Do something useful with spectrum auction proceeds - Lowenstein

Mark Lowenstein

The good news: the recently completed C-band auction was a tremendous success, raising some $80 billion -- significantly above consensus estimates. The bad news: we’ll never really know what happens to that $80 billion, which is a particular shame during this pandemic era when broadband availability and affordability have become front-burner issues. The industry and regulators need to take a serious look at this.

Dating back to the PCS auction in the mid-1990s, more than $200 billion has been raised in a series of spectrum auctions. Where does this money go? The bulk of these auction proceeds have gone straight into the miasma of the U.S. Department of the Treasury. And after that? Who knows.

There have been a few earmarks where funds have been used for some industry-specific purposes, most notably the $7 billion from the AWS-3 auction in 2014 that was used to fund FirstNet. But if you add up all the spectrum auctions over the past 25 years, probably 95% of the proceeds have been used to "reduce the deficit" or some other generic black hole of government spending.

It’s a real shame that the operators that write the big checks and the regulators who design the auctions have not advocated more strongly that these funds be used for a more useful, industry-specific purpose. Even in an era where we casually bat around trillion dollar stimulus funds, $80 billion from the recent C-band auction is still a very meaningful amount of money. And here’s the disconnect: $7 billion from the $900 billion December 2020 Covid relief fund is being directed to various broadband-related programs; and billions more is earmarked for telecom-related initiatives in the $1.9 trillion stimulus bill currently being debated.

Although I support most of the programs these funds are being directed to, the structure itself is perverse. Consider the irony: $80 billion from a recent auction windfall, plus billions more from the 3.45 GHz auction likely to start later this year, will pretty much vanish, while $20+ billion from Covid stimulus and other recent programs will be used for broadband/telecom initiatives - funded, ultimately, by taxpayers.

Consider what the industry could do with $100 billion ($80 billion from C-band and $20 billion as a conservative estimate of the 3.45 GHz auction). Let’s start with the assumption that in a 2020s, pandemic and post-pandemic era economy, there are two needs, not nice to haves: a phone (likely cellular), and broadband (some of which, over time, could be met by cellular through 5G fixed wireless access). Right now, there are two big ‘buckets’ of need: broadband availability and broadband/cellular affordability. Roughly 20% of households in the U.S. lack decent quality, affordable (relatively speaking) broadband. Pegging the affordability number is more challenging, but it’s probably safe to say that one-third of U.S. households struggle to pay for both cellular and broadband. And in an economy ravaged by a pandemic, that number probably isn’t going down.

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Now, let’s return to our $100 billion number. Just $20 billion of that could provide a $500 annual "connectivity" credit for 20 million households for two years. Take another $20-$30 billion and use it to subsidize building broadband to the unserved, and improve it to the underserved.  Heck, if Dish thinks it can build a 5G network for $10 billion, it’s not far-fetched to assume that $20-30 billion could make a pretty good dent in completing the broadband build. Plus, ever more viable and affordable options to do so are emerging, from fixed wireless access to LEO satellite services such as Starlink.

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Now, this isn’t the industry’s first universal broadband/communications affordability rodeo. Tens of billions have been earmarked over the past 10-15 years, with, frankly, middling results. Cynics can’t be blamed for wondering whether throwing billions more at the problem will do the trick. On the other hand, initiatives such as the Lifeline Assistance Program (LAP) and the Universal Service Fund (USF) have been gutted in recent years. For example, while minimum service standards for LAP have increased, subsidies to those providing the program haven’t changed since the mid-90s. So operators and states have opted out.

But three things are different, circa early 2021. First, there is growing -- dare I say bi-partisan -- support for actually doing something. It is one of the key priorities of interim FCC Chair Jessica Rosenworcel, and a soon to be Democratic majority FCC. Second, there’s an expanding array of viable solutions for providing broadband in addition to running expensive fiber, including vastly more wireless spectrum capacity, fixed wireless access/5G, and LEO satellite services such as Starlink. Third, the money’s there - a meaningful amount of it.

Money from the stimulus funds will help, and I wouldn’t necessarily turn it away. But if we could take, just for kicks, $75 billion of the $100 billion just from the 2020-21 spectrum auction proceeds, and the bulk of proceeds going forward, a serious dent could be made in addressing the availability/affordability issue.

The other item that rarely gets mentioned is the multiplier effect. The broadband and wireless markets are largely saturated. If we expand broadband access/affordability, the addressable market increases, which will end up in those same operator pockets that are now being emptied to pay the banks for massive loans required to fund said spectrum purchases.

And it’s not just about throwing more money at the problem. As I’ve said, there are programs already out there, with more, such as RDOF, recently added. But it’s a panoply of programs that are well-meaning...but in a way only big government can do, both fragmented and overlapping. We need to get all this under one, better managed and coordinated umbrella. Many existing programs, such as Lifeline, have been gutted, while age-old programs such as USF are antiquated and have been dying a slow death.

It would be a massive win if we could pull all this off. The need is there. The will is there. And the dollars could be there.

Mark Lowenstein, a leading industry analyst, consultant, and commentator, is managing director of Mobile Ecosystem. Click here to subscribe to his free Lens on Wireless monthly newsletter, or follow him on Twitter at @marklowenstein.

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not represent the opinions of FierceWireless.