[Senate Hearing 109-686]
[From the U.S. Government Publishing Office]
S. Hrg. 109-686
WIRELESS ISSUES AND SPECTRUM REFORM
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
MARCH 14, 2006
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana Chairman
TRENT LOTT, Mississippi JOHN D. ROCKEFELLER IV, West
KAY BAILEY HUTCHISON, Texas Virginia
OLYMPIA J. SNOWE, Maine JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada BARBARA BOXER, California
GEORGE ALLEN, Virginia BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire MARIA CANTWELL, Washington
JIM DeMINT, South Carolina FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana E. BENJAMIN NELSON, Nebraska
MARK PRYOR, Arkansas
Lisa J. Sutherland, Republican Staff Director
Christine Drager Kurth, Republican Deputy Staff Director
Kenneth R. Nahigian, Republican Chief Counsel
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Samuel E. Whitehorn, Democratic Deputy Staff Director and General
Counsel
Lila Harper Helms, Democratic Policy Director
C O N T E N T S
----------
Page
Hearing held on March 14, 2006................................... 1
Statement of Senator Allen....................................... 73
Statement of Senator Burns....................................... 75
Statement of Senator Dorgan...................................... 2
Statement of Senator Kerry....................................... 14
Prepared statement........................................... 14
Statement of Senator Lautenberg.................................. 2
Statement of Senator Lott........................................ 27
Statement of Senator Pryor....................................... 71
Statement of Senator Stevens..................................... 1
Witnesses
Hecker, JayEtta Z., Director, Physical Infrastructure Issues,
U.S. Government Accountability Office.......................... 15
Prepared statement........................................... 17
Hubbard, Robert W., President/CEO, Hubbard Television Group; Vice
President, Hubbard Broadcasting, Inc.; Secretary/Treasurer,
Association for Maximum Service Television, Inc................ 40
Prepared statement........................................... 42
Kahn, Kevin C., Senior Fellow and Director, Communications
Technology Lab, Intel Corporation.............................. 32
Prepared statement........................................... 34
Kenney, Jeannine, Senior Policy Analyst, Consumers Union; on
behalf of the Consumers Union, Consumer Federation of America,
and Free Press................................................. 53
Prepared statement........................................... 55
Kneuer, John M.R., Acting Assistant Secretary for Communications
and Information, National Telecommunications and Information
Administration (NTIA).......................................... 8
Prepared statement........................................... 10
Seidel, Catherine W., Acting Bureau Chief, Wireless
Telecommunications Bureau, Federal Communications Commission... 3
Prepared statement........................................... 6
Sugrue, Thomas J., Vice President, Government Affairs, T-Mobile
USA, Inc....................................................... 49
Prepared statement........................................... 51
Walsh, Thomas F., General Manager, Illinois Valley Cellular;
President of the Board, Rural Cellular Association............. 28
Prepared statement........................................... 30
White, Lawrence J., Co-Chair, Spectrum Policy Working Group, The
Digital Age Communications Act (DACA) Project, Progress &
Freedom Foundation (PFF); Professor of Economics, Stern School
of Business, New York University............................... 64
Prepared statement........................................... 66
Appendix
Inouye, Daniel K., U.S. Senator from Hawaii, prepared statement.. 81
Joint prepared statement of Jerry Ellig, Ph.D., Senior Research
Fellow/Jerry Brito, J.D., Legal Fellow, Mercatus Center, George
Mason University............................................... 88
Letter, dated March 14, 2006, to Hon. Ted Stevens and Hon. Daniel
K. Inouye from a group of digital television and set top box
manufacturers.................................................. 91
Response to written questions submitted by Hon. John D.
Rockefeller IV, to Catherine W. Seidel......................... 90
Shure Incorporated, prepared statement........................... 81
WIRELESS ISSUES AND SPECTRUM REFORM
----------
TUESDAY, MARCH 14, 2006
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m. in room
SD-106, Dirksen Senate Office Building, Hon. Ted Stevens,
Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. TED STEVENS,
U.S. SENATOR FROM ALASKA
The Chairman. Thank you for coming. We obviously will not
have the presence of the Co-Chairman today, after his sad loss
yesterday. This is the tenth in the series of hearings on
communications. Today, we want to look at various wireless
issues, including the use and management of spectrum. Spectrum
is one of our most important national resources. Americans
increasingly rely on its use daily for family communications,
work, education, and entertainment. Moreover, wireless services
are essential to the ability of first responders and the
military to save lives and protect our homeland. In the past,
Congress has responded to advances in technology and changes in
the communications market by updating laws concerning the use
and management of spectrum. In 1993 Senator Inouye and I
participated in moving legislation through Congress that
directed the FCC toward licenses by auction. And earlier this
year, Congress set a hard date of February 17, 2009, for the
DTV transition, which will provide spectrum for public safety
and wireless broadband service able to reach rural America. As
part of the DTV legislation Congress at our request extended
the FCC's auction authority to September 30, 2011. Senator
Allen and I have proposed legislation that will allow
unlicensed wireless devices to provide new services over the
unused or white spaces of television's broadcast spectrum, so
long as such devices did not cause harmful interference to TV
service. Today, we hear whether Congress needs to address any
particular wireless issue or further address spectrum reform.
We have two panels. Let me call the first panel to the table if
you will. Catherine Seidel, Acting Bureau Chief, Wireless
Telecommunications Bureau of the FCC. Mr. John Kneuer, Acting
Assistant Secretary for Communications and Information of NTIA.
JayEtta Hecker, Director of Physical Infrastructure of the U.S.
Government Accountability Office, GAO. While you are there, let
me turn to my colleague here, Senator Dorgan.
STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan. Mr. Chairman, thank you very much. As is
always the case there are competing hearings. We have an
appropriations subcommittee hearing going on in another room,
so I won't be at all of this hearing. But I wanted to come by.
First, let me say I know all of this Committee feels terrible
about Senator Inouye's loss and the death of Mrs. Inouye is a
real blow to the U.S. Senate. And our thoughts and prayers are
with Senator Inouye today.
As Co-Chair of the congressional wireless caucus, along
with Senator DeMint and with Congressman Pickering and Wynn, we
are very interested in these new wireless technologies and what
they can mean for our country. I have always felt, Mr.
Chairman, and perhaps the same is true with you, coming from
Alaska, that many new technologies offer promise to provide
additional service to rural areas of the country. And I believe
wireless certainly does that and is a technology that I want to
embrace to help expand further deployment of broadband to rural
areas, which is so very important. And I support wireless for
that purpose.
I also support Senator Snowe's bill to promote auctioning
off spectrum in smaller geographic areas so that rural carriers
can more easily access spectrum. And I also support the
legislation you just described to free up unused spectrum for
unlicensed wireless use.
There is a lot happening in this area, including, Mr.
Chairman, the issue of concentration, which ought to be a
concern for us and also for the FCC. I was on the Committee in
1996 when we wrote the Telecommunications Act. The world has
changed since then. I mean, it is an unbelievably different
landscape since that time, but one relentless push has been
concentration. Concentration in virtually every area of
communications, including a recent announcement in the last
week or two about another very, very large merger. So, I think
as we talk about the technology and the use of spectrum, we
also need to think about this issue of concentration and what
it is going to mean to the landscape, if unchecked five and 10
years from now, but again I think this is the right hearing to
have. I appreciate, Mr. Chairman, your willingness to proceed
to have this hearing and I look forward to hearing from the
witnesses.
The Chairman. Thank you very much, Senator.
Senator Lautenberg?
STATEMENT OF HON. FRANK R. LAUTENBERG,
U.S. SENATOR FROM NEW JERSEY
Senator Lautenberg. Mr. Chairman, this is an appropriate
time to call this hearing, given the serious interest of what
is happening with spectrum. I think it leaves us notably behind
other countries. And we all share an interest in expanding
telecommunications and broadband to every corner of the United
States. If we plan to remain competitive in this
technologically connected world, we can't afford to miss any
opportunities to provide information to every American wherever
we can do so. High speed Internet is a 21st century utility,
one that obviously not only improves communication, education
and, of course, the economy. Now many Americans don't have
broadband because they live in smaller towns and coming from
the most densely populated state in the country, it seems
challenging to talk about smaller towns. We have a lot of them
in New Jersey and they need to have these services available.
And where a company won't make it available or they simply
can't afford broadband services, we have to help that
availability. And that is why unlicensed spectrum offers so
much promise. It is an important resource. It can provide a
catalyst for broadband deployment in all parts of the country,
both urban and rural. And already we have seen unlicensed
spectrum at work in our local coffee shops or the public park
in the middle of town. On a larger scale, cities and towns
across the country are using unlicensed spectrum to aid their
residents by creating their own municipal networks. And we
should embrace this effort, which is why I was pleased to join
Senator McCain to introduce the Community Broadband Act to make
sure local communities can continue to make broadband available
for all their residents. But that is only one piece of the
puzzle. Greater availability of unlicensed spectrum could
improve the speed and reliability of these networks while
reducing costs to consumers. Obviously, large parts of the
spectrum are and should be reserved for government and
business, but the airwaves are, after all, a public resource.
Unlicensed spectrum can be used to promote the public interest.
As for portions of the spectrum that are auctioned
commercially, we have got to ensure that women-owned and
minority businesses are getting equal opportunities. It is
quite unclear as to whether or not this is happening. I look
forward to hearing from our witnesses and perhaps we can get
some light shed on these issues. Thank you very much, Mr.
Chairman.
The Chairman. Thank you, Senator, for the information of
all the witnesses, your statements that you presented will be
printed in the record in full. We would appreciate it if you
could keep your statements as short as possible. We do want to
hear you though because we are winding down now on these
hearings. We have got these hearings today and we are going to
have one more hearing, I believe. We have one this afternoon
and then one in addition to that. We will then complete our
series of some 17 hearings on communications. So our first
witness is Catherine Seidel, Acting Bureau Chief of the
Wireless Telecommunications Bureau with the FCC. If I have my
way, we will drop the ``Tele'' and just talk about
communications from that. Now, Ms. Seidel.
STATEMENT OF CATHERINE W. SEIDEL, ACTING BUREAU CHIEF, WIRELESS
TELECOMMUNICATIONS BUREAU,
FEDERAL COMMUNICATIONS COMMISSION
Ms. Seidel. Good morning, Chairman Stevens, Members of the
Committee. I am Cathy Seidel, Acting Chief of the Wireless
Bureau at the FCC. I appreciate the opportunity to appear
before you today to discuss wireless issues and spectrum
reform.
