FCC BUDGET WOULD INCREASE, THEN LEVEL, UNDER BUSH PLAN

Nearly $19 million of FCC increase would come from fees collected by the agency. Additional $30 million must be appropriated under White House plan, unchanged from last year. Despite plan to increase FCC budget through fee collection, Bush said long-term goal was to freeze total regulatory fees. FY 2002 regulatory fees would increase to $219 million from $200 million in FY 2001, but fees would remain at latter amount through FY 2006.

FCC said budget proposal included staffing level equivalent to 1,975 full-time workers. “Nearly 40% of the requested FY 2002 increase in the funding level ($7,614,000) will cover mandatory increases for salaries and benefits and other areas and inflationary increases for contract services,” it said. “The balance of the funding increase ($10,997,000) includes funds to replace outmoded computer equipment, maintenance of electronic filing systems and productivity enhancements to the Commission’s information technology infrastructure.”

White House also said FCC in 2002 would “achieve 90 percent of licensing activities within established time frames” and “80 percent of all FCC applications will be filed electronically.”

House Commerce Committee Chmn. Tauzin (R-La.) said President offered “restrained budget” that was “fair and responsible.” However, he said Bush ignored FCC Chmn. Powell’s recommendations to bolster agency’s engineering capabilities. Powell late last month told Telecom Subcommittee (CD March 30 p2) that FCC needed increases in engineer compensation as well as improvements in engineering facilities to attract and retain staff talent, which TIA said would help speed to market communications products awaiting FCC equipment authorization.

Powell made “compelling case to Congress for the need for additional money” to address agency’s “outdated engineering capabilities,” Tauzin said. “Given the FCC’s enormous responsibilities in the Digital Age, I will personally ask the White House to reconsider the agency’s funding level.”

President also would increase universal service fund for high-cost and rural telecom support to $5.64 billion from $5.6 billion. However, he would eliminate funding of Rural Utilities Service (RUS) Rural Telephone Bank, while leaving $3.1 million to administer existing RTB loan commitments. “The President’s budget proposes no more federally funded loans” for that program, Administration said. Daschle and Gephardt also are pushing for TOP to be restored to $45 million and for Rural Telephone Bank to continue. Last week they also called for NTIA to create program to promote telecom infrastructure for Native Americans.

Proposal includes creating RUS-administered distance learning and telemedicine program that would provide $100 million in “Treasury-rate” loans and $2 million in grants “to finance installation of broadband transmission capacity (i.e., the fiber optic cable capacity needed to provide enhanced services such as the Internet or high speed modems) for rural communities.”

In keeping with its stated policy of limiting advance funding, Bush Administration’s budget doesn’t propose any advance appropriations for CPB for 2004. Public broadcasting had sought FY 2004 appropriation of $365 million for CPB, which heretofore has been forward funded for 2 years in Labor-HHS bill. Administration said CPB should get appropriations like other programs that receive federal assistance, so its 2004 funding request would be in FY 2004 budget. “It sets a dangerous precedent,” APTS Pres. John Lawson said: “Forward funding has been a firewall for the editorial independence of PTV and public radio for the past 25 years.” He said it was bad public policy to put public broadcasting on such “short funding leash,” and expressed hope that Congress would restore advance funding for CPB as it had been doing. CPB Pres. Robert Coonrod said that although Administration’s decision not to continue to provide corporation with advance funding was part of overall budget policy decision, “we believe that good public policy reasons exist to justify the continuation of advance appropriations for CPB.” He said he hoped Congress would provide CPB exemption from restrictions on advanced funding.

Public broadcasters’ bid to justify forward funding request as exemption for “programmatic reasons” apparently didn’t work. APTS spokeswoman said PTV programs were developed on the basis of money promised or seed money. “When we have funds committed it’s easier for us to go out and get other money… to leverage other private and public money” for developing programs, she said. As for PTFP, which will help facilitate digital conversion of PTV stations, funding for FY 2002 is unchanged from current $43 million, down from requested $110 million. While grateful that PTFP funding wasn’t cut, Lawson said it was ironic that Administration, which was “rightly concerned” about DTV transition, was doing so little to help public broadcasting’s transition to digital.

