<DOC>
[106th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:65904.wais]
A REVIEW OF THE FCC's SPECTRUM POLICIES FOR THE 21st CENTURY AND H.R.
4758, THE SPECTRUM RESOURCE ASSURANCE ACT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TELECOMMUNICATIONS,
TRADE, AND CONSUMER PROTECTION
of the
COMMITTEE ON COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
JULY 19, 2000
__________
Serial No. 106-142
__________
Printed for the use of the Committee on Commerce
------------------------------
U.S. GOVERNMENT PRINTING OFFICE
65-904 CC WASHINGTON : 2000
COMMITTEE ON COMMERCE
TOM BLILEY, Virginia, Chairman
W.J. ``BILLY'' TAUZIN, Louisiana JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas RALPH M. HALL, Texas
FRED UPTON, Michigan RICK BOUCHER, Virginia
CLIFF STEARNS, Florida EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio FRANK PALLONE, Jr., New Jersey
Vice Chairman SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania BART GORDON, Tennessee
CHRISTOPHER COX, California PETER DEUTSCH, Florida
NATHAN DEAL, Georgia BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma ANNA G. ESHOO, California
RICHARD BURR, North Carolina RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California BART STUPAK, Michigan
ED WHITFIELD, Kentucky ELIOT L. ENGEL, New York
GREG GANSKE, Iowa TOM SAWYER, Ohio
CHARLIE NORWOOD, Georgia ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma GENE GREEN, Texas
RICK LAZIO, New York KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming TED STRICKLAND, Ohio
JAMES E. ROGAN, California DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING,
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland
James E. Derderian, Chief of Staff
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Telecommunications, Trade, and Consumer Protection
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL G. OXLEY, Ohio, EDWARD J. MARKEY, Massachusetts
Vice Chairman RICK BOUCHER, Virginia
CLIFF STEARNS, Florida BART GORDON, Tennessee
PAUL E. GILLMOR, Ohio BOBBY L. RUSH, Illinois
CHRISTOPHER COX, California ANNA G. ESHOO, California
NATHAN DEAL, Georgia ELIOT L. ENGEL, New York
STEVE LARGENT, Oklahoma ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming BILL LUTHER, Minnesota
JAMES E. ROGAN, California RON KLINK, Pennsylvania
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi JOHN D. DINGELL, Michigan,
VITO FOSSELLA, New York (Ex Officio)
ROY BLUNT, Missouri
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Baca, Rudy L., Global Strategist, Precursor Group............ 85
Gutknecht, Hon. Gil, a Representative in Congress from the
State of Minnesota......................................... 16
Kelley, Mark, Chief Technology Officer, Leap Communications
International.............................................. 88
Lee, Hon. Malcolm R., Assistant Deputy Secretary, Department
of State................................................... 42
Nethercutt, Hon. George R., Jr., a Representative in Congress
from the State of Washington............................... 14
Rohde, Hon. Gregory L., Assistant Secretary, Department of
Commerce................................................... 22
Smith, Craig M., Vice President, Strategic Planning, SBC
Wireless................................................... 73
Strigl, Dennis F., President and Chief Executive Officer,
Verizon Wireless........................................... 79
Sugrue, Thomas J., Chief, Wireless Telecommunications Bureau,
Federal Communications Commission; accompanied by Dale N.
Hatfield, Chief, Office of Engineering and Technology,
Federal Communications Commission.......................... 34
Material submitted for the record by:
Flanigan, Matthew J., President, Telecommunications Industry
Association, prepared statement of......................... 101
Hatfield, Dale N., Chief, Office of Engineering and
Technology, Federal Communications Commission, letter dated
August 25, 2000, enclosing response for the record......... 111
Wolley, Howard, Vice President, Federal Relations, Verizon
Wireless, letter dated July 28, 2000, enclosing response
for the record............................................. 104
(iii)
A REVIEW OF THE FCC's SPECTRUM POLICIES FOR THE 21st CENTURY AND H.R.
4758, THE SPECTRUM RESOURCE ASSURANCE ACT
----------
WEDNESDAY, JULY 19, 2000
House of Representatives,
Committee on Commerce,
Subcommittee on Telecommunications,
Trade, and Consumer Protection,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:05 a.m. in
room 2322, Rayburn House Office Building, Hon. W.J. ``Billy''
Tauzin (chairman) presiding.
Members present: Representatives Tauzin, Oxley, Stearns,
Cox, Largent, Shimkus, Pickering, Markey, Boucher, Rush, Wynn,
Luther, Sawyer, Green, McCarthy, and Dingell (ex officio).
Also present: Representative Bilbray.
Staff present: Mike O'Rielly, majority staff; Cliff Riccio,
legislative analyst; and Andy Levin, minority counsel.
Mr. Tauzin. The hearing will come to order.
We want to ask the first panel if they would kindly take
their seats this morning. Let me first welcome you all to this
long-awaited spectrum management policy hearing, which I like
to refer to as the U.S. spectrum policy blueprint for the 21st
Century.
We will hear today from two panels of distinguished
experts, one representing the government and the public sector
and one representing the private sector.
Our panelists, I am assured, are prepared to comment on a
wide array of spectrum issues, ranging from those that have
global important to those that are quite local in scope.
Nonetheless, all of the issues should and will be addressed
together today because they essentially raise the same policy
consideration, that is, how do we reconstruct our domestic and
international spectrum management policies to ensure that our
commercial and that our public spectrums, resources that
frankly grow more scarce every day, are allocated as
efficaciously as possible.
On the domestic front, of course, Congressman Gutknecht and
Nethercutt are going to address today the FCC's unfortunate
treatment of certain long-standing licenses issued to operate
on the 1427 to 1432 MHz band. I want to applaud them for their
leadership on this issue.
I have some questions regarding this situation and I have a
few questions today for the FCC about its rules prohibiting the
warehousing of KA band spectrum slots that may be hindering the
broader deployment of broadband services to rural and
underserved areas of the United States.
This is also a legislative hearing on H.R. 4758, which is a
bill introduced by Cliff Stearns which lifts the FCC's
artificially imposed spectrum caps for future auctions.
I am an original co-sponsor of this legislation and I
believe it could provide some relief in the immediate future in
terms of helping our American spectrum managers find available
bands for the rural and Third Generation wireless services.
I might add an area of communications development where the
United States, I believe, woefully lags the rest of the world.
Also, the upcoming 700-MHz auction is quickly approaching.
It appears that there have been many complications surrounding
the band-clearing plan for Channels 60 to 69.
In light of the complicated issues surrounding the
transition to digital television, it is still very much in
question whether broadcasters providing analog services within
Channel 60 to 69 today will be able to vacate these channels
even by the year 2006.
We are going to have hearings very shortly on the issue of
the digital transition. There are grave concerns that we are
well behind in that effort that was scheduled to be completed
by the year 2006.
Surely Congress never intended that viewer's analog signals
could be taken away from them before a digital signal is
available in most of our markets.
Consequently, there are so many issues that broadcasters,
old companies, design licenses in the 700 MHz band need to work
out before you rush to auction off the system.
Moreover, it doesn't make a whole lot of sense to me to
issue licenses now that may not vest any rights of possession
to the licensees for another 6 or more years. As I said before,
there is more to an auction than raising revenue for the
Federal Government.
I am inclined to agree with my colleague in the Senate,
Senator Domenici of New Mexico, who has indicated that it may
be more prudent to delay the 700-MHz auction for purposes of
clarifying the uses of the spectrum.
I simply do not believe that going forward with such an
auction to meet the September 30 target date for collection of
revenue, which I am now more convinced our government doesn't
obviously need would be in the public interest.
On the international front, the scheduling of this auction
management hearing could not come at a more opportune time with
the recent June 2 conclusion of the International
Telecommunications World Radio Conference.
At the Global Spectrum Summit held in Istanbul, spectrum
managers from all over the world formulated future spectrum
allocation plans that will have a very dramatic impact on the
U.S. economy and the Congress should therefore thoroughly
review the impact of these plans.
Discussions on WRC-2000, which included over 160 nations,
verify the need for additional spectrum for international
mobile telecommunications and reaffirm the need to identify
potential bands worldwide to accommodate the growing demand for
Third Generation services, commonly referred to as 3-G.
Third Generation wireless services include enhanced voice,
video, Internet and other broadband capabilities using wireless
spectrum.
While the U.S. is just beginning to study potential
spectrum availability for 3-G services, much of the world,
especially Europe and Asia, is rapidly moving forward with
licensing, deployment of these 3-G capabilities.
International carriers are capturing a greater share of the
marketplace by providing advanced mobile services. In the U.S.
it has become painfully evident that there is no long-term
spectrum management plan for deployment of 3-G and advanced
services.
Personally, I am concerned that we have fallen well behind
Asia and Europe in the deployment of these new wireless
technologies.
Some have suggested that the rest of the world has
recognized the U.S. dominance in the e-commerce arena and the
only way the rest of the world can counter is by leap-frogging
the U.S. technology by putting low-cost, handheld Internet
computing devises in the possession of their entrepreneurs.
We know there is no simple solution. The wireless spectrum
allocation decisions are inter-dependent upon spectrum uses.
I hope we can learn more about the requisite studies and
reallocation process that need to occur if we are going to
implement 3-G in the U.S. in the very near future.
While telecommunications has been a substantial contributor
to the high tech revolution that has kept our economy growing,
wireless telecommunications is a vital part of the economy.
The wireless industry has demonstrated that competition has
driven the provision of new services and falling prices for
American consumers.
It is essential for the continued expansion of the U.S.
economy that a well-planned, well-perceived and well-conceived
spectrum management policy become the blueprint to fulfill U.S.
spectrum needs.
Now is the time to begin the process specifying how and
when Third Generation can be made domestically available on a
going-forward basis.
Failure to keep pace with world allocation and failure to
harmonize U.S. spectrum allocation with the rest of the world
will no doubt harm U.S. consumers, U.S. manufacturers and U.S.
service providers.
So this is a very important hearing and we look forward to
the testimony of both of these very important panels.
The Chair now yields to my friend, the ranking minority
member from Massachusetts, Mr. Markey, for an opening
statement.
Mr. Markey. Thank you, Mr. Chairman, very much. I would
like to commend you for calling this hearing this morning on
various spectrum related issues, including legislation that
proposes to remove the so-called spectrum cap.
As we know, spectrum at any given time is a finite
resource. We also know that every company currently utilizing
the spectrum or hoping to harness the airwaves in the future
for their new gadget, regardless of its particular application,
all have one thing in common: They all want more spectrum.
Because we obviously cannot accede to the requests of all
companies and all industries and all technologies at the same
time, we are forced to ration use of the spectrum.
The FCC is tasked, in coordination with NTIA to manage use
of spectrum resources and to allocate and assign airwave
frequencies so that we derive the maximum benefit for the
American public. This is not an easy job.
Yet, NTIA and the FCC have performed this job in a way that
today provides Americans with the most competitive, most
innovative wireless markets in the world.
Without question, wireless consumers increasingly enjoy the
benefits of a concerted policy articulated by both the Congress
and the FCC to ensure a competitive marketplace for wireless
goods and services.
Today, more wireless consumers have five or more wireless
carriers to choose from. The result of adding competition to
the original cellular duopoly has been a dramatic lowering of
prices and an acceleration of the introduction of innovative
pricing plans and wireless products.
Our success in adding competition has its roots in the
FCC's eligibility rules for obtaining new wireless licenses and
in the spectrum cap, which is designed to prevent licensees
from obtaining an unhealthy consolidation of the public
spectrum resources in individual markets.
In short, the spectrum cap set today at 45 MHz in major
markets and 55 MHz in rural markets ensures that there will be
at least four competitors in each area.
Given the palpable benefits that the spectrum cap policy
has achieved for American consumers, I do not believe it is
wise at this time to remove it.
New spectrum sharing technologies or sophisticated
compression techniques will allow companies to wring more
efficiency out of what they currently have.
In addition, increased investments in infrastructure such
as additional cell sites can help alleviate congestion in
isolated instances.
On their existing frequencies, wireless companies will be
able to roll out new web-based services, indeed many are doing
so today. Retention of the spectrum cap will permit such
advances while simultaneously maintaining the competitive gains
we have thus far painstakingly secured for consumers.
Moreover, in the aftermath of the recent World Radio
Conference in Istanbul the United States must now full assess
the frequencies identified at Istanbul in order to ascertain
whether additional spectrum could or should be made available
for so-called 3-G services.
If such additional spectrum is allocated for 3-G services
in the future, then it would be appropriate at that time to
examine adjusting the spectrum cap.
I strongly believe, however, that any such future
adjustments in the cap should only be made if we retain the
competitive marketplace structure that exists today.
Again, I want to thank you, Mr. Chairman, for calling this
hearing. I look forward to hearing from our witnesses.
Mr. Tauzin. I thank my friend.
The Chair is now pleased to recognize the author of the
very wise legislation that is before this subcommittee today,
my friend from Florida, Mr. Cliff Stearns.
Mr. Stearns. I also want to commend you for this hearing
and also for your cogent opening statement on my legislation.
I want to thank the folks that have co-sponsored my bill,
particularly yourself, Mr. Chairman, Mr. Oxley, Mr. Deal, Mr.
Ehrlich and of course, Mr. Rogan and Mr. Boucher.
I look forward to the witnesses.
With the conclusion of the International Telecommunication
Union's World Radio Conference recent assembly and new rounds
of spectrum auctions around the corner, this is a very timely
and important hearing into over spectrum policies and
management issues.
Mr. Chairman, the wireless industry is perhaps the most
dynamic sector of telecommunications today. It is an exciting
time. Practically every day I read or hear about some wireless
innovation that will make our lives a little easier, more
exciting.
But as everyone knows, the spectrum is getting more scarce
and most costly than it was a few years ago. One of the
pressing goals of the World Radio Conference was to allocate
spectrum for Third Generation wireless, 3-G, and establish
international spectrum use, thereby reducing disputes over both
domestic and international use of spectrum.
However, the administration may have missed the opportunity
to harmonize spectrum uses to assure that as wireless
innovators are given access to spectrum, such access does not
frustrate existing users, particularly when it comes to public
safety and national security.
Therefore, I am interested to hear Assistant Secretary
Rohde's testimony and what plans the administration has to
assure efficient spectrum use while allowing innovation to
flourish.
While Secretary Rohde and Ambassador Shutler are to be
commended for their tireless efforts in furthering the United
States spectrum needs, the Federal Communications Commission
Wireless Bureau deserves an equal amount of credit.
While Congress deliberates streamlining and reforming the
FCC, the Wireless Bureau under the direction of the Bureau
Chief, Tom Sugrue, is to be commended for reducing by 99
percent the number of items that have been pending at the
Bureau for a year or more.
This illustrates the Wireless Bureau is capable and can be
trusted to properly execute one of its core functions.
However, Mr. Chairman, I disagree with the policies and
direction of the Commission on spectrum management,
particularly spectrum limits and auctions.
While the FCC had the foresight not to impose spectrum caps
on the upcoming 700-MHz auction of Channels 60 through 69, I do
have some concerns that rushing to start the auctions in
September will result in a spectrum train wreck waiting to
happen, ultimately causing more harm than good to the wireless
marketplace.
For starters, spectrum to be auctioned may not even be
available by 2006 and there is no clear process to determine
how much or when the incumbent broadcasters will clear the
spectrum.
Additionally, the FCC even lacks the authority to ensure
the incumbent broadcasters vacate the spectrum in a timely
manner.
This uncertainty by the bidders will surely mean the U.S.
Treasury and the American taxpayer will be deprived of the true
value of this spectrum.
Congress needs to carefully examine and weigh the positives
and negatives of whether the auction should proceed as
scheduled or further delay the auction.
While the auctions are one of my concerns, the other is the
FCC's policy on continuing its spectrum cap of 45 MHz on
commercial mobile spectrum licenses.
That is the reason that I have introduced the bill, which
repeals the FCC spectrum cap on auctions conducted after the
first of this year.
It ensures, Mr. Chairman, that market forces rather than
regulations drive the wireless sector. Let me make clear for
the record that this legislation serves as a means to begin a
dialog and examination of our spectrum policies and I have
every intention to work with my colleagues and the witnesses
and industry representatives to improve this legislation.
Today the commercial wireless industry is the most
competitive sector of the United States telecommunication
marketplace. More than 94 million people use wireless phones in
the United States. Two hundred thirty eight million Americans
can now choose between three and seven wireless providers. More
than 88 million Americans can now choose from among six or more
wireless providers and 88 million Americans can chose among
five wireless providers.
While in the early years of commercial mobile services the
cap served as a means to ensure that competition thrived, the
current 45-MHz spectrum cap is beginning to impact innovation
and competition in the wireless industry.
Without sufficient spectrum, wireless carriers will soon
face increasing difficult in meeting the growing demand for
existing services, as well as face limited competition by
denying wireless providers access to open markets.
Consumers ultimately are denied the benefits that arise
from additional competition such as lower prices and innovative
services.
Furthermore, wireless providers have limited room for
advanced services such as data on their networks as they plan
for Third Generation, 3-G, services, which will include
enhanced voice, video, Internet and other broadband
capabilities.
The lack of spectrum threatens the ability to expand
current systems and entice new customers. Additionally,
continuation of the spectrum cap will result in the continued
lag of the United States companies behind Europe and Japan in
the deployment of wireless 3-G technologies.
To put the United States 45 MHz cap in perspective, Japan's
leading wireless carrier, DOCOMO, has 86 MHz of spectrum
everywhere in its country and in Britain most companies operate
with a 90 MHz spectrum allocation cap.
I have a chart here, which illustrates what I just
mentioned. The U.S. is dwarfed internationally as compared to
Japan, Britain or even Argentina in allowing spectrum
allocations.
In fact, many countries, including Australia, Brazil,
Korea, the Philippines, Singapore, Taiwan and Venezuela don't
even have a spectrum cap.
So, Mr. Chairman, the spectrum cap was originally adopted
in order to prevent the concentration of control over spectrum
in too few hands. But with competition in the provision of
wireless services now a reality, rigid structural regulations
such as a spectrum cap are no longer necessary to ensure a
robust wireless marketplace.
Commissioner Michael Powell in the 1998 biennial review of
spectrum caps stated, ``I cannot imagine any other industry
segment that can better laud their state of economic
competition as meaningful.''
Furthermore, the anti-trust agency's review of mergers
between wireless carriers is sufficient to prevent undue market
competition by wireless carriers even in the absence of the
market cap.
Commissioner Powell, who once served as an anti-trust
attorney at the Department of Justice furthermore stated, ``I
think the barriers to reconsolidation are pretty high.''
Finally, this legislation I am offering prevents the FCC
from imposing the commercial mobile radio service spectrum cap
on spectrum auction after January 1, 2000. It does not repeal
the current spectrum cap on CMRS spectrum or lift the cap on
spectrum that has already been auctioned.
I think this legislation is timely to ensure innovation and
competition in this country and I thank you again for holding
this hearing.
Mr. Tauzin. The Chair thanks the gentleman.
The Chair is pleased now to welcome and recognize the
ranking minority member of the full community, the gentleman
from Michigan, Mr. Dingell, for an opening statement.
Mr. Dingell. Mr. Chairman, first of all, thank you for
recognizing me. Second of all, thank you for holding the
hearing.
The Federal Communications Commission was established
nearly 70 years ago. The primary purpose of that agency at that
time and today, too, is managing the public spectrum. In my
view, that duty remains the most important function of the
Commission to this very day.
Unfortunately, the FCC needs, at times, to be reminded of
where its priorities lie. Instead of focusing here on making
sure that services are delivered to the public in the most
efficient and timely manner with competition and other virtues
that would be helpful to the consumer, the agency not
infrequently strays from its core mission to pursue some other
agenda. At this time I do not know what that agenda might be.
For example, this community has repeatedly advised the
commission to take steps to avert what has become known very
widely as the C-block debacle.
The advice of the community was largely ignored by the
agency. The FCC issued C-block licenses after protracted delay,
causing untenable financial difficulties to the bidders.
The debt restructuring plan eventually adopted by the FCC
was too little, too late, and wholly unworkable. Many companies
that had bid on these licenses found themselves with few
alternatives but to seek Federal bankruptcy protection,
something which has complicated the situation and which has
delayed the entire handling of the matter.
Why is this important? We would not be holding this hearing
today on H.R. 4758, a bill dealing with the application of
spectrum caps to the re-auction of C-block licenses if these
companies were actually competing in the marketplace.
We would than have 4 to 6 competitors in every market. The
United States would be well on its way to achieving wireless
substitution for landline service, as is the case in many other
countries around the world.
You may draw from that statement that we are falling behind
other countries because of the behavior of the FCC. The
commission, however, still has the opportunity to adopt a pro-
competitive, pro-consumer plan with respect to most of these C-
block licenses.
But, as usual, it stubbornly refuses to do so for reasons
that quite frankly are beyond my comprehension. The FCC could
simply accept full payment of nearly $5 billion from the
largest C-block licensee.
This additional competitor would immediately begin
providing service in countless markets throughout the country.
Instead, the commission wrong-headedly insists on re-auctioning
these licenses, in large part to incumbent wireless companies
in existing markets. By definition, this means less
competition, higher prices and poorer service for consumers.
If the spectrum cap is eliminated as proposed here,
incumbents would bid on all the re-auctioned spectrum making a
bad situation still worse and reducing the level of competition
and service available to consumers as well as potentially
reducing the value of the sale to the taxpayers. We will hear
much today about the need for incumbent providers to get access
to more spectrum. Perhaps that is so. I do not question either
the arguments nor the motives. I think it is perfectly
reasonable to devote more spectrum for commercial mobile
service in the light of exponential growth and demand as well
as future rollout of so-called Third Generation services. In
fact, I support the allocation of new spectrum for this purpose
as well as the commensurate increase in the spectrum cap when
this new spectrum is auctioned off.
However, additional spectrum should not be made available
to incumbents by taking it from everyone would-be competitors,
particularly those who are already licensed but not operating
in the band. This action would clearly be contrary to the
public interest and would certainly cause a significant loss of
competition. Not only would it reduce the number of competitors
in the market, but it would actually cause further delay in the
rollout of new services.
It also would raise questions as to the value of sales by
the FCC with consequent losses of money to taxpayers.
Because most of the C-block licenses the FCC wants to re-
auction are currently embroiled in litigation, the high bidder
in any re-auction would most certainly be precluded from
occupying the spectrum for a substantial period of time.
Even if potential bidders were willing to assume this risk,
the public would be precluded from receiving the benefits of
additional capacity until the courts lift the cloud over its
title.
I would note to all that this could take years to resolve
and during the time that we wander in this quagmire service
will not be made available to the consuming public and we won't
have the vaguest idea of who will get the spectrum or who will
get to use it and how the service will be made available to
consumers.
The agency still has an opportunity to settle the
litigation once and for all. It can do the simple, intelligent
thing, accept nearly $5 billion on behalf of the U.S.
taxpayers, watch these licenses go to work as early as tomorrow
for the benefit of American consumers to increase competition
and very frankly to serve the public interest.
Or, the commission can, as it appears to be determined to
do, opt for protracted litigation, a cloud over the re-auction,
and fewer competitors in the market, a delay in service rollout
and probably a loss in money for the taxpayers.
It would appear that the commission should spend more time
in managing the spectrum for the public benefit and less time
in Federal court.
Thank you, Mr. Chairman.
Mr. Tauzin. The Chair thanks the gentleman.
The Chair wishes to associate itself with the gentleman's
comments regarding the C-block auction. I think they are
awfully cogent and well placed.
I hope the commission begins to pay some attention to that
kind of logic. It makes awfully good sense.
Mr. Dingell. We share that hope.
Mr. Tauzin. We certainly do.
The Chair will recognize the vice chairman of the
committee, Mr. Oxley from Ohio.
Mr. Oxley. Thank you, Mr. Chairman. Let me welcome our good
friends and colleagues, Mr. George Nethercutt and Gil Gutknecht
as well as Greg Rohde and Tom Sugrue. Neither one of them are
strangers to the committee, particularly. We are glad to have
you here.
I sponsored the spectrum auction legislation back in the
1980's and for a while there I thought I was a lonely voice,
indeed I was a lonely voice in the wilderness.
Finally, in 1993, we struck pay dirt and passed the first
spectrum auctions of the radio spectrum and indeed produced
tens of billions of dollars for the public treasury, something
that all of us in this committee should be very proud that we
were able to accomplish.
It wasn't easy, but I think the success of the auctions
over the years have been obvious to everybody concerned in
terms of dollars raised and in terms of fairly allocating a
valuable public resource.
As a frequent critic of the FCC, it is only fair that I
commend the FCC for its management of the bidding process,
particularly the first round, I thought, went extremely well.
It was very well managed and in a situation that nobody had
ever had a opportunity to participate in before.
From my discussions and witnessing the auctions firsthand,
I have to give a great deal of credit to the FCC and the staff
for what they were able to do. All of us as taxpayers and
consumers are benefiting from those decisions.
But spectrum auctions and spectrum management are about
more than just money, although that is obviously one heck of an
important component, particularly in the lean years when we had
massive budget deficits.
Spectrum policy is also about things such as promoting the
deployment of new technologies, protecting public safety,
managing interference, and coordinating with international
bodies.
So as I said, I am pleased that we hold today's hearing to
examine these issues, all of which are quite current, and
particularly as a co-sponsor of the gentleman from Florida, Mr.
Stearns' legislation to lift the caps on the amount of new
spectrum providers may purchase at auction, I do believe that
the existing caps could hinder the timely deployment of Third
Generation wireless services in some markets, much to the
detriment of our economic expansion, much to the detriment of
new technologies, much to the detriment of consumer choice.
So I am pleased to associate myself with the remarks of the
gentleman from Florida and to commend him for his legislation.
That is why I am proud to be a co-sponsor.
I am looking forward to a lively discussions on these and
other issues. With that, I yield back.
Mr. Tauzin. The Chair thanks the gentleman The Chair
recognizes the gentleman from Ohio, Mr. Sawyer, for an opening
statement.
Mr. Sawyer. Thank you, Mr. Chairman. Thank you for this
hearing. It is a pleasure to welcome our witnesses,
particularly George and Gil, to the committee.
The subject we are here to talk about today is important.
The May 2000 World Radio Conference was a great success.
Specifically the U.S. was able to identify three additional
bands of spectrum for 3-G allocation.
This additional spectrum is anticipated to meet the
forecasted growth of traffic and services that will outstrip
the capacity of spectrum identified in 1992. After the success
of the conference, it is time to begin the process of
identifying and specifying how and when additional 3-G spectrum
can be made available domestically.
While some European countries in Japan are expected to
begin deployment as early as 2001. U.S. wireless industry does
not anticipate 3-G deployment until around 2003.
Failure to keep pace with world allocation and failure to
reconcile U.S. spectrum allocation with the rest of the world
will harm U.S. consumers, manufacturers and service providers.
There are a lot of problems and roadblocks associated with
U.S. allocation of the three additional bands because much of
the spectrum set aside is already being used.
For example, the 1755 to 1850 MHz band is currently
allocated in the United States for exclusive government use.
While the European Union would like that spectrum to be
allocated for 3-G services in the U.S., some Federal agencies,
particularly the Department of Defense are concerned that any
3-G services that are licensed in the band could interfere with
existing DOD communications.
I also understand that much of the spectrum to be allocated
in the next spectrum auction scheduled for September is already
used by television stations.
I would really be interested in hearing today from NTIA and
FCC regarding the effects of high-density mobile and fixed
systems and their impact on existing planned communication
systems and some of the additional frequency bands identified
at the conference.
I am also interested in hearing today from the FCC
regarding spectrum caps. These caps have caused network
congestion and extended busy signals or delays. They have been
routinely criticized by many communications providers as
preventing the growth and innovation of existing wireless
networks and systems.
Mr. Stearns' bill is one approach to deal with those
problems. I understand there may also be technological
approaches that would be just as effective.
I look forward to a candid discussions with the FCC on the
full range of options. There are many of us who are on the
committee who a friend of Elmore Brock, the Chairman of the
European Union Foreign Affairs Committee. He joined us in
Tucson earlier this year and as we drove the airport together
he pulled out his telephone and began a conversation in German.
It went on for 4 or 5 minutes. When he got done he closed his
phone and he looked at me and said, ``I was conducting a live
radio interview in Germany with some of the editors of my
newspapers.''
He said, ``They thought I was there.''
He said, ``Can you do that with your phone?''
I said I didn't think I could.
He said, ``Wait until you see what we are going to be able
to do next year.''
I just hope that American consumers will have the
opportunity to do the same thing that Elmore Brock does as a
matter of ordinary conduct of business.
Finally, let me say, Mr. Chairman, that I think you are
right to note that despite the fact that Mr. Oxley is regularly
credited with putting us over the top in terms of balancing the
Federal budget, that spectrum allocation should not drive
fiscal policy, but it is also important to understand that
fiscal policy should not drive spectrum allocation.
With that, I yield back the balance of my time.
Mr. Tauzin. I thank my friend. I would like to point out
that we can do that with some of our phones. We just can't do
it in German.
The Chair yields to my friend from Oklahoma, Mr. Largent.
Mr. Largent. Thank you, Mr. Chairman. I have no questions
at this time.
Mr. Tauzin. Mr. Wynn from Maryland is recognized.
Mr. Wynn. Thank you, Mr. Chairman. I don't have a formal
opening statement. I just want to express a concern that I have
or more of an inquiry. As we talk about spectrum management, I
hope we do not focus exclusively on the role of the FCC, but we
also focus on the management by the companies.
I have been advised that some companies that are managing
their spectrum are saying that they actually have adequate
amounts of spectrum at this point while others are saying that
as a result of tremendous demand that they need to have the
caps lifted.
I have not reached a conclusion on this issue, but I did
find it interesting that there is apparently some different of
opinion within the industry on this issue.
The second issue that I had an interest in was the notion
of the designated entity. I think it was initially designed to
bring new entrants and diversity.
I would like to know more about who these companies are and
whether in fact that goal is in fact being achieved, if these
are in fact companies that reflect diversity or whether they
are just companies who would be natural competitors and whether
or not the designated entity notion really has any meaning
today.
So I hope that those issues will be reflected in the course
of today's hearing. Thank you.
Mr. Tauzin. I thank the gentleman. Are there any further
requests for opening statements? The gentleman from Chicago is
recognized.
Mr. Rush. Thank you, Mr. Chairman. Mr. Chairman, I commend
you on this hearings that you are holding this morning. As
technology continues to develop at a fast pace, Americans are
becoming more savvy in the field of technology and are
demanding high-speed data.
The ability to download information, music and videos, from
the Internet onto their wireless phone is becoming the accepted
norm.
However, many technology companies are unable to meet this
norm or consumer demand because of the lack of spectrum.
Further, it is argued that many American companies are
unable to compete globally in the telecommunication market
because their foreign counterparts have access to more spectrum
than they do.
The availability of spectrum is thus a important issue that
must be dealt with delicately. It is suggested that one way to
deal with this issue is to repeal the spectrum cap, especially
in C- and F-block licenses.
However, I fervently and unequivocally oppose any proposal
to curtail the C-block licenses for designated entities. I
would like to caution my colleagues that any proposal to tinker
with the C-block licenses should not undermine the spirit of
those licenses, which is to provide diversity in the
communication field.
With that in mind, Mr. Chairman, I thank you again for
holding this hearing and I yield back the balance of my time.
Mr. Tauzin. I thank the gentleman. Are there further
requests?
Mr. Luther from Minnesota.
Mr. Luther. Thank you, Mr. Chairman. I just also wanted to
thank you for holding the hearing and wanted to recognize
Representative Gil Gutknecht, a fellow Minnesotan who came to
this body the same year as myself and I am pleased that he is
having the opportunity to testify here today. Thank you.
Mr. Tauzin. He gets a lot of respect from this committee, I
want you to know that. Thank you, Mr. Luther.
Are there any further requests for opening statements?
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. John Shimkus, a Representative in Congress
from the State of Illinois
Thank you Mr. Chairman for holding this very timely and important
hearing this morning on spectrum management policy.
With the explosion of wireless phone services--as well as other
services which require the use of radio frequencies--the demand for
spectrum, especially by telecommunications companies, has increased
dramatically.
In addition to the increase in wireless customers, is the trend for
people to stay on their wireless phones longer, and the roll out of
``3-G'' services that offers consumers broadband and multimedia
capabilities, which are serving as a even greater drain on spectrum. As
a result, the wireless companies are crying out for more spectrum.
In just a matter of just 2 short years, we have come upon an urgent
policy challenge. In order to maintain our competitive edge in the
wireless communications industry, the U.S. will have to deploy the most
efficient and effective spectrum management possible, as soon as
possible.
However, in this process it will be important to maintain the
delicate balance of competition that has developed in the wireless
industry which holds prices down and continues to drive technological
innovation.
I would like to thank our distinguished panel for being here today
to share their perspectives and expertise on how to best govern the use
of this scarce resource.
Thank you again Mr. Chairman for holding this hearing today.
I yield back.
______
Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
Mr. Chairman, thank you for calling this important hearing today.
Before I begin, let me take a moment to acknowledge the work of the
negotiators for the U.S. Government and the U.S. wireless industry for
their recent success at the 2000 World Radiocommunication Conference--
better known as WRC just held. All reports seem to indicate that this
process was fruitful. While not everything went our way, it seems that
the outcome was as a success.
The general subject matter for today's hearing is not new to this
Subcommittee. We have wrestled with spectrum management issues a number
of times since I have been Chairman and many times before.
In all that time, the Committee has generally tried to defer to the
FCC to provide guidance and sound spectrum policy. In fact, it is often
this Committee that is forced to fight with other Congressional
Committees to keep such policy on the right track. We have not always
succeeded at this task and certain poor policies are in place because
of others work.
Increasingly, however, it is the FCC's spectrum policies, decisions
and timing that are coming under necessary scrutiny. At heart of this
scrutiny is the fundamental issue of whether the FCC is prepared to
address spectrum needs for the foreseeable future. This Committee must
ask if the FCC's spectrum policy is flexible enough to deal with
tomorrow's issues, or if it looks back to yesterday.
Let me be plain. I believe that the wireless marketplace is about
as competitive as any other telecommunications market out there.
Approximately 100 million Americans now subscribe to one of the
multiple wireless providers. The number of wireless subscribers is
increasing at a dramatic rate.
As more consumers turn to wireless services, providers are being
forced to compete for consumers. And the consumer is reaping the
benefits of this competition. Low prices, low cost to obtain
telephones, myriad of service options to pick from, increasing services
and options are just a short list of benefits from competition.
Fortunately, the future looks even brighter. Wireless technologies
are improving daily. Their capabilities are surpassing past
achievements by leaps and bounds. Wireless telephones once focused on
voice communications are now being transformed into multimedia,
multipath communication devices.
However, popularity tends to lead to new problems. For the wireless
industry, this can mean congestion, stalled innovation or delayed roll-
outs. Success at WRC only starts another process for additional fights
for spectrum at the FCC.
Today's legislative hearing is focused on my friend from Florida,
Mr. Stearns' bill. While I need more time before commenting on the
merits, I do think that it is headed in the right direction. The old
rules of the FCC on spectrum caps need to be reexamined and if the FCC
is not going to change them, we must give serious consideration to
doing it ourselves. This is especially true given how the FCC has
handled spectrum caps for the 700 MHz auction.
In addition, today I hope to hear when the FCC and the NTIA plan to
complete studies necessary to allocate additional spectrum for so-
called third generation wireless--or 3G. This should be a priority
given the rest of the world's movement on 3G issues. Perhaps the
Committee needs to consider putting a statutory time limit on these
studies if answers are not sufficient or forthcoming.
I thank the witnesses in advance and look forward to the testimony.
I yield back my time.
Mr. Tauzin. The Chair would ask that all of us take a
moment of silence to recognize and mourn the passing of our
friend, Senator Coverdell. While you are doing so, I would ask
you also to think and pray for the passing of our good friend,
Mr. Markey's father, who he lost this weekend.
We will take a moment of silence.
(A moment of silence.)
Mr. Tauzin. Now we will present our first panel. We are
pleased and honored to have two of our fellow Members of the
House here to testify on important issues regarding spectrum
management.
From Washington State, the Honorable George Nethercutt,
Jr., and from Minnesota, as was recognized by Mr. Luther, the
Honorable Gil Gutknecht.
We are also pleased to recognize the Honorable Greg Rohde,
the Assistant Secretary of the Department of Commerce who
survived 10 years on the Hill with Senator Byron Dorgan. A
frequent contributor to our hearings, Tom Sugrue, the Chief of
the Wireless Telecommunications Bureau of the Federal
Communications Commission, Mr. Malcolm Lee, the Assistant
Deputy Secretary of the Department of State, and also Mr. Dale
N. Hatfield, Chief of the Office of Engineering and Technology
who is joining Tom Sugrue here today.
So we want to welcome our first panel and we thank you for
your contributions. Under our rules your written statements are
a part of our record without objection, as are the written
statements of the members without objection part of the record.
