Thoughts and analysis on the proposed ham radio application fees.

There has been a lot of talk about the FCC’s Notice of Proposed Rulemaking (NPRM) that proposes to implement the application fees for fiscal year 2020, especially where it comes to the Amateur Radio Service (ARS).  This was a story first broken by REC Networks to the amateur community.   While there are also suggested modifications to the application fees for commercial broadcast stations, I want to focus this discussion on the controversy over a proposed fee of $50 on most applications filed for the ARS.

This NPRM came as a result of the RAYBAUMS Act that was passed in 2018 by Congress and signed by President Trump.  The Act is a bunch of sweeping reforms in the FCC, including everything from requiring public Wi-Fi hot spots to permit 9-1-1 calls to the application fees we speak about today.

First, a couple of definitions before we move forward:

A regulatory fee is imposed by the FCC is charged to the direct consumers of FCC services including everything from commercial broadcast stations, telecom providers, companies that operate satellites and private land mobile users.  These fees are normally charged to FCC consumers on an annual basis.  These fees are used for the day to day operations of the FCC, including enforcement. The FCC just recently issued a Report and Order establishing the regulatory fees for FY2020. The RAYBAUMS Act, as well as previous legislation has statutorily exempted certain services and user types from regulatory fees including government agencies, non-profit organizations providing public safety services (such as volunteer fire departments), noncommercial educational broadcast stations and the ARS.

An application fee is imposed by the FCC to offset the costs of the transactional tasks of acting on an application that is filed by an FCC consumer.  Unlike regulatory fees, these are not charged annually, but by transaction.  RAYBAUMS has excluded government agencies and non-profit organizations providing public safety services, but not the ARS, from application fees. 

Further, there is a provision in the Communications Act for both regulatory and application fees where in the event that the costs incurred by the Commission to collect a fee exceeds the cost of the fee itself, then the FCC, in their own judgment, can set a fee of $0.

A significant part of RAYBAUMS is the appropriation of $339 million to the Commission for FY2020.  Yes, RAYBAUMS was the Congressional action that renewed the funding for the FCC in FY 2019 and 2020.  Another appropriation bill will need to come up in order to fund the FCC for FY 2021 and beyond. 

With this appropriation, Congress is advancing $339 million to the FCC, but that advance has strings attached.  Specifically, the FCC needs to recover that $339 million from FCC consumers.  By statute, this is done through the collection of the regulatory fees.  The formulas used take into consideration the number of employees in a particular Bureau and then is proportioned by the use type. For example, in the Media Bureau, a Class B FM station in Los Angeles will pay a considerably higher regulatory fee than a Class C AM station on a graveyard channel in Podunk.   The costs incurred by the FCC by the filing of applications is up and above that $339 million and Congress expects that the FCC recovers those expenses through application fees.  Therefore, in a perfect world, the Commission gets $339 million from Congress and by end of the fiscal year, they would have expected to return that $339 million back to the general fund, but at the same time, the Commission can’t run at a deficit caused by “labor”, such as that involved in the processing of applications. 

The FCC has proposed an application of $50 for amateur radio applications including new licenses, upgrades to license class, vanity call signs, requests for duplicate licenses and renewal applications.  The FCC specifically did not propose a fee for administrative updates, such as mailing address changes, because keeping the FCC informed about your current address is in the public interest.  The determination on administrative updates further states that the Commission is not bound to a "by transaction” flat fee, but instead, they can use other fee categories (such as renewals) to offset the costs of administrative updates.  The broadcast services also do not charge application fees for administrative updates.

The application fees proposed by the FCC are up and above any fee that is charged by a Volunteer Examiner Coordinator (VEC) to recover expenses associated with an examination.  While VEC fees are payable to the VEC or supporting club/group, the $50 fee is directly payable to the FCC, likely through their Fee Filer system and must be paid either by credit/debit card, electronic clearing house (with a routing code and checking account number) or wire transfer.

My look through the ULS data here at REC from the calendar year 2019 shows that there were 131,347 applications filed in the ARS, including administrative updates.  Of those applications, 102,772 would be eligible for a fee.  At $50 per application, this would mean that the FCC would have collected over $5.1 million, just in application fees.

This draws the big question from me.  When you consider that out of 131,347 ARS applications filed in 2019, only 2,982 of them were “offlined”, or otherwise fell out for FCC staff manual interaction and research, while the remaining applications flowed through either through applicant entry into the Universal License System (ULS) or sent to ULS through bulk data files provided by the VECs; does this overall cost to the FCC for the processing of ARS applications really reach anywhere near $5 million per year?  I have a hard time buying that argument. 