The central focus of the FCC's early spectrum policy and
regulation was management of the problem of interference among
the adjacent spectrum users. Initially, the FCC sought to
address this problem by employing a prescriptive, band-by-band
approach whereby it allocated spectrum blocks to limited
categories of spectrum users for a specific service subject to
detailed and restrictive service rules.
Spectrum policy, however, must keep up with the pace and
innovation in wireless technologies to increase opportunities
for technologically innovative and economically efficient
spectrum use. The FCC has sought to move its spectrum policy
toward more flexible and market-oriented regulatory models,
both licensed and unlicensed, as alternatives to more
traditional spectrum regulation. The licensed model has focused
on providing exclusive, more easily transferable licensed
rights to flexible use frequencies, subject to limitations on
harmful interference. The Commission has also used the
``commons'' or ``open access'' model, which allows users to
share frequencies on an unlicensed basis, with the usage rights
that are governed by technical standards, but with no right to
protection from interference.
Because each of these models offers benefits to spectrum
users and the public, the Commission has sought to apply them
in a balanced way, rather than attempting to rigidly apply a
single regulatory model. This balanced approach has yielded
positive results and given service providers the freedom they
need to develop innovative new service offerings and to
structure their network efficiently.
Wireless communications are also vital to the Federal,
state and local authorities responsible for maintaining public
safety and responding to emergencies. Accordingly, the
Commission has taken steps to ensure that public safety
authorities have access to sufficient spectrum to meet their
needs. Over the past year, the Commission has continued to
dedicate significant effort to implementing a reconfiguration
of the 800 MHz band. The Commission is also addressing whether
public safety broadband communications can be accommodated
within the current 24 megahertz of public safety spectrum in
the 700 MHz band.
Another essential aspect of the FCC's role as spectrum
steward is to promote the use of spectrum to provide wireless
voice and data services throughout the country, including rural
and hard-to-serve areas. Over the past year, the Commission has
implemented a number of policies in order to fulfill this goal.
For example, the Commission reconsidered its band plan for the
Advanced Wireless Service to ensure that it contains a mix of
spectrum block sizes and geographic license areas. The revised
band plan provides additional spectrum for licensing on a
smaller geographic area basis, both to promote entry by smaller
and regional carriers, and to provide all potential bidders
with the flexibility to obtain spectrum in the increments that
best suit their needs.
A central foundation of the Commission's spectrum
management policy is the mechanism it uses to award spectrum
licenses. Since 1993, when Congress authorized the Commission
to assign licenses through competitive bidding, the Commission
has used auctions to assign commercial spectrum. All FCC
licenses are subject to auction except public safety, public
broadcasting, and international satellites.
The Commission's experience has shown that auctions
efficiently distribute spectrum to the applicants that value it
most and compensate the public for use of a valuable and scarce
resource. In the years since we received auction authority,
bidders have won over 28,500 licenses at auction, and paid over
$14.5 billion to the General Fund of the U.S. Treasury.
Later this year, the Commission will conduct several
significant auctions, including the auction of 4 megahertz of
spectrum in the 800 MHz band for new nationwide air to ground
services, and the auction of 90 MHz of paired spectrum for the
Advanced Wireless Service.
We are also taking steps to implement Congress's directive
with respect to the auction of commercial spectrum in the 700
MHz band that is being made available by the digital television
transition.
In granting the Commission the authority to assign license
by competitive bidding, Congress directed that we ensure that
small businesses have the opportunity to participate in the
provision of spectrum-based services. To achieve this mandate,
the Commission has established various incentives to provide
small businesses with opportunities to participate in auctions.
As the Commission's spectrum policies have developed we have
repeatedly examined these incentives to ensure that our rules
achieve their purpose of promoting opportunities for small
businesses without unintended consequences. Currently, the
Commission has an open rulemaking examining proposed
modifications to the Commission's rules regarding relationships
between small businesses and large communications providers.
In its regulation of the wireless industry generally, the
Commission has relied largely on competition to drive
innovation, lower prices, and protect consumer interests. This
light-handed approach has produced robust competition in the
commercial wireless sector, to the benefit of consumers. In the
past 5 years, the number of subscribers to commercial mobile
services has more than doubled from 97 million in June of 2000
to 195 million in June of 2005. Mobile telephones have gone
from high-end luxury services to commonly available
communication devices. In addition to providing voice services,
wireless providers are increasingly bringing broadband
capability to subscribers in the places where they live and
work.
Finally, although the Commission has taken a light-handed
regulatory approach to wireless regulation, the government
continues to play an important role in setting rules for the
spectrum use, and in national consumer protection issues. For
example, the Commission has implemented regulations to ensure
that individuals who use hearing aids have access to wireless
services and that all wireless consumers have access to
enhanced 911 and local number portability.
Thank you for the opportunity to testify before you today
regarding wireless issues and spectrum reform. I would be happy
to answer questions.
[The prepared statement of Ms. Seidel follows:]
Prepared Statement of Catherine W. Seidel, Acting Bureau Chief,
Wireless Telecommunications Bureau, Federal Communications Commission
Introduction
Good Morning Chairman Stevens, Co-Chairman Inouye, and Members of
the Committee. I appreciate the opportunity to appear before you today
to discuss wireless issues and spectrum reform.
In my testimony, I will describe briefly the background and
development of the Federal Communications Commission's (FCC) spectrum
and other regulatory policies for wireless services. I will also
discuss our efforts to implement these policies to license and manage
the Nation's non-Federal spectrum resources and wireless services.
Background
As you know, the FCC is an independent agency charged with
regulating interstate and international communications by radio,
television, wire, satellite and cable. The FCC's role is to regulate
non-Federal use of electromagnetic spectrum, while the National
Telecommunications and Information Administration (NTIA) oversees
Federal use of spectrum. The two agencies work cooperatively to
encourage sharing of spectrum when possible, and to transition spectrum
use between Federal and non-Federal users.
I am Cathy Seidel, Acting Chief of the Wireless Telecommunications
Bureau. Under the direction of Chairman Martin and the Commissioners,
the Bureau oversees the use of spectrum for domestic terrestrial
services. In developing and implementing the Commission's spectrum
policy, we collaborate with our colleagues in the Office of Engineering
and Technology, which oversees spectrum allocation for non-Federal use,
the Media Bureau, which oversees broadcast radio and television
services, and the International Bureau, which oversees satellite
services.
Spectrum Management
The central focus of the FCC's early spectrum policy and regulation
was management of the problem of interference among adjacent spectrum
users. Initially, the FCC sought to address this problem by employing a
prescriptive, band-by-band approach whereby it allocated spectrum
blocks to limited categories of spectrum users for specific services
subject to detailed and restrictive service rules.
Spectrum policy, however, must keep up with the dizzying pace of
change and innovation in wireless technologies. In the last several
decades, wireless technology has advanced rapidly, bringing new
services and capabilities to the American people. These technological
advances create the potential for systems to use spectrum more
intensively than in the past. The Commission's challenge has been to
accommodate more intensive spectrum use while ensuring that existing
spectrum users are protected from harmful interference.
To increase opportunities for technologically innovative and
economically efficient spectrum use, the FCC has sought to move its
spectrum policy toward more flexible and market-oriented regulatory
models, both licensed and unlicensed, as alternatives to more
traditional spectrum regulation. The licensed model has focused on
providing exclusive, more easily transferable licensed rights to
flexible-use frequencies, subject to limitations on harmful
interference. The Commission has also used the ``commons'' or ``open
access'' model, which allows users to share frequencies on an
unlicensed basis, with usage rights that are governed by technical
standards, but with no right to protection from interference.
Because each of these models offers benefits to spectrum users and
the public, the Commission has sought to apply them in a balanced way,
rather than attempting to rigidly apply a single regulatory model to
all spectrum. This balanced approach has yielded positive results.
Wireless licensees have provided consumers with advanced mobile
communications capabilities through use of exclusive and technically
flexible licenses. Unlicensed services, on the other hand, have
provided a wealth of innovation recently. Both models have proven
valuable because they give service providers the freedom to develop
innovative new service offerings and to structure their networks
efficiently.
Wireless communications are also vital to the Federal, state and
local authorities responsible for maintaining public safety and
responding to emergencies. Accordingly, the Commission has taken steps
to ensure that public safety authorities have access to sufficient
spectrum to meet their needs. Over the past year, the Commission has
continued to dedicate significant effort to implementing a
reconfiguration of the 800 MHz band to eliminate interference problems
caused by the historical interleaving of public safety and commercial
wireless channels in the band. The Commission is also addressing
whether public safety broadband communications can be accommodated
within the current 24 megahertz of public safety spectrum in the 700
MHz public safety band.
Another essential aspect of the FCC's role as spectrum steward is
to promote the use of spectrum to provide wireless voice and data
services throughout the country, including in rural and hard-to-serve
areas. Over the past year, the Commission has implemented a number of
policies in order to fulfill this goal. For example, the Commission
reconsidered its band plan for the Advanced Wireless Service to ensure
that it contains a mix of spectrum block sizes and geographic license
areas. The revised band plan provides additional spectrum for licensing
on a smaller geographic basis, both to promote entry by smaller and
regional carriers, and to provide all potential bidders with the
flexibility to obtain spectrum in the increments that best suit their
needs. This band revision builds on other Commission policies intended
to increase the efficiency and flexibility with which service providers
can obtain access to spectrum in rural areas, including permitting
licensees to partition, disaggregate, and lease their spectrum in
secondary market transactions.
Auctions
A central foundation of the Commission's spectrum management policy
is the mechanism it uses to award spectrum licenses. Since 1993, when
Congress authorized the Commission to assign licenses through
competitive bidding, the Commission has used auctions to assign
commercial spectrum. All FCC licenses are subject to auction except
public safety, public broadcasting, and international satellites.
The Commission's experience has shown that auctions efficiently
distribute spectrum to applicants that value it most and compensate the
public for use of a valuable and scarce resource. In the years since we
received auction authority, bidders have won over 28,500 licenses at
auction, and paid over $14.5 billion to the General Fund of the U.S.
Treasury.