We will ask the members of the panel as well as the members
of the committee to recognize the 5-minute rule. We have some
timers to kind of guide you guys. If you please, watch those
timers. When they hit yellow, kind of start wrapping up for me.
We will begin with a dear friend from Washington State, the
Honorable George Nethercutt, Jr.
STATEMENTS OF HON. GEORGE R. NETHERCUTT, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF WASHINGTON; HON. GIL GUTKNECHT, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA; HON.
GREGORY L. ROHDE, ASSISTANT SECRETARY, DEPARTMENT OF COMMERCE;
THOMAS J. SUGRUE, CHIEF, WIRELESS TELECOMMUNICATIONS BUREAU,
FEDERAL COMMUNICATIONS COMMISSION; ACCOMPANIED BY DALE N.
HATFIELD, CHIEF, OFFICE OF ENGINEERING AND TECHNOLOGY, FEDERAL
COMMUNICATIONS COMMISSION; AND HON. MALCOLM R. LEE, ASSISTANT
DEPUTY SECRETARY, DEPARTMENT OF STATE
Mr. Nethercutt. Thank you, Mr. Chairman, and thanks to all
the members of the subcommittee for welcoming Congressman
Gutknecht and me to talk about this important issue today.
Mr. Chairman, I believe Congress has the obligation to
ensure that spectrum allocation proceeds in a fashion that does
not unfairly penalize incumbent users. Unfortunately in my
experience, recent FCC decisions have harmed small businesses
that rely on assured access to spectrum.
Little regard is given to licensed users that are wholly
dependent on spectrum and the committee should keep this in
mind as it reviews this area. I represent a company called
Itron from Spokane, Washington, which manufactures equipment
used by utility companies to remotely monitor individual
meters.
Itron has key operations in Washington, Minnesota, North
Carolina and customers throughout the United States. Many of
Itron's products rely on ERTs, Encoder-Receiver-Transmitters,
which link a customer's meter directly to the utility company
through radio signals.
These products greatly enhance the utility's ability to
monitor power usage down to 15 minute intervals, if necessary,
load profiles, outage information, meter tampering and a host
of other important data points and allow dynamic decisionmaking
on such things as efficient asset utilization, energy
distribution and energy spot market purchases as customer needs
change.
There are more than 16 million automatically read meters in
the United States today. As we consider legislation to
deregulate electricity, these systems will be in even greater
demand.
Obviously, this business in dependent on continued access
to spectrum to grow and thrive and the company has several
licenses in different frequencies which have allowed it to roll
out widely used products.
While Itron has been an industry leader, having invested
over $100 million in technology that uses the band, it has also
encountered significant interference from the FCC in
maintaining its access to licensed spectrum.
Last year Itron struggled with an FCC rule that suspended
the processing of all applications in the 928/952/956 MHz bands
for applicants who did not provide subscriber services.
This multiple address system rulemaking essentially put a
freeze on Itron's business. No utility was willing to make the
large capital expenditures associated with a system that was
subject to this application freeze. This severely depressed
business.
Similarly, utilities that had planned, budgeted for or even
ordered automatic meter reading equipment faced a scenario in
which they would be unable to obtain licenses. After extensive
consultation, this year the FCC lifted its freeze in the 900-
MHz band, only to insist on reallocating another band of
spectrum that Itron uses. As a result of the FCC June 8 report
and order, Itron and its customers are again struggling with
the same uncertainties.
Itron uses the 1427 to 1432 MHz band under a 1994
nationwide FCC license that enables power and water utilities,
critical industry infrastructure users, to develop and deploy
wide area networks for telemetry communications to and from
utility meters.
Itron is the only licensed commercial user of the spectrum
and two utility systems have already installed Itron equipment
to use this spectrum for fixed network monitoring.
In addition, Itron has pilot customers that use the
spectrum in Alabama, Illinois, New York, Maryland, California,
Texas and Michigan. Several other Itron customers have
expressed an interest in upgrading to their flagship product
for large commercial and industrial users, which requires the
1427 to 1432 MHz band.
On June 8, 2000, the FCC allocated the 1429 to 1432 MHz
band and 11 other MHz as well on a primary basis to Wireless
Medical Telemetry Services, (WMTS), in ET Docket 99-255,
effectively locking Itron out of an important part of the band.
The FCC report and order gives no indication of the likely
outcome for the remaining two MHz, 1427 and 1428 in this band,
creating significant uncertainties for Itron and an unfavorable
business climate.
No utility is likely to buy systems that depend on this
spectrum unless they have assurance that it will continue to be
available in the future.
Other customers cannot be accommodated without Itron having
access to the upper three MHz of the band. Given last year's
action on the 900-MHz band, potential customers are going to be
shying away from doing business with Itron. The FCC has created
this problem.
Energy providers and users would be the immediate losers as
they would be unable to distribute and use scarce energy
resources in the most efficient way possible and ultimately we
would all be the poorer for this outcome as increased
inefficiencies were felt throughout the economy.
The irony of this occurring against the daily backdrop of
reports about high energy prices, inefficient energy
distribution, and looming brown-outs should not be lost on the
FCC.
I see the red light is on, Mr. Chairman. I would just say
my hope is that this committee would act to take steps to
protect incumbent users and not effectively, by silence on the
FCC's part, put a company out of business or threaten its
continued future.
I will submit a formal testimony for the record in full so
that you can have the benefit of my complete remarks.
Mr. Tauzin. Thank you, Mr. Nethercutt.
The Chair is now pleased to welcome the Honorable Gil
Gutknecht of the State of Minnesota.
STATEMENT OF HON. GIL GUTKNECHT
Mr. Gutknecht. Well, thank you, Mr. Chairman. I have a
written statement that I will submit, but I just want to
summarize for the members what has happened here.
We have a small, little company with headquarters in
George's district, but they employ 430 people in my district.
Right now that company is hanging on by its fingernails because
of a ruling that was made June 8 by the FCC.
In effect what we have here is a pioneer company that went
out and developed a very useful product for utilities, the
reading of meters, whether it is gas or electric or water, to
manually go around to every house and attempt to read those
meters is a very expensive and sometimes even dangerous
proposition because of aggressive dogs and other things that
they encounter trying to get those meters read.
They came out and developed a very interesting technology
using wireless and using a very small section of band width.
What we have now is the FCC, by refusing to recognize an
agreement that Itron had worked out with a competitor in that
same spectrum.
Now we have this company with over 1,000 employees, almost
half of them in my district, that basically is looking at an
uncertain future at best because many utilities will not go
ahead and order the equipment that it takes to install this if
they are not certain that they are going to have the spectrum.
All of this was very solvable. The parties to this had
reached an agreement, but the FCC refused to acknowledge that
and on June 8 they really sent this company into a tailspin.
We are basically here today asking for some kind of relief
from this subcommittee and the Congress. But at the end of the
day, I have to say this, it really should not require an act of
Congress to get some common sense and fairness out of a Federal
agency.
It is really almost an embarrassment that we have to come
before this committee, but I want to thank you for the
opportunity because over 1,000 people in George's district and
in my district are counting on us to provide some kind of
relief and just basic fairness in the allocation of the
spectrum.
This is a pioneer. They homesteaded this particular chunk
of the spectrum and now our own government seems to be prepared
to go out and shoot them. I think there is something wrong with
that formula.
I yield back the balance of my time.
[The prepared statement of Hon. Gil Gutknecht follows:]
Prepared Statement of Hon. Gil Gutknecht, a Representative in Congress
from the State of Minnesota
Mr Chairman, Members of the Subcommittee, I want to thank you the
opportunity to testify today. I want to thank my colleague Mr.
Nethercutt for his testimony as well.
In Waseca, Minnesota, in my district 430 employees build utility
meter reading equipment for Itron. The June 8th decision by the FCC has
needlessly put these employees futures in jeopardy by casting a shadow
over the future of Itron's business. As Mr. Nethercutt has pointed out,
this is not the first time the FCC's carelessness has put Itron in
jeopardy. By putting Itron's spectrum in doubt utilities will be
extremely hesitant to make the large capital expenditures associated
with a system that may or may not have spectrum available at a future
date.
The biggest problem with the FCC's actions is that they could
easily been prevented by offering a win-win solution for Itron and
Medical Telemetry. When Itron first became aware that Medical Telemetry
might possibly move to the spectrum that Itron occupied, Itron went to
Medical Telemetry and the two sides were able to notify the FCC on May
31, 2000 that they were optimistic that a basis for spectrum sharing
could be finalized very shortly. Both parties asked the FCC to issue a
Further Notice of Proposed Rulemaking in order to conclude the band
sharing agreement. Both sides recognized their technologies were
compatible and that they could share the spectrum.. Further, Itron
through its band sharing agreement with Medical Telemetry would
facilitate development of Medical Telemetry's own equipment by
providing its engineering expertise to save Wireless Medical Telemetry
Services the costly R & D expense to bring their own equipment into
service.
Instead of acting on this agreement, the FCC issued a Report and
Order on June 8th which granted primary usage of the 1429-1432 band to
the Wireless Medical Telemetry Service. These 3 megahertz were part of
the 5 megahertz band that had previously been used by Wireless Utility
Telemetry. The Report and Order leaves the future use of the remaining
2 megahertz in doubt, creating even more uncertainty for Itron's
products.
What did the FCC do wrong? The FCC rightly recognized the validity
of Medical Telemetry's needs. But at the same time they did not
recognize that Medical Telemetry needs a compatible spectrum neighbor.
The FCC should have recognized Itron, especially in light of a spectrum
sharing agreement, as a compatible neighbor to Medical Telemetry.
Further, the FCC should have recognized that Itron, as the only
commercial user of the spectrum, has an equally valid claim to the
spectrum band as Medical Telemetry.
As we have heard the FCC has a goal to encourage the most efficient
use of spectrum. But, when offered a mutually beneficial arrangement
between to competing parties for spectrum, the FCC denied their
arrangement in favor of one primary user. Based on the proposed
agreement submitted to the FCC by Medical Telemetry and Itron, and
willingness of Itron to even assist in the development of Medical
Telemetry's technology, the FCC should have made Critical Industry
Infrastructure and Wireless Medical Telemetry Services co-primary users
of the spectrum.
Mr. Chairman, Itron is a stark example of a federal agency having
the opportunity to make the right decision and choosing the wrong one.
They have put a company with over 1200 employees in serious jeopardy.
When a mutually beneficial agreement was proposed between the two
interested parties, the FCC arbitrarily and carelessly decided to
ignore this agreement and offer the spectrum to just one of the
potential users. Itron has been left with a fraction of its former
spectrum and the knowledge that at a future date it could lose even
that.
I thank you for the opportunity to testify today. I hope that
Itron's highlights a problem with FCC's spectrum allocation and I
welcome the continued interest of the Committee to ensure fair and
equitable spectrum allocation practices.
Mr. Tauzin. I thank the gentleman.
The Chair will do something in order to accommodate my
friends. If the gentlemen have to leave to go to other
business, the Chair will be happy to allow them to do so and to
separate this panel at this point.
Let me first ask if there are any questions of the members.
I would like to engage you just a little bit on the issue
before you do leave.
My understanding was that in 1992 Congress itself sought to
prioritize automatic meter reading technology development and
that then Chairman Dingell and Markey added a provision in the
House Bill 6191 which became Public Law 102-556 directing the
Departments of Commerce and Energy in fact to determine the
application of automated utility meter reading technology, that
it was in the public interest and would be in fact good for
energy, water conservation, public safety and economic
development.
It seems like Congress prioritized this. The Commission
established spectrum for this company to go out and do it. The
company goes out and does it. There is a concern about sharing
the spectrum with other medical users I think. Are you saying
that the telemetry folks who wanted to share the spectrum were
ignored?
Mr. Nethercutt. None whatsoever, to my knowledge, Mr.
Chairman. That was what was so shocking; the expectation was
that there would be a mention of it, a confirmation of it, a
recognition of the fact that there is this agreement that would
allow a sharing, a fair sharing, an equitable sharing.
Mr. Tauzin. And the licenses for Itron were renewed through
August 15, 2004 by the Commission on May 12, 1999. Is that
right?
Mr. Nethercutt. Indeed.
Mr. Tauzin. So we have some real strange situations here.
We are going to want to get some answers from Mr. Sugrue at the
appropriate time.
Do either one of you want to comment before I turn it over
to the other members?
Mr. Gutknecht. Well, Mr. Chairman, just one final point
about this. The people at Itron had also told the medical
telemetry people they would help them with some of the research
and development. So it was a win-win situation.
For some reason which we cannot explain the FCC decided not
to acknowledge that agreement.
Mr. Tauzin. The Chair thanks the gentleman. Are there
further comments or questions by the members?
Mr. Markey. Not right now.
Mr. Tauzin. Mr. Oxley.
Mr. Oxley. Maybe it would be appropriate while the members
are here to ask Mr. Sugrue to give his side of the story and
perhaps we can uncover something.
Mr. Tauzin. The gentleman makes a good suggestion. Let me
do that. Mr. Sugrue, I know you have a written statement and
you have a lot to tell us about spectrum management. But if you
will take the mike, sir, and give us the Commission's point of
view on this so that we can understand why this has occurred.
Mr. Sugrue. I am going to use the first question to defer
to my colleague, Dale Hatfield, whose office did the allocation
decision and is familiar with this topic.
Mr. Tauzin. Mr. Hatfield.
Mr. Hatfield. Yes, thank you. I think this discussion we
have had here really illustrates the difficulty that we are
facing in this country in spectrum management.
You heard a very eloquent speech regarding the value of
doing automated meter reading and using radio waves to do so.
You know, I would support and understand that as well. But we
also have the high cost of medical care in this country that
concerned us greatly. Wireless medical telemetry systems are
used in hospitals, for example, to allow patients to move
around so that they can be walking and so forth and you can
monitor their vital signs and so forth and see how well they
are recovering. For example, in a hospital one of the problems
they have is they allocate certain amount of their space for
cardiac care and different types of care. It is very difficult
to know in advance how many patients you will have of one
category or another. By making the medical equipment be able to
be moved around, one can change your equipment assets, move
them around, and get better utilization of your hospital
facilities because they are connected by wireless means.
You know, I am not real familiar with exactly what happened
here, but what I am very familiar with is that it is a very,
very difficult issue here trying to make the decision.
Mr. Tauzin. Mr. Hatfield, we interrupt to try to get some
answers. You are telling me you are not familiar with it. That
is not good. You represent the Commission here. The Commission
made the decision.
Mr. Sugrue, if you can help us, please do. Somebody made a
decision that despite the fact that the medical telemetry
people wrote you a letter saying that they had no problem
sharing the spectrum, and Itron offered even to help them
develop the technology to share, that that was ignored.
I think we need to know why was it ignored. Why did the
Commission in effect boot Itron out to give this spectrum to
the telemetry folks?
Mr. Hatfield. First, sir, in our order in June there is
actually a footnote in there that recognizes Itron's desire to
operate in the band. So I don't think it is correct that we
ignored it.
Moreover, we are prepared and are very much encouraging the
sharing of this, trying to work out agreements where the
spectrum can be shared between these two vital interests. That
is our whole goal.
Mr. Tauzin. Are you telling me that the Commission
recognized the sharing agreement or not? What does this
footnote mean?
Mr. Hatfield. I am doing this by memory. My recollection is
that they were asking to be a primary user in the spectrum and
that we recognize that in our dealing with them.
Mr. Tauzin. I am still very confused. Mr. Sugrue, let me
make a complaint on it.
Mr. Rush. Mr. Chairman, I am sitting here and I am trying
to get the----
Mr. Tauzin. Mr. Rush, I am, too. I will recognize you in a
second. Let me just see if I can complete this.
You saw this panel. You knew that Mr. Nethercutt and Mr.
Gutknecht were going to be here today. Mr. Oxley correctly
asked to give you a chance to respond. Why are you not prepared
to respond? Why can't you tell us what happened?
Mr. Hatfield. I can only speak for myself. I had no
indication before I arrived here today that we would be asked a
question on this matter. Moreover, it is an open matter at the
Commission now. They have come in to us with a petition and we
are dealing with that petition.
Mr. Tauzin. Mr. Sugrue, would you kindly respond, sir?
Mr. Sugrue. I don't know if there is a problem in
communication, but we were not apprised that this was the topic
or that the two gentleman would be testifying. We would have
certainly come with a better answer. I apologize for that.
I will say, the last time I talked with anyone from Itron
was last fall about the MAS situation, the MAS spectrum that
was referred to in at least one of the statements.
This was a program in response to or an order the
Commission put out because Congress changed the law in 1997 to
require us to auction off spectrum, commercial spectrum, when
there were mutually exclusive applications.
The Commission put a freeze on the spectrum until it could
write rules on that. We thought Itron made a compelling case
and we lifted the freeze in December of that year.
I don't think there is any attempt to certainly put anyone
out of business. You will see in my statement, if we get to it,
that I sort of reference utility reading as an innovative
concept.
I guess I would just ask you permission to get back to you
on this.
Mr. Tauzin. I think that is fair. I will recognize other
members in a minute.
Mr. Hatfield, you said there was a petition before the
Commission. What is the timetable on that petition?
Mr. Hatfield. That is my understanding.
Mr. Tauzin. What is the timetable on it?
Mr. Hatfield. We will do it as quickly as we can, sir.
Mr. Tauzin. Let me ask that within the next 10 days you
submit to us in writing a response to the concerns expressed by
our two members here today. We particularly would like to know
what happened to the letter confirming an agreement by the two
users to share and why was it ignored, if in fact it was
ignored.
What does the footnote mean, if in fact it has meaning? Can
Itron continue to operate or not? What is exactly the situation
of the company? We are obviously interested in resolving this
if we can without the necessity of legislating.
I will ask my friend from Illinois to ask his question.
Mr. Rush. Mr. Chairman, I just wanted to comment on this
issue and how it is being conducted. Mr. Chairman, I know you
are a very, very fair chairman and I know that you don't want
to put any witness under any undue and surprising
circumstances.
I just kind of believe that if we would take a step back
and allow the FCC to respond to the request of other members
and also the request of yourself, Mr. Chairman, we would
probably get better answers.
I am just kind of surprised, and I know that you don't want
to bushwhack any witnesses here. That is not your style. But it
seems that that might be what is happening here and I would
just respond that these witnesses should be allowed to go back
to the FCC and respond to both the Members of Congress and also
to you, Mr. Chairman.
Mr. Tauzin. If the gentleman will yield, the Chair is not
above bushwhacking. I want you to know that.
Mr. Rush. Mr. Chairman, I want to remind you that lat time
that I and other members from this side bushwhacked a witness,
you were very, very upset.
Mr. Tauzin. I guess it depends on whose ox is being
bushwhacked. I was certainly not trying to do it in this case.
I thought you were prepared to respond to the witnesses who
were going to be part of your panel.
If you are not, I am suggesting that within the next 10
days you respond in writing and that you try to give us some
very cogent answers to what I think are some very serious
questions raised by both Mr. Nethercutt and Mr. Gutknecht.
The Chair recognizes my friend from Massachusetts.
Mr. Markey. Thank you, Mr. Chairman. You know, this is a
perfect example of the spectrum management policy that we have
had in place and the ongoing need to revisit it. Here we have,
obviously, a very important wireless meter reading technology
that saves consumers lives.
We have had an introduction over the last several years of
wireless medical telemetry which doesn't save people's money,
it saves people's lives; right?
So you have this kind of balance that you are trying to
strike in assuring that all the technologies are able to be
deployed.
I think it would be important, especially in an era of
continued Medicare cutbacks, of trying to squeeze more
efficiency out of the existing medical system, to utilize the
technology to make sure that the medical centers are able to
provide for families, especially in these cardiac or other
situations, with the maximum amount of information that the
medical personnel can gain access to while serving more and
more patients.
So working out some kind of a compromise here seems to me
to be in the best interests of the American public. I think the
FCC should be give, you know, 10 days as you were saying, Mr.
Chairman, to report back to us and give us their set of reasons
for trying to create a new balance.
Mr. Tauzin. If the gentleman would yield to me, let me
point out that staff indicates to me that medical telemetry was
given a total of 14 MHz and there is a real question whether it
needs additional MHz. It has room to grow for the next 10 years
already.
So kindly answer that inquiry. The information we have is
that they simply didn't need to have priority spectrum
allocated to them; that they had enough to go for 10 years.
Second, they wouldn't even have equipment that could
operate in the 14 to 32 bands in the next 2 years. So, you
know, there are some real questions as to why this action was
taken as precipitously as it was. The gentleman is correct, it
raises some real questions about the way spectrum is being
managed.
So please take the time and respond thoroughly to us, if
you can, Mr. Sugrue. We would appreciate it.
Are there any further questions or comments for our two
colleagues so that I might dismiss them?
I thank you both for your contributions. We will make
available to you whatever we find out from the Commission
regarding the current status of this dispute and hopefully get
it resolved without the need for us to legislate.
Mr. Nethercutt. Thank you, Mr. Chairman.
Mr. Tauzin. Thank you very much.
Mr. Sugrue. Mr. Chairman, we will respond in that
timeframe.
Mr. Tauzin. Thank you, Mr. Sugrue and Mr. Hatfield. I
appreciate it.
The Chair is now pleased to recognize an old friend, the
Honorable Greg Rohde, Assistant Secretary of the Department of
Commerce, for his testimony. Mr. Rohde.
STATEMENT OF HON. GREGORY L. ROHDE
Mr. Rohde. Thank you very much, Mr. Chairman. I really
commend you and the members of this committee for holding this
hearing.
I came here thinking I was going to begin my testimony with
an obviously stupid statement such as that spectrum management
is usually a topic that doesn't get people to pound on the
doors or pay much attention to it.
Given the discussion we just had, it demonstrates that in
Mr. Markey's usual eloquence, I think he has stated very well
that we are in a lot of challenges right now in spectrum
management and balancing interests.
Spectrum management is not simply a topic for engineers any
more. It is something that has very broad social implications.
It is not even an isolated telecommunications issue, as we can
see with this discussion as well as many others that we will
discuss today in the hearing. It has very broad social
implications.
NTIA, as many of you know, has two primary functions. One
is that we are the policy shop for the administration in
developing telecommunications and information policy.
In addition, we have a very important spectrum management
function. In a sense we wear both of these hats. Within our
spectrum management function at NTIA, we process allocations
from 53 different Federal agencies at the rate of about 300 to
400 a day, in other words, about 6,000 to 10,000 of these
allocations per month.
This is a very complex, manually intensive process. At NTIA
we are trying to change that process into an automated system.
Currently, some of the allocations could take up to 15 days to
go through the process.
Our goal at NTIA is to turn that process, to move it from
15 days into a matter of minutes, creating a great deal of
efficiency in how we conduct spectrum management.
In addition at NTIA, we assess the spectrum availability
for about 62 major new Federal rated communication systems each
year. This process for each one of these new rated
communication systems takes between 4 to 6 months, again on a
manual basis.
We are also trying to automate this process as well to try
to turn that 4 to 6 months into about a 2-month period of time
through automation.
We are hopeful that the Congress will support budget
requests in 2002 to provide us funding to continue on this
process of automation which is going to result in a great deal
of saving for taxpayers and promote a lot of spectrum
efficiency.
In addition to these automation procedures at NTIA, we have
a couple of policies which we have in order to try to promote
spectrum efficiency amongst the constituents that we have in
the Federal agencies whose spectrum that we manage.
One of those policies is that we require every Federal
agency, before they get a Federal allocation, to demonstrate
that that need cannot be met in the commercial private sector,
before they can get an allocation.
In addition, we have shown a great deal of leadership at
NTIA, prior to my coming to NTIA, of promoting efficient
technology such as narrow banding and digital modelization.
In addition, NTIA is engaged in a significant outreach
program for public safety purposes. Throughout this week and
Monday I hosted a round table on all-hazards warnings. We all
know that we have one of the best weather systems and weather
prediction systems in the world. We have a very good
forecasting system to alert people to natural disasters and
storms.
But, there are new technologies out there such as emergency
e-mail systems and reverse 911 systems that exist. The question
is: How do we integrate this into our hazard warning systems to
provide better information to consumers and to promote public
safety.
In addition, NTIA is looking at allocating Federal spectrum
for Federal, state, and local law enforcement agencies so that
they can communicate with each other in the case of an incident
in order to protect public safety.
Another area that NTIA is focusing on in our spectrum
management responsibilities is we really want to be an agency
of innovation.
One of the initiatives that I began when I first got to
NTIA as to start an initiative called the WICI, the Wireless
Innovations and Communications Initiative. The purpose of this
is we think that we need to transform the way in which we have
conducted spectrum management in the past.
The purpose of this initiative is to relook at how we
conduct spectrum management and to do it in a fashion that
promotes innovation of new technologies. The WICI is founded on
two very special principles. That is, we need to pull the
Federal agencies which we serve to the table and help them
identify new technologies that can help them meet their
existing needs in a more efficient manner.
At the same time, we need to shoulder our responsibilities
to the general public for managing the scarce resource in a way
that fosters innovation in the private sector.
As you all know, we are caught in a very tough dilemma of
spectrum management and that is, we have conflicting Federal
agencies and private sector. We are trying to bring that
coordination together.
We also work hard to try to advance new technology such as
ultra-wide band. We are currently beginning some testing in
ultra-wide band devices in order to participate in the FCC's
rulemaking process and provide some comments.
Also, IMT-2000 is a major priority for NTIA. We were very
successful in the work this spring in Istanbul in getting the
rest of the world to agree to our position that we should have
maximum flexibility in identifying multiple bands for IMT-2000.
NTIA believes that development of high speed mobile
Internet access is one of the most important public policy
decisions we face in our agency.
We believe it has very broad social implications and also
goes a long way to helping us achieve our other fundamental
purpose at NTIA which is to provide policy guidance to the
administration in achieving our goals of expanding Internet
access to more and more communities.
With that, I notice the stoplight is on. I will be happy to
answer any more of your questions or speak more to you about
your interest in IMT-2000.
[The prepared statement of Hon. Gregory L. Rohde follows:]
Prepared Statement of Hon. Gregory L. Rohde, Assistant Secretary for
Communications and Information, U.S. Department of Commerce
Mr. Chairman, Ranking Member and other members of this
subcommittee, I want to thank you for inviting me to testify today on
spectrum management policies and the results of the World
Radiocommunications Conference. I am Gregory Rohde, Assistant Secretary
for Communications and Information and Administrator of the National
Telecommunications and Information Administration (NTIA) within the
Department of Commerce. I would like to begin my remarks today by
giving a brief overview of NTIA's spectrum management responsibilities,
accomplishments and planned improvements; our spectrum outreach to the
public safety community; the promotion of new technologies including a
new initiative; an assessment of the World Radiocommunication
Conference (WRC) which was recently held in Istanbul; and the
implementation of future third generation personnel communication
systems.
i. spectrum management
One of NTIA's responsibilities is to serve as the President's
primary advisor on telecommunication information policies. The other
primary responsibility on behalf of the President is to manage the
radio frequency spectrum used by Federal agencies in satisfying their
legislatively assigned missions. In this role, NTIA processes the
Federal agencies' request for frequency assignments; provides Executive
Branch leadership in coordinating both current and future spectrum
requirements among the Federal agencies and with the Federal
Communications Commission (FCC); develops and promotes positions at
Treaty Conferences and other technical and management fora of the
International Telecommunication Union (ITU) regarding United States
spectrum management interests; and supports specialized administration
initiatives that are designed to achieve specific improvements in areas
such as air traffic safety, Federal spectrum management procedures,
protection of critical infrastructures, and public safety.
A fundamental goal of spectrum management at NTIA, as it is
worldwide, is to ensure that there is compatible operation with other
radiocommunication systems, validate compliance with spectrum
management rules and regulations, and to ensure that spectrum is
available for future needs. NTIA's spectrum coordination role is
therefore critical to the success of air traffic control, national
defense, national resource management, and other vital government
functions. Another fundamental goal is to manage this public resource
in an efficient manner as to create an environment that encourages
private sector innovation. To that end, NTIA's spectrum management
function can help advance our broader policy goals to expand access to
telecommunications and Internet services to all Americans.
Satisfying Spectrum Needs
NTIA continues to coordinate the spectrum needs of the Federal
Government by processing frequency assignment requests by some 53
Federal agencies. NTIA processes approximately 300 to 400 such requests
daily through an automated screening process to correct errors in the
data and ensure conformity of rules and regulations and through a
coordination process with Federal spectrum-using agencies via the
Interdepartment Radio Advisory Committee (IRAC) to ensure compatible
operation of radiocommunication systems. In addition, NTIA also
certifies spectrum availability of approximately 60 to 70 new major
radiocommunications annually.
NTIA also provides leadership for and manages the activities of the
IRAC, a body of representatives from twenty Federal agencies that are
major users of the spectrum. The IRAC has provided valuable advice to
the Executive Branch on numerous spectrum policies and issues for the
past 78 years. NTIA has maintained a constant relationship with the FCC
both through the IRAC and directly to ensure compatible operations of
our radiocommunication systems. This is especially important today
since the vast majority of the spectrum is no longer divided into
exclusive private-sector and Federal-sector bands, but is shared by all
users in the United States.
Spectrum Efficiency
The Federal Government constantly seeks to modernize its
radiocommunications, increase the amount of information transmitted per
unit bandwidth, and expand the use of more efficient digital technology
and the use of private sector radiocommunications. In order to improve
Federal spectrum use, NTIA uses the following management tools. First,
NTIA based on the Office of Management and Budget (OMB) regulations
requires that every Federal Government user requesting a frequency
assignment determine whether its need can be met by a private or
commercially available service provider. This policy has helped
encourage consideration of commercial services by many Federal
Government agencies, including the Department of Defense.
Second, we promote the use of new spectrum efficient technologies.
The Federal Government is a leader in developing new spectrum-efficient
techniques such as narrowbanding, digital modulation, and spectrum
sharing as well as in the use of the highest quality spectrum-efficient
equipment. An example of using these techniques can be shown in the
land mobile communications area.
The use of mobile communications is a critical and expanding need
for most Federal agencies in the accomplishment of their missions.
However, the needs of the private sector for mobile communications in
fee-for-service offerings, commercial business uses and public safety
operations, which are also expanding, have placed great pressure on
NTIA to allow wider access to the portions of the spectrum used by the
government mobile services. NTIA has taken the initiative to make sure
that all Federal uses are as efficient as possible so that Federal land
mobile communications needs can continue to be met in the bands
available. The agencies we regulate generally agree with this effort,
however, funding is difficult to obtain because it is so costly to
completely replace the current systems, which seem to work adequately.
Moreover, the agencies are very concerned about control security and
emergency response issues when the most efficient solutions require
several agencies to share one network.
Government applications of mobile radios include communications for
building security, law enforcement by Federal Bureau of Investigation,
Drug Enforcement Agency, Treasury, U.S. Coast Guard, U.S. Park Police
and military police, and for communications with vessels and aircraft.
As the technology has advanced, the sophistication of services provided
has advanced at the same time and the amount of spectrum needed for
each individual communication has decreased. However, since mobile
radios used in cars and by pedestrians are engineered for long life and
durability, they are very expensive and funding for replacement radios
are hard for government agencies to obtain; the FBI has asserted it
will cost them approximately $4-billion to replace their aging networks
with modern technology.
To help solve this problem, NTIA has issued regulations halving the
channel widths of all Federal land mobile radios. All new systems are
now expected to operate at the narrower 12.5 kHz bandwidth and all
existing systems are expected to transition to the narrower widths by
2005 or 2008 depending on the frequency band being used. We picked long
transition periods to allow the users to maximize the service they
could obtain from existing assets. NTIA has also restructured the way
in which the 406.1-420 MHz band will be used to allow for more
efficient operations maximizing user density. Although it has taken
several years to complete planning to do this, all Federal agencies
support with the resultant assignment efficiencies and are working on a
plan to transition to this plan.
NTIA has authorized vendor-operated fee-for-service mobile systems
in Boston, New York, Philadelphia, Baltimore, Washington and Norfolk.
These have been very successful in Washington, moderately successful in
New York and Philadelphia and largely unsuccessful in Boston,
Baltimore, and Norfolk. We intend to further encourage the use of these
efficient shared networks by encouraging and supporting the use of
locally designed and controlled networks wherever possible.
ii. spectrum management process improvements
NTIA is also making progress to more efficiently conduct its
management of Federal spectrum. To this end, we are increasing
automation and reducing bureaucratic red tape in spectrum management.
Spectrum Management Processes
Federal government spectrum management involves three essential,
closely-linked processes: (1) development of spectrum policy leading to
rules and regulations that govern the use of spectrum and resolve
spectrum management issues; (2) certification that spectrum will be
available for planned radiocommunications; and (3) authorization of
frequencies to satisfy current Federal agency operational needs. These
are traditionally paper-intensive activities, and we are working hard
to automate our processes, to make information more readily available
and to make our frequency assignments more quickly. We want to reduce
the amount of time it takes for a routine frequency assignment to mere
minutes, and a complex assignment to at most three days, for a process
that now can take as long as 15 or more days.
Frequency Authorization Process
NTIA processes between 6,000 and 10,000 frequency assignment
actions monthly. These actions, applications from Federal agencies for
new frequency assignments or revisions of existing assignments, must be
coordinated with other Federal agencies, and in many cases with FCC and
the Government of Canada, to ensure compatible operations with other
radiocommunication systems. In addition, these actions include several
hundred new assignment proposals each month submitted by the FCC on
behalf of non-Federal activities, and by Canada, or coordination with
Federal agencies, again to assure compatible operation between
radiocommunication systems. NTIA processes all of these action requests
via its Frequency Management Records System (FMRS) using computer
workstations. This includes the use of over 720 automated procedures to
process the actions, to validate information quality, to ensure
compliance with spectrum allocation and assignment rules and
regulations, and to verify international coordination requirements.
The processing of each day's actions submitted by the various
Federal agencies, FCC and Canada, results in the compilation of an
assignment action agenda which is sent to the 21 Frequency Assignment
Subcommittee (FAS) for their review and coordination. Each member must
provide their agency's position on each action (acceptance or table for
cause) to NTIA electronically within 15 working days (essentially
voting). NTIA tabulates all votes on each action, and approves it or
keeps it tabled depending on the tabulation of votes and NTIA's
position.
The complexity of, and time requirements for, this processing and
coordination procedure are increasing due to not only the constant
growth in the number of stations authorized by NTIA (doubled since
1980), but also the number of non-Government stations in shared
Government/non-Government bands being authorized by the FCC, as well
the number of new stations being authorized by Canada that must be
coordinated.
Records for NTIA-approved actions are placed in the NTIA-maintained
Government Master File (GMF) of frequency assignments (or removed in
the case of deletions). The updated GMF is provided to the Federal
agencies monthly on CDROM.
The GMF data on the CDROM can be searched, selected, sorted, and
printed on paper or exported to files through the use of a desktop or
laptop computer. There are approximately 426,000 approved frequency
authorizations in the GMF.
Within the last five years, NTIA, in partnership with the
Department of Defense, developed the Spectrum XXI software capability
for Federal agencies to: (1) prepare their applications for frequency
assignment actions, (2) assess the action's compliance with NTIA rules
and regulations, and (3) determine if the action would result in
interference to other spectrum users. Over 250 persons within the
Federal government have completed a one-week training course on
Spectrum XXI. NTIA has also overhauled its frequency management records
system by developing and implementing new software on state of the art
work stations.
NTIA's goal for improvement is to provide a completely automated
and electronically accessible (domestically and ultimately globally)
central capability (E-commerce at the Federal level on a global basis)
for the frequency management community to obtain approval of frequency
assignment action requests within minutes for routine requests, to a
maximum of 3 days for more complex requests.
Spectrum Policy Development and Issue Resolution Process
Federal radiocommunication policy development and spectrum issue
resolution are largely based on the efforts of NTIA's Office of
Spectrum Management with a very heavy reliance on the advice of the 20-
member IRAC, which represents Federal spectrum users. The IRAC meets
more than 200 times each year, and its subcommittees involve the
exchange, reproduction, and distribution of over 100,000 pages of
documents relating to Federal spectrum management and assignment of
frequencies. We are working to reduce the massive paper load that
accompanies such activity, and we recently awarded a contract to
transfer IRAC documents from the past 78 years over to CD-ROM and onto
computer servers.
Our goal in this area is to provide a completely computer automated
and electronically-accessible capability (in essence, E-government) for
the Federal spectrum management community to obtain information from
the official IRAC policy development and spectrum issue resolution
documentation.
Spectrum Certification Process
Both OMB Circular A-11 and the NTIA Manual require that every
Federal agency developing a major radiocommunications system obtain
NTIA certification that the spectrum required by the system will be
available when the system is ready to be deployed. NTIA currently
assesses spectrum availability for approximately 62 major, new Federal
radiocommunications systems each year. For the most part, these systems
are reviewed manually using document-based information processing
techniques. This process takes an average of approximately 4 to 6
months to complete for each system.