With that said, what would be the threshold for the cost of collection?  We already know its more than $14 (vanity call signs).  Also, is this item averaged considering that the costs per transaction would vary.  For examples, it may be less expensive for the FCC to handle a debit card payment than it would for a wire transfer.  Let’s say for the sake of this argument, that threshold is $20.  This means that if the application costs are more than $20, then the $20 average expense for collections is then added on.  If the actual processing costs are less than the threshold collection cost, then the fee is then waived, and nothing is collected. 

This is a two-edged sword. Licensed radio amateurs are FCC consumers, I think that is a point we all can agree on.  At the same time, the ARS is the Commission’s only true technical education initiative that encourages everyday citizens to gain knowledge in science, technology, engineering and math (STEM) subjects to be applied outside of a commercial environment in order to help their community and/or promote international goodwill.  The ARS reaches people, from all walks of life, all genders and all ages.  

In preparing REC’s comments for MD Docket 02-270, I have been reviewing the potential costs that the FCC could incur on applications based on certain situations, such as a flow through application, which comes in at less than a dollar per application to applications that require paper to be sent (such as duplicate licenses) and those that are otherwise offlined (including administrative updates, which are always offlined if a legal name change is involved) costing anywhere from $10 to $65 depending on the extent of the work that is done and whether any “paper” has to be mailed out.

If we use these actual costs and then aggregate them between all proposed feeable application types with no upward adjustment for any specific application type, we would have an average fee of $2.67 per application (this is based on my estimate of how much the average ARS application costs the FCC to process).  As we saw with the recent changes in vanity call signs and what I had earlier mentioned, the cost of collection outweighs the cost of the fee and therefore, the FCC has the judgment to not charge application fees from ARS users.  The costs incurred still has to come from somewhere.  Therefore, they would be subsidized by other commercial consumers of the FCC Wireless Telecommunications Bureau, some of which, hire those with technical skills and hold an ARS license.  Even if we used a “self-funding” cost for duplicate licenses (at about $10.35 per transaction), we still are in a situation where the collection costs are still higher than the fee.

The FCC needs to come forward with how they (indirectly) determined that it costs over $5 million to administrate application transactions in the ARS, especially in light of the high number of “flow through” applications that are filed.  The FCC does state in their NPRM that the maintenance of the ULS is a part of that $50 fee.  We highly doubt that it costs the FCC to receive an application, flow it through ULS, “offline” it if necessary and then issue an authorization without actually mailing it. 

Going back to the STEM subject, it is not just in the public interest to waive filing fees on administrative updates because that helps the FCC in their work, but it is also in the public interest to remove barriers to demonstrating their skills through the various ARS examinations at Technician, General and Amateur Extra class levels.  A candidate who takes their examinations through Laurel VEC will never have to pay a dime in today’s environment.  With that, we should exclude applications for new licenses and modifications (except those requesting vanity call signs) from fees and have other transactions such as duplicate licenses, vanity call signs and renewals subsidize all of the applications filed in the ARS. 

If we limit fees to those categories, this would mean that in 2019, there were 89,739 applications eligible for a fee.  Now, based on the actual overall expense incurred by the FCC for all ARS applications (not including collections), this is what kind of FCC expense is necessary to reach certain fee levels:

FCC Expense to process only ARS applications

Subsidy per feeable application

Collections cost

Rounded application fee

$500,000

$5.57

$20.00

None

$1,000,000

$11.14

$20.00

None

$1,500,000

$16.72

$20.00

None

$1,794,000

$19.99

$20.00

None

$1,795,000

$20.00

$20.00

$40

$2,000,000

$22.28

$20.00

$40

$2,500,000

$27.85

$20.00

$50

$3,000,000

$33.43

$20.00

$55

$4,000,000

$44.57

$20.00

$65

$5,000,000

$55.72

$20.00

$75

So, with only charging fees on renewals, vanity call signs and duplicate licenses while continuing to recognize new hams and those who upgrade, the Commission has to spend at least $1,795,000 in ARS application processing in order to justify a fee (again, based on the assumption that it costs $20 to collect fees).