Later this year, the Commission will conduct several significant
auctions, including:
Air-Ground--The auction of four megahertz of spectrum in the
800 MHz band for new nationwide air-ground services is
scheduled to begin on May 10, 2006. For this spectrum, the
Commission has developed a flexible licensing approach,
offering three alternative band plan configurations. Thus, the
band will ultimately be configured and licenses will be awarded
based on the band plan that receives the highest aggregate bid.
Advanced Wireless Service--On June 29, 2006, the auction of
90 MHz of paired spectrum in the 1710-1755 and 2110-2155 MHz
band is scheduled to begin. The Commission has adopted flexible
service rules for the Advanced Wireless Service, to promote
innovation and development of next-generation services and
capabilities in the band. Notably, this auction will occasion
the first use of the Spectrum Relocation Trust Fund.
Established by Congress in the Commercial Spectrum Enhancement
Act, the Trust Fund allows the use of auction proceeds to
reimburse Federal agencies for the cost of relocating existing
operations in the 1710-1755 MHz band. Another potential change
to the Commission's auction processes that could facilitate the
transition of non-Federal incumbent spectrum users in future
auctions would be the use of ``two-sided auctions'' or
``auction vouchers.''
We are also taking steps to implement Congress's directive with
respect to the auction of commercial spectrum in the 700 MHz band that
is being made available by the digital television transition. Congress
has recently passed legislation directing the Commission to begin an
auction for this spectrum no later than January 28, 2008. This spectrum
is particularly well-suited for wireless broadband uses, and promises
to yield significant benefits and innovative services for consumers.
In granting the Commission the authority to assign license by
competitive bidding, Congress directed that we ensure that small
businesses have the opportunity to participate in the provision of
spectrum-based services. To achieve this mandate, the Commission has
established various incentives, such as bidding credits and spectrum
set-asides, to provide small businesses with opportunities to
participate in auctions. As the Commission's spectrum policies have
developed, we have repeatedly examined these incentives to ensure that
our rules achieve their purpose--promotion of opportunities for small
businesses--without unintended consequences. Currently, the Commission
has an open rulemaking examining proposed modifications to the
Commission's rules regarding relationships between small businesses and
large communications service providers.
Wireless Service Regulation
In its regulation of the wireless industry generally, the
Commission has relied largely on competition to drive innovation, lower
prices, and protect consumer interests. This light-handed approach has
produced robust competition in the commercial mobile wireless sector,
to the benefit of consumers. In the past five years, the number of
subscribers to commercial mobile services has more than doubled from 97
million in June 2000 to 195 million in June 2005. Mobile telephones
have gone from high-end luxury services to commonly available
communications devices. In addition to providing voice services,
wireless providers are increasingly bringing broadband capability to
subscribers in the places that they live and work.
Although the Commission has taken a light-handed regulatory
approach to wireless regulation, the government continues to play an
important role in setting the rules for spectrum use, such as
protection from harmful interference. The government also plays an
important role in national consumer protection issues. For example, the
Commission has implemented regulations to ensure the hearing disabled
have access to wireless handsets and that all wireless consumers have
access to enhanced 911 and local number portability.
Conclusion
Thank you for the opportunity to testify before you today regarding
wireless issues and spectrum reform. I would be pleased to answer any
questions.
The Chairman. Thank you very much. The next witness is John
Kneuer, Acting Assistant Secretary for Communications and
Information of NTIA. Pardon me, Senator Lott, did you wish to
make an opening statement?
Senator Lott. No, thank you, Mr. Chairman.
STATEMENT OF JOHN M.R. KNEUER, ACTING ASSISTANT
SECRETARY FOR COMMUNICATIONS AND INFORMATION,
NATIONAL TELECOMMUNICATIONS AND INFORMATION
ADMINISTRATION (NTIA)
Mr. Kneuer. Thank you, Chairman Stevens, Members of the
Committee, for inviting me here to testify about NTIA's role in
spectrum management and reform. My name is John Kneuer; I serve
as the Acting Administrator at NTIA.
NTIA's responsibilities in general include, advising the
Secretary of Commerce and the President on telecommunications
policy matters, as well as managing the Federal radio spectrum.
It is really the intersection of these two roles,
telecommunications policy and spectrum management that has been
the focus of NTIA during the Bush Administration.
We have strived to make additional spectrum available, both
on an unlicensed basis and a licensed basis to ensure that
there is adequate spectrum for competitive services and new
technologies, but at the same time making sure that we continue
to maintain access and preserve the ability of critical Federal
missions, public safety, homeland security, and our national
defense.
I would like to talk about three recent experiences that we
have had that have really underscored the challenges of
balancing these competing interests. Working with the FCC, we
were able to identify 90 MHz of new spectrum to be licensed
through an auction scheduled for this June, for advanced
wireless services, that required the relocation of the Federal
systems that were in those bands. We also worked to come up
with a technical solution to allow unlicensed broadband
wireless devices, WiFi-like devices, to co-exist in the 5 GHz
band with spectrum that had previously been for the exclusive
use of Federal radar systems.
Last, we worked again with the FCC to come up with
technical rules to allow for the introduction of a brand new
technology, ultra-wideband (UWB). UWB operates across huge
bands of spectrum that are reserved for Federal and non-Federal
systems, very challenging to our spectrum policies. Each of
these proceedings, while they were ultimately successful,
really underscored the challenges and the limitations of our
regulatory environment. In fact in 2003, the President observed
that, ``the existing legal and policy framework for spectrum
management has not kept pace with the dramatic changes in
technology and spectrum use.'' It was based on that observation
that the President launched his spectrum policy initiative.
This is an inter-agency initiative that has four principal
goals: (a) foster economic growth; (b) ensure our national and
homeland security; (c) maintain the U.S. global leadership in
communication technology development and to satisfy other
needs, such as public safety, scientific research, and
transportation infrastructure.
This morning I want to talk about some of the objectives
and some of the accomplishments that we have been making in
satisfying this initiative. It is important to recognize that
this is not just an NTIA initiative; this is not just a
Department of Commerce initiative; this is an inter-agency
government-wide initiative. One of the things that underscores
this is that in June of 2005, the Office of Management and
Budget gave guidance to each of the Federal agencies, that
beginning with the Fiscal Year 2007 budgets, the agencies are
required to consider the economic value of the radio spectrum
when they propose funding for a spectrum-dependent system in
their budget. This is a big deal. This is the first time that
agencies and the Federal Government don't just look at spectrum
as a free resource, when they are making their plans on
building new systems and presenting their budgets. They need to
recognize the economic value and the opportunity costs in that
regard. To underscore this point the Department of Defense has
made great strides working in this regard. DOD really led the
way in coming up with their systems and their plans in this
regard, not just in the capital planning process, but the
Department of Defense has been a very strong partner of ours in
the initiative and advancing the state of radio art. So I
wanted to give them their credit in that regard.
While the initiative is not limited to the Department of
Commerce, we do have a significant role. In May of last year,
we submitted to the White House an implementation plan that
laid out dozens of steps that we will undertake to meet the
President's initiative. Let me quickly just go through a few.
The implementation plan itself is available on our web page and
you can see all the different activities we are doing, but I
thought I would underscore a few this morning.
We are identifying opportunities for sharing systems
between Federal and non-Federal public safety systems. I think
the experiences in the Gulf and Katrina and Rita really
underscored the need for Federal, state, and local first
responders, and public safety entities to work together, to
communicate together, by identifying opportunities for us to
partner together. We identify capital savings. We don't need to
build redundant systems. We identify spectrum savings and we
clearly ensure continued interoperability.
We are also working on a strategic spectrum plan, I think
GAO in their report called for increased planning, long range
planning. Each of the agencies has supplied to NTIA, their
long-range spectrum needs plans, and we are coordinating those
into an overall Federal plan. For the first time, we will look
at the Federal spectrum use in one holistic way, rather than
individual agencies in that limited way. We are also working on
producing a plan for bringing incentives to Federal spectrum
use. The FCC has a number of tools at their disposal to bring
market forces to create incentives for spectrum use, whether it
is auctions or creating secondary markets, we are limited in
our ability to get that done. In the Federal space, we are
working on plans to come up with rational incentives. I think
it is important we recognize that each of those, not every
system, not every application, is the same. We can't have a
one-size-fits-all approach. We should try to identify
opportunities to bring market-based incentives as well as other
incentives to increase efficient use of the Federal spectrum.
Finally, one of the recommendations that was included in
the President's spectrum initiative was to work with the
Congress to pass the Commercial Spectrum Enhancement Act, which
would create a process where Federal entities are reimbursed
for the relocation of their bands to clear up spectrum.
I want to thank you, Senator Stevens, for your leadership
in getting that bill passed last year, because of that
legislation the FCC will be able to auction that 90 MHz of
spectrum this June and that auction will bring billions of
dollars into the Treasury. It will give every wireless carrier
the ability to be a broadband provider, and we think that is
important. So, I want to thank you again for your leadership in
that regard.
Thank you for my invitation. I am happy to take any
questions.
[The prepared statement of Mr. Kneuer follows:]
Prepared Statement of John M.R. Kneuer, Acting Assistant Secretary for
Communications and Information, National Telecommunications and
Information Administration (NTIA)
Thank you, Chairman Stevens, Senator Inouye, and Members of the
Committee, for inviting me here to testify about the National
Telecommunications and Information Administration's (NTIA) role in
spectrum management and reform. My name is John Kneuer, and I serve as
the Acting Assistant Secretary for Communications and Information and
Acting Administrator of NTIA.
Among its responsibilities, NTIA is the principal
telecommunications policy advisor to the Secretary of Commerce and the
President, and the manager of Federal Government use of the radio
spectrum. Throughout the Bush Administration this intersection of
telecommunications policy and spectrum management has been the key
focus of NTIA.
By identifying new spectrum for both licensed and unlicensed
services, and working with the Federal Communications Commission (FCC)
to authorize entirely new services, NTIA has worked to ensure that
commercial wireless services have adequate access to spectrum to
compete with incumbents and provide new services to consumers, while at
the same time preserving spectrum access for critical Federal systems
and public safety services. Achieving this balance between commercial
and government interests, while critical, has not always been easy in
the current regulatory environment.
Three recent experiences underscore this challenge: (1) identifying
90 MHz of spectrum to be auctioned for licensed advanced wireless
services; (2) finding a technical solution to allow unlicensed
broadband systems to share spectrum with critical government systems in
the 5 GHz band; and (3) working with the FCC to accommodate ultra-
wideband devices that operate across huge bands of both Federal and
non-Federal frequency bands. While ultimately successful, the effort
required to introduce these technologies exposed the limits of our
spectrum management system.