NTIA's goal in this area is to develop an automated,
electronically-accessible (domestically and ultimately globally)
capability for the spectrum certification community to obtain, use, and
provide all the necessary information to obtain approval of their
system certification requests within the time frame of two months.
Overall Process Improvement Summary
If the Federal government can gain the efficiencies I described, it
may be possible for these same type of improvements to be made on a
national basis with the result of providing the needed spectrum for use
by both the Federal government and private sector very quickly without
bureaucratic delays of months and years and to share more spectrum
based on sound technical grounds. This could essentially enable
management of spectrum largely through the use of E-commerce techniques
The President's budget for FY 2001 requested $1 million ($200,000
via appropriations and $800,000 from reimbursement from the Federal
agencies) for these improvements. This was the first leg of a four-year
program to meet these goals. If the United States is to maintain its
competitiveness in the marketplace and to make strides in closing the
digital divide gap, the United States must improve its spectrum
management processes and cut out the red tape and bureaucratic road
blocks that inhibit timely distribution and sharing of spectrum for
radiocommunications.
iii. spectrum outreach
Now I would like to describe NTIA's activities in extending a
helping hand to the public safety community.
All Hazards Roundtable
On July 17, 2000, NTIA, in cooperation with an inter-agency working
group that works on public safety issues, hosted the All-Hazard Warning
Roundtable. Dr. Jim Baker, administrator of the National Oceanic and
Atmospheric Administration (NOAA), was a co-host at the event. The
purpose of the roundtable was to bring together representatives of
existing systems, such as NOAA with its weather radio, with
representatives of new and emerging technologies, including the
Internet and wireless products, as well as reverse 9-1-1 systems, to
see how our already excellent warning system can be improved. I viewed
the roundtable as the start of a process that will bring government and
industry together to talk about creating a more comprehensive warning
network.
The event was an overwhelming success as all the panelists agreed
that more needs to be done in order to provide effective and immediate
warnings. Follow-up meetings will take place so that substantive and
technical issues can be discussed so that hazard warnings may be widely
available to the public through various existing and emerging
telecommunications technologies. The roundtable is the latest activity
of the informal inter-agency group that was organized last year until
Vice President Gore's National Partnership for Reinventing Government.
The working group published a report, ``Saving Lives With An All-Hazard
Warning Network'' that found NOAA Weather Radios forms the backbone of
an all-hazard system. However, we found that we must improve access to
warnings and make warnings themselves better.
Federal & State Joint Project
One of the more pressing needs of all radio services in terms of
radio spectrum is for the public safety services. The inability of
agencies from the Federal Government to talk to state and local
counterparts in times of emergencies and natural disasters is a
paramount concern. NTIA has recently put forth plans to designate
certain federally allocated radio frequencies for use by Federal, state
and local law enforcement and incident response entities to improve
their communications during emergencies and help them to better respond
to threats to public safety. This new plan is the first step towards
ensuring that sufficient radio spectrum is available when and where an
emergency or public safety need may arise. The plan was developed in
cooperation with the IRAC and the Federal Law Enforcement Wireless
Users' Group (FLEWUG). It provides a total of 40 radio frequencies,
under the control of the Federal Government, to be used for
intermittent law enforcement and incident response requirements during
emergencies relating to public safety.
In another example of Federal-state cooperation, NTIA, working with
the Department of Defense, authorized the state of Wisconsin to use
Federal radio frequencies to test a shared land mobile communications
system that will greatly ease communication during emergencies as well
as during day-to-day communications. There are a number of land mobile
systems currently operated by Federal agencies or by State and local
governments around the country that provide communications during
emergency operations to all levels of government. To further promote
this capability, the NTIA, working with the Departments of the Treasury
and Justice jointly sponsored Public Safety Wireless Network (PSWN)
Program, have initiated a number of pilots throughout the country to
test and evaluate various interoperable solutions among all levels of
government. Although there are many emergency land mobile systems, the
Wisconsin Pilot project is the first system providing shared services
on a day-to-day basis. However, with the continued efforts of the NTIA
and the FCC, working with the PSWN Program, it is anticipated that
future shared systems and programs will be more readily available.
National Coordination Committee (NCC)
The National Coordination Committee (NCC) was established by the
FCC to solicit input from the public safety community in the further
development of rules governing the new 700 MHz public safety band,
particularly in regard to interoperability. NTIA actively participates
in the NCC by offering advise and subject matter expertise on issues
directly related to the NCC. NTIA, together with the U.S. Department of
Justice (DOJ), the Federal Emergency Management Agency (FEMA) and the
U.S. Department of Treasury co-sponsor the NCC. Participation is vital
to ensure that interoperability between Federal, State and local
responders is achieved.
iv. promotion of new technologies
The Federal government uses a minimum amount of spectrum as
possible to perform its existing and planned mission needs. Every
Federal agency must determine if its radiocommunication requirements
can be satisfied by the private sector before they develop their own
radiocommunications. It is critical that the Federal government have
sufficient spectrum to meet all its obligations to the American people
including national defense, law enforcement, resource management
control, air traffic control, and any other safety-of-life services.
The Federal government has been very successful in using new technology
in developing its radiocommunications and conserving spectrum.
In my judgement, one of the most important things I can do in my
capacity at NTIA, is to get the Federal agencies and the private sector
to engage in a constructive dialogue. It is imperative--as a nation as
a whole and from the individual perspectives of Federal agencies and
the private sector--that a cooperative relationship exist between the
government and private sectors be realized.
WICI
One initiative I started at NTIA earlier this year is to establish
the ``Wireless Innovations in Communications Initiative'' to promote
spectrum efficiency and innovation and to create a dialogue between the
Federal government agencies and the private sector. The Federal
agencies, considered collectively, are a large user of communication
services in the United States. Although many of these services are
provided by commercial providers through government contracts, the
Federal government continues to own and operate significant
communications facilities that perform certain mission-critical
functions. Federal agencies use the radio spectrum to operate the
wireless portions of these Government-operated communications
facilities. Because of the growing public and private sector
requirements for spectrum, there is an urgent need to ensure that this
limited national resource is used effectively and efficiently.
One of the objectives of the WICI is to promote innovative
developments in communications technologies and facilitate their timely
application to satisfy actual communication needs by both the Federal
agencies and the private sector. The scope of this initiative extends
across the full range of wireless communications technologies,
including fixed, mobile, radar, navigation, and satellite
communications. The approach planned for conducting WICI was to
establish a committee (WICI Committee) within the Interdepartment Radio
Advisory Committee (IRAC) comprised of senior experts in the Federal
government who understand their agency's radiocommunication
requirements and can envision the potential applicability of new
technologies. The WICI Committee has scheduled a series of meetings in
which representatives from Federal agencies discuss their
communications requirements. In addition, private sector developers of
communication innovations present their ideas on how to satisfy the
Federal agencies' requirements. WICI is intended to promote the
development of innovations in wireless communications and
systematically examine their applicability to actual communications
requirements.
Six meetings of the WICI have taken place since the initiative was
begun in March of this year. The focus of these first meetings have
been on land mobile communications, specifically software defined
radios and public safety communications. Following the presentations by
Federal agencies, 8 major private sector developers have come forward
and have explained their new technologies that address the requirements
described in the Federal briefings. Other areas such as satellites and
radar will be addressed in the future. The spectrum management process
will also be discussed with the private sector as well.
I hope that over time, this initiative will foster better
cooperation between government and private sector in spectrum
management. I believe that we can do more to assist Federal agencies to
more efficiently meet their communications needs and to promote
continued innovation of wireless technologies. The purpose of the WICI
is to point us in a new direction with respect to spectrum management.
New Technologies
NTIA is very interested in helping advance the development of new
wireless technologies that will create efficiency and opportunity. One
example is ultrawide band (UWB).
UWB transmits very low power radio signals with very short pulses,
often in the picosecond (1/1000th of a nanosecond) range using very
wide signal bandwidths. Because of that combination of characteristics,
UWB has shown promise for many commercial applications, including
wireless communications within buildings and the locations of objects
on the other side of walls or other barriers. UWB will be using the
same spectrum that is presently being used by conventional
radiocommunication devices, including emergency services. As a result,
it will be important to ensure that there are no adverse effects from
UWB to these critical services.
The FCC, in coordination with NTIA, has granted waivers for three
UWB manufacturers. This has enabled limited production of these devices
until more permanent rules can be established and appropriate
measurements and analysis can be made to determine the technical
feasibility of sharing spectrum.
NTIA has begin a comprehensive test and analysis program that will
be carried out jointly by NTIA's Office of Spectrum Management in
Washington and our Institute for Telecommunication Sciences in Boulder,
Colorado. This program will determine from a technical and engineering
point of view, the conditions under which UWB technology can be
integrated in the spectrum environment ensure compatible operation with
existing safety-of-life systems including those used or planned for air
traffic control with special attention to the Global Positioning System
(GPS). NTIA will be spending approximately $1 million for this effort
which is to be completed in the fall of this year. This testing program
will also help the FCC, which recently proposed new rules allowing UWB
systems on an unlicenced basis.
v. wrc-2000
The WRC--General
I would like discuss briefly the results of the World
Radiocommunication Conference 2000 (WRC-2000) which was held in May in
Instanbul, Turkey. The National Telecommunications and Information
Administration (NTIA), along with the Federal Communications Commission
(FCC) and other Federal agencies provide the main technical support for
the United States delegation at World Radiocommunication Conferences.
Given the gravity of the issues involved at WRC-2000, NTIA considered
this year's conference among the top priorities of the agency this
year. The outcome of this past conference, as with previous
conferences, affect significantly on spectrum management and the
development of wireless communications services in the United States,
and the competitive position of U.S. manufacturers. Therefore,
conference preparation and follow-up is a responsibility that NTIA
takes very seriously.
I spent a week and a half in Istanbul with the 157 member U.S.
delegation (including 59 representatives from companies) to the WRC-
2000. There were over 2000 delegates from over 150 countries--each
working to ensure that their existing uses of the spectrum for their
radiocommunications would be protected and that their future
requirements for the spectrum would be satisfied. Countries were also
attempting to agree on new rules or modifications to existing
regulations and procedures required to ensure compatible operation. I
had the opportunity to talk to members of many delegations to promote
the U.S. views and to listen to their views on the many issues being
addressed at the WRC. It was apparent that both developed and
developing countries had definite views on: (1) obtaining additional
spectrum for implementing International Mobile Telecommunications 2000
(IMT-2000) and future generations of advance communications; (2)
allocating sufficient spectrum for GPS and the European Galileo
satellite-based worldwide navigation systems; and (3) ensuring
appropriate distribution of spectrum for broadcast satellite services.
Developing countries were particularly interested in obtaining
guaranteed future access to satellite spectrum which the developed
countries have almost fully occupied over the last 30 years. The
developing countries were very concerned that as technology opened the
doors for broadband communications, they would fall in the shadows of
this economic boom and communications expansion--exacerbating the
economic and digital divide that currently exists between developing
and developed countries. They expressed concern that both the economic
gap and the digital divide would continue to grow. Moreover, they
feared being forced to set aside spectrum for new broadband systems and
to transition equipment infrastructure when their first generation
cellular was still developing. Many developing countries still appear
to be slow to adopt regulatory reform needed to facilitate
communications investment. Developing countries are also as concerned
as we are in the Administration about the digital divide. It is safe to
say, that wireless communications technologies are taking on a greater
importance in most nations, including our own, and are viewed as a
critical means to expanding economic opportunity.
It was a privilege and an honor to work with Ambassador Gail
Schoettler and members of the U.S. delegation. Her outstanding
leadership, along with the outstanding effort by the delegation
members, was paramount to the success of the United States. I would
also like to express my admiration for the cooperation between NTIA,
FCC, State Department, and the industry members of the delegation. In
my estimation and based on discussions with others that attended
previous conferences, this was one of the most productive. I would also
like to bring to the attention of the subcommittee, Ambassador
Schoettler's report, in which a number of recommendations were made to
improve future conferences. Among other things, she points to the
importance of WRC preparations starting early and maintaining
continuity of leadership and organization from conference to conference
and that communications between industry and government and within the
delegation, with the press and with Congress, should be open and
timely. Finally, she recommends that a strong and continuous
international outreach program should be undertaken--something that
Ambassador Schoettler did well prior to the WRC and which we need to be
certain to follow up on. As a nation, the United States needs to take
these conferences very seriously in order to continue the United
States' leadership role in the ITU and subsequent WRCs, and maintain an
open and free market place.
WRC--Major Issues for Federal Government
The major issues at the WRC included: (1) Broadcasting Satellite
Service (BSS) re-planning, technical and procedural matters; (2)
International Mobile Telecommunications 2000 (IMT-2000); (3) Non-
Geostationary Orbit and Geostationary Orbit (NGSO/GSO) spectrum
sharing; (4) Radionavigation Satellite Service (RNSS) issues including
GPS sharing with Mobile-Satellite Service (MSS); and (5) high density
fixed systems (HDFS). The United States met all its objectives in these
major areas including sufficient spectrum for IMT-2000, protection of
U.S. communication and radionavigation systems, agreement that mobile
satellite service cannot share with GPS, and sufficient spectrum for
GPS and other planned satellite navigation systems.
I would like to focus my remarks with respect to WRC-2000 on
implementation of IMT-2000 since NTIA will be playing a pivotal role in
this process. And, I would say at the outset that, in my judgement, the
development of advanced wireless services is one of the most important
communications policy issues facing our nation. The Internet revolution
will take yet another dramatic leap when we, hopefully, have widespread
availability to mobile Internet access. I consider the development of
wireless Internet critical to achieving important policy goals such as
closing the digital divide.
vi. development of wireless technologies and services
Transition to IMT-2000
Over the past decade, there has been enormous worldwide growth in
the use of cellular-type wireless communications systems. Many
countries initially introduced analog systems and have now transitioned
to digital systems. Studies in the International Telecommunication
Union (ITU) and elsewhere indicate that this growth in personal
communications is likely to continue. Third generation (3G) wireless
communications systems will provide mobile and satellite-based
broadband capabilities, and represent a path for the evolution of
existing cellular and personal communications services (PCS). Annual
service and infrastructure revenue for 3G is estimated to approach $100
billion by 2007, of which two-thirds is predicted to come from data and
other non-voice services. It has also been estimated that wireless
subscribers are projected to grow from 469 million in 1999, $1 billion
in 2002, and 1.26 billion in 2005 or an average penetration rate of
nearly 20 percent. The United States cannot afford to get left behind
in this technological leap forward.
The member administrations of the ITU have identified the technical
characteristics of a third generation system, and have termed it
International Mobile Telecommunications-2000 (IMT-2000). Key features
include a high degree of commonality of design world-wide;
compatibility of services within IMT-2000 and other fixed networks; and
high-quality world-wide use and roaming capability for multi-media
applications (e.g. video-teleconferencing and high-speed Internet
access). The ITU established an agenda item for WRC-2000 which
considered the review of spectrum and regulatory issues for advanced
mobile applications in the context of IMT-2000, noting that there is an
urgent need to provide more spectrum, particularly for the terrestrial
component of such applications and to make adjustments to the Table of
Frequency Allocations as necessary.
Let me briefly review the IMT-2000 WRC-2000 results.
IMT-2000--U.S. WRC Results
In accordance with U.S. goals and the concerns of the developing
world, the outcome of the conference provides direction to facilitate
technology development but also emphasizes flexibility for
administrations. The conference adopted various types of regulatory
text for implementation of IMT-2000 in a number of bands. These include
bands for the terrestrial component of IMT-2000: 806-960 MHz (some
countries noted that spectrum was available in their countries as low
as 698 MHz, but most felt uneasy about including existing broadcast
bands), 1710-1885 and 2500-2690 MHz. For the satellite component the
bands included 1525-1544, 1545-1559, 1610-1626.5, 1626.5-1645.5,
1646.5-1660.5, 2483.5-2500, 2500-2520, and 2670-2690 MHz. The
Conference also approved High Altitude Platform Stations (HAPS)
operations in portions of the bands 1885-2025 and 2110-2200 MHz. The
language in the various regulatory texts is different, however the
meaning is the same, maximum flexibility for implementation. This
regulatory identification for IMT-2000 does not preclude the use of
these bands for any applications of the services to which they are
allocated and does not establish priority in the Radio Regulations. For
the new bands above 1 GHz, a significant amount of language was
accepted by the Conference that makes it clear that administrations can
implement any of the bands in any time frame, for any service or
technology, and may use any portion of the bands that they deem
appropriate based on national requirements.
In summary, the WRC-2000 identified 519 MHz of additional spectrum
for terrestrial (plus 230 MHz from WARC-92), totaling 749 MHz of
spectrum for IMT-2000. It should be noted that the International
Telecommunication Union (ITU) Radiocommunications Bureau only
forecasted a need of 160 MHz of additional global spectrum for
terrestrial by 2010, exclusive of frequency bands already used for
first and second generation systems. It is up to each nation to decide
which bands will be adopted for IMT-2000 in their country.
Administrations can implement any bands in any time frame, for any
service or technology, and may use any portion of the bands that they
deem appropriate based on national requirements.
The United States won a very significant victory at WRC-2000 in
that the conference adopted our plan to utilize a multi-band approach
and provide administrations with flexibility to develop 3G technology.
This approach provides enough guidance with respect to which band will
be 3-G bands while permitting market-place flexibility.
IMT-2000--The Domestic Scene
The real work is about to begin domestically. The United States
must now decide what bands or portions thereof will be allocated or
reallocated for IMT-2000 use domestically. The possibilities for
terrestrial include 698-960, 1710-2025, 2110-2200, and 2500-2690 MHz.
NTIA and the FCC agreed before the WRC-2000 to perform studies for the
1755-1850 MHz band (NTIA) and for the 2500-2690 MHz band (FCC). The
studies are to examine, among other things: existing spectrum
allocations; existing use; existing investment; future use; potential
availability of alternate spectrum for potentially displaced users,
changes in the domestic allocation table, cost and time frame to move
existing users; sharing potential of existing users with IMT-2000
services and the possibility of existing users in 2500-2690 MHz band
providing IMT-2000 services. The satellite component possibilities
include the use of 1525-1559, 1610-1660.5, 2483.5-2500, 2500-2520 and
2670-2690 MHz bands. Bands are not as congested in most other
countries. Most European countries and Japan are licensing 3G operators
now, who will begin services in 2002.
The 1755-1850 MHz band supports four main Federal functions: space
telemetry, tracking and control (TT&C); medium capacity fixed
microwave; tactical radio relay training; and aeronautical mobile
applications such as telemetry, video and target scoring systems. This
band is allocated on an exclusive basis to the Federal Government for
fixed and mobile, space operation (Earth-to-space) and space research
(Earth-to-space) services, and in the 1761-1842 MHz portion, used for
space tracking, telemetry and command. Fixed links are operated by
Federal agencies for voice, data, and/or video communications where
commercial service is unavailable, excessively expensive, or unable to
meet required reliability. Applications include law enforcement,
emergency preparedness, support for the National air space system,
military command and control networks, and control links for various
power, land, water, and electric-power management systems. Other
specified fixed links include video relay, data relay, and timing
distribution signals. Probably the most critical system in the band is
the USAF Space Ground Link Subsystem (SGLS). This system, via Earth-to-
space uplinks in the 1761-1842 MHz band, controls the U.S. military
satellites, including telecommunications satellites, intelligence
gathering satellites, the Global Positioning System (GPS) satellite
constellation, and satellites of other Federal government agencies and
U.S. allies.
The two major services in the 2500-2690 MHz band are the
Multichannel Multipoint Distribution System (MMDS), and the
Instructional Television Fixed Service (ITFS).
MMDS is a public radio service transmitting from one or more fixed
stations, and received by multiple receivers at various locations.
There are over 2500 licenses for MMDS in the band, nation-wide.
Licenses are granted on the basis of Basic Trading Areas (BTAs). MMDS
is a technology for delivering fixed wireless high-speed access. Until
recently, the incumbent local telephone companies and local cable
systems--both wired services--have offered the only options for mass
market high-speed access. The MMDS frequencies, located in the 2.1 and
2.5-2.7 GHz bands, are suited for the delivery of broadband access to
data, voice and Internet service. The channels allocated to MMDS have
traditionally been used to provide a multichannel video programming
service, so-called ``wireless cable,'' that is similar to cable
television. Rather than being hardwired, MMDS uses microwave
frequencies. Like broadcast television, MMDS is transmitted from a
broadcast tower, usually located on a mountain or tall building, to
special antennas on residences or businesses throughout a local market.
The technology is, however, undergoing rapid changes. In September
1998, the FCC announced new rules which allow two-way service via MMDS
frequencies. When MMDS can be used for two-way service, it will become
a viable broadband service delivery option. The two-way capability
allows a return channel, so MMDS can be effectively used as a wireless
option for interactive applications and two-way data service. The new
rules still contemplate fixed service, even for two-way operations.
The other major service in the band is the ITFS, and is regulated
under Part 74, Subpart I of the Commission's Rules. ITFS is used for
television transmission of academic subject matter to remote
classrooms, or other locations. ITFS channels are from 2500 to 2596
MHz, and interleaved with MDS channels above 2644 MHz. Of the 31, six-
megahertz channels in the MMDS/ITFS spectrum band, the FCC licenses
twenty of these channels to non-profit educational entities. The
channels are used by educators for instructional programming, and
unused channels may be leased to MMDS operators, and can be used for
the same kind of broadband services discussed above. Partnerships have
developed between ITFS spectrum holders and MMDS companies that provide
expertise, revenue, and access to hardware and software to ITFS
partners, to better enable them to build their distance learning
programs.
All of the above bands are used at present. Incumbent users in
these bands have objected to having their operations moved, because of
cost, effects on mission/business plans, and the interruption of day-
to-day activities. However, if the United States is to be competitive
in the marketplace for succeeding generations of wireless
communications, the United States will have to make the appropriate
decisions that will make the necessary spectrum available while
minimizing the effects and costs to those who may have to be displaced.
For those who may be required to relocate, additional spectrum may have
to be found or other accommodations will have to be made to continue
their operations.
Addressing all the issues in selecting a band or bands and
potential relocation of those displaced will require cooperation and
collaboration between the Federal government agencies, the NTIA,
industry, and the FCC. To this end, the Administration believes it
imperative that the U.S. spectrum regulators (FCC and NTIA) and major
stakeholders agree to a schedule of events that will result in spectrum
for IMT-2000 being designated for use by September 30, 2002, which
coincides with Congressional direction that the FCC auction the 1710-
1755 and 2110-2160 MHz. The major ingredients to meet this goal will be
completion of the spectrum studies by the FCC and NTIA as discussed
above, timely coordination between the FCC and NTIA including the
Federal agencies and industry stakeholders affected, and the expediency
of the FCC rule-making process.
The United States also has to focus on of what other countries are
doing. For example, most PCS users in the United States cannot take
their phones to Europe and use them since PCS systems in the United
States use incompatible technologies. U.S. GSM users can roam to
Europe. Therefore, other countries planned use of spectrum for IMT-2000
could have an effect on frequency bands the United States may choose or
on the need for manufacturers to expand the use of multi-band, multi-
technology equipment. However, industry is very concerned about the
impact this will have on the affordability, features, and size of
equipment, particularly if the United States is unable to harmonize
frequencies with the rest of the world. The United States has stood
firmly behind the concept of technology innovation and flexibility in
the past, while Europe has been very successful in promoting single
bands and single technologies.
Another aspect of this decision, is the impact the spectrum
selection will have on the digital divide, the gap between those
individuals and communities that have access to these Information Age
tools and those who don't. NTIA's ``Falling Through The Net'' report in
July 1999 indicated that better-educated Americans are more likely to
be connected to the Internet, whites are more likely to be connected
than African-Americans and Hispanics, wealthier schools are more likely
to be connected than poorer schools, and people with disabilities are
less likely to have access to technology. The United States will have
to evaluate the impact of decision options on the gap and hopefully
make decisions that will close the gap.
The Administration intends to engage in a serious inter-agency
process, working cooperatively with the private sector, to identify
aggressively particular spectrum and develop 3G wireless services. NTIA
will lead this process on behalf of the Administration and we will
regularly inform the Congress on the progress of our efforts.
conclusion
Thank you for this opportunity. I will be happy to answer your
questions.
Mr. Tauzin. Thank you, Mr. Rohde.
The Chair is now pleased to welcome Mr. Tom Sugrue for your
prepared testimony.
STATEMENT OF THOMAS J. SUGRUE
Mr. Sugrue. Thank you, Mr. Chairman, Congressman Markey,
members of the panel. It is a pleasure to be here today. I
appreciate your invitation to talk about spectrum management
matters at the FCC.
I would also like to introduce Dale Hatfield who has
already had a opportunity to speak. I am sure I speak for Dale
in saying we are honored to appear on this distinguished panel.
We didn't realize how distinguished it was going to be at
the time, but with Assistant Secretary Rohde and U.S.
Coordinator Lee, both Dale and I at earlier stages of what are
now somewhat extended careers, served at deputy administrators
at NTIA.
I know we continue to have a great deal of respect and
admiration for those organizations and their current leaders
here today.
Mr. Chairman, it should be obviously to all that wireless
services play an increasingly important role in the lives of
all Americans.
For example, I would bet that most people in this hearing
room are carrying a wireless device, although I hope they have
turned them off so as not to detract us during this fine
testimony.
Mr. Tauzin. Me, too.
Mr. Sugrue. But wireless services are truly ubiquitous.
They are really everywhere. Mr. Chairman, with your indulgence,
permit me to tell you briefly about my experiences just this
morning to illustrate this point.
Let's call it the eight encounters or a wireless kind.
First, I woke up this morning to music coming from my clock
radio which was sent to me by an FM broadcasting spectrum.
As I got up I turned on the television to catch one of the
morning talk shows. FCC rules prevent me from telling you which
one. But that was broadcast using VHF television broadcast
spectrum.
Third, on that show they were conducting an interview with
someone in a foreign country being carried live over a
satellite feed, using international satellite spectrum.
Fourth, the TV show switched to a weather report showing
digital Doppler images from the National Weather Service using
federally allocated spectrum.
Fifth, as I drove out of my house I used my remote garage
opener to close the garage door, using Part 15 Unlicensed radio
spectrum.
Sixth, while driving away, I passed the utility company
employee who was engaging in remote meter reading, no doubt
using Itron technology, fortunately, not out of business yet,
using possibly private allocated spectrum in the MAS band.
Mr. Tauzin. Did it interfere with your heart monitor?
Mr. Sugrue. My pacemaker has been racing all morning.
Seventh, while driving to work I used my own cell phone. I
want to make a point that I used it very carefully, with its
speed dial, hands-free operation, on the way to work to speak
with my secretary, using 800 MHz cellular spectrum.
Eighth, the taxicab driver on the way here was using his
radio to speak with his dispatcher to confirm the pickup and
get assigned his next fare using SMR or private mobile radio
spectrum.
Eight wireless experiences, and all before 10 o'clock in
the morning. The point of this is not only to illustrate how
prevalent these services are in ordinary life, but also to
emphasize that these are wonderful technologies that are so
valuable because they serve real human needs.
We who work in the field can sometimes get so involved in
our discussions about MHz and GHz, about TDMA and CDMA or
whatever, it is easy to lose sight of the fact that real people
use these services.
Wireless technologies and services have a direct impact on
people's ability to do their jobs efficiently, on the flow of
information, on the provision of safety services, and on the
overall quality of life of our citizens.
Mr. Chairman, spectrum management is a major regulatory
function of the FCC. Our written statement outlines our
activities in that regard. But I would like to just turn the
balance of my oral statement to address our spectrum cap
policies which are the subject of a bill that Congressman
Stearns and others on this committee have introduced.
This bill would eliminate the caps, spectrum cap for CMRS
spectrum auctioned in the future and for any licenses
transferred thereafter.
By my reading, the goal of this bill is to preserve a fully
competitive market for CMRS services while at the same time
assuring that carriers have access to enough spectrum to deploy
innovative advance services. On that goal, I can assure you,
Congressman Stearns, we are in vehement agreement.
The FCC's cap applies to CMRS spectrum and provides that no
carrier can have more than 45 MHz in any single market, thus
ensuring at least four competitors in each market. The purpose
is to promote competition. I think the growth of competition in
this industry has been a great success story for consumers.
I have a couple of charts to illustrate that. This first
one looks, I am sure, like a picture of nothing. But what it is
is a picture of the state of competition in CMRS services just
5 years ago at the end of 1994.
I asked the staff to develop a map that showed the areas
that had markets with more than two providers as of that date.
It came back with nothing on them. There was nothing. This was
a tight, government-sanctioned duopoly from sea to shining sea.
Two years later Congress and the FCC working together had
taken action to auction new spectrum for CMRS services and we
were beginning to see the first signs of competition but still
in a very few areas. This is the end of 1996.
Three short years later, now the map of competition has
converted to this rainbow of colors. There are many markets
with six and seven providers and more than two-thirds of
subscribers have access to five competitors that can provide
them service.
The benefits of this outbreak of competition in such a
short period of time are sort of summarized in the last chart.
We call this our up and down chart. All the things in this
industry that you would like to see going up are going up,
subscribership up 400 percent, jobs 300 percent, investment 400
percent in 6 years. Bills and prices going down and the wait
for licenses has been cut by a third.
Mr. Chairman, I see the light is on. I just want to end up
and say we think our spectrum cap policy has contributed to
this. We are interested in working with you and Congressman
Stearns on ensuring that our goals of competition in the future
and a robust industry are realized. Thank you.
[The prepared statement of Thomas J. Sugrue follows:]
Prepared Statement of Dale N. Hatfield, Chief, Office of Engineering
and Technology & Thomas J. Sugrue, Chief, Wireless Telecommunications
Bureau, Federal Communications Commission
Spectrum management is a core responsibility of the FCC, which has
taken on heightened importance under Chairman Kennard's leadership.
Spectrum is a finite and valuable national resource. Management of this
scarce resource has become increasingly complicated over recent years.
Explosive growth in new wireless services has stimulated demand. We are
pleased to discuss spectrum management with the subcommittee
today.<SUP>1</SUP>
---------------------------------------------------------------------------
\1\ The comments and views expressed in this Statement are offered
in our respective capacities as Chief of the Office of Engineering and
Technology and as the Chief of the Wireless Telecommunications Bureau
and may not necessarily represent the views of the Commission or the
individual FCC Commissioners.
---------------------------------------------------------------------------
Rapid advancements in radio technologies in recent years,
particularly in the areas of integrated circuitry, signal processing
and digital systems, have led to the development of a wide range of new
radio communications technologies. The advent of these new technologies
has been accompanied by increased demand for spectrum to permit the
operation and growth of new radio services. These new services have
included, for example, the personal communications services (PCS),
advanced paging systems, intelligent transportation services (ITS),
mobile satellite services (MSS) and two-way multichannel distribution
service (MMDS) operation.
Today, we simply do not have enough spectrum to give everyone all
that they want. This increasing demand is being propelled by a host of
developments including the growing shift of our economy towards the
service sector, the increasing mobility of our workforce, and the
convenience and increased efficiency produced by mobile/portable
communications combined with improved performance and falling cost of
wireless devices. Increasing requirements for public safety and for
national defense systems, satellite services, private users, amateur
radio, and the dramatically growing interest in accessing the Internet
are compounding the shortages of spectrum.
In today's highly competitive environment, our biggest job as
spectrum managers is to find ways to avoid a spectrum drought that
constrains the development of new technologies. The challenge we face
is how to balance competing demands for scarce spectrum while striving
to promote competition through the deployment of new technologies and
services while ensuring that the public interest is best served.
Competition in the Wireless Marketplace
The FCC, consistent with the direction of Congress, is responding
to the explosion of wireless demand by managing the spectrum, to the
highest extent possible with a market-oriented approach. When Congress
created the Commercial Mobile Radio Services (CMRS) in the 1993
Balanced Budget Act, it was with the mandate that the Commission should
facilitate regulatory flexibility and promote market entry when writing
its rules. This was based upon the belief that, in such an environment,
the commercial wireless industry would develop into a vibrant
marketplace known for innovation and intense competition.
In order to remain abreast of how commercial operators' business
plans were unfolding, Congress has required the Commission to provide
annual updates on the status of competition in the CMRS industry. This
coming report, the fifth such one, will show that significant progress
continues to be made towards Congress' goals. Competition continues to
develop in the mobile telephone industry. Just five years ago,
consumers could choose from only two cellular carriers, which generally
offered service on a local or regional basis and engaged in very
limited, if any, competition for price, service packages, or quality.
Today, nearly three-quarters of the U.S. population lives in areas
where five or more mobile phone carriers are competing to offer
service. More people are subscribing to mobile phone service every
year, prices are falling, and subscribers are using their phones more
often. In addition, six carriers have acquired extensive footprints and
are offering their customers service packages that allow them to make
calls from almost anywhere in the country without incurring roaming
charges. Moreover, not only is mobile telephone service an emerging
competitive alternative to wireline telephone service, it is an
extremely valuable service in its own right, as more wireless
subscribers choose their mobile telephone as their only telephone.
The past year has also seen significant developments in the
emerging mobile data sector. Mobile telephone and other wireless
carriers have begun to offer mobile data services such as Internet
access. Many have also announced their plans to migrate to third
generation (3G) networks so that they can offer these services at
faster speeds. The paging industry is positioning itself as a
competitor in the mobile data market by offering two-way, advanced
services such as email and Web content updates. In addition, new
protocols and technologies are being developed that will facilitate the
growth of mobile data in the years to come.
3G and the WRC
Today, the next generation of mobile wireless services will likely
include capabilities for multimedia applications and a wide range of
services, in addition to voice, such as video-teleconferencing, high
speed Internet, and high data rate offerings.
A major step forward for the next generation of wireless services
was taken recently at the World Radio Conference (WRC) sponsored by the
ITU in Istanbul in late spring 2000. The nations of the ITU have agreed
to the identification of additional spectrum bands for possible use by
IMT-2000. WRC-2000 adopted an approach based significantly on the
multi-band, flexible approach to identifying spectrum for wireless
services originally nurtured and fostered in the U.S. In the wake of
the recent identification of multiple bands for IMT-2000 by the
international community, the U.S. is evaluating whether additional
spectrum could, or should, be made available for 3G services and other
advanced mobile communications services in the United States. This task
presents a major challenge to the FCC and the other parts of our
government involved in these studies since all of the additional
spectrum identified at WRC for 3G services is heavily encumbered in the
United States. We hope that our efforts to make spectrum use more
efficient and to make more spectrum available for new services will
ensure that consumers needs are met both inside and outside the
government.
Overview of Spectrum Management Principles
Spectrum is a valuable and finite public resource that must be
allocated and assigned in a manner that will provide the greatest
possible benefit to the American public. Consistent with the FCC's
statutory obligations, we view our mission as ensuring that the radio
spectrum is used efficiently and effectively. One of our principal jobs
is to help to define policies that maximize the efficient use of the
spectrum and promote the introduction of new services and technologies.
There are four major functions in spectrum management: allocation,
service rules, assignment, and compliance/enforcement. The allocation
of spectrum for particular uses and the development of specific
technical and service rules governing those allocations is a crucial
determinant of industry structure and performance. The means by which
we assign spectrum is a critical factor in stimulating competition.
Finally, our rules are only effective if we have a means to enforce
compliance.
Over time, technological advances, growth in user demand, and the
finite nature of spectrum have made our spectrum management
responsibilities increasingly complex. To address the continuing growth
of demand for radio services, we have focused our approach to spectrum
management on allowing spectrum markets to make more efficient use of
frequency bands through new technologies and on increasing the amount
of spectrum available for use. In addition, we have sought to encourage
the development and deployment of new, more spectrum-efficient
technologies that will increase the amount of information that can be
transmitted in a given amount of bandwidth and to allow greater use of
the spectrum occupied by existing services wherever possible.
We would like to briefly highlight the four major spectrum
management initiatives currently underway at the commission.
(1) First, flexibility is increasing. We are seeking to promote
flexibility in our spectrum allocations, i.e., less restrictive service
rules and harmonized rules for like services, in order to allow
licensees to respond better to demand from customers.
(2) Second, is the development of new technologies. We are
fostering the development of new spectrum efficient technologies such
as Ultra-wideband (UWB) and Software-Defined Radios (SDR). This spring,
we issued an NPRM on UWB and an NOI on SDR. Ultra-wideband (UWB)
technology may offer us a wonderful opportunity to use spectrum more
efficiently. This technology appears to be able to operate on spectrum
already occupied by existing radio services without causing
interference. SDR is a new generation of radio equipment under
development that can be quickly reprogrammed to transmit and receive on
any frequency within a wide range using virtually any transmission
format. This new technology could change the way users can communicate
across traditional services.
(3) Third, is promoting the use of higher frequencies. We are
stepping up our efforts to explore the use of higher frequency
spectrum. Just last week we convened a public forum to explore
opportunities at the 90 GHz band. Until recently, the commercial
viability of equipment at this high a level was not feasible. Use of
higher frequency spectrum may mitigate the congestion in high demand
bands under 3 GHz.
