Spectrum Auction: Federal Tax Cut Soon?

[August1991]

In an interesting but basically wrong column, Terence Corcoran wrote this about the recent cellphone spectrum auction:

In the media, telecom beat specialists are trumpeting the auction results as the harbinger of amazing new services and cheaper prices. The fact that these new cheaper prices will first have to overcome $4.25-billion in dead-weight capital costs -- equal to a $230 tax on each cellphone user in Canada -- is apparently a non-issue.

This won't be a tax if the feds refund the money to us all either through a tax cut or through paying down the federal debt. (Please oh God don't let the politicians blow the $4.25 billion on themselves or more stuff nobody wants... )

Tax cuts are among the federal government's options as it decides what to do with a $4.3-billion windfall from an auction for wireless spectrum licences, Industry Minister Jim Prentice said yesterday.

While Mr. Prentice said the Conservative government is not sure yet whether to allocate the money to tax cuts, debt repayment or spending programs, the Liberals questioned whether the auction proceeds are an upfront bonanza.

National Post

Spending programs? No, no, no.

I'd go for broad based tax cuts. They're politically popular (as in they help win elections to get a majority government) and they make it hard for future governments to raise spending. Let future governments worry about paying down the debt (instead of devising new ways to spend money).

----

Now then, let's get back to Corcoran. He states:

An auction is certainly a good way to allocated a scare resource. But it means paying billions for a scarcity that government policy created.

That's not precisely true. An auction is a good way to decide the value of something of an unknown value. The scarcity arises because, presumably, there are competing uses for the wavelength spectrum. Or maybe there isn't. Is it bad if the government tries to extract the highest price possible from the sale of a resource? Better that than people wastefully competing to stake a claim.

Which brings me back to the idea that this spectrum auction amounts to a $230 "tax" on each cellphone user in Canada. If everyone in Canada is a cellphone user, and the government cuts taxes, then we'd just get our money back. It'd be a wash.

To the extent there are non-cellphone users, then they'll get refund (subsidized by cell phone users). That strikes me as fair. The wavelength spectrum, like the stars in the heavens, belongs to everyone.

Most important though is that possession of this valuable resource is not subject to wasteful bickering and lobbying. $4.25 billion is a tidy sum.

I'd expect Flaugherty (flanked by Prentice) to make a tax cut announcement perhaps this fall.

NDP finance critic Tom Mulcair said the New Democratic Party opposes "tax giveaways" and would not support debt repayment from the funds at this time.

"You don't pay off your mortgage if your roof is leaking and water is seeping into your basement," he said in an interview.

The NDP would want the funds used to help manufacturing industries where thousands of workers have been losing their jobs and for long-term investments in infrastructure, especially public transit, "whether it's spread out over 10 years or it's something in the next year."

Tax giveaways? Only the NDP could come up with such a phrase while advocating giving the money away to private companies (manufacturing industries). Edited July 24, 2008 by August1991

[jdobbin]

This won't be a tax if the feds refund the money to us all either through a tax cut or through paying down the federal debt. (Please oh God don't let the politicians blow the $4.25 billion on themselves or more stuff nobody wants... )

The Tories have already spent billions this summer. I expect they will spend more. Given Flaherty's reputation, even if Canada is in deficit, he won't show it on the books.

This idea that the sale of government property is a tax is ridiculous. The airwaves are owned by Canadians. The sale is a lease to companies to develop an economic use for those airwaves. The companies will try to achieve profitability by attracting consumers to their product. In many cases, this will result in pay a lower fee than what is being paid now. In other cases, it will mean paying a higher fee but receiving much more service.

If competition doesn't happen, there is still spectrum left to be sold.

I'd go for broad based tax cuts. They're politically popular (as in they help win elections to get a majority government) and they make it hard for future governments to raise spending. Let future governments worry about paying down the debt (instead of devising new ways to spend money).

It looks like it is too late. The Tories just announced $3 billion worth of spending on Ontario infrastructure. I'd day the cash is more or less gone between Ontario, Quebec and Nova Scotia.

Edited July 24, 2008 by jdobbin

[August1991]

This idea that the sale of government property is a tax is ridiculous.

How sad your idea. Government property? Who is the "government"?

People like Ted Rogers, Danny Williams etc wined and dined Trudeau and Liberals and assorted "government", civil servant hangers on in the past to get a favourable decision. (Mulroney and his minions got a free lunch too.) Cable TV and cell phone operators got a "government" nod.

