Spectrum Entangled in Debt Limit Talks

In a debate where much of the discussion has centered on which government programs to kill or cut, spectrum auctions offer one of a few large offsets. The Congressional Budget Office was reluctant to estimate revenue from spectrum auctions because of the many variables, government officials said. CBO ultimately “scored” auctions as raising $24.5 billion over 10 years (CD July 25 p1).

Broadcasters’ best bet to escape spectrum legislation they deem harmful is if Congress passes a short-term debt ceiling bill that doesn’t include ways to reduce the deficit such as by auctioning frequencies, an industry lobbyist said. The industry is more vulnerable to the specter of incentive auction legislation along the lines of what already passed the Senate Commerce Committee (S-911) if there’s a comprehensive budget deal, the lobbyist said. That’s because such a deal would likely include a spectrum auction to raise money to lower the deficit.

The Reid amendment includes spectrum auctions and reallocation of the 700 MHz D-block to public safety. Reid estimated that the spectrum parts of his plan would raise $15 billion for the U.S. Treasury from spectrum auctions. The Congressional Budget Office last week estimated that a similar spectrum plan by Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., would raise only $6.5 billion. CBO based its S-911 estimate on auctions raising $24.5 billion and the bill’s other provisions costing $18 billion.

Reid’s office didn’t say how it came up with its revenue estimate, but the package’s spectrum section would spend less than S-911. Reid’s bill provides $7 billion through 2017 for the corporation that would run the public safety network. CBO estimated S-911 would send $8.6 billion through 2017 to that corporation, and $12.5 billion through 2021. Reid proposed $300 million for public safety research and development, while Rockefeller proposed $900 million. CBO estimated that S-911 would spend $1.3 billion on spectrum relocation, but Reid proposes no more than $1 billion for relocating companies participating in voluntary incentive auctions. The Reid bill also could raise more money than S-911 because it wouldn’t allow the FCC to reallocate spectrum for unlicensed use until it collected at least 90 MHz in a given area, up from 84 MHz in the Rockefeller bill.

The Reid proposal would permanently extend FCC auction authority by repealing Section 309(j)(11) of the Communications Act. S-911 and the GOP House Commerce Committee bill only would extend auction authority through 2021. Reid would authorize voluntary incentive auctions of broadcast and mobile satellite service spectrum, under which the commission would pay a portion of auction proceeds to licensees who relinquish spectrum. The plan also would require several auctions by Jan 31, 2016, of spectrum in the ranges 1915-1920 MHz, 1995-2000 MHz, 2020-2025 MHz, 2155-2175 MHz, 2175-2180 MHz, as well as 25 MHz “between the frequencies of 1755 megahertz, minus appropriate geographic exclusion zones.” The Reid plan also contains provisions on federal spectrum relocation and sharing.

"The spectrum piece of Leader Reid’s bill is very good,” said a Rockefeller spokeswoman. “We continue to work closely with the White House and other parties in the debt talks to make sure that the final version reflects our early goals -- including a key component to this, which is essential funding for rural deployment. Ultimately, this plan mirrors Chairman Rockefeller’s legislation in many ways and would help us get the nationwide network built and operable to help ensure public safety."

"NAB is deeply concerned about provisions currently in Senate Majority Leader Reid’s legislation that would threaten the future of a great American institution -- free and local television,” a spokesman said.

Wireless providers who stand to gain from incentive auctions supported the Reid plan. “The proposal set forth by Senate Democrats clearly recognizes that the new revenues generated from incentive auctions will be a winning proposition for American consumers, the U.S. economy and our global competitiveness,” said Mobile Future Chairman Jonathan Spalter. CTIA supported the Rockefeller bill and the Reid plan is similar, said CTIA Vice President Jot Carpenter. The wireless association would like more emphasis on clearing broader bands under 3 GHz, he said.

"At this point, there isn’t agreement on the substance of a deal or on the process for implementing it,” said David Taylor, managing partner at Capitol Solutions and an expert on budget issues. “The safe bet is that this will be a long weekend. All sides have increased the rhetorical volume, but my sense is that with a sputtering economy, the worst-case scenario for most members remains a default and that the prospects for a default remain in the low single digits.” There’s no real difference financially over a 10-year window between key spectrum proposals, Taylor said. “CBO scored the president’s FY2012 budget as raising $24.5 billion from spectrum auctions over 10 years net of projected relocation and incentive auction costs,” he said. “The president’s FY2012 budget proposed a permanent extension of the FCC’s auction authority."

Broadcasters Call Foul

Broadcasters have several problems with the Reid proposal, the NAB spokesman said. Among concerns: (1) The plan doesn’t ensure that a relocated broadcaster can replicate its existing coverage area. (2) It doesn’t prohibit forced channel sharing. (3) It doesn’t prohibit forced repacking of UHF stations into the less-desirable VHF band. (4) It provides no “guaranteed compensation” to stations that go out of business or are repacked.

New figures on the impact on broadcasters of the auction the FCC seeks authority to hold, shared with many on Capitol Hill, were released by NAB Monday (CD July 26 p4) in part because of the debt ceiling negotiations, President Gordon Smith said. “If this moves along what we call in legislation ’the regular order,’ there are lots of opportunities for us to raise these factual issues of physics and to strike the best possible deal that we can for broadband and broadcasting,” he said in response to our question during a news briefing Monday. “If we're part of the debt ceiling negotiations, then time is a little bit more truncated. And we do think that once you take another bite at broadcasting, policymakers should understand what could be lost in exchange for what could be gained."

"If we become a pay-for in the debt ceiling deal, what we are asking for is protection of our contours” of areas served by TV stations protected from interference, Smith said. “What we are asking for is covering of our costs of relocation. And the preservation of the innovation that we have.” It would cost about $2.5 billion in capital expenses for full-power TV stations to change channel locations as part of repacking the band for an incentive auction, NAB Vice President Bruce Franca estimated.

NAB’s concerns about the incentive auction are “unfounded,” Media Bureau Chief Bill Lake said Monday night. “The Commission has made clear that we contemplate only voluntary contributions of spectrum by broadcasters. We have not proposed to recapture a prefixed amount of spectrum by whatever means necessary, but rather offer individual broadcasters the opportunity to receive a capital infusion by contributing some -- or all -- of their spectrum to auction,” Lake said by email. “To unfairly deny broadcasters these innovative options would not serve the future of broadcasting. And the incentive auction proposal has wide-ranging, bipartisan support. We welcome NAB’s support for voluntary incentive auctions,” he added. “If Congress authorizes such auctions, we look forward to working with NAB and its members to implement the program."

CTIA sees “no conscious effort to harm broadcasters” in the Reid proposal, Carpenter said. How the auction will ultimately play out isn’t settled, with the proposal punting most of the details for the FCC to decide, he said.

"Any removal of revenue-enhancing tax reform from a debt ceiling/deficit reduction package would seem to only increase chances that incentive auctions will be incorporated into legislation, given the $10 billion-$15 billion that lawmakers believe can be recovered from the sale of rights to broadcast airwaves,” said Jeff Silva, analyst at Medley Global Advisors. “However, without broadcast industry buy-in, such government receipts and anticipated spectrum-capacity gains could prove ephemeral and illusory. Congressional authorization of incentive auctions alone probably will not do the trick.”