used with very few strings attached, including for broadband. There is also a $10 billion set-aside, the capital projects fund, that can be used by state and local governments for myriad purposes, again including middle mile broadband. It would be nice if Senator Cantwell would at least wait until these astronomical sums are spent before demanding more.

With all of this in mind, blowing up spectrum negotiations over unrelated middle mile funding is unjustifiable. Certainty in spectrum is simply too important to sacrifice on the altar of unnecessary middle mile broadband spending.

On March 10, spectrum auction authority lapsed without a clean extension. Not only are all future auctions put on hold, but bidders that previously won licenses not formally issued by the FCC cannot use them. Wireless carriers who have invested millions – in some cases hundreds of millions – of dollars bidding for licenses must wait for the FCC to issue them before they can turn on service.

Until Congress restores the FCC’s authority, the agency is forbidden to issue the licenses that bidders have already won. Absurdly, the agency has already taken the money but are not allowed to deliver the goods until Congress acts.

Wireless carriers, who were some of the biggest bidders in recent auctions, expected to recoup their investments quickly using more spectrum access to grow their customer bases. Instead, if Congress does not rectify this situation, carriers may be forced to eat this loss or make up the cost elsewhere.

The latest extension would have pushed the expiration date from March 10 until May 19. Unfortunately, despite passing the House, this simple bill was blocked by senators favoring an alternative proposal that would have extended the deadline to September 30. The reason for this delay is that the deadline for an agreement would fall after a long-anticipated DoD report on our nation’s defense spectrum needs. Of course, DoD compiling a report on its own spectrum needs embodies the proverbial fox guarding the henhouse. It’s not hard to imagine what DoD’s conclusion will be.

Where should we go from here?

First, Senator Cantwell needs to recognize that her middle mile demands are an unreasonable waste of taxpayer dollars compounded by the loss of potential auction revenue and economic development during this lapse. This double-whammy to the taxpayer must be avoided going forward.

Second, a clean extension of auction authority needs to pass forthwith, along with the creation of a pipeline for future spectrum auctions. Policymakers will continue to iron out the exact details, but allowing this lapse to continue is irresponsible.

Third and finally, DoD needs to reassess its approach to spectrum. Yes, it is important that DoD’s technology works without interference. Yes, they need to have constant access to bands that they will rarely use, such as those used for ICBM detectors that almost never go off. Yes, great power competition in the world is increasing. However, contemporary great power competition is primarily economic in nature, meaning the savvier national security strategy is allowing industry more access to commercial spectrum. DoD should recognize more commercial spectrum as a national security priority necessary to ensure American technological leadership, not a concession to civilians.

Wherever the chips may fall in these negotiations, spectrum auctions have been an unalloyed good for the American economy and middle mile has been well funded. The former should not be jammed up on behalf of the latter. Congress, the Department of Defense, and Senator Cantwell must not hold up true American broadband needs for less urgent problems.