Sept. 1, 2014 SIGN IN | REGISTER

Spectrum Auction Deal May Haunt Congress

It is always possible that Congress will do many more productive things before November. God knows there are plenty of items on the agenda.

Perhaps a new and improved transportation bill — actually any bill other than the House version would be improved — will emerge that can keep the economy moving and improve our highways and transit system. Perhaps we will make progress on fiscal policy, inching toward the broad agreement that eluded the super committee. Perhaps we will at least find sensible ways to avoid the sequesters — perhaps some revenue instead of defense cuts? Nah.

It is more likely that the biggest accomplishment of the year was the deal to extend the payroll tax cut, unemployment benefits and the “doc fix.” That deal was not easy, of course. There was a long impasse, as President Barack Obama demanded that the payroll tax cut be paid for by a tax on the highest earners and Republicans demanded offsets in other domestic programs. That was followed by Republicans saying they would not require offsets for the payroll tax cut and then a short burst of intense negotiations behind closed doors over how to pay for the rest of the initiatives. And then victory — largely through a plan to apply revenues from spectrum auctions.

The plan swept through Congress with impressive bipartisan margins. The press largely reported it as Congress framed it, without looking seriously at what the deal entailed. A closer look shows how dangerous it is to let lawmakers throw something together without any serious deliberation or scrutiny.

Start with the conditions for conducting auctions of spectrum to create new wireless capacity. House Republicans insisted on statutory language that has broken the hugely successful spectrum auction authorization first effected in 1993 and also delayed for many years any possibility that digital broadcast spectrum that is almost entirely unused can be repurposed to serve the growing demands for wireless broadband.

Back in the early 1990s, the wireless phone market in each local area had two competitors, commonly including the local Bell company. The Federal Communications Commission, with Congressional authorization, sold new licenses in each market but opened them up to new firms who did not already participate in the duopoly. The result was an explosion of real competition, with four or five firms, sometimes more, in each market. This new competition resulted in the dramatic expansion of wireless usage, new devices and the innovation (and jobs) that followed — not to mention lower prices for all of us.

No more. Thanks to AT&T, which was rebounding from the denial of its attempt to acquire T-Mobile, and with the active connivance of Verizon and broadcasters, the House majority wrote into the payroll tax deal a prohibition on the FCC setting any conditions for bidder eligibility in auction. So, unlike in 1994, one firm can buy all the spectrum up for auction. The House majority gave erstwhile monopolists a guarantee that they can participate in the auctions to expand their monopoly power.

Of course, it is possible that this system will maximize revenues for the government and thus relieve the burden of taxpayers, a bonus to offset the likely expansion of monopoly power.

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