President Bush’s new budget proposal includes a provision authorizing the FCC to impose “user fees” on unlicensed wireless. This is a dangerous idea, clearly pushed by incumbent licensed wireless operators to dampen competition from innovative new approaches.
The goal of spectrum policy should be to make spectrum cheap, because that will mean capacity is abundant. Making spectrum more expensive just reinforces the notion that spectrum is an inherently scarce resource. As I’ve argued in great detail, there is no discrete limited resource called “the spectrum.” Innovation in technology and usage models can increase usable wireless capacity far beyond what is possible today.
Now, the administrative infrastructure around spectrum policy does have costs, and there are legitimate arguments for charging some minimal fees to avoid perverse incentives for wasteful wireless usage. Adding a dollar to the price of a WiFi router wouldn’t sink the industry.
Yet that’s not what this new proposal contemplates. The Administration’s budget justifies the new “usage fees” on the grounds that unlicensed wireless approaches should face the same cost structure as competing licensed services:
“Service providers using different technologies to deliver a similar product can face different spectrum license acquisition costs. The lack of parity in spectrum assignment creates incentives that can diminish the overall utility of the spectrum.”
Parity? Level playing field? Sounds like the arguments incumbent phone companies always make to hamstring innovative competitors. If unlicensed wireless approaches are more successful because they don’t require exclusive assignment of capacity to one service provider (who pays a fee for the privilege), that’s no reason to burden those efficient technologies with a tax. Moreover, because unlicensed systems need not have a central service provider, imposing taxes may be significantly more complicated and limiting that with tradiitonal services. It’s like the Kurt Vonnegut story where anyone above average is forced to wear heavy weights and wear headphones playing distracting noise, in order to bring them down to the norm.
And don’t buy the line that the proposal arose from fiscal policy. The fees would make a negligible contribution to the budget. At a projected $360 million per year, they would amount to about 0.1% of the current deficit. The cost in terms of productivity and investment in new wireless technologies that could be destroyed far exceeds that.
Let’s not kill off the golden goose of innovation with needless and discriminatory taxes. I thought Republicans like George W. Bush opposed that sort of thing.
UPDATE: Harold Feld of the Media Access Project, who knows the Washington telecom landscape as well as anyone, is urging people to calm down about this news. He says the proposal is actually targeted at digital TV broadcasters, and is unlikely to ever be passed in a form targeted at unlicensed wireless. I hope Harold is right. I’ve just seen too many sneak attacks like this from incumbent lobbyists to be confident.