(3 updates, including a major one- see below)
From the Dewayne-Net Mailing List run by Dewayne Hendricks.
http://www.rcrnews.com/news.cms?newsId=25545
Bush proposes tax on Wi-Fi, unlicensed spectrum
By Jeffrey Silva
RCR News
Feb 6, 2006
WASHINGTON-President Bush, facing a huge budget deficit, today proposed squeezing more money from the nation's airwaves by supporting legislative changes that would allow the Federal Communications Commission to set "user fees" on "un-auctioned" radio spectrum.
The proposal, contained in the president's 2007 budget plan and projected to raise $3.6 billion during the decade, is believed to be aimed at unlicensed frequencies used for Wi-Fi and other applications.
It's unclear whether the "user fee" tax would be paid by equipment vendors or end users.
"Spectrum assignment policy has not kept pace with the changing market. Service providers using different technologies to deliver a similar product can face different spectrum license acquisition costs," the budget stated. "The lack of parity in spectrum assignment creates incentives that can diminish the overall utility of the spectrum."
Bush's $2.77 trillion spending package proposes $302 million for the FCC in fiscal 2007. Most of the agency's budget would be underwritten by regulatory fees.
Bush again called for the elimination of the Telecommunications Development Fund, describing it as "a poorly performing venture capital enterprise financed by interest earned on spectrum auctions." The TDF was included in the 1996 telecom act, whose ten year anniversary is Wednesday.
(end RCR News excerpt)
Update 2/7/2006 (#2) - To me, Jeffrey Silva is a wizard journalist! In the aftermath of his original article on this topic, the Bush Administration has now stated unequivocably that taxation of license-exempt wireless use isn't going to happen.
http://www.rcrnews.com/news.cms?newsId=25561
White House denies Wi-Fi tax; satellite, taxi companies could face spectrum fees
By Jeffrey Silva
RCR News
Feb 7, 2006
WASHINGTON-The White House today clarified that a new budget proposal to set user fees on un-auctioned spectrum would not lead to taxes on frequencies designated for Wi-Fi. But the White House said satellite, taxi and other industry sectors that do not pay for spectrum could be forced to pay for use of the nation's airwaves in the future.
"The administration's proposal does not impact unlicensed spectrum. We do not wish to charge fees on unlicensed use," said Alex Conant, a spokesman for the Office of Management and Budget.
OMB specified that radio channels reserved for Wi-Fi and cordless telephones are off the table insofar as spectrum user fees. President Bush, who sees wireless technology as key in achieving his goal of universal and affordable broadband access by 2007, likely would have faced strong opposition from wireless and high-tech companies were he to attempt to extract fees from the use of Wi-Fi and other unlicensed technologies.
(end RCR News excerpt)
So... it looks like use of licensed spectrum, in comparison, might even become a bit less tenable compared to the use of license-exempt spectrum.
Update 2/7/2006 (#1) - Reaction to the RCR News article is mixed. While there is the predictable outrage against "taxing Wi-Fi", no one seems to have been able to track down additional context for author Silva's claim that the budget proposal does in fact target the use of license-exempt spectrum to raise additional tax revenue. I, for one, am giving Silva the benefit of the doubt, that he had additional context for his headline that, for whatever reason, didn't make it into the article.
One of the reasons that I decided to highlight Silva's article is that stories, which I will classify as "rumors", have reached me that arguments are quietly being made to regulators and lawmakers behind the scenes that "not only are Muni Wi-Fi networks unfair [to both wireline and wireless telcos] because they're being paid for with tax money, but they don't have to pay for their spectrum... but we have to pay for our spectrum, and that's just not fair!" If such claims are being circulated, they're an incredibly specious "big lie"... but such things have been known to happen in Washington, DC.
Benn Kobb wrote:
With regard to the Bush administration proposal on fees that you've mentioned, it may be premature to conclude that it has much to do with license-exempt spectrum.
Jeff Silva's RCR story says that the change "is believed to be aimed at unlicensed frequencies used for Wi-Fi and other applications." Where's the foundation for that belief? User fees for those who didn't get their licenses at auction is an old idea -- and it has never applied to unlicensed devices.
