ICB Toll Free (800/888) News by: Judith Oppenheimer, Publisher, ICB Toll Free (800/888) News
Thursday July 24 1997 at 01:18:33 PM EDT


The toll free auction is dead, but only in the feline sense, i.e., it may have a few more lives left. Don't be surprised to see it resurface in another form in the future--perhaps even later this year. I wouldn't bet on it, but neither would I bet against it

New York, New York US - New York, NY July 24, 1997 (ICB TOLL FREE NEWS) As the balanced budget bill was being kicked around earlier this year, various spectrum auction provisions figured into the Senate version of the budget bill. At one point the Senate bill also included a provision that would have given the FCC authority to auction vanity toll free numbers in the under a procedure similar to that used for spectrum auctions. This met with much resistance from the industry, and was removed from the Senate bill before it was reported from committee.

Earlier this month both Senate and House versions of the balanced budget bill were passed, and neither contained any provision for toll free auctions. The matter is now in conference and toll free auctions are not part of it. It is unlikely, but not impossible, that toll free auctions will resurface as part of the conference process.

So, is the toll free auction issue dead? It is probably dangerous to speculate that anything is ever dead on Capitol Hill. It does appear, however, to be comatose. Although toll free auctions are thus apparently beyond the reach of the balanced budget legislation, that does not mean it might not resurface in some later budget proposals. Also, Congress will continue to address spectrum auction legislation. That would be a natural place for proponents to seek to revive the toll free auction issue.

Spectrum Auction History

Comparative Hearings - Starting with a 1946 Supreme Court ruling (Ashbacker v. FCC), the FCC used a system known as "comparative hearings" to choose if more than one party applied for a certain spectrum channel in the same market. Under this system, when one party filed an application, say, for TV Channel 2 in Anytown, USA, the FCC issued a public notice establishing a cut-off date by which any other mutually exclusive applications must be filed. All timely filed, complete, and acceptable applications were placed in a consolidated hearing to determine which of the competing proposals would best serve the public interest.

Random Selection - Lotteries - Over the years, many became disenchanted with the comparative hearing process. The main criticisms were that the system consumed too much time and resources in order to draw fine distinctions between applicants that were not all that significant. So, starting in the early 1980's, Congress gave the FCC authority to choose among mutually exclusive applications for certain types of licenses by lottery rather than comparative hearing. This process soon became subject to abuse by speculators, which provided the political will to finally give the FCC auction authority.

Competitive Bidding - Spectrum Auctions - In 1993 Congress gave the FCC authority to use auctions to choose from among mutually exclusive applications for certain types of spectrum licenses. PCS auctions got the most attention, but the law essentially specifies auctions for applications for new authorizations--it does not apply to renewals of existing licenses--for spectrum based services that involve subscriptions or fees by users (e.g., cellular, PCS, paging, satellite TV, etc.). The primary purpose of spectrum auction authority was not to raise revenue. In theory, the FCC is not supposed to consider the revenue impact when deciding whether to use auctions. Auctions were intended, at least initially, as an alternative to lotteries which were, in turn, an alternative to comparative hearings. Today, all three methods remain on the books and any one may be used depending on the type of license involved.

Auctions as a Revenue Source - The 1993 spectrum auction authority was adopted primarily as an experiment; it sunsets in 1998. While initially prompted by non-revenue issues, the large amounts raised by the FCC in spectrum auctions has caused politicians to view them differently. Both Congress and the Administration now frequently use anticipated spectrum auction revenue as a factor in their fiscal proposals.

We can be almost certain that the FCC's spectrum auction will be continued, and also fairly confident that revenue and budget factors will be a primary consideration in future spectrum auction policy.

Author/Correspondent's Profile: Judith Oppenheimer, Publisher, ICB Toll Free (800/888) News

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