(4) And fourth, is the development of secondary markets. We are
exploring ways that the Commission can encourage more active secondary
market trading in spectrum similar to what currently occurs in wireline
bandwidth. Available capacity could be ``leased'' on a temporary basis
to meet short or medium term demand for particular services. Such
arrangements have tremendous potential for all of the parties involved.
The lessor could gain revenues while maintaining control of spectrum
that they feel is needed to meet their long-term strategic objectives.
The leasee would be able to make a profit by providing services to
otherwise under-served customers. Consumers would benefit from the
availability of the service and manufacturers would benefit by the sale
of more products. We, as regulators representing the public, would
benefit from the greater and more efficient use of the spectrum
resource that we have been charged with managing in the public
interest. We convened a public forum in May with a broad range of
representatives from industry and academia to gain insight into why
there has not been active secondary trading and how the FCC could
facilitate such activity. We are currently reviewing the results of the
forum and gathering additional information and ideas. We hope to follow
this effort with a more formal proceeding.
These initiatives represent a balanced approach that will help the
Commission to meet the demand of new users. We cannot allow spectrum to
constrain competition in new mobile services. We must be innovative and
aggressive in using spectrum more efficiently and making more spectrum
available.
Auctions as an Efficient Assignment Tool--two examples
The primary tool used by the FCC to assign spectrum is our highly
successful competitive bidding program. Since Congress gave the FCC the
authority to conduct auctions late in 1993, we have seen wireless
competition explode. Our experience with auctions has shown that
Congress' decision to authorize this approach to assigning licenses was
a sound one. The FCC auctions thousands of licenses each year with
great success. Assignment through auctions has also proven to be the
quickest method the Commission has used in putting licenses into the
hands of those who value them most. Auctions have promoted the entry of
new companies into telecommunications markets and stimulated the
development of innovative wireless services. We have led the world in
demonstrating that an efficient, transparent spectrum auctions process
can work. The FCC has won awards and recognition worldwide for its
innovative computerized simultaneous multiple round auction design,
which allows large numbers of licenses to be auctioned at one time. In
the United States, we have a number of major auctions planned in the
coming months.
700 MHz
First, we have scheduled an auction of 36 MHz in the 700 MHz band
for this fall. This is the television Channel 60-69 analog spectrum
that Congress mandated the broadcasters return, after a transition
period, in exchange for being given new spectrum for digital
television. Our approach to this band illustrates the FCC's thinking in
the spectrum management area, and also demonstrates how difficult it
can be to translate theory into consumer benefit.
The bandwidth available is highly valuable ``beach front''
property. It is well suited for a number of highly valuable uses,
including high speed fixed Internet access that could compete with DSL
and cable modems in the residential market, as well as high-bandwidth
mobile services. We are all well aware that our decisions on the
service rules for a new band like this affect who bids in the auction.
We try to make our rules as technology-neutral as we can, and to let
the market decide how licenses should be aggregated and which services
will be the highest valued uses.
In response to the record, we created two licenses each in six
different regions. We also allowed licensees to aggregate their
licenses within a region. So, we might see aggregation within a region
to provide fixed wireless, i.e., Internet access, or geographic
aggregation to provide mobile wireless. We recognize that even an
auction which offers this much flexibility might still present
challenges to potential bidders to obtain the spectrum they need to
fulfill their business plan. So we are continuing to explore improved
auction designs that would allow for bidding on packages of licenses,
e.g., combinatorial bidding. With package bidding, bidders would not be
restricted to placing bids on individual licenses, but would also be
allowed to place all-or-nothing bids on packages of licenses. This
approach would allow bidders to better express the value of any
synergies that might exist among licenses and to avoid the risks
bidders face in trying to acquire efficient packages of licenses. The
FCC was instructed by the Congress in the 1997 Balanced Budget Act to
test this licensing approach.
Also, with six megahertz of this spectrum we are testing a new
concept called ``guard band managers.'' Guard band managers will manage
spectrum that buffers and protects adjacent public safety spectrum in
the 700 MHz band. At the same time, they will serve as a useful market
experiment because they will need no additional license authority to
lease the spectrum to third parties, and will be able to respond to the
ebb and flow of the market.
C/F Block
Another major upcoming auction involves some significant C and F
block PCS licenses. These licenses were reserved for so-called
``designated entities'' or ``entrepreneurs'' when they were originally
auctioned. Not surprisingly, the interest in this auction is intense
because the available licenses, which can be readily used to provide
cellular-like mobile telephone service, will include many major
markets.
Many large service providers have asked us to conduct an ``open
auction'' for this spectrum by lifting the ``designated entity''
classification for this spectrum, which restricted eligibility to bid
in the original C and F block auction to smaller companies--
specifically entrepreneurs with gross revenues of less than $125
million and total assets under $500 million. Needless to say, those
providers who are eligible to bid under the original DE rules are
arguing strenuously that we keep the rules in place for this auction.
Both sides of the debate have also proposed various compromise
approaches, by which the DE restrictions would be kept in place for
some subset of the licenses and lifted for others. At the same time,
some of these DE providers are also urging that we lift the current
transfer restrictions which prevent them from selling licenses they won
in earlier C or F block auctions to entities who would have been
ineligible to bid in those auctions. The FCC has released a Notice of
Proposed Rulemaking in which it tentatively concluded that it should
amend its rules to change the eligibility restriction for some but not
all of the licenses and that it should address the transfer and
assignment rules. A decision on this is expected early next month.
Spectrum Cap
Having discussed overall spectrum policy let me now turn my remarks
to Congressman Stearns' bill on the CMRS spectrum cap. By my reading,
this bill would eliminate the cap for spectrum auctioned after January
1, 2000, and for any of those licenses transferred or assigned
thereafter.
The Commission in 1994 instituted the CMRS spectrum cap when the it
was finalizing the service rules for broadband PCS. The cap applies to
the 180 MHz of CMRS spectrum used by cellular, PCS and digital
Specialized Mobile Radio (SMR) services predominantly to provide mobile
voice, but increasingly to provide mobile data services and, in some
cases, fixed services as well. It governs the amount of CMRS spectrum
that can be licensed to a single entity within a particular geographic
area. Under the cap, a single entity may acquire attributable interests
in the licenses of cellular, broadband PCS, and digital SMR services
that cumulatively do not exceed 45 MHz of spectrum within the same
urban geographic area, or 55 MHz within the same rural geographic area.
The goal has been to prevent excessive concentration and promote active
competition within each CMRS market by limiting the amount of this
critical resource any one entity could control. In urban areas, for
instance, no one entity can control more than 25% of the available CMRS
spectrum; thus the cap ensures that there are at least four competitors
licensed in each area.
The spectrum cap has played a vital role in ensuring the
development of competition in the market, with all the benefits this
brings to consumers. There remain significant reasons to be concerned
about the effects of undue concentration of CMRS spectrum. For example,
even in major metropolitan markets, where numerous competitors are
offering mobile voice and data services, the two cellular carriers
still have in excess of 70% of the customers in most markets. We
recognize that this situation is changing as new entrants into these
markets begin offering services and competing for customers.
Nevertheless, many firms that have been awarded licenses are still in
the early stages of their network build-out.
Last fall the Commission completed a review of the CMRS spectrum
cap. It concluded that eliminating the spectrum cap at this time could
lead to a reduction in competition through market consolidation.
Specifically, following extensive review--which included analysis of
the state of competition in CMRS markets--the Commission concluded that
the public interest was best served by retaining the prime aspects of
the spectrum cap. It found that the spectrum cap continued to serve
several important purposes: promoting competition, preventing excessive
concentration of licenses, providing incentives for licensees to make
more efficient use of their spectrum, encouraging innovation, and
promoting dissemination of licenses among a wide variety of applicants.
In last fall's review, the FCC also recognized that adjustments to
the spectrum cap rule were necessary to reflect market conditions. For
instance, it revised the cap's attribution rules with respect to
passive investors. These changes make it easier for carriers,
especially small carriers, to raise capital. In addition, the FCC
raised the spectrum cap to 55 MHz for rural areas. The FCC found that
the economics of serving rural areas are different than are urban
areas. In rural areas, there are fewer problems to permitting the
spectrum to be held by a smaller number of players. We are not likely
to have five, six, or seven carriers all offering competing services in
rural markets, the way we do in urban markets and, as a result, the
risks of anticompetitive conduct by foreclosing entry by permitting
some greater degree of consolidation of spectrum are lower. A 55 MHz
aggregation limit in rural areas will permit carriers serving these
areas to achieve economies of scope and scale and will allow greater
partnering between PCS and cellular in those areas, thereby helping to
make competition in rural areas more vigorous. Such partnering might
also further the deployment of PCS and other broadband services to
rural areas.
The ``bright line'' aspect of the spectrum cap also promotes
regulatory certainty and promotes regulatory efficiency. For instance,
the cap greatly expedites the assignment of spectrum using auctions
because it eliminates the need for case-by-case analysis of whether a
carrier's bidding for, and acquisition of, spectrum in particular
markets would result in undue spectrum concentration. The cap also
speeds the processing of transfers of control or assignment of
licenses; in that context also, it provides clear guidance to parties
involved in what the FCC is likely to find acceptable and what licenses
they will likely have to spin-off. Thus, it enhances regulatory
certainty and transparency for licensees and improves regulatory
efficiency for the FCC.
Much has been said about the impact of the spectrum cap on the
ability of CMRS carriers to provide advanced broadband mobile services.
We all support and want to encourage the efficient and timely
deployment of advanced mobile technologies. But we must also be
cognizant of the risks of undue market consolidation if we allow CMRS
carriers to aggregate spectrum in excess of the cap. In a system like
ours that relies principally on market forces, not government mandates,
to ensure the development and deployment of new wireless services and
technologies, one must proceed cautiously before permitting substantial
consolidation and reduced competition in wireless markets. Such
consolidation would likely lead not only to higher prices, but also to
reduced incentives for investment and innovation. Thus, we could well
see a slower, not faster, rollout of advanced wireless services if we
permit this to become a more concentrated, less competitive
marketplace.
CMRS markets are rapidly changing. PCS is becoming available in
more and more areas, PCS and digital SMR are attracting more and more
subscribers, and market share differences between cellular and these
new competitors are narrowing. Technology also is rapidly evolving.
Current digital technologies are up to 20-25 times more efficient than
analog technologies, and even the early implementation of 3G
technologies promises to double or triple that efficiency. While new
services rapidly increase demand, new technologies help respond on the
supply side. The FCC will continue to track these changes and report on
the evolving level of competition in CMRS markets as part of its annual
report on the state of CMRS competition. In the meantime, we will
attempt to ensure that our policies are current and reflect the best
interests of the American public in this rapidly changing environment.
Since issuing our most recent spectrum cap order last fall, we have
sought additional ways of ensuring that broadband CMRS carriers could
obtain needed spectrum for advanced services. For example, the FCC has
stated that as it makes new spectrum available, it will consider
whether to exempt that spectrum from the cap or otherwise adjust the
cap. Certainly, additional spectrum provides a basis for liberalizing
the application of the cap. As we make more spectrum available for 3G
services, including by using some of the bands identified in the WRC,
we will certainly consider how, if at all, to apply the spectrum cap to
those new allocations. The first application of this approach came in
January of this year when the FCC determined that the 30 MHz of
spectrum to be auctioned this fall in the 700 MHz range would not be
subject to a spectrum cap. But it made this decision in large measure
because the CMRS spectrum cap helped ensure that a competitive
structure in the CMRS marketplace was being maintained.
Also, with regard to the upcoming PCS C and F block auction, the
Commission currently is considering allowing large carriers--many of
whom argue for additional spectrum in the near future--the opportunity
to bid for some of these licenses. Further, we are considering whether
to divide the 30 MHz C blocks into three blocks of 10 MHz, which would
allow virtually all carriers to bid for at least some of these licenses
in virtually all markets in order to gain additional spectrum and do so
without any need to exceed the CMRS spectrum cap.
Where the spectrum cap truly interferes with a carrier's provision
of advanced services, the Commission has endeavored to be flexible. In
our 1999 spectrum cap order, we expressly invited carriers to submit
waiver requests if they could credibly demonstrate that in a particular
geographic area the spectrum cap was having a significant adverse
effect on their provision of 3G or other advanced services. Carriers
were asked to identify what additional services they would provide if
the spectrum cap were waived, why such services cannot be provided
without exceeding the cap, and any potential adverse effects of such a
waiver, such as on competition in the relevant geographic market. While
some carriers have requested general waivers of the cap, no carrier has
submitted a specific request demonstrating the need for such a waiver
in any particular market. But we stand ready to consider such waivers
as we pursue the long-term solution of making spectrum available.
Finally, even though our most recent review of the spectrum cap was
completed just ten months ago, the FCC has committed to reviewing the
cap before year's end.
Conclusion
All around the world, the growth in demand for wireless services
has been unprecedented; and estimates are that by the year 2002
wireless users will number toward one billion. An important part of
this demand will come from anticipated new multimedia services and the
Internet.
The nature of the wireless services is highly dynamic; and the
mobile communications services of today, and certainly of those
expected in the future, are a far cry from the first mobile telephony
offerings of two decades ago. Wireless services have significantly
progressed from early analog techniques, through major changes
resulting from digital processing of the signals and advancements in
miniaturization and portability of equipment.
The FCC must now attend to several different aspects of spectrum
management to assure that next-generation mobile services are brought
to the American public on a competitive basis, in a manner to permit
efficient and orderly transition from earlier generation services, and
with sufficient flexibility to permit operational and technological
efficiencies. How all us involved in this dynamic field--including the
Congress, the Executive Branch agencies, the FCC, and the industry--
respond to these challenges will determine how quickly we as a nation
make progress to the next generation of mobile communications. We are
confident that we can all meet this challenge.
Mr. Tauzin. The Chair thanks the gentleman.
The Chair will recognize the final witness on this panel,
Mr. Malcolm Lee, Assistant Deputy Secretary, Department of
State.
We will place Mr. Stearns, the author of the legislation in
the Chair. I have to make another vote in another committee
right now. So Mr. Stearns will take over the Chair.
Mr. Lee, you are recognized for your 5 minutes.
STATEMENT OF HON. MALCOLM R. LEE
Mr. Lee. Thank you, Mr. Chairman. It is a great pleasure to
appear before this committee to address the important issues of
spectrum management and the 2000 World Radio Telecommunication
Conference as they relate to Third Generation wireless in the
21st Century.
I will make three points today.
First, that information technology is transforming the U.S.
economy and wireless communications is at the cutting edge of
this new economy.
Second, that the U.S. delegation to the World Radio
Conference succeeded in our objectives of identifying multiple
bands for possible 3-G deployment and in doing so we
established a sound framework for the deployment of Third
Generation wireless services while protecting incumbent users.
Third, as we look ahead I would like to assure you that the
Department of State will work closely with other agencies,
Congress and the private sector to aggressively carry forward
domestic decisions and policies with respect to Third
Generation and international fora.
The World Radio Conference is convened every 2 or 3 years
under the auspices of the International Telecommunications
Union. It met most recently from May 8 to June 2.
These conferences attempt to establish an orderly framework
for use of the radio spectrum without which chaos would reign
and radio communications would be impaired by interference by
competing signals and transmissions. Third Generation wireless
services are a major part of the agenda for the last
conference. The U.S. position on IMT-2000, as 3-G is known in
the ITU world, is guided by three basic principles.
The first, to take into account incumbent users of the
bands being considered for possible IMT-2000 implementation.
Second, to establish a strong forward-looking framework for
the development and deployment of new technologies.
Third, to preserve flexibility in the domestic
implementation of conference results in IMT-2000. In
recognition of existing systems in the bands being considered
internationally for IMT-2000 and the need to lay a framework
for development and deployment of new technologies such as 3-G,
the U.S. developed the proposal for the conference that
identified multiple bands for possible IMT-2000 use.
This proposal was developed with the full participation of
the U.S. private sector and interested U.S. Government
agencies, and in the end, the World Radio Conference adopted
the essence of the U.S. proposals and identified spectrum in
several bands or portions of bands as being available for IMT-
2000 or other uses.
The results provide us the necessary flexibility to decide
what is best for the U.S. in the development of IMT-2000
service offerings while giving full consideration to the
incumbent users of the identified bands involving market forces
and other domestic and international considerations.
I would like to recognize the truly outstanding performance
of Ambassador Gail Shettler in leading the U.S. delegation.
Against difficult odds, she delivered a truly magnificent
result. We have much to learn from her success.
I would also like to give special recognition to all
members of the U.S. delegation for their tireless efforts.
The road ahead: The results of the World Radio Conference
will be implemented in the United States through processes
undertaken and managed by relevant domestic agencies, principal
among them, the FCC and the Department of Commerce.
The Department of State, in cooperation with other
agencies, will present the results of these domestic processes
before a variety of international fora. There will be several
international meetings in the near future during which we will
have the opportunity to engage other countries in order to
advocate U.S. interests with regard to 3-G wireless services.
Among our objectives at these meetings will be to secure
leadership positions and relevant activities and to shape the
discussions and agendas in a way that will advance U.S.
spectrum policies.
Several of these meetings will tackle tough, technology
work necessary to evaluate the implications of IMT-2000
implementation in the specific bands identified by the World
Radio Conference.
Among other things this work includes technical evaluation
of the ability of IMT-2000 systems to share common spectrum
with incumbent systems without causing interference.
In conclusion, Mr. Chairman, we are pleased to report that
the World Radio Conference 2000 results with respect to IMT-
2000 met U.S. objectives. We maintained the flexibility
necessary to pursue our national prerogatives with the best
possible implementation of IMT-2000 and the several bands
identified at the World Radio Conference.
The U.S. process for assessing the feasibility of
implementing 3-G in these bands has already begun through the
initiatives of the relevant government agencies.
The Department of State is a partner in these initiatives
as we carry forward the results of these U.S. processes to a
growing number of international fora.
Mr. Chairman, I look forward to working with you and this
committee as we carry that agenda forward.
[The prepared statement of Hon. Malcolm R. Lee follows:]
Prepared Statement of Malcolm R. Lee, Deputy Assistant Secretary of
State
Introduction
Thank you Mr. Chairman. My name is Malcolm R. Lee. I am Deputy
Assistant Secretary of State for Economic and Business Affairs and the
United States Coordinator for International Communications and
Information Policy at the Department of State. Working with the
Secretary and Assistant Secretary for Economic Affairs, I am
responsible for the formulation, coordination, and oversight of foreign
policy related to international communications and information policy,
including determination of U.S. positions and the conduct of United
States participation in negotiations with foreign governments and
international bodies.
Before coming to the Department of State in June, I served as
Special Assistant to the President and Senior Director for
International Trade and Economic Policy within the National Economic
Council of the White House. There, I worked on a broad range of
economic and trade matters, including the 1997 World Trade Organization
(WTO) Basic Telecommunications Service Agreement, the U.S.-China
Bilateral WTO Accession Agreement, and legislation recently passed by
the House of Representatives to extend Permanent Normal Trade Relations
status to China.
It is a great pleasure to appear before this Committee to address
the important issues of spectrum management and the 2000 World
Radiocommunication Conference as they relate to Third Generation
wireless service and the 21st Century. I look forward to working
closely with you Mr. Chairman, Congressman Markey, and other members of
this Committee as I fulfill my responsibilities.
Economic and Technological Context
Mr. Chairman, I compliment you for convening this hearing.
Information and communications technology is transforming the U.S.
economy, fueling record growth, higher wages, higher productivity, and
fundamental changes in the way we conduct business and our daily lives.
Information technology (IT) accounts for only 8% of total jobs, but has
been responsible for nearly one-third of U.S. economic growth from 1995
to 1999. Declining information technology prices have lowered the
overall inflation rate by one half of a percentage point from 1994 to
1998. And the production and use of IT was responsible for more than
half of the acceleration in U.S. productivity growth in the second half
of the 1990s.<SUP>1</SUP>
---------------------------------------------------------------------------
\1\ See U.S. Department of Commerce Digital Economy 2000.
---------------------------------------------------------------------------
An integral component of this new economy is the wireless
telecommunications industry. Use of the airwaves--the radio spectrum--
is the lifeblood of this industry, as well as that of other commercial
and governmental users. The next generation of wireless
telecommunication services promises to expand further and revolutionize
this new IT-driven global economy with innovative new services and
capabilities for businesses and consumers.
The 2000 World Radiocommunication Conference
In my former capacity, I was able to attend, for a brief period in
May, the International Telecommunication Union's (ITU's) World
Radiocommunication Conference (WRC). I am pleased to have this
opportunity to describe to the Committee the results of that Conference
as they relate to third generation wireless.
The WRC is convened every two to three years under the auspices of
the ITU with the most recent WRC being held in Istanbul from May 8 to
June 2, 2000. These conferences establish the frequency allocations and
regulatory procedures and regulations necessary for the harmonious
operation of global radiocommunication services. The WRC attempts to
establish an orderly global framework for the use of the radio
spectrum. Without that framework, and without coordination, chaos would
reign and radiocommunications would be impaired by interference of
competing signals and transmissions. The Final Acts of these
conferences are submitted to the Senate for advice and consent to
ratification.
I would like to recognize, at the outset, the truly outstanding
performance of Ambassador Gail Schoettler, former Lieutenant Governor
of Colorado, in leading the U.S. delegation in its preparation of U.S.
positions before the Conference, and in the presentation of those
positions at the Conference. Against difficult odds, Ambassador
Schoettler and her team delivered a magnificent result that preserved
and advanced U.S. interests. We can all be proud of the contribution
she made to this country in this capacity. I would also like to give
special recognition to all members of the U.S. delegation for their
tireless efforts before and during the Conference that resulted in the
solid achievements that we will review, in part, today.
We have much to learn from Ambassador Schoettler'ssuccess and I am
committed to taking whatever steps are necessary, in coordination with
the Commerce Department, the Federal Communications Commission (FCC),
and other interested agencies, to ensure we are effectively advancing
U.S. interests internationally. We must remain vigilant that we have
organized ourselves as effectively as possible, that the private sector
and government agencies are working as a team, and that we begin our
preparations early enough to ensure the best possible U.S. proposals
for the Conference. We must maintain high level attention and reach out
to our international partners. In that spirit, I have consulted with
the leadership of the Department of State, and will be calling a
meeting of relevant agencies to review our preparations for WRC 2003. A
careful review of Ambassador Schoettler's personal specific
recommendations will be part of that process. Both my interagency
colleagues and I will continue consultations with the private sector so
that their views can be integrated into the planning for WRC 2003.
The United States successfully addressed several important issues
at the WRC. These included:
<bullet> Protecting existing radionavigation satellite bands from
allocation to other services and allocating a new band for this
service;
<bullet> Adopting technical provisions for sharing between
geostationary and non-geostationary satellite systems;
<bullet> Fighting off restrictions on the free flow of information by
making sure that content based restrictions were not written
into the Radio Regulations; and
<bullet> Ensuring new broadcasting-satellite channeling plans protected
an acceptable number of U.S. systems and imposed no
unacceptable technical or operational constraints for our
region.
Third Generation (3G) wireless communications, collectively
referred to in the ITU as IMT-2000, was another prominent issue on the
WRC-2000 agenda. The U.S. position on IMT-2000 was guided by three
principles:
1. To take into account incumbent users of the bands being considered
for possible IMT-2000 implementation;
2. To establish a strong, forward-looking framework for the development
of new technologies; and,
3. To preserve flexibility in the domestic implementation of the
Conference results on IMT-2000.
In other words, Mr. Chairman, the goal of the United States, often
in the face of strong opposition, was tomaintain our national
prerogatives for management of potential 3G spectrum. That required
ensuring a result that would allow and encourage the development of new
advanced communications applications while taking into account
incumbent U.S. users of these bands. Maintaining U.S. flexibility for
upcoming national spectrum management decisions was essential to the
United States given important incumbent government and U.S. commercial
users in the bands that a number of prominent international players
sought for IMT-2000 use.
Results of the WRC 2000
At the Conference, the United States faced a strong push by the
European Conference of Posts and Telecommunications (CEPT), many Asia-
Pacific states, and several countries in our region, for globally
harmonized bands for 3G wireless services. These proposals were for the
use of bands with either existing heavy U.S. government use or with
existing heavy U.S. commercial and educational users. I refer here to
the bands 1710-1885 MHz and 2500-2690 MHz, respectfully. The 1710-1885
MHz band is heavily used by Federal agencies, particularly the
Department of Defense, for uses such as point-to-point tactical
microwave relay transmissions and space operations.<SUP>2</SUP> A
portion of this band, 1710-1755 MHz, has already been reallocated in
1999 for non-Government use as of January 2004 under the 1993 Omnibus
Budget Reconciliation Act (OBRA 93). The 2500-2690 MHz band is
extensively used by commercial and educational entities, such as
colleges and universities that are licensed to operate Instructional
Fixed Television Service (ITFS) stations for distance learning
applications as well as for commercial purposes such as the Multi-
point, Multi-channel Distribution Service (MMDS).
---------------------------------------------------------------------------
\2\ For example Telemetry, Tracking and Command (TT&C), which is
used to monitor and control space launches.
---------------------------------------------------------------------------
In recognition of existing systems in these bands, and the need to
lay a framework for development and deployment of new technologies such
as 3G, the United States developed a proposal for the WRC that
identified multiple bands for possible IMT-2000 use. This proposal was
developed with the full participation of the U.S. private sector and
interested U.S. government agencies. In the end, the WRC adopted the
essence of the U.S. proposals and identified spectrum in several bands,
or portions of those bands, as being available for IMT-2000 or for
other services. The result allows for U.S. domestic processes to
evaluate and study future deployment of 3G services.
The WRC decisions on IMT-2000 were consistent with the principles I
stated earlier and with the proposal of the United States entering the
Conference. The results provide us the necessary flexibility to decide
what is best for the United States in the development of IMT-2000
service offerings, while giving full consideration to the incumbent
users of the identified bands, evolving markets forces, and other
domestic and international considerations. The WRC resolution relating
to IMT-2000 and the new spectrum allocation stated:
``. . . due consideration should be given to the benefits of
harmonized utilization of the spectrum for the terrestrial
component of IMT-2000, taking into account the use and planned
use of these bands by all services to which these bands are
allocated.''
The WRC did not assign any priority to the implementation of one
band over another, thus maintaining the implementation flexibility
sought by the United States.
The Road Ahead
The Department of State will work closely with other interested
agencies to ensure that the results of the WRC relating to 3G are
translated into benefits for the U.S. Government, the private sector,
and U.S. citizens. The results of WRC 2000 will be implemented in the
United States through processes undertaken and managed by the relevant
domestic agencies, principal among them being the FCC and the National
Telecommunications and Information Administration (NTIA) at the
Department of Commerce. Assistant Secretary Rohde of the Department of
Commerce and FCC Wireless Bureau Chief Sugrue have outlined their plans
in this regard.
The Department of State, in cooperation with the other agencies,
will present the results of these domestic processes before a variety
of international fora. This requires developing international positions
and strategies--at bilateral, regional and multilateral levels--to
advance U.S. policies and interests. Timely domestic decisions by the
relevant technical agencies on 3G related spectrum will put the United
States in the best position to engage other countries as they formulate
their own domestic policies and requirements with respect to 3G
services.
Mr. Chairman, allow me to note a few of the activities that the
Department of State has already undertaken, or will undertake, to
ensure that the results of WRC 2000 are implemented in a manner
consistent with U.S. principles and global economic goals.
There will be several international meetings in the near future
during which we will have the opportunity to engage other countries in
order to advocate U.S. interests with regard to 3G wireless services.
Among these meetings will be an August meeting of the Organization of
American States Consultative Committee on Radiocommunication Matters
(CITEL) and an international meeting in August of ITU Working Party 8F
which has been assigned the work relating to IMT-2000 and future
advanced mobile telecommunications applications.
Among our objectives at these meetings will be to secure leadership
positions in relevant activities and to shape discussion and agendas in
a way that will advance U.S. spectrum policies. Several of these
meetings will tackle technical work necessary to evaluate the
implications of IMT-2000 implementation in the specific bands
identified at WRC-2000. Among other things, this work includes
technical evaluation of the ability of IMT-2000 systems to share common
spectrum with incumbent systems without interfering with each other's
operations.
Conclusion
Mr. Chairman, in conclusion, we are pleased to report that the WRC
2000 results with respect to IMT-2000 met U.S. objectives. We
maintained the flexibility necessary to pursue our national
prerogatives for the possible implementation of IMT-2000 in several
bands identified at WRC. The U.S. process for assessing the feasibility
of implementing IMT-2000 in these bands has already begun through the
initiatives of the relevant government agencies. The Department of
State is a partner in these initiatives as we carry forward the results
of the U.S. domestic process into a growing number of international
fora.
Thank you, Mr. Chairman and to the Subcommittee for this
opportunity to share with you some of the results of WRC 2000, and to
report on our ongoing activities to promote the full benefits of the
emerging information and communications technology based economy.
I look forward to working with you Mr. Chairman, with this
Committee, with my colleagues at other government agencies, and with
the private sector to ensure that the Department of State, and the U.S.
Government as a whole, are doing everything we can to advance U.S.
interests internationally.
Mr. Stearns [presiding]. Thank you, Mr. Lee.
Mr. Sugrue, when I saw your charts over there, it looked
like even after all time has gone by, and this appears to be
one of the most competitive areas of telecommunications because
those charts were pretty dramatic.
If possible, I think the committee would like to have
copies of those. Were they in your testimony?
Mr. Sugrue. I don't know whether they are in the testimony.
Are they? If not, we will certainly supply them.
Mr. Stearns. We would like for you to supply those.
[The charts follow:]
[GRAPHIC] [TIFF OMITTED]65904.001
[GRAPHIC] [TIFF OMITTED]65904.002
Mr. Stearns. It seemed like you had rural areas where you
still, even at this date, you don't have them. Now, I
understand from the staff in those rural areas that you have
raised the caps to 55 MHz.
Mr. Sugrue. Yes, right.
Mr. Stearns. I guess the idea is there is less competition
there so we will raise the caps. So following that argument, I
would like to say that in Boston, for example, they have AT&T,
Cellular One, Sprint, PCS, Verizon Wireless and Omnipoint and
who knows about tomorrow?
Here in Washington we can choose from AT&T, Cellular One,
Sprint, PCS, Voicestream and Verizon Wireless.
Mr. Sugrue. And Nextel.
Mr. Stearns. So if in the rural areas you are increasing
the MHz, why in the areas where it is very competitive, why
aren't you doing it?
Mr. Sugrue. We get a lot of questions on that because it
looks backwards, just the way you put it, that is, there is
less spectrum congestion in rural areas, so why lift the cap
there?
There are two sides to the arguments about the spectrum
cap. One is the congestion point, but the other is what are the
downsides from lifting the cap which is basically market
consolidation and less competition.
When we looked at rural areas, it seems we were not going
to have, as a practical matter, 6 or 7 competitors in rural
areas. We will be lucky in some of these to have 3 or 4.
As you pointed out, those areas that still had white space
on them were almost all rural areas. The map that had some
yellow in it with only three competitors was also rural areas.
There seemed to be no need to keep a cap on. Remember, the goal
is to ensure competitive market structure.
We want to ensure in Boston and in Washington that we have
an opportunity to have at least 4 and more desirably 5 or 6,
there are six competitors in Washington right now.
The only effect of lifting the spectrum cap in a town like
Washington would be to allow one of the six to acquire the
other. Lifting the cap itself doesn't create one more MHz of
spectrum for the industry as a whole. The pie doesn't get any
bigger. It just means it is divided into fewer slices.
So instead of 6 carriers, we will have 4.
Mr. Stearns. By lifting the caps that would happen?
Mr. Sugrue. By lifting the cap on the present 180 MHz, that
is what would happen. Where I think we are in agreement, as we
go forward and make new spectrum available, I think that is a
good occasion to consider lifting the cap.
Mr. Stearns. So for the auctions that you are talking
about, September or next year, you agree to lift the cap? Are
you saying this afternoon that you agree to lift the caps?
Mr. Sugrue. Well, the Commission did decide that for the
700 MHz auction. I would certainly anticipate that Assistant
Secretary Rohde referred to and Coordinator Lee referred to
that is coming out of the international process, when we
identify that as commercial mobile radio spectrum for 3-G type
services, I can't commit what a future Commission will do in a
year or two, but I think that is a very fair question to say,
``Hey, let's say we put 100 MHz more on the table. How are we
going to treat that under the cap?''
One concern I would have with the approach under the bill,
Congressman, is that it just says ``don't apply the cap at all
to it, no spectrum aggregation limits.''
That would let a single carrier or one or two, but
literally a single carrier, acquire all the spectrum in that
auction.
I think it might be more appropriate and what I think I
would recommend to the Commission at the time, if I am still
there, would be to consider adjusting the cap, you know, if it
is 45, raise it to 55 or something suitable.
Mr. Stearns. Let me, if I could, have staff put up the
chart that I brought with me for my opening statement. I don't
know if you saw that chart.
Mr. Sugrue. I was just looking at it during your statement.
Mr. Stearns. You know, the U.S. is dwarfed internationally
as compared to Japan, Britain, or even Argentina in allowing
spectrum allocations. In fact, many countries including
Australia, Brazil, Korea, the Philippines, Singapore, Taiwan,
and Venezuela don't even have a spectrum cap.
Now, how do you explain that in those countries they don't
even have a spectrum cap, yet you are saying here this morning,
you are conditionally, and isn't it true that Bell South was
denied a spectrum cap waiver for going one MHz over the
spectrum cap?
Mr. Sugrue. No. It was actually for half a MHz, but who is
counting? That is correct, actually.
Mr. Stearns. Don't you think that that is absurd, for you
to deny because of a half a MHz?
Mr. Sugrue. Well, I think the Commission's reasoning at the
time, the argument Bell South made was because they were using
it for data services it shouldn't count against the cap. That
was the principal policy argument.
I think the Commission found no way data services are going
to be part of what CMRS is all about. Certainly as we move
Internet services we wouldn't want a policy that said data
doesn't count for some reason or----
Mr. Stearns. So it was the wrong decision?
Mr. Sugrue. No, I didn't say that. I said that the policy
argument for not applying the cap was it shouldn't apply to
data services. The cap should only be focused on voice
services.
Mr. Stearns. Wasn't it just for that purpose?
Mr. Sugrue. Wasn't it just for what purpose?
Mr. Stearns. When they want this extra half a MHz?
Mr. Sugrue. They acquired a mobile data network which
counted under our cap. It was used exclusively for data. But as
we evolved, the same spectrum will be used for data and voice
interchange. It is now.
Mr. Stearns. But to answer my question----
Mr. Sugrue. Yes. I would like to get back to that if I
could.
Mr. Stearns. All these countries are dwarfing us and you
see some countries that don't have any spectrum cap. Do you
think we are just losing the possibility of innovation in our
wireless industry if we continue to have this cap?
Mr. Sugrue. I don't think so. Dwarfing us maybe in terms of
the amount of aggregation they permit. Let me take the U.K.
because I am most familiar with that. They just did a 3-G
auction. It got a lot of attention because of the amount of
money it raised.
They had the functional equivalent of a spectrum cap, only
they apply it as a one license to a company rule. They had 140
MHz of so-called 3-G spectrum. They divided it up into five
licenses. One was reserved for a new entrant, 35 MHz. The other
4, 1 was 30 MHz and the other 3 were 25. If you add that up,
that is 140.
No one company could get two licenses. In other words,
there was a very clear and very strict limit on spectrum
aggregation in that market.
The U.K. has four 2-G providers. It made the spectrum
management decision that it wants five 3-G providers and carved
the spectrum up accordingly. It could have taken that 140 and
made bigger hunks of it in effect by dividing it only into four
licenses. But it made it smaller because it wanted more
competition.
You can look across Europe and across Asia. No country that
I am aware of is using the transition to 3-G as an occasion to
allow their industry to consolidate down, in other words, to
have a reduction in competition. They are all going from their
so-called second generation base and moving up.
In Europe, at least in almost all the EU markets, there are
going to be 4 to 6 3-G competitors. All we are trying to do is
preserve that same competitive market structure that we think
has served us well here, and will serve us well in the future.
The answer may be that we need to get more spectrum on the
table.
Mr. Stearns. Okay. Thank you. My time has expired. The
gentleman from Massachusetts, the ranking member, Mr. Markey.
Mr. Markey. Thank you, Mr. Chairman, very much. Again, you
know, it has from our perspective, historically, not been how
much spectrum any one company may have, but how many
competitors are in each market, because the essence of our
telecommunications policy in the United States is that we are
trying to induce paranoia in all of the other companies.
The more there are, the more paranoia is induced. We saw
from 1980 to 1992 in a duopoly there isn't a lot of progress.
There just isn't. You are sitting on half a market, you know,
and no one feels they have to innovate and have to lower the
price of the service to consumers.
So we believe that we are in the lead because we really
have done this great job of creating this incredibly paranoia-
driven marketplace that has served us so well and I think it
continues. That is the essence of our policy.
