Its multi-billion dollar spectrum giveaway undercuts the president's populist message.
President Obama seeks to finance the American Jobs Act of 2011 by raising taxes on the wealthiest Americans. But the Act includes a spectrum giveaway worth tens of billions of dollars to some of America's wealthiest and most politically powerful individuals and corporations.
Of the Act's 155 pages, 30 are devoted to repurposing U.S. spectrum assets (popularly known as the "public airwaves"), which have been estimated to be worth over $1 trillion. Spectrum, which allows Americans to communicate wirelessly, is the foundation for many fast growing industries, including Android, iPad, and Kindle mobile computing platforms and the hundreds of thousands of software applications built upon them. The president is unquestionably right that better utilization of spectrum would foster new industries and job growth.
One way the president proposes to achieve this goal is by rezoning TV broadcast spectrum from broadcast to mobile broadband service and then reselling the rezoned spectrum in what he euphemistically calls an "incentive auction." In theory, the government would receive a fraction of the windfall from the rezoning. But the president leaves specifying the actual fraction to the discretion of Congress and the Federal Communications Commission (FCC), which will result in all but a few crumbs of the windfall going to the broadcasters.
Since World War II, Congress, mostly acting through the FCC, has given away hundreds of billions of dollars worth of spectrum rights -- arguably as much as $480 billion--to various commercial entities such as broadcast, cellular telephone, and satellite companies. In the mid-1990s, Congress announced that licensed spectrum rights would henceforth be auctioned. Despite several highly publicized spectrum auctions that netted the government tens of billions of dollars, including the largest auction of public assets ($19.1 billion) in the history of the United States, the majority of new spectrum rights have continued to be given away to powerful incumbent spectrum licensees such as the broadcasters.
All over the world, spectrum, as a vital, publicly controlled natural resource, has become to the Information Age what oil was to the Industrial Age. In the early 2000s, a spectrum auction in England raised $35.4 billion and one in Germany $46.2 billion. In 2010, a government auditor in India found that a single spectrum giveaway cost the Indian public $40 billion, a giveaway that Time magazine lists as No. 2 on its list of "Top 10 Abuses of Power." Only the Watergate scandal that brought down President Richard Nixon in 1974 is listed above it.
The 1920s Teapot Dome scandal, America's great oil scandal, which involved illegally leasing public lands to oil companies at below market rates, is a useful reference point. Three differences between the Teapot Dome oil scandal and the current spectrum scandal suggest the unique political problems associated with spectrum giveaways. First, the size of the Teapot Dome oil assets giveaway was negligible in comparison to the current spectrum assets giveaway. Second, the public could easily understand the nature of oil rights, whereas it has trouble understanding the nature of spectrum rights, including their non-intuitive electromagnetic properties. Third, the Teapot Dome scandal involved an illegal kickback to a high ranking public official, whereas to all appearances the current giveaway is perfectly legal, merely reflecting the institutional corruption of America's special interest politics.
The Obama Administration's spectrum reallocation policy has been characterized by lots of talk of spectrum auctions and fees while in practice relying almost exclusively on giveaways. Its January 2011 giveaway of mobile broadband service rights to satellite operators is a vivid example. Unfortunately, the proposed Jobs Act continues this pattern. On the one hand, the president recognizes that the current allocation of spectrum rights to TV broadcasters is holding back the growth of highly demanded wireless Internet services. On the other hand, he has decided that, given the power of the broadcast lobby, the only politically feasible way to rezone broadcast spectrum is to grant the incumbent broadcasters a windfall.
To be sure, many broadcast lobbyists fear an incentive auction because, by providing the windfall in one lump sum, it potentially makes it more publicly visible and thus politically risky. The politically safer and well tested approach has been to seek the windfall in bite-sized chunks; for example, by spreading the windfall over many years in small license modifications camouflaged in technical mumbo-jumbo in obscure FCC proceedings. The spectrum lobbyists motto might as well be, to kill a frog, boil it slowly; otherwise, it may notice the temperature change and jump out of the pot.
Nevertheless, the momemtum to quickly convert broadcast into mobile broadband spectrum appears unstoppable, if only because the broadcast industry is rapidly declining. Americans increasingly want to watch media on their own schedule, not the broadcasters' schedule. They also don't want to be stuck with the limited media options their local broadcasters provide.
Instead of giving a windfall to the media moguls, some of whom, like CBS's Sumner Redstone, Fox's Rupert Murdoch, and NBC's Brian Roberts, are already billionaires, the president should allocate auction receipts to the American people. This would undoubtedly anger many powerful members of Congress from both political parties, many of whom fear getting on the wrong side of the media conglomerates that, in addition to owning America's local TV stations and daily newspapers, aggressively lobby behind-the-scenes on spectrum policy and are believed to control the gateway to their constituents. But to do otherwise undercuts the credibility of the president's message that he is willing to fight for middle class Americans.
Specifically, the president should explicitly state how much of the auction proceeds will go to the public. He should encourage the Congressional deficit reduction super committee to close the many spectrum loopholes in government laws designed to prevent giveaways of public assets. And given the Federal government's demonstrated facility in conducting spectrum giveaways below the public radar, the president should propose accounting and other procedural reforms to reduce the incentives for such institutional corruption among his staff.
--J.H. Snider, President of iSolon.org, is a 2011-2012 network fellow at Harvard University's Edmond J. Safra Center for Ethics.
Addendum:
Petition to the White House
If you agree that the Federal government is giving away too much of the public's airwaves to powerful special interest groups, please consider signing a petition to that effect on the White House's new We The People petition website. Please also consider passing the petition along to anyone else you think might support the cause. The petition is available here: We petition the Obama Administration to require that spectrum lessees be charged market rates like other lessees of public assets such as land and buildings.
The President, who has demonstrated political courage in creating the We The People website and inviting politically inconvenient petitions like the one above, promises to provide an official response to any petition that receives more than 5,000 signatures within thirty days of being created. This petition, created on October 3, 2011, must reach the 5,000 signature threshold by November 2, 2011. A campanion blog, SpectrumBS.info, provides J.H. Snider's critiques of news articles on related spectrum issues.
You will have to sign in to the White House website to be able to sign the petition. This is to discourage people from signing the same petition more than once. The petition is not publicly displayed on the White House website until 150 people have signed it. This is to discourage the posting of obscene and other inappropriate material. Until the 150 threshold is reached, the petition can only be signed at http://wh.gov/2qN.
The text of the petition is copied below:
WE PETITION THE OBAMA ADMINISTRATION TO: require that spectrum lessees be charged market rates like other lessees of public assets such as land and buildings.
Since World War II, the Federal government has given away as much as $480 billion in spectrum rights to the private sector, including wealthy individuals and highly profitable corporations such as TV broadcasters, satellite operators, and mobile phone carriers. In the early 1990s, Congress mandated that spectrum rights be allocated by auction. But most spectrum rights have continued to be given away, often with a pretext of public interest obligations that are unenforced and later renegotiated. The Obama Administration has engaged in much talk about spectrum auctions and fees, but most spectrum rights have continued to be given away. When the government transfers spectrum rights from the American public to private corporations, the public should receive fair compensation for its property.