Policy

Bush Proposes Analog TV Tax

2/13/2005 7:00 PM Eastern

Washington— President Bush’s new budget calls for a multimillion-dollar tax on analog TV stations and for shutting down an underperforming investment fund capitalized by bidders in federal spectrum auctions.

The $2.57 trillion spending plan calls on Congress to authorize the FCC to impose an analog “lease fee” of $500 million in 2007 “to encourage the digital transition” by the country’s 1,366 commercial stations.

NO APPETITE

The White House revived the analog spectrum tax even though Congress has previously shown no appetite to collect more revenue from TV stations than the various user fees they pay the FCC.

“Applying a spectrum tax on local TV stations would slow the DTV transition and ultimately harm consumers who rely on over-the-air broadcasting for news, entertainment and public interest programming,” the National Association of Broadcasters said in a statement last Monday.

The federal government is eager to reclaim the analog spectrum so it can allocate the airwaves to public-safety groups and auction the rest to wireless broadband providers for billions of dollars.

In another move, the White House called for elimination of the Telecommunications Development Fund (TDF) because it has lost nearly 70% of its investments while running up high administrative costs.

Congress created the little-known TDF as part of the Telecommunications Act of 1996 to help finance small businesses with new technologies that would otherwise struggle to raise seed money.

But the fund has written off $10 million of the $14.5 million invested in 14 companies, and has spent $9 million on salaries and other overhead costs. The fund has $29 million on hand, according to the White House.

“As a result of the TDF’s disappointing performance, lack of impact and high administrative costs, the budget proposes terminating the fund and returning remaining assets to the Treasury,” the Bush budget said.

TOWNS DISAPPOINTED

Rep. Ed Towns (D-N.Y.) fought to include the TDF in the telecom law nine years ago.

“I am disappointed by the president’s budget recommendation to eliminate the TDF program. Given the program’s recent implementation, I do not believe it has operated long enough for a fair evaluation, and moreover, any performance review of TDF must be made in the context of the recent collapse of the telecommunications sector,” Towns said in a statement.

“I think it is important to note that through disciplined decision-making, TDF has conserved its capital and has significant funds available to invest in firms that fulfill the program’s mission.”

The TDF obtains its capital from interest earned on deposits of bidders that plan to participate in FCC auctions.

A TDF official said the fund wanted to work with the White House on the issue.

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