Many of these countries that we are look at over here, they
just don't have a lot of competition inside of their countries.
In fact, the country itself is part of the company and has less
of a stake in ensuring that there is paranoia, because the
government doesn't like to be paranoid, since they have a piece
of the action.
So, necessarily, you have to factor that in as you look at
the rest of the world. They are following us. They are trying
to catch up to our policy, introducing more competition.
So I would like you to start off, Mr. Sugrue, if I could,
by telling us whether or not, depending on the company, if they
have 30 or 40 or 45 MHz right now, generally speaking it has
been utilized fully.
How much is left over? What else can be run out of the
existing spectrum that most of these companies already have in
terms of their capacity to continue to expand?
In the same way we were talking about in the medical
telemetry area, perhaps there is another 5 or 10 years some
people are contending. I guess the meter reading industry is
saying they have so much spectrum right now they are not even
going to use it, the medical telemetry industry. They don't
need any more.
How do you view that issue generally in terms of the
industry incumbents that already have a piece of this spectrum?
Mr. Sugrue. Well, right now, one interesting thing is that
very few carriers, very few carriers have 45 MHz, that is; they
are not cap constrained, at least that is a regulatory matter.
They could acquire more spectrum. We looked pretty carefully at
that with respect to the C- and F-block auction we have
scheduled for November.
Since Mr. Dingell is not here, I guess I can mentioned
that. I was going to avoid raising it.
Mr. Markey. The question now is raised, should we apply the
cap to that spectrum?
Mr. Sugrue. There was an initial question as to whether to
keep it as a set aside or not for designated entities. The
Commission has proposed, it hasn't got to the order stage, but
proposed splitting the baby, lifting it for some and not for
others.
But when we looked at it, it was clear that the Commission
also thought that dividing those 30 MHz licenses into 10 MHz
slices would allow virtually all carriers in virtually all
markets to acquire additional spectrum, that is, incumbent
carriers in the market.
As I said, almost no one is at 45 right now. I should note
that as a practical matter, too, in some of these major
transactions the Department of Justice in its anti-trust review
is more conservative than we are.
In the Verizon-GTE-Vodaphone family of transactions, they
insisted on divestiture of licenses down to 35 MHz in most
markets, whereas we would have allowed them to go up to 45.
On the technology point, Congressman Markey, new
technologies not only will provide a lot of advanced data
services, but are much more efficient in terms of delivering
voice services as well.
Current CDMA technologies deliver about 20 to 25 times over
spectral efficiency in terms of the number of voice channels.
The next generation will double that.
Mr. Markey. So if a PCS company today has 30 MHz, are they
using 10 of that right now, 20 of that right now, 26 of that
right now, on average?
Mr. Sugrue. Sprint, which is the fastest growing carrier in
the country, that they are using ten or less in all their
markets.
Mr. Markey. Of their 30, right now?
Mr. Sugrue. Yes.
Mr. Markey. Mr. Hatfield, can you give us an idea of the
new technologies that are out there that might make it more
possible for the incumbent companies to wring more efficiencies
out of the existing spectrum?
Mr. Hatfield. There are a number of techniques. One is
called compression, where essentially you reduce by using
computer power, reduce the number of bits that you have to
transmit to convey a particular conversation or whatever, and
there is also more efficient, what we call more efficient
modulation techniques that essentially enable you to send more
bits per second per unit of bandwidth.
Then, of course, the whole nature of the cellular idea is
rather than having a single conversation being broadcast
covering a very wide area, you shrink the size of the coverage
area down so that you can use the same frequency over and over
and over again in the same area.
So a conversation here, somebody standing out in the
corridor using a cellular phone, that same frequency can be
used in northwest Washington very easily for another
conversation.
So by shrinking the size of the cells down, you can get
additional use.
Mr. Markey. These two ideas that you just mentioned, do
they wring out an extra 5 percent efficiency or 10 percent or
is it more like 50 percent?
Mr. Hatfield. No. As Tom was saying, they can be very
significant. There are technologies like using very highly
directive antennas so if you and I were having a conversation
the antenna would be pointing at you.
Let me state clearly that these additional technologies
cost some money. So what the public policy tradeoff is is what
is the cost of that additional technology versus the cost of
taking spectrum away because this is all encumbered spectrum we
are talking about now.
So to provide new spectrum for somebody you almost
invariably have to take it away from somebody else and there is
an opportunity cost associated, being an economist for a
moment, there is an opportunity cost associated with that.
So there is a balancing here between the new technology and
the cost of the spectrum because you can make that tradeoff.
Mr. Stearns. The gentleman's time has expired. The
gentleman from Oklahoma, Mr. Largent, is recognized for 5
minutes.
Mr. Largent. Thank you, Mr. Chairman. I just have one
comment and one question. It is interesting talking about the
spectrum because it is a very unique commodity. I can't think
of another resource, call it a natural resource or commodity
that the government essentially owns, operates, controls,
delegates and distributes.
So it really makes it kind of a nuanced subjected to talk
about when you think about it. My question is really pretty
simple and follows along the same lines as Mr. Markey's.
That is, one of the witnesses that will testify on the next
panel made an ominous prediction. Mr. Kelley of Leap Wireless
said that, let's see, I have a quote here, he said ``Leap
Wireless loves its lawyers, it just does not want to pay more
of them to contest the market concentration that is sure to
come if H.R. 4758 is adopted.''
Mr. Sugrue, I would just like you to maybe make a comment
about Mr. Kelley's prediction that market concentration--that
frankly we are seeing it in pharmaceuticals. We are seeing it
in telecommunications. We are seeing it in food services. We
are seeing it in just about every industry.
Do you agree that if H.R. 4758 is adopted, the caps are
lifted, that we would see a market concentration and do you
also agree that it would result in limiting competition in the
wireless industry as opposed to encouraging competition?
Mr. Sugrue. I would agree that before we are able to
allocate and make more spectrum available for these services,
lifting the caps would be a mistake, I think. It would allow
consolidation and that would have, I think, negative impacts on
the industry.
I will acknowledge though, that the bill is forward
looking. Again, it applies to future auctions. Now, we have one
sort of funny twist there in that we have some of the old
spectrum that is in a future auction. That is the C- and F-
block that has been discussed a bit. I would continue to apply
the caps to that spectrum because I think we would see the
consolidation there.
But as I said, the 700 MHz spectrum which was the first new
spectrum we had to apply the cap to, we said, no, that is new
spectrum. We will take that off cap. We are not trying to
constrain people from growing. But I think it is vital to
preserve a competitive market. As I say, when I look overseas I
see them moving to more competition, not less.
Whatever the answer is, and we can talk about what it is,
it is not to permit our competitive market structure, as I
said, to reconsolidate down.
Mr. Largent. When the FCC is considering an application for
spectrum, I guess there is a process that you go through in the
auction where you are applying to participate in the auction
and you have to have some sort of reason for needing the
spectrum.
I assume the FCC would require that. In other words, you
wouldn't just allow a participant in an auction who just wants
to hoard spectrum. Is that true?
Mr. Sugrue. Well, we addressed that in two ways. One, an
auction puts a price on spectrum. We think when you could just
come in and get spectrum for free by pleading your case
effectively and lining up support, we were concerned that was
more of a risk. That is the first step.
Second, we also have service requirements in some of our
services where you have to, for example, PCS and Cellular, the
first of what we call ``build-out'' requirements for our PCS
services have just come due. Those carriers have to file
reports showing they are providing service to a certain
percentage of the customers in their license area.
Then, the third thing is the spectrum cap which prevents
the hoarding. That is, we say up to a certain limit, you can go
up to 45, but not beyond that.
Mr. Largent. Is that within a given market?
Mr. Sugrue. Yes, within a geographic market. We have been
fairly receptive to aggregations across the country. There does
seem to be a trend toward nationwide footprints that seems to
be efficient, that seems to be what customers are looking for.
So we have allowed carriers to coble that together area by area
by area.
We are just very concerned. For example, in Washington we
don't want AT&T and Sprint merging or any of the other major
carriers because we think that would be bad for competition
here or Boston or wherever.
Mr. Largent. Thank you, Mr. Chairman. I yield back.
Mr. Stearns. I thank the gentleman. The gentleman from
Ohio, Mr. Sawyer, is recognized for 5 minutes.
Mr. Sawyer. Thank you very much, Mr. Chairman. Mr. Rohde,
you mentioned that you were looking forward to a time when the
allocation process could be automated to go from weeks or days
to a matter of seconds. Could you tell us how you plan to go
about doing that?
Mr. Rohde. We are in that process right now. As I stated,
we have in the budget request for 2000, seeking money from
Congress to help us further along that process. It is fairly
complicated. It involves us automating the process within NTIA,
but also, since we work with these 53 different Federal
agencies, they need to automate their process as well as they
connect into our agency.
Also keep in mind, a great deal of this allocation work
that we do is classified. So these communication systems have
to be encrypted and they have to be protected because several
of these communications need to be classified.
Mr. Sawyer. Is the success of what you are seeking to do
dependent on concomitant efforts at each of those 50 or so
other Federal agencies?
Mr. Rohde. It is dependent because we have to be on the
same communication network. We have to have the same or similar
automation processes that communicate with each other and NTIA
could have the greatest automated system within our agency, but
if the other agencies do not have that it won't work.
Mr. Sawyer. Does your budget request anticipate that need?
Is it reflected within yours?
Mr. Rohde. It does request that. In fact, it is consistent
with the 80-20 rule that Congress has established in spectrum
management.
What that means is that the request is for $1 million, but
$200,000 would come as a direct appropriation to NTIA which
then would be matched by $800,000 through the agencies because
it is a service to all the other agencies.
Mr. Sawyer. Mr. Sugrue, when can we in the United States
expect to have 3-G technologies available such that, for
example, the single hand set be compatible across a number of
national frontiers?
Mr. Sugrue. I have two answers to that, Mr. Sawyer. One is
at the first level it really is a carrier choice. We in this
country do it somewhat different than they do in other
countries where they allocate spectrum, specify a standard, say
it has to be used for 3-G services, define what 3-G is and so
forth.
We make spectrum available on a more flexible property-like
basis. The current spectrum that the carriers have, they are
free to deploy 3-G services or 3-G type services in it right
now.
Indeed, many of them are in the process of going to what in
the parlance of the industry now is called 2\1/2\ G which is a
little short of full 3-G, but much faster in terms of bandwidth
than what we have now.
We will see those types of things, at least according to
some of the carriers, starting the first half of next year. We
are already seeing data services and Internet access.
Again, pick up the Washington Post and, you know, you can't
avoid, every other page you see an ad, ``Here, buy this
phone.'' The phone prices are falling through the floor as they
almost always do in a competitive market.
So full 3-G, that is probably more 2002, 2003. But here it
will be a more, I think, evolutionary path than sort of Europe
has said 3-G shall occur beginning in 2002. Everyone has to be
there. I think we will evolve over time to it.
Mr. Sawyer. Mr. Lee, and perhaps Mr. Sugrue as well, could
you talk about and develop a little more fully the negotiations
with the Europeans in their rules to allow different 3-G
technologies to compete in their markets and their
harmonization with what we are seeking to do?
Mr. Lee. Certainly. In 1998 the European Commission issued
a directive that there would be one standard for UMTS which is
the EU version of 3-G as it was approved by their Standards
Institute.
This was the government mandating a single standard. We
viewed it as unacceptable and being contrary to long-standing
U.S. policy of standard neutrality. Through a series of very
senior Cabinet level interventions, the Europeans agreed to
technology neutralizing for 3-G open to all standards, but they
saved one standard. They said that their standard had to be one
use throughout Europe, but they would allow one other standard
in each member state.
We prefer non-discriminatory standards, letting the
marketplace decide. We have made our views known to the
Europeans. We will continue to make our views known that we do
not favor a regime which favors any standard. So we are still
engaged with them on this matter.
Mr. Stearns. The gentleman's time has expired. The
gentleman from Illinois, Mr. Shimkus is recognized for 5
minutes.
Mr. Shimkus. Thank you, Mr. Chairman. Let me first correct
for the record something Mr. Hatfield said. He pointed to me
and said I was to the left of Ed Markey. I don't think I have
ever been to the left of Ed Markey, with all due respect to my
friend. I am not sure any of us have been to the left of Ed
Markey.
Mr. Markey. Where is Paul Wellstone when you need him?
Mr. Shimkus. Since I have been here we have gone from the
spectrum is worth a lot of money to the spectrum is worth
nothing to the spectrum is now worth a lot of money again. And
I have only been here 4 years. So I am waiting to see what
happens in the next iterations.
But it does speak to the issue of not making budget
prognoses on spectrum because we are never really sure what
technology will do and how it may be in the future, looking
ahead.
I also do some work with the Army War College in preparing
some of these General-wannabes to come before committees. One
thing I tell them is ``Always be prepared to be bushwhacked and
know your enemy.''
This question is not an attempt to do the bushwhacking, but
it is a question that is directed very similar, not the same
companies, but it has to deal with the private auction of radio
spectrum and the alarm industry.
As I understand in the Balanced Budget Act of 1997 it
instructs the FCC to exempt from spectrum auctions those
private radio operations used to protect the safety, life,
health or property. Alarms can easily qualify for this
exemption. I am interested to hear the FCC's perspective.
The concern is the auction of the large versus the small,
what some think is an exemption for the smaller, regional type
operations and the fear of the crowding out inability then to
expand the business.
Can you give me some of your thoughts, Mr. Sugrue, of the
Commission?
Mr. Sugrue. Yes. Congress, in 1997, did create this new
category of public safety radio services. We have always had a
category of public safety services but it was clear from the
statutory definition that public safety services were really
government agencies, police, fire, et cetera.
This new category though is clear that it is broader than
that. It includes some private types of users that are using
the spectrum in a public safety related manner and to deliver
public safety-related type services.
We have a notice outstanding, that is how we initiate a
proceeding, to address just that and to come up with a
definition. We have a full record on that. We should have an
order on that this fall. I would say October, maybe September,
but October is probably safer, to address what that definition
is and how to apply it.
Congress in a sense took away the exemption from auctions
for private services generally, but then put this one back in
for public safety related private services. That is what we are
wrestling with, how to apply those two provisions.
Mr. Shimkus. And that is why there is a bit of fear in the
industry because they are not sure how the resolution of that
will be. So I throw that out, as you know, as a concern.
Let me also talk about an issue that I have heard on
spectrum auctions and when you go to the auction process, if
there is a high demand for a limited commodity, the price and
the revenues to the government could be at this point in time
pretty high as we saw in the initial auction which then for
some went belly up for a while.
How does the mid to smaller companies, how do we reconcile
and allow them to be somewhat competitive in this market? I am
speaking kind of as a person who believes in supply and demand,
believes in the markets, and believes in competition. But how
do the mid-sized to small or medium-sized companies get
involved in the game?
Mr. Sugrue. In a couple of fashions. First of all, in what
we call our band plan, that is, how many licenses there will be
in terms of the size of the geographic areas and the size of
the spectrum blocks. We try to be sensitive to the needs of
small businesses.
We also have to be sensitive to the other factors Congress
identified including the roll out of services and efficient and
so forth. But certainly we look at that.
We also provide bidding credits for small businesses. We
consistently do that in just about every auction so that a
small business, and there is some head room in that in terms of
how small you have to be, can participate and get like a 25
percent bidding credit. So if you bid a dollar, you only have
to pay 75 cents.
We also permit licenses to be what we call partitioned and
what we call disaggregated, that is divided up so if a big
carrier doesn't want to serve, we hear this a lot from the
rural areas, they don't want to come in to the rural areas,
they can divide their license and essentially transfer it to
the rural areas.
Finally, under Dale Hatfield's leadership, we are looking
at spectrum leasing as an option, whether we can promote that,
which is another way small companies can either acquire
licenses and lease them to others or vice versa, that is, they
can lease from a major carrier spectrum in the areas that major
carriers are using.
Mr. Shimkus. Thank you. Mr. Chairman, my time has expired.
Mr. Stearns. The gentleman's time has expired. The
gentleman from Michigan, the ranking member of the full
committee, Mr. Dingell, is recognized for 5 minutes.
Mr. Dingell. Mr. Chairman, I thank you. I have these
questions for Mr. Sugrue. Mr. Sugrue, this is a question which
will require a simple yes or no answer.
I understand the majority of C-block licenses the FCC
intends to re-auction in November were originally assigned to
NextWave Communications and that NextWave has offered to pay
the government the full amount of the bid which is nearly $5
billion in one lump sum payment. Is that correct?
Mr. Sugrue. I should----
Mr. Dingell. Just yes or no.
Mr. Sugrue. I am recused on the NextWave matter,
unfortunately, because of my prior firm. But I think I can
answer that. I think the answer is yes. Yes, I think I can
answer yes.
Mr. Dingell. The answer is yes?
Mr. Sugrue. I believe so.
Mr. Dingell. Is that true, Mr. Hatfield?
Mr. Hatfield. As far as I know, sir.
Mr. Dingell. Mr. Rohde?
Mr. Rohde. I don't know.
Mr. Dingell. You don't know.
Now, Mr. Sugrue, has the FCC refused to accept this payment
which would resolve all legal questions of title and allow
NextWave to roll out services immediately to the public? I
understand again you are recused, but this is simply a factual
question.
Mr. Sugrue. Well, they have certainly not accepted the
payment. That is true.
Mr. Dingell. Do you agree with that, Mr. Hatfield?
Mr. Hatfield. You are getting beyond my personal knowledge,
but that is my understanding.
Mr. Dingell. There is no one, I think, who would quarrel
with that.
Now, the FCC believes that it has authority to cancel the
NextWave licenses and to reauction them in November. Is this a
judgment which is bottomed on settled law or is it an open
question before the courts?
Mr. Sugrue. The FCC----
Mr. Dingell. Is this a matter which is in litigation before
the courts at this time?
Mr. Sugrue. NextWave has sought Supreme Court review of the
Second Circuit decision that upheld the Commission's decision.
That is correct.
Mr. Dingell. So there is a substantial legal controversy on
this matter, is that not true?
Mr. Sugrue. There is an appeal taken, yes.
Mr. Dingell. The FCC has not agreed with the matter and it
has not been concluded before the courts?
Mr. Sugrue. There are still appeals pending, yes, sir.
Mr. Dingell. Do you agree with that, Mr. Hatfield?
Mr. Hatfield. I am an engineer.
Mr. Dingell. You might give a better answer than the
lawyers. This matter is also before the DC Circuit Court; is it
not?
Mr. Sugrue. Is has been dismissed, but I presume it will be
back there soon, I would guess.
Mr. Dingell. Let's talk here about the value of the bids.
Now, if these bids are under a legal cloud when the auction
commences in November, doesn't that mean that the licenses will
probably be sold for a lower price?
Mr. Sugrue. Risk about ownership could very well affect
price, although the potential bidders we talked to seemed
fairly confident and very enthusiastic about bidding on them.
Mr. Dingell. Of course, that is what you would expect a
bidder to tell you; isn't it?
Mr. Sugrue. Some of them come in and wring their hands
about ``Oh, we can't bid now, we can't,'' whatever. You would
be surprised at how many stories we hear about the problems
with the licenses we are trying to auction.
Mr. Dingell. Are you going to sit there then and tell me
that this will produce the highest possible return for the
government on the sale, when it is under a cloud?
If you were advising a client to buy a property under a
cloud, would you tell them ``bid the top'' or would you tell
them ``bid the lowest?''
Mr. Sugrue. In these circumstances people seem fairly
competent in the Commission's legal position and the
competitive market seems to be driving the price up. I think it
will produce a lot of money, to the extent that is the concern.
Mr. Dingell. But it is a legitimate concern?
Mr. Sugrue. It is a legitimate concern, Mr. Dingell, yes.
Mr. Dingell. Now, I assume the licenses could not be
immediately issued after the auction; is that correct? There
are a lot of questions that will have to be resolved, including
waiting the outcome of the lawsuit because the court may very
well stay the sale until the rights of the parties are
concluded. Isn't that right?
Mr. Sugrue. Well, I shouldn't speculate on NextWave's legal
strategy. People do seek stays of auctions pretty regularly,
every auction.
Mr. Dingell. Young lady, why don't you come up to the
table? Mr. Sugrue is looking very uncomfortable. He is in part
recused and I am just trying to get some factual answers from
him.
Mr. Sugrue. Come on up to the table, Kathleen. This is
Kathleen----
Mr. Stearns. Just give us your name for the record.
Ms. Ham. My name is Kathleen O'Brien Ham. I am Deputy Chief
of the Wireless Telecommunication Bureau.
Mr. Dingell. Now, could you tell us, Ms. O'Brien, that
given the uncertainties involved, why does the FCC insist on
canceling these licenses rather than simply settling the
litigation for one and all, accepting $5 billion for the U.S.
Treasury, and letting the licensees go to work immediately for
the benefit of American consumer?
Mr. Stearns. The gentleman's time has expired. We are going
to have a second round.
Mr. Dingell. Can she just answer my question?
Mr. Stearns. Oh, yes. I am just saying that we are going to
have a second round here and so----
Mr. Dingell. I will be happy to wait for my turn on the
second round, but I sure would like to hear the answer.
Mr. Stearns. Absolutely, absolutely.
Ms. Ham. I should say that there is a pending petition for
reconsideration that NextWave has before the Commission. So the
commissioners themselves will very soon have the opportunity to
address the questions that you are indicating.
Mr. Dingell. How long has that been pending?
Ms. Ham. It has been pending, I believe, since February.
Don't quote me on that, but I believe since February.
Mr. Dingell. My $40 Casio watch says this is July. It has
been pending 6 months and nothing has been done on this during
that time?
Ms. Ham. Well, at the same time that that was filed with
the Commission, NextWave filed a petition for review in the DC
Circuit which was just recently dismissed. The Commission
addressed the petition for review in the DC Circuit.
Mr. Dingell. Which matter has now been dismissed?
Ms. Ham. The appeal that NextWave sought in the DC Circuit
simultaneously with filing a petition for reconsideration
before the Commission was dismissed by the DC Circuit.
Mr. Stearns. The gentleman's time has expired.
Mr. Dingell. Could I just get an answer as to what has
happened to this petition?
Mr. Stearns. Madam, can you just tell him what has
happened?
Ms. Ham. Yes. The matter is pending before the Commission.
The Commission will very shortly address the merits of the
question that you raise about cancellation.
Can I make one point? That is that on the face of all the
licenses that were auctioned, including NextWave, the licenses
were conditioned on full and timely payment. A payment was due
on October 29, 1998.
Other C-block licensees lost their licenses when they
failed to make that payment. That was my only point.
Mr. Dingell. I appreciate your assistance, but it goes
beyond what I want.
Ms. Ham. Okay. Sorry, I am sorry.
Mr. Stearns. The gentleman from New York, Mr. Fossella, is
recognized for 5 minutes.
Mr. Fossella. Thank you, Mr. Chairman. I would yield my
time to Mr. Dingell, but I am afraid his pacemaker would
explode at this point.
Just simply, in your opinion, over the next decade what is
the demand or how much spectrum will be needed over the next
decade, Mr. Sugrue?
Mr. Sugrue. Over the next decade for commercial mobile
radio services? That is hard to tell because there is a race
between the increasing demand and the increasing capacity of
the technology to essentially derive more efficiency out of the
current allocations.
Mr. Fossella. Can you give me a rough estimate? I am sure
there are industry estimates as to what is going to be needed.
Mr. Sugrue. Well, we have at the FCC, tentatively, and
maybe I should let Dale answer this because in part it is a
technology question, but in a policy statement the Commission
adopted last fall, they tentatively identified an extra 85 MHz
that could be allocated for these services.
We have 30 MHz that was referred to at the UHF spectrum
that we are allocating that can be used for this. We have 48
more MHz, that is Channels 52 to 59, another part of the
digital transition.
So we have some spectrum coming down the line that will be
available for these services.
Mr. Fossella. I am just curious to hear over the next
decade what you believe is going to be needed and I am just
curious if you have an assessment.
Mr. Hatfield. If I could ask for a clarification of your
question, are you asking the demand for all uses of the
spectrum or just for advanced mobile services?
Mr. Fossella. Actually, both, if you can. If you don't have
that now, you can provide that. That would be great.
Mr. Hatfield. I shouldn't have asked the question. The only
thing that we can really say is that there is just an explosive
demand that is being driven by the fact we are an increasingly
mobile society. The devices are getting smaller, cheaper, and
more functional and all that sort of thing.
There is efficiency that you can gain in transportation. So
all the forces are working, I think, in the direction of
continued increases in demand, offset, as Tom said, by the fact
that we are getting some help on the technology side as well.
Let me just say specifically regarding mobile, one of the
difficult issues is that it depends upon, for example, if you
believe people on their Palm Pilots will be getting actually
delivered video pictures, for example, that consumes an awful
lot of spectrum. If that market doesn't develop then there
would be correspondingly less.
So it is very difficult for us in government trying to
forecast with any degree of certainty what the market is going
to do even a couple of years from now.
That is the reason the Commission in general has gone to
this more flexible approach where we give the providers the
opportunity to adjust the technology they are using and so
forth to meet the changes in demand.
That is about the only thing you can hope to do, to give
licensees flexibility.
Mr. Fossella. So at this point, it is safe to say you
haven't been able to quantify how much is going to be needed?
Mr. Hatfield. No. Just because the fundamental changes
here, the technology is changing so fast that what we are
seeing is----
Mr. Fossella. If I might, I mean presumably private
industry is assessing their needs right now and planning for
the future. I assume that industry has an assessment of what
the needs are over the next decade.
Mr. Hatfield. Yes. In part of our allocation proceedings,
the industry typically will file reports with us in which they
estimate future demand. As I said, the difficult is that a lot
of those are dependent upon, you know, consumers willingness to
buy certain new features and functions.
It seems like those things are difficult to forecast.
Mr. Fossella. Let me shift gears for a second. I assume my
time is probably running out. I think what Mr. Stearns was
getting at before in terms of the global nature of this
industry and whether the United States is going to be at an
economic or competitive disadvantage, do you believe that the
other nations have allocated and licensed sufficient amounts of
spectrum to meet the needs of their wireless industries.
If yes, do you think the United States has meet that
obligation, and if not, what should we be doing to do so?
Mr. Sugrue. Well, I will take a crack at that. Let me just
comment on industry studies as to their needs. It is important
they do that, but I have never seen such a study that indicated
any industry needed less spectrum than they have.
It is always ``the sky is the limit.'' One virtue, again,
of the auctions program, not to tout that, is that it makes
people sort of put up or shut up in terms of what their needs
are.
I think this industry, in fairness to them, is willing to
put up. They are looking for an opportunity to buy additional
spectrum. I think all the countries in the world are working
toward providing enough spectrum for this next generation of
mobile services, we and Europe, Japan and everyone else.
I think we have some special challenges here. For a variety
of reasons, the spectrum, I think, is even more intensively
used for a variety of uses, both non-government and government
uses in the U.S. than anywhere around the globe. That creates
special challenges and problems in terms of spectrum
management.
For example, we have more broadcast stations than
practically every other country. We had the U.K. up there. For
years they had four national networks. That four channels was
all they needed. They have licensed more broadcast stations
since then. That is just one example. No one has quite the
operations we have.
So I think it is especially challenging to the U.S. to
carve out, particularly in the bands that can be used for
mobile services which are down below three GHz, but I mean
where it is the most crowded.
Mr. Stearns. The gentleman's time has expired.
The gentleman from Virginia, Mr. Boucher, is recognized for
5 minutes.
Mr. Boucher. Thank you very much, Mr. Chairman. Mr. Sugrue,
I also have some questions for you. I am concerned about the
upcoming auction of the 700 MHz spectrum which you now have
scheduled for September 6.
That space, as I am sure you know, is now occupied by
television broadcasters residing in Channel 60 to 69 and it is
to be auctioned notwithstanding the fact that the broadcasters
are not required to vacate that spectrum for many years into
the future.
Even the date upon which the vacation of the spectrum will
be required is somewhat uncertain. That uncertainty has
dramatically depressed the anticipated price that this spectrum
will receive at auction.
In the United Kingdom, a spectrum which I am told has
propagation qualities that are somewhat inferior to our 700 MHz
spectrum, recently sold at public auction for $30 billion.
Now the budget estimate that we have for the sale of our
more robust and better 700 MHz spectrum is $2.6 billion. So you
have $30 billion in the United Kingdom versus $2.6 billion for
a better spectrum in the United States.
That discrepancy is caused by the uncertainty that exists
about when this asset could be delivered to the purchaser. Now,
it seems to me that we are perhaps squandering a budget
opportunity. Here is an example of where budget policy is
driving spectrum decisions and not even doing so in a way that
is wise from a budgetary standpoint.
I would like to ask you if you first of all share these
concerns, and second, if you do share these concerns, if you
would agree that it would be in our national interest to
postpone this auction and to have this auction at a time when
we have some measure of certainty about when the spectrum is
going to be vacated by broadcasters and be made available to
the purchasers, an event which would dramatically increase the
price that would be paid.
I would also like to ask you what would have to happen for
this impending auction to be delayed.
The final question I would ask you, and you can answer
these in any order that you like, is what in your opinion is
the latest date, given current circumstances, by which
broadcasters would be required to vacate Channel 60 to 69?
I remember when we were having the discussion about
allocating spectrum to broadcasters for the digital transition
that we made an agreement that they would not have to surrender
spectrum back to the government until such point in time as the
digital transition was complete. By that we meant that the
consumer premises equipment, the TV sets in homes, would have
to be digital compatible.
I think the figure we set was something like 80 percent of
television sets being digital compatible. I can just about
assure you that the last analog TV set in America will be in my
Congressional district. It is going to be a long time before we
get 80 percent digital compatibility with TV sets where I live.
So with that the standard, when do you think we are going
to get to that point, if that is the standard. If it is not,
when do we get to the point where we have some certainty about
when the spectrum is going to be vacated and be made available
to the purchaser?
So with that group of questions I would be very interested
to hear what you have to say.
Mr. Sugrue. Well, I think I will take them in random order.
I would just like to note initially that the schedule for this
auction wasn't our idea in the first instance. It was mandated
by an act of Congress, I gather for budgetary reasons. There is
still on the books in the Communications Act, a date that says
``you shall auction it by such and such a date.''
I know we did move this auction a little bit. We had
scheduled it for May originally, and move it to September,
which did place in jeopardy getting the money in the treasury
by the time specified in the legislation. That made everyone a
little uncomfortable, but we thought it was appropriate to do
so.
But there was at least some feeling that if we held the
auction within the timeframe Congress had specified that we
would at least come close.
I know at least one of the Commissioners, and this will be
a decision they will make, has already said he would be
uncomfortable, indeed I think he has said ``opposed'' to moving
the auction without a change in the law.
Now, others may feel differently about it, but I just
wanted to put that sort of framework on it. I will certainly
report back, Mr. Boucher, that you, and I heard the Chairman's
opening remarks, have expressed these views and I think quite
well.
I think it is a problem when you are auctioning off
spectrum that is encumbered. Usually when we do this we have a
plan in place that has a voluntary relocation negotiation and
so forth that is followed eventually by a mandatory relocation.
So that a year or 2 years, at least 3 years out or
something you can see at some point the Commission will step in
and force people to move.
Mr. Boucher. Well, Mr. Sugrue, let me just say that no
matter what happens, the money that is realized from this
auction is not going to inure to the fiscal year 2000 budget.
Now you are trying to auction this in fiscal year 2000.
What is the harm in delaying this even a year? You could
then account for that money in the next fiscal year, which is
when it would be received anyway. Is there any harm in doing
that?
Mr. Sugrue. I am not a budget expert. As you put it, I
wouldn't see any harm, but the law----
Mr. Boucher. I am going to yield to Mr. Dingell who has a
question on this.
Mr. Dingell. The FCC has said that they don't have to
vacate these channels until 2006. The gentleman here is asking
a very important question. There is a voluntary relocation they
might make.
Now ``voluntary'' means just that. It means if they really
want to they can, but they don't have to. So all this time they
are going to be waiting while it is decided whether or not they
are going to pay, how much they are going to pay, and when they
are going to get off.
They are essentially going to be buying a depreciated asset
because they are buying something which is valued at being
realized at some conjectural time in the future.
Now, how do you defend that? How does the Commission defend
that?
Mr. Sugrue. Well, again, in the first instance, we moved on
this at the direction of Congress that required us to auction
it off. If I could just lay out, perhaps, a somewhat different
scenario, just to argue the other side.
Mr. Dingell. Defend it, if you will.
Mr. Sugrue. One way to help facilitate the transition of
digital television is, if we get the new licensees out there
they will have an incentive. This is very valuable spectrum, I
agree with you 100 percent. This is beach-front property.
They will have the incentive to negotiate with the
broadcasters. It will be a pretty penny, Mr. Dingell, I agree.
Mr. Dingell. It is going to cost the taxpayers a lot
because of the way you are proceeding. You are going to get a
lot less for this than you would have gotten if you had handled
the matter better.
Mr. Stearns. I would remind the gentleman that we are going
to have a second round of questioning here. Mr. Sugrue, why
don't you finish up if you have your answer and then we will go
to the second round so that all members can pursue this?
Mr. Sugrue. Congress changed the law last year to require
the accelerated auction, i.e., required us to auction off this
spectrum sooner than 2006. I think the thought was it has some
value in the commercial marketplace.
If you look at a map of the country, and I have one but not
with me, of where these stations are, Channel 60 to 69 of the
broadcast band are the least occupied channels. There are parts
of this country where this spectrum is free and clear and
usable.
Within some cities, parts of it are occupied but other
parts are available for use.
Mr. Stearns. The gentleman's time has expired.
The Chair recognizes himself for 5 minutes. We will pursue
this a little bit. You have the public interest standard and
then you have the Appropriations Committee. Under the public
interest standards, can't you decide to delay this because you
have your comment period coming. The dates of your comment
period are like the end of September.
Yet, you have designated September 6 as the date you are
going to do the auction on the 700 MHz. I think the first
question is, can't you, on the public interest side, decide to
delay this? I think that is what you are hearing from the
committee. You seem reluctant to want to do anything.
Mr. Sugrue. We moved the auction one time and all. I can
tell you the Commissioners are reluctant to move it
dramatically again because there is a specific deadline in the
law.
As I said, I will report back the in of the members of this
committee in seeing that auction moved, despite the provision
of the law specifying a date.
While I am a lawyer, I haven't practiced in a while. I
would have to check whether the public interest standard can
overrule explicit directions in the Communications Act. But if
it does, we will have a little fun with it.
Mr. Stearns. We are told we don't want you to go down that
road. I mean I don't want to kill a dead horse. But you have a
comment period from August 16 to September 15, yet you have
given notice that September 6 is when you are going to do that
auction.
What can the Justice Department or the FTC do to prevent a
company from buying all the spectrum?
Mr. Sugrue. Very little. Well, buying the spectrum, it
depends whether it is at auction or through a merger. At an
auction there is no particular Justice Department review at
that time.
That is strictly a licensing matter under the exclusive
jurisdiction of the FCC. So decisions as to how many licenses
one company can acquire in an auction are a matter under the
Communications Act for the Commission.
The Department of Justice and the FCC share jurisdiction.
Under Hart-Scott-Rodino, the Department of Justice reviews
certain types of mergers and the FCC reviews transfer of
licenses and sometimes those involve the same transactions.
Mr. Stearns. Is there any type of auction rule that you can
do to prevent folks from buying all the spectrum? Is that a
technical feasibility or is that a possibility to do the
auction rules in such a way?
Mr. Sugrue. Sure, we could----
Mr. Stearns. Would that solve your problem?
Mr. Sugrue. We do limit sometimes. For example, we have a
restriction that we just sunset for what we call LMDS spectrum.
That is spectrum that can be used for wireless local loop
services, broadband services, fixed services, that prohibited
telephone companies and cable companies from bidding on that
spectrum in their operating areas to promote competition.
We could limit the number of licenses a carrier can
acquire, any single carrier can acquire in an auction. The
spectrum cap is just another way of doing that. Frankly, it is
a more flexible way of doing that.
Mr. Stearns. Following what Mr. Boucher mentioned about
with the broadcasters vacating the channel, what private and
public procedures are you folks doing? I mean this is not
something that has just come to your attention today. What
procedures and plans have you put in place and can you tell us
what they are?
Mr. Sugrue. The procedures and plans, the recent order the
Commission adopted established certain guidelines and
presumptions for voluntary transactions. By the way, we read
the act as not permitting us to have mandatory relocation.
I think Congress was fairly clear that the broadcasters
don't have to move out of that spectrum and we can't order them
to move out of it until 2006 and even then only under the
conditions that Mr. Boucher referred to which was 85 percent
DTV penetration and certain other conditions.
If we could read it to have a mandatory relocation, say,
you know, we think it is better for you to move in 2004, at
least we in the Wireless Bureau, my friends in the mass media
may feel differently, but we in the Wireless Bureau, I think,
would welcome the ability to do such a reading.
