Bush's budget plan calls for taxing spectrum licenses

The Bush administration has submitted a proposal to the Federal Communications Commission (FCC) asking the regulatory body to consider imposing fees on unauctioned spectrum licenses which would yield about $3.6 billion during the next 10 years. Industry analysts initially saw this as an effort to target newer broadband and WiFi services, but a closer analysis shows that there are no plans to tax WiFi. The administration on Monday submitted to Congress its 2007 budget proposal, and the chapter dealing with communication shows the administration's plan for the government to benefit from taxing the proliferation of wireless devices and technologies and also to promote a more efficient use of spectrum.

On efficient use of spectrum, the Bush administration says that service providers using different technologies to deliver a similar product can face different license-acquisition costs, and the "lack of parity in spectrum assignment" creates incentives diminishing overall spectrum utility. The budget document then argues that "User fees will help to ensure that spectrum is put to its highest and best use, by internalizing the value of spectrum to license holders... This will have the effect of advancing U.S. economic growth and technological progress. Fee collections are estimated to begin in 2007 and total $3.6 billion in the first 10 years."

The administration is trying to confront a known fact: Many organizations use licenses they did not acquire at auctions. These include cell phone companies (the telcos received free cellular licenses back in the mid-1980s when the FCC started the service and distributed most of the initial licenses by free lottery), industrial satellite, all industrial users and several satellite companies (both DBS, which received licenses free and at auctions, and other forms of satellite communication).

There is an interesting story here: One element conspicuously missing from the 2007 budget proposal is a call for "analog TV spectrum fees," a call present in practically every budget submitted to Congress since the mid-1990s. The TV tax proposals remained just that--proposals--because they had been defeated each year by the effective lobbying of the National Association of Broadcasters (NAB) and other commercial-TV interests. The Bush-proposed unlicensed spectrum tax apparently is meant to take the place of the TV tax, with the administration having concluded that the TV lobby is just too powerful. Analysts argue that the spectrum license tax has even less of a chance of passing than the previous tax idea which targeted broadcasters.

For more on the administration's tax plan:
- see this Telecomweb report
- and Harold Feld's ZDNet comments

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