Sen. John Kennedy (R-Louisiana) didn’t mince any words when he opened Thursday’s U.S. Senate Subcomittee on Appropriations hearing regarding Federal Communications Commission oversight: He does not favor the C-Band Alliance plan for what would amount to a private auction of the nation’s mid-band airwaves.
FCC Chairman Ajit Pai, the first witness to testify, said he has not yet made up his mind about how the FCC will handle the C-band, but the other two witnesses were firmly entrenched in Kennedy’s corner, blasting the CBA for postulating that its proposal for releasing C-band (3.7-4.2 GHz) would be faster than a government-run auction.
To be clear, Kennedy at the start of the hearing said his mind could be changed, but his bias is for a public auction—not one where foreign-owned satellite companies get a windfall. He’s heard estimates that the initial value of the C-band—not the total 500 megahertz in the band but 300 to 400 megahertz—could generate as much as $60 billion.
He also questioned the big argument in favor of the CBA proposal—that it will make spectrum available faster, saying that the litigation ensuing from a privately run sale would actually make the CBA plan a longer-term endeavor.
Complicated array of issues
In his testimony, Pai said the FCC’s C-band proceeding involves a complicated array of legal, policy and other issues, and many of those are still being hammered out. But he ticked off four goals he wants to see accomplished: make a significant amount of spectrum available for 5G; make the spectrum available quickly; generate revenue for the federal government; and ensure the services currently delivered using the C-band spectrum will continue to be delivered to consumers.
The C-Band Alliance includes Intelsat, SES and Telesat; Eutelsat dropped out last month. The satellite companies use the C-band spectrum to deliver services to content, broadcast, cable and other companies that in turn deliver services to American consumers. But none of the satellite companies are based in the U.S.
Asked who owns the spectrum, Pai said that ultimately, it’s a public resource owned by the American people. He also acknowledged the FCC does not have a firm estimate on how long it would take the government to conduct an auction.
Kennedy suggested convening all of the people involved in the FCC’s auctions process, and instructing them to get an auction done in, say, two to three years. If someone says they can’t get it done in the allotted timeframe, “fire somebody,” and find someone who can do it, he said.
The Louisiana lawmaker also said that based on his reading of the Communications Act, the FCC must use a public auction process. Anybody who knows “a law book from a J.Crew catalog knows there’s going to be a lawsuit, several,” and it will take years, he said.
He also brought up security concerns. “I’m not saying this is the case, please don’t misinterpret me, but any private company that comes to us and says, ‘Hey, I’ve got a win-win for me and the American people, and I can do it faster, and we’re going to beat those Chinese, and let me handle it and keep the money,’ what if they’ve got it presold to Huawei? That would not be cool, Mr. Chairman… You’d get a call from the president on that one.”
David Williams, president of the Taxpayers Protection Alliance, agreed that a private sale likely will take longer than seven years because there will be litigation. “This could actually slow the deployment of 5G,” he said. The FCC ultimately will be a quicker process than a private sale. If there are hiccups with a private sale, he posited, where’s the recourse?
Citizens Against Government Waste President Thomas Schatz said one of the reasons the CBA may be saying it would be faster is they may already know to whom they would sell it. “It wouldn’t be fair,” but that’s one way to do it. “The FCC is going to have to oversee this auction, which also begs the question: why don’t they just do it themselves since they’re the experts?”
For its part, the CBA is sticking to its guns, saying no other proposal before the FCC frees up the C-band spectrum for 5G as quickly as the CBA’s does while preserving the video and radio services that currently use the spectrum. In addition, the CBA has pledged to make a contribution to the U.S. Treasury as part of its plan, CBA spokesman Peter Pitsch told senators in a letter Thursday.
He also pointed to a letter from Grover Norquist, president of Americans for Tax Reform, which originally opposed the CBA’s plan but has been encouraged by changes to the CBA proposal. For one thing, the CBA will clear more spectrum than first proposed. For another, CBA’s commitment to make a contribution to the U.S. Treasury addresses its concerns about taxpayers getting a cut, and finally, the group is convinced that there will be reasonable FCC oversight over the transition of the spectrum.
In a note to investors on Thursday, New Street Research analyst Vivek Stalam summed it up, saying Kennedy’s crusade continues but lacks support. The room was empty for most of the hearing and only two other senators spoke. Kennedy indicated he might want to hold another hearing with FCC staff to talk about the auction process, and he noted the “$60BN windfall” at length, saying it could fund “several other government projects (including the wall).” As noted previously, “without more support, we don’t see much of a path forward for Kennedy’s opposition,” Stalam wrote.
Pai reiterated during his testimony that he hopes to have a C-band plan on the FCC's agenda before the end of the year.