F: Do I hear $30 billion?

Note: This is Part IV of a short series on the issue of the failure of our representatives in Washington to provide our first responders with the communications technology necessary to save lives. Part I | Part II | Part III.

We've talked for years about the importance of getting new spectrum in the hands of our first responders. But today that priority was a casualty of the clout that powerful interests wield in Congress and a process driven by gimmicks aimed at making a fiscally irresponsible budget more palatable.-- Senator John Kerry, Oct. 20, 2005, after Senator John McCain's proposal to expedite the spectrum transition was defeated

There is a big component in this story that DB has only mentioned in passing -- the auction.

While the federal government has designated some of the frequencies in the 700 MHz band for our first responders, the rest will be put up for auction. One of the reasons this part of the spectrum will be so good for emergency services is that broadcasts at 700 MHz can penetrate walls easily. This also makes it ideal for wireless broadband or WiMax. The government expects these auctions to bring in tens of billions of dollars. Some independent analysts suggest as much as $30 billion or more.

The Senate has set an auction date of Jan. 2009, preceding the April 7, 2009 deadline they set for the relinquishing of those frequencies to the public. The House deadline is Dec. 31, 2008 and the auction date they set is Jan. 7, 2008.

Keep this in mind as we take a look at the legislation.

First, let's look at some of the people who are pushing for a 2009 deadline. Here's FCC Chairman (and son of the former Secretary of State) Michael K. Powell, testifying before the Senate's Commerce, Science and Transportation Committee on Sept. 8 2004.

Of course, questions will be asked about what is the "right" hard deadline for the transition. In choosing 2009 as a target date for our plan, we focused on three potential benefits. First, because the Commission's tuner mandate becomes fully effective on July 1, 2007, having a deadline of 2009 will add millions more digital sets to the marketplace before analog signals are turned off. The tuner mandate and other market forces will also further drive down the costs of digital-to-analog converters during that time for those households still relying on analog broadcast television.

Further, a 2009 deadline would provide time to prepare the public on the impending end of the transition so they could take steps to prepare themselves in the natural course of replacing old sets.

Finally, under the current 85 percent statutory test, the added DTV 8 sets with tuners and the expansion of DBS local-into-local markets will help ensure that most of the country meets the 85% threshold, providing for a nationwide end to the transition rather than a piecemeal result. The ultimate benefit of the 2009 deadline, in conjunction with steps we already have taken, will be to reduce to a minimum the number of consumers reliant on analog broadcast television.

Whenever the transition ends, however, we recognize that there will be consumers that still tune into analog over-the-air television.

We've already addressed his first point. Sure, "a deadline of 2009 will add millions more digital sets" but so will a deadline of 2008, or (remember this testimony is from 2004) so would 2007. The same goes for his second point. How long does a minority of TV watchers need to get a gadget? Four or five years? How many first responders and disaster victims need to die before their needs outweigh the TV viewers who would be surprised by the need for a gadget subsidized by the American taxpayer? His third point doesn't seem to support 2009 in particular, just the need for a transition from analog to digital, a goal he concedes will not be fully met.

In short, no reason given by the FCC for choosing 2009 over an earlier date outweighs the needs of our public safety agencies. None.

On Oct. 20, 2005, Sen. John McCain (R-AZ) introduced an amendment that would have pushed the Senate's deadline up to April 7, 2007, but it was defeated 5-17 by the Commerce Committee. He introduced a 2008 amendment to the full Senate on Nov. 3 and it was defeated, 60-39.

Here's what our friend Ted Stevens said in arguing against McCain's amendment:

Mr. President, this amendment would close off the analog broadcasting too close to the auction of spectrum. We currently have an April 2009 date. The auction date is January of 2009. It is just too close together. The leases cannot be processed. There is no way those auction proceeds can be available until licenses are issued. This amendment would end analog broadcasts before the funds are available for the converter box fund or the translator conversion fund authorized by S. 1932. We need help in this transition. The amendment makes spectrum available to public safety groups before they can put it to use because we are informed public safety groups must have at least 3 years to prepare for the use of spectrum.

