WASHINGTON-The fiscal 1998 budget President Clinton plans to unveil this week will propose expanded auction authority and at least one major education program underwritten by wireless license sales, despite uncertainty about revenue projections in a marketplace already flooded with spectrum, service providers and debt.
An administration source said not to expect any surprises on spectrum auctions over what was proposed in the 1997 budget.
In that budget, Clinton asked Congress to give the Federal Communications Commission more leeway in auctioning the airwaves. The Office of Management and Budget, in the fiscal 1997 spending plan, estimated a return of $32 billion by 2002 from selling private wireless licenses, broadcasting licenses and toll-free telephone numbers-all currently exempt from auction licensing-in addition to digital paging and pocket telephone licenses being sold today.
That expanded auction measure was incorporated into the Republican balanced budget plan passed by Congress, but Clinton vetoed the package in late 1995 as part of a bloody fight with Republicans that resulted in two partial government shutdowns.
Under a 1993 law that created spectrum auctions, the FCC is limited to selling to commercial wireless licenses. That could change if the White House and Congress make good on their vows to reach a compromise that erases the budget deficit by 2002.
But sparks will fly along the way. The paging industry vigorously opposes the sale of 888 toll-free numbers, which are valuable in terms of marketing and subscriber value.
The private wireless sector, for its part, also opposes auctions but shows signs of willingness to pay via spectrum user fees.
To date, the FCC has raised $22 billion mostly from the sale of digital paging and pocket telephone licenses. In doing so, wireless communications has been transformed into a landscape that promises to be more competitive than any other sector in the telecommunications industry.
But auctions have raised fundamental policy and economic questions that have far-ranging implications for the Clinton budget and for the wireless industry.
First, does the White House still believe it can raise more than $30 billion during the next five years given the fact most valuable digital paging and pocket telephone licenses already have been sold and the uncertain prospects of auctioning either digital or analog TV licenses?
Second, will the continued flow of spectrum-driven by budget policy rather than telecom policy-into the marketplace backfire by driving auction prices down and rattling Wall Street to the point of withholding funding from wireless carriers with new licenses?
If that were to occur, the competitive marketplace envisioned by policymakers could go up in smoke as heavily leveraged carriers file for bankruptcy.
The U.S. Treasury, in turn, would not receive monies pledged for licenses nor be able to extract tax revenues from would-be carriers.
Already, there are signs of such problems. The congressionally mandated 2.3 GHz auction, designed to help pay for fiscal 1997 programs, has created uncertainty in the capital markets for C-block personal communications services, according to the wireless industry.
The Clinton administration initially wanted to pay for a college tuition tax credit with monies from the auction, but that money will be scored on the fiscal 1997 ledger and won’t be available for that initiative in 1998.
The president also planned to underwrite public school renovation with proceeds from the auction of TV channels 60-69. But it is far from clear whether that money is going to be there either given that the spectrum is tied up in a dispute between the FCC and the broadcasting industry.
Complicating the matter further is the fact public safety agencies want a chunk of TV channels 60-69 for free, which would reduce the potential monetary return from that spectrum.
The FCC this year intends to auction more paging, specialized mobile radio and general wireless licenses, but the amount of spectrum is relatively small and auctioneers could be disappointed with the results of bidding.
The lure of auction riches, meanwhile, has caused a rift between budget makers and telecom policymakers in Congress. Separately, Congress and the administration will knock heads over Republican efforts to pass a balanced budget amendment and to kill the Overseas Private Investment Corp., which provides political risk insurance for wireless ventures in Russia and other emerging democracies overseas. OPIC is on the hit list of taxpayer supported programs deemed corporate welfare.
“Regular citizens must make it clear they expect Congress to stop talking about corporate welfare and start doing something about it,” said John Kasich (R-Ohio), chairman of the House Budget Committee.
But OPIC has its strong political backers and industry support from the National Association of Manufacturers and the U.S. Chamber of Commerce.
“Our most proud achievement has been the positive impact that OPIC-backed projects have had for America-generating U.S. exports and creating jobs for Americans for the last 25 years,” said Ruth Harkin, president of OPIC.
