Remarks of Chairman Reed E. Hundt American Mobile Telecommunications Association Leadership Conference June 27, 1995 (as prepared for delivery) I am honored to speak to your organization today, and am particularly pleased to be asked to speak for two reasons. First, I understand I am the first FCC Chairman to address your members in the past five years. This privilege ranks up there with a few other firsts I have accomplished: I was the first FCC Chairman to go to high school with the future Vice President of the United States and to law school with the future President of the United States. Of course, the fact that I was educated with President Clinton and Vice President Gore had nothing to do with my appointment as Chairman of the FCC. This is truly a random coincidence! The real reason I was selected as Chairman was that I was the first candidate for the position to share a birthday with Alexander Graham Bell. As we all know, decision making inside the Beltway is an exact science. But more importantly, I am extremely pleased to speak to your organization as you celebrate your 10th anniversary. Ten years ago your organization had two staff members, a $200,000 budget and a handful of members. Today you have a budget of over $1 million, 365 members and are creating a sister organization to represent your industry internationally. AMTA has played a vital role in the early development of America's wireless communications infrastructure over the last ten years. In fact, your members are the true mobile service pioneers. Your members were building systems and providing communications services to the business user in the 1970s, long before the terms "digital," "PCS," and "Information Superhighway" entered the mainstream. I applaud AMTA for its service to the SMR industry and the wireless community in general. Over the years you have provided a strong leadership role on wireless issues at the FCC and on Capital Hill. I am certain that as your industry continues to develop and compete in the new wireless world, your visionary role as the voice of the SMR industry will continue. Your recent commitment to establish an affiliated organization to foster international development of wireless communications is a major step to help your members explore new markets. I wish you the best in these exciting ventures! I also would like to point out your organization's significant efforts in helping us fight speculation. Speculation robs legitimate SMR operators of the chance to compete and robs the general public of valuable new services. Your publications on fraud, and your cooperation with the Commission, the FTC, FBI, and SEC are extremely helpful to our continued efforts at fighting this significant problem. And when one explores the changes that have occurred in your industry and in society since your organization's founding, the results are staggering. In the SMR industry in 1985 there were approximately 375,000 mobile units. The industry primarily provided private dispatch services to the business user. Today there are more than 1.8 million SMR mobile units in service. And your industry provides services ranging from private, local dispatch services to a fully interconnected, high capacity wide-area mobile service. The wireless communications industry in the United States is probably the most exciting business in the world. It is in this industry that some experts predict the SMR units will reach 4 million by the end of 1995 and the customer base will double every year for the next three years. It is in this industry that many predict SMRs will become a multi-billion dollar industry by the end of this decade. It is in this industry that the number of cellular subscribers grew last year by almost 50 percent -- to more than 25 million. It is this industry that is the fastest growing sector of the U.S. economy in terms of new customers added. It is this industry that has recorded the biggest auction in history. That was our first PCS auction, raising nearly $8 billion. It is in the Guinness Book of Records. It is this industry that is in the middle of the biggest single investment boom ever made in a single technology: PCS. Over the next few years more than $30 billion will be invested. This investment in PCS and all types of wireless communications services will ultimately create directly and indirectly more than one million new jobs. This investment will ultimately generate in tax revenues far more every year than the auction revenues already earned. This investment is about economic growth; it's about helping to start businesses daily; it's about the economic engine of the 21st century. I don't know how far or how fast the wireless industry is going. No one does. But I do know that change will be the only constant wireless competitors face. When I think of your future I'm reminded of the history of General Motors. In 1908, William Durant, the first CEO of General Motors, met with J.P. Morgan's chief partner, George W. Perkins. The House of Morgan was the key source of finance for the industrialization of America. Durant assured Perkins that Perkins ought to loan him money because, he said, "There will come a time when a half million automobiles are built and sold in this country." After Durant left, with no commitment, Perkins said, "If this man has any sense at all, he will keep those observations to himself when he tries to borrow money." Within six years, the U.S. auto industry achieved Durant's prediction. By 1920, another six years later, this country was making two million automobiles a year. Think about AM/FM radios. They are ubiquitous, cheap, in every home, car and workplace; easy to carry, simple to use, always ready to be turned on. Soon, the same thing will be true about interactive radios: also called wireless devices. You may have read that a group of former FCC employees, along with some new arrivals on the communications scene, gave themselves a press conference recently in which they blithely opined that the FCC should be eliminated. It is fairly obvious that this group has a rhetorical and political mission that pushes its logic beyond the limits of good sense. Still these commentators are honorable men and we owe it to the process of rational debate to ask seriously what is the purpose of the FCC. First, the FCC manages the public property of the airwaves to promote the public interest. This means, among other things, that we make sure that new businesses and small businesses have a chance to gain access to spectrum. Without us, the big established companies would be in total control of the communications revolution. These are fine companies but they shouldn't be the only ones involved in the most important industry in this country's future. They may very well gain control of the airwaves and make it impossible for new entrants with great ideas to participate in the wireless revolution. In SMR services, this need is particularly acute. Your industry has service providers ranging from multi-million dollar, wide-area systems to local service providers. Both of these types of enterprises are vital to the success of the wireless revolution. Both should be able to compete against the telecommunications giants. That is why we intend to foster an industry structure that allows large and small providers the flexibility to offer the services their customers need. Some SMR spectrum should be available for wide-area