Freedom Line Blog

As Congress considers reauthorization of the Federal Communications Commission (FCC), it must exercise extreme diligence to prevent it from becoming a vehicle for crony capitalism and waste of taxpayer dollars.

Currently, Congressional FCC reauthorization includes provisions that would reimburse broadcasters in spectrum incentive auctions, which could in turn be exploited to subsidize the upcoming ATSC 3.0 transition, as many had predicted.  By way of background, ATSC 3.0 refers to the upcoming transition to yet another new broadcasting standard, which will force over-the-air viewers to purchase new television sets or converter equipment at their own expense.  If that rings a bell, it’s for good reason.  That’s what occurred in recent years with the last conversion.

Here’s the problem.  Current provisions could constitute a blank check at taxpayer expense to broadcasters so that they could fund new equipment for the transition from the U.S. Treasury, as the legislation creates a new Treasury Fund in an undisclosed amount of money.  Although broadcasters ostensibly must direct the money they receive only toward costs associated with the spectrum auction, the likely scenario remains that the FCC will remain unable to detect and stop waste, fraud and abuse if the funds are used instead to upgrade their equipment in pursuit of ATSC 3.0.

Accordingly, it’s important that Congress not allow this legislation to become a wasteful open account for broadcasters to exploit for their own benefit at taxpayer expense.  At a minimum, they must establish greater safeguards to ensure that waste, fraud and abuse are not allowed, and that American consumers are not deprived of access to over-the-air TV access as a consequence of necessary installation of ATSC 3.0 transition equipment funded by taxpayers, whether in whole or in part.

To be clear, we welcome any and all technological and telecommunications advancement in this field, but we must also remain vigilant against the looming likelihood of crony capitalism and waste of taxpayer dollars in an era of growing deficits and debt.  Congress must therefore ensure that protections against those possibilities are incorporated into upcoming FCC reauthorization.

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.

Does the federal government have too little on its plate these days, or too much?  The American public is unequivocal on that question, with a record 60% telling Gallup that bureaucrats are wielding too much power.  Only 7% say “too little.”

Despite that ugly reality, the Federal Communications Commission (FCC) seeks to increase its level of micromanagement over our telecommunications market.  The auction of spectrum from television stations to wireless carriers is obviously long overdue, and ideally would improve service quality and speed within that growing market.  Unfortunately, the FCC intends to limit participation in bidding on highly valuable low-frequency airwaves by excluding the largest and most successful carriers in many markets.  As Bret Swanson observes at TechPolicyDaily.com, that threatens to “blow up” the entire auction:

Because the auction depends on inducing the broadcasters to give up their spectrum in the first place, if two of the largest prospective bidders are limited, or sit out entirely, the whole thing could blow up.  Without the two largest bidders, prices are likely to be much lower, and broadcasters might say, no thanks.  No broadcaster participation, no new spectrum for new mobile innovations.”

The wireless industry has brought innovation scarcely imaginable even five years ago, but that vitality will be jeopardized if bureaucrats pursue this sort of overregulation and abandon the regulatory light touch approach.  As Swanson ominously notes:

The FCC is about to take a huge risk with a hugely successful U.S. industry.  It’s also openly favoring and disfavoring specific firms, something U.S. law used to try to avoid.  The added irony, although it shouldn’t matter in a country that values the Rule of Law, is the favored firms are both foreign and the two disfavored are domestic.”

Instead if new FCC micromanagement, what we need is an open and fair incentive auction.  Allowing the market to work, unencumbered by such bureaucratic arbitrariness, will unleash more of the profound potential that the wireless marketplace possesses to spark new social, economic and technological realities for America’s consumers.