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The federal government had already wasted 18 years and more than $1 billion in taxpayer money in a quest to create DRSC (Dedicated Short Range Communications) technology, a system for vehicle to vehicle communications. During that time, precious spectrum bandwidth, the 5.9 GHz band, was locked up and made unavailable for use by the American people, even though it was, and is, critical to expansion of faster broadband. Nevertheless, in December 2016, instead of freeing the spectrum from the aging failed experiment, the Obama administration in its very last moments, proposed a pricey mandate requiring that that all new cars and trucks have DSRC embedded in them. And for the last two years, as in the previous eighteen, nothing happened.
The Transportation Department last said it was still reviewing comments. Others have indicated a decision as to what to do next was being made at “higher levels” in the current administration. But, with spectrum being finite and obviously in short supply, why the delay? The government-created technology continues to slow innovation, just as it has done for years.
While today we stand poised to rush into a 5G world, DSRC was created when 2G was all the rage, after the FCC allocated the spectrum for use by the Department of Transportation. Back then, government decided that automated vehicles would best be served by connective technology. The marketplace thought otherwise, heading down a different road. The use of radar, cameras and lidar, (pulsating lasers), are the most active and prominent solutions being deployed today. The threat of the government mandate being imposed, in a completely different direction than the market, is creating uncertainty in transportation innovation, and resulting in lost opportunity for wi-fi.
As work began twenty years ago, the Department of Transportation only created one answer and devised only one path forward to “solve” its perceived problem of “automated vehicles” building a technology solution that could only be made effective with a massive government mandate. That is, for the system to work, all vehicles on the road would have to have the appropriate technology embedded – at a cost of over $100 billion to consumers. Additionally, billions of dollars would have to be spent on infrastructure to accommodate the new technology. Ironically, the justification used for the last two decades has been that the proposed mandate would enable DSRC technology to be deployed more quickly. That argument continues to be made even as radar and lidar vehicles are taking to the roads, leaving the government dream solution in the dust.
From the start, the DoT failed to understand that if government acts to address a problem of public concern the correct approach is to identify the problem then craft public policy that will encourage as many potential solutions as possible so that the most innovative will have the opportunity to provide the benefits to society. Rather than harnessing the opportunities of the market providing a broad swath of potential innovations, government has, not surprisingly, failed in its attempt to dictate a specific technology.
Some have suggested that perhaps the government could continue its pet project and but also allow for more current market accepted innovations to move forward by proposing that the spectrum band be shared. The idea has been sharply rebuffed by those insisting that the band must only be used for vehicle connections and safety.
The rebuke has always been odd given that the safety applications only use a small portion of the spectrum claimed by DSRC interests. As it turns out, the rest of that spectrum has been envisioned for use by commercial applications that are not safety services. Why should these services be provided special status in the market? Why should government be competing with the market at all?
The correct next step for the Department of Transportation is to acknowledge that the FCC knows the best way to deploy spectrum and offer the spectrum back so that it can actually be put to very good use. The Department should not just hold the spectrum for something later or replace the DRSC odyssey with some new scheme. The spectrum is needed now and should be used to its best purpose. The FCC made a bet on the auto industry twenty years ago, a bet that should never have been made, and now with that plan having failed long ago, they should seek to better their record and yield to market demands.
The Honorable Kevin Brady Chairman,
Committee on Ways and Means
United States House of Representatives
1100 Longworth House Office Building
Washington, D.C. 20515
November 6, 2017
RE: Preserving Interest Deductibility is Critical to Capital Investment, Job Creation and Economic Growth
Dear Chairman Brady:
On behalf of the members of the following organizations, we write today to express our strong support for the Tax Cuts and Jobs Act introduced on November 2nd. We applaud your efforts to prioritize tax reform in the 115th Congress and support efforts to modernize the tax code to promote economic growth and job creation. We greatly appreciate your leadership on tax reform, and we stand ready to work with you and your colleagues to ensure swift passage of your legislation in the days ahead.
