Executive Summary
This paper discusses two broad legislative approaches to restarting the auction authority of the Federal Communication Commission (FCC). Under one approach, FCC auction authority would simply be restarted with no requirements or timelines. Under the other approach, the National Telecommunications and Information Administration (NTIA) would identify a minimum amount of federal spectrum for transfer to the FCC for auction for non-federal purposes. A minimum amount of that spectrum would be auctioned for full-powered uses, and tight timelines would ensure timely action by both NTIA and the FCC. Under the first approach, few FCC auctions and few receipts are likely in the next 10 years. Under the second approach, many auctions and substantial receipts are all but certain in the next 10 years. The first approach should receive a substantially lower budgetary score than the second approach.
Background
Wireless spectrum is an asset whose value has increased rapidly in the past few decades. But transferring control of spectrum from one entity to another has proven difficult. Coordination of wireless spectrum in the United States is divided between two federal agencies: the NTIA for federal spectrum, and the FCC for non-federal spectrum. Before 1993, the vast majority of spectrum was federal, used by federal agencies, and coordinated by the NTIA. Much spectrum remains either exclusively federal or shared between federal and non-federal users. Some federal spectrum has been efficiently used; other federal spectrum has not.
Auctioning federal spectrum licenses to non-federal users was one of the most important innovations in spectrum policy. From 1994 through 2023, the FCC conducted approximately 100 auctions and raised hundreds of billions of dollars of receipts for the US Treasury.
Beyond the revenue generated by these receipts, the auctions’ greatest economic contribution has been distributing wireless spectrum to higher-valued uses. Markets’ main benefit is their ability to allocate assets to the highest-value uses. Through FCC auctions, private entities bid billions of dollars for spectrum that previously was used by federal agencies. By willingly taking the auction receipts in exchange for spectrum, the federal government reveals that it values the receipts more than the spectrum. Private entities reveal that they value the spectrum more than the auction receipts. All parties to the auctions are better off.
The greatest winners from FCC spectrum policy in recent decades are American consumers—and, indeed, consumers around the world. Over the past three decades, Americans have benefitted from a wide range of new services that rely on spectrum previously under federal control. Wireless service providers can offer new products thanks to both greater spectrum access and decreased government regulation. Other countries, seeing the enormous value of wireless services, have followed suit both by implementing spectrum auctions and limiting regulation. Imitation is not merely the sincerest form of flattery; it is also the basis for exporting innovative American technologies and innovative forms of American regulation.
But American innovation both in wireless technology and wireless regulation has slowed. By 2021, the FCC had practically exhausted the supply of federal spectrum that was ready for transition to non-federal use. Despite substantial and growing demand for commercial wireless spectrum, the NTIA has added little, if any, to the pipeline for auction in recent years. So even if the FCC restarted auction authority today, there is little federal spectrum available. Some causes are below:
- Federal agencies are protective of the spectrum they use and generally lack incentives to free up frequencies for more efficient uses.
- The federal government has no market mechanism to assess which federal spectrum is worth keeping and which would be better transferred to non-federal use in exchange for auction receipts. On the other hand, non-federal customers pay annual spectrum fees, which continually demonstrates the value they ascribe to their spectrum use.
- Even when it receives federal spectrum, the FCC may decide not to auction it. The commission can instead allocate this spectrum for uses that are not assigned by auction, such as satellite services and unlicensed devices.
- Competing interests in the same band may cause substantial delays in auction decisions and substantial reductions in auction receipts. For example, the FCC recently initiated a notice of inquiry (NOI), rather than a notice of proposed rulemaking, for an FCC decision in the Upper C-Band. That entire band is currently under FCC control, but the NOI will delay the FCC’s decision. Moreover, the FCC is considering options for the Upper C-Band that may result in few to no auction receipts.
If federal spectrum allocations become fixed and inflexible, FCC auctions will generate fewer receipts even if Congress extends FCC auction authority. More importantly, American consumers suffer when spectrum is not put to its best and highest-valued use as revealed through auctions.
Alternative Legislative Language for Better Budgetary Results
Congress is considering two approaches to restarting FCC auction authority. Under one approach, FCC auction authority would simply be restarted. But the NTIA would not be required to reallocate any spectrum from federal use, the FCC would not be required to auction any spectrum for full-power use, and neither agency would need to meet any timeline. The FCC has some non-federal spectrum ready for auction: the returned DISH spectrum and the Upper C-Band. But it is unlikely that the commission will transfer any federal spectrum to non-federal use.
Under the other approach, as in S.3909, the Spectrum Pipeline Act of 2024,1 FCC auction authority would be combined with the following requirements:
- Minimum threshold amounts of spectrum to be transferred to the FCC for auction. Under S.3909, the NTIA would identify 1,250 megahertz of spectrum currently allocated for exclusively federal or shared federal use between 1.3 gigahertz and 13.2 gigahertz to be transferred to the FCC for non-federal use. In the past four years, no spectrum has been transferred from federal to non-federal use. In the four years prior to that, as little as 100 megahertz of spectrum (3.45 to 3.55 gigahertz) were transferred to non-federal use. Without minimum requirements, the NTIA is not likely to transfer a meaningful amount of federal spectrum to the FCC for auction in a timely manner. A bill similar to S.3909—meaning, a bill requiring a defined minimum amount of spectrum to be auctioned under a specific timeframe—can expect substantially higher receipts in the next 10 years than a bill without required minimum amounts.
- Minimum threshold amounts of spectrum to be auctioned for full-power use. Of the spectrum transferred to the FCC under S.3909, at least 1,250 megahertz would be auctioned for full-power use. The FCC has the authority—and in recent years has preferred—to allocate spectrum for low-power purposes, unlicensed purposes, or satellite services. These are worthy allocations, but they generate fewer, if any, auction receipts. A bill similar to S.3909 would generate substantially higher receipts in the next 10 years than a bill without minimum threshold amounts of spectrum to be auctioned for full-power use.
- Tight timelines for the NTIA and the FCC. S.3909 would set tight timelines for the NTIA to identify federal spectrum to be transferred for non-federal use and for the FCC to auction much of that spectrum. Without these timelines, the NTIA might belatedly or never identify federal spectrum to transfer to the FCC. For the past eight years, it has identified little spectrum. The timelines would give the administrator of the NTIA substantial leverage to force recalcitrant agencies to identify spectrum in a timely manner. The timelines would also require the FCC to auction the spectrum within a few years. A bill similar to S.3909 would generate substantially higher receipts in the next 10 years than a bill without timelines for actions by NTIA and the FCC.
Taken together, these provisions mean that a bill similar to S.3909 should receive a substantially higher budget score than a bill that would simply extend FCC auction authority.