House, Senate Commerce Leaders Eye January Return to C-Band Legislation Talks, After Breakdown

House and Senate Commerce Committee leaders told us they’re aiming to return after the holiday recess to talks on legislation aimed at allocating proceeds from a pending FCC spectrum auction of in the 3.7-4.2 GHz C band. Senate Commerce Chairman Roger Wicker, R-Miss., wasn’t able to reach an agreement with Democratic lawmakers (see 1912160061) to attach language from his C-band-centric 5G Spectrum Act (S-2881) to one of two FY 2020 minibus appropriations bills (HR-1158/HR-1865) that President Donald Trump signed last week. Some officials and lobbyists we spoke with are skeptical the lawmakers can reach an agreement that will bridge the divide that prevented a deal on S-2881.

“We could start talking about it even as we speak,” Wicker told us before the recess. His S-2881 would set a graduated scale for amounts the FCC would be required to return to the Treasury, beginning with “not less than 50 percent” of the first $40 billion in proceeds. At least 75 percent of the next $10 billion would go to Treasury, along with at least 90 percent of any proceeds above that level. Senate Commerce advanced the measure on a party-line 14-12 vote amid objections from committee ranking member Maria Cantwell of Washington and other Democrats (see 1912110038).

Time is running very short for Congress to weigh in, Wicker said. The FCC is expected to act on its first C-band auction item at its Jan. 30 meeting, though an auction public notice and other more consequential notices and orders aren’t expected until later (see 1912130061). “What will happen in the absence of legislation is that the FCC will make all of the decisions” on the C-band auction, Wicker said. “They’re constrained. They don’t have as many options available to them” for allocating the sale proceeds as Congress could provide via legislation. “I hope that won’t be the final result,” he said.

House Communications Subcommittee Chairman Mike Doyle, D-Pa., said he’s aiming for House Commerce to address C-band legislation in January, but “we’re not where we need to be” yet. Doyle and others back the Clearing Broad Airwaves for New Deployment (C-Band) Act (HR-4855/S-2921), which favors allocating auction proceeds for rural broadband and other telecom priorities. Wicker “hasn’t really come up much from his original position” on how to apportion the earnings “and we just weren’t ready to make a deal,” Doyle said. “We recognize there’s going to have to be incentive payments” to C-band incumbents, but the graduated proceeds proposed in S-2881 “is a bit much.”

House Commerce Committee ranking member Greg Walden, R-Ore., appears to have at least softened his earlier misgivings with the approach outlined in HR-4855/S-2921. “Some of the proceeds should go to help fill the gaps in America where we don’t have high-speed reliable broadband,” he said. “And you’ve got to have a system where the current licensees are willing to come to the table.” Negotiations to attach C-band language to the appropriations bills “came on late in the process and it just wasn’t ripe,” Walden said. There’s going to be a greater feeling of urgency to address the issue early in 2020, he said.

Senate Pushback

“I think there are a lot of” Democrats and Republicans “who want to make investments in broadband and see 5G” coverage expanded, so there will be plenty of interest in continuing negotiations into the new year, Cantwell told us. “But we’re not going to give a big pay-out to big satellite companies in the process” via S-2881. “That would be illogical,” she said. Cantwell and Senate Communications Subcommittee Chairman Brian Schatz, D-Hawaii, are pursuing their rival measure, the Investing in America’s Digital Infrastructure Act (S-2956). The bill would require “nearly all” C-band auction proceeds be deposited into a Digital Divide Trust Fund (see 1911210056).

“Hope springs eternal, but those negotiations are effectively closed until some time after” Congress returns in January, Schatz told us. “I think [the FCC needs] to wait for Congress to weigh in” before acting, Schatz said. “It would be a grave error for the FCC to move forward without any guidance” from lawmakers.

