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Wireless carriers could add capacity under Reid’s plan

By Joelle Tessler
Associated Press / July 29, 2011

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WASHINGTON - The debt ceiling battle could produce an unlikely winner: smartphone users.

Senate majority leader Harry Reid’s current plan would direct the Federal Communications Commission to auction off highly valuable radio spectrum to wireless carriers desperate for more airwaves. Companies such as AT&T and T-Mobile USA say they need more capacity to keep up as their customers increasingly use iPhones, tablets, and other portable devices to handle mobile applications, online video, and other bandwidth-hungry services.

The plan could generate critical revenue for a government spending beyond its means. Congressional budget officials estimate the auctions would raise $13.1 billion for deficit reduction.

Reid’s proposal would also deliver a big victory to public safety officials: It would set aside airwaves and money for the construction of a nationwide wireless broadband network that would let police officers, firefighters, and emergency medical workers communicate with each other across agencies and jurisdictions.

But the proposal still faces significant hurdles. For one thing, a competing debt ceiling plan from House Speaker John Boehner, which was to be voted on last night, contains nothing on wireless spectrum auctions. Boehner’s focus is on spending cuts, not finding new sources of revenue. What’s more, Reid’s proposal has run into opposition from television broadcasters, which are under pressure to give up spectrum that would be sold to wireless carriers.

The haggling over wireless spectrum auctions comes as Congress rushes to try to agree on a plan to stave off an unprecedented US default on its debt, which could have catastrophic consequences for the global economy. The Treasury Department has warned that the government will run out of money to pay its bills after Aug. 2 if Congress does not raise the debt ceiling. Reid and Boehner are pushing competing proposals to lift the debt limit and slash spending.

No matter how the current fight plays out, many in Washington see spectrum auctions as an attractive way to chip away at the federal deficit.

Stifel Nicolaus analyst David Kaut, for one, says spectrum auction legislation has a good shot of passage in Congress - whether it is part of the current debt ceiling package, a deficit reduction measure down the road, or even a stand-alone bill.

Reid’s proposal would give the FCC authority to auction airwaves voluntarily relinquished by government agencies and television broadcasters with extra spectrum. It would allow broadcasters to share in the auction proceeds.

Congressional budget officials estimate those auctions would raise a total of $24.5 billion over 10 years. Reid’s plan envisions $13.1 billion going to the Treasury Department to help narrow the federal deficit.

At this point, perhaps the biggest hurdle facing any spectrum auction proposal is opposition from television broadcasters reluctant to give up their existing airwaves.