Based on these experiences, in 2003, President Bush stated that
``the existing legal and policy framework for spectrum management has
not kept pace with the dramatic changes in technology and spectrum
use.'' As a result, and in order to ensure that America has a spectrum
policy for the 21st Century, President Bush established his Spectrum
Policy Initiative. The objectives of this inter-agency Initiative are
to:
(a) foster economic growth;
(b) ensure our national and homeland security;
(c) maintain U.S. global leadership in communications
technology development and services; and
(d) satisfy other vital U.S. needs in areas such as public
safety, scientific research, Federal transportation
infrastructure, and law enforcement.
This morning I will highlight the progress that the Administration
is making in spectrum management reform in implementing the President's
Spectrum Policy Initiative.
The President's Spectrum Policy Initiative
The Secretary of Commerce chairs and directs the work of the
President's Spectrum Policy Initiative, which consists of two broad
courses of activity: an inter-agency Spectrum Task Force, and regular
public outreach. In June 2004, the Secretary of Commerce submitted two
reports to the President, one with recommendations of the Spectrum Task
Force, and one including recommendations submitted during public forums
and in response to a public notice of inquiry.
In November 2004, the President issued his second Executive
Memorandum on spectrum reform and directed the Department of Commerce,
the Office of Management and Budget, and the Department of Homeland
Security and other agencies to implement the recommendations included
in the two reports. The following is a summary of the activities that
the Department of Commerce, and certain other Executive Branch Offices
and Departments, have undertaken to implement the recommendations.
Progress in Implementing the President's Spectrum Policy Initiative
Capital Planning and Investment Control Procedures
The President directed the Office of Management and Budget (OMB) to
``provide guidance to the agencies for improving capital planning and
investment control procedures to better identify spectrum requirements
and the costs of investment in spectrum-dependent programs and
systems.'' In June 2005, OMB instructed the Federal agencies to
consider the economic value of radio spectrum when developing
justifications for new spectrum-dependent systems, beginning with
Fiscal Year 2007 budget requests. The Secretary of Commerce asked each
agency to report on its progress on this directive.
Several agencies identified a number of potential improvements to
capital planning and investment control procedures related to spectrum-
dependent technologies. Each has begun the process of implementing
these improvements. NTIA is now working with OMB and the Federal
agencies to review the individual agency capital planning processes as
they relate to spectrum-dependent investments. This review will
identify best practices with the objective of defining a consistent
approach for including spectrum in the Federal capital planning
process.
Department of Commerce Progress
Pursuant to the November 2004 Executive Memorandum, the Department
of Commerce is directed to complete various tasks to implement the
recommendations set forth in the June 2004 Reports. These tasks
include: (a) developing a plan to implement recommendations for which
it is responsible; (b) producing a Federal Strategic Spectrum Plan; and
(c) developing a plan to identify and implement incentives for more
efficient spectrum use. There have been numerous accomplishments to
date in meeting these tasks.
Implementation Plan: The President directed the Secretary of
Commerce to establish a plan for the implementation of all other
recommendations included in its June 2004 Reports. On May 30, 2005, the
Department of Commerce transmitted this plan to the Executive Office of
the President and has commenced working on the recommendations it set
forth. This plan sets forth milestones and timelines for implementation
of the Intitiative over several years. Milestones and accomplishments
to date include:
Policy and Plans Steering Group: In order to enlist the
leadership of Federal agencies in the resolution of spectrum
policy matters, the Department of Commerce established the
Policy and Plans Steering Group, or PPSG, in January 2005. This
advisory group is composed of top leadership officials, at an
Assistant Secretary-level or equivalent, from the Federal
agencies that are major users of radio spectrum. The PPSG
advises NTIA's Administrator on spectrum policy and strategic
plans. The PPSG has committed to resolve major contentious
spectrum issues affecting Federal and non-Federal spectrum
users. The PPSG first met in January 2005 and will hold its
third meeting at the end of this month to provide input on the
implementation of the Spectrum Policy Initiative's
recommendations.
Commerce Spectrum Management Advisory Committee: The Department
of Commerce chartered the Commerce Spectrum Management Advisory
Committee in 2005. This Committee, organized pursuant to the
Federal Advisory Committee Act, will consist of private sector
experts in spectrum and spectrum policy. It will advise the
Assistant Secretary for Communications and Information on a
broad range of issues regarding spectrum policy and on needed
reforms to domestic spectrum policies and management. This
advice will include suggested reforms to facilitate the
identification of spectrum for new technologies and services.
Improvement of Spectrum Management Processes: NTIA has laid out
a program for the next five years to modernize and improve
spectrum management processes. The program includes: (1) a
review and improvement of our international spectrum management
policies including the improvement of our World
Radiocommunication Conference preparation process and the
international policy and framework that could become barriers
to the implementation of new spectrum efficient technologies;
(2) standardization and implementation of methods and analysis
tools to assess new technologies to reduce the time it takes to
provide access to spectrum; (3) adopt a spectrum management
career development program to maintain our expertise in
adapting new technologies and using the spectrum more
efficiently and effectively; and (4) application of modern
information technology (IT) to provide more rapid access to
spectrum and make the spectrum management process more
effective and efficient.
Federal/Non-Federal Public Safety Demonstration Program: The
Department of Commerce has identified a number of candidate
pilot programs to test the operational and cost effectiveness
of sharing spectrum and communications infrastructure among
Federal, state and/or local governments. NTIA coordinated with
Federal agencies to consider existing demonstration programs
for use in the pilot program. NTIA is evaluating seven programs
in accordance with selection criteria that include factors such
as whether the program demonstrates cost-effectiveness of
sharing, whether the program is in existence and funded, and
whether the program operates within existing allocations.
Federal Strategic Spectrum Plan: As directed by the President,
the Department of Commerce requested spectrum plans from 15
agencies. The agency plans include: (1) current and future
spectrum requirements for future technologies or services; (2)
the planned uses of new technologies or expanded services
requiring spectrum over a period of time agreed to by the
selected agencies; and (3) suggested approaches to meeting
identified spectrum requirements in a spectrally efficient way.
NTIA is integrating these individual agency plans into the
foundation for the development of a comprehensive Federal Strategic
Spectrum Plan. It will address the fragmentation, shortage,
interference and security issues related to spectrum used by public
safety organizations. Additionally, the President called for the
Department of Homeland Security's Spectrum Needs Plan in the Federal
Strategic Spectrum Plan.
The President directed this plan to be completed within six months
after receiving the agency plans. It will be completed this summer and
will lay the foundation for spectrum management for the 21st Century.
Plan to Identify and Implement Incentives: The President also
directed the Secretary of Commerce to develop a plan identifying and
implementing incentives to promote more efficient and effective use of
the spectrum, while protecting national and homeland security, critical
infrastructure, and government services. NTIA's Incentives Plan is
organized around projects at several stages:
Public Outreach: NTIA identified two tasks as part of its
public outreach---a public workshop on economic and other
incentives that it sponsored at the National Academy of
Sciences, and a review of the use, or proposed use of, economic
incentives in other counties. NTIA's workshop was held on
February 28 and March 1, 2006. This forum brought together
world-renowned experts and spectrum managers to present and
discuss ideas on how incentives could apply to Federal
Government and commercial spectrum users. NTIA will use the
information gained from this workshop to guide and inform
development of further studies identified as part of the plan.
Spectrum Valuation: Economic incentives for more efficient
spectrum use are based on the premise that spectrum rights have
measurable value. NTIA plans to study methods to estimate the
economic value for spectrum used by Federal agencies and the
opportunity cost of government spectrum versus other uses.
Federal User Fees: NTIA proposes to study the possible
effectiveness of user fees designed specifically to encourage
Federal agencies to make more efficient use of spectrum, as
well as questions regarding whether such fees would be
effective or appropriate for Federal Government spectrum use.
Non-Fee Incentives: On the premise that positive incentives
through the granting of greater rights are basic to economic
approaches to spectrum management, NTIA plans to examine
incentives other than fees for Federal users, including, for
example, the feasibility of granting agencies tradable rights
and allowing agencies to accept payment for, or otherwise
benefit from, allowing others to access their spectrum.
Sharing: With new technologies offering advances in spectrum
sharing, NTIA plans to examine increased sharing of spectrum
among Federal agencies or between agencies and other uses. This
inquiry will look at such issues as frequency availability for
such systems, different dynamic spectrum access techniques, and
preemptive spectrum rights.
Spectrum Rights and Secondary Markets: On a broader level, NTIA
plans to study spectrum rights and how they apply to all
spectrum users, including how the FCC and NTIA define rights,
and what changes, if any, would be beneficial and practical.
NTIA will explore ways to enhance secondary markets, including
increasing technical flexibility, developing real time
electronic trading mechanisms, and expanding the trading of
spectrum to Federal as well as non-Federal users.
This Incentives Plan also reflects NTIA's efforts to support the
President's legislative proposals on spectrum. The President in his
Fiscal Year 2007 budget recommended: (1) the FCC's auction authority,
which was extended through Fiscal Year 2011 in the Deficit Reduction
Act of 2005, be made permanent; and (2) new authority be given to the
FCC to charge fees for unauctioned spectrum licenses and construction
permits.
Spectrum Relocation Fund: The Department of Commerce is
implementing the Commercial Spectrum Enhancement Act, which was passed
by Congress and signed by the President in December 2004. This Act
establishes a spectrum relocation fund for Federal agencies from the
proceeds of an auction that is scheduled to be held by the FCC in June
2006. The fund streamlines the process for reimbursing Federal agencies
that must relocate from Federal spectrum that is being reallocated to
commercial use. NTIA has worked with the Federal agencies that operate
microwave radio-relay communications systems in the 1710-1755 MHz band
to identify the systems requiring relocation, to identify new microwave
bands or non-spectrum options, such as fiber optics, and to make the
relocation cost estimates. NTIA led the multi-agency activity, which
resulted in identifying 2,240 microwave radio-relay systems that will
be relocated, at a relocation cost of nearly $936 million. The
relocation-fund process has worked very well thus far, and the auction,
referred to as the ``Advanced Wireless Services'' or ``AWS'' auction,
is expected raise several billion dollars. New spectrum will become
available by this process, and American consumers and businesses will
reap the benefits of more bandwidth for mobile technologies. For
business, this means greater productivity; and for the consumer, more
choices and improved services. At the same time, Federal agencies will
also benefit as they are able to upgrade their services and equipment.
Conclusion
Thank you again for inviting me to testify. I welcome any questions
that you may have for me.
The Chairman. Thank you very much. Our next witness is Ms.
Hecker of the GAO. Does any Senator have a time problem and
wish to make a statement before Ms. Hecker speaks?
Senator Kerry. Mr. Chairman, that is very generous of you.
Could I take advantage of that?
The Chairman. Yes.
STATEMENT OF HON. JOHN F. KERRY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Kerry. First of all, thank you, Mr. Chairman. I
thank the witnesses and thank you, Mr. Chairman for holding
this hearing. I have heard you describe how reliable broadband
connection in Alaska would make a difference for folks who are
in remote areas and who need some economic opportunity. I could
not agree with you more. There are just too many people who
either don't have access to broadband Internet service or they
can't afford it, one of the two. Almost 60 percent of the
country is unconnected as a consequence. Despite the
President's promise of ubiquitous broadband by 2007, we are
clearly now well into 2006, short of that goal. Only 40 percent
of the households in America are subscribing and it seems,
incredibly, that the FCC is sitting on a rulemaking proceeding
that will help correct these problems. I have been pleased to
join in a bipartisan effort with Senator Allen, to sponsor
legislation that will better utilize spectrum and accomplish
that goal. I just think that this is the only way we are going
to make real all of our talk about competitiveness and secure
America's place in the marketplace.
What our legislation would do, Mr. Chairman, is enable
entrepreneurs to provide affordable competitive high-speed
wireless broadband in areas that have no connectivity. It does
so by providing additional unlicensed spectrum, which is now
spurring an outpouring of innovation and creates an
affordable--and broadly available wireless broadband solution--
for unconnected rural homes, small businesses and public safety
agencies. It allows kids, parents, just a whole bunch of people
to suddenly connect, who can't connect. We have specifically
put in the bill a provision that will prevent any interference
with licensed entities and to avoid any kind of spectrum clash
or interference.
So I think that it is important not to have false arguments
put in the way of this. I think this really could be helpful.
So, Mr. Chairman, thanks so much for bringing the Committee
together around this. It could not be more important to all of
us. Thank you.
[The prepared statement of Senator Kerry follows:]
Prepared Statement of Hon. John F. Kerry,
U.S. Senator from Massachusetts
Mr. Chairman, I thank you for holding this hearing. We often talk
about the importance of greater broadband deployment--and it is time to
set Federal policy that will encourage it.
I have heard you describe how reliable broadband connections in
Alaskan villages could change the economic opportunities in those
villages. I really believe you are on to something Mr. Chairman and I
applaud your leadership on this issue.
Unfortunately, many people either do not have access to broadband
Internet service or simply cannot afford it. Despite President Bush's
promise of ubiquitous broadband by 2007--we are well short of that goal
(currently 40 percent of households subscribe).
Incredibly, it seems that the FCC is sitting on a rulemaking that
will help correct this problem. I am pleased to join Senator Allen in
sponsoring legislation that seeks to better utilize spectrum and
accomplish this goal.
I have talked repeatedly in recent months about broadband as a key
to economic growth--a job creator--a tool for learning and innovation.
Indeed, it is a central pillar of our long-term competitiveness.
Our legislation will enable entrepreneurs to provide affordable,
competitive high-speed wireless broadband services in areas that
otherwise have no connectivity.
It does so by providing additional unlicensed spectrum--which is
spurring an outpouring of innovation and creating affordable and
ubiquitous wireless broadband solutions--for unconnected rural homes,
for small business, for public safety agencies, and more.
It is my hope Mr. Chairman that we can come to agreement for a
timely mark-up of the Allen/Kerry bill.
The Chairman. Thank you very much. Ms. Hecker.
STATEMENT OF JayEtta Z. HECKER, DIRECTOR, PHYSICAL
INFRASTRUCTURE ISSUES, U.S. GOVERNMENT
ACCOUNTABILITY OFFICE
Ms. Hecker. Thank you, Mr. Chairman, I am very pleased to
be here to speak on this important topic. As somebody has
already said, the spectrum is really critical to our economy.
At the same time, there is a rapid growth in demand, and
concerns about scarcity, since most of the useable spectrum is
already assigned. Similarly, there are concerns about
underutilization, so we have done some work and have raised
some concerns about whether the Federal framework that we have
is really adequate to respond to the growing and future demand.
We have in fact concluded that the need for attention to this
matter is acute.
What I will cover is four topics and try to sweep through
them pretty quickly. The first is the extent to which the FCC
has adopted market-based mechanisms. Second, the extent to
which government has adopted market mechanisms. Third, based on
a review that we have done for this Committee, what some of the
key options are for improving spectrum management. Finally, our
summary of some of the institutional barriers that we believe
there are to comprehensive spectrum reform.
The first issue about FCC: there is no doubt that FCC, with
Congressional support, has moved forward incrementally to adopt
market-based approaches. Clearly, and most importantly, is use
of auctions. Also important are enhancing the use of secondary
markets and introducing flexibility in certain bands. While
auctions represent a substantial improvement, we would note
that only a very small portion of total licenses, outstanding
licenses, have actually been auctioned. Our analysis shows it
is less than 2 percent of licenses.
On the allocation issue, we are concerned that basically
FCC still employs largely a command-and-control process for the
allocation of spectrum. And again, as I mentioned, while there
is some flexibility in some bands, like CMRS, where the users
are allowed to choose technology, have flexibility in their
business models and services, that is not the case for most of
the spectrum that is allocated. Concerns have been raised that
the allocation process is slow and inefficient, leading to
underutilization and not getting spectrum in the hands of the
users who can make the most efficient and intense use of it.
Quickly then, to the governments use. Again, I think you
have heard from Mr. Kneuer, there are clear initiatives on
NTIA's part. But, it is certainly not comparable to what some
other countries have done to truly adopt market-based
mechanisms or proxies for market mechanisms and improving the
incentives for efficient use by government users.
The current status quo, consistent with the limitations of
Federal law, is that the fees that are imposed on government
users are actually based on the number of assignments and are
designed to spread the cost across the widest range of
government users, and is not at all even a beginning proxy for
the intensity of use of spectrum.
So, only 80 percent of the spectrum management cost of NTIA
is recovered by the fees that are imposed on agencies. The
premise is for some kind of incentive based fees and getting
some transparency for the distribution and utilization in
different government agencies; I think the inventory and first
Federal plan that Mr. Kneuer talked about is definitely a first
step forward. That is definitely a first step and we do
acknowledge that there are definitely difficulties and
challenges in applying market incentives, but we believe that
the data show that there are substantial gaps and
underutilization of spectrum by the government and improvements
are definitely needed.
The two options that our work has identified to improve
spectrum management are basically extending and refining
auction authority, and reexamining the use and distribution of
spectrum.
Obviously, the auction authority has been extended, but
there is actually still some opportunity for some further
refinements of auction authority. By Congress talking about
better definition or clarity or flexibility in license rights,
similar to your legislation allowing for unlicensed use of TV
broadcast, white space as an example. Also, there are
opportunities for further enhancement of secondary markets and
further refinement of small business incentives.
The second major proposal put forward is basically that
what we really need is a national spectrum census, and we are
beginning to do that on a Federal level. We really do not have
it on the commercial side. We need a broader evaluation of the
tradeoffs between government and commercial use, licensed and
unlicensed. Some steps are underway.
Our major concern, though, and this is really the bottom
line is that there are fundamental institutional barriers to
comprehensive reform of spectrum with a current government
structure. While we have these two agencies, and each of them
is talking about reform, neither has ultimate government
decision-making authority or the authority to impose
fundamental reform and that is why we really have a piecemeal
approach in our view.
We have two outstanding recommendations. One is that the
agencies really need to work together to have a complete
national spectrum plan. The other recommendation is for
potentially to have a commission like a base closing commission
to be established by either Congress or the President that
would do a comprehensive examination of current spectrum
management and opportunities for reform.
In conclusion, the Congress has taken a vital first step
with the extension of auction authority, but substantial work
remains to be done and is vital to promote or perhaps even
ensure the more efficient and effective use of this vital and
national resource. Thank you, Mr. Chairman.
[The prepared statement of Ms. Hecker follows:]
Prepared Statement of JayEtta Z. Hecker, Director, Physical
Infrastructure Issues, U.S. Government Accountability Office
Mr. Chairman and Members of the Committee:
We appreciate the opportunity to provide testimony on spectrum
reform issues. As you know, the radio-frequency spectrum is used to
provide an array of wireless communications services that are critical
to the U.S. economy and various government missions, such as national
security. Demand for radio-frequency spectrum has exploded over the
past several decades as new technologies and services have been--and
continue to be--brought to the market in the private sector, and new
mission needs unfold among government users. As a result, nearly all
parties are becoming increasingly concerned about the availability of
spectrum for future needs because most of the usable spectrum in the
United States has already been allocated to existing services and
users. Compounding this concern is evidence that some of the spectrum
is currently underutilized. Many parties believe that spectrum
management reform--such as greater reliance on market-based mechanisms
that invoke the forces of demand and supply--is essential to meeting
the growing and unpredictable demand for spectrum.
My statement today will identify (1) the extent to which the
Federal Communications Commission (FCC) has adopted market-based
mechanisms for commercial uses of spectrum, \1\ (2) the extent to which
market-based mechanisms have been adopted for Federal Government use of
spectrum, (3) options for improving spectrum management, and (4)
potential barriers to spectrum reform. My comments are based on our
body of work on spectrum management, including our recently issued
report to this Committee; \2\ these reports were prepared in accordance
with generally accepted government auditing standards.
In summary:
FCC is incrementally adopting market-based approaches to
managing the commercial use of spectrum. Market-based
mechanisms can help promote the efficient use of spectrum by
invoking the forces of supply and demand--that is, they provide
users an incentive to use the spectrum as efficiently as
possible. Examples of market-based mechanisms include
introducing flexibility in the use of spectrum, using auctions
to assign licenses, and enhancing the use of secondary markets
as a means for companies to obtain access to spectrum. FCC has
adopted these mechanisms for commercial uses. For example,
although FCC currently employs largely a command-and-control
process for spectrum allocation, it has provided greater
flexibility within certain spectrum bands. In addition, FCC
began using auctions to assign spectrum licenses for commercial
uses in 1994. According to industry stakeholders, FCC's
implementation of auctions is seen as an improvement over
comparative hearings and lotteries, the primary assignment
mechanisms employed in the past. Finally, FCC has taken steps
to facilitate greater secondary market activity, which may
provide an additional mechanism to promote the efficient use of
spectrum.
While some countries have adopted market-based mechanisms to
encourage the efficient use of spectrum by government agencies,
the Department of Commerce's National Telecommunications and
Information Administration (NTIA) has not adopted similar
mechanisms for Federal Government use in the United States.
NTIA imposes fees that recover only a portion of its cost to
administer spectrum management, rather than incentive-based
fees--that is, fees that more closely resemble market prices
and thus encourage greater spectrum efficiency among government
users; currently, NTIA does not have authority to impose fees
that exceed its spectrum management costs. However, adopting
market-based mechanisms for Federal Government use of spectrum
might be difficult or undesirable in some contexts because of
the primacy of certain government missions, the lack of
flexibility in use of spectrum for some agencies, and the lack
of financial incentives for government users.
As we reported in December 2005, industry stakeholders and
experts have identified a number of options for improving
spectrum management. The most frequently cited options include
(1) extending FCC's auction authority, (2) reexamining the use
and distribution of spectrum, and (3) ensuring clearly defined
rights and flexibility in commercially licensed spectrum bands;
there was no consensus on these options, except for extending
FCC's auction authority. Given the success of FCC's use of
auctions and the overwhelming support for extending FCC's
auction authority, we suggested that the Congress consider
extending FCC's auction authority beyond the 2007 expiration
date. Congress extended FCC's auction authority to 2011 with
the passage of the Deficit Reduction Act of 2005. \3\
The current management framework may pose barriers to reform
since, while two agencies have been given responsibility for
aspects of spectrum management, neither has been given ultimate
decision-making authority over all spectrum use or the
authority to impose fundamental reform, such as increasing the
reliance on market-based mechanisms. Under this divided
management framework, FCC manages spectrum for non-Federal
users while NTIA manages spectrum for Federal Government users.
However, spectrum management issues and major reform cross the
jurisdictions of both agencies. To address these barriers, we
have previously recommended that (1) the Secretary of Commerce
and FCC establish and carry out formal, joint planning
activities to develop a national spectrum plan to guide
decision making; and (2) the relevant administrative agencies
and congressional committees work together to develop and
implement a plan for the establishment of a commission that
would conduct a comprehensive examination of current spectrum
management. \4\ To date, these recommendations have not been
implemented.
Background
The radio-frequency spectrum is the part of the natural spectrum of
electromagnetic radiation lying between the frequency limits of 9
kilohertz and 300 gigahertz. \5\ It is the medium that makes wireless
communications possible and supports a vast array of commercial and
governmental services. Commercial entities use spectrum to provide a
variety of wireless services, including mobile voice and data, paging,
broadcast radio and television, and satellite services. Additionally,
some companies use spectrum for private tasks, such as communicating
with remote vehicles. Federal, state, and local agencies also use
spectrum to fulfill a variety of government missions. For example,
state and local police departments, fire departments, and other
emergency services agencies use spectrum to transmit and receive
critical voice and data communications, and Federal agencies use
spectrum for varied mission needs such as national defense, law
enforcement, weather services, and aviation communication.
Spectrum is managed at the international and national levels. The
International Telecommunication Union (ITU), a specialized agency of
the United Nations, coordinates spectrum management decisions among
nations. Spectrum management decisions generally require international
coordination, since radio waves can cross national borders. Once
spectrum management decisions are made at the ITU, regulators within
each nation, to varying degrees, will follow the ITU decisions. In the
United States, responsibility for spectrum management is divided
between two agencies: FCC and NTIA. FCC manages spectrum use for non-
Federal users, including commercial, private, and state and local
government users under authority provided in the Communications Act.
NTIA manages spectrum for Federal Government users and acts for the
President with respect to spectrum management issues. \6\ FCC and NTIA,
with direction from the Congress, jointly determine the amount of
spectrum allocated to Federal and non-Federal users, including the
amount allocated to shared use.
Historically, concern about interference or crowding among users
has been a driving force in the management of spectrum. \7\ FCC and
NTIA work to minimize interference through two primary spectrum
management functions--the ``allocation'' and the ``assignment'' of
radio spectrum. Specifically:
Allocation involves segmenting the radio spectrum into bands
of frequencies that are designated for use by particular types
of radio services or classes of users. For example, the
frequency bands between 88 and 108 megahertz (MHz) are
allocated to FM radio broadcasting in the United States. In
addition to allocation, FCC and NTIA also specify service
rules, which include the technical and operating
characteristics of equipment.
Assignment, which occurs after spectrum has been allocated
for particular types of services or classes of users, involves
providing a license or authorization to use a specific portion
of spectrum to users, such as commercial entities or government
agencies. FCC assigns licenses for frequency bands to
commercial enterprises, state and local governments, and other
entities, while NTIA makes frequency assignments to Federal
agencies.
When FCC assigns a portion of spectrum to a single entity, the
license is considered exclusive. When two or more entities apply for
the same exclusive license, FCC classifies these as mutually exclusive
applications--that is, the grant of a license to one entity would
preclude the grant to one or more other entities. For mutually
exclusive applications, FCC has primarily used three assignment
mechanisms--comparative hearings, lotteries, and auctions. FCC
historically used comparative hearings, which gave competing applicants
a quasi-judicial forum in which to argue why they should be awarded a
license instead of other applicants. In 1981, partially in response to
the administrative burden of the comparative hearing process, the
Congress authorized the use of lotteries, which allowed FCC to randomly
select licenses from the qualified applicant pool. \8\ The Congress
provided FCC with authority to use auctions to assign mutually
exclusive licenses for certain subscriber-based wireless services in
the Omnibus Budget Reconciliation Act of 1993. \9\ Auctions are a
market-based mechanism in which FCC assigns a license to the entity
that submits the highest bid for specific bands of spectrum. As of
November 30, 2005, FCC has conducted 59 auctions for over 56,000
licenses to select between competing applications for the same license,
which have generated over $14.5 billion for the U.S. Treasury. However,
only a very small portion of total licenses has been auctioned. (See
fig. 1.)
In some frequency bands, FCC authorizes unlicensed use of
spectrum--that is, users do not need to obtain a license to use the
spectrum. \10\ Rather, an unlimited number of unlicensed users can
share frequencies on a non-interference basis. Thus, the assignment
process does not apply to the use of unlicensed devices. However,
manufacturers of unlicensed equipment must receive authorization from
FCC before operating or marketing an unlicensed device.
FCC Has Adopted Several Market-Based Mechanisms for Commercial Uses
To promote the more efficient use of spectrum, FCC is incrementally
adopting market-based approaches to spectrum management. For instance,
FCC has introduced some flexibility in the spectrum allocation process,
although it remains largely a command-and-control process. In addition,
in 1994, FCC instituted auctions to assign certain spectrum licenses.
According to industry stakeholders, FCC's use of auctions is seen as an
improvement over comparative hearings and lotteries, the primary
assignment mechanisms employed in the past. Finally, FCC has taken
steps to facilitate greater secondary market activity, which may
provide an additional mechanism to promote the more efficient use of
spectrum.
FCC Has Introduced Some Flexibility in the Spectrum Allocation Process
but
Allocation Remains Largely a Command-and-Control Process
FCC currently employs largely a command-and-control process for
spectrum allocation. \11\ That is, FCC applies regulatory judgments to
determine and limit what types of services--such as broadcast,
satellite, or mobile radio--will be offered in different frequency
bands by geographic area. In addition, for most frequency bands FCC
allocates, the agency issues service rules to define the terms and
conditions for spectrum use within the given bands. These rules
typically specify eligibility standards as well as limitations on the
services that relevant entities may offer and the technologies and
power levels they may use. These decisions can constrain users' ability
to offer services and equipment of their choosing.
However, FCC has provided greater operational and technical
flexibility within certain frequency bands. For example, FCC's rules
for Commercial Mobile Radio Service (CMRS), which include cellular and
Personal Communications Services (PCS), are considered less
restrictive. Under these rules, wireless telephony operators are free
to select technologies, services, and business models of their
choosing. FCC has not provided comparable flexibility in other bands.
\12\ For example, spectrum users have relatively little latitude for
making similar choices in frequency bands allocated to broadcast
television services.
Further, the Spectrum Policy Task Force Report, a document produced
by FCC staff, identified two alternatives to the command-and-control
model: the ``exclusive, flexible rights'' model, and the ``open-
access'' model. \13\ The exclusive, flexible rights model provides
licensees with exclusive, flexible use of the spectrum and transferable
rights within defined geographic areas. This is a licensed-based
approach to spectrum management that extends the existing allocation
process by providing greater flexibility regarding the use of spectrum,
and the ability to transfer licenses or to lease spectrum usage rights.
The open-access model allows a potentially unlimited number of
unlicensed users to share frequency bands, with usage rights governed
by technical standards, but with no rights to interference protection.
This approach does not require licenses, and as such is similar to
FCC's Part 15 rules (which govern unlicensed use in the 900 MHz, 2.4
GHz, and 5.8 GHz bands)--where cordless phones and WiFi technologies
operate. Both models allow flexible use of spectrum, so that users of
spectrum, rather than FCC, play a larger role in determining how
spectrum is ultimately used. FCC's Spectrum Policy Task Force
recommended a balanced approach to allocation--utilizing aspects of the
command-and-control; exclusive, flexible rights; and open-access
models. FCC is currently using elements of these two alternatives
models, although it primarily employs the command-and-control model.
FCC's Use of Auctions for Commercial Licenses Is Seen as an Improvement
Over Past Assignment Mechanisms
In 1994, FCC began using auctions--a market-based mechanism that
assigns a license to the entity that submits the highest bid for
specific bands of spectrum. FCC's implementation of auctions mitigates
a number of problems associated with comparative hearings and
lotteries--the two primary assignment mechanism employed until 1993.
For example:
Auctions are a relatively quick assignment mechanism. With
auctions, FCC reduced the average time for granting a license
to less than 1 year from the initial application date, compared
to an average time of over 18 months with comparative hearings.
Auctions are administratively less costly than comparative
hearings. Entities seeking a license can reduce expenditures
for engineers and lawyers arising from preparing applications,
litigating, and lobbying; and FCC can reduce expenditures
associated with reviewing and analyzing applications.
Auctions are a transparent process. FCC awards licenses to
entities submitting the highest bid rather than relying on
possibly vague criteria, as was done in comparative hearings.
Auctions are effective in assigning licenses to entities
that value them the most. Alternatively, with lotteries, FCC
awarded licenses to randomly-selected entities.
Auctions are an effective mechanism for the public to
realize a portion of the value of a national resource used for
commercial purposes. Entities submitting winning bids must
remit the amount of their winning bid to the government, which
represents a portion of the value that the bidder believes will
arise from using the spectrum.
As we reported in December 2005, many industry stakeholders we
contacted, and panelists on our expert panel, stated that auctions are
more efficient than previous mechanisms used to assign spectrum
licenses. \14\ For example, among our panelists, 11 of 17 reported that
auctions provide the most efficient method of assigning licenses; no
panelist reported that comparative hearings or lotteries provided the
most efficient method. Of the remaining panelists, several suggested
that the most efficient mechanism depended on the service that would be
permitted with the spectrum. \15\
FCC Has Acted to Facilitate Secondary Market Transactions
While FCC's initial assignment mechanisms provide one means for
companies to acquire licenses, companies can also acquire licenses or
access to spectrum through secondary market transactions. Through
secondary markets, companies can engage in transactions whereby a
license or use of spectrum is transferred from one company to another.
These transactions can incorporate the sale or trading of licenses. In
some instances, companies acquire licenses through the purchase of an
entire company, such as Cingular's purchase of AT&T Wireless.
Ultimately, FCC must approve transactions that result in the transfer
of licenses from one company to another.
Secondary markets can provide several benefits. First, secondary
markets can promote more efficient use of spectrum. If existing
licensees are not fully utilizing the spectrum, secondary markets
provide a mechanism whereby these licensees can transfer use of the
spectrum to other companies that would utilize the spectrum. Second,
secondary markets can facilitate the participation of small businesses
and introduction of new technologies. For example, a company might have
a greater incentive to deploy new technologies that require less
spectrum if the company can profitably transfer the unused portion of
the spectrum to another company through the secondary market. Also,
several stakeholders with whom we spoke noted that secondary markets
provide a mechanism whereby a small business can acquire spectrum for a
geographic area that best meets the needs of the company.
In recent years, FCC has undertaken actions to facilitate
secondary-market transactions. FCC authorized spectrum leasing for most
wireless radio licenses with exclusive rights and created two
categories of spectrum leases: Spectrum Manager Leasing--where the
licensee retains legal and working control of the spectrum--and de
Facto Transfer Leasing--where the licensee retains legal control but
the lessee assumes working control of the spectrum. FCC also
streamlined the procedures that pertain to spectrum leasing. For
instance, the Spectrum Manager Leases do not require prior FCC approval
and de Facto Transfer Leases can receive immediate approval if the
arrangement does not raise potential public interest concerns. \16\
While FCC has taken steps to facilitate secondary market transactions,
some hindrances remain. For example, some industry stakeholders told us
that the lack of flexibility in the use of spectrum can hinder
secondary market transactions.
Market-Based Mechanisms Have Not Been Adopted for Federal
Government Use of Spectrum
In some countries, spectrum managers have adopted market-based
mechanisms to encourage the efficient use of spectrum by government
agencies. In the United States, NTIA has not adopted incentive-based
fees for Federal Government users of spectrum; rather, NTIA applies
fees that recover only a portion of the cost of administering spectrum
management. Additionally, adopting market-based mechanisms for
government use of spectrum might be difficult or undesirable in some
contexts because of the primacy of certain government missions, the
lack of flexibility in use of spectrum for some agencies, and the lack
of financial incentives for government users.
Incentive-Based Fees Have Not Been Used to Promote Spectrum Efficiency
Among Federal Government Users of Spectrum in the United States
Spectrum managers in some countries have adopted market-based
mechanisms for government users of spectrum. For example, in Australia,
Canada, and the United Kingdom, spectrum managers have implemented
incentive-based fees for government users of spectrum. Incentive-based
fees are designed to promote the efficient use of spectrum by
compelling spectrum users to recognize the value to society of the
spectrum that they use. In other words, these fees mimic the functions
of a market. These incentive-based fees differ from other regulatory
fees that are assessed only to recover the cost of the government's
management of spectrum.
In the United States, NTIA has not adopted incentive-based fees, or
other market-based mechanisms, for Federal Government users of
spectrum. Currently, NTIA charges Federal agencies spectrum management
fees, which are based on the number of assignments authorized to each
agency. In our 2002 report, we noted that, according to NTIA, basing
the fee on the number of assignments, rather than the amount of
spectrum used per agency, better reflects the amount of work NTIA must
do for each agency. \17\ Moreover, NTIA stated that this fee structure
provides a wider distribution of costs to agencies. However, NTIA's fee
does not reflect the value of the spectrum authorized to each agency,
and thus it is not clear how much this encourages the efficient use of
spectrum by Federal agencies. The fee also recovers only a portion of
the cost of administering spectrum management. NTIA does not currently
have the authority to impose fees on government users that exceed its
spectrum management costs. \18\
Applying Market-Based Mechanisms to Federal Government Users May Not Be
Effective in All Contexts
Applying market-based mechanisms might be difficult or undesirable
for Federal Government users in some situations. The purpose of market-
based mechanisms is to provide users with an incentive to use spectrum
as efficiently as possible. However, the characteristics of government
use of spectrum impose challenges to the development and implementation
of market-based mechanisms for Federal Government users, and in some
situations, make implementation undesirable. For example:
Primacy of certain Federal Government missions. Because of
the primacy of certain Federal Government missions--such as
national defense, homeland security, and public safety--
imposition of market- based mechanisms for use of the spectrum
to fulfill these missions might not be desirable. In fact, NTIA
officials have told us that the agency rarely revokes the
spectrum authorization of another government agency because
doing so could interfere with the agency's ability to carry out
important missions.
Lack of flexibility in use of spectrum. Market-based
mechanisms can create an incentive to use spectrum more
efficiently only if users can actually choose to undertake an
alternative means of providing a service. In some situations,
Federal Government agencies do not have a viable alternative to
their current spectrum authorization. For example, spectrum
used for air traffic control has been allocated internationally
for the benefit of international air travel. Thus, the Federal
Aviation Administration has little ability to use spectrum
differently than prescribed in its current authorizations. In
situations such as this, market-based mechanisms would likely
prove ineffective.
Lack of financial incentives. If Federal Government users
can obtain any needed funding for spectrum-related fees through
the budgetary process, market-based mechanisms are not likely
to be effective. However, imposing fees will make the cost
visible to agency managers, thus providing them information
they need if they are to manage spectrum use more efficiently.
Whether more efficient spectrum use actually occurs will depend
in part on whether agencies receive appropriations for the full
amount of the fees or only for some portion. If agencies do not
receive appropriations for the full amount, some pressure will
be created, but it will not be as strong as the private
sector's profit motive.
Industry Stakeholders and Panelists Suggested Several Options to
Improve Spectrum Management
As we reported in December 2005, industry stakeholders and
panelists on our expert panel offered a number of options for improving
spectrum management. \19\ The most frequently cited options include (1)
extending FCC's auction authority, (2) reexamining the distribution of
spectrum--such as between commercial and government use--to enhance the
efficient and effective use of this important resource, and (3)
ensuring clearly defined rights and flexibility in commercially
licensed spectrum bands. There was no consensus on these options for
improvements among stakeholders we interviewed and panelists on our
expert panel, except for extending FCC's auction authority.
Extend FCC's Auction Authority
Panelists on our expert panel and industry stakeholders with whom
we spoke overwhelmingly supported extending FCC's auction authority.
For example, 21 of 22 panelists on our expert panel indicated that the
Congress should extend FCC's auction authority beyond September 2007--
the date auction authority was set to expire at the time of our expert
panel. Given the success of FCC's use of auctions and the overwhelming
support among industry stakeholders and experts for extending FCC's
auction authority, we suggested that the Congress consider extending
FCC's auction authority. In February 2006, the Congress extended FCC's
auction authority to 2011 with the passage of the Deficit Reduction Act
of 2005. \20\
While panelists on our expert panel overwhelmingly supported
extending FCC's auction authority, a majority also suggested
modifications to enhance the use of auctions. \21\ However, there was
little consensus on the suggested modifications. The suggested
modifications fall into the following three categories:
Better define license rights. Some industry stakeholders and
panelists indicated that FCC should better define the rights
accompanying spectrum licenses, as these rights can
significantly affect the value of a license being auctioned.
For example, some industry stakeholders expressed concern with
FCC assigning overlay and underlay rights to frequency bands
when a company holds a license for the same frequency bands.
\22\
Enhance secondary markets. Industry stakeholders we
contacted and panelists on our expert panel generally believed
that modifying the rules governing secondary markets could lead
to more efficient use of spectrum. For example, some panelists
on our expert panel said that FCC should increase its
involvement in the secondary market. These panelists thought
that increased oversight could help to both ensure transparency
in the secondary market and also promote the use of the
secondary market. Additionally, a few panelists said that
adoption of a ``two-sided'' auction would support the efficient
use of spectrum. With a two-sided auction, FCC would offer
unassigned spectrum, and existing licensees could make
available the spectrum usage rights they currently hold.
Reexamine existing small business incentives. The opinions
of panelists on our expert panel and industry stakeholders with
whom we spoke varied greatly regarding the need for and success
of FCC's efforts to promote economic opportunities for small
businesses. For example, some panelists and industry
stakeholders do not support incentive programs for small
businesses. These panelists and industry stakeholders cited
several reasons for not supporting these incentives, including
(1) the wireless industry is not a small business industry; (2)
while the policy may have been well intended, the current
program is flawed; or (3) such incentives create inefficiencies
in the market. Other industry stakeholders suggested
alternative programs to support small businesses. These
suggestions included (1) having licenses cover smaller
geographic areas, (2) using auctions set aside exclusively for
small and rural businesses, and (3) providing better lease
options for small and rural businesses. Finally, some industry
stakeholders with whom we spoke have benefited from the small
business incentive programs, such as bidding credits, \23\ and
believe that these incentives have been an effective means to
promote small business participation in wireless markets.