If we were to not waive the fees for new hams and upgrades (as the FCC had proposed), this is what we are looking at (102,772 feeable applications):

FCC Expense to process only ARS applications

Subsidy per feeable application

Collections cost

Rounded application fee

$500,000

$4.86

$20.00

None

$1,000,000

$9.73

$20.00

None

$1,500,000

$14.59

$20.00

None

$2,000,000

$19.46

$20.00

None

$2,055,000

$20.00

$20.00

$40

$2,500,000

$24.33

$20.00

$45

$3,000,000

$29.19

$20.00

$50

$4,000,000

$38.92

$20.00

$60

$5,000,000

$46.65

$20.00

$65

If new hams and upgrades are also charged, then the Commission needs to be spending at least $2,055,000 on amateur radio application processing in order to justify even a $40 fee.  This would mean in order for the Commission to collect any fees on the ARS, the costs to the Commission for processing and collections combined is at least $4.1 million.   I find it hard to believe the FCC spends $4.1M on ham radio applications.

I am not sure what it will take to get a straight answer out of the FCC on this issue, but as this proceeding becomes more ripe after publication in the Federal Register, I plan to make at least one ex parte presentation round on this issue.  A Freedom of Information Act (FOIA) request may be necessary to get the information we need to determine what the Commission’s actual expense is on an application and on collections.

Should hams pay their share?  Yes.  However, new hams and those going through the upgrading process should not be penalized for their achievements.  By those who have been active for at least 10 years, they have well established themselves and therefore a reasonable fee between $40~70 for another 10-year extension on the license is justified.  Those who want “extras” like duplicate licenses, especially when they can go online and get one for free or they need it for international travel; as well as those who want a vanity call sign should also subsidize the promotion of new blood to the hobby as well as encourage those who are licensed to expand their skills and reach for the next level.

Depending on how much the FCC really spends on ham radio applications, I would support a fee only for renewals, duplicate licenses and vanity call signs with the proceeds from those fees subsidizing all amateur application expenses.

73 de KU3N

 

QUESTIONS AND MYTH CONTROL

Does the money collected go to enforcement of ham radio rules?
Ongoing enforcement is funded through the appropriation that the legislation makes to the FCC, which for FY 2020 is $339 million.  These funds are recovered by FCC consumers through the use of regulatory fees and amateur radio is statutorily exempt from regulatory fees.  Just because ham radio is exempt from regulatory fees, they are not excluded from reaping the benefits from FCC operations.

Since ham radio is not done for profit, wouldn’t it be considered “noncommercial educational”, which is exempt in the RAYBAUMS Act?
The Noncommercial Educational (NCE) designation is given radio and TV broadcast stations in accordance with Section 397(6) of the Communications Act that defines an NCE station as a “noncommercial educational educational radio or television station which is owned and operated by a public agency, or nonprofit private foundation, corporation or association.”  Ham radio is normally licensed to individuals and are not considered as NCE broadcast stations.

Why not just make the license for a lifetime?
An Amateur Radio license is actually two licenses.  It is an operator license and a station license.  If it was just considered an operator license, then lifetime licenses would be no problem but because of provisions in the Communication Act, station licenses are limited to a certain term and must be renewed.

This is just a way for the FCC (or Ajit Pai) to kill ham radio so they can auction off the spectrum.
I can’t buy that and also, you can’t blame the FCC for this.  The folks at the FCC are hard working career folks who take their orders from the Commissioners.  The Commission itself is at the will of Congress and they delegate specific authorities on the FCC.  RAYBAUMS came out of Congress, not from the 8th floor of the old FCC building.

Where do you think the ARRL will lean on this?
I think they will want no fees at all.  In order to do that, they need to justify that, they would need to demonstrate that the FCC spends less than $4.1 million on processing amateur applications and collecting fees.  If fees are justified based on actual WTB spending, then I hope they follow my lead to exempt new hams and upgrades while having renewals, duplicate requests and vanity call signs subsidize the costs of processing all ARS applications.

Where do you think the Commissioners stand on this specific issue?
I feel that Rosenworcel and Starks truly care about STEM education.  I will need to back and read previous remarks and speeches from Pai and Carr. I don’t think O’Reilly really cares about this at all, either way.  All we need is three Commissioners to turn this.  Therefore, we need to make sure this remains a nonpartisan issue because we may need help from both sides for this one.

In the event that Biden wins in November, could that be a turning point on the outcome of this?
I don’t think it will at all.  I don’t think this is a Republican vs. Democrat issue. I do feel that a Democratic Commission may be more welcoming to expanding educational programs, especially STEM and even more especially directed towards women and girls.  But, I do think that a Republican majority in the Commission is just as capable of supporting young people entering STEM and therefore could be receptive to assuring as easy as a process as possible for people to enter the hobby.  This is good for America.  STEM should not be a political football.  Let’s keep the Biden vs. Trump debate out of this.  It really has no place here.