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Congress Must Match Time and Money When Funding ACP With Spectrum Auctions

Congress Must Match Time and Money When Funding ACP With Spectrum Auctions

April 30, 2024

The Affordable Connectivity Program (ACP) is the best way to help low-income Americans afford access to broadband Internet service, but it will disappear next month unless Congress appropriates additional funding. Since funding is hard to find, Sen. Maria Cantwell (D-WA) has proposed using the proceeds from spectrum auctions to extend ACP’s life. The Spectrum and National Security Act of 2024 counts on getting revenue via a five-year extension of the Federal Communications Commission’s authority to auction spectrum, $7 billion of which will go to ACP.

By most estimates, however, $7 billion is only enough for around one year of ACP. President Biden requested $6 billion for a one-year extension last October, and the program is much lower on cash today than it was then. Long-term sustainability should come from reforms to outdated broadband subsidies and perhaps shrinking ACP itself. Such reforms would reduce the need for last-minute funding scrambles like the one we find ourselves in now. But insofar as spectrum auctions would provide a stopgap, we should make sure it really can bridge the deficit.

Funding policies with spectrum auction proceeds relies on the black box of Congressional Budget Office (CBO) scoring: The CBO projects how much money the government is likely to get from auctions authorized by a bill, and that defines how much money legislators can allocate to priorities such as ACP. Essentially, the legislation is spending the money before it comes on the assumption that the FCC will recoup it by selling spectrum usage rights.

While the CBO’s method for estimating future auction proceeds is often opaque, it does weigh spectrum revenue differently based on the specificity of a bill’s requirements and the time horizon in which the auctions would take place. This practice reflects the fact that it’s easier to predict revenue from an auction of a specific band that’s required by statute than from a general authorization for auctions that may or may not happen. And an auction set for five years from now is less certain than one next year.

These two factors suggest ways to enhance the viability of spectrum auctions as a funding mechanism for ACP.

First, the bill could shorten the time horizon of the auction authority: If we can only get one year of funding, then we should only authorize one year of auction authority so that there can be a new CBO score to “spend” next year. As written, the bill spends five years’ worth of revenue for one year of ACP. That mismatch leaves ACP unsustainable by next year but without auction authority to offer as funding.

Second, the bill could get more specific and mandatory about the auctions it envisions. It helpfully mandates an auction of the 13 GHz band, but it directs federal incumbent users to merely study other bands to determine if commercial use is feasible. CBO will give weight to the possibility that those federal agencies will block any commercial entry to their spectrum and, therefore, that revenue from a commercial auction might not materialize. That discount will reduce the available funding for ACP compared to a statute that had less uncertainty.

Congress need not dictate the choice between spectrum sharing, exclusive licenses, unlicensed, or any other allocation. Indeed, achieving a balanced stock of all those applications should be the outcome of getting more commercial spectrum capacity. But a mandate that the federal government find a way to allow some form of commercial access would go a long way toward both better spectrum policy and a more sustainable ACP.

Spectrum auction authority and ACP extension have been difficult policy problems for over a year now. There is room for mutually reinforcing solutions to both, but that delicate balance should ensure that we don’t trade away long-term ACP sustainability.

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