We are going to get them the spectrum. They will not be able to use it until we have the money to bring about the transition. I believe our whole committee should oppose this amendment.

DB thinks Stevens was confused because his dates do not make sense at all. He seems to be complaining that the dates are already "too close" together. McCain's amendment would have set the deadline ahead by two years. How would this be "too close" to the auction date? The House had no problem setting an auction date after the transition deadline.

Also, the auction date is an arbitrary date set by the Senate. It's not Halley's comet. They could change it if they wanted, which also counters his next point, that the auction funds would come in after the subsidies for the consumer tuners. And perhaps if the subsidies weren't an outrageous $3 billion for consumers (to hand over to digital tuner manufacturers, plus $200 million for the broadcasters) and the Congress wasn't hell-bent on cutting taxes for the wealthy, then coming up with a reasonable subsidy before receiving a windfall of tens of billions from the auction wouldn't be too much of a sacrifice for Congress to make for the people who risk their lives to protect us from disaster.

Lastly, Stevens says that it will take three years before they can use the technology. This is the most offensive distortion of all. Our first responders won't be able to spend any time implementing the new communications systems until they can use the frequencies. Call your state's firefighters association and ask them if they have time to even think about what technology they'll be using in three years. These groups are worrying about how to protect the shrinking budgets they have right now. If Stevens is correct about the three years, then 2009 won't be when they start using the system. It will be 2012.

And if they don't get the funds to pay for the set-top tuners until the auction in 2009, how in the world can our first responders start preparing to use their new gear? The funds for that equipment come from the same auction as the $3.2 billion for the tuners and broadcasters. Outrageous. [Edit: States can begin to apply for loans against those funds in October 2006. States must pay at least 20% of the cost of implementation.]

Remember, Congress and the Senate will determine the auction date. If they have a problem with the date, if they need the funds sooner, they can change it. The question is why don't they want to change the auction date? The answer? Money.

You see, the government is already auctioning off 90 MHz beginning in 2006. This is important because the Congressional Budget Office recommends the 2009 date for the 700 MHz band (all emphasis mine):

CBO estimates that the proceeds from the auction of the 60 megahertz now used by broadcasters would most likely total between $10 billion and $15 billion, with an expected value of about $12.5 billion. But offering the wireless industry a total of 150 megahertz within a two- or three-year time period, would probably result in lower bids in the 90 megahertz auction that will take place under current law.

In other words, waiting until 2009 will be more profitable. Auctioning the 700 MHz band sooner will hurt profits expected from the auctions already in the works. Our public safely and national security have to wait because Congress doesn't want to lose money.

And it's not even a sure thing. Here's what the CBO said in a report on the exact same topic in 1999 (all emphasis mine):

The overall effect of the transition's lasting beyond 2006 is that some of the anticipated benefits from the move to digital TV may not be available as originally planned. Of particular significance for policymakers is that receipts from the scheduled auctions of licenses for the use of spectrum formerly available for analog broadcasting are likely to be lower. Each year of delay expected in freeing up those frequencies in a given market reduces a potential bidder's valuation of the license by the bidder's annual cost of funds. For example, if bidders desired a 10 percent rate of return on their investment, a one-year delay in receiving use of the spectrum would reduce what they were willing to pay for their license by about 10 percent (although the correspondence is not always exact).

The entire thing is a gamble and in the balance are the people who make up America's most important line of defense, our first responders.

DB will take a closer look at the House bills and the politicians and lobbyists involved in this mess in the next installment. Unfortunately, that won't be for a few days as DB has a business trip planned (gotta work).

In the meantime, any help would be welcome. This is the hardest part... figuring out which corporations profit the most and which politicians care the most about those companies. It is clear that they care more about the money than about the lives of our first responders.