Consumers Pay for FCC Arrogance

In an auction of underused TV spectrum coming next spring, the FCC was tasked by Congress to repurpose TV channels into wireless broadband so that consumers’ voracious demand can be satisfied while prices are kept at affordable levels.

The FCC’s auction is supposed to accomplish five things at once: first, encourage mobile wireless service operators to bid aggressively on spectrum; second, collect $7 billion toward a law enforcement wireless network (FirstNet); third, provide $1.75 billion to move some broadcasters to different channels; fourth, defray some of the Treasury’s debt; and fifth, provide enough incentive to induce broadcasters to put TV channels up for auction. The first item is to provide the money to cover the other four uses of funds.

For the FCC’s auction to succeed it must provide a lump sum to TV station owners that is bigger than the expected future earnings from conventional operations. This means the FCC’s auction “incentive” will need to be high, if the intent is to get broadcasters to vacate channels.

The Congress knew that the broadband wireless spectrum crunch must be addressed to prevent damage to the consumer and to the economy. For that reason, Congress insisted on an open and fully competitive bidding system.”

Ignoring the Congress’s instructions and at the coaxing of Sprint and T-Mobile, the FCC’s concocted auction rules that tend to exclude the bidders with deepest pockets (including Verizon, AT&T and a few others).

The FCC’s rules are anti-consumer. All wireless mobile service providers have customers who need more spectrum. AT&T and Verizon alone have over 200 million such customers, and Sprint and T Mobile have about 100 million. All of these consumers want their services to be faster and better.

When it comes to getting more spectrum for consumer wireless broadband services and access to innovative applications, why do some consumers matter more to the FCC than others? By discriminating against some wireless service providers, the FCC’s rules would adversely affect the services of millions of consumers.

This is where the FCC has botched the auction’s chances for success and failed the consumer. The consumer consequences of these actions will be harsh. A recent study showed that the discriminatory bidding rules would lead to billions of dollars of losses for American Consumers.

Now that the FCC has shown that it is open for business and doling out favors, Sprint and T-Mobile have recently filed for reconsideration asking for – get this – even more favorable concessions. Yes, the lobbyists are back at the FCC’s trough. In the meantime, the National Association of Broadcasters has filed a lawsuitobjecting to the lopsided rules — all of this uncertainty because the FCC couldn’t bring itself to setting open and competitive rules.

Despite consumer needs and in contradiction to Congressional instructions, the FCC gave itself the divine right to pick which consumers win and which consumers lose. The net effect of the FCC’s regulatory arrogance is will be botchery on a large-scale – reducing the bid amounts, lowering the funds available as “incentive,” reducing the channels repurposed for wireless broadband, and jeopardizing the build out of law enforcement’s FirstNet, as well as stiffing the U.S. Treasury, taxpayers and consumers needing for more broadband.

Don’t you get apprehensive when some regulators try to think for themselves?

Alan Daley and Steve Pociask contributed to this piece for The American Consumer Institute Center for Citizen Research.

 

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