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Pai Proposes Using Spectrum Auction Revenue to Fund Rural Mobility

Randy Sukow / Sep 14, 2016

Current universal service support is not enough to promote mobile broadband communications in rural America, FCC Commissioner Ajit Pai said during a speech yesterday in Cincinnati. Pai called on Congress to approve a “rural dividend” in the form of revenues from future spectrum auctions.

“One often overlooked cost of the record rates paid in recent auctions is that every dollar spent on spectrum is a dollar that cannot be used for deployment,” Pai said. “That typically translates into less investment in rural America. By recycling a small portion of the funds raised at auction back into deployment, the rural dividend voids this opportunity cost.”

Pai’s plan is to set aside 10 percent of auction revenue into a fund to support rural mobile broadband, which the Commission would distribute to remote areas. He noted that if the Commission had such a policy for auctions conducted over the last 10 years, it would have collected $7 billion for rural mobile services by now. It would have “precluded” the current need to raise more revenue through universal service, which is the equivalent of a tax on telecommunications customers.

The rural dividend was one of three proposals Pai proposed to boost rural mobile broadband, including establishing a second phase of the universal service Mobility Fund. Unlike the first phase, in which the FCC declared a $400 million fund upfront, “the total funding should be tied to what it takes to get the job done,” he said. He suggested steps to take toward ensuring efficient Mobility Fund awards to the areas where it would do the most good.

The third step he suggested was changing the construction rules for wireless spectrum licensees covering rural areas. Under current rules, those holding PCS and 700 MHz licenses might never build out to certain low-population areas. Pai proposed raising the coverage areas to 95 percent of geographical license areas, but at the same time increasing the initial term of spectrum licenses from 10 years to 15 years.

“With the additional certainty of a 15-year license, carriers can better justify the long-term investments it takes to serve rural areas. And for licenses that the FCC has already issued, we should take a fresh look at the renewal stage at the reasonable steps we can take to incentivize investment in rural America,” he said.

Pai’s rural mobile proposals were part of a larger plan he unveiled to increase both wireline and wireless broadband investment through entrepreneurship, deregulation and the creation of “Gigabit Opportunity Zones,” which would provide tax incentives to build broadband in economically challenged areas.

While these ideas might find several supporters in the current Congress, the current administration and FCC would almost certainly shoot them down.  Perhaps the November elections will change the political atmosphere enough for another look.

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