American Jobs Act calls for spectrum fees
As it waves a metal detector over every inch of the country’s economy, looking for any stray nickel or dime with which to fund its ambitious American Jobs Act (Jobs Act), the Obama Administration apparently thinks it’s hit a minor jackpot: spectrum fees. That’s probably not good news for spectrum users of any stripe (although TV broadcasters may get a pass, at least initially). As the national debate on the proposed bill develops, all spectrum users should keep their eye on this particular detail. Things could get pricey if this proposal finds its way into law.
The issue arises in Section 278, which would require the Commission to collect nearly $5 billion over the next ten years through such fees. The fees would come in through annual assessments for spectrum use. The universe of fee payers would include pretty much anybody who holds any kind of spectrum license – except broadcast television and/or public safety licensees, and initial licensees/permittees who got their authorizations through the competitive auction process. (But note – that last exemption for auction winners gets them only through the initial license term or until their license is modified, at which point they join the ranks of the fee-eligible.)
The Jobs Act doesn’t say anything about the regulatory fees that licensees already pay, so presumably the proposed user fees would be in addition to reg fees. The likely rationale: regulatory fees are supposed to cover the cost of the FCC’s regulatory operations; spectrum user fees, by contrast, constitute a tax on the commercial benefits licensees can realize through utilization of their spectrum.
How exactly would the spectrum fee be calculated for licenses in the various services?
First, the Jobs Act would set annual minimum dollar levels the Commission would be required to collect. For fiscal 2012 overall collections would be at least $200,000,000; that number would go up in hefty $100,000,000-plus increments until 2015, when it would top off at $550,000,000, where it would stay until 2021. While the Jobs Act doesn’t say what would happen after 2021, it’s probably a pretty good guess that the government, having experienced a 10-year ride on the spectrum user fee gravy train, would likely stay on board for another few laps.
So the Jobs Act sets the annual nut the Commission would have to make. But it would leave it up to the Commission to figure out just how to make that nut.
The FCC would set up a schedule of fees for various classes of authorizations. In doing so, the Commission would be permitted to consider:
- the highest value alternative spectrum use forgone;
- scope and type of permissible services and uses;
- amount of spectrum and licensed coverage area;
- shared versus exclusive use;
- level of demand for spectrum licenses or construction permits within a certain spectrum band or geographic area;
- the amount of revenue raised on comparable licenses awarded through an auction; and
- such factors that the Commission determines, in its discretion, are necessary to promote efficient and effective spectrum use.
The real wild card among those factors is the first one: the concept of “alternative spectrum use forgone”. The Jobs Act doesn’t explain precisely what that term means. But it’s a pretty good guess that, under that rubric, the Commission would be free to consider not just how valuable the spectrum is to its existing licensees’ operations (based, say, on actual revenues, etc.), but rather how valuable it might be if it were being put to some better – i.e., more lucrative – use.
Such an approach echoes elements of the debate that has been swirling for the last couple of years around the possible re-purposing of TV spectrum for broadband use. The argument there is that, in the eyes of some, broadband constitutes a higher and better use of the spectrum than does broadcast television. Because of that, so that line of thinking goes, TV operators can and should be forced off their current space on the band in favor of broadband.
Factoring the concept of “alternative spectrum use forgone” into the calculation of user fees could provide an effective way for the Commission to “encourage” licensees to embrace Commission-favored services.
Of course, even if the Jobs Act were to be enacted today, TV licensees could breathe easy, since the Act would exempt them from spectrum user fees. How long that exemption would last – if it were to survive the legislative process in the first place – is anybody’s guess.
Under the Jobs Act, the Commission would be expected to act fast to get the spectrum user fee machine up and running. Within 60 days of the Act becoming law, the agency would have to initiate a rulemaking proceeding looking to devise the nitty-gritty details of methodology for determining and assessing the fees. And that wouldn’t be one of those lazy take-as-much-time-as-you-want rulemakings, either – the Jobs Act specifies that the Commission would have to be set up to collect the first round of fees no later than September 30, 2012.
And in case you might be tempted just not to pay the user fee, you might want to think again: the Jobs Act specifically authorizes the Commission to revoke authorizations for failure to make timely payment.
It’s way too early to be able to reliably predict whether the Jobs Act is likely to be enacted (and, if it does make through the process, whether the spectrum user fees will still be part of the final package). But it’s clear that the Administration sees such fees as a source of cash, and cash is what it needs, even if the projected collections over the first ten years – i.e., about $5 billion – would be relatively small potatoes when stacked up against the Jobs Act’s overall cost of $447 billion. So we can expect spectrum fees to be actively in play as the federal government works to address the country’s economic problems.
Besides the proposed spectrum user fee, the Jobs Act includes other spectrum-related proposals. The spectrum user fee provision (Section 278) is only one of 27 sections contained in Subpart H of the Jobs Act, entitled “National Wireless Initiative”. The other sections deal with granting the FCC authority to conduct incentive auctions (similar to other bills that have previously been introduced in Congress), reallocation of federal government-held spectrum to private use, reallocation of the “D Block” for public safety use, establishment of a new Public Safety Broadband Corporation and many other matters. While none of those other provisions may have the dramatic and near-universal reach of the spectrum fee concept, they nevertheless still warrant careful attention. We’ll keep our eyes out and report back here as warranted.