Remarks of Chairman Reed E. Hundt at a VIP Luncheon of Phillips Business Information Inc. August 25, 1995 I'm honored to be here. At the Commission, we learn a great deal about the industry's perspectives on current issues from reading your publications. I hope it is equally true that the industry can learn as much about what the Commission is up to and why. If that is not the case, I hope the fault is not at our end. I want the Commission to be as open and accessible as our rules permit. I want your reporters to feel free to go beyond merely reporting what is in our public statements and our public notices, so that your readers gain the fullest possible understanding of what it is that we are doing. It is in that spirit of openness that I accepted your kind invitation today. Our nation's wireless communications industry, which many of your publications cover, probably is the most exciting business in the world. 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 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. That is why when people compliment the FCC on the success of the auction I always say: it's not about the money we raise; it's about the businesses we help get started; it's about the economic growth they generate. 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 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 their 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. No one has a better idea of this purpose than someone in the wireless industry. 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 have a chance to get 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. Second, we do auctions of spectrum, like no one else in the world has done. 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 conduct auctions that guard the rights of incumbents, such as the incumbents in the PCS spectrum. Third, the FCC stands ready to set fair rules of competition for new wireless businesses. If you can't get access to the local loop; if you aren't treated fairly by long distance companies; 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. FCC, as you know, stands for Fair Competition in Communications. I spoke earlier of the incumbents in the PCS spectrum. With the recent issuance of the A and B block licenses, the process of relocating these incumbents has just begun. Our rules provide for a period for voluntary negotiations,followed by a period of mandatory negotiations. Even though relocation is in its earliest stages, we are hearing a growing number of complaints from participants, especially from the PCS side of this equation. The PCS industry has joined behind a petition for rulemaking that would permit PCS licensees to share the costs of relocating incumbents. We expect to issue a NPRM on cost sharing rules this fall. Beyond cost sharing concerns, many other complaints go to the issue of whether our rules grant too much leverage to the microwave incumbents during the initial stages of the negotiation period. Some PCS licensees are describing what they face in negotiations with some microwave incumbents as "greenmail." We will be looking at both sides of this issue very carefully, to see how the process is working. Our goal remains the same -- we want to facilitate the fastest possible rollout of PCS services to the American public, while protecting the rights of incumbent occupants of the PCS spectrum. I don't know how far or how fast this industry is going. No one does. But, when I think of its 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. Wireless borrowers can use this story when they go to Wall Street. And as you already know, the number of cellular subscribers grew last year by almost 50 percent -- to more than 25 million. Wireless is the fastest growing sector of the U.S. economy in terms of new customers added. 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. In order to make our contribution to your future, we created a new Bureau to focus on wireless telecommunications issues -- under the terrific leadership of Gina Keeney. Under her leadership, the new bureau has completed four spectrum auctions and we are moving forward rapidly on more. I am pleased to take this opportunity publicly to announce our lineup of upcoming auctions: MMDS and 900 MHz SMR in November 1995. These are both firsts in this country: the first special mobile radio auction and the first auction of spectrum for the purpose of delivering video. Broadband C Block in December 1995 As you know, the courts again have stayed our scheduling of this auction. We are committed to moving forward as expeditiously as possible after the Court of Appeals rules on the challenge to the auctions rules. We are confident that we will prevail on the merits in the litigation, and that we can get the auction back on track as soon as the court rules. Oral arguments are scheduled for Sept. 28. This is a key auction, not only because C block will provide a significant opportunity for small businesses and new entrants to participate in the communications market, but also because this third 30 megahertz auction is the one that essentially guarantees vigorous competition in all geographic markets. IVDS auction in 1st Quarter 1996. This should complete the IVDS auctions. Then it will be up to the licensees to make Broadcast TV an interactive service. We will auction the Broadband PCS D and E blocks in the First Quarter of 1996, and the F block in the Second Quarter of 1996. These are the ten megahertz licenses that may be combined to form mobile phone businesses in some markets. In others they will be the vanguard of new wireless applications. Other auctions in 1996 will include: Cellular Unserved (1st Quarter) Narrowband PCS (2nd Quarter 1996) 800 MHz SMR (3rd Quarter 1996) 50 MHz (GWCS -- General Wireless Communications Service -- 3rd Quarter 1996) 220 MHz (3rd Quarter 1996) We don't make predictions but there isn't much doubt that these auctions will total more than a billion extra dollars for the Treasury. More important -- because it's not about the auction revenue -- these auctions will energize brand new competition and brand new wireless industries that will add hundreds of thousands of jobs to the economy. This is an aggressive schedule, but we're going to do our best to meet it. So if people ask you what is the purpose of the FCC, tell them that among other things we are working overtime to promote rapid introduction of new wireless services to the American consumer. When I talk about overtime I mean overtime all the time -- and without extra pay. It has been said that "government isn't the solution, it's the problem." I am perfectly willing to admit that government is filled with problems, but that is in part because government takes on hard problems. And having problems is no excuse for abandoning the pursuit of the public interest that is the purpose of government. The FCC has struggled for years to find a fair, fast, and efficient way to mete out licenses to use the public property of