BUSH BUDGET PUZZLES INDUSTRY WITH SPECTRUM AUCTION ‘SHIFT’
Wireless and broadcasting industries and their regulators were caught offguard Wed. when Bush Administration seemed to propose mysterious multibillion-dollar initiative to hasten broadcasters’ departure from analog spectrum. White House buried section in tables in back of “budget blueprint,” which otherwise didn’t mention FCC or telecom issues even once. By end of day Wed., our sources still were trying to figure out exactly what policy shift was being contemplated. White House and OMB didn’t return calls for explanation. Fuller budget book with line items and explanations isn’t expected until April.
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Listed as budget offset for FY 2002 is $2.6 billion lost to “shift spectrum auction deadlines and promote clearing.” Another $1 billion would be dedicated to item in FY 2003, but then $5.1 billion revenue would be gained in FY 2004, $2 billion in FY 2005 and $4 billion in FY 2006. Sources on Hill and in industry speculated that Bush planned to push back 700 MHz auction scheduled for this fall. Figures indicate that changes such as pushing back 700 MHz auction would bring in additional $7.5 billion in revenue to govt. through 2011. That spectrum also is broadcasters’ analog spectrum, making it most likely candidate for item meant to “promote clearing,” presumably of broadcasters’ current channels. It was obscure whether item could include changes in 3rd-generation (3G) auction scheduled for fall 2002. Previous Congressional Budget Office estimates have been that auctions through 2010 would bring in $28 billion (CD Feb 16 p1).
Meanwhile, Bush plan appeared to resurrect “lease fee” for broadcasters staying on analog spectrum before they were required to give it up for DTV in 2006. Like similar plans floated by Clinton Administration (CD Feb 5/99 p1), FCC ex-Chmn. William Kennard (CD Jan 23 p4) and previous Bush Administration, White House would take in about $200 million annually from broadcasters until 2006. Telecom leadership in Congress opposed plan when Clinton Administration proposed it, but members we contacted on both sides of aisle Wed. had heard nothing of Bush’s plans. Neither had staffers at NTIA, which isn’t greatly involved in Bush’s telecom policy yet since it has no political appointees.
“This has got us scratching our heads,” said broadcast industry source. Hill sources said item must represent significant change of policy, even if they didn’t yet know what.
Budget proposal would effectively end Rural Telephone Bank (RTB) by eliminating $3 million to run program that makes loans to rural telcos. USTA official said RTB made $175 million in loans last year and was seen as one weapon against digital divide between urban and rural areas. Money usually was used to build out rural telephone infrastructure. He said program didn’t cost govt. much because telcos paid back loans with interest, though rates were set lower than telcos could get commercially. Budget document said not funding new loans would add pressure for privatization, although RTB has been moving gradually in that direction anyway by slowly paying back startup capital it received from govt. when it was founded in 1972. “It’s not a subsidy; it’s a loan program,” USTA official said.
Blueprint had little to say about other telecom programs. For example, it didn’t mention Commerce Dept.’s Technology Opportunity Program, which Administration has been seen preparing to eliminate. Overall, Commerce Dept. would see its budget cut to $4.8 billion from $5.1 billion. It “is engaged in a careful review of its staffing,” blueprint said, “with the goal of ‘de- layering’ unnecessary management levels and reducing lower priority management positions.” Blueprint promised Bureau of Export Administration would be “strengthened,” with no further details. Bureau would get slight increase, source told us, that would be used to upgrade 15-year-old equipment “held together with duct tape,” among other uses. “They're giving us some money for additional export licensing people.” Increases would have nothing to do with returning satellite export control to Commerce from State Dept. “We didn’t make that request with that in mind,” source said.
New weather satellites for National Polar-orbiting System to be developed with Defense Dept. would get $83 million increase in budget proposal. Even though Coastal Impact Assistance Fund and unrequested programs would get axe in budget, NOAA would receive overall boost to more than $3 billion from $2.62 billion allocated in fiscal year 2001.
As expected, tax cut plan outlined in blueprint and in Bush’s address paid no attention to proposals pitched by telecom groups and other businesses, such as broadband deployment tax incentive. Many in Congress are expected to pressure for items such as popular broadband tax incentive bill (S-88) by Sen. Rockefeller (D-W.Va.). That bill now has 48 co-sponsors, despite recent withdrawal as co-sponsor of Sen. Brownback (R-Kan.), who is writing his own very different proposal for promoting broadband deployment.