Toomey, Rubio Not Impressed by CBO Score for Spectrum Act

The CBO report “reconfirms that our bill builds a robust public safety network, pays for itself, and still generates real deficit reduction,” said Rockefeller and Ranking Member Kay Bailey Hutchison, R-Texas, in a joint statement late Wednesday. Rockefeller previously had touted his bill as raising about $10 billion for the U.S. Treasury. “This is just another step along the path to final passage."

Sen. Pat Toomey, R-Pa., “remains opposed to the bill,” a Toomey spokeswoman said. Toomey was one of four Commerce Committee members who voted against S-911 at markup. “The communications needs of our nation’s first responders must be met, but he believes it should be done in a fiscally responsible manner,” the spokeswoman said. S-911 “spends three times more than it dedicates to debt reduction. Maximizing auction revenue and using it for debt reduction should be high priorities in any spectrum legislation that comes before the Senate.” Sen. Marco Rubio, R-Fla., another no vote at markup, also remains opposed, a spokesman said. Communications Subcommittee Ranking Member Jim DeMint, R-S.C., a third no vote, said earlier this week that S-911 gave away too much spectrum for free.

Rockefeller hinted Wednesday that one senator who voted “no” would vote “yes” when the bill came to the floor (CD July 21 p13). Removing Toomey, Rubio and DeMint leaves Sen. Olympia Snowe, R-Maine. But her office declined to comment.

CBO estimated that S-911 would increase direct spending by $18 billion, but the cost would be more than covered by $24.5 billion in revenue generated from spectrum auctions authorized by the bill. CBO predicted that 150 MHz to 225 MHz of spectrum below 3 GHz could be auctioned by 2021, and that “the weighted average unit price paid by winning bidders” would be about 70 cents per MHz per person. It predicted $8.4 billion over the next five years and $16.1 billion after 2016. Giving away the D-block would cost the government $2.75 billion, CBO said. CBO estimated that S-911 would give $12.5 billion for building and running the public safety network, $250 million for state and local grants and $900 million for a research and development program. It would cost an estimated $1.3 billion to cover federal relocation costs, CBO said. The CBO estimated $250 million for “other” costs (http://xrl.us/CBO911).

CBO’s estimate of $24.5 billion for auction revenue “is a fair score,” said Vince Jesaitis, government affairs director for the Information Technology Industry Council. “We have been estimating all along that incentive auctions, depending on how they are structured, could produce $20-30 billion,” he said. “While we are still trying to determine what some of CBO’s assumptions are and how they valued the other spectrum to be auctioned, our initial reaction is that this is very much in the ballpark."

But some say CBO was too conservative in its estimate. “CBO has a history of coming in low” with revenue estimates for spectrum auctions, and the $24.5 billion estimated by CBO looks to become the next example, said Lisa Sutherland, a Creative Government lobbyist who worked for Ted Stevens, R-Alaska, on the Senate Commerce and Appropriations Committees. The 700 MHz auction brought in twice the revenue that CBO estimated, Sutherland said. Also, CBO’s estimate that the D-block is worth $2.75 billion is too high, she said. “When you take the two 2 MHz guardbands needed to prevent interference off the table, only 6 MHz of the D-block is usable,” she said. “When bidders figure out that police and firefighters can’t afford to have any interference during a hostage situation or a raging fire” and therefore require guardbands, “that will really suppress what they are willing to pay,” she said.

There may be room to tweak S-911 to reduce the $18 billion in increased spending, ensuring the bill will raise at least $10 billion for the deficit, Sutherland said. For example, legislators could reduce the $12 billion going to the public safety network, or the $1 billion going to research, she said. The House draft by Commerce Committee Republicans provides less money to public safety and auctions off all spectrum, including that sought for unlicensed use, a telecom industry lobbyist noted.

Analysts are still upbeat on S-911’s chances. “In the big picture, the shortfall isn’t that big a deal,” MF Global analyst Paul Gallant said. “Money within the bill is probably fungible, and you're also talking about 9/11 and public safety, which are pretty big political drivers by themselves.” The score “was a disappointing number for the bill’s advocates, but there’s still an increasing likelihood that deficit reduction politics will generate momentum for the legislation,” said Potomac Research analyst Paul Glenchur. “The modest CBO number could further complicate efforts to reallocate the D-block or establish major funding for a public safety broadband network.” Medley Global Advisors analyst Jeff Silva said the score “could complicate passage of the Rockefeller bill if congressional backers of a D Block auction and deficit hawks generally seize upon the less-than-anticipated savings and the $18 billion in costs significantly associated with core public safety provisions of the measure.” But the Rockefeller bill “remains the strongest legislation vehicle in Congress” for spectrum and public safety, Silva said.