Post

Why The Spectrum Section of the Jobs Bill Is An OMB Fantasy and a Political and Policy Nightmare

September 16, 2011 , , , ,

Not surprisingly, the ubiquitous combination of incentive auctions/D Block re-allocation/Public Safety Network has made its way into the proposed American Jobs Act. Somewhat surprisingly, the spectrum piece is not simply a reprint of the Hutchison/Rockefeller S.911 Bill or the Democratic House discussion draft. It’s not even a straight cut and paste from Reid’s Debt Ceiling/Deficit Reduction draft (Reid being the one who introduced the President’s Bill) that gave the broadcasters conniptions but raised the revenue for debt reduction. (All of which you will find, with a useful comparison chart, on our handy Spectrum in the 112th Congress resource page.)

No, this was clearly written by the Office of Management and Budget (OMB), which took the opportunity to “enhance” the basic idea of incentive auctions and the D Block reallocation/Public Safety network with some bright ideas of its own. It’s as if the President shouted down to OMB in the basement while they were scrambling to get this bill together and said: “Yo! Make sure you throw in that public safety incentive auction spectrum thingy we keep talking about!” And the folks down in OMB, realizing that for once they could draft a bill that no one with any actual spectrum policy experience cared about, proceeded to draft a bill whose short title should have been: “OMB Fantasy Spectrum Bill To Raise Revenue And Screw Everything Else.” 

What makes me say such a thing? Perhaps it’s the fact that the bill adds no fewer than 10 new references to OMB in the spectrum policy section, each designed to insert OMB in positions of authority over the FCC and NTIA in entirely unprecedented ways. While the bill doesn’t quite require NTIA and FCC staff to prostrate themselves and kowtow when OMB staffers enter the room, it comes pretty damn close. In addition, the Bill contains a spectrum fee provision, a perenniel OMB wish-list favorite, but with the surprise twist that it requires the FCC to impose spectrum fees on everyone: including folks like AT&T and Verizon who got licenses at auction.

Of course, it also screws up unlicensed, but more by removing the pro-unlicensed language in the Rockefeller Bill (such as it was) rather than by actively trying to destroy it, like the Republican Discussion Draft. OMB tends to regard unlicensed as meaningless because it doesn’t directly raise revenue for the Federal Government. (As best as I can determine, OMB thinks it learned everything it needed to know about spectrum in 1993 when Congress authorized spectrum auctions and has done its best to remain stubbornly ignorant about the value of unlicensed since.)

All this might be forgiven as harmless, and an object lesson for why revenue makes such a bad driver of spectrum policy, were it not for the fact that the bill is also profoundly bad politics. OMB appears to have believed that it could include every provision every stakeholder ever hated becuse the Jobs Bill would be a train that would drag it over the finish line, without worrying about whether drawing so much negative attention from so many different stakeholders would create a train wreck instead.

For example, lets consider the spectrum fee proposal in more detail. The Bill does not only apply spectrum fees to those who got their licenses for free, as in previous proposals. It requires the FCC to impose license fees on everyone, with two exceptions. Whether you got your license at auction, whether it’s exclusive or not exclusive, the FCC is supposed to assess a fee. In addition, the Bill requires the FCC to collect $550 million in spectrum fees every year (starting in 2015) no matter what, essentially transforming what was supposed to be a mechanism for getting folks who got their license for free. i.e., television broadcasters, to leave, so that the spectrum could be auctioned for more “efficient” use (like wireless broadband). By requirng the FCC to collect $550 million every year no matter what, the “spectrum fee” becomes a wireless tax with the FCC left the unenviable task of figuring out how to apportion the tax burden.

Not only is that bad policy, it guarantees that the FCC will have to impose spectrum fees on wireless providers, because there is no way anyone else can afford to cough up $550 million. What else is the FCC going to do, charge a new $50/yr fee on every bus fleet or power company with a Part 90 license? So CTIA, Verizon, AT&T, while still supporting the bill, are in no position to say “pass right away with no changes,” which is supposed to be the Administration’s talking point these days. And while it was never really in the cards that Congress would “pass this Bill” as submitted by the President, did OMB have to go out of their way to make it politically impossible for that to happen? And piss off the bill’s friends in the bargain?

Even more ridiculous, the two classes of licensees exempted from spectrum fees are public safety and . . . . wait for it . . . . television broadcasters. This is so dumb politically it makes me wonder if OMB ever gets out of the White House much. First, spectrum fees were initially all about going after the broadcasters for their free spectrum, so those who supported spectrum fees for ideological reasons will be annoyed. More importantly, this doesn’t solve the “NAB problem.” The National Association of Broadcasters will lobby just as hard against radio spectrum fees as they will against television spectrum fees.

The end result is that OMB’s “enhancements” of the Rockefeller bill achieve the undesired goal of making it needlessly harder to pass the Bill and annoying the Bill’s supporters, while still pissing off opponents just as much. The fact that they would also be phenomenally bad policy is simply a yummy extra for the few of us that care about substance and the people of the United States, who have to live with the end result.

Fortunately for the Administration and its supporters, the fix is relatively straightforward. Simply substitute the current spectrum section for the Rockefeller/Hutchison language (which, after all, got fairly substantial bipartisan support in the Commerce Committee) and move things along. It’s a small headache, especially in the overall migraine of trying to get the Jobs Bill passed at all, but it was an entirely avoidable headache at a time when the White House has more than enough headaches to keep them busy.   

Hopefully everyone will Learn a Valuable Lesson In Life from this little episode. While it is important to have someone like OMB keeping policy affordable and sustainable, it is disastrous to have OMB try to develop policy. Many a business has run to ruin when bean counters get too heavily involved in day-to-day management and the business becomes all about reducing expenses rather than manufacturing products or selling services. While a government is not a business, the same logic applies. If you focus too much on raising revenue, you screw up the stuff you are trying to accomplish. 

So next time, call or email me first, I promise to set you right.


About Harold Feld

Harold Feld is Public Knowledge’s Senior Vice President and author of “The Case for the Digital Platform Act,” a guide to what government can do to preserve competition and empower individual users in the huge swath of our economy now referred to as “Big Tech.” Former FCC Chairman Tom Wheeler described this book as, “[...] a tour de force of the issues raised by the digital economy and internet capitalism.” For more than 20 years, Feld has practiced law at the intersection of technology, broadband, and media policy in both the private sector and in the public interest community. Feld has an undergraduate degree from Princeton University, a law degree from Boston University, and clerked for the D.C. Court of Appeals. Feld also writes “Tales of the Sausage Factory,” a progressive blog on media and telecom policy. In 2007, Illinois Senator Dick Durbin praised him and his blog for “[doing] a lot of great work helping people understand how FCC decisions affect people and communities on the ground.”