Tech update (spectrum)

Recent/upcoming developments… The Senate Commerce Committee, which has jurisdiction over the FCC/spectrum policy, held a hearing this week on spectrum policy.  Chairman Cruz (R-TX) used the hearing as an opportunity to push for enactment of his Spectrum Pipeline Act (see summary here), which would renew the FCC’s expired auction authority and require federal agencies to identify 2,500 Mhtz of mid-band spectrum, auction 1,250 Mhtz of spectrum for commercial wireless use within six years, and use the remaining spectrum for licensed or unlicensed use.  Cruz made clear at the hearing that he would like to see this bill included in the Republicans’ “reconciliation” legislation, something that Senate Majority Leader Thune (R-SD) also supports, as do House Republican committee leaders.  However, numerous Republicans (e.g., Sens. Rounds (R-KS), Fischer (R-NE), Cotton (R-AR)) are channeling DOD resistance to giving up the spectrum they control.  Sen. Wicker (R-MS) indicated this week that DOD has told him they are strongly opposed to giving up the spectrum.

Our outlook… The tensions displayed between Cruz and Fischer at this week’s hearing are indicative of the dynamic that’s existed for the last few years, with DOD resistance inhibiting progress on legislation that would require federal spectrum to be auctioned.  The potential for spectrum legislation to contribute $100+b in revenue to offset tax cuts in the reconciliation bill provides a catalyst that has not to-date existed.  Moderate Republicans are objecting to other spending cuts planned for the reconciliation bill (e.g., Medicaid), which creates a greater need to rely on spectrum auctions.  Our view is that the spectrum provision has only a 50+% probability of being included in the reconciliation bill (i.e., on-balance likely, but with very limited conviction).  This is the case, because in order for the reconciliation bill to pass, it requires close to complete unity among Republicans, and it appears those who are aligned with DOD remain highly resistant.  If Republicans fail to include this provision in their reconciliation bill, an effort will re-emerge to enact it on a bipartisan basis, but that will likely take well into next year, given the divergence between Cruz and his Democratic counterpart, Sen. Cantwell (D-WA) over how the spectrum should be used.

* In addition to DOD’s resistance to giving up its spectrum, there is also some tension between industry stakeholders, with wireless carriers calling for spectrum to be dedicated to fully licensed use, while the cable industry is advocating for spectrum sharing, something to which the DOD appears to possibly be amendable.  Cruz claims that his legislation is flexible enough to accommodate both purposes.

Watch for these developments… In order for the spectrum provision to be included in the reconciliation bill, it will be necessary for the White House, Defense Secretary Hegseth and Republican leaders to make a strong push for it and overcome DOD resistance.  We are looking for any indication that dynamic is emerging, and whether any of DOD’s Republican allies in Congress (e.g., Sens. Fischer, Rounds, Cotton) are expressing openness to the spectrum provision being added to reconciliation.