Spectrum License Modifications Called Huge Giveaway
Spectrum value is lost when incumbents get the FCC to modify their licenses at no charge, said J.H. Snider, research director of New America Foundation’s Wireless Future Program. To protect spectrum value, the FCC should charge for license revisions, Snider, author of a paper on spectrum “giveaway,” told a Tuesday panel. Another participant estimated that the U.S. loses out on $10 billion yearly in potential fees.
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Changing the parameters of a license changes the value of the spectrum involved, according Snider. An example of “free” modification is the change from site-based to geographic-based licensing and digital rights for cellular. Without such modifications, licenses now held by cellphone companies in the 800 MHz band would be worth far less, Snider said. After next year, when the FCC completes the auction of the 700 MHz band spectrum, nearly all spectrum below 3 GHz will have been assigned. This means “the name of the game going forward will be the license modification,” said Snider. License changes are popular with incumbents because they “can be done quietly, under the radar,” he said.
“You have to have a Ph.D. in spectrum technology to know what is going on,” Snider said. Former Rep. Bob Edgar, D- Pa., president of Common Cause, agreed. People will not get excited about this issue unless they understand it, he said. “If the people take this issue on, we can stop this giveaway,” said Gary Bass, executive director of OMB Watch. He said $100 billion could be lost in the next 10 years. “What would be the reaction if we gave away our interstate highway system to General Motors and only GM could decide which cars could use it?” asked Bass.
Some license changes occur through waivers. Once enough waivers of a given sort are issued, the FCC may adhere to the rulemaking process but “it is a fait accompli,” Snider said. License modifications topping a certain threshold should be valued by an independent auditor and integrated into FCC and the National Telecommunications and Information Administration rulemaking procedures, he said. The Office of Management and Budget would then review the “costs and benefits of such modifications,” he said.
The FCC should quit allocating spectrum and leave that to Congress, increasing political accountability, said Snider. The idea was endorsed by Drew Clark, project manager of the Center for Public Integrity’s Well Connected project.
Auction bids bear scant relation to actual deposits into the Treasury. Since 1995, total net bids on FCC-auctioned licenses totaled $59 billion, said Snider. “As of December 31, 2006, the Treasury only reported $20.8 billion in net receipts,” he said. The $59 billion figures comes from double counting, he said. For example, the FCC auctioned licenses to NextWave Telecom, which went bankrupt. With NextWave in bankruptcy, the FCC reauctioned the licenses, netting $16 billion, in a sale later voided by the Supreme Court.