In the days ahead, the Federal Communications Commission should release a draft proposal for its highly anticipated, multibillion-dollar auction of the electromagnetic spectrum. This may be the highest-stakes auction of spectrum ever.
If the FCC fails to get the spectrum allocated speedily, it could put at risk America’s chances of gaining supremacy in the deployment of superfast 5G technology. 5G is the fifth generation of wireless smartphone technology, and the race is on to implement 5G technology and its myriad applications. An estimated $500 million and more than 1 million jobs may hang in the balance.
The midband spectrum between 3.7 and 4.2 gigahertz, sometimes called “the C-band,” is typically used for TV, cable, and radio programming nationwide. Currently, the assignment of this spectrum goes to several satellite companies. This band could be freed up and auctioned to companies such as Verizon, AT&T, and others that intend to use it for 5G development.
FCC Chairman Ajit Pai said his goal is to hold the auction of this valuable spectrum space in December 2020. That would be great news — if the FCC can pull it off. Every month that goes by without the auction advantages our foreign competitors, most notably China, which provides its tech industry billions of dollars in government subsidies to best American firms.
Meanwhile, President Trump rightly made 5G deployment a national security and economic policy priority and wants America to lead, and not from behind.
One monkey wrench in the FCC’s plan is the expectation of a challenge from the satellite companies, Intelsat being the largest. These companies are threatening lawsuits or bankruptcy if the current draft plan is adopted. The FCC insists it has the right to reassign the spectrum for billions of dollars less than the satellite companies want.
The agency may be right, but the problem is that bankruptcy or lawsuits, unless the courts summarily dismiss them, mean the government can toss any chance of an auction in 2020 out the window. In past cases, litigation and bankruptcy claims by the affected parties have held up auctions for years despite the FCC eventually prevailing.
The FCC should also beware that any perceived devaluation of the licensing rights of the current spectrum owners could reduce the money raised during this and subsequent auctions. Those who bid for FCC spectrum leases believe they are purchasing a right to use it for a specified number of years. They should also dismiss the argument some are making that since these are foreign-owned companies, the government should take a harder line. It ignores the fact that many of the shareholders are Americans. It is equal protection of the law that brings foreign investment to the United States in the first place.
The auction expects to raise some $30 billion, and Pai should get the best deal he can. He shouldn’t let the satellite companies hold this process hostage. But the FCC should also remember there is a high cost to the national interest from a delay. Only China wins under that scenario. A negotiated settlement with all the affected parties would clear away the final hurdles to getting this done. It would expedite the U.S. becoming the leader in the next generation of communications technology. It would be a big win for the American economy and would make Pai a hero.
Stephen Moore (@StephenMoore) is the finance and economics columnist of the Washington Examiner magazine and an economic consultant with FreedomWorks.
