Thoughts About The CBA's New Proposal

I've had a close look at the proposal the CBA released on Friday and it is very good. It's actually quite similar to the proposal I made to the FCC in Dec in that it requires the payments to be made directly between the spectrum buyers and the sat companies, bypassing Congress. Then Congress will be unable to interfere with transactions between two private parties. Also it allows the FCC to give Congress 100% of the auction proceeds which makes for a wonderful sounding resolution.

I have to give the CBA a lot of credit here because they took my idea and made it even better. Where I had focused exclusively on the strength of the rights that the sat companies possess and was proposing they be paid for selling these, the CBA completely changed the focus to one of speed rather than rights. One realizes the brilliance of this move when you consider that everyone is in favor of speed, but few understand the complexities of rights. So they have basically stolen Congress's sound bite. Now no one in Congress can talk about how the taxpayer owns the spectrum and how these filthy foreign satellite companies are trying to steal something from the people. Because with this proposal the tax payers are getting 100% of the auction proceeds. In contrast, the sat companies now own the sound bite. The Need for Speed.

Everyone understands that if you want somebody to sprint, you need to pay for it. Sprinting is painful. No one does it without receiving some sort of benefit. Now if Congress wants to try to capture the high ground in this debate they have their work cut out for them. They need to argue that somehow we shouldn't have to pay for speed. We should be able to get speed for free. I'm not sure how you could make such an argument and I doubt, even if you could make it, that you would get much sympathy for your position.

The other thing the CBA does is make a great effort to justify why speed actually will increase the revenue to the US Treasury. They cite no less than 4 different reasons and even bring in highly respected telecom economist Coleman Bazelon to make their case. It will be very difficult for anyone to argue against an economic analysis of this caliber.

Finally, and perhaps the most genius of all their additions, was to change the method of measurement for the allocation of proceeds between the satellite companies. This would probably only even be noticed by the most discerning of readers, but they are now using the C-Band active antenna count to make this calculation. They rightly argue that if you are paying them for the speed of moving, then the companies that have the greatest amount of work to do are those with the greatest number of antennas. The most interesting aspect of this change is that no one but the CBA knows how many antennas everyone has. Thus I would be very confident in betting anyone out there that Eutelsat doesn't have 5% of the antennas! So now the time has come for Eutelsat to be punished for quitting the CBA. And Eutelsat is unlikely to get much sympathy from the FCC either, as their history shows they can't stand hold outs. Therefore, I think given this new proposal, it is reasonable to increase the estimates for Intelsat's percentage of the CBA proceeds to 46%.

The other thing that this new allocation method does is that it completely cuts out the SSOs. Sat companies are no longer being compensated for rights, or licenses, or future business potential, or any of the things the SSOs have suggested they ought to be paid for. Instead they are being compensated for the speed of moving. Thus, because the SSOs have no antennas and nothing to move, they will get nothing of the proceeds.

In short, this is a really fine proposal put forth by the CBA. I doubt it will silence all the critics in Congress, but it offers a very good solution. And because they have now named their number (50%) and it is the same number contained in the 5G Spectrum Act, that got the furthest along of any proposed bill, I can't see any reason the Repubs will want to take this issue back up again. They now will get 5G, they have a workable deal that is fair and economically well justified, they got the US Treasury 50%, and will be able to claim they are receiving 100%, the Dems have no good soundbite to use against them anymore. So why bother? I therefore predict the Repubs will block any attempt to pass a bill which could jeopardize this attractive solution.