Spectrum Auction to be Delayed, Spectrum Fees Collected

As expected, budget outlined Administration’s intent to introduce legislation that would delay FCC’s 2 scheduled auctions for 700 MHz band and would create lease fee for analog broadcasters. Legislation, first signaled by Bush in budget blueprint released in late Feb. (CD March 2 p1), would provide $2.6 billion offset for FY 2002 as result of delaying Ch. 60-69 auction to 2004 from 2001 and Ch. 52-59 to 2006 from 2002. “The legislation will promote clearing the spectrum in channels 60-69 for new wireless services in a manner that ensures incumbent broadcasters are fairly compensated,” budget said. Channel 60-69 auction now is set for Sept. 12, after being delayed for 4th time earlier this year. Last month, FCC approved notice of proposed rulemaking that started process for auctioning Ch. 52-59 under statutory deadline of Sept. 30, 2002 (CD March 19 p1).

“From a purely public policy perspective, clear bands bring greater predictability, which allows for the bidders to propose higher prices for that spectrum,” CTIA spokesman said. “From the perspective of the industry, in the end the dates run basically the same course whether you have an auction and then clear or clear and then have an auction.” Existing deadline of 2002 for Ch. 52-59 band was established in 1997 balanced budget act at time when lawmakers eyed auction proceeds as way of adding up budget numbers, although current surpluses make that need less pressing. Budget includes projected offsets from spectrum auctions and “major asset sales” of $2 billion for 2002, $7.6 billion for 2003, $14.2 billion for 2004 and $2.8 billion for 2005. Budget documents indicated that delaying auction dates would increase auction proceeds by $7.5 billion and that over next 5 years, auction revenue is expected to be close to $25 billion.

Budget makes good on Administration pledge several weeks ago to still move ahead on auction legislative proposal despite initially chilly reception on Capitol Hill, particularly from Tauzin. Budget proposal also estimates $198 million in revenue for FY 2002 from proposed analog spectrum lease fee, which would require statutory change. Plan said Administration would propose legislation authorizing FCC to create lease fee for analog broadcasters to expedite clearing of 700 MHz in face of 2006 transition target for DTV. Legislation would direct Commission to implement rule “to apportion the aggregate fee amount among broadcasters,” budget said. “Upon return of its analog spectrum license to the FCC, an individual broadcaster is exempt from the fee.” Agency can recoup up to $2 million from fee collections in fiscal 2002 to cover costs of developing and implementing program. Clinton Administration and previous Bush Administration each floated similar leasing fees that were shot down by Congress, and House Budget Committee already has rejected similar proposal this year. Budget documents released earlier this year indicated federal govt. would take in $200 million annually from broadcasters until 2006.

Tauzin said he supported President’s decision to postpone certain spectrum auctions, but “penalizing America’s broadcasters -- who are struggling to make the transition to digital -- with punitive spectrum fees is a terrible idea, and I will fight it every inch of the way.” Aide to Rep. Markey (D-Mass.) called Bush budget “confirmation of a lot of rumors… There’s not a lot of surprises.” He reiterated his criticism of White House “budget alchemists” whose spectrum plan is intended to “turn air into gold.” Markey aide also was concerned about proposed end to forward funding for public broadcasters, saying “people who are trying to run a television network… have to have a more sound basis for programming decisions” than yearly appropriations cycle.

Democrats are concerned Bush’s plan relies too heavily on input of Defense Dept. In paper released last week, Senate Minority Leader Daschle (D-S.D.) and House Minority Leader Gephardt (D-Mo.) said FCC should hold auction by Sept. 2002 as currently scheduled. They said they would support extending statutory deadline if that’s “necessary to maximize its [auction’s] effectiveness and address telecommunications policy concerns.” Democrats said “no single interest should dominate” spectrum debate.

No New Funding for CALEA

As expected, budget also contained no new funding to reimburse telecom carriers for costs of complying with Communications Assistance for Law Enforcement Act (CALEA). CALEA authorizes reimbursement for costs associated with modifying digital equipment installed before Jan. 1, 1995, to comply with federal govt. wiretap requirements. “With the appropriations provided in 2001, total funding for the program has reached $500 million, the authorization level provided in the act,” budget said.

NTIA’s operating budget would increase to $14 million from $11.4 million. However, grants made available to nonprofit or public sector organizations through NTIA’s Technology Opportunities Program would be cut to $13 million from $43 million, cutting total number of grant recipients to about 35 from 80.