In addition to the much-needed reduction in the corporate tax rate, we greatly appreciate the delicate balance that the Tax Cuts and Jobs Act achieves with respect to interest deductibility for businesses. As you know, access to affordable capital is a key determinant in whether and how quickly investments can be made to grow their businesses. Because debt is the most accessible and cost-efficient form of capital, it is important that businesses continue to be allowed to deduct interest as an ordinary and necessary business expense.
Significantly, the House Tax Cuts and Jobs Act recognizes the importance of affordable capital by not proposing complete elimination of interest deductibility or a flat percentage “haircut” on the deduction. Adoption of a percentage haircut would overstate a corporation’s economic income, result in over-taxation, and increase the cost of capital. This would hamper the ability of many companies to invest and expand their businesses. We are supportive of the bill’s carefully crafted 30% “thin-cap” rule, which strikes the right balance by preserving interest deductibility, but not rewarding overly leveraged companies. Indeed, capital-intensive companies that finance infrastructure investment through a combination of debt and equity will have a greater ability to maintain proposed levels of investment if limits on the deductibility of interest are imposed using a thin-cap rule.
We urge the Committee to remain committed to the thin cap approach to the interest deduction. Elimination of the deduction or an arbitrary haircut runs counter to a stated purpose of corporate tax reform – to make the U.S. system more competitive and more consistent with other countries. In contrast, adoption of a thin-cap rule as currently contemplated would not make the U.S. an outlier with respect to other countries, because a few countries, such as Germany, already impose thin-cap rules applicable to a company’s interest expense.
We look forward to working with you and your colleagues to achieve the important goal of passing the House Tax Cuts and Jobs Act.
Sincerely,
Pete Sepp President National Taxpayers Union
Thomas A. Schatz President Council for Citizens Against Government Waste
David Williams President Taxpayer Protection Alliance
Charles Sauer President Market Institute
Tom Giovanetti President Institute for Policy Innovation
Jeff Mazzella President Center for Individual Freedom
Andrew Langer President Institute for Liberty
Bartlett Cleland President Madery Bridge
For twenty years, the federal government has been devising a plan for talking cars, promising a reduction in injuries and deaths. For twenty years, the government jealously guarded a block of spectrum to use as it pursued its ill-advised industrial policy designed to compete with private industry. For twenty years, nothing happened. But life outside of this government Xanadu went on.
In 1999, the FCC set aside the 5.9 GHz band of spectrum for “Dedicated Short Range Communications (DSRC)” and “Intelligent Transportation Systems (ITS),” a vehicle to vehicle communications system. Five years later the Commission established licensing and service rules to govern the spectrum slice. Despite every advantage being provided nothing resulted over time, even though more than $1 billion in taxpayer money was wasted. That block of spectrum cordoned off for this government adventure has become increasingly valuable over the decades. Valuable in terms of money certainly, but more importantly the band had become valuable in terms of the potential for greater innovation.
For years, communications and tech companies have been seeking permission to use the 5.9 GHz band for additional wireless bandwidth, recognizing that this part of the spectrum is what will help consumers get to gigabit wi-fi. The band is very well suited to serving taxpayers directly, by providing them a means of receiving faster mobile broadband now, providing greater speeds for the last 100 feet. The fact is that we are facing various challenges in spectrum, most prominently that the spectrum we have allocated, a raw material for innovation, is getting more crowded. Consumer demand for more and more broadband continues to grow rapidly as the importance of wireless services to our economy increases. Maximizing resources only makes sense, particularly when it benefits taxpayers and the economy.
The goal must be the maximization of spectrum use – to drive innovation and the economic benefits that follow. That is, the rules governing this band should be altered so that it can be used simultaneously and more effectively by more entities. Allowing those who are enamored with, and invested in, the government’s vehicle to vehicle communications approach to try it in the marketplace without government playing favorites and competing against those who have other valuable use for spectrum should be encouraged. But, the only way that the goal will be achieved is by the FCC again acting, acting in the best interest of innovation and the public.
The Commission should act quickly to reallocate this precious spectrum resource to a productive use, to designate more unlicensed spectrum so that wi-fi can continue to meet the huge demand of consumers. Twenty years is more than long enough. Let others use the spectrum for additional innovations. Such single allocations are a vestige of old bad government, government that dictated industries and outcomes. The time has come for a new approach, to innovate.
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