Congress is currently considering legislation to extend the authority of the Federal Communications Commission (FCC) to conduct spectrum auctions, which will otherwise expire in early March. Spectrum auctions have been wildly successful, both in maximizing the efficient use of the airwaves and in generating billions of dollars for taxpayers in the form of deficit reduction. Simply put, extending the FCC’s authority is a no-brainer.
Yet recent Congressional efforts, such as the Spectrum Auction Reauthorization Act of 2022, bog down spectrum policy in unnecessary bureaucracy and wasteful spending, leading our country in exactly the wrong direction.
Not so long ago, the U.S. was the center of innovative wireless spectrum policies. Other countries imitated us because America was clearly benefitting from market-oriented policies that spurred the development of wireless services and technologies to the benefit of the American consumer. Taking these market principles to their logical conclusion, American spectrum policy would be driven by regulatory flexibility and freedom of contract—what I have labeled an Open Spectrum approach—rather than command-and-control rules that prevent this precious resource from being put to its best and highest-value use.
Instead of moving closer to these principles, American spectrum policy has in recent years lost its way, looking more like a bureaucratic puzzle than a foundation for innovation. The American wireless industry is stagnating. Revenues are flat and costs are rising. The stagnation also paralyzes our technology companies. And spectrum policy has increasingly been at odds with putting the airwaves to their highest and best use.
While the vast majority of prior revenues from FCC spectrum auctions has gone to the U.S. Treasury, Congress has in recent years used the lapse of spectrum auction authority as an opportunity to engage in pork-barrel spending. Since extending spectrum auction authority is considered a revenue raiser by the Congressional Budget Office (CBO), some members of Congress realized that instead of simply having auction proceeds pay down the deficit (the legal default), they could earmark CBO-projected spectrum auction proceeds toward their pet funding projects, bypassing the “inconvenience” of the appropriations process and corresponding Congressional votes.
Not only is this unfair to taxpayers, but it also distorts policy. Rather than putting spectrum to its highest and best use, spectrum policy decisions are now influenced by how high the Congressional Budget Office “scores” legislation that parcels out auction authority. The tail wags the dog, and the ultimately loser is the American consumer.
The most recent effort to pass spectrum auction legislation—the Spectrum Auction Reauthorization Act of 2022—is an example of this trend. It earmarked the vast majority of the funds from projected auctions in the next few years, $23 billion, for specific grant programs, bypassing the Congressional appropriations process and corresponding Congressional votes.
Some of the earmarks have been debated—and rejected--by Congress in the past. All of the spending, such as up to $15 billion for “Next Generation 911” grants, beg the question of why so much money needs to be siphoned off FCC auction receipts rather than paid from the U.S. Treasury. Does the American public want the FCC, rather than the U.S. Treasury, to be financing federal programs?
As if $23 billion backdoor spending were too little, some are now pushing to allocate additional spectrum proceeds to extend the “Affordable Connectivity Program,” a low-income broadband subsidy program that both the FCC’s Inspector General and the Government Accountability Office recently found to be highly vulnerable to fraud.
To the extent the ACP works, it should be paid through the ordinary appropriations process. To the extent the program needs to be repaired, repair it. But to extend the program vulnerable to fraud without repairs through FCC auction receipts is irresponsible. Other governments may wish to expand through obscure government agencies programs subject to fraud. But the American consumer deserves better, much better.
The Federal debt ceiling has been reached, and the Department of Treasury is taking “extraordinary measures” to keep the federal government operating. Some members of Congress are calling for spending cuts in order to garner their vote to raise the debt. Other members of Congress seek to negotiate a spectrum bill that would raise spending that has not been vetted or debated, or worse, that has been debated and rejected. Hiding federal spending on dubious programs at the FCC rather than having them approved through appropriations and Treasury won’t fool many people.
America has economic malaise: slow growth, the looming shadow of inflation, and widespread consumer concerns. We can do much better. America is at its best when we have faith in the good judgment of consumers, when we unbridle the extraordinary creativity and innovation of American entrepreneurs, and when we allow the federal government to do what law and prudent judgment require it to do—but not more. The wireless sector is the once and future dominant engine of American economic growth. Getting rid of spectrum earmarks and unburdening wireless policy from the tawdry distractions of paying for Congressional pork will show consumers– and bureaucrats around the world who mistakenly believe America is past its prime – that America is ready to lead in the wireless sector again.