Over the last decade, the United States has experienced a very apparent and widespread explosion of demand for wireless data. Cellular networks now use an unprecedented amount of bandwidth each month due to the onset of streaming and social media applications such as Netflix and Twitter; however, the success of these services hinges upon an out of date and nearly obsolete broadband network. Problems with reliability prompted a reaction from the FCC to improve the infrastructure that supports these networks with the intention of creating an eventual fifth generation (5G) network to replace the current 4G networks.
In response to this demand, in 2012 Congress approved the plan for an “incentive auction.” The intention was to use market forces to maximize the usefulness of these airwaves through a variation of a blind auction, beginning on March 29th, 2016 and concluding in March of 2017. This auction was essentially designed to repurpose airwaves that provide radio and television services with the idea that companies’ underutilized bandwidth would be voluntarily sold back to the federal government, which would then reallocate it to others that require more data.
According to the FCC’s official website, this auction realigned “84 megahertz of spectrum – 70 megahertz for licensed use and another 14 megahertz for wireless microphones and unlicensed use. The auction yielded $19.8 billion in revenue, including $10.05 billion for winning broadcast bidders and more than $7 billion” in profit for the U.S. government. The next step in the process is a 39-month period in which infrastructure upgrades on existing TV antennas and towers will take place. This is to be funded through $1.75 billion allotted by Congress in 2012.
Although this incentive auction was a great idea – essentially using market forces to repurpose underutilized bandwidth – it hasn’t worked as well as promised. Congress’ failure to adequately fund the mandate may make this free market success story turn into a big government nightmare.
Estimates for upgrades necessitated by the auction have exceeded the previous $1.75 billion, reaching $2.1 billion and resulting in a $35 million deficit. And as the government proves time and time again, this estimate will only increase – just look at California’s current attempt to build a high-speed rail which is unsurprisingly behind schedule and over budget.
Due to this shortage of funding, the government has been inadvertently forced to use a form of eminent domain to force smaller companies to participate. This restructuring of the dial will impact over 1,100 TV channels and 600 FM stations. Despite receiving no benefit from the auction, these channels and stations will be forced to either pay for all their relocation costs themselves or go off the air. Many of these affected TV and radio stations are in rural areas, where there is a major lack of channel selection, not to mention much thinner profit margins, making these stations particularly vulnerable to this major change.
FCC Commissioner Michael O’Rielly even said himself that the current funding is insufficient and Congress needs to provide additional funding to negatively affected broadcasters to help with this transition – especially radio stations, which have received nothing; not even a penny from Congress’ efforts in 2012.
Thankfully, solutions are in the works. In response to these issues, both the Senate and the House have offered legislative remedies to help smaller and struggling broadcast companies with the transition. In July 2017, U.S. Senators Jerry Moran (R-KS), Brian Schatz (D-HI), Jim Inhofe (R-OK), Todd Young (R-IN), Richard Blumenthal (D-CT) and Tom Udall (D-NM) introduced the Viewer and Listener Protection Act with the intention of alleviating the $35 million deficit created by the infrastructure requirements.
Rep. Frank Pallone (D-NJ) has offered the Viewer Protection Act in the House, while Representatives Bill Flores (R-TX) and Gene Green (D-TX) have introduced the Radio Consumer Protection Act, both of which have the same intentions as the Senate bill. These bipartisan efforts will be needed to prevent the collapse of many small market media stations.
Don’t get me wrong: the United States’ technological infrastructure certainly needed an upgrade. America ranks 28th in the world for Internet speed, behind even significantly less developed countries such as Ireland and Kenya. The incentive auction by the FCC was originally a good idea, but without changes, the government will be picking winners and losers. In this case, the winners are the larger corporations who obtain much needed bandwidth – which is a positive – and the losers are the smaller radio stations unable to withstand the change.
Eminent domain was originally meant for large infrastructure projects benefiting the general public with due compensation for those negatively affected. It should not be used as a government tool to force smaller markets to change their respective assignments, especially such action results in profits to the government.
Upgrading our data network to 5G is critical to meet the demands for data in this country; however, reaping $7 billion in profit from an auction without properly compensating smaller markets is crony capitalism at its finest and Washington must actively solve this problem.
This was never the intent of Washington, so let’s not ensure it’s not the result.