What we said in the most recent order was, ``You come to us
with a deal where a broadcaster agrees to move early and the
conditions in the local market are 1, 2, 3 and 4, there will be
a presumption, a rebuttable presumption, but a presumption that
that transaction will be approved.''
We are trying to provide some certainty, albeit within the
voluntary negotiation framework, for band clearing to take
place.
Mr. Stearns. My time has expired. I just want to tell all
members, on this second round what we intend to do is finish
this and then adjourn for lunch and then come back with the
second panel.
So at this point, Mr. Markey, the gentleman from
Massachusetts, is recognized for 5 minutes.
Mr. Markey. Thank you. I just have one question and that is
again for Mr. Sugrue. I would like Mr. Rohde to answer it as
well.
Can you give us an update on progress on implementation of
the enhanced 911 service? As you know, Mr. Tauzin and I and
other members on the committee worked together on a bill signed
into law last year on Wireless 911 services.
We have a strong interest in seeing wireless help save
lives. What is the status of the FCC's implementation of that
accurate location technology and, Mr. Rohde, what is the
position of the administration on that issue?
Mr. Sugrue. The date we established for the beginning of
the rollout of E911, and it will be a transition because it is
like all these things are, is October 1, 2001.
Last year we required all the carriers to file reports with
us by this October 1, a year ahead of time, on their plans to
implement.
This was to get sort of a head start as to where people
stood, how they were going to implement, what problems were
going to occur, so we didn't walk up to October 1, 2001 and
then the sky is falling, it can't be done or whatever.
So we are trying to get ahead of the curve on that. We have
been talking with carrier, technology vendors, manufacturers
and the public safety community. All four of those groups have
to be involved to have this be a functional system as to where
things stand and where things need to be done or improved.
Mr. Markey. Mr. Rohde?
Mr. Rohde. The administration obviously supported that
legislation. At this time, as you know, this is really a matter
where they are proceeding in implementing that. We have not,
the administration has not seen anything that has caused us to
feel we need to comment at this point. So we are just waiting
and watching the FCC's proceedings.
Mr. Markey. Believe it or not, there are now 100,000 911
calls made everyday on wireless technology. So, obviously, it
is critical that those safety issues, those emergency calls,
are protected because it is going to increase and the public
safety must be given the highest priority as we are working
through this issue.
Mr. Stearns. I thank the gentleman. Mr. Dingell is
recognized for 5 minutes.
Mr. Dingell. Mr. Chairman, thank you. For Mr. Hatfield, Mr.
Hatfield, do you agree or disagree with the statement that
digital service can provide 20 to 25 times as much capacity as
analog?
Mr. Hatfield. It depends upon the base of what the analog
you are talking about----
Mr. Dingell. Now you are sounding like a lawyer.
Mr. Hatfield. I am trying not to. That sounds aggressive,
but technology has been changing the rate. You look at the
original analog systems that we installed in this country----
Mr. Dingell. At this time it can provide 20 to 25 times----
Mr. Hatfield. That is aggressive.
Mr. Dingell. That is aggressive? But we would assume that
the FCC would aggressively manage this, could we not?
Mr. Hatfield. Yes, I think those sort of numbers would come
from the----
Mr. Dingell. Let us go to the next question. I don't mean
to be rude, but my time is very limited here.
Do you know how much spectrum is used by the incumbent
carrier such as Bell Atlantic and SBC, that is currently
devoted to analog use? I believe in the case of Bell Atlantic
it is 51 percent analog and in the case of SBC it is 59 percent
analog. Is that right?
Mr. Hatfield. I have no reason to doubt that.
Mr. Dingell. Mr. Rohde, do you agree or disagree?
Mr. Rohde. I do not know.
Mr. Dingell. You don't know.
Mr. Sugrue?
Mr. Sugrue. All the cellular carriers are still providing
substantial amounts of analog service.
Mr. Dingell. We could pick up a huge amount of spectrum by
simply requiring them to move at an early time from where they
are with analog to digital; is that not so? Yes or no?
Mr. Sugrue. Moving to digital, yes, creates more spectrum.
Mr. Dingell. It would create a lot more spectrum. Now, if
we leave this situation go on in the course that it is, we open
new spectrum to them, give them a opportunity to bid on it.
They then can bid on it, get that new spectrum and then convert
from analog to digital and have a whole lot more spectrum;
isn't that right?
Mr. Sugrue. I didn't follow every step in that process, but
I think generally I agree with that.
Mr. Dingell. Okay. And that would tend again further to
diminish competition in terms of providing public service;
would it not?
Mr. Sugrue. Consolidation of providers in this market would
diminish service in my view.
Mr. Dingell. That is right. Now, does the FCC have a rule
requiring these companies to maintain analog service?
Mr. Sugrue. The two cellular carriers we do, yes.
Mr. Dingell. You could repeal that, could you not?
Mr. Sugrue. Yes, we could.
Mr. Dingell. When does the FCC plan to look at the wisdom
of this rule and consider repealing it so that these companies
can take advantage of additional capacity?
Mr. Sugrue. We are going to be looking at that the second
half of this year.
Mr. Dingell. The second half of this year? Is this going to
proceed as speedily as the other matter we discussed earlier?
Mr. Sugrue. At least.
Mr. Dingell. You have not comforted me. Now, given the
uncertainties involved, why does the FCC insist on canceling
the NextWave licenses rather than simply settling the
litigation once and for all, accepting $5 billion on behalf of
the U.S. Treasury and letting the licenses go to work
immediately for the benefit of U.S. consumers?
There must be a good reason for this. Could somebody come
forward and tell me?
Mr. Sugrue. Could Ms. Ham respond?
Mr. Dingell. Ms. Ham, without obfuscation, could you please
give me an answer to that question and not to other questions?
Why?
Ms. Ham. Again, I don't want to evade your question, but
you have to understand the matter is pending.
Mr. Dingell. All I want is an answer to my question, not to
someone else's.
Ms. Ham. Fairness to all and process. The auctions program
assigns thousands of licenses.
Mr. Dingell. The answer here, I think, simply is that there
is no reason. Isn't it?
Ms. Ham. No. I think the answer is that we set out rules.
We condition the licenses on full and timely payment and we
want to enforce that as to everybody. So from the Commission's
perspective, it is just following our rules and our process.
Mr. Dingell. When did the company not make a full and
timely payment?
Ms. Ham. The Commission had suspended the payments for the
C-block while it underwent a proceeding. All the C-block
licensees were apprised of what the schedule for the payments
would be. A payment was due on October 19, 1998.
Four C-block licensees came in and asked for a waiver of
that payment deadline. NextWave was not one of them. The
Commission denied that waiver, not once but twice.
Mr. Dingell. NextWave had already filed for bankruptcy
protection at this point.
Ms. Ham. NextWave had already filed for bankruptcy
protection at that point, yes.
Mr. Dingell. So now NextWave did not have to make that
payment because they had filed for bankruptcy protection; isn't
that right?
Ms. Ham. Again, the government is in litigation. You are
putting me in a very awkward situation given that the
government is in litigation on this very issue, which I think
is what we are on appeal for.
Mr. Dingell. Are you prepared to sit there and tell me that
FCC is not required to wait for the courts to settle this
matter?
Ms. Ham. I will tell you that I have been involved in the
auctions program almost from the start. Every auction is
contested. We deal with litigation. There is an 800 MHz auction
that is going to start very shortly. A stay petition has been
filed on that auction. My only point is that it is not unusual
to have litigation associated with an auction.
If we caved every time somebody filed a litigation against
us we would never conduct an auction. So I think we have to
proceed. Our ruling from the Second Circuit was a very strong
one because it goes to the question of our authority over the
licenses.
From the Commission's standpoint, this is an issue of
jurisdiction, of who gets to decide issues of assignment of
licenses, bankruptcy judges or in the instance of the Second
Circuit, they said that these matters have got to be reviewed
by the Commission and then by the DC Circuit which has
exclusive jurisdiction over licensing matters emanating from
the FCC.
Mr. Stearns. The gentleman's time has expired.
The gentleman from Ohio, Mr. Sawyer, is recognized for 5
minutes.
Mr. Sawyer. Thank you, Mr. Chairman.
Just to follow up on that question, is the question of
efficiency of current use of spectrum a factor in granting
additional spectrum to current licensees?
Mr. Sugrue. I hesitate only because if you are under the
spectrum cap right now, we don't look at whether you are using
your spectrum efficiently or not.
Mr. Sawyer. Should you be?
Mr. Sugrue. I don't think so. I think one virtue of the
spectrum cap we haven't gotten to is that it provides clarity,
transparency, people understand it.
I was in private practice for almost 4 years between my
various government stints and there were a lot of transactions
we dealt with.
One nice thing in dealing with the wireless side as
compared with some other types of transactions where you knew
if you could structure your deal so that you came within the
spectrum cap you would have no trouble at the FCC on the
wireless side. You would go through.
On the other hand, if you were over that particular market,
you had to come up with a divestiture plan, a spin-off plan.
Mr. Sawyer. Is it possible to drive measures of comparative
efficiency that would be beneficial to the efficient use of
available spectrum?
Mr. Sugrue. It conceivably would be possible. I should say
this, actually, in services that we do not auction we have
rules like that.
Mr. Sawyer. How do you plan to deal with the allocation of
spectrum to departments like DOD that don't want to give up
current spectrum allocations?
Mr. Sugrue. Very carefully.
Mr. Sawyer. Mr. Lee, I hope you are listening carefully
because I am going to ask you to respond from a point of view
of our dealings with the Europeans in particular.
Mr. Rohde. My friend, Mr. Sugrue, is asking for relief, so
maybe I will provide it. Your question, actually, is more
appropriate to NTIA because we deal with them about the Federal
Government spectrum.
One of the topics we are discussing at this hearing is IMT-
2000, which, among the spectrum bands that were identified at
the World Radio Conference for the development of IMT-2000, it
identified three basic bands.
A couple of those bands involve government incumbents such
as the Department of Defense.
Mr. Sawyer. You now stipulated to the basis of my question.
It is the answer I am looking for.
Mr. Rohde. Right. The question is how we move forward?
Mr. Sawyer. Yes.
Mr. Rohde. We have to move forward in a very conscientious
collaborative manner in which we are getting the Federal
agencies and also the private sector, who also has incumbent
interest in other bands that have been identified, to look at
what is exactly the best process for us to proceed to identify
additional spectrum, if indeed additional spectrum, wherever it
is found, whether it is Department of Defense incumbent
spectrum or private sector or whatever, part of that process
has to involve a look at how do you compensate the incumbent
use.
One of the challenges we have in this country is that we
don't have spectrum reserves. All of it is being used.
Mr. Sawyer. Should efficiency in use of that spectrum be a
factor as you measure further allocation of spectrum?
Mr. Rohde. It certainly should and also, as I said in my
testimony, we at NTIA, as the managers of the Federal spectrum
with these Federal agencies, we are pushing upon them
technologies and procedures in which they can more efficiently
use the spectrum they have.
Mr. Sawyer. Mr. Lee, when we ran out of time the last time
we were talking you were talking about the pathway for future
negotiations with other jurisdictions.
Could you comment on Mr. Rohde's and Mr. Sugrue's comments
on agency allocation from that point of view?
Mr. Lee. Right. As Assistant Secretary Rohde said, the work
result was we identified several bands. The next step is to
decide where we in the United States, where Third Generation
wireless can go in the spectrum. That is being studied.
The international is fluid. Countries are making their
national decisions. Assistant Secretary Rohde is committed to
try to move the process quickly. But timely domestic decisions
on these questions of spectrum and 3-G related issues, well,
timely decisions will put the U.S. in the best position to take
our national policies internationally as other countries make
their decisions.
Mr. Sawyer. Mr. Rohde, Mr. Lee, how would you counsel us to
press our European colleagues as we try to reconcile the
decisions they make with the ones that we foresee as important
to us?
Mr. Rohde. Well, I think the short answer to that is to
work closely with us as we engage with the Europeans on this. I
mean, I was at the World Radio Conference and saw firsthand the
challenges that we have in this international fora.
Part of that is that we have a philosophically different
approach to spectrum policy and telecommunications policy than
a lot of our European partners do. We have a more government-
mandated approach and we have more private sector approach.
It is very important that the Congress work closely with
the State Department and NTIA, the FCC, as we go into these
international fora so that we can represent the interests of
the U.S. industry and the U.S. consumers in the best way
possible.
Mr. Sawyer. Thank you very much.
Mr. Stearns. The gentleman's time has expired. The
gentleman from Virginia is recognized for the final series of
questions for 5 minutes.
Mr. Boucher. Thank you very much, Mr. Chairman. Mr. Sugrue,
I want to return to the 700 MHz issues for a few moments and
just respond to a couple of the things that you said in
response, I think, to Mr. Stearns' questions a few moments ago.
You were stating as a possible justification for going
ahead with this auction in September the potential that if you
had actual wireless license holders trying to get into the
spectrum at a time when broadcasters were already there, that
it might promote negotiations between those license holders and
the broadcasters on a way to encourage the broadcasters to
vacate at an early date.
What I am told about those negotiations, to the extent that
they have already begun, is that they are going pretty badly.
The broadcasters are asking for tremendous compensation.
For example, in some cases they want to share revenues with
the wireless potential license holders. They want half of
revenues in some cases. In other cases they are asking that the
potential wireless license holders pay the entire cost for the
transition to digital as a way to encourage them to get out
early.
So it would appear to me that in these cases the
negotiations are not going to fare very well. That probability
is going to depress even further the amount of money that the
wireless companies are willing to bid in this auction.
You know, our budget estimate is $2.6 billion. I am told
that we may not even get that much. Let me stress again that
this is for a set of frequencies that are more robust than what
brought $30 billion in the United Kingdom. And we may not get
$2.6 billion.
I think these facts underscore the need for the Commission
to do whatever you can to exercise whatever discretionary
authorities you have to delay this auction.
I think you have heard a clear statement from this
committee today that it needs to be delayed. It is not even
good budget policy to auction at this time, much less good
spectrum management policy.
I would encourage you to do what you can. Take the message
back. Let us try to get this delayed. Bluntly speaking, we
don't have time in this legislative year to pass a bill. We
have 5 weeks of Session left. You have observed the Congress
long enough to know how long it takes to pass anything around
here. We, bluntly speaking, don't have the time to pass a bill
to delay this auction.
But it needs to be delayed. The government is foregoing a
tremendous amount of budget opportunity here is we force this
auction now. So I just hope you will take that message back. I
would welcome anything you have to say. That is all I have to
say Mr. Sugrue. I will just assure you, I will take this
message back. I am meeting with the Chairman at 2:30 this
afternoon on a spectrum-related matter, but I assure you that
this will be No. 1 before we get to that. I will express your
views and those of the other members of the committee on it.
Mr. Boucher. All right. Thank you, Mr. Sugrue.
Mr. Stearns. I thank the members and I thank the witnesses
for their participation. The subcommittee will be in recess
until 1:30.
[Brief recess.]
Mr. Tauzin. The committee will please come to order. The
Chair obviously wishes to apologize for his absence. I
understand you had a little fireworks while I was gone.
We are going to try to calm things down now. We will get to
the second panel. With my apologies, we have had both committee
votes and floor votes that have taken us away.
The second panel will consist of Mr. Craig Smith, Vice
President, Strategic Planning, SBC Wireless; Mr. Dennis Strigl,
President and Chief Executive Officer of Verizon; Rudy Baca,
Global Strategist of the Precursor Group; and Mark Kelley,
Chief Technology Officer of Leap Communications International.
Gentleman, thank you so much for your patience and for
waiting so long to testify. Other members will be arriving as
this vote finishes on the floor. I apologize for the lack of
their presence as well. This is a long day already. Thank you.
Before I introduce you and get you talking, I just thought
of one feature of the wireless communication industry which is
most disturbing to me. I take my phones off in the office when
I have guests come in to visit with me. But they come in with
their phones on. There ought to be some rule that the phones go
off when-if anybody has a phone on, take it off right now so we
can have a quiet hearing.
Mr. Craig Smith is Vice President of Strategic Planning,
SBC Wireless.
STATEMENTS OF CRAIG M. SMITH, VICE PRESIDENT, STRATEGIC
PLANNING, SBC WIRELESS; DENNIS F. STRIGL, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, VERIZON WIRELESS; RUDY L. BACA, GLOBAL
STRATEGIST, PRECURSOR GROUP; AND MARK KELLEY, CHIEF TECHNOLOGY
OFFICER, LEAP COMMUNICATIONS INTERNATIONAL
Mr. Smith. Thank you, Mr. Chairman. My name is Craig Smith
and I am Vice President, Strategic Planning, for SBC
Communications.
Spectrum planning for our wireless affiliate, SBC Wireless
is one of my principle responsibilities. Let me begin by
thanking you and the members of your committee for providing me
the opportunity to speak with you today on this vital issue to
the United States and to its many current and future wireless
customers.
SBC Wireless serves customers in 26 States, in Washington,
DC and in two U.S. territories, with subscribers in 9 of the
top 10 markets and 31 of the top 51 markets in the United
States.
Mr. Chairman, radio spectrum is a scarce resource critical
to the operation of all wireless systems. In most cases the
acquisition of new spectrum is not as simple as buying
additional switching or transmission equipment from a vendor or
deploying new fiber systems in the ground to meet growing
broadband service needs and terrestrial wire line networks.
By contrast, wireless operators, in order to serve the
growing needs for new services through the use of limited
spectrum resources, must have a firm vision of their future
spectrum needs and a strategy for obtaining the right spectrum
in the right quantity and the right place and at the right
time.
Of vital interest to wireless carriers, spectrum allocation
decisions involve the identification of available of
potentially available spectrum for various uses.
Since domestic spectrum allocation decisions are in part
tied to the international spectrum allocation process, any
decisions in this area must address not only domestic concerns,
but also international proceedings as was just observed at the
World Radio Conference in Turkey.
These allocation decisions are important to domestic
carriers because they impact the global compatibility of
services with the U.S. and the rest of the world and ultimate
pricing of wireless equipment due to scale worldwide production
volumes.
That being realized, domestic regulatory decisions become
vitally important. Ultimately the market value of spectrum is
determined by the potential of the spectrum to satisfy business
plan objectives.
Toward that end, however, the way the spectrum is licensed,
for example, the particulars of the spectrum band, the build-
out requirements, the restrictions on services that may be
offered and whether the spectrum is currently encumbered with
other users all impact how effectively that spectrum will be
able to actually realize that potential.
All of these things ultimately have a tremendous impact on
its value. Therefore, merely identifying the spectrum
represents only one-half of the equation. Regulatory policies
that follow these allocations will have dramatic impacts on the
efficiency with which the allocated spectrum is ultimately
deployed for service.
As a further example, decision concerning the amount of
spectrum an operator may obtain, for example, the spectrum caps
that we have talked about, stifle the marketplace's ability to
solve spectrum shortages and have the effect of distorting the
actual demand for additional spectrum.
That being said, Mr. Chairman, I will now offer the members
of the subcommittee a brief review of specific issues facing
current wireless operators today. Pursuant to the FCC rules, a
single entity may currently acquire attributable interest in
the licenses of broadband PCS, cellular and SMR services that
cumulatively do not exceed 45 MHz of spectrum within the same
geographic area.
The CMRS spectrum cap was originally adopted in 1994 to
ensure no one carrier could completely control a single market,
thus impeding the development of competition.
While this may have been a laudable goal during the
industry's infancy and served the purposes for which it was
intended, as was pointed out very graphically by Mr. Sugrue,
the state of competition for wireless services has long
rendered such a requirement moot.
Today's wireless markets feature from three to seven viable
service providers offering various alternatives to both niche
and general customers alike.
The growth in demand for wireless service is far exceeding
every early prediction. The industry now faces limitations in
network capacity caused by an increase in both the number of
subscribers utilizing these services and the amount of air time
each subscriber consumes.
I would like to address in my brief time remaining this
issue that was brought up earlier regarding the bands in the
700 MHz range, which is the Channel 60 to 69 bands that have
been designated by the Commission for potential fixed and
mobile services.
For consumers to fully extract the benefit of this truly
exceptional spectrum opportunity for next generation services,
service providers need clear access to the spectrum.
The Commission's efforts to expedite the 700 MHz proceeding
to meet the congressionally imposed mandates are laudable. The
FCC has worked diligently to auction the 700 MHz band in full
compliance with the Congress's objectives.
However, the required auction and service rules are very
complex and may contain conflicts and ambiguities that require
further clarification from the FCC.
So in summary on this point, we would like to say we concur
totally with the remarks of Congressman Boucher that this
auction should be delayed for all the reasons he so eloquently
stated earlier today.
So in summary, Mr. Chairman, some wireless carriers,
including SBC Wireless are already experiencing spectrum
shortages simply trying to cope with increased demand for
current services.
New opportunities and the anticipated demand for new higher
bandwidth services promise increased spectrum shortages in the
future. The spectrum for these services will likely exceed the
increased capacity achieved through the operational
improvements and technology innovations in major metropolitan
areas, still leaving consumers without full access to the
services they desire.
As noted, other countries have already committed
significant blocks of spectrum to future services. It is in the
public interest that the United States not fall behind the rest
of the world in making spectrum available for new services.
Today, wireless operators are beginning to offer wireless
data services. While these services are not yet at the byte
rates envisioned over the IMT-2000 compliant network the fact
remains that wireless data services will grow steadily over the
next 10 years.
In the interest of consumers, service providers need to be
prepared to accommodate that growth through the judicious
implementation of sound spectrum policy that promotes the most
efficient use of available spectrum.
Thank you.
[The prepared statement of Craig M. Smith follows:]
Prepared Statement of Craig M. Smith, Vice President--Strategic
Planning, SBC Communications, Inc.
Good morning, Mr. Chairman, my name is Craig Smith and I am the
Vice President for Strategic Planning for SBC Communications and
spectrum planning for our wireless affiliate, SBC Wireless, is one of
my principal responsibilities. Let me begin by thanking you and the
members of your committee for providing me the opportunity to speak
with you today on this vital issue to the United States and to its many
current and future wireless consumers.
SBC Wireless has enjoyed customer growth of over 130% during the
past 3 years, closing 1999 with 11.2 million customers. Already in
2000, that number has grown to nearly 12.4 million. We serve those
customers in 26 states, Washington, D.C., and two U.S. territories--
with a total of 117 million potential subscribers in nine of the top 10
U.S. markets and 31 of the top 50 markets in the United States.
introduction
Mr. Chairman, there are many types of wireless services resident in
a variety of radio spectra. For the purposes of this hearing, I will
confine my remarks to the collection of services commonly referred to
as Commercial Mobile Radio Services, or CMRS. The services that make up
CMRS are cellular, broadband personal communications services (PCS),
and specialized mobile radio.
Radio spectrum is a scarce resource critical to the operation of
all wireless systems. In most cases, the acquisition of new spectrum is
not as simple as buying additional switching or transmission equipment
from a vendor or deploying new fiber systems to meet the growing needs
of broadband services in our terrestrial wireline networks. By
contrast, wireless operators in order to serve the growing needs for
new services through the use of limited spectrum resources must have a
firm vision of their future spectrum needs and a strategy for obtaining
the night spectrum in the night quantity in the right place at the
night time.
Having developed this vision and a complementary business plan to
support its implementation, wireless operators must be concerned with
two related but separate processes: spectrum allocation and spectrum
licensing. Spectrum allocation decisions involve the identification of
available or potentially available spectrum for various uses. Since
domestic spectrum allocation decisions are in part tied to the
international spectrum allocation process, these any decisions in this
area must address not only domestic concerns but also international
proceedings as was just observed at the World Radio Conference in
Turkey. These allocation decisions are important to domestic carriers
because they impact global compatibility of services, and the ultimate
pricing of wireless equipment due to scaled worldwide production
volumes.
That being realized, domestic regulatory decisions become vitally
important. Ultimately, the market value of spectrum is determined by
the potential of that spectrum to satisfy business plan objectives.
Toward that end, however, the way spectrum is licensed, for example,
the particulars of the spectrum band, build-out requirements,
restrictions on services that may be offered, and whether the spectrum
is currently encumbered with other users, impact how effectively that
spectrum will be able to actually realize that potential. All of these
things ultimately have a tremendous impact on its value. (For a
discussion of ``clearance'' issues, see also, ``Future Spectrum
Allocations'' below.)
Therefore, merely identifying the spectrum represents only one half
of the equation. Regulatory policies that follow those allocations will
have dramatic impacts on the efficiency with which the allocated
spectrum is ultimately employed for service. As a further example,
decisions concerning the amount of spectrum an operator may obtain
(i.e. spectrum caps) stifle the marketplace's ability to solve spectrum
shortages and have the effect of distorting the actual demand for
additional spectrum.
That being said, Mr. Chairman, I will now offer the Members of the
Subcommittee a brief review of specific allocation and licensing issues
facing U.S. wireless operators currently.
spectrum allocation in the united states
The nations of the world, through the International
Telecommunications Union (ITU), allocate spectrum to radio services in
the form of an International Table of Allocations. Each nation also
establishes a domestic table of allocations based to some extent on the
International table. The US actually maintains two Tables of Allocation
relative to the use of the spectrum, one at the FCC and one at the
NTIA.
Congress chartered the Federal Communications Commission (FCC) with
regulating non-federal use of radio with Congress providing guidance
from time to time through federal acts and laws. The National
Telecommunications and Information Agency (NTIA), on behalf of the
President, exercises authority over federal government use of spectrum.
Any ``new spectrum'' which the FCC may make available to commercial
interests usually represents federal spectrum that has been reallocated
for non-federal use.
current us spectrum allocations
Cellular
Cellular Radiotelephone Service is licensed in the 824 to 849 MHz
and 869 to 894 MHz bands in 306 Metropolitan Statistical Areas (MSA)
and 428 Rural Service Areas (RSA). This 50 MHz of spectrum is divided
evenly between the ``A'' and ``B'' carrier, 25 MHz apiece.
PCs
The FCC reallocated the 1850 to 1990 MHz band to Emerging
Technologies and then specifically to digital Personal Communications
Services (PCS). This is sometimes referred to as Broadband PCS because
the FCC also established Narrowband PCS for paging and messaging at 901
to 902 MHz.
The Broadband PCS band plan provides for three 30-MHz licenses
(blocks A, B, and C) and three 10-MHz licenses (blocks D, E, and F).
The A and B blocks are licensed in 51 Major Trading Areas (MTAs). The
C, D, E, and F blocks are licensed in 493 smaller Basic Trading Areas
(BTAs). Licenses for the A through F blocks were determined by auction.
The A, B, D and E blocks were open to all bidders. The C and F blocks
were set aside for entrepreneur or ``small business'' companies with
restrictions against leasing or selling out to ``bigger'' companies
within five years.
spectrum caps
Pursuant to Section 20.6 of the FCC rules, a single entity may
currently acquire attributable interests in the licenses of broadband
PCS, cellular and SMR services that cumulatively do not exceed 45 MHz
of spectrum within the same geographic area. This CMRS spectrum cap was
originally adopted in 1994 to ensure no one carrier could completely
control a single market, thus impeding the development of competition.
While this may have been a laudable goal during the industry's
infancy, the state of competition for wireless services has long
rendered such a requirement moot. Today's wireless markets feature from
three to seven viable service providers offering various alternatives
to both niche and general customers alike. With the growth in demand
for wireless services far exceeding every early prediction, the
industry now faces limitations in network capacity caused by an
increase in both the number of subscribers utilizing these services and
the amount of airtime each subscriber consumes.
By comparison, Japan's leading wireless carrier, DoCoMo, has 86 MHz
of available spectrum throughout the country. In Britain, most
companies operate with a 90 MHz allocation. Furthermore, both Europe
and Japan are on schedule to deploy next generation, high-speed,
wireless data services by the first half of 2001. To accomplish this,
the Europeans have allocated 355 MHz while the United States--even
after upcoming auctions--will have only 210 MHz available for the same
services.
Ironically, as the industry matures, the goal of the Commission to
ensure competition by limiting acquirable spectrum has evolved into a
de facto barrier to innovation due to the near exhaustion of network
capacity in many markets. This example of the ``Law of Unintended
Consequences'' leaves viable carriers scrambling for alternatives to
relieve upward pressures imposed by the marketplace for new and
expanded feature sets.
Furthermore, as the volume of demand for airtime approaches full
capacity in some systems, even the quality of basic voice services
becomes impacted. Subscribers face situations wherein they cannot make
calls for lack of an available channel. This, in turn, has the effect
of damaging subscribers' perception of the carrier's quality of service
despite the fact the system may be operating in optimal fashion given
the spectrum available by law.
At the end of 1998, the FCC issued a Notice of Proposed Rulemaking
(NPRM) asking for industry comment as to whether the cap should be
repealed, modified or retained, or alternatively, whether the FCC
should simply forebear from enforcement of the cap. In that proceeding,
SBC urged the Commission to eliminate the spectrum cap.
is there a need for more sj2ectrum?
If forecasts of future demand for non-voice services such as data,
digital music, and video prove accurate, demand for spectrum will
exceed even the increased capacity achieved through technical
innovation in major metropolitan markets.
The primary drivers of increased spectrum demand will likely be
continued growth in mobile subscribers and the degree to which they
will continue to depend on wireless to serve their communications
needs, combined with the increase in the number of mobile voice
customers who will also want access to non-voice applications.
Specifically:
<bullet> As competition increases penetration of cellular and PCS
mobile services will also increase, along with usage, further
reducing the opportunity for current licensees to develop next-
generation IMT-2000 type services in their currently licensed
spectrum. Current operators should not be precluded from
offering advanced services where possible. However, it is
unlikely that under the current cap on spectrum licensing,
there will be sufficient spectrum to support all of the
services envisioned in the future.
<bullet> As ``wireless follows wired,'' users will demand mobile access
to the applications they use most on a wired basis, such as e-
mail, e-commerce and internet/intranet browsing. These new
wireless data applications promise to compound the capacity
problems associated with continued growth in voice subscribers.
It will be very difficult to set aside sufficient spectrum to
evolve to these next generation services while continuing to meet the
growing needs of existing customers. With the 45 MHz cap, both 25 MHz
cellular and 30 MHz PCS licensees have a single option for adding
capacity: obtaining a 10 MHz PCS license. However, most of these
licenses, particularly in major markets, have already been acquired by
operators for the purpose of extending their coverage or to provide
other competitive services. Clearly, additional spectrum will be
required and lifting the caps will create opportunities for current
providers to utilize existing spectrum, either by acquisition or
through partnering with other licensees.
3rd generation wireless services
Worldwide attention has turned increasingly towards the development
of Third Generation (3G) wireless systems. These systems fall under the
IMT-2000 standards umbrella, as defined by the International
Telecommunications Union (ITU). The vision for 3G services addresses
both fixed and mobile wireless services, and for the latter the ability
to move seamlessly through the home, office, and outdoor environments
with a single device while maintaining access to a wide variety of
multimedia services.
A clear implication of fully implementing 3G will be the need for
new spectrum on par with and potentially surpassing the bandwidth
secured for today's first and second generation systems.
At the recently completed WRC-2000, in recognition of growing
consumer demand for multimedia applications and a wide range of
services (e.g. video-teleconferencing, high speed Internet, speech and
high rate data), the ITU adopted IMT-2000 standards that are inclusive
of varying technologies and platforms, best enabling existing systems
to operate with the next generation of wireless standards. Commonly
referred to as 3G, these standards have become the worldwide vision of
a global advanced mobile communications service for the 21st century
containing the following key features:
<bullet> high degree of commonality of design worldwide;
<bullet> compatibility of services within IMT-2000 and with the fixed
network;
<bullet> toll quality voice service;
<bullet> data speeds up to 2 Megabits per second (``Mbps'');
<bullet> small terminals for worldwide use;
<bullet> worldwide roaming capability.
In its Petition recently filed with the FCC, the Cellular
Telecommunications Industry Association (CTIA) requested that the FCC
immediately initiate a Rule Making, stating that designation of
additional spectrum for commercial mobile wireless telecommunications
service is vital because current and future scheduled spectrum
allocations in the United States are neither sufficient for development
of new 3G services, nor in harmony with likely worldwide implementation
of IMT-2000. Failure to keep pace with world identification of spectrum
for IMT-2000 or to harmonize U.S. IMT-2000 frequency bands with the
rest of the world will harm U.S. consumers, manufacturers, and service
providers.
future spectrum allocations
700 MHz
As a result of the Balanced Budget Act of 1997 (BBA), the FCC
reallocated spectrum formerly assigned to TV channels 60 to 69.
Channels 60 to 62 and 65 to 67 were designated for commercial use while
the remaining channels were designated for the exclusive use of public
safety. The 700 MHz band is particularly interesting as a space to
foster the deployment of 3rd Generation, or 3G, services. The
spectrum's excellent propagation characteristics make it ideal for
Internet services.
In its NPRM released in mid 1999, the Commission proposed service
rules for commercial licensing of the 746 to 764 MHz and 776 to 794 MHz
bands for potential provision of fixed, mobile and broadcasting.
However, for consumers to fully extract the benefit of this truly
exceptional spectrum opportunity for next-generation services, service
providers need clear access to the spectrum.
The Balanced Budget Act specified this spectrum be auctioned in
2001. However, the Year 2000 DOD Appropriations Bill called for moving
up this auction into year 2000.
The Commission's efforts to expedite the 700 MHz proceeding to meet
this Congressionally imposed mandate are laudable. The FCC has worked
diligently to auction the 700 MHz band in full compliance with
Congress' objectives. The auction, after one delay already, is
scheduled to commence September 6, 2000, and bidders must register by
August 1, 2000. However, the required auction and service rules are
very complex and may contain conflicts and ambiguities that require
further clarification from the FCC. It also includes a combinatorial
bidding format that is new and uncertain to even experienced bidders.
As a matter of sound spectrum management policy, however, the rush
to auction the 700 MHz spectrum will jeopardize the efficient
assignment of the spectrum and disserve the public interest. In
addition to the aforementioned auction issues requiring answers,
another significant unresolved issue concerns the matter of
``clearing''. As noted above, this spectrum is currently encumbered by
television transmissions. In order to free the spectrum for 3G use,
over 100 channels must first be vacated by these incumbent
broadcasters. Without clearing, the 700 MHz band will remain virtually
unusable until the conclusion of the Digital Television (DTV)
transition period scheduled for the end of 2006, and may extend well
beyond 2006 due to delays in the DTV transition. The Commission is now
seeking comment on the establishment of voluntary band-clearing
mechanisms to facilitate the early availability of these bands for
commercial wireless services while promoting efficient migration to
DTV. However, a final decision by the Commission is not likely before
November 2000, at which time the auction will likely be over.
Because Congress has indicated that its budgetary goals have
already been met, the Commission and Congress should work together to
postpone the 700 MHz auction into fiscal year 2001.
C&F Block Spectrum
Fully as important, the Commission has not yet completed the 1.9
GHz PCS C and F Block rulemaking proceeding. Certainty in this
proceeding is crucial for auction planning at 700 MHz. Both auctions
will offer up to 30 MHz of spectrum in bands ideal for a broad variety
of mobile and wireless applications. Potential bidders in the 700 MHz
auction should be fully informed of the terms and conditions for the
scheduled November 29, 2000 reduction of C and F Block PCS licenses
prior to the start of the 700 MHz auction. This information is
necessary to formulate appropriate business plans. Therefore, it is not
in the public interest to initiate the 700 MHz auction until interested
parties can formulate their own individual spectrum acquisition plans
based on the final eligibility and availability restrictions of the C
and F Block spectrum vis-a-vis the 700 MHz commercial spectrum.
conclusion
Some wireless operators, including SBC Wireless, are already
experiencing spectrum shortages simply trying to cope with increasing
demand for current services. New opportunities and the anticipated
demand for new higher bandwidth services promise increased spectrum
shortages in the future. Demand for more spectrum for these services
will likely exceed even the increased capacity achieved through
operational improvements and technical innovation in major metropolitan
markets leaving consumers without full access to the services they
desire.
As noted, other countries have already committed significant blocks
of spectrum to future services anticipated under IMT-2000. It is in the
public interest that the United States not fall behind the rest of the
world in making spectrum available for new services. Today wireless
operators are beginning to offer wireless data services. Although these
services are not at the bit rates envisioned over an IMT-2000 compliant
network, the fact remains that wireless data services will grow
steadily over the next 10 years. In the interest of consumers, service
providers need to be prepared to accommodate that growth through the
judicious implementation of sound spectrum policy that promotes the
most efficient use of all available spectrum.
Mr. Tauzin. Thank you very much, Mr. Smith.
Next we will hear from Mr. Dennis Strigl, President and
Chief Executive Officer of Verizon Wireless in New Jersey.
Mr. Strigl.
STATEMENT OF DENNIS F. STRIGL
Mr. Strigl. Thank you very much, Mr. Chairman and members
of the subcommittee. Thank you for inviting me to give my
perspective on spectrum management.
I would like to make one and only one main point in my
testimony. That is that the wireless industry's continued
ability to provide critical benefits to the American public,
and the Nation's economy for that matter, depends on gaining
more radio spectrum.
