By James Erwin
Yesterday, the Senate Commerce Committee held its confirmation hearing for Secretary of Commerce nominee Howard Lutnick. Perhaps the most interesting insight Lutnick offered was to agree with Digital Liberty’s long-held position that the Department of Defense is sitting on too much spectrum that should be commercialized.
“There’s enormous amounts of spectrum held by the Department of Defense,” Lutnick told the Committee. “I’d like to try to help us drive some of that spectrum towards our businesses.”
This is an encouraging sign that the Trump Administration will take the need to privatize more of the radiofrequency spectrum and resume auctions for licensed use seriously, something over which the Biden Administration consistently wallowed in indecision. But lawmakers should also see this this an opportunity for the reconciliation package currently under negotiation.
Authority for spectrum auctions expired in 2023, and Congress has failed to come to an agreement since then about how to resume. This is an embarrassing policy failure. Since replacing the previous arbitrary system in 1994, FCC spectrum auctions have generated more than $230 billion in revenue for the U.S. Treasury. In addition to revenue generation, this competitive bidding system facilitates a meritocratic distribution of spectrum licenses nationally, ensuring that telecommunications networks remain anchored to market principles.
Since the expiration of auction authority, DoD and their allies in the Senate have been standing in the way of an agreement that both resumes the sale of licenses and frees up spectrum for said auctions over the long term. As Lutnick noted in his confirmation hearing, DoD is sitting on an enormous amount of spectrum that it doesn’t need, which should be relinquished to the private sector. Contemporary great power competition is primarily economic in nature, meaning the savvier national security strategy would allow industry more access to commercial spectrum. Everything from 5G and 6G networks to Wi-Fi to data streams for next-generation AI technologies are key to competing with China – DoD should recognize that more commercial spectrum is a national security priority necessary to ensure American technological leadership, not a concession to civilians.
So far, this argument has not found any purchase with Pentagon careerists, who have stonewalled with a series of working groups and reports that amounted to nothing. But there is an opportunity to break the logjam with the reconciliation bill Congressional Republicans are currently crafting.
Budget reconciliation is the process by which bills can be passed without clearing the 60-vote threshold to override a filibuster in the Senate. It can be done once per fiscal year, cannot touch entitlements, and can only affect revenue and spending – that is, it can raise taxes, lower taxes, raise spending, lower spending, or liquidate government assets to generate revenue – but cannot change other policy and must be deficit-neutral. As long as a bill meets these stipulations, it takes only a simple majority to pass it through either house of Congress. Presidents increasingly use this process to pass their economic agendas on party-line votes when they first take office.
DoD and their Republican champions in Congress are requesting between $100 and $200 billion in the package. This is a huge ask with Republicans trying to extend expiring provisions of the Trump tax cuts from 2017 in a bill that has to be deficit-neutral. DoD can get what it wants by relenting on spectrum: to generate revenue to pay for defense spending, they should identify bands of spectrum they don’t really need and put them up for auction. This provides a direct monetary incentive to finally do so.
Economist Stephen Moore has recently noted in both the Washington Examiner and the Daily Caller that spectrum auctions and the sale of other assets like drilling, mining, and timber rights are obvious revenue generators that can provide the money DoD is requesting without affecting the equation on extending lower taxes. As Moore wrote in the Caller:
Congress could raise at least another $100 billion in another round of spectrum auctions. This would sell or lease space that the military doesn’t need and that other agencies of government (such as local police and fire departments) are fine without.
This strategy would help stimulate the economy in two ways. First, as in the past, the revenues raised can offset any real or imagined revenue loss from the imperative of making the Trump tax cuts permanent.
A new report by the economic consulting firm NERA, finds that auctioning 100 megahertz of mid-band spectrum that’s licensed for 5G will boost U.S. GDP by more than $260 billion, and create 1.5 million new jobs.
While the exact number on revenue is a bit hairy due to the opaque scoring methods of the Congressional Budget Office and the cost of relocating incumbents, DoD is in no position to both refuse to sell its unused spectrum and demand $100 billion or more in new spending. If they want it, they can pay for it with spectrum and leave the CBO score for the rest of the package unaffected.
Some of the prime real estate DoD is sitting on could be shared with the private sector through such mechanisms as Citizens Broadband Radio Service (CBRS) licenses – these are licenses that are paid for at auction, after all – but the lion’s share of revenue generation has historically come from exclusive licensed mid-band spectrum that will enable the aforementioned 5G/6G deployments and AI data processing. They do not necessarily need to exclusive license everything, but if they want their money, they should be expected to supply a robust FCC auction that can generate the revenue they want without forestalling tax extensions or further cuts.
Spectrum auctions will accelerate economic development, create jobs, and pay for DoD’s requested spending without ruining the CBO score for extending tax cuts. This is a win-win-win for DoD, industry, and Republicans seeking to advance President Trump’s agenda. All parties should take yes for an answer.
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