Congress Mandates FCC Spectrum Auctions

Published February 24, 2012

Congressional passage of a bill extending payroll-tax cuts and jobless benefits on February 17 included a mandate that the Federal Communications Commission conduct auctions of wireless spectrum for commercial use. The auctions are expected to raise $25 billion, which will be used to help fund the extensions.

The auctions will sell spectrum currently owned by television broadcasters. A portion of the proceeds will be used to build a nationwide network for emergency responders such as police and fire departments on the so-called C-Block spectrum. The remainder will be made available to wireless carriers to help meet the current demand for bandwidth prompted by the growth of Internet-connected smartphones and tablet computers.

John Stephenson, director of the Telecommunications and Information Technology Task Force at the American Legislative Exchange Council, said the nation has a critical need to relieve the spectrum crunch.

“There’s already not enough spectrum, and with new technologies like the iPhone, which caused usage to shoot up 9,000 percent at just one carrier [AT&T], there is clearly a need for far more spectrum,” explained Stephenson.

Congress Opposed FCC ‘Conditions’
In his 2012 State of the Union address, President Barack Obama asserted one of the nation’s challenges is an incomplete high-speed broadband network that he claimed prevents some small businesses from reaching world markets.

Rep. Fred Upton (R-MI), chairman of the House Energy & Commerce Committee, took umbrage with the President’s remark.

“The President said we have an incomplete high-speed broadband network, but his Federal Communications Commission is protecting its turf instead of joining us to free up airwaves to build the next-generation communications networks,” Upton said in a press statement.

Upton was referring to the FCC’s decision to put conditions on auctions of reclaimed broadcast spectrum, limiting bids to smaller companies and cutting out larger telecom firms.

Upton and congressional Republicans, opposed these conditions, instead favoring an open auction of the bandwidth. The FCC objected to keeping the auctions open and remained committed to keeping the restrictions.

Restrictions Cut Spectrum Value
The last time the FCC ran an auction for C Block, it added controversial Internet network neutrality rules onto it as a condition of sale, Stephenson noted. Congress doesn’t want the commission to impose such conditions at the next auction, he said.

“The bottom line is government is not making spectrum available, which right now is badly needed for investors and innovation. Instead, the FCC and Congress are fighting over the rules of auctions and who gets to be the boss instead of figuring out ways to deliver more spectrum,” he said.

“And with the C-Block auction, the FCC showed it does not do auctions well. Once the net neutrality rules were added, the value of the spectrum was lost,” he explains.

“Congress is justified in bringing up their objections, but they need to recognize the failure of government [to provide] for growing demand for spectrum while they and the FCC are fighting over rules,” Stephenson said.

‘Burdensome’ Rules on Internet
In his address, Obama acknowledged some government regulations are outdated, unnecessary, or too costly.

That’s true, Upton said, but under the Obama administration the vast federal bureaucracy has churned out some of the most expensive rules in history, putting jobs at risk and driving up prices for middle-class families.

Stephenson cites net neutrality as an example, calling it a solution in search of a problem.

“The FCC has imposed burdensome rules on the Internet. Competition and innovation are the strongest forces to keep the Internet strong, free, and growing, yet the FCC doesn’t recognize this. Part of it can be traced back to the history of the FCC. The original governing statue for the FCC was written in 1934; it was last updated in 1996,” he explained.

“Back in 1996, cell phones were much different than they are today. Today you can do as much with your cell phone as you can with your personal computer. The FCC and Congress have failed to keep the laws up-to-date with the technology,” he said. “So what we get is the FCC applying outdated laws for Ma Bell technology. Because of that, we’re getting tension and losing opportunities in the digital economy.”

Government’s Revenue Motive
Richard Bennett, a senior research fellow with the Information Technology and Innovation Foundation, says one thing the FCC is really good at is designing options that maximize government revenue.

“The FCC is taking a much more hands-on, regulatory approach when it comes to the Internet and spectrum these days, so Congress and the FCC are going to have to come to some sort of d├ętente as to what role the FCC will have over the Internet and spectrum. This is not going to be easy,” said Bennett.

Bartlett D. Cleland, policy counsel with the pro-market Institute for Policy Innovation, says this auction shouldn’t be considered as a budgetary scheme designed to fill a revenue hole.

“That’s looking at the issue upside-down. Revenue should never drive spectrum; innovation should,” he said.

Kenneth Artz ([email protected]) writes from Dallas, Texas.

Internet Info

“Upton Responds to State of the Union Address,” Representative Fred Upton, House Energy and Commerce Committee Press Release, January 24, 2012: