[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
 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.1
---------------------------------------------------------------------------
    \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.1
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    \1\ See U.S. Department of Commerce Digital Economy 2000.
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    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:

 Protecting existing radionavigation satellite bands from 
        allocation to other services and allocating a new band for this 
        service;
 Adopting technical provisions for sharing between 
        geostationary and non-geostationary satellite systems;
 Fighting off restrictions on the free flow of information by 
        making sure that content based restrictions were not written 
        into the Radio Regulations; and
 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.2 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:

 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.
 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:

 high degree of commonality of design worldwide;
 compatibility of services within IMT-2000 and with the fixed 
        network;
 toll quality voice service;
 data speeds up to 2 Megabits per second (``Mbps'');
 small terminals for worldwide use;
 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 1
---------------------------------------------------------------------------
    \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'. 
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' 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' 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:

 Lower wireless prices
 Heightened equipment and service quality
 Accelerated introduction of technological advances
 Efficient and innovative use of the spectrum
 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.
                                 ______
                                 
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