Senate wants industry to pay costs of moving spectrum

In an action that could dampen commercial interest in future spectrum auctions, the Senate fiscal 1999 Defense authorization bill proposed that private-sector organizations reimburse federal agencies for expenses up to $5 billion associated with reallocating radio spectrum frequencies.

The Federal Communications Commission (FCC) already has auctioned off a substantial portion of the federal radio frequency spectrum to cellular telephone companies, mobile satellite operators and other commercial firms as mandated by the Balanced Budget Act of 1997.

That law also requires the auction of another 20 MHz of as-yet unidentified spectrum below the 3 GHz frequency. A National Telecommunications and Information Administration (NTIA) report issued this year pegged the cost to agencies of auctioning off the additional 20 MHz and moving to other frequencies at more than $1 billion, or about half the $2 billion the Office of Management and Budget would take in from the auction.

The Senate authorization bill, which the Senate passed last month, will ensure that reallocation costs are absorbed by the commercial users who purchase those frequencies.

Anthony Valletta, former acting assistant secretary of Defense for command, control and communications (ASD/C3I) and now a senior vice president at SRA International Inc., estimated frequency reallocation costs for DOD to range from $1 billion to $5 billion, depending on the frequencies sold and the amount and type of new equipment needed to operate on other frequency bands.

Moreover, the frequency reallocations could have an adverse effect on DOD operational missions as well as critical services that are managed by the Federal Aviation Administration and law enforcement operations by agencies such as the FBI, according to the NTIA report.

The bill would amend the NTIA Organization Act to require companies buying frequency to compensate federal agencies for frequency reallocation costs in advance, and the bill also stipulates that the money should be applied specifically to reallocation, and not put into a general fund.

The House authorization bill, passed last month, contained no language specific to compensation for frequency reallocation.

Cindy Raiford, currently the deputy director of communications in ASD/C3I who is slated to take over as director of a new DOD spectrum office, called the Senate bill "a very positive step forward for the department. We have been working for years to make our concerns known, and we are grateful for the support we are receiving on the Hill.''

Raiford said giving up part of the radio frequency spectrum has emerged as a key issue for the Pentagon. Spectrum issues gained attention on Capitol Hill and at top levels of DOD late last year when the Pentagon almost lost valuable Global Positioning System spectrum at an international radio conference. "Our top management understands the importance of spectrum to national security operations," Raiford said.

The requirement that buyers of frequencies sold at auction by the FCC pay reallocation costs may dampen companies' demand for spectrum, which initially was propelled by the financial success of the cellular telephone industry, according to industry sources. An auction last year brought in hefty bids, but many of the bidders could not come up with the funding to make initial payments to the FCC.

Raiford said the industry has already had a "strong reaction" to the language in the Senate bill.

A spokesman for the Personal Communications Industry Association called the Senate spectrum language "absolutely nuts.... Taken at face value, this bill means bidders face double payments. Who would want to bid under such circumstances?"

Another industry source predicted that the telecommunications industry will heavily lobby Congress to remove the language during a joint House/Senate conference.