Subject: [NEXTEL-1] A Spectrum of Abuse at FCC?

From: [email-masked]
Date: Sun, 25 Jul 2004 18:21:13 -0400

A spectrum of abuse at FCC?
By Jay Lefkowitz and John O'Quinn

July 25, 2004

The Federal Communications Commission - the agency charged with
allocating
wireless, radio and television spectrum frequencies - has issued a
decision
in which it has threatened to break the law, and in the process cost
taxpayers millions, if not billions, of dollars. How? It's all about
spectrum allocation.

Cell phones, pagers, PDAs, wireless internet services and the like, all
share one thing in common -- they depend on spectrum to operate, the
same
spectrum used for radio and television. Since the early 1990s, the FCC
has
been tasked with reallocating spectrum for use in wireless devices.
Chairman Michael Powell has properly made spectrum allocation for
wireless
broadband services a commission high priority. Unfortunately, the FCC's
last major spectrum reallocation -- predating Mr. Powell's FCC tenure -- 
was an unmitigated disaster. In 1995, the commission sold nearly $5
billion
of radio spectrum to a company called NextWave in an action reserved for
"small businesses and other designated entities." In short, the small
business bought off more than it could chew and went bankrupt before
paying
the FCC.

During the years of litigation in which the FCC sought (and failed) to
reclaim its licenses, that portion of the spectrum lay fallow even as
its
value soared well above $10 billion.

Now the FCC is at it again. This time, it has given away at least $5
billion worth of prime spectrum to Nextel. In exchange, Nextel is
supposed
to set aside only $2.5 billion to help reduce its own interference with
frequencies used by public safety and emergency agencies. Talk about a
sweetheart deal.

While Nextel has dressed up its deal as a public safety initiative, this
is
little more than a modern-day land grab, with the FCC giving away
valuable
spectrum in exchange for Nextel doing what it was already supposed to do
-- 
not interfere with emergency frequencies. Nextel's ironically named
"Consensus Plan" is a deal that could only be dreamed up in Washington.

This is not to detract from Nextel's success story -- building up a
national wireless telephone network based on what were, in essence,
taxicab
dispatch licenses, at a time when the FCC was still following arcane
procedures for awarding spectrum licenses based on specific, limited
uses.
But in successfully petitioning the FCC to allow use of that spectrum
for a
wireless network, Nextel was obligated to avoid interference with the
neighboring emergency frequencies. Having failed to prevent
interference,
Nextel cannot now play the part of the victim in taking new, lucrative
spectrum resources from the FCC.

To pull off this scheme, the FCC has violated the Communications Act by
refusing to auction off the portion of the spectrum it is instead giving
to
Nextel. Spectrum is, of course, critical to the future of the wireless
Web,
to mobile phone networks, and to technologies we can only now imagine.

In a market economy, the highest and best use for spectrum is measured
by
dollars. So, unsurprisingly, an auction would fetch the public coffers a
handsome return. In fact, Verizon announced that it was ready to start
the
bidding at $5 billion. A competitive, transparent, economically driven,
free-market approach to spectrum allocation is exactly what Congress
intended when it amended the Communications Act to require auctions. But
instead, rather than recover "for the public a portion of the value of
the
public spectrum resource made available for public use," as Congress
required, the FCC shortcircuited the process in hopes of funding pet
projects not yet approved by Congress.

Worse yet, by going forward with this deal the FCC will not only cost
taxpayers several billions in revenue; it may violate criminal laws as
well. By approving the deal, the FCC is redirecting money that should go
into the public treasury to certain projects it has designated -- in
essence spending money Congress has never approved.

On its face, the Nextel deal makes no economic sense. So to understand
it,
one has to appreciate that, in our system of government, Congress
controls
the purse strings. Because the FCC lacks authority to spend federal
dollars
to pay for improvements to public safety and emergency radio services,
it
has come up with this Rube Goldbergesque scheme to have Nextel pay for
it
in exchange for spectrum.

To be sure, such improvements would be laudable, and Congress should
authorize them. But in the absence of such congressional action, the
Nextel
deal smacks of the kind of channeling of money forbidden by the
Anti-Deficiency Act, the Miscellaneous Receipts Act, and Section 641 of
the
criminal code. Make no mistake, the FCC will direct expenditure of the
money Nextel is setting aside for public safety projects. As the deal
makes
explicit, the "disbursement of funds" by Nextel for these projects "will
be
subject to de novo commission review." (July 8 FCC Press Release)

To be clear, Nextel is not setting up this fund out of the goodness of
its
heart. As Nextel has said, "We are not doing this for charity."
("Noguchi,
Nextel, FCC in standoff over prime cellular spectrum," The Washington
Post,
May 7, Page E1) Rather, Nextel's "commit[ment] to funding public safety"
is
in exchange for receiving spectrum. (Nextel Press Release)

Thus, at bottom, the Nextel deal is nothing more than an end-run around
limits on FCC authority and Congress' spending prerogatives. With the
FCC
approving this deal, one wonders what's next? There is no limit to
schemes
motivated regulators and special interests could cook up in dimly lit,
smoke-filled rooms. Those days are supposed to be over.

It is fortunate the FCC has indicated that before its decision is final,
the commission will consider the GAO's assessment of the legality of its
actions. But regardless of the GAO determination, because the FCC could
not
resist the temptation of the Nextel deal, Congress needs to step in now,
restore the market-driven auction system and save the commission from
itself before billions in revenue are lost and more laws are broken.

Jay Lefkowitz is former head of the White House Domestic Policy Counsel.
John O'Quinn is a former law clerk to Justice Antonin Scalia.

Copyright © 2004 News World Communications, Inc. All rights reserved.
http://www.washtimes.com/commentary/20040724-105245-9495r.htm

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