President Barack Obama is calling for high spectrum license fees on wireless technology firms in his record $3.9 trillion budget, reviving a proposal that has failed to move in the past.
But with the Democratic administration committed to halve the projected $1.7 trillion budget deficit by 2013, the latest campaign for tax hikes on wireless carriers and other spectrum license holders could get more traction this time around in the Democrat-led Congress.
The president’s budget proposes raising $4.8 billion over the next decade through additional wireless spectrum fee hikes. Those annual fees would start at $50 million in 2009, jump to $200 million in 2010, and gradually increase over the next 10 years to $550 million per spectrum user per year, generating an estimated total of $4.8 billion over the next decade.
Pricing Out Small Carriers
The government fees are ill-conceived, said Scott Testa, who teaches marketing at St. Joseph’s University in Philadelphia, Pennsylvania.
“This will limit competition because it raises the barrier to entry,” Testa said. “Only the big companies will be able to afford these fees. I’m not sure that’s the way it should be. If the government makes using the wireless spectrum too expensive, it will be anti-competitive.
“Government policy should encourage competition, not discourage it,” Testa added. “This idea would ensure that there would be a smaller chance of new players entering the market.”
Consumers Will Pay
Patrick Gray, president of Prevoyance Group, an IT strategy consulting company in North Carolina, said the proposed fees on wireless carriers are “marketing spin” for what amounts to “new taxes to consumers.”
“Fees targeted towards corporations, be they spectrum fees, carbon taxes, windfall profits taxes, etc., will invariably be passed on to consumers,” Gray said. “Just as promoting ethanol through federal subsidies led to higher food prices—essentially putting an ‘ethanol tax’ on food—spectrum fees will hit consumers with higher wireless prices.”
It’s a marketing spin, Gray says, because “the Obama administration can present these as taxing those big, evil corporations while sticking up for consumers and the middle class, all the while knowing full well these taxes and fees will be passed right back to the consumers the politicians are purporting to protect.”
Jeff Kagan, an independent telecom and wireless analyst based in Atlanta, Georgia, said the proposal indicates a fondness for government intervention.
“Should government be small, taking care of the basics like police and soldiers and providing schools and paving roads?” Kagan asked. “Or should it be larger, trying to take care of us all and charging taxes and fees on corporations and individuals to try and pay for it all?
“The current administration thinks they should expand government,” Kagan added. “They are looking at all the areas they can increase taxes and fees. This wireless spectrum fee is one of those. We have to decide as a people what kind of world we want going forward.”
Phil Britt ([email protected]) writes from South Holland, Illinois.