Let me just comment if I may on why this matters. There
really are two reasons.
First, the wireless industry is providing critical benefits
to the American public and to the economy. Second, the wireless
industry's ability to continue to grow and provide new services
and new benefits to the public and the economy depends upon
access to considerably more radio spectrum.
The benefit to the American public can be, I think, best
illustrated by one statistic and Congressman Markey gave it
this morning. There are more than 100,000 emergency calls that
are now being made from wireless phones, and that is every day.
Customers, and your constituents, I might add, are
increasingly relying on wireless services, not only for
business and for personal calls, but also as a lifeline in
emergencies.
There are more than 90 million wireless subscribers in the
United States today alone and market experts predict that the
U.S. penetration could double to as much as 70 percent or even
more in the next few years. In fact, there are some European
markets that are rapidly approaching those kind of wireless
penetration levels.
The cumulative capital investment today exceeds $70
billion. Hundreds of thousands of jobs have been created in
this industry and in supporting industry and that has occurred
over the past few years.
The future for us holds even greater promise. Innovative
wireless technologies are being developed that will provide
consumers with the next generation of wireless services,
delivering high speed, high bandwidth data and multimedia
applications, including wireless Internet access, location
services, real-time traffic information and even access to
large data files.
Now, the downside of the success story is that it puts a
tremendous strain on the critical resource that we have which
is spectrum.
The amounts of spectrum originally allocated to cellular
and PCS carriers will not be enough to meet the accelerating
demand for airtime, let alone the next generation of services
which are quite spectrum intensive.
The bottom line, Congress needs to take actions that will
enable the wireless industry to grow and obtain usable and
unencumbered spectrum which is needed to meet the American
public's demand for wireless communications.
There are actually three concrete steps that Congress and
the FCC should take and I believe they should be taken now.
First, and most immediate, is to insure the spectrum that
becomes available is usable. To that end, I would say defer the
700 MHz auctions. This spectrum is simply unusable because much
of it is already being used, as we talked this morning, by the
television broadcast stations who are not obligated to move to
lower channels under the current digital television rules until
at least the year 2006.
The action is urgently needed because without it the FCC
will begin the process for auctioning off this spectrum on
August 1, selling off such severely encumbered spectrum makes
absolutely no sense. It will severely depress the value of the
spectrum and decrease the revenues that the Federal Government
will receive.
I would ask that Congress today urge the FCC to delay the
September auction date to allow the FCC, broadcasters and the
industry time to work out a solution to this problem. It must
do it now because the deadline is imminent and the FCC, as we
heard this morning, is moving ahead.
As Congressman Boucher pointed out this morning, the FCC
has the discretionary authority, we believe. They needs to be
urged by Congress to use that authority.
While the industry needs the spectrum sooner, I would just
stress that it has to be usable spectrum.
The second action that I would urge is for Congress to
repeal the FCC spectrum cap. We talked at length about that
this morning. Let me just say that it is a critical needs, I
believe, for everyone in the industry to do away with the old
rules, get on with the new way of operating.
We know, my company alone within the next year needs 65 MHz
of spectrum in order to operate and introduce new benefits and
new services to the American public.
So in summary, I think the Congress must act and act
quickly to adopt market-driven spectrum policies that promote
the development of advanced wireless technologies and services.
I urge Congress to defer the 700 MHz auctions, repeal the
spectrum cap so that future auctions, including the C- and the
F-block auction are open and fair. Also, I would ask that
Congress direct the FCC and the NTIA to determine how the 3-G
frequency bands will be used to the benefit of the American
public, the economy and our competitiveness in global
communications, the worldwide market overall.
Thank you very much.
[The prepared statement of Dennis F. Strigl follows:]
Prepared Statement of Dennis F. Strigl, President and CEO, Verizon
Wireless <SUP>1</SUP>
---------------------------------------------------------------------------
\1\ Verizon Wireless is a newly formed joint venture of Verizon
Communications and Vodafone AirTouch. It combines the U.S. wireless
properties of these companies to form the nation's largest wireless
network, covering more than 90% of the U.S. population.
---------------------------------------------------------------------------
Mr. Chairman and Members of the Committee, thank you for inviting
me to give my perspective on spectrum management policy. I want to make
one and only one point in my testimony:
The wireless communications industry's continued ability to provide
critical benefits to the American public and the nation's economy
depends on gaining access to more radio spectrum.
Congress should act quickly to increase the supply of useable
spectrum that is available for our industry to purchase, and allow all
companies to compete for that spectrum, so that we can respond to the
public's growing demand for wireless voice and data services. It
should:
1. Defer the 700 MHz auction. This is urgent, because without
Congressional action, the FCC will auction this spectrum in less than
two months, even though the same spectrum is already largely occupied
by television stations. We need spectrum, but we need useable spectrum.
A premature auction will deprive the U.S. Treasury of much of the value
of this spectrum. Policy makers, broadcasters and the wireless industry
need time to find ways to make that spectrum useable.
2. Repeal the FCC ``spectrum cap.'' The FCC continues to enforce a
limit on the amount of spectrum any carrier can own, even though the
rule long ago achieved its purpose, and now only impedes carriers from
competing for the spectrum they will need to meet future growth in
demand for data and other new services.
3. Transform the success of WRC-2000 into new spectrum for new
wireless services. The May 2000 world radio conference achieved
important victories for the U.S. in securing international agreement on
the bands available for ``Third Generation'' services. The U.S. needs
to seize on these victories quickly by designating more bands for 3G
and licensing them.
The wireless industry is providing critical benefits to the
American public and the economy.
This point can be illustrated with one statistic: More than 100,000
emergency calls are now being made from wireless phones every day.
Customers (and your constituents) are increasingly relying on wireless
services not only for business and personal calls, but as a lifeline in
emergency situations.
That growth is astounding: There are more than 90 million wireless
subscribers in the United States alone, and the number of minutes of
calls continues to accelerate. Cumulative capital investment exceeds
$70 billion. Market experts predict that U.S. penetration could double
to as much as 70% or even more in the next few years, a level that a
number of European markets are already rapidly approaching. Digital
technology has been a catalyst. The capacity and efficiency of our
networks have increased, handset features and choices have been
enhanced, battery time has lengthened and equipment size and cost have
been reduced. Wireless services have become a part of many customers'
daily routine, often used by customers as an alternative to picking up
a wireline telephone.
This has been accompanied by a tremendous surge in usage. Between
1995 and 1999, the average monthly minutes of use per subscriber at one
of Verizon Wireless's predecessor companies, Bell Atlantic Mobile,
increased by 122%, from 79 minutes to over 175 minutes. During the same
period, the average price for these minutes of use, considering both
monthly access and per minute usage charges, dropped by 60%. These
trends, together with the continued rapid growth of the subscriber
base, explain why, between calendar years 1995 and 1999, the total
minutes of use jumped over 320%, from about 2.7 billion minutes to 11.7
billion minutes annually.
The benefits that the wireless industry has provided to the
American economy flow from the ability of our industry to grow and
serve the public. Hundreds of thousands of jobs have been created in
this industry and supporting industries over the past few years.
Verizon Wireless is a good example: our company alone employs about
30,000 people. The contributions that this industry have made to the
long success of the U.S. economy have been well-documented by
economists, the FCC and others.
The future holds even greater promise. Innovative wireless
technologies are being developed that will provide consumers with a
wide range of high-speed data and multimedia applications, including
wireless Internet access. To fulfill our customers' anticipated demand
for high-speed, high-bandwidth data services, the key is Third
Generation (3G) high-speed data technology. The wireless industry's
existing Second Generation CDMA technology can only deliver raw data
rates that average 14.4 kilobits per second. The 3G technologies
presently under development hold out the promise of a dramatic
improvement in data rates, liberating consumers from ``plugged in''
PC's. In addition to e-mail and general internet access, wireless
broadband means location services such as tailored, real-time traffic
information, access to large data files, and greatly enhanced point of
sale information. High-speed broadband access involves shorter response
times and quicker and fuller information flow.
The wireless industry's ability to continue to grow and provide new
services to benefit the public and the economy depends on access to
considerably more radio spectrum.
The downside of this success story is that it has put tremendous
strain on the industry's critical resource: spectrum. All of our
services depend on having the spectrum capacity to meet the demands of
our customers. Without enough of it, we will not be able to provide the
services customers want at the level of quality they expect and
deserve. The amounts of spectrum originally allotted to cellular and
PCS will not be enough to meet the accelerating customer demands for
airtime.
The problem is growing because of the transformation of the
wireless industry from primarily a voice service to a technology that
provides data, including e-mail, messaging and Internet access, as well
as voice traffic. Verizon Wireless seeks access to new spectrum to
implement plans to introduce the next generation of wireless services--
the broadband voice and data services known as Third Generation, or 3G.
At the same time, we must also accommodate the tremendous surge in
voice usage we are experiencing.
Data applications are very spectrum-intensive, and the higher-speed
data technologies that are being developed require many times the
spectrum that voice or conventional slow-speed data need. The great
promise of access to data communications anytime, anywhere will be
affected if wireless service providers cannot obtain more spectrum
resources.
Congress needs to take actions that will enable the wireless
industry to grow and obtain the spectrum it will need to meet the
public's demand for wireless communications.
Federal law vests the Congress, and through it, the FCC, with the
responsibility to manage spectrum resources for the benefit of the
American people. It is an important responsibility, because wireless
communications have already affected all of our lives, and are now a
major component of the national economy. Congress needs to take steps
that will ensure that the supply of the key resource for wireless
communications, spectrum, is available. This will have benefits not
only to individuals, their businesses, and the economy, but it will
help promote the competitiveness of the U.S. in the increasingly global
telecommunications market. Other nations have already allocated and
licensed sufficient amounts of spectrum to meet the needs of their
wireless industries. The U.S. must do the same. There are three
concrete steps that Congress should take now.
1. Defer the 700 MHz auction.
Deferral is urgently needed, because without it, the FCC will begin
the process of auctioning this spectrum on August 1. This spectrum
remains already largely occupied by television broadcast stations.
Aside from being clearly unwise spectrum policy, selling off encumbered
spectrum will severely reduce the value of the spectrum and thus
decrease the revenues that the federal government will receive.
Under an appropriations act enacted early in 1999, Congress
directed the FCC to auction spectrum currently used by nearly 100 UHF
TV stations on Channels 60-69 by September 30, 2000, and the FCC thus
feels compelled to begin the auction that month--even though the Budget
Committee has indicated the revenues are not needed or anticipated in
this fiscal year. Auction applications are due August 1. But much of
that spectrum is simply unuseable, because it is currently being used
for television. Broadcasters are not obligated to move to lower
channels as part of the digital television rules until at least the end
of 2006, and in some situations much longer. I am attaching to my
testimony a map that demonstrates the areas that are protected against
interference to these stations. In those areas, we are concerned that
we may be largely precluded from providing mobile service.
Auctioning spectrum that is so severely encumbered not only makes
no sense, but it will significantly depress the revenues from the
spectrum. The auction will fail to deliver anywhere close to the real
dollar value of that spectrum to the U.S. Treasury.
Congress needs to repeal the September 30 deadline to allow the
FCC, broadcasters and our industry time to work out a solution to this
problem; only then should the auction occur. It must, however, do so
now, because the deadline is imminent, and the FCC is moving ahead.
There is another reason to defer the auction. The FCC is planning
to use a new bidding scheme, combinatorial bidding, that is extremely
complex and has never before been used. My company has many questions
about the procedures that the FCC intends to use in this auction, yet
there has been no time to obtain clarity since the FCC just published
the combinatorial bidding rules two weeks ago. Conducting an auction
before all parties and the FCC are clear on the ground rules is a
recipe for problems.
The FCC has already decided that it will permit broadcasters and
wireless service providers to negotiate voluntary agreements that would
facilitate the early availability of this spectrum for commercial
wireless service while promoting efficient migration to DTV. It is also
seeking comment on the use of other voluntary mechanisms to clear the
spectrum, but it has set a deadline for comments that do not end until
mid-September, after the auction is underway. Therefore, the Commission
is unlikely to reach any decisions until long after the auction is
over. The Commission must be given more time to thoroughly consider all
its rules before auctioning these licenses.
The current schedule for the auction will already result in the
U.S. Treasury receiving the auction receipts outside of fiscal year
2000. Delaying it for a year will not undermine budgetary objectives,
while creating greater certainty for bidders, greater interest in the
auction, and ultimately greater benefits for American consumers and
taxpayers. I urge Congress to extend the deadline for this auction
until September 2001.
2. Repeal the FCC ``spectrum cap.''
Unfortunately, outdated rules still exist that restrict our ability
to acquire the spectrum resources we expect we will need to provide 3G
and other new services. The FCC's ``spectrum cap'' rule, which dates
from 1994, prohibits any company from holding more than 45 MHz of
cellular, PCS and specialized mobile radio (SMR) spectrum in the same
geographic area, with a higher limit of 55 MHz in rural areas. The non-
uniform nature of the size of license areas and licensed bands further
prevent carriers from approaching even these caps in their full
footprint. This economic regulation was not imposed by Congress. To the
contrary, in the 1993 Omnibus Budget Reconciliation Act, Congress had
replaced traditional wireless regulation, such as entry and price
controls, with a competitive, market-driven model.
The ``cap'' is an outdated vestige of a time, years ago, when there
was considerably less wireless competition. Today, however, the
industry is one of the most vigorously competitive in the nation.
Prices have fallen dramatically, and new and enhanced service features
are introduced into the market every day. In his February 28, 2000
speech to CTIA's annual convention, FCC Chairman William Kennard
characterized the wireless industry as ``the poster child for
competition.'' In its 1999 Competition Report, the FCC reported that
more than 75% of the U.S. population is served by at least 5 wireless
service providers and more than 93% of the population is served by at
least 4 wireless service providers. In the Washington, D.C. market, for
example, we hold one license and compete against SBC, AT&T, Sprint and
Nextel.
Today, the cap threatens to constrain our ability to grow to meet
demand and offer new services. It threatens to impair the very
competition that it was intended to promote and to penalize carriers
for their competitive success. My company and many others are
restricted from bidding on new spectrum that we can use productively to
serve the public. Lifting the cap, and allowing an open and fair
auction of available spectrum, will favor innovation and competition in
the wireless industry and yield the highest auction revenues by
allowing any firm that values the spectrum to bid.
I want to thank Congressman Stearns for introducing the spectrum
cap legislation and to thank you, Mr. Chairman, and others who have co-
sponsored the bill. I urge the Committee to pass this important piece
of legislation. By doing so, it will promote a more competitive auction
for the ``C'' and ``F'' block PCS licenses that the FCC has scheduled
for this coming November. The bill meets the need for a full, fair, and
open auction that permits all interested carriers to bid, by lifting
all bidding restrictions.
The ``C'' and ``F'' block licenses are particularly suitable for 3G
services, since the PCS band has been identified globally for that
purpose. We need to be able to make our business plans based upon the
opportunities and the needs of this exploding market and to meet the
global competition that 3G will intensify. U.S. competitors are at a
significant disadvantage relative to our non-U.S. counterparts. For
example, as a result of the recent 3G auction in the United Kingdom,
the four national wireless providers now have as much as 90 MHz of
spectrum, double the amount permitted under the U.S. spectrum cap.
The spectrum cap's adverse impact on budgetary policy is obviously
a matter of supply and demand. It reduces auction revenues by excluding
carriers that are likely to place the highest value on the new
spectrum.
In short, the spectrum cap rule is not only no longer necessary; it
threatens to impede my company's ability to obtain the spectrum we need
to serve the public. Competitive industries require market-driven
policies, not outmoded regulation. Spectrum caps pick winners and
losers by allowing some to bid on new spectrum while excluding others.
Such policies penalize the most successful carriers by denying them
access to the additional spectrum resources we need to remain
competitive and offer new services.
3. Capitalize on the Decisions of WRC-2000.
Substantial amounts of additional spectrum are needed to support 3G
wireless services. The wireless industry, working with the U.S.
Government, estimated that at least 160 MHz of additional spectrum will
be needed over the next decade in addition to the current cellular and
PCS bands. And, the U.S. is not alone in recognizing the need for more
spectrum. Last month, governments from around the world met at the
World Radiocommunication Conference (WRC-2000) in Istanbul, Turkey. The
Conference, which established proactive policies for the development of
3G services, was a major success for the U.S. It identified two key
bands to accommodate the future development of 3G technologies and
services--a significant step toward meeting future market demand and
promoting worldwide spectrum harmonization.
These actions are encouraging, but we cannot claim victory yet.
Important steps must now be taken domestically to implement the
decisions made at WRC-2000. The U.S. Government must work diligently to
complete its spectrum studies and make decisions about what spectrum it
will make available in the U.S. for 3G. This process must occur soon,
and it must consider the entirety of the subject bands. Piecemeal
treatment would be unfortunate and counterproductive. My company stands
ready to assist the FCC and NTIA in these efforts. Failure to complete
these studies and license this spectrum quickly will place the U.S.
behind the rest of the world in the deployment of advanced mobile
technologies and services. What is at stake is the ability of consumers
to benefit from these new technologies and services and of the U.S. to
reestablish its leadership in the wireless marketplace.
conclusion
Congress must act now to adopt market-driven spectrum policies that
promote the development of advanced wireless technologies and services.
I urge Congress to (1) defer the 700 MHz auction, (2) repeal the
spectrum cap this year so that future auctions, including the upcoming
``C'' and ``F'' block auction, are open and fair, and (3) direct the
FCC and NTIA to determine how the 3G frequency bands will be used to
the benefit of the American public, the economy, and our
competitiveness in the global communications market.
Mr. Tauzin. Thank you, Mr. Strigl.
Next will be Mr. Rudy Baca, Global Strategist for the
Precursor Group here in Washington, DC. Mr. Baca.
STATEMENT OF RUDY L. BACA
Mr. Baca. Thank you. Mr. Chairman and members of the
subcommittee, thank you for the honor of testifying before your
subcommittee today on the subjects of H.R. 4758 and spectrum
policies for the 21st Century.
I am Rudy Baca, analyst with the Precursor Group. The views
expressed here are mine alone. By way of introduction, the
Precursor Group is an independent employee-owned controlled
research company structured to avoid financial conflicts of
interest inherent in Wall Street research.
In that context I offer the following insights and
observations in hopes that they will be useful to the
subcommittee.
The Spectrum Resource Assurance Act, H.R. 4758, recognizes
that wireless communications providers in the United States are
at a competitive disadvantage with their foreign counterparts
because of a lack of adequate radio frequency spectrum.
Spectrum is the life blood of wireless services. But not
all radio frequency spectrum is equally useful or available.
Spectrum management policies determine the rules of the game.
That is, who can play, how much spectrum they will get, and
where it will be located.
Governments have traditionally managed radio frequency
spectrum as a public resource for the common good. A coherent,
efficient forward-looking spectrum management policy and
process is critical for U.S. wireless operators to be able to
compete in providing global, interconnected, seamless advanced
communications.
Technologically sound spectrum policies allow for the
competitive provision of communication services which benefits
the public with rapid deployment of innovative offerings at
fair prices.
Conversely, antiquated and ad hoc spectrum decisions can
hinder development and delay or even deny services to the
public by predetermining winners and losers or handicapping
some providers unfairly.
The world is on the cusp of the rollout of Third Generation
wireless services. Third Generation, also known as IMT-2000 and
UMTS promise one, wireless Internet access; two, increased data
utility; and three, video capability from a handheld
communications devise.
The governments of the European community and Japan in
particular view 3-G as an opportunity to leapfrog the U.S.
dominance of the Internet and e-commerce by building upon
higher wireless penetration rates for second generation digital
cellular, that is PCS outside of the United States.
The agencies responsible for spectrum management in the
U.S. must rapidly streamline the spectrum identification,
allocation and licensing processes if the U.S. operators are to
be able to compete and meet this challenge successfully.
The reality of spectrum management in the U.S. in 2000 and
for the foreseeable future is one of chronic spectrum
shortages, especially compared to most of the rest of the
world. These shortages are the result of intensive spectrum
usage in the U.S. for both commercial and government purposes.
This means that the U.S. suffers one, from an availability
imbalance, and two, from a commercialization imbalance. The
availability imbalance springs from the U.S. role as the sole
remaining global super power. National and global commitments
require tremendous ongoing and increasing use of radio
frequency for security and defense purposes.
These legitimate needs mean that very large portions of the
radio frequency spectrum are simply off limits for commercial
that is non-government use.
Accordingly, spectrum management policies in the U.S. must
be even more efficient and targeted in identifying usable
spectrum, allocating it for wireless services, harmonizing the
uses with other countries and clearing the bands by relocating
incumbent users, licensing and assigning that spectrum for
commercial.
Unencumbered spectrum is almost non-existent in the U.S. So
new services must either be squeezed into already licensed
spectrum, that is, shared spectrum among technologically
compatible users or incumbent users must be relocated to other
frequency bands.
In summing up, what I would like to say is that the
investment community is well aware of these imbalances that are
occurring and you are going to see a very dramatic effect on
the ability of U.S. providers to compete.
The government programs and policies outside of the United
States have specifically targeting Third Generation as a way
for their providers to not only catch up to but to surpass U.S.
providers.
It is absolutely critical that spectrum reforms such as the
spectrum cap be looked at as the hindrances that perhaps may
have served at a time when the U.S. was transitioning from a
duopoly into a competitive marketplace but are now thwarting
competitive U.S. provision of communication services with
ongoing global communications development.
Thank you very much.
[The prepared statement of Rudy L. Baca follows:]
Prepared Statement of Rudy L. Baca, The Precursor Group
Mr. Chairman, thank you for the honor of testifying before your
Subcommittee on H.R. 4758 and Spectrum Policies for the 21st Century. I
am Rudy Baca, Global Strategist with The Precursor Group<SUP>'</SUP>.
The views expressed here are mine alone. I request that my full written
testimony be printed in its entirety in the hearing record.
By way of introduction, The Precursor Group<SUP>'</SUP> is an
independent, employee owned and controlled research company structured
to avoid the potential financial conflicts-of-interest inherent in Wall
Street research. The Precursor Group<SUP>'</SUP> does no investment
banking, money management, proprietary trading, or stock picking. We
help institutional investors anticipate change in regulation,
technology, competition, and globalization so that they can invest more
proactively than reactively. In that context, I offer the following
insights and observations in hopes that they will be useful to the
subcommittee.
i. the united states is relatively disadvantaged by spectrum scarcity
The Spectrum Resource Assurance Act, H.R. 4758, recognizes that
wireless communications providers in the United States are at a
competitive disadvantage with their foreign counterparts because of a
lack of adequate radio frequency spectrum. Spectrum is the ``life
blood'' of wireless services. But not all radio frequency spectrum is
equally useful or available. Spectrum management policies determine the
``rules of the game,'' that is, who can play, how much spectrum they
will get and where it will be located.
Governments have traditionally managed radio frequency spectrum as
a public resource for the common good. A coherent, efficient, forward-
looking spectrum management policy and process is critical for U.S.
wireless operators to be able to compete in providing global
interconnected seamless advanced communications. Technologically sound
spectrum policies allow for competitive provision of communications
services, which benefits the public with rapid deployment of innovative
offerings at fair prices. Conversely, antiquated and ad hoc spectrum
decisions can hinder development and delay or even deny services to the
public by predetermining winners and losers or handicapping some
providers unfairly.
The world is on the cusp of the rollout of Third Generation (3G)
wireless services. 3G (a/k/a IMT-2000 and UMTS) promises wireless
Internet access, increased data utility, and video capability from a
handheld ``communications device''. The governments of the European
Community and Japan, in particular, view 3G as an opportunity to build
upon higher wireless penetration rates for Second Generation digital
cellular (PCS) outside the U.S., to leapfrog the U.S.'s dominance of
the Internet and E-commerce.
The agencies responsible for spectrum management in the U.S. must
rapidly streamline the spectrum identification, allocation, and
licensing processes if U.S. operators are to be able to meet this
competitive challenge successfully.
ii. why there's a problem with spectrum scarcity in the u.s.?
The reality of spectrum management in the U.S. in 2000, and for the
foreseeable future, is chronic spectrum shortages, especially compared
to most of the rest of the world. These shortages are the result of
intensive spectrum usage in the U.S. for both commercial and government
purposes. This means that the U.S. suffers an (1) availability
imbalance, and a (2) commercialization imbalance.
Availability Imbalance. The U.S. is the sole remaining global
superpower. National and global commitments require tremendous on-going
and increasing use of radio frequency spectrum for security and defense
purposes. These legitimate needs mean that very large portions of the
radio frequency spectrum are ``off-limits'' for commercial (non-
government) use. Accordingly, the spectrum management policies in the
U.S. must be even more efficient and targeted in identifying usable
spectrum, allocating it for wireless services, harmonizing uses with
other countries, clearing the bands by relocating incumbent users, and
licensing (``assigning'') spectrum for commercial use.
Unencumbered (``virgin'') spectrum is almost non-existent in the
U.S., so new services must either be squeezed into already licensed
spectrum--that is, spectrum is ``shared'' among technologically
compatible users--or, incumbent users must be relocated to other
frequency bands. Both necessitate consistent and intensive spectrum
management. In addition, domestic allocations must be ``harmonized''
with international allocations to facilitate roaming and minimize
interference. To function effectively, the responsible agencies must
make the required resources available to manage these processes.
Commercialization Imbalance. Spectrum management in the U.S. is a
more complex, and therefore prolonged, process than in most countries
because of the previously noted scarcity of usable spectrum and also
the many U.S. regulatory ``managers'' with conflicting goals. Unlike
almost all other countries, where one entity is responsible for
spectrum management, the U.S. spectrum management policy process
involves numerous participants. The FCC manages commercial uses of
spectrum, including some public safety uses; NTIA manages governmental
uses, including Department of Defense, and the national security agency
uses; the Department of State ``coordinates'' international
communications agreements, including treaties; and, more recently, the
USTR is responsible for trade aspects of communications. All impact
spectrum management to varying degrees, with the FCC and NTIA being the
principal managers.
Reconciling the oftentimes divergent interests of these entities is
done on a generally informal and ad hoc basis. While that may have
sufficed in a pre-mobile hard wired telephone voice communications
world dominated by monopoly national operators, a more efficient and
consistent spectrum management policy process is needed in the
increasingly global virtual village of modern mobile digital voice,
data, and video communications if U.S. operators are going to be able
to compete effectively. Otherwise, this regulatory imbalance between
the U.S.' spectrum management approach and that of the rest of the
world will continue to handicap U.S. operators in providing advanced
global and domestic communications services such as 3G.
iii. what can be done to correct the imbalance?
Spectrum management policy and practice reform could ameliorate the
competitive disadvantage caused by spectrum scarcity and ad hoc multi-
regulator spectrum management. Comprehensive reform could include
rationalizing and streamlining the process with emphasis on expedited
technical recommendations and evaluations such as ``sharing studies''.
The private sector could be more fully engaged in all aspects of
the process. For example, although the private sector has recently been
given an increased ``advisory'' role, the ITU (International
Telecommunication Union) remains a government-dominated bureaucracy
under the United Nations. The government Members are adept at
leveraging the one country/one vote ITU system into regional blocs that
cut against the lone U.S. positions that increasingly seek ``multi-
band'' approaches borne of U.S. scarcity of contiguous spectrum. The
U.S. has been remarkably successful in advocating its spectrum policies
internationally, but faces a much more difficult task as spectrum
management processes exacerbate spectrum scarcity for new advanced
mobile communications. Technological development now operates on
``Internet time,'' while U.S. spectrum management is encumbered by
bureaucratic delay and legacy prohibitions such as the FCC's Spectrum
Cap. Removal of the Spectrum Cap pursuant to H.R. 4758 and other
spectrum management reform could help correct the spectrum imbalances
hindering U.S. operators.
Mr. Chairman, thank you again; it is an honor to testify before
your Subcommittee.
Mr. Tauzin. Our final witness is Mr. Mark Kelley, Chief
Technology Officer of Leap Communications International who is
speaking for the PCIA, the Personal Communications Industry
Association here in Alexandria, Virginia.
Mr. Kelley.
STATEMENT OF MARK KELLEY
Mr. Kelley. Thank you, Mr. Chairman and thanks to the
committee for allowing me to speak today, particularly on the
impact of H.R. 4758, the Spectrum Resource Assurance Act.
I am the Chief Technical Officer of Leap Wireless in San
Diego. I want to tell you just a little bit about the services
that we offer and what we are doing. It is going to be in a bit
of a contrast to what you have heard from some of the others
today.
Leap Wireless is a wireless communication carrier. We
deploy, own and operate wireless networks in domestic and
international markets with strong growth potential. We
purchased 36 licenses in the 1999 C-block reauction. We are
purchasing additional licenses throughout the United States.
Through our subsidiary, Cricket Communications, we are
planning on offering an innovative service to 35 of those
markets within the next year.
Cricket has already introduced an innovative, local
wireless service known as ``The Around Town Phone'' to
residents of Chattanooga and Nashville. What we are offering in
Chattanooga and Nashville is what we are going to be offering
in all the other markets where we own spectrum in the United
States.
What we are able to do in 10 MHz a spectrum is to offer
unlimited, unlimited wireless voice service for $29.95 a month
and in doing that we have provided an opportunity for a lot of
Americans who haven't previously been able to afford wireless
service to have wireless service. We are doing that in 10 MHz
of spectrum in many markets.
One of a couple of the issues that I would like to talk to
you today is: How much spectrum do you really need for voice.
The issue was raised several times this morning, in particular,
Mr. Sawyer had led a discussion about the efficiency of the
spectrum and isn't it incumbent upon the people that hold that
spectrum to be efficient with it?
Briefly, with our 10 MHz of spectrum, we are offering
unlimited service to what we believe will be up to 20 percent
of any one market. That is after accounting for some of the
deployment challenges and so forth that all wireless carriers
have.
The most important thing to emphasize here is that the
future technologically is even better. There are two or three
technological developments that are underway right now that are
going to provide up to 6X more capacity in the existing
spectrum and I want to talk about just a few of those.
One is the first phase of 3-G which is known as 1XRTT,
sometimes called 2.5-G. but what 1XRTT is going to do is permit
us to essentially double the amount of users that we can put in
the spectrum today.
The next development is a new compression of vocoder
development which is going to give us another 50 percent more
capacity beyond 1XRTT.
Finally, something Mr. Hatfield and the panel this morning
referred to, there is a thing called ``smart antenna''
technology which is going to allow up to two or three times
more capacity above and beyond that.
Incidentally, with regard to smart antenna technology, it
is already being used in several other places in the world for
people to add capacity to their own systems. It was the method
of pointing the antenna specifically at the users.
So between our efficient use of spectrum and what we know
is going to be possible in the next several years, we believe
that we can handle quite a bit, even more than the 20 percent
that we are handling right now with our 10 MHz of spectrum.
We also believe were we to acquire even another ten MHz in
the regions where we don't have more, that we could offer
wonderful wireless data service as well. Briefly about wireless
data, a lot of discussion this morning and indeed this
afternoon, has focused on the U.S.'s position relative to other
countries with respect to high speed wireless data services.
There is technology available that will be rolled out
commercially next year that will allow up to two megabytes per
second, in a one and a quarter MHz channel, which would allow
carriers such as ourselves to offer high-speed, 3-G-like
services within our own spectrum band.
Really, what will occur then when this equipment is
available commercially is that you will see rolled out by not
only ourselves, but mostly the other carriers who have adopted
the same technology and it will be applications and services
that are riding on top of this high-speed data.
It is really the spectrum cap that allows smaller carriers
such as ourselves to be able to play in a market with the other
much larger carriers.
So in conclusion, and I didn't mention the designated
entity status, we are a DE. We do believe that the set asides
are also equally critical for our own survival. But we believe
that the technology today and tomorrow allows you to do a ton
in 45 MHz.
Thank you very much.
[The prepared statement of Mark Kelley follows:]
Prepared Statement of Mark Kelley, Chief Technical Officer, Leap
Wireless International
Good morning, Mr. Chairman and members of the Committee. Thank you
for inviting me here today to discuss FCC spectrum policies and the
potential impact of H.R. 4758, the Spectrum Resource Assurance Act. My
name is Mark Kelley. I am Chief Technical Officer of Leap Wireless
International of San Diego, California.
Leap Wireless is a wireless communications carrier that deploys,
owns, and operates wireless networks in domestic and international
markets with strong growth potential. Leap purchased 36 FCC licenses in
the 1999 PCS C Block re-auctions and is purchasing additional licenses
throughout the United States. Through its subsidiary, Cricket
Communications, Leap plans to offer its innovative service in 35
markets by the end of 2001.
Cricket has already introduced an innovative local wireless service
offering, known as Around-Town Phone Service, to residents of
Chattanooga and Nashville, Tennessee. Cricket gives customers the
freedom to make all of their local calls for a low, flat rate of $29.95
per month. Cricket customers can also choose to receive voicemail,
caller ID, and call waiting services at a price that is competitive
with traditional landline service. By tapping into large underserved
markets like Chattanooga and Nashville, Cricket seeks to achieve rapid
penetration growth. At the same time, Cricket also intends to re-shape
the economic models of wireless service by lowering the costs of
wireless service to the American consumer. Cricket plans to offer its
innovative service in 35 markets by the end of 2001.
Leap employs over 200 people in the United States and has over
46,000 subscribers domestically. While still maintaining an operating
loss in this build-out stage, the company had revenues of $22 million
in 1999 and $3.3 million in 1998. The company began operations in 1998.
As Leap understands the purpose of H.R. 4758, it would prohibit the
FCC from applying any spectrum aggregation limits to spectrum purchased
at auction today. It would not, however, forbid the FCC from applying
its 45 MHz spectrum limits (``spectrum cap'') to current licenses and
the transfer and assignment of these licenses. This proposal creates an
unnecessarily complex dichotomy for a rule that continues to promote
local wireless voice and data competition. Companies that exceed the
spectrum cap with ``new'' spectrum purchased at auction would be
permitted to expand without limits. In contrast, companies that choose
not to participate in auctions could not expand with ``old'' spectrum
garnered through secondary market mechanisms. This dichotomy gives the
largest incumbent cellular/PCS operators a tremendous incentive to
participate in the upcoming PCS re-auction before they actually need
this spectrum. As a result, incumbent operators are more likely to
ignore potential spectrum efficiencies in favor of warehousing
spectrum.
H.R. 4758 also threatens specific congressional goals for the
remaining C and F Block PCS licenses now scheduled for re-auction to
designated entities in November. Despite clear guidance from Congress
and recent reminders from Chairman Tauzin, Mr. Dingell and many of the
members of this Committee, the FCC is on the verge of dismantling a
program that is bringing new companies like Leap to the wireless
market, thereby denying American consumers the choice and lower prices
that new companies offer.
It is not an overstatement to tell you that Leap Wireless, as well
as scores of other new wireless carriers, would not be in business
today without two crucial spectrum polices: (1) the Federal
Communications Commission's 45 MHz spectrum aggregation limits
(``spectrum caps'') for local cellular, PCS and SMR spectrum holdings;
and (2) the PCS C and F Block set-aside program that makes spectrum
available to congressionally-identified designated entities.
The FCC adopted the spectrum cap limit coincidentally with its
creation of the Personal Communications Service (PCS) rules and
Congress' adoption of competitive bidding procedures to award PCS and
other commercially used spectrum licenses. (47 U.S.C. Sec. 309(j)).
Without the spectrum cap, the two cellular licensees in each local
market--one of which is the incumbent local telephone company--would
have been free to bid on the new PCS spectrum by using monopoly profits
from their phone operations and the duopoly profits from their cellular
operations. Ultimately, consumers would have been denied the benefits
of new digital networks, lower prices and innovative service offerings.
The FCC determined just last September that it should retain the
spectrum cap in order to promote the continued rollout of wireless
alternatives and prevent re-consolidation of this market. More
specifically, the Commission found that the spectrum cap was providing
consumers with several benefits, including:
<bullet> Lower wireless prices
<bullet> Heightened equipment and service quality
<bullet> Accelerated introduction of technological advances
<bullet> Efficient and innovative use of the spectrum
<bullet> Reduction of spectrum warehousing by carriers
Leap notes that recent evidence indicates that PCS is still in its
early rollout state in many communities, with only 23% of all PCS
licenses in commercial operation. Many communities still do not yet
have a choice of mobile carrier other than the two cellular operators.
Leap agrees wholeheartedly with the authors of H.R. 4758 that the
wireless industry is experiencing strong growth and competitive
development, with many communities having a choice of five or more
wireless services. However, it is because of the spectrum cap--not
despite it--that Americans now have far greater choices in mobile
providers. Because the spectrum cap prevents the concentration of
spectrum in to a few hands, the government is able to let market forces
work rather than imposing strict behavioral regulation over pricing and
operations.
