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The Obama administration Feb. 26 proposed to tax wireless carriers as much as $550 million per year for the right to hold a spectrum license. The fee would be in addition to the billions carriers have already paid in spectrum auctions held by the FCC (Federal Communications Commission).
Under the budget outline provided by the Obama administration, the new fees would be used to help reduce the $1.7 trillion national deficit. The proposal before Congress would charge carriers like AT&T, Verizon and Sprint $50 million this year. The fee per carrier would jump to $200 million in 2010 and eventually rise to $550 million by 2019.
According to the OMB (Office of Management and Budget), the fees would generate $4.8 billion over the next 10 years.
“We will need to begin bringing down the budget deficit to avoid a fiscal crisis in the future. So as we come out of the recession, and consistent with the President’s campaign proposals, the budget combines spending reductions and revenue increases,” OMB Director Peter Orzag stated on the OMB blog. “The roughly $2 trillion in deficit reduction that the budget contains for the next decade is split evenly between spending reductions (of roughly $1 trillion) and revenue increases (of roughly $1 trillion).”
The nation’s major carriers were mum on the proposal, taking the official stance that they are reviewing the proposal. However, it is widely expected the carriers will fight the new fee as it works its way through the Congressional budget process.
While the carriers were silent on the fee, bloggers were not. At DSLReports.com, for instance, bloggers widely panned the proposal, claiming that the carriers could be expected to tack the fee onto users’ phone bills. “All of it will just be passed on to the consumers as another tax hidden by the feds in fees on businesses,” wrote one blogger. Another predicted the proposed fee would become “another USF [Universal Service Fund] slush fund.”
In the most recent FCC spectrum auction, carriers paid nearly $20 billion to grab a swath of the 700MHz spectrum being deserted by broadcasters as part of the digital television transition. Verizon was the big winner, paying more than $6.5 billion for six large regional licenses that are the equivalent of a national license. In addition, Verizon Wireless won 24 regional licenses located in most of the country’s metropolitan areas and another 77 smaller licenses.
Satellite television provider EchoStar was the other big winner in the auction, grabbing enough regional licenses to establish a national footprint while AT&T won 266 small licenses.
Verizon Wireless’ new prime airwaves are considered particularly well-suited for broadband because the signal properties can travel great distances and penetrate mountains, buildings and walls. The FCC placed conditions on the sale of the spectrum, requiring the winning bidder to build an open network to which users can connect any legal device and run the software of their choice.