licensing. Also, spectrum should be available for small businesses that are interested in providing niche services. The marketplace should determine how your businesses develop and what services you provide, not regulation. A second purpose of the FCC is that we do auctions of spectrum, like no one else in the world has done. And these auctions have done more to stimulate competition in wireless services than any measure adopted by the FCC, ever. The most important facts about the auction techniques that we have pioneered are these: auctions are fast; auctions are fair; auctions create efficient markets. In addition, we have demonstrated that you can establish auction rules that guard the rights of incumbents. In our 900 MHz SMR Order, adopted in April, we provide for auctions in a service that had been in regulatory limbo for years. We also ensure that incumbents would have the right to continue their existing service without interruption and would gain increased service flexibility in the process. These factors are important in establishing the auction framework. We plan to strongly guard these rights in future auctions. And we have proven that auctions do not exclude small businesses. You can conduct auctions that include small businesses as well as big businesses, such as will be amply demonstrated in the upcoming entrepreneurs' block auction of the third 30 megahertz swatch of PCS spectrum. Small companies and entrepreneurs must participate in the auction process to help ensure the continued development of dynamic, new ideas that will lead the communications revolution. As Congress intended in enacting auction legislation, we intend to use special provisions in our competitive bidding rules for small businesses to ensure their ability to participate in the auction process. Auctions also help deter speculation by placing licenses in the hands of those users who value them most. The marketplace determines the value of the license. Windfall profits to speculators and inefficient secondary market transactions become a thing of the past. Bidders must develop an economic rationale to support any bid they place. Bidders must pay for their licenses promptly and bidders must stay current on any installment payments they may receive from the government. In our auctions to date we have experienced minimal participation by traditional speculators, and where speculation did occur, the licenses were recovered and will be re-auctioned. Auctions have also reduced the time it takes for the Commission to issue a license from years to just a few months. In short, auctions are the most efficient mechanism to guarantee that the products and services of the wireless industry will be like any other consumer product: consumers will get choice; innovation will be driven by competition; some companies will succeed, others may not; buildout will be driven by demand not by regulators; and government won't pick winners, the market will. Our auctions are the new paradigm for spectrum management. Instead of saying why auctions, we should always say why not auctions. For SMR services auctions will place licenses in the hands of those who value them most. Auctions will allow for efficient aggregation of licenses, and auctions will create a licensing mechanism that is fast and efficient. I have previously announced that an auction for the 900 MHz SMR service will begin in November. This is the first specialized mobile radio auction and it will further propel the rapid development of this service. A third important role for the FCC is to set fair rules of competition for new wireless businesses. If you aren't given your fair chance to compete -- the FCC is there for you. The Department of Justice and the state public utility commissions each have their roles, but only the FCC can and has set fair national rules of competition for everyone in our burgeoning national communications businesses. Fair competition means an even playing field for all participants in the wireless communications revolution. Large companies and small companies alike both deserve an equal opportunity to compete. Your industry must have the same operational flexibility afforded to competing commercial mobile radio services such as cellular and PCS. Unfortunately this has not been the case. To date, both large and small operators have had far less flexibility than either cellular or PCS providers to expand geographic coverage or increase channel capacity. That's what our 800 MHz rule making is really about. I know that this proceeding is controversial, and that many people in the SMR industry are concerned about some of our proposals. But I think everyone can agree that the status quo needs changing. SMRs can't continue to be competitive if our rules require you to seek approval of every tower before you can build it or move it while cellular and PCS providers may adapt their systems freely to changing customer demands without involving the Commission. We are working hard to come up with solutions that will be fair to small and large SMRs alike and that will give both the opportunity to grow. We have received valuable input from all segments of the industry, and we want to keep working with you. But we can't turn back the clock -- the pace of change in this industry requires us to move forward. In wireless communications, tremendous technological changes continue to occur. Substantial private investment is being committed. Employment opportunities are being created. And consumers are receiving a wide array of choices. All these changes are forces that thrive in a competitive market. Our goal is to further move the environment from one where the government determines the parameters of the competition to where a fair market does. As Congress struggles to rewrite the 1934 Communications Act I encourage them to look at the wireless industry as a road-tested model of how competition in lieu of intervention can lead us into the information age. For everyone in wireless communications, competition rules the day. Regulatory barriers will disappear. Soon there will be many competitors of different sizes with unique plans going after the same wireless customer. The best service at the lowest price will be the only surefire way to win. In this era of rapid change I remind you of four of Jack Welch's Six Edicts of Success that he has used in revolutionizing the way General Electric does business and making GE one of the most respected companies in the world: 1) Control your destiny, or someone else will; 2) Face reality as it is, not as it was or as you wish it; 3) Don't manage: Lead; and 4) Change before you have to. These are simple principles that are being applied every day in the wild and wooly communications industries, and I certainly think they are appropriate in the wireless world. Our goal at the Commission is to ensure that the mobile service pioneers in the SMR industry have a fair opportunity to compete in this changed environment. To do so requires fair rules of competition for both large and small service providers. It requires a rapid transition from the old order to the new order. It requires a new way of thinking about wireless services. By seizing the opportunity to compete and looking to the future of the wireless world, the mobile service pioneers of the SMR industry can be leaders of the wireless revolution. The opportunity is in the air. I know you will make the most of it.