The spectrum cap also sends the proper efficiency signals to
carriers as it promotes the efficient use of existing spectrum and the
modernization of networks. Some of the most vociferous proponents of
eliminating the cap are the same carriers unwilling to transition to
digital networks. While the new PCS industry is 100 percent digital,
cellular carriers are still primarily using legacy analog networks:
Bell Atlantic 49% digital; SBC 41% digital; AirTouch 39% digital; GTE
26% digital (Source: Merrill Lynch, The Matrix--1Q 00, June 20 2000)
H.R. 4758 suggests that the spectrum cap can be replaced with
antitrust enforcement. Leap believes that the cap is the least
intrusive means of preserving a diversity of operators and consumer
choice. Antitrust litigation is costly, time-consuming and detracts
from an entrepreneur's focus on rolling out new services. Mr. Chairman,
Leap loves its lawyers, it just does not want to pay more of them to
contest the market concentration that is sure to come if H.R. 4758 is
adopted.
The bill also threatens the completion of Congress' express goal of
putting licenses in the hands of designated entities, namely, rural
phone companies, small businesses, and business owned by women and
minority groups. With the advent of auctions, Congress recognized that
these companies would not be able to compete head-to-head in auctions
with the largest wireless carriers. It directed the FCC to ensure that
its auction procedures give designated entities a meaningful
opportunity to participate in auctions and enter the wireless
marketplace. For PCS, the Commission originally implemented this
guidance by reserving 40 MHz of the 120 MHz for designated entities
(the C and F block spectrum bands). Despite a few well-publicized
bankruptcies, this program has been extremely effective in putting
spectrum in the hands of entrepreneurs and small carriers like Leap.
The C and F block companies are rolling out services in rural markets
and major metropolitan areas and offering innovative service
alternatives like Around-Town Phone Service to replace traditional
landline service.
This bill before you today allows the nation's largest carriers to
participate in the very auctions now reserved for designated entities--
unquestionably the last auction in which designated entities will have
a meaningful opportunity to purchase reserved PCS spectrum. Despite the
unquestioned success of this entrepreneurs' program, the FCC is now
considering a proposal that would take back as much as 20 MHz of the 30
MHz reserved for designated entities. The mega-carriers claim that this
spectrum will relieve congestion and is the only available alternative
for them to offer advanced 3G services. This contention is simply
untrue. The FCC will be conducting a 700 MHz auction in September and
is slated to re-allocate additional spectrum for mobile services in the
next year or so. In addition, carriers always have the option of
entering the secondary market for spectrum through assignments and
transfers, affiliation agreements, swaps, mergers, and disaggregation
and partitioning arrangements.
As the FCC has repeatedly recognized until now, it is simply not
plausible for designated entities to compete in open auctions against
the nation's largest companies who are targeting specific markets.
Under the current rules, designated entities bid against each other.
Under the FCC proposal, designated entities would be forced to bid
against companies, like SBC, that are almost 400 times as large as the
largest designated entity. H.R. 4758 would remove the last impediment
for these mega-carriers to obtain the very spectrum meant to promote
the creation of new competitors and new business opportunities for
entrepreneurs.
Leap urges this committee to move cautiously in eliminating a
program that is the catalyst of mobile wireless competition. The FCC is
scheduled to review the continued need for the spectrum cap later this
year as part of its Congressionally-mandated biannual review. Moreover,
a straightforward waiver process is in place and the Commission has
raised the cap to 55 MHz for rural markets.
The adoption of H.R. 4758 will reduce the number of potential
competitors in the wireless marketplace by eliminating the possibility
of any meaningful designated entity participation in the upcoming C and
F block re-auction, ultimately harming the American consumer. This
committee should reject a proposal that so narrowly targets Congress'
goals of avoiding an excessive concentration of licenses and
disseminating licenses among a wide variety of applicants, including
small business, rural telephone companies, and members of minority
groups and women.
Mr. Tauzin. Thank you, Mr. Kelley.
The committee wants to recognize the presence of Mr. Brian
Bilbray, who is not a member of the subcommittee but is a
member of the full Commerce Committee. I want to welcome you,
Brian, to these hearings.
Mr. Bilbray. Thank you, Mr. Chairman.
Mr. Tauzin. We only have about five or so minutes before we
are all going to have to run. We have a 15-minute vote on the
floor. I have asked Mr. Stearns to proceed over there and then
to come back. So as soon as he gets back, he will be back
before I will be back and he will reconvene the hearing.
But let me recognize myself and see if we can get another
member in before we have to go. I have just a couple of quick
questions.
First of all, my understanding is that digital can
accommodate as much as 20 times the number of conversation as
analog can accommodate on the spectrum. According to the
reports we have seen, various phone companies have different
percentages of digital in their mix. For example, Verizon is at
49 percent. I think SBC is at 41 percent.
Obviously, increasing the percentage of digital in the
wireless mix would increase dramatically the efficient use of
the spectrum. Mr. Smith, maybe you could respond to that. Mr.
Strigl, you could tell us something. You, too, Mr. Kelley. Is
that so and what is being done about that?
Mr. Smith. Well, Mr. Hatfield, I think, made a statement
that I would even say was very understated when he said that is
an aggressive number, the 20 to 25 times number. I think that
the more operative number is around six times the digital
capacity over analog.
With regards to the mix of analog and digital, there is no
question that digital services are more efficient in the
spectrum.
But I would like to remind you that to the degree to which
a mix is between analog and digital is to a large extent
determined by the customers themselves who have analog phones
versus digital phones.
Mr. Tauzin. But obviously a company can aggressively pursue
the sale of its digital products.
Mr. Smith. That is exactly correct.
Mr. Tauzin. I suspect that should be in company plans;
right?
Mr. Smith. It is in our company plans. One thing I will
point out that was not mentioned this morning, Mr. Dingell
accurately, I think, pointed out that the FCC requires us to
provide a base of analog service everywhere and one of the
reasons that that is still the case is that there are multiple
digital technologies across the country, GSMT, and so the
analog service becomes a common denominator for roaming.
So we will probably always have a degree of analog
capacity.
Mr. Tauzin. Do you want to comment on that, Mr. Strigl?
Mr. Strigl. Mr. Chairman, I think the better way of
measuring digital penetration is to look at the usage that
comes from digital customers. While we have 49 percent of our
base that is digital, we are moving very rapidly more and more
to digital, but that 49 of our base accounts for approximately
80 percent of our busy hour usage.
So we have moved very rapidly. I think that the analog
customer base that exists today is more what we could
categorize as the ``glove box'' customer. They use the phone
very little and primarily for emergency reasons.
Mr. Tauzin. Mr. Kelley, do you want to respond?
Mr. Kelley. Yes. If I could just comment on that. What he
is saying is absolutely accurate if you have 50 percent or more
of your spectrum that is devoted to analog. It is true, that is
really not being used very much, even by the customers that you
have to reserve that spectrum for.
You can't dynamically allocate more spectrum to digital
just when you need it.
Mr. Tauzin. I want to give you each a chance, if you will,
and this is the only other question I have for you, to respond
to anything you heard in the first panel that you really want
to disagree with, wholeheartedly, aggressively, passionately.
Here is your chance, anyone of you. Mr. Strigl.
Mr. Strigl. I would be pleased to respond to some of the
comments that I heard this morning about this very issue that
we are talking about. It is interesting and I think it works in
a laboratory to try to plan how to more efficiently engineer a
digital network.
But the fact of the matter is, if you look at what is done
in cities like New York City today or Los Angeles today, you
can look at virtually every other building top and see an
antenna.
So I think what Mr. Hatfield suggested this morning in
terms of better engineering techniques perhaps works in some of
the smaller markets, but we are at a limitation in the larger
markets today that makes building out, obtaining more cellular
tower sites very, very difficult.
Mr. Tauzin. So you are back to needing more spectrum?
Anyone else? Mr. Smith.
Mr. Smith. I would start out by concurring with Mr.
Strigl's remarks and say that with regard to the issue of
spectrum caps, again, the spectrum caps were very effective in
doing what they were intended to do, and the graphs show that.
But to compare spectrum caps in 1994 to spectrum caps in 2000
is an unfair comparison.
We are here in 2000 looking at three major trends in
wireless usage. No. 1, increased minutes of use because of the
pervasive nature of wireless, increased penetration, more
customers than every coming on board, and the advent of new
wireless digital data services. All of these things will, for
all the reasons mentioned, increase the demand.
Mr. Tauzin. It is a different marketplace.
Mr. Smith. It is just a different marketplace.
Mr. Tauzin. As they say in Istanbul, you can't go back to
Constantinople.
Mr. Smith. That's right.
Mr. Tauzin. Mr. Kelley.
Mr. Kelley. Yes. Just to reiterate, where we have rolled
out service, it is not a laboratory. These are real users using
1,000 minutes a month of phone service, some of them up to
15,000. It is an unlimited service. We are able to do this by
making 100 percent use of the latest digital technology.
Mr. Tauzin. I am not allowed to vote wireless, otherwise, I
would. I have to go in person.
The committee will stand in recess for about five or 10
minutes until Mr. Stearns can reconvene the hearing.
[Brief recess.]
Mr. Stearns [presiding]. The Subcommittee on
Telecommunications will reconvene. The Chairman will be back
momentarily and I think members will. Just to expedite, the
second panel has been very patient to wait while we had a
second round of questions with the first panel.
So let me start off the questioning.
Mr. Kelley, I guess you were here earlier when we showed
the graphs of what the other countries, where they have a lot
more than the 46 MHz and many countries don't even have any
limits.
You seem to think if we don't do anything that technology
will take care of it. That is what you imply. I heard the end
of your testimony. Isn't it true that if the spectrum cap is
lifted for future auctions it would increase the value of the
spectrum because more people would bid on it? Do you think that
is true?
Mr. Kelley. I am the CTO of Leap Wireless. I will give you
my best estimate. I really wouldn't want to tread in the area
of the value of it. That is really not the message I was here
with today.
Referring back to the charts that you showed, I did see
them. Referring to some of the comments that were made earlier,
there is this fixed pie of spectrum in the world. That is all
that there is. It is between 300, 400 or 500 MHz and around
3,000 MHz. That is all there is.
You can consolidate that into a few groups or you can allow
more competitors into the market in the same pie by using
smaller slices and in doing so you enable companies such as
ourselves at Leap Wireless to offer what is the lowest wireless
phone service, mobile service, anywhere on the planet ahead of
Europe and Asia.
Mr. Stearns. Mr. Baca, do you agree?
Mr. Baca. I agree that the value of the spectrum is
dependent upon the number of rules determining who can bid and
who can't bid. I think what is important here is to look at
what is the effect on competition.
The spectrum cap served a very useful purpose when the U.S.
was transitioning from a duopoly environment into a competitive
environment, particularly because the FCC was using a new
licensing methodology. So we are moving in a very different way
than we had done before in communications provision.
Other countries have used that experience that the U.S. has
had and see that they no longer need something like a spectrum
cap because there are other means by which they can achieve
those same goals. There are other law enforcement type means
where they can prevent undue concentration.
So I am saying that the spectrum cap served a purpose but
it is no longer needed now and in fact is thwarting the
competitive ability of U.S. providers.
Mr. Stearns. Mr. Smith, do your companies own or operate
any commercial licenses outside the United States and if so,
based upon what you have seen on spectrum caps, if any, imposed
on your licenses outside the United States, you might compare
and give us some comments on that.
Mr. Smith. We do own licenses in Europe and in Mexico and
in several other parts of the world. I am not that familiar
with all of the spectrum rules outside of the U.S., but I can
tell you what we have experienced is a rapid growth of
subscribership based upon our freedom and our ability to build
networks within the constraints of what the local laws are and
which have allowed us a degree of pricing flexibility which has
allowed our customer base to continue to grow.
Mr. Stearns. In those licenses that are outside the United
States, have you been able to provide additional services to
these folks that you can't provide those same services here in
the United States?
Mr. Smith. Well, not yet. I think we have not reached an
impediment at that point, but clearly we are kind of at the
cusp of the introduction of some new services and our concern
is that as we move forward into the next several years and as
we do spectrum planning for the next several years that there
are no artificial boundaries and no artificial barriers here,
particularly in the U.S. to be able to offer whatever services
our customers might want.
Mr. Stearns. Are you bumping up against the cap now?
Mr. Smith. We are not necessarily bumping up against the
cap. We are clearly bumping up against capacity limits in the
spectrum allocations that we have in some major markets.
We happen to serve a number of major markets in the U.S.,
very large cities, Los Angeles, Chicago, Boston, Washington, D.
C., and so forth. In many of these cities we are virtually at
the limits of our current technology.
Mr. Stearns. Limits of current technology?
Mr. Smith. We would allow that there are going to be some
technological improvements in the future, and we are going to
take advantage of those, but we are at a point where additional
spectrum is going to be needed in a very short period of time.
Mr. Stearns. Mr. Strigl, based upon some of these questions
I have asked Mr. Smith, is there anything you would like to
comment on?
Mr. Strigl. First of all, my company, Verizon Wireless does
not own licenses outside the United States. However, our two
owners, Verizon Communications and Vodaphone Air Touch own
numerous licenses outside of the United States.
I guess I would just offer that some of the commentary that
I heard this morning suggesting that there was not a
significant amount of competition in international markets I
think is just plain wrong.
If I look at the United Kingdom, Italy, or Germany, they
are very competition markets. So I would just correct that
perception if I might.
Mr. Stearns. My time has expired.
The gentleman, Mr. Green from Texas, is recognized for 5
minutes.
Mr. Green. Thank you, Mr. Chairman. I apologize for all of
us running and being gone. That is kind of the nature of the
system here.
Mr. Smith, I note in your testimony the rapid expanding FCC
spectrum auction of the 700 MHz bandwidth is causing great
concern within your industry. If the issue of clearing is not
resolved by the September 1 auction date, how do you think this
will affect the bidding on the spectrum?
Mr. Smith. Well, I know that there is a large degree of
concern in the industry and the FCC and their Policy
Memorandum, Opinion and Order on the spectrum clearing issue
has taken a fairly passive position favoring instead private
negotiations between what they call license holders and
broadcasters that occupy the spectrum today.
The concern that we have is that in order to be a license
holder you have to bid on the spectrum and you have to win the
spectrum.
Yet, as a company that is concerned about the evaluation of
our business, we need to know how much it is going to cost to
clear that spectrum before we can begin to build business plans
and before we can establish a willingness to pay in the
auction.
So the discussions have to take place with the broadcasters
before the auction begins, not after the auction begins.
So that would cause us a degree of concern. I can't speak
for everybody but it is causing us a degree of concern and at
least it will impact the degree to which we are aggressive
bidders in the auction.
Mr. Green. Would that affect the amount of money that the
auction may raise? It seems logical.
Mr. Smith. Logically, it would. If there was a more
aggressive bidding across the board you would expect the prices
to rise. Certainly if this were unencumbered spectrum I would
expect the values to be much higher than they would be if it
was encumbered spectrum.
Mr. Green. How long do you thing the 700 MHz auction should
be delayed to better bring the spectrum to the consumers?
Mr. Smith. Well, as a practical matter, there are a number
of issues that have to be resolved. Any delay at all is
probably going to be for several months. That would place it on
top of the scheduled time for the C- and F-block in November.
Our recommendation is that it is delayed on into 2001 and
maybe as late as July 2001.
Mr. Green. Thank you. Mr. Strigl, Verizon Wireless, I guess
I should keep up with the market better, do you also have GTE
Wireless?
Mr. Strigl. Congressman Green, the merged company of GTE
Wireless, Vodaphone, Air Touch, PrimeCo and Bell Atlantic
Mobile.
Mr. Green. Okay. Because I know the beauty of the spectrum
in Houston, for example, GTE Wireless is one of them along with
Houston Cellular. Because of the spectrum expansion now we have
4 or 5 companies and the competition has worked to the benefit
of the consumer. More people, obviously, are having cellular
phones.
In your testimony you spoke of Verizon's interest in
bidding on the spectrum recaptured from the NextWave bankruptcy
proceedings.
Are you concerned that this C- and F-block spectrum could
be flawed if all the legal entanglements are not resolved or to
simply the question, would you urge the FCC to postpone this
auction if all the legal issues surrounding the recaptured are
not fully resolved before the auction?
I guess what I am wondering, who would bid on an auction
where they may end up spending a great deal of time in court?
Mr. Strigl. I think, sir, that both auctions at current
course and speed are flawed. Would we bid? We have already said
that we were very interested in bidding on 700 MHz. I think
that what happens is the values are significantly depressed.
I am terribly concerned about clearing it. On the 700 MHz
auctions, I have the particular problem of having to go to my
board, justify how much money I would put down on this auction
and then turning around again and saying, ``Here is how much
money I need to clear the spectrum.''
With the reauction of the 1900 MHz, perhaps this, too,
should be delayed somewhat until the legal entanglements have
worked their way through. But in both cases I can't forego at
least studying and figuring out how I can bid on this and use
it in either case.
Mr. Green. So again, on both auctions, I guess you would be
interested in seeing some of the issues resolved hopefully by
the middle of next year?
Mr. Strigl. Yes, sir. Yes. Certainly on 700 MHz because it
is not usable until at best 2006. There is plenty of time for
that. So I would concur with my colleague, Mr. Smith, that mid
next year is probably thoughtful.
Mr. Green. Mr. Chairman, I know my time is out. But I see
Mr. Smith may have an additional comment.
Mr. Smith. If I could just follow up on your question,
Congressman Green, one way to look at this with regard to the
700 MHz spectrum is that by the policy that has been
established by the FCC where the potential licensee will have
to negotiate with the broadcasters, the value of the spectrum,
to address your point, is actually being transferred from the
public interest, from the government and the public, extracting
that value for themselves to the broadcasters.
I think Congressman Boucher this morning talked about some
of the discussions that he had been privy to where that could
actually occur.
So the more that this is delayed the more we have an
opportunity to reach some sound judgments with regards to what
the value of this spectrum is actually worth, to maximize its
value for the government.
Mr. Green. Thank you, Mr. Chairman.
Mr. Tauzin. Thank you, Mr. Green. Before we finish with the
panel, I would like to ask any of you, if you can help us
understand this, what are the elements that have allowed our
Asian and European friends to move more quickly on 3-G than we
have in this country?
What elements are there that are missing here?
Mr. Baca?
Mr. Baca. If I could do that, Mr. Chairman, what I did was
recently look at that very issue for investors. My big
conclusion was that spectrum management outside of the United
States is a much more simplified process. It is done in one
group generally. There is one entity within the government that
can do that.
There is also a greater availability of potentially usable
spectrum. In the industry, the spectrum is so cut up into the
various government and non-government users that it is very,
very difficult to get contiguous spectrum.
We saw that in the U.S. proposal for the recent WRC in
Istanbul. It was spun. There were slices of spectrum all over
the spectrum map and it was spun as more flexible and more
innovative and allowing all sort of, you know, benefits, but it
was just spin.
Basically, what it said was the U.S. doesn't have the
spectrum so that we are not like the U.K. which says, we don't
have to wait for the ITU to move and allocate new spectrum. We
have contiguous spectrum available, so we can schedule an
auction. We can be first off the block. We can raise $35
billion.
It is simply that the U.S. needs to be more focused and
efficient in managing the spectrum because it has less spectrum
available and tremendous demands on it. So the U.S. can't
afford the luxury----
Mr. Tauzin. Is that all it is? Are there any other
elements, any other problems we face that they don't face that
are handicaps to the deployment of 3-G in this country?
Mr. Kelley. If I could just respond to that and actually
just comment on the perception that somehow the U.S. is as far
behind Europe and Asia in this.
3-G means different things to different people. To some
people it means more spectrum. To others it means a new
technology.
But what it means to most people who would like to see
wireless data, high speed wireless data, but to consumers much
the way you can see Docomo's I-mode service in Japan, which
incidentally is done at 9.6 kilobytes a second, not any blazing
speed at all.
What it really means is being able to offer a higher speed
data service. That is something that will be possible to do
next year. That is really the point I would like to make.
If we have the opportunity ourselves to have another ten
MHz of spectrum in the markets where we only have ten today,
then with 20 MHz a spectrum we would be able to provide not
only our unlimited voice service, but high speed wireless data
services as well, which would really accomplish the end game
which is to bring high speed wireless data to American
consumers.
Mr. Tauzin. Are there any other comments? Mr. Strigl?
Mr. Strigl. Mr. Chairman, I really can't add much to that
except to say that I, too, believe that what is touted as
greater success in Europe is not necessarily so. Remember that
first there is greater penetration in Europe.
That is driven in part by the fact that there is less land
line penetration and we do see substitution over their very
early time.
Mr. Tauzin. In short, they have a weaker wired system as we
and they have had to rely upon wireless a lot more than we
have.
Mr. Strigl. In many countries, sir, that is correct. They
have done some things in terms of advance services that we
haven't done as quickly, like two-way SMS but you will see that
roll out very quickly here.
Mr. Tauzin. Mr. Baca, if I can summarize again, your
conclusion after studying this is that it is simply a problem
of management and availability of contiguous enough spectrum
for indeed these advanced services to roll out?
Mr. Baca. It is certainly not a matter of the competition
spirit of U.S. providers or certainly their technological
ability. It has to be other impediments that are causing them
to become competitively disadvantaged domestically versus
outside of the United States.
It is the ability to know that you are going to have access
on a timely basis to the spectrum that you say that you need.
Mr. Tauzin. Thank you. Mr. Stearns, do you have anything
you would like to follow up on?
Mr. Stearns. No, Mr. Chairman. I think you hit upon it
basically. If you were sitting in our place, I might just go
down the line here, what do you think this committee could do
to make sure that we are competitive in 3-G and that we would
have superior competitiveness with the Europeans.
May I start with you, Mr. Smith?
Mr. Smith. Sure. One of the concerns we had in spectrum
allocation policy is that the FCC has demonstrated a practice
of incrementally developing spectrum allocation. In other
words, we are going to auction this off this year. There is no
long-term plan.
As we look at the world allocation, international
allocation of tables and look at what has been done at WRC 2000
and so forth, I think the FCC needs to step back, and with the
NTIA, because some of the spectrum is government-controlled,
and say, what is the long-term plan here? Here is where we are.
Here is where we want to be. Then develop cooperatively between
the Congress, between the FCC and the NTIA a plan.
Mr. Tauzin. Would my friend yield?
Mr. Stearns. Sure.
Mr. Tauzin. It may be useful, I mean you can comment on
this if you like, it may be useful for us to consider next year
the adoption of a legislative policy position to guide such a
long-term plan. I mean part of the stop and go decisions that
are being made is not just the fault of the agencies.
Much of it is the fault of the Congress who for years have
been looking at spectrum as a piggybank, as a cash cow, and
making decisions, as many of us pointed out, that are related
to the budget, not necessarily to good spectrum policy.
Perhaps we might want to explore that, Cliff, in terms of
defining for the administration what a long term policy should
look like and therefore giving the Budget Committee a few more
barriers to leap before it begins dictating spectrum policy on
the basis of financial requirements. That may be our
responsibility as well.
Did you have anything else, Cliff?
Mr. Stearns. I was just going to ask the rest of them if
they agree.
Mr. Strigl. Yes, sir, I do agree with what Mr. Smith has
said in terms of the long term plan. I would add, however, just
a caution. That is that we are behind in having a long term
plan so I would prefer not planning the plan for a long time.
Mr. Baca. I think that the Congress could be very effective
by urging all of the participants, and that is part of the
problem, that in the U.S. there are many more participants.
There is NTIA and all the 43 Defense agencies and the FCC and
there is the Department of State and there is USTR.
Urge all of them, make this a No. 1 priority, to make sure
that they demonstrate that they can implement the decisions
that were made internationally WRC domestically and show how
this will form the basis for a new spectrum management plan.
The one big piece of advice is the advice that I give my
students when I teach international communications at
Georgetown. My parting advice to them is: When you go back to
your foreign countries, remember, auctions and anti-trust are
not spectrum management. That is law enforcement.
Mr. Stearns. Mr. Kelley.
Mr. Kelley. Yes, thanks.
To continue with the competitive forces that we have in
this country that have created the technologies that we have
now is the most prudent action I think we could take, by
continuing to allow the set aside program, as it was
constructed, to continue and by keeping the spectrum caps in
place you allow companies like ourselves to exist and will
allow other new wireless companies to roll out new services as
well.
Mr. Tauzin. Thank you, Cliff. Thank you all.
The record, by our rules, will stay open for 30 days. So if
you have additional suggestions or comments, I would encourage
you, by the way, to examine the testimony in the next few days
that you heard on the first panel. If you want to make
additional comments regarding that testimony, I would deeply
appreciate that.
I like the interaction of panels. Because we separated you,
we didn't get that. So if you would kindly do that for me in
the next 30 days, the record will stay open.
My deep thanks for your patience today. The hearing stands
adjourned.
[Whereupon, at 3 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Prepared Statement of Matthew J. Flanigan, President,
Telecommunications Industry Association
Mr. Chairman and Ranking Member, thank you for this opportunity to
testify before the Subcommittee on a matter of great importance to the
telecommunications industry. I am Matthew J. Flanigan, President of the
Telecommunications Industry Association (TIA).
TIA is a full-service national trade organization with membership
of 1,000 large and small companies that provide communications and
information technology products, materials, systems, distribution
services and professional services in the United States and around the
world. The association's member companies manufacture or supply
virtually all of the products used in global communications networks.
TIA seeks to provide its members a forum for the examination of
industry issues and information and serves as their voice on public
policy and international issues. Accredited by the American National
Standards Institute (ANSI), TIA also is a major contributor of
voluntary industry standards that promote trade and commerce in
telecommunications products--domestically and around the world--
including standards for many of the products that use the wireless
spectrum. Since January 1999, TIA has been the secretariat for the
Third-Generation Partnership Project 2 (3GPP2), which was created
to support International Mobile Telecommunications (IMT)-2000, the
International Telecommunication Union (ITU)-led initiative to develop
global third-generation wireless standards. To that end, TIA's
contributions to IMT-2000 help form the backbone of the ITU's radio
interface recommendation.
Mr. Chairman, TIA strongly supports and greatly appreciates the
attention you are giving today to this nation's pressing need for more
radio spectrum for the advanced wireless telecommunications services
known as third-generation or ``3G'' services. Last month, on June 2nd
in Istanbul, Turkey, the ITU completed the World Radiocommunication
Conference 2000 (WRC-2000), a global meeting of national
administrations that identified several possible additional radio
frequency bands for the provision of IMT-2000. IMT-2000 is the ITU's
terminology for the wireless 3G systems capable of broadband and
multimedia applications, including voice, video, and data.
The successful conclusion of WRC-2000 presents a unique opportunity
to move without delay to begin the process of making third-generation
spectrum available in the United States. For the sake of U.S.
consumers, manufacturers and service providers, it is extremely
critical to keep pace with world market demand and to harmonize U.S.
bands for 3G services with the spectrum being designated in the rest of
the world. How do we move toward achieving alignment with the rest of
the world for 3G services? The answer begins with sound spectrum
management and a focused, cooperative effort between the Federal
Communications Commission (FCC) and the Executive Branch.
principles of sound spectrum management
As manufacturers of wireless products and systems, TIA members have
a direct interest in our nation's spectrum management polices.
Responsible spectrum management contributes to high volume
manufacturing that increases opportunities for competition in both the
equipment and service markets and also ensures that consumers and users
can purchase equipment using the best technology at the lowest price.
Geographically unified national allocations, for example, reduce
equipment cost through economies of scale. Harmonized domestic and
international spectrum allocations increase exports and jobs generated
by this industry.
Radio spectrum is a unique, ubiquitous natural resource. Unlike
many other natural resources, it can be repeatedly reused. However, it
is a resource that can only accommodate a limited number of
simultaneous users at one time. This limitation requires careful
planning and management in order to maximize its value for public and
private services. This is particularly true because the demand for
communications spectrum is rapidly increasing. Both the competition in
wireless markets and the continuing development of new radio
technologies are increasing the demand for access to the same limited
spectrum. While this increased demand is placing pressure on regulators
to make difficult choices among competing potential spectrum users, it
is also stimulating technological advances in spectrum sharing
techniques and creating the opportunity to realize economies of scale.
The shared goal of global, mobile, seamless, ``anytime, anywhere''
communications was the motivation for the high degree of consensus
achieved at the recent WRC-2000. The national administrations
represented there recognized the need to achieve a global harmonized
spectrum plan so as to maximize economies of scale, lower costs, and
secure an early implementation of the third-generation services. The
outcome of this conference represents sound spectrum management at the
international level. The U.S. must now move promptly to make its own
spectrum management decisions at the national level in light of the
global framework adopted at WRC-2000, and make available on an
expeditious basis the spectrum needed for 3G services.
While sound spectrum management is not easy to accomplish, it is a
challenge that can be met through strategic planning and recognition of
the fundamental principles that lead to optimal spectrum usage. It is
TIA's position that increased reliance on market forces, rather than
government oversight, will lead to the most economically efficient use
of spectrum, the development of the most innovative technologies, and
the universal deployment of wireless services. This does not, however,
mean that the government can take a hands-off approach to how spectrum
is allocated. This is a function that remains uniquely the government's
and it should be given a high priority.
In a competitive market, companies will develop and produce those
technologies and services that are most desired by consumers. And they
will offer these services at competitive prices. If spectrum can be
used for those services that are most in demand, then companies will
have a greater profit motive for entering the wireless market. In this
way, market forces will encourage an efficient, innovative, and
flexible use of the spectrum and will serve as the best arbiter among
competing technologies and the services that they provide.
However, a management framework that relies on market forces does
not preclude the government from playing a significant role within that
framework. As I noted, spectrum management is an essential task that
the regulator must undertake. This includes determining how best to
apportion spectrum among competing services, both licensed and
unlicensed, making spectrum available for essential public safety
services and national defense, and protecting users from harmful
interference.
Traditionally, governments have allocated available frequency bands
for specific uses before granting licenses to use the frequencies.
Regulators should establish the initial geographic scope and bandwidth
of licenses, taking into account the various characteristics of
different frequencies, electromagnetic compatibility and the different
spectrum needs of broad categories of service. This approach still
allows for technological developments that might make the most
effective and efficient use of the bandwidth provided, as well as
permitting the introduction of new services that are compatible with
the intended use of the spectrum.
Ultimately, spectrum allocation decisions must reflect a government
and private sector consensus as to what services are technologically
possible, commercially viable, spectrally efficient and likely to
benefit the public. Allocating spectrum without an understanding of
domestic and global marketplace and technical demands can lead to
fractured markets, increased equipment costs, delayed research and
product development, and increased time-to-market. This is particularly
true where the failure to achieve harmonization with global allocation
plans will put a nation at a competitive disadvantage that will
continue throughout the life of the service. Many argue this is
precisely the case with 3G services in the U.S.
It is also self-evident that the substantial benefits to the U.S.
economy arising from a well-crafted spectrum allocation process, as
described above, will be lost if spectrum allocation decisions are
driven primarily by the demands of federal budget planning. Although
spectrum auctions may be an effective license assignment tool for
certain services, spectrum auctions should not be a substitute for
sound spectrum allocation decisions or used primarily as a means of
revenue generation. In addition, as noted, responsible spectrum
stewardship requires that consideration be given to services that do
not generate commercial revenues, for example, public safety systems.
Just as worldwide telephony standards have enabled
telecommunications systems to cross borders and become globally
accessible, harmonized spectrum coordination around the world can
enable more effective, economical and competitive wireless
communications. This provides the consumer with global communications
mobility as well as global access. Given the unprecedented potential
growth in advanced mobile and personal communications, and the
convergence of telecommunications and information technologies, it is
imperative that the U.S. rises to the difficult challenge of ensuring
sound spectrum planning and management for third-generation wireless
services,
3g spectrum allocation priority
As I have noted, the ITU recently completed its WRC-2000 meeting
and the outcome was very successful for the future of third-generation
wireless services. The conference recognized that approximately 160 MHz
of additional spectrum would be needed to meet the projected demand for
3G services in the next decade. It identified both the 1710-1885 MHz
and 2500-2690 MHz bands as potential bands for the service, with no
preference given to either band. It indicated strong support for
market-driven policies, including those that allow operators to evolve
their first- and second-generation mobile systems to 3G and provide
operators with flexibility in choosing technologies. It is now time for
the U.S. to move forward expeditiously to develop a national spectrum
plan for 3G.
The bands identified by the WRC-2000 are currently being used in
the U.S. The 1710-1850 band has been used by the federal government.
Part of this spectrum, the 1710-1755 MHz band, already has been
reallocated for commercial wireless services, and is likely to be
available for 3G. The 1755-1850 MHz band is heavily used today by many
federal agencies, and the National Telecommunications and Information
Administration (NTIA) has indicated that it will study the band to
determine whether, and under what timeframe, portions of the band can
be made available for IMT-2000.
The 2500-2690 MHz band also is being used today for commercial
fixed services, i.e. the Multichannel Multipoint Distribution Service
(MMDS) and the Instructional Television Fixed Service (ITFS). This
spectrum originally was used for ``wireless cable'' systems, but recent
rule changes now permit it to be used for wireless Internet access and
other fixed services.
It is imperative that the FCC and NTIA work with industry to
determine what portions of the bands identified at WRC-2000 can be made
available for IMT2000 in a timeframe that meets market demand. Studies
must be completed to determine, for example, whether 3G services can
share spectrum with existing services in these bands, whether
relocation of existing services is feasible, and the cost and timing of
such relocations. The wireless industry has asked the FCC to commence a
rulemaking proceeding to begin this process and to work with NTIA to
complete these studies as soon as possible.
The ability of consumers to benefit from emerging wireless services
depends on prompt action by the federal government. The U.S. economy
also needs to evolve to advanced wireless services in order to continue
its information technology driven expansion. Wireless technologies and
services are becoming essential to many e-commerce applications and
industry is planning a variety of future information services that can
be provided wirelessly. Consumers in the United States and abroad are
beginning to rely on mobile, hand-held devices and services to deliver
the Internet anywhere, any time.
As the federal government proceeds to study the bands for 3G uses,
it must also avoid taking actions that could preempt their use and
prevent the U.S. from adopting a 3G spectrum plan that is harmonized
with the rest of the world. For example, the FCC, in its Spectrum
Policy Statement released in November 1999, proposes to make available
1710-1755 MHz paired with 2110-2150 MHz and 2160-2165 MHz for fixed and
mobile wireless services which could include 3G technology and
services. This proposal is inconsistent with the harmonized approach
that the WRC-2000 framework seeks to promote and should be put on hold
until the studies of the proposed bands are completed. Although the FCC
is permitted, under the Balanced Budget Act of 1997, to auction 1710-
1755 MHz at any time after January 1, 2001, and is presently obligated
to license 2110-2150 MHz by September 30, 2002, to proceed in
auctioning these bands prior to completing the spectrum studies on the
bands identified at WRC-2000 would put the U.S. irrevocably out of step
with the rest of the world. This threatens to harm the U.S. wireless
industry and the American public by depriving them of the global
economies of scale that harmonized spectrum allocations would bring. I
call upon Congress to address this matter by directing the FCC to
refrain from auctioning any part of the 1710-1755 MHz or 2110-2150 MHz
bands prior to the completion of these studies and a decision on
whether this spectrum is appropriate for 3G services in the U.S.
conclusion
In conclusion, Mr. Chairman, I would urge the Subcommittee to
provide both support and direction to the FCC and NTIA in order to
facilitate completion of the studies needed to allocate 3G spectrum in
the U.S. Prompt action by these agencies is essential to ensure that 3G
spectrum allocation decisions are made on the basis of informed
consideration of all alternatives. This will allow U.S. consumers and
industry to avoid the costs of precipitous action, as well as those
arising from undue delay, including lost economic growth and jobs,
unreasonable delays in introducing new services for the American
public, and further erosion of U.S. leadership in the wireless
technology area.
The Subcommittee should establish a regular reporting structure to
assure that it is informed about how the studies are proceeding. The
Subcommittee should also encourage the FCC and NTIA to establish
ambitious goals for the completion of the work. Both agencies should be
strongly encouraged to keep the private sector involved by working
closely with industry and trade associations such as TIA to complete
the necessary studies and by developing a plan for obtaining spectrum
for 3G services. Finally, the Subcommittee should take steps to assure
that the auction of 1710-1755 MHz and 2110-2150 MHz does not occur
before the completion of these spectrum studies by NTIA and the FCC.
Thank you again for allowing TIA to present its members' views.
______
[GRAPHIC] [TIFF OMITTED]65904.003
[GRAPHIC] [TIFF OMITTED]65904.004
[GRAPHIC] [TIFF OMITTED]65904.005
[GRAPHIC] [TIFF OMITTED]65904.006
[GRAPHIC] [TIFF OMITTED]65904.007
[GRAPHIC] [TIFF OMITTED]65904.008
[GRAPHIC] [TIFF OMITTED]65904.009
[GRAPHIC] [TIFF OMITTED]65904.010
[GRAPHIC] [TIFF OMITTED]65904.011
[GRAPHIC] [TIFF OMITTED]65904.012
[GRAPHIC] [TIFF OMITTED]65904.013