Federal Spectrum Incentive Act May Require Evolving Incentives, Stakeholders Say

The high-profile bill would let federal agencies recoup 1 percent of the profit from any spectrum they give up for auction. CEA, the Competitive Carriers Association (CCA) and CTIA voiced enthusiasm for the measure when it was introduced last Congress in the House and this Congress in both chambers.

Federal agencies express concern “about the 1 percent number, it’s not even in the ballpark,” said Karl Nebbia, a former associate administrator of NTIA’s Office of Spectrum Management, on an episode of C-SPAN’s The Communicators earlier this month. “Agencies see it as an opportunity, but it’s got to be a real opportunity.” Nebbia told us he based this impression on what he heard from agencies when they compared 1 percent against their costs in past relocations. Tom Power, then U.S. deputy chief technology officer-telecom in the White House Office of Science and Technology Policy, said in the fall that federal agencies “would love to see that number a little higher.” Power is now CTIA general counsel.

The 1 percent figure is “probably far too low to be a meaningful incentive to motivate federal agencies to go through all of the work to relocate,” said Armand Musey, managing director at Goldin Associates. “In most cases, it is nowhere near enough to even pay the direct costs for doing so. Much of the spectrum is not prime spectrum, which lowers the amount even further.”

“We haven’t discussed that among ourselves as a committee,” said bill sponsor Rep. Brett Guthrie, R-Ky., of the 1 percent concern. Guthrie said he hopes to advance the legislation. “We’ve talked about it,” Guthrie said of the bill. “I think there might be some opportunity to move forward. Of course, we’re doing several things with the subcommittee, with the telecom rewrite and other issues now.” Guthrie and Communications Subcommittee Chairman Greg Walden, R-Ore., “haven’t met on that recently,” Guthrie added. Guthrie views the legislation “as a starting point,” a Guthrie spokeswoman said later, saying its provisions may well shift following any hearings and opportunities for agencies to give feedback.

Guthrie co-chairs the Congressional Spectrum Caucus alongside the bill’s other backer, Rep. Doris Matsui, D-Calif. “The legislation would allow federal agencies to share in the spectrum auction proceeds for the first time in history,” a Matsui spokeswoman said. She said Matsui intends to work with federal agencies and colleagues to advance the bill.

Walden and subcommittee ranking member Anna Eshoo, D-Calif., co-sponsor the bill. Sens. Ed Markey, D-Mass., and Deb Fischer, R-Neb., introduced a Senate companion for the first time this Congress when the bill was reintroduced. It’s referred to the House Commerce and Armed Service committees, and to Senate Commerce. The Congressional Budget Office assessed the bill last Congress and said it expects it would cost each affected agency $1 million a year due to the interagency engineering studies and coordination. CBO also estimated each affected agency would receive about $8 million from the Spectrum Relocation Fund created by the bill. Enacting that legislation “would increase net direct spending by $30 million over the 2015-2024 period,” it said. House Republicans and the White House asked stakeholders about the legislation last year -- Republicans inquired about the bill through their Communications Act overhaul process, prompting favorable responses from stakeholders hungry for more spectrum (see 1404280061), and the White House through a request for information on spectrum policy, prompting similar industry responses.

Lobbyists whose associations want more spectrum freed up worried less about the figure. “I expect there will be ample opportunity to discuss what constitutes an appropriate incentive as the bill moves through the process,” said CTIA Vice President-Government Affairs Jot Carpenter. “That’s the purpose of hearings, negotiations and mark-ups. The important thing is that Representatives Guthrie and Matsui and Senators Fischer and Markey sparked a critical and timely debate about how additional spectrum can be brought to market for commercial use.”

The legislation’s “time has come,” said CEA Vice President-Government and Political Affairs Veronica O’Connell, who's “very hopeful” of movement this year, citing its strong bipartisan support. She doesn’t see 1 percent as too low and said it begs the question of 1 percent of what. The recent AWS-3 spectrum auction exceeded expectations all around, pulling in more than $40 billion in revenue. “We don’t know if 1 percent is the right figure,” said CCA Vice President-Legislative Affairs Tim Donovan. “We may not know until we know what bands are targeted.” The number may need to be revisited down the road, he said, explaining CCA’s enthusiasm due to the “incredible demand” for more spectrum among its members. CCA has been focused on the AWS-3 auction and 3.5 GHz opportunities but sees longer-term concerns, Donovan said. “There’s nothing else in the pipeline right now.”

“The problem is that not all spectrum is the same,” said Public Knowledge Senior Vice President Harold Feld. He said 1 percent of AWS-3 spectrum auction revenue “would have been huge,” but 1 percent of AWS-2 spectrum, which sold for $1.5 billion, “would have been less attractive.” Feld said 1 percent is “likely to be much too low” for agencies with small allocations of high-band spectrum, but for other agencies, 1 percent could be 10 times their annual operating budget.