Senate Commerce OBBB Draft would Speed Innovation

Late last week, the Senate Commerce Committee released the text of its portion of the One Big, Beautiful Bill Act, which the Senate hopes to clear by the Fourth of July. Like the House version before it, this bill makes great strides for innovation and growth on both spectrum and AI policy.

Spectrum Auctions

Under the leadership of Chairman Ted Cruz (R-Texas), the committee draft would finally reopen spectrum auctions after nearly four years. The Federal Communications Commission – which just received a new commissioner with Olivia Trusty’s confirmation by the Senate – would both be given the authority to hold auctions again and tasked with finding a pipeline of 800 MHz of spectrum for future auctions. Of this, 500 MHz will come from spectrum currently exclusive to the government, which the private sector can put to better use. This seems to have resulted from an agreement between Senate Republicans and the Department of Defense, with all due credit to President Trump for requiring the military to work with Congress on identifying bands they could vacate.

The commerce bill also imposes a strict timeline to ensure this opportunity does not go to waste or languish in development hell – 200 MHz must be auctioned within four years and the remainder within eight, similar to the House bill that mandates at least 200 MHz within three years of enactment and the remainder within six years. The House bill, however, directed the FCC to find 600 MHz in total.

Both bills score at a little over $80 billion in expected revenue according to the Congressional Budget Office. This figure likely factors in the 110 percent relocation costs the FCC is required to cover for incumbents to vacate the bands they are using, which comes out of the auction proceeds. But even if these costs exceed current estimates, CBO has a bizarre practice of scoring spectrum auctions at 50 percent their expected revenue on the off chance that the auction never takes place.

Spectrum auctions have generated over $233 billion since 1994 while wireless investment has added $260 billion to GDP. Of this, $118 billion has come in since just 2018 – demand is growing. Absurd though this may seem given the black-letter law mandated auctions within eight years and the very public willingness by FCC Chairman Brendan Carr to get it done, it nonetheless provides a ballpark for net revenue after relocation costs.

Beyond the revenue, which helps Congress preserve the Trump tax cuts that have spurred investment and job creation, spectrum auctions move resources away from the government and into the private sector through exclusive licenses. Giving licensees skin in the game akin to private property will encourage innovation well beyond what government can do with the spectrum. It could generate close to $400 billion in consumer benefits.

All in all, this is a great step forward for innovation. Privatizing government spectrum should be a priority in OBBB.

AI Moratorium

The House EnC title included an unexpected treat: federal preemption of state and local AI regulation. As ATR has argued to the Trump administration and to the public, this policy is necessary ensure innovation and human flourishing. Thousands of proposals have been introduced in state legislatures to regulate or discourage the development of AI; even if they are not totally egregious, it is impossible for deployers to comply with a patchwork of 50 state laws. AI is plainly interstate commerce, and Congress should preempt its regulation like they did internet taxes through the Internet Tax Freedom Act.

While the House-passed OBBBA attached AI preemption to a $500 million appropriation to modernize government systems with AI, it is unlikely this would survive the Byrd Bath. This is the knock-down, drag-out session where the Senate parliamentarian rules whether provisions of the package conform to the rules of reconciliation, which stipulate that all provisions must be primarily budgetary, not merely incidental to the budget.

It is possible that the Senate parliamentarian, who makes rulings on what can and cannot be included in reconciliation bills, will rule against the AI preemption, not because it is bad policy but because it is not technically a budget item. To improve its chances of survival, Senators rewrote this section to attach the AI moratorium not just to the modernization of government systems but also to the Broadband Equity, Access, and Deployment (BEAD) program. Under the Senate bill, the over $40 billion in BEAD funding can now be used to deploy AI infrastructure and encourage its adoption, which the moratorium would insulate from a patchwork state laws undermining the fiscal sustainability of the program. Tying preemption directly to a budgetary item could help the provision survive the upcoming Byrd Bath.

Overall, the Senate Commerce Committee should be commended for their work to build on the House draft by auctioning more spectrum and threading the budgetary needle on AI preemption. Spectrum auctions and AI preemption are both great policies that should carry in this bill or in the future if the parliamentarian disagrees with their Byrd eligibility. Regardless, the Senate Commerce Committee has done great work to draft pro-innovation policy that will benefit future generations of Americans.