ADMINISTRATION CIRCULATING DRAFT SPECTRUM FEE LEGISLATION

The Bush Administration is circulating draft legislation that would give the FCC new authority to charge fees for unauctioned spectrum licenses and construction permits as well as permanent authority to conduct auctions. The proposal is similar to one proposed in the President’s 2004 budget proposal, but not enacted. The proposal is also in line with the FCC’s Spectrum Policy Task Force report recommendations.

The Commerce Dept. (DoC) pushed the proposal in a May 22 letter to Capitol Hill leaders from Gen. Counsel Theodore Kassinger. In the letter, he said the FCC needed fee authority for unauctioned spectrum to “promote more efficient and effective spectrum use” and giving the Commission permanent auction authority would “allow for more certainty in the auction and planning process in the coming years.”

The Administration proposed the unauctioned spectrum fee earlier this year, but the plan was left out of the 2004 federal budget (CD Feb 4 p1). The FCC’s auction authority is set to expire in 2007. An NAB spokesman said Wed. the group would oppose the bill. In response to the Feb. budget proposal, NAB Pres. Edward Fritts had said: “Broadcasters should not be saddled with an unfair spectrum tax, which would ultimately slow the transition to digital and harm consumers who rely on local stations for high-quality news, information and entertainment programming.”

The Kassinger letter said the proposal could bring in $10 million in 2005 and $4 billion in the next 10 years. However, the White House budget estimated the proposal would raise $1.9 billion in 10 years. House Commerce Committee spokesman Ken Johnson said there was some concern about how the bill could affect the budget. “Clearly, this legislation could have a big impact on the budget,” he said. “As a result, we're going to take a lot of time to analyze carefully. Our staff has begun this process.”

Spectrum user fees were proposed first in the FCC’s Spectrum Policy Task Force report released in Nov. In April, FCC Comr. Adelstein supported giving the Commission the authority to impose fees. “While we may not need to impose fees in all situations, the Commission should have the discretion to impose fees to promote efficiency, particularly for those services in which incumbents did not pay for their licenses,” Adelstein told the U. of Colo.-Boulder.

The bill didn’t define which entities would be classified as “unauctioned spectrum license” holders, but sources suggested broadcasters could be targeted. “The Commission may determine over time different classes of spectrum licenses or construction permits upon which such fees may be assessed,” the bill said. An analysis of the bill said: “Given the many and varied uses of spectrum, it is understood that fees may not be appropriate for every class of spectrum license or construction permit.”

The bill would establish factors the FCC should consider in establishing the fee methodology, including: (1) Scope and type of permissible services and uses. (2) The amount of spectrum and licensed coverage area. (3) Shared versus exclusive use. (4) The level of demand for spectrum licenses or construction permits within a certain spectrum band or geographic area. (5) Other such factors that the FCC determined were necessary to promote efficient and effective spectrum use.

The bill would require the FCC to begin collecting fees by Sept. 30, 2005. The Commission would have to begin the rulemaking process to establish a fee methodology within 60 days of passage of the legislation. The bill also would allow the FCC to conduct further rulemakings to modify the fee methodology and allow it to charge late penalties for missed payments.

The letter was sent to Vp and Senate Pres. Cheney, House Speaker Hastert (R-Ill.), House Majority Leader DeLay (R- Tex.), Senate Majority Leader Frist (R-Tenn.), House Minority Leader Pelosi (D-Cal.), Senate Minority Leader Daschle (D- S.D.), House Commerce Committee Chmn. Tauzin (R-La.) and ranking Democrat Dingell (Mich.); Senate Commerce Committee Chmn. McCain (R-Ariz.) and ranking Democrat Hollings (D-S.C.).