STATEMENT OF THE HONORABLE REED E. HUNDT CHAIRMAN, FEDERAL COMMUNICATIONS COMMISSION 1 NOVEMBER 1994 Welcome to the FCCC: the Federal Competition in Communications Commission. This morning, we are releasing the roster of applicants for the FCC's December 5 auction for broadband Personal Communications Systems licenses. That means we are really announcing the starting lineups in the contest to build the telephone systems of the 21st century. Auction winners will build new wireless networks to compete head-on both with existing cellular networks and the traditional wired phone system. Seventy-four companies have filed applications for the chance to bid on 99 licenses in 51 regional markets. The application lineup will lead to an all-star team for American telecommunications. Like any all-star squad, the lineup includes well-known communications players, some non-industry veterans and some promising rookies. The roster just proves what we have said all along: if we bid it, they will come. Our experience tells us that not all 74 applicants will necessarily go all the way to participating in the auctions. And, obviously, no one is guaranteed to win in the auction or, having won, to succeed in business. But the opportunity to succeed is guaranteed for all. The auctions for the publicly-owned airwaves that we began in July will add up to the largest auctions of public assets in history. With the third auction, for regional advanced paging licenses, still underway and with its high bids currently totaling $394 million, these auctions have so far raised more than one billion dollars for the federal treasury. No one knows how much the December 5 auction will add to that total. But the other consequences of the auction will be far more important than the money raised. It will launch a new industry, generating economic growth and new jobs. It will increase competition in telecommunications, accelerating the development and introduction of new technology and reducing rates for consumers. American industry's world leadership in productivity is often attributed to our lead in communications and information. The auction will help insure that America maintains that lead. Estimates are that winning bidders will invest as much as 30 to 50 billion dollars, in addition to their bids, to build competing wireless networks. This investment will add an additional 300,000 manufacturing, management, sales and service jobs in the wireless industry and may contribute as many as 700,000 additional related jobs. This may represent the greatest one- time private sector investment in any single industry in the nation's peacetime history. It is certainly the greatest single economic opportunity ever made fairly available to women and minorities. The wireless phone competitors appear to have one goal in common: they want to be your phone company -- or one of your phone companies.. Wireless phones will no longer be status symbols of the rich and famous. Competition will reduce wireless phone rates dramatically and put the technology within financial reach of most American homes and businesses. Just the advent of this competition has begun to reduce prices: monthly cellular prices fell by more than 12 percent in the past year, a drop most analysts attribute to industry anticipation of a more competitive market. The race to develop the airwaves is like the race to stake mining claims around Sutter's Mill, but instead of looking for the mother lode in the ground, the rush now is to weave gold from thin air. This development of the airwaves represents a totally new policy. In the past, when the government has doled out its property to promote development, it has generally done so for free. This was particularly true of land, as in the 19th century land rushes and railroad land grants. But it was also true of the airwaves: for most of this century, the federal government gave away the publicly-owned airwaves, as well. The existing cellular phone systems were built on licenses handed out for free, only two per market area and one of those to the local phone company. When did we make this change? Just last year, when Congress passed President Clinton's budget package, granting the FCC the authority to auction those airwaves that are used for subscription services. Today's announcement is a triumph of reinventing government that began with that vote. The fact that we have such intense interest in the upcoming auction is a testimonial to the work of the FCC team. When we received auction authority in August, 1993, most observers predicted it would be several years before this agency could organize its first auction. But we proved that what some had regarded as a sleepy little agency was actually a sleepless little agency and we held our first auction in July, less than a year after receiving the congressional go-ahead. We didn't take our auction rules from the standard texts, because no one has ever attempted what we are doing. As someone on the staff said to me the other day, we 're not reading history, we're making it. We took a risk on new auction methods, never tried before, based on game theory techniques that won this year's Nobel Prize in Economics for several Americans. The auctions feature complex strategizing by the bidders and spirited bidding. The economists tell us that the process drives bids to an optimal level of economic efficiency: a high, but fairly valued price. Similarly, we consulted with industry and economic experts to divide up the available PCS frequencies so that the bidding options for airwave licenses provide a basis for sound investment and for realistic competition to existing wired and cellular phone networks. In June of this year, we revised an earlier PCS plan that many in the industry felt would not provide the right frequency bands or market opportunities. Our revised frequency allocations will result in less complex and lower-priced consumer equipment, reduced industry start-up costs and better opportunities for small businesses, rural phone companies, and women- and minority-owned businesses. We squeezed a hat and out came a rabbit. Above all, the revised rules have provided attractive competitive frequency packages in each market. It was this agency's hard work, and not coincidence, that caused businesses of different sizes and shapes to tell us by the number of their applications that our PCS plan got it right. But it will be America's world-leading entrepreneurship that will take the opportunities we provide and develop the wireless communications industry. We were also determined that our plans for the new wireless market would include opportunities for smaller businesses, including women and minorities. Accordingly, our PCS plan includes another set of auctions, shortly after the conclusion of this one, for packages of local frequencies which provide special opportunities for those entrepreneurs. Those licenses will be valuable assets in and of themselves in local markets, and also as building blocks for regional and nationwide wireless networks. When all the dust settles, we anticipate that in each regional market there will be many full- service wireless providers competing against each other and against the wire telephone providers. It should make for a lively time. What you will see emerging this morning is the first chapter in the history of the American telephone industry of the 21st century. This history will evolve, of course, as business conditions, consumer demand, and technology dictate. Those who go on to win licenses in December may not ultimately win the competition to furnish the next century's day-to-day communications: we have fashioned a policy in which nothing is guaranteed but a fair chance at The American Dream. The investments the FCC is promoting through this auction lead in a different direction: to competition instead of monopoly and to prices and services determined by the market rather than the government. To provide you with a profile of the applicants and information on the next steps in the auction process, it is my pleasure to introduce Gina Keeney, Director of the Wireless Bureau at the FCC. Gina came to the FCC from the staff of the Senate Commerce Committee, where she worked on the legislation that authorized the auctions, so you could not have a better guide. Gina. Thank you all for coming.