the airwaves. Auctions are the best thing we've come up with and they work terrifically well. I call that an example of government finding a solution to a problem. And when I tell you your civil servants at the FCC are working overtime; they are doing this so that others get the chance to build careers. They don't profit for themselves. They are doing this to help you and to have something historic to share with their children. So I think everyone in the Wireless Bureau deserves, for their selfless hard work and the hard work they are committing to do for the rest of this year, a round of applause. Our auctions should continue; let's not threaten their success by attacking the tiny, intrepid, hardworking FCC. As Abraham Lincoln explained, "the legitimate object of government is to do for the people what needs to be done but which they cannot, by individual effort, do at all, or do so well, for themselves." Lincoln therefore thought that government funds should be used to help build infrastructure in the new western state of Illinois. No one in Illinois could build that infrastructure acting alone. By acting together, through government, the country could make sure that the small businesses, entrepreneurs, immigrants, and little people of Illinois would have a fair chance to explore their own future. As it happened, their future became the great united country we are proud to call ours today. We have before us today the same necessity -- but this time we need to build the infrastructure not of the industrial age but the information age. One clear example of the proper role of Government and this Commission in building the information age infrastructure is our plan to address the wireless communications needs of the public safety community. We have joined with the Administration, and with the industry itself to ensure that public safety is part of modern communications and that the process to bring this about be a fair and open one. We are unwilling to let matters simply evolve. With NTIA, which has the spectrum management responsibilities for federal agencies, we have established the Public Safety Wireless Advisory Committee. Last week Assistant Secretary Irving and I announced a group of distinguished individuals to chair and oversee the work of the Advisory Committee. Its chairman, Philip Verveer has a well earned reputation of fairness and commitment to public service in communications. His steering committee includes senior public safety officials from the federal, state and local governments, and from key public safety equipment manufacturers. I do not intend this Advisory Committee's work to culminate simply in a report. Its recommendations will become part of a parallel rulemaking that will allow the Committee's decisions to be put into place as soon as possible. The Committee will address five key goals: First, to obtain sufficient spectrum for public safety to meet all its communications needs, at the quality and service standards it demands. Second, to create an environment that promotes interoperability, emerging technologies, and efficiency, where technology can meet public safety requirements instead limiting them. Third, that competition be turned to public safety's advantage by providing it with the opportunity to purchase equipment and services from multiple vendors. Fourth, that the structure evolves to one managed by the users, and not Washington. And, fifth, to take advantage of the auction environment so that some of this money can provide the means to finance new equipment and the transition costs of public safety. We are committing substantial resources to this endeavor. It is a major priority of the Commission and the Administration. Just as all Americans acting through government had to take special steps to open up the West for everyone in the last century, so at the predawn of the 21st century we need to take special steps to make sure that the communications revolution will include all Americans and benefit all Americans. Advances in communications technologies hold out the promise of vastly increasing our wealth and comfort. They also have the capacity to sow violence and despair by dividing further the gap between the haves and the have-nots. We must understand that the power of communications tests as never before our capacity to act as a wise and caring society. The power of communications tests as never before whether we wish to use that power for better or whether we will stand aside and watch it be used for worse. If we turn over the power of communications solely to the pursuit of commercial success we will not pass that test. Complete, blinkered pursuit of maximum profit has its place in our economy, but will not ensure that every American has a reasonable opportunity to participate in the Information Age. Pure commercialism will not, for example, put modern communications technologies in every classroom in the country. And pure market forces will not give everyone in America a fair chance to participate in the new businesses. In this vein, another challenge we face during the infancy of the PCS industry is Hearing Aid Compatibility. Allegations have been raised about potential interference to hearing aid wearers by certain types of digital PCS devices. The Commission has received a petition for rulemaking on HAC from an advocacy group for persons with hearing impairments. Comments have been received on this petition, and we are reviewing our options. The wireless industry is currently exempted from the HAC provisions of the Communications Act. These same provisions, however, require the Commission to periodically review this exemption, and to remove this exemption if we find that certain public interest, technological and economic factors are met. Many people view these HAC interference allegations as nothing more than jockeying between rival transmission technologies. We are taking all such allegations very seriously, however, and we do not expect that parties would file frivolous pleadings and comments. While there may be some jockeying around between competitors, we will be examining the horses that are being ridden very carefully. I applaud the industry for taking these concerns seriously and embarking upon an extensive PCS testing program in Oklahoma. If we find that PCS devices do cause interference to hearing aid wearers, I believe we must take all appropriate steps to solve this problem. Our goal must be to ensure that all Americans are able to participate as fully as possible in the benefits of wireless telecommunications, not merely those who are fortunate enough to be free of hearing impairments. The Commission and the communications industry have a special responsibility. We are the ones who must take up the challenge of identifying areas where our tool of the common good -- government -- can operate in conjunction with market forces to accomplish society's goals. To this end, I look forward to working with those of you who cover us as we do our jobs.