Freedom Line Blog

CFIF has long advocated auction of over-the-air television stations’ airwaves – or spectrum – by the Federal Communications Commission (FCC), which offers a critical free-market opportunity for the wireless telecommunications industry to avoid looming network congestion issues.  It’s one of those rare potential win/win opportunities as Americans increasingly rely on mobile devices, and it constitutes the core mission of what the FCC should rightfully be doing with its resources.

While strongly favoring spectrum auction, however, we’ve also consistently opposed crony capitalist efforts to game the system and corrupt this promising opportunity.  Just last week, for example, we highlighted our distaste for Dish Network’s scheme to exploit “small business” discounts for its own benefit.

Unfortunately, we may be witnessing another attempt at exploitation of the spectrum auction process.  Namely, television broadcasters offering spectrum in the upcoming incentive auction may possess the ability to sell it twice, as reported by Broadcasting & Cable’s Washington Bureau Chief John Eggerton:

According to a source familiar with their thinking, some ‘major’ broadcasters are looking at putting spectrum in the pot and, if they win, taking advantage of tax laws to keep that money in escrow and use more cash, or a loan, to bid on some of that reclaimed broadcast spectrum in the forward auction – they would need to use other money since reverse payments won’t be available until both sides of the auction close.  They could then sell or lease the spectrum to wireless carriers hungry for it.”

What would make such attempts particularly galling is that the broadcasters originally received that spectrum free of charge, so they’d be selling twice something they didn’t pay for even once.

FCC auction of spectrum for more productive use is to be applauded, and was a long time in coming.  But please, let’s keep it free of attempts at unjust enrichment via exploitation of byzantine regulatory mechanisms.

This week’s CFIF TechNotes – happy Thanksgiving week, and enjoy!

(1)  At Wireless Week, Representative Greg Walden (R – Oregon) warns the Federal Communications Commission (FCC) against spectrum caps in upcoming auctions:

Walden and other Republicans are warning the FCC not to pick winners and losers in the auction and to allow as much participation as possible.  ‘I don’t think it’s fair to take perhaps some of the biggest bidders out of the process in the beginning,’ Walden said.  ‘Remember, part of the requirement here is to generate maximum revenues for the taxpayers.'”

(2) From Reuters, T-Mobile eyes an airwaves purchase from Verizon Wireless, according to sources:

T-Mobile US is looking to buy wireless airwaves from larger rival Verizon Wireless to bolster its mobile network capacity for data services, a source familiar with the matter said on Tuesday.  While T-Mobile has approached Verizon about buying the spectrum, the process is still in the early stages, according to the source, who asked not to be named. The source was not authorized to discuss the matter.  T-Mobile, the No. 4 U.S. mobile service provider, might have to pay as much as $3 billion for the airwaves, which are not being used by Verizon, according to one analyst estimate.  The airwaves would give T-Mobile additional network capacity to help it catch up with its bigger rivals in delivering high-speed wireless services.”

(3) From The New York Times, FCC Chairman Tom Wheeler calls for transforming the technology used by phone systems:

Americans could soon be one step closer to getting that videophone they were promised in the 1960s.  The chairman of the Federal Communications Commission said on Tuesday that the agency would begin ‘a diverse set of experiments’ next year that would begin to move the nation’s telephone system from its century-old network of circuits, switches and copper wires to one that transmits phone calls in a manner similar to that used for Internet data.  The Internet-based systems allow more information to be transmitted at one time, making possible the addition of video to phone calls, as employed by services like Skype and Vonage.  While consumers can already use those services, most of the legacy telephone networks still use analog technology, employing an out-of-date system of physical switches that is expensive to keep operating.”

(4) From The Wall Street Journal, “FCC to Begin Acting on Phone-Network Upgrade”:

AT&T and other legacy phone providers have been looking to retire the old networks in favor of new, IP-based phone systems that are often delivered by broadband, both wired and wireless.  But it has been unclear how many of those old rules would be applied to the new networks, in part because the FCC previously decided against classifying broadband Internet as a telecom service, which would subject it to greater regulatory oversight.  ‘Our current infrastructure has served us well for almost a century but it no longer meets the needs of America’s consumers.  The transition to broadband and IP services that has already begun is driven by consumers who are moving to the Internet and choosing to connect in ways not imagined just a decade ago,’ AT&T’s Jim Cicconi said in a response published online.  The transition to IP technology has yielded many benefits, such as greater speed and capabilities.”

(5)  And from Broadcasting & Cable, even Senator Charles Schumer (D – New York) has urged the FCC to refrain from attempting to adopt incentive auction rules that would limit the participation of any wireless carriers:

‘It is the responsibility of the Commission to structure the auction so that broadcasters will realize substantial benefit for choosing to put spectrum up for auction, broadcasters who will have to move to new channel assignments can be adequately compensated, and so that the auctions can generate maximum revenue in order to adequately fund FirstNet,’ Schumer wrote in a letter to FCC Chairman Tom Wheeler.”

Freshman Rep. Billy Long (R-MO), a professional auctioneer, displays an easy grasp of the soaring national debt in this speech from the House floor.

(Note: Go to the 3:30 mark for Long’s auctioning of the federal debt)

H/T: The Daily Caller