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New FCC spectrum fees

Hidden in President Obama’s 2011 budget is almost $5 billion in new FCC fees. These fees consist of both spectrum auctions and “license fees.” That shouldn’t surprise anyone. Previous presidents have proposed that broadcasters pay more and higher fees for the use of spectrum. However, in light of the push for broadband, broadcasters should be especially concerned.

Setting the stage

Last July, the Democrat majority directed the Congressional Research Center (CRC) to prepare a report on spectrum, broadband and related issues. That report is called, “Spectrum Policy in the Age of Broadband: Issues for Congress." The CRC employs about 700 people and acts as an arm of Congress to assemble data and provide analysis on topics the members request. Whether or not it was the author’s intention, this report has become a cornerstone for Obama’s broadband plans. Let’s see what the report recommends.

It doesn’t take long for the report’s authors to suggest charging new fees. On page one it states, “Among the spectrum policy initiatives that have been proposed in Congress are: allocating more spectrum for unlicensed use; auctioning airwaves currently allocated for federal use; and devising new fees on spectrum use, notably those collected by the Federal Communications Commission (FCC).” Continuing, “The Obama Administration has proposed that new fees be levied on spectrum use.”

But the CRC report notes that licensing fees might serve other administration policy goals. “For example, if the purpose of a new user fee is to encourage more efficient use of spectrum, one approach might be to assess fees on any license holder that does not take steps to maximize the benefit of its spectrum holdings. Fees could become a tool for implementing wireless broadband if policy determines that broadband networks provide the maximum value to society (the ultimate owner of the spectrum holdings)." Emphasis added.


“The 2010 fiscal year budget prepared by the Office of Management and Budget projects new revenue from spectrum license fees of $4.775 billion [emphasis added], based on the assumption that additional license fees will be collected by the FCC. An analysis of the budget, prepared by the Majority Staff of the Senate Budget Committee, [that means Democrats] states that these would be user fees collected by the FCC on spectrum licenses that were assigned but not auctioned [unauctioned].”

While it is true that previous administrations have also proposed increasing FCC fees, those proposals were never enacted. The Bush administration, for example, called for TV broadcasters to pay taxes on their analog spectrum. President Clinton included unrealized income from spectrum auctions to help make his budget appear more balanced. However, this White House’s proposal is part and parcel of an encompassing plan to expand broadband, largely on the backs of television broadcasters.

It’s not just new broadcast spectrum fees being advanced, other telecommunications fee increases are being proposed, as well, to support Obama’s plans. In early February, Rep. Edward Markey, D-MA, introduced legislation that would “update” (read this as increase fees for) the E-Rate program. You may recognize that name because it appears on all your telecommunication bills as an FCC tax. The taxes alone on my communications bill exceed the entire cost of the phone line.

The E-Rate program was initially designed to help lower the cost of phone service in rural areas. Since its launch in 1996, the E-Rate tax has become a boondoggle of billions of dollars distributed primarily to small phone companies. Now Markey wants to expand the tax so he can fund low-income people’s access to the Internet. Under his proposal, vouchers would be provided for free home broadband service. It would also offer money to companies that serve “low-income students,” assuming the companies would pass on the discounts. And, of course, the bill would also increase subsidies to schools and libraries for Internet access. What elected official could argue against such lofty goals?

Markey calls his bill an “update,” but let’s use the proper term: It’s a national tax increase. This illustrates how easy it is for government to sneak in new fees and taxes under the guise of what some elected official thinks is betterment for the society.

For the greater good

The CRC report also argues that new wireless technology has placed increased demands on spectrum. “Some argue that wireless policy should also shift, placing a greater value on innovation to achieve goals deemed to be in the public interest … If spectrum policy serves broadband policy and broadband policy serves multiple sectors of the economy, then perhaps spectrum should be more readily available for a wider pool of economic participants.

“The amount of spectrum needed for fully realized wireless access to broadband is such that meeting the needs of broadband policy goals could be difficult to achieve through the market-driven auction process unless large amounts of new radio frequencies can be identified and released for that purpose [emphasis added]. Without abandoning competitive auctions, spectrum policy could benefit from including additional ways to assign or manage spectrum that might better serve the deployment of wireless broadband and the implementation of a national broadband policy.”

Call me a skeptic, but “additional ways to assign or manage spectrum” sounds a lot like requiring the FCC to mandate broadcast spectrum sharing, perhaps with the implementation of what’s becoming known as the “SD-only option” for broadcasters.

We will continue this discussion in future articles.