Senate Appropriations Financial Services Subcommittee Chairman John Kennedy, R-La., was relieved the effort to attach S-2881 to the funding bills had become as “dead as fried chicken,” due partly to his avid opposition. Kennedy led filing of S-2921 and the addition of Senate Appropriations Committee-backed pro-public auction language (see 1909190079) to the report on the chamber's version of the FY 2020 FCC-FTC budget bill (S-2524) despite opposition from Wicker and Senate Communications Chairman John Thune, R-S.D.

“I certainly don’t want to treat anyone unfairly and the [C-band] incumbents have to be taken care of,” Kennedy said. “But no one can be allowed to make an obscene profit” off the spectrum sale. “It’s slowly sinking in that a majority of the Senate and the House want this done fairly, transparently and in the light of day, and in a way that will move 5G along. We can accommodate all these interests” while “dedicating the lion’s share of the profits to the American people.”

Wicker acknowledged “concerns” Cantwell, Kennedy and Schatz had with S-2881 but said their counterproposals aren’t “fleshed out” enough to be a viable alternative. “One disadvantage that we’ve had as negotiators is that we didn’t get the [Congressional Budget Office] score” on S-2881 before Commerce voted on the measure, Wicker said. That “would have helped a lot” in convincing Kennedy and Democrats to support attaching S-2881 to the FY 2020 federal appropriations measures.

Doyle also noted ongoing misgivings with CBO’s scoring of the C-band auction, saying the figure “keeps changing.” If CBO “doesn’t give [the auction] a high score,” then the proceeds allocation proposed in S-2881 is “even more problematic,” he said. After paying the proposed graduated amount of proceeds to the band’s incumbents and the Treasury “there’s not going to be much left” to fund telecom projects.

Experts Watch

Communications sector officials and lobbyists gave a range of opinions about Congress’ prospects of finding a path forward on C band, though many are skeptical given the clear divisions on display during Senate Commerce’s markup of S-2881. The executive session “spoke for itself, so the question is whether there will be any meeting of the minds before” the recess ends, said Public Knowledge Policy Director Phillip Berenbroick.

“It’s unfortunate that this has been contentious,” but while “direction from Congress is good,” the FCC “already has authority to move on this” on its own, said Americans for Tax Reform Federal Affairs Manager Katie McAuliffe. That authority doesn’t extend to allocating the auction proceeds to specific projects, but ATR favors allowing that money to go to Treasury to “help reduce the debt.” ATR supported the C-Band Alliance’s unsuccessful bid for a private auction (see 1910170038).

Hill Democrats are likely to “sit back and watch” and if FCC Chairman Ajit Pai “strikes too rich a deal” favoring the satellite companies, “then they’ll pounce and say ‘we should legislate,’” said one telecom lobbyist. “Whether or not the Republicans get on board at that point is going to depend on CBO and whether” the office gives the auction “a big score, a small score or no score. The bigger the score, the more the temptation for Republicans to want to legislate because that’s more money to spend” on priorities like rural broadband. “The less money there is to spend, the more the incentive to protect” the majority-GOP FCC “probably takes priority,” the lobbyist said.

Voqal Director-Telecommunications Strategy Mark Colwell sees “the makings of a bill happening now” due in large part to Walden’s support for allocating a part of C-band earnings to rural broadband. “That’s a pretty major step forward” since it signals bipartisan support for “some of the proceeds, if not most, going toward digital divide work,” Colwell said. “What exactly it would tackle depends upon what kind of revenue [the auction] will generate” and that will be directly related to the FCC’s C-band rules and plans.

“It’s tough to predict” how a compromise will balance lawmakers’ competing proposals, but S-2881’s language reserves "some money for Treasury, but they’ve got some flexibility” to allow for incentive and transition payments “is going to be the ticket to win,” Colwell said. “If you don’t give the satellite companies anything, then they’re clearly going to litigate” and that could further lengthen the timeline for completing the auction process.

CBA has “always maintained that the FCC has the necessary statutory authority to achieve a C-band clearing order,” a spokesperson emailed. “That said, legislation could clarify certain concerns. More than anything, our legislators and regulators should seek to avoid delay, as speed is essential for the U.S to be positioned to win in the important race to 5G.”