Spectrum User Fees Proposed

Like the swallows returning to Capistrano or Punxutawny Phil exiting his hole each February, user fees have appeared in the President's 2007 budget.

The Bush administration has proposed starting to collect user fees on unauctioned spectrum, including broadcasters', beginning in 2007.

The fees would raise $3.6 billion over its first 10 years, according to the administration.

The National Association of Broadcasters sees the new budget as an improvement, however, pointing to its explicit recognition of the money that will be raised from recouped analog spectrum and the lack of an explicit analog TV user fee.

"It appears the White House has abandoned the idea of taxing broadcasters billions in 'analog TV spectrum fees' and instead has given its blessing to the budget reconciliation bill as the means by which to raise billions in revenue (go to the last paragraph in bold)," said NAB spokesman Dennis Wharton. "You will recall that each White House budget submitted for the last 10 years or so has included spectrum tax provisions in the billions that would target TV broadcasters."

Last year's budget talked of  "an annual lease fee for analog spectrum use by commercial broadcasters," while this one simply refers to a general fee for users of unauctioned spectrum. 
Variations of the user fee idea have been proposed repeatedly by the Clinton and Bush White Houses but have failed thanks to broadcasters’ lobbying. Nevertheless, demands for spectrum from the wireless industry and from public safety officials make defeating the fees an increasingly tough fight.

Don't know if it is a change in emphasis, but the user fees were a boxed item in the online version of the budget.

The administration also proposed eliminating the the Telecommunications Development Fund,  which uses interest on spectrum proceeds of venture capital, and reiterated its support for the DTV bill establishing a hard date for the DTV transition and return of spectrum for auctions and first responders.
Following is the FCC portion of the budget, verbatim:

The President’s 2007 Budget proposes $303 million for the Federal Communications Commission (FCC), of which $302 million would be offset directly by regulatory fees.
This funding supports the Commission’s ongoing work to ensure that Americans have rapid and efficient communications services.

There has been enormous growth in advanced communications technologies in recent years. According to the most recently issued FCC report on broadband high-speed Internet access, at the end of 2004, the number of total broadband subscribers reached approximately 38 million. This represents a 34-percent increase from 2003, and a 440-percent increase from 2000, when the United States had seven million broadband lines. The dramatic growth in broadband depicted in this report shows that progress is being made toward the Administration’s goal of universal, affordable access to broadband by 2007.

FCC plans to auction 90 megahertz of spectrum for advanced wireless services in 2006 and 2007, half of which represents spectrum moving from Federal to private use. This spectrum will allow mobile wireless companies the opportunity to become broadband providers—further stimulating vigorous competition and bringing better prices and improved services to consumers.

Ensuring Public Resources Are Used Effectively

The radio spectrum plays an increasing role in everyday life, as wireless devices and technologies proliferate. To promote efficient spectrum use, the Administration supports granting FCC authority to set user fees on unauctioned spectrum licenses based on public-interest and spectrum-management principles.

Spectrum assignment policy has not kept pace with the changing market. Service providers using different technologies to deliver a similar product can face different spectrum license acquisition costs. The lack of parity in spectrum assignment creates incentives that can diminish the overall utility of the spectrum.

User fees will help to ensure that spectrum is put to its highest and best use, by internalizing the value of spectrum to license holders. This will have the effect of advancing U.S. economic growth and technological progress. Fee collections are estimated to begin in 2007 and total $3.6 billion in the first 10 years.

Spectrum auctions have proven to be an effective mechanism to assign licenses for certain spectrum-based services. The Administration supports legislation to permanently extend FCC’s auction authority.

To ensure that public funds are used effectively, the Administration proposes to eliminate the Telecommunications Development Fund, a poorly performing venture capital enterprise financed by interest earned on spectrum auctions.

The Administration supports reconciliation legislation that sets a date certain for the transition from analog to digital television broadcasts, requires the auction of recovered analog television spectrum, and provides for consumer education on the transition. The legislation will ensure the provision of advanced multi-channel video service to consumers, as well as make available valuable spectrum for public safety use and telecommunications innovation. When this transition occurs, it will bring benefits to consumers as well as emergency responders, and support the Administration’s priorities of homeland security and economic growth.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.