-----

This time, Prentice (and Harper) made these people pay, upfront, visibly, openly to the "government". We (taxpayers) got $4.2 billion dollars this time. How many billions did Ted Rogers, Danny Williams or Pierre Peladeau pay indirectly to the Liberal Party for comparable spectrum/bandwidth?

On this point alone, Stephen Harper is an honest man and too few Canadians understand this. (Maybe Stephane Dion understands it.)

Edited July 24, 2008 by August1991

[jdobbin]

How sad your idea. Government property? Who is the "government"?

Either you believe spectrum is for the government to sell or you do not. If it wasn't, companies could have simply set up a shingle and started competing now without asking anyone.

People like Ted Rogers, Danny Williams etc wined and dined Trudeau and Liberals and assorted "government", civil servant hangers on in the past to get a favourable decision. (Mulroney and his minions got a free lunch too.) Cable TV and cell phone operators got a "government" nod.

That maybe so. But then Harper didn't let the big guys bid on spectrum this time around. Doesn't sound like the government had a hands off approach as to who got to bid. Perhaps they might have even got more money if it had been a free for all, you think?

This time, Prentice (and Harper) made these people pay, upfront, visibly, openly to the "government". We (taxpayers) got $4.2 billion dollars this time. How many billions did Ted Rogers, Danny Williams or Pierre Peladeau pay indirectly to the Liberal Party for comparable spectrum/bandwidth?

Into Liberal party bank accounts? Boy, you are reaching.

On this point alone, Stephen Harper is an honest man and too few Canadians understand this. (Maybe Stephane Dion understands it.)

Honesty comes with how the money will be used. Apparently, it was spent today on Ontario roads.

[Fortunata]

Honesty comes with how the money will be used. Apparently, it was spent today on Ontario roads.

Steve knows there is an election coming and he needs to buy votes now.

[August1991]

Honesty comes with how the money will be used. Apparently, it was spent today on Ontario roads.

Better Ontario roads than restaurant dinners/Florida condos for Liberal hacks. How did Danny Williams and Ted Rogers get their spectrum? (How is this done elsewhere in the world?)

Dobbin, I really don't want to be partisan. Let's be happy that we have a government that sells this public resource (publicly, for all to see) to the highest bidder. I'm sure Dion would do the same.

Edited July 24, 2008 by August1991

[jdobbin]

Better Ontario roads than restaurant dinners/Florida condos for Liberal hacks.

Really? You have evidence that Rogers and Williams paid for condos for Liberals? I'd love to see it.

How did Danny Williams and Ted Rogers get their spectrum? (How is this done elsewhere in the world?)

It was done the way it has been done in many countries: by proposals for service. The government set the guidelines and the companies offered their proposals to an arms length group. In Canada that meant a licence dependent on Canadian content.

I think I have gone on the record long ago that that those type of restrictions should go. However, I think that Canadian still own the airwaves and that they should be bid upon every five to ten years by whoever wants to buy them.

Dobbin, I really don't want to be partisan. Let's be happy that we have a government that sells this public resource (publicly, for all to see) to the highest bidder. I'm sure Dion would do the same.

There was no one who was sure that the spectrum sale was going to work. The U.S. sale just a short time ago fizzled.

I'm happy that there is a market for auction. What I would like is a limit to this lease so that spectrum can be auctioned again after a certain term. In other words, why is a permanent lease allowed for something that Canadians own?

[August1991]

It was done the way it has been done in many countries: by proposals for service. The government set the guidelines and the companies offered their proposals to an arms length group. In Canada that meant a licence dependent on Canadian content.

And Dobbin, how much was that worth?

[jdobbin]

And Dobbin, how much was that worth?

Over the years, quite a lot as we often hear from Shaw, Rogers and Canwest. Since the 1970s, it has fueled a multi-billion industry in Canada.

I have no problem eliminating all Canadians content rules if the government can auction off the licences every several years.

Edited July 26, 2008 by jdobbin

[August1991]

Either you believe spectrum is for the government to sell or you do

...

That maybe so. But then Harper didn't let the big guys bid on spectrum this time around. Doesn't sound like the government had a hands off approach as to who got to bid. Perhaps they might have even got more money if it had been a free for all, you think?

I agree.

My only wish is that this auction had been completely open.

In another thread, eyeball talked about the importance of the "transparency" of government. To me, this auction was transparent. In the past, how did anyone obtain previous bandwidth? Was there a public auction?

Really? You have evidence that Rogers and Williams paid for condos for Liberals? I'd love to see it.

I have none.

I'm sure that Ted Rogers and Danny Williams obtained their initial licences to operate cable TV networks in a perfectly legal manner.