Two FCC Commissioners Walk Into a Bar

Cite this Article
Eric Fruits, Two FCC Commissioners Walk Into a Bar, Truth on the Market (June 09, 2023),

Grab a partner, find a group, and square up for Truth on the Market’s second Telecom Hootenanny. We’ve got spectrum auctions, broadband subsidies, and a European 5G tango.

Former FCC Commissioners Have Some Thoughts

Writing with Kirk Arner in RealClearMarkets, Harold Furchtgott-Roth—formerly of the Federal Communications Commission (FCC)—comments on the Spectrum Auction Reauthorization Act, recently passed out of the House Energy and Commerce Committee. Arner and Furchtgott-Roth note that reauthorizing spectrum auctions is a “good and necessary idea,” but take issue with the “$23 billion Ponzi scheme” the reauthorization creates.

First, the bill would authorize the FCC to borrow more than $3 billion from the U.S. Treasury.  As for the NTIA, it would be allowed to borrow $200 million, also from the Treasury.

Second, the bill would then authorize the FCC to sell large swaths of federally-owned radio spectrum rights, which are public assets currently owned [by] the government.  The proceeds from these auctions would be in the many, many billions of dollars.

Third, following the FCC auctions, the bill would require the proceeds to be distributed in a specific way.  Off the top, over $3.2 billion would be returned to the Treasury to essentially pay back the initial FCC and NTIA loans from step one.  Beyond that, $19.8 billion would be directed to NTIA, including $14.8 billion to implement a “new 911” program and $5 billion for a new “middle-mile” program.

Kristian Stout and I wrote last year here at Truth on the Market that “the auctioning of licenses provides revenues for the government, reducing pressures to increase taxes or cut spending.” Similarly, Furchtgott-Roth and Arner argue that the proceeds from spectrum auctions should go entirely to the U.S. Treasury, to be appropriated by Congress. But the authors conclude that the Reauthorization Act instead mandates those proceeds be spent on specific “pet projects.”

It’s a fairly open secret that the Affordable Connectivity Program (ACP) that provides broadband subsidies is expected to run out of money within the next year. At a Brookings Institution event, fellow former FCC Commissioner Michael O’Rielly argued that the FCC is “not well-suited” to distribute ACP funds.

Even so, O’Rielly defended the ACP as the “best structure we have to date” and supported congressional appropriations to fund the program. He’s likely correct, as I concluded in a recent Truth on the Market post:

Even if the ACP program is not perfect in itself, it goes a long way toward satisfying the need to make sure the least well-off stay connected, while also allowing private providers to continue their track record of providing high-speed, affordable broadband.

In a recent research note, Kathryn de Wit of Pew’s Broadband Access Initiative noted that the ACP is interconnected with several other federal broadband and that lack of funding for ACP could disrupt these other programs:

Failure to fund ACP could also jeopardize the success of other federal broadband access initiatives. The Broadband, Equity, Access, and Deployment (BEAD) program, which is providing $42 billion to states, requires that ISPs participate in the ACP. And the Treasury Department’s Capital Projects Fund program also requires that ISPs participate in the ACP.

There’s a lot of money swirling around in telecom these days. Let’s hope Congress can carve some time out of their upcoming re-election campaigns to make sure it’s put to good use.

EU’s 5G Cost-Sharing Proposal Goes Over Like a Lead Balloon

Meanwhile, in Europe, a majority of EU member states now oppose a proposal by large telecom operators to impose a network fee on tech giants such as Google, Apple, Facebook, Netflix, Amazon, and Microsoft to fund the rollout of 5G and broadband in Europe.

In Truth on the Market, Miko?aj Barczentewicz and Giuseppe Colangelo describe the proposal as “a curious phenomenon in which the commission revived the seemingly dead-and-buried idea of a legally mandated ‘sender pays’ network-traffic scheme.”

The European Commission’s proposal is driven by large telecoms’ complaints that, in the name of “fairness,” large online platforms—whose users consume a significant chunk of bandwidth—should contribute more to the cost of telecom networks. Telecoms supporting the proposal include Deutsche Telekom, Orange, Telefonica, and Telecom Italia. Barczentewicz and Colangelo conclude that no such “fairness” problem exists and that none of the telecoms’ concerns can be addressed via the proposed “sender pays” or “network fees” scheme.

Apparently, some EU countries agree. Telecom ministers from 18 countries expressed concern that the proposal might violate the EU’s “net neutrality” rules and would impose extra costs that would be passed on to consumers.

Rent seeking never rests, so it looks like this is just one of the first dances in Europe’s Network Fee Hootenanny.