Snider Estimates U.S. Government Has Given Away $480 Billion in Spectrum Usage Rights

July 17, 2007. The New America Foundation (NAF) released a paper [52 pages in PDF] titled "America's $480 Billion Spectrum Giveaway: How it Happened, and How to Prevent it from Recurring". The author is the NAF's Jim Snider.

The paper argues that while the U.S. has nominally established a spectrum auction system, with exceptions for certain categories, such as public safety and terrestrial broadcasting, this system has largely distributed public assets without compensation.

First, the paper presents its arguments regarding the nature and size of this "giveaway".

The paper estimates that 90 percent of the value of spectrum usage rights has been given away without public compensation. The paper estimates the value of spectrum usage rights by using data disclosed by publicly traded companies that hold spectrum usage rights in their Forms 10-K for the year 2006 filed with the Securities and Exchange Commission (SEC). It estimates the total value at $522 Billion.

The paper then estimates Department of the Treasury receipts at $40 Billion. Hence, it argues that there has been an approximately $480 Billion "giveaway".

Second, the paper presents arguments regarding how spectrum usage rights holders acquire these rights without full public compensation. This is a discussion of lobbying and political communications strategies. For example, it argues that uncompensated value is transferred through the license modification process. It elaborates that the compensated license acquisition in the auction process merely provides a "foot in the door" for the spectrum usage rights holder.

Third, the paper offers numerous policy recommendations.

For example, it argues that a "revolving door" between industry and the Federal Communications Commission (FCC) and the Congress should be addressed. It states that "A conflict of interest occurs because government regulators have an interest in not alienating potential future sources of financial support in the form of salary or equity investment. The conflict of interest causes regulators to write rules that support private interests, not the public interest. This problem is pervasive at the FCC."

It adds that some "former FCC employees are given equity interests -- some worth potentially hundreds of millions of dollars -- in telecommunications companies seeking favorable treatment before the FCC."

The paper suggests increasing the time ban on former FCC employees lobbying the agency from one to three years. It also recommends that "private companies lobbying the FCC or Congress with former FCC employees as stockholders should be required to disclose those equity interests".

The paper also recommends requiring the Congress to appropriate spectrum usage rights grants.

It recommends that spectrum usage rights licenses should be treated as leases, that these leases should be integrated into the government contracting system, and that spectrum should be treated like other government owned natural resources.

The paper also recommends that the federal government increase the public visibility of spectrum licensing. It recommends a government created "central database including the details of every spectrum assignment in the United States" and "historical information so that the modifications of any license over time can be tracked".

Moreover, it recommends that the government "should require that all spectrum license and allocation modifications that reach a threshold valuation should be valued by an independent auditor and integrated into the FCC's and NTIA's rulemaking procedures, including both formal rulemakings and waivers of particular rules on a case-by-case basis. OMB should then review the costs and benefits of such modifications with an expected economic impact above a certain threshold."

It also recommends the the FCC's Office of the Inspector General should be converted into a "True Inspector General".

Snider presented his paper on July 17, 2007, at an event hosted by the NAF. Michael Calabrese (NAF), Bob Edgar (new head of the Common Cause), Gary Bass (Executive Director of the OMB Watch), and Drew Clark (Center for Public Integrity) commented upon, and praised, Snider's paper.

The presentation was attended by NAF personnel, representatives of various groups, and reporters. Few representatives of the industries criticized in the paper, or the FCC or Congressional staff, attended the event.