Freaking trade press should know better, or at least learn to read more carefully. There is a steady drum beat of reports, starting I think with this one at RCR Wireless News that the President wants a “wifi tax.” This is, bluntly, a misreading of the plain language of the President’s budget proposal.

Lord knows there is plenty in the proposed budget not to like, but there’s no “wifi tax.” My analysis (and a little context) below.

O.K., here is what the President’s 2007 budget actually says about spectrum user fees. I have put the critical words (skipped by the industry press) in bold.

“Ensuring Public Resources Are Used Effectively”

“The radio spectrum plays an increasing role in everyday life, as wireless devices and technologies proliferate. To promote efficient spectrum use, the Administration supports granting FCC authority to set user fees on unauctioned spectrum licenses based on public-interest and spectrum-management principles.

”Spectrum assignment policy has not kept pace with the changing market. Service providers using different technologies to deliver a similar product can face different spectrum license acquisition costs. The lack of parity in spectrum assignment creates incentives that can diminish the overall utility of the spectrum.

“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.”

See, licenses not distributed by auction, not “unlicensed spectrum.”

So where does all this come from? For years, a number of economists have argued that giving free spectrum to broadcasters and other commercial entities under the old “public interest” model amounts to a multi-billion dollar public subsidy and rip off. (My friend Jim Snider at New America Foundation writes about this in his excellent expose of broadcaster lobbying power “Speak Softly and Carry a Big Stick.”) In particular, while the broadcasters were stalling the digital transition, a number of neo-con and progressive economists argued that we should impose user fees on broadcasters to push them off the analog spectrum so we could auction that.

Anyone who knows the political score here in DC understands that user fees for commercial broadcasters has a snowball’s chance on the planet Mercury. But the administration would propose them every year, which allowed them to include revenue from these fees in their budget projections, and Congress would politely ignore the request, and all was right in the world.

This year, Congress has fixed a hard date for broadcasters to move to digital (I think it landed somewhere around March 2009, but I lost track of the final version that was included in the budget reconciliation bill Congress just passed). So the administration could no longer justify spectrum fees on the “broadcasters need to move off analog and are costing us billions by holding up the auctions.” So they grabbed the standard neo-con language about fees pushing licensees to maximize the economic value of teh spectrum license, which the neo-cons equate with being the “highest, best use” of the resource.

I suspect most firemen and EMTs will dispute this later point. So the Administration budget asks to give the FCC authority to create fees based on “public interest and spectrum management principles.” In other words, the FCC could exempt the public safety and critical infrastructure crowd, charge a low fee for the poor schlubs using industrial walkie-talkies (who haven’t switched to NexTel phones) and charge broadcasters a huge fee.

This proposal has even LESS of a chance of passing than the previous one that only targeted broadcasters, although it makes more sense. A lot of people use licenses they didn’t acquire at auction. This includes cell phone companies (the telcos all 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, a bunch of satellite folks (both DBS (which got a bunch of licenses free as well as a bunch at auction) and other forms of satellite communication). So the President’s estimates that “fee collections will begin in 2007 and will amount to $3.6 Billion over the first ten years” should be treated with the same seriousness as “the Administration will develop the technology to transform toxic sludge into gold.”

But even in the version proposed by the President, THERE IS NO WIFI TAX. This is why people are having such a hard time figuring out how it would be collected, since IT WOULDN’T BE COLLECTED.

Now, it is always possible that some bright boy will decide that they should impose a fee on “unlicensed” spectrum because it is not distributed by auction, although that doesn’t make a lot of sense for either economic reasons or technical reasons. (I won’t get into the details unless someone in the comments is really interested.) If that happened, then it would be time to get up in arms. But that’s not what is being proposed.

I get annoyed about this stuff because people get all excited about it and then, when they find out it’s not real, they tune out policy that does matter. There are plenty of assaults on open spectrum that we don’t need to get distracted by the imaginary ones.

UPDATE: RCR Wireless now reports that the Bush Administration has “clarified” that the user fees don’t apply to unlicened. Seemed pretty obvious to me.

Stay tuned . . .

Comments are closed.