The FCC's own explanation of the proposal states, in part (from its FY 2007 budget estimate):
"The FCC would be authorized to set user fees on un-auctioned spectrum licenses and construction permits, which would help bring parity to spectrum license acquisition costs, thus reducing market distortions and promoting greater efficiency in the use of spectrum resources. Fee collections would begin in 2007 and would be deposited into the general Fund of the Treasury."
Regardless of the wisdom, or lack thereof, of this proposal, at least four phrases suggest that it is not a measure aimed at unlicensed devices:
1. "Un-auctioned spectrum licenses" are those held by the majority of, but not all, AM/FM/TV broadcasters, 800 MHz cellular telephone carriers and any number of other operators depending on how far back in the warehouse you want to go.
Unlicensed devices don't have licenses and so would not be included, unless someone at the FCC is being very sloppy with language.
2. "Construction permits" - unlicensed devices don't have those.
3. "Spectrum license acquisition costs" - unlicensed devices have no such costs. Even the relocation costs imposed on 1900 MHz unlicensed devices aren't license acquisition costs.
4. "Fee collections begin in 2007": There is no way they could start collecting fees on unlicensed devices next year. It would take longer than that to work out the snarky details of an unprecedented new kind of collection - not to mention beating back industry opposition.
I've known Jeff Silva for years, he's one of the best in the business. Perhaps there's more that he didn't publish. But I'm not ringing the alarm bells for unlicensed devices just yet.
He said it is "unclear" whether the fees would be paid by equipment vendors or end-users. It's more likely that the fees would be paid by licensees.
In a great "Tales Of The Sausage Factory" blog article, Harold Feld writes (excerpts):
There is a steady drum beat of reports, starting I think with this one at RCR Wireless News that the President wants a “wifi tax.” This is, bluntly, a misreading of the plain language of the President's budget proposal. Lord knows there's plenty there not too like, but there's no “wifi tax.” My analysis (and a little historic context) below.
Anyone who knows the political score here in DC understands that user fees for commercial broadcasters has a snowball's chance on the planet Mercury. But the administration would propose them every year, which allowed them to include revenue from these fees in their budget projections, and Congress would politely ignore the request, and all was right in the world.
Update 2/6/2006 - This won't stand. By the time this proposal is quietly abandoned, the combined resources of the entire consumer electronics industry, what's left of the independent Internet industry, the movement to offer Municipal Wi-Fi Internet Access, consumers, the technology industry, the computer industry and many more will have been marshalled in opposition of this proposal.
The proposal is ludicrous - it purports to be leveling the playing field, that some wireless service providers buy auctioned spectrum, and others do not pay because they use license-exempt spectrum. There are so many holes in this perspective it's difficult to know where to start:
- Anyone, or any entity has the ability to use license-exempt spectrum. That's the entire point of license-exempt spectrum. Any wireless service provider can choose to use license-exempt spectrum and avoid paying auction or purchase fees.
- The reason that some entities choose to pay auction or purchase fees for spectrum is to 1) gain ownership of an asset, in this case exclusive use of a portion of spectrum in a given geographic area, and 2) have absolute control over over that spectrum - mitigate interference, and 3) "freeze out" competitors from using a particular portion of spectrum in a given geographic area (even if the purchasing entity chooses not to use it at all - they "own" it and no one else can use it.)
- License-exempt spectrum isn't the only spectrum allocation method that doesn't mandate fees - much of the spectrum in the US is allocated on a licensed first-one-in basis with no fee for the actual use of the spectrum. Satellite links, backhaul microwave links, (if memory serves) some of the spectrum (24/28/38/39 GHz) used by First Avenue Networks, IDT, and XO was originally allocated without auction revenues flowing to the US treasury. Not to mention that the US television and radio broadcasters have never paid "auction" fees for their use of spectrum. The US Military has never paid "auction fees" for their use of spectrum.
It will be amusing when it becomes apparent that the Bush Administration is, in the end,
trying to tax the use of light! Free Space Optical (FSO) communications is the use of laser light in the air for communications - no different in scope from what the Administration is proposing to tax; FSO is wireless, it is license-exempt, and it is used to build commmunications networks.
Taxing light... what a concept.
(Original post 1:05 PM 2/6/2006)
By Steve Stroh
This article is Copyright © 2006 by Steve Stroh (except for the RCR News exerpt). Excerpts and links are expressly permitted (and encouraged.)
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