osewalrus (osewalrus) wrote,

Link Harvest: CBO Spectrum Valuation of 2012 Backfires


fatlefty will appreciate this.

As explaned in this article, Commerce Committee staff are having a touch of trouble with the "spectrum pipeline" bill. The Congressional Budget Office (CBO), from which all budget numbers flow, has decreed that spectrum auctions between now and 2022 get a "0" revenue score or a negative revenue score.

This is an artifact of how CBO does scoring. Back in 2012, when Congress passed the Spectrum Act as part of the "Jobs and Budget Goodness Act of 2012," the leadership promised that FCC spectrum auction authority would generate $25 billion as an offset for the federal government. So CBO needed to find a way to score this at $25 billion. At the time, however, the bands designated for auction by the statute were highly questionable on whether we could actually get them away from DoD, and the valuation of the spectrum using conventional measures was about $15 billion, from which one would need to subtract the cost of moving the federal users (estimated at about $10 billion). The TV broadcast Incentive Auction was extremely difficult to score, and that money got allocated first to paying off broadcasters moving expenses (capped at $1 billion) and $7 billion allocated for First Net.

So how to get the remaining money for $25 billion? The FCC authority to do spectrum auctions at all was expiring in 2012. Part of the bill extended it it 2022. Normally, CBO would designate that as revnue neutral until Congress designated new bands to auction. But CBO needed $25 billionnow. So CBO assumed that all auctions of federal spectrum the FCC might conduct between now and 2022 would total the remainder. Poof, $25 billion in projected federal revenue to offset expenditures without new taxes.

Fast forward to 2014. We hold the AWS-3 Auction, which raises approx. $40 billion (originally about $44 billion, but DISH just forfeited back about $3 billion). Combined with the $1.5 billion from the AWS-2 auction in 2013, this means federal auctions raised more than enough money to cover First Net and moving fed users before we even got to the Incentive Auction, as well as significant money to the Treasury for deficit reduction.

So now, of course, Congress wants to do it again. CTIA, the wireless people, have a list of federal spectrum bands they want. The bill drafters go to CBO to get a projected score.

"The score is zero revenue, less the cost of interruption to federal users and uncomepnsated expenses, so it is a negative score."

"Say what?!"

CBO then explains that any possible revenue from any possible auction of Federal spectrum was already accounted for in 2012. True, based on the AWS-3 auction results, CBO was a tad conservative. And yes, the Feds have already made back more than the $25 billion CBO estimated as revenue in 2012. But under the CBO scoring rules, it doesn't matter. Sale of a federal asset, which is how CBO thinks of spectrum auctions. Cannot be scored twice. Had the auctions failed to meet the projected revenues, it would not have mattered, because for budgeting purposes they would have been assumed to meet the projected revenues until 2022, when we would forget about them. But the auction over-performed, so CBO will not rescore it.

I agree with those in Congress frustrated that this makes no real world sense. But you guys set up the CBO scoring system so you could play cute accounting games. Every now and then, this turns around and bites your patootie. 

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