Debt Talks Could Provide Opening for Spectrum Legislation

A spectrum auction is one of the few big offsets available and the $25 billion or so from a voluntary incentive auction of broadcast spectrum, plus possibly a few other auctions, would offset part of the cuts that would have to be made in the energy and commerce area. That is critical because it could save Congress from having to make some additional cuts to health care spending, high-tech and wireless industry officials said. In a sense, Congress’s inclination to protect health case could give carriers the leverage they need to get incentive auction legislation through Congress, they said.

House Majority Leader Eric Cantor, R-Va., included a slide mentioning spectrum and the Universal Service Fund in his presentation during the debt ceiling negotiations chaired by Vice President Joe Biden (CD July 14 p1). The Congressional Budget Office has estimated that the president’s spectrum proposals would generate $24.5 billion in auction proceeds over 10 years. That figure is consistent with the number that was raised during the Biden-led budget talks.

One budget expert noted that the president’s FY2012 budget endorsed the administration’s plan to reallocate 500 MHz of spectrum to wireless broadband over 10 years. But the budget failed to directly advocate reallocation of even a single MHz of spectrum, didn’t call for any specific auctions and did not outline how incentive auctions might work. The official also noted that in the budget world every new dollar in spectrum auction proceeds reduces the deficit by the same amount as a dollar in spending cuts.

Debt-ceiling negotiations appeared to stall, after meetings between Obama and congressional leaders broke up Thursday. Obama called a press conference Friday to press congressional leaders to come back with another offer, with an Aug. 2 deadline looming.

"I hope this opening is what we need to get Congress to approve voluntary incentive auctions,” said a wireless carrier official Friday.

Debt limit talks could inform the future of spectrum legislation, lawmakers said during a House Communications Subcommittee hearing Friday (see related report in this issue). “The debt talks do have an impact” on spectrum legislation since auctions would raise money to reduce the deficit, Rep. Lee Terry, R-Neb., said at the hearing. As the “clock continues to tick on the debt ceiling … we have a bill in front of us that can raise billions of dollars for our country and therefore I hope we can move on this quickly,” said Rep. Cliff Stearns, R-Fla. “Our national debt is really the threat” and it’s “really encumbering all our discussions here in Washington right now,” said Rep. John Shimkus, R-Ill.

Demand is already “exploding” for spectrum and it will only increase by the time voluntary incentive auctions begin, said Peter Cramton, economics professor at the University of Maryland. The economist predicted the auctions could take in “tens of billions” of dollars “and possibly much, much more."

"There is credible evidence to suggest that if the President and Congress chose to do so, they could raise more than $25 billion from spectrum auctions over the next 10 years,” said David Taylor, executive director of the Wireless Broadband Coalition. “Doing so helps reduce the deficit, it would also boost the economy by stimulating private sector capital investment and create jobs.” Taylor predicted at CTIA’s conference in March that the debate over raising the debt ceiling would increase the likelihood that spectrum legislation clears Congress.

"The whole idea of an incentive auction is that you're incented to give back spectrum, you're going to get paid back,” said Jeff Silva, analyst at Medley Global Advisors. But if auction proceeds are being promised in several different directions, including to offset healthcare reductions, broadcasters may be scared off from selling their spectrum, Silva said. “Are you going to trust the federal government to pay you,” he said. “If you're less willing [to sell] then a bunch of things don’t happen. Industry doesn’t get the spectrum. Government doesn’t get the proceeds. … It’s a very, very tricky proposition.”

"Rushing to sell spectrum to solve the budget crunch is a lot like raiding your kid’s college fund to pay the credit card bill,” said Public Knowledge Legal Director Harold Feld. “It may look like a good idea now, but you and your family will likely regret it later on. While no one is surprised that the hunger for revenue is driving things, it is important to make smart choices about what to auction and how rather than panic.” Feld noted that estimates for how much auctions will bring it are by their nature unpredictable. “There is no reliable way to estimate revenues from incentive auctions, because we have far too many unknowns as to the level of participation, the payoff broadcasters will demand, and what conditions will be like in financial markets when the auction occurs,” he said.