Reexamine the Use and Distribution of Spectrum
Panelists on our expert panel suggested a reexamination of the use
and distribution of spectrum to ensure the most efficient and effective
use of this important resource. One panelist noted that the government
should have a good understanding of how much of the spectrum is being
used. To gain a better understanding, a few panelists suggested that
the government systematically track usage, perhaps through a ``spectrum
census.'' This information would allow the government to determine if
some portions of spectrum were underutilized, and if so, to make
appropriate allocation changes and adjustments. \24\
A number of panelists on our expert panel also suggested that the
government evaluate the relative allocation of spectrum for government
and commercial use as well as the allocation of spectrum for licensed
and unlicensed purposes. While panelists thought the relative
allocation between these categories should be examined, there was
little consensus among the panelists on the appropriate allocation. For
instance, as shown in figure 2, 13 panelists indicated that more
spectrum should be dedicated to commercial use, while 7 thought the
current distribution was appropriate; no panelists thought that more
spectrum should be dedicated to government use. Similarly, as shown in
figure 3, nine panelists believed that more spectrum should be
dedicated to licensed uses, six believed more should be dedicated to
unlicensed uses, and five thought the current balance was appropriate.
Ensure Clearly Defined Rights and Flexibility
Similar to a suggested modification of FCC's auction authority,
some panelists on our expert panel suggested better defining users'
rights and increasing flexibility in the allocation of spectrum. Better
defining users' rights would clarify the understanding of the rights
awarded with any type of license, whether the licensees acquired the
license through an auction or other means. In addition, some panelists
stated that greater flexibility in the type of technology used--and
service offered--within frequency bands would help promote the
efficient use of spectrum. In particular, greater flexibility would
allow the licensee to determine the efficient and highly valued use,
rather than relying on FCC-based allocation and service rules. However,
some panelists on our expert panel and industry stakeholders with whom
we spoke noted that greater flexibility can lead to interference, as
different licensees provide potentially incompatible services in close
proximity. \25\ Thus, panelists on our expert panel stressed the
importance of balancing flexibility with interference protection.
The Current Framework for Spectrum Management May Pose Barriers to
Reform
Under the current management framework, neither FCC nor NTIA has
been given ultimate decision-making authority over all spectrum use or
the authority to impose fundamental reform, such as increasing the
reliance on market-based mechanisms. FCC manages spectrum for non-
Federal users while NTIA manages spectrum for Federal Government users.
\26\ As such, FCC and NTIA have different perspectives on spectrum use.
FCC tends to focus on maximizing public access to and use of the
spectrum. Alternatively, NTIA tends to focus on protecting the Federal
Government's use of the spectrum from harmful interference, especially
in areas critical to national security and public safety. Further,
despite increased communication between FCC and NTIA, the agencies'
different jurisdictional responsibilities appear to result in piecemeal
efforts that lack the coordination to facilitate major spectrum reform.
For example, FCC's and NTIA's recent policy evaluations and
initiatives--the FCC Spectrum Policy Task Force and the Federal
Government Spectrum Task Force, respectively--tend to focus on the
issues applicable to the users under their respective jurisdictions.
\27\
Major spectrum reform must ultimately address multidimensional
stakeholder conflicts. One source of conflict relates to balancing the
needs of government and private-sector spectrum users. Government users
have said that because they offer unique and critical services, a
dollar value cannot be placed on the government's provision of
spectrum-based services. At the same time, private-sector users have
stated that their access to spectrum is also critical to the welfare of
society, through its contribution to a healthy and robust economy. A
second source of conflict relates to balancing the needs of incumbent
and new users of spectrum. Since most useable spectrum has been
allocated and assigned, accommodating new users of spectrum can involve
the relocation of incumbent users. While new users of spectrum view
relocations as essential, incumbent users often oppose relocations
because the moves may impose significant costs and disrupt their
operations. A third source of conflict relates to existing technology
and emerging technology. Some new technologies, such as ultra-wideband,
\28\ may use the spectrum more efficiently, thereby facilitating more
intensive use of the spectrum. However, users of existing technology,
both commercial and government, have expressed concern that these new
technologies may create interference that compromises the quality of
their services.
The current spectrum management framework may pose a barrier to
spectrum reform because neither FCC nor NTIA has ultimate authority to
impose fundamental reform and these stakeholder conflicts cross the
jurisdictions of both FCC and NTIA. As such, contentious and protracted
negotiations arise over spectrum management issues. We previously made
two recommendations to help further the reform process. First, we
recommended that the Secretary of Commerce and FCC should establish and
carry out formal, joint planning activities to develop a national
spectrum plan to guide decision-making. \29\ Additionally, we also
recommended that the relevant administrative agencies and congressional
committees work together to develop and implement a plan for the
establishment of an independent commission that would conduct a
comprehensive examination of current spectrum management. \30\ To date,
neither recommendation has been implemented.
Concluding Observations
With authorization from Congress, FCC has taken several steps to
implement a more market-oriented approach to spectrum management. In
recent years, FCC has taken actions to facilitate secondary-market
transactions. FCC authorized spectrum leasing for most wireless radio
licenses with exclusive rights and also streamlined the procedures that
pertain to spectrum leasing. In addition, FCC has conducted 59 auctions
for a wide variety of spectrum uses, including personal communications
services and broadcasting. FCC's auctions have contributed to a vibrant
commercial wireless industry. The Congress' recent decision to extend
FCC's auction authority was, in our opinion, a positive step forward in
spectrum reform. However, more work is needed to ensure the efficient
and effective use of this important national resource. To help reform
spectrum management, we have previously recommended that (1) the
Secretary of Commerce and FCC should establish and carry out formal,
joint planning activities to develop a national spectrum plan to guide
decision-making; and (2) the relevant administrative agencies and
congressional committees work together to develop and implement a plan
for the establishment of a commission that would conduct a
comprehensive examination of current spectrum management. \31\ To date,
these recommendations have not been implemented.
Mr. Chairman, this concludes my prepared statement. I would be
happy to respond to any questions you or other Members of the Committee
may have at this time.
ENDNOTES
\1\ FCC manages spectrum use for non-Federal users, including
commercial, private, and state and local government users.
\2\ GAO, Telecommunications: Strong Support for Extending FCC's
Auction Authority Exists, but Little Agreement on Other Options to
Improve Efficient Use of Spectrum, GAO-06-236 (Washington, D.C.: Dec.
20, 2005); GAO, Telecommunications: Comprehensive Review of U.S.
Spectrum Management with Broad Stakeholder Involvement is Needed, GAO-
03-277 (Washington, D.C.: Jan. 31, 2003); and GAO, Telecommunications:
Better Coordination and Enhanced Accountability Needed to Improve
Spectrum Management, GAO-02-906 (Washington, D.C.: Sept. 30, 2002).
\3\ Pub. L. No. 109-171, Sec. 3003, 120 Stat. 4 (2006).
\4\ GAO-02-906 and GAO-03-277.
\5\ Radio signals travel through space in the form of waves. These
waves vary in length, and each wavelength is associated with a
particular radio frequency. Radio frequencies are grouped into bands
and are measured in units of Hertz. The term kilohertz refers to
thousands of Hertz, megahertz (MHz) to millions of Hertz, and gigahertz
to billions of Hertz.
\6\ The Department of State also plays a role in spectrum
management by coordinating and mediating the U.S. position and leading
the Nation's delegation to international conferences on spectrum
management.
\7\ Interference occurs when two or more radio signals interact in
a manner that disrupts the transmission and reception of messages.
\8\ In 1981, Congress added Section 309(i) to the Communications
Act to give FCC the authority to assign a broad range of licenses by
lottery. The Balanced Budget Act of 1997, Pub. L. No. 105-33, 111 Stat.
260, tit. III, Sec. 3002, terminated FCC's authority to assign licenses
by lotteries, except with respect to licenses for non-commercial
broadcast stations and public broadcast stations. See, 47 U.S.C.
Sec. 309(i)(5) and 47 U.S.C. Sec. 397(6).
\9\ 47 U.S.C. Sec. 309(j). In subsequent years, the Congress has
modified and extended FCC's auction authority, including exempting some
licenses from competitive bidding, such as licenses for public safety
radio services and noncommercial educational broadcast services.
\10\ Traditional unlicensed devices are low-powered equipment that
operate in a limited geographic range, such as cordless phones, baby
monitors, garage door openers, and wireless access to the Internet.
\11\ NTIA employs a similar process for Federal Government spectrum
users.
\12\ In some instances, statutory restrictions are an impediment to
granting greater flexibility.
\13\ For more information on these alternative spectrum management
models, including the perceived advantages and disadvantages of each,
see GAO-06-236.
\14\ See GAO-06-236. We convened, in collaboration with the
National Academies, two panels of experts to discuss spectrum
allocation and assignment issues and options to improve spectrum
management. The panelists convened at the National Academies on August
9, 2005, and August 10, 2005. A total of 23 panelists participated on
our two expert panels. For more information on the expert panels, see
GAO-06-236.
\15\ For example, some panelists did not support using auctions to
assign spectrum licenses for public safety services.
\16\ The public interest concerns arise as a result of FCC policies
pertaining to (1) eligibility and use of the license and spectrum, (2)
foreign ownership limitations, (3) designated entity and entrepreneur
benefits, and (4) competition. See Promoting Efficient Use of Spectrum
Through Elimination of Barriers to the Development of Secondary
Markets, WT Docket No. 00-230, Second Report and Order, Order on
Reconsideration, and Second Further Notice of Proposed Rulemaking, 19
FCC Rcd. 17503 (2004).
\17\ GAO-02-906.
\18\ In its 2005 program assessment of NTIA, OMB noted that NTIA
does not currently have sufficient mechanisms in place to ensure
efficient and effective Federal spectrum use. OMB further notes that
NTIA lacks the authority to implement market-based or other incentives
to promote efficient and effective use of the Federal spectrum among
Federal agencies. According to OMB, NTIA plans to study incentives to
promote the more efficient and effective use of spectrum and seek
authority to implement incentives, as appropriate.
\19\ GAO-06-236.
\20\ Pub. L. No. 109-171.
\21\ Fifteen of twenty-two panelists suggested modifications to
enhance the use of auctions.
\22\ Underlay rights allow unlicensed users to operate in the same
spectrum bands as licensees, as long as the unlicensed users do not
cause undue interference for licensees. For example, ultra-wideband
technology operates at very low power levels over a very wide range of
spectrum, and thus might avoid interfering with licensed spectrum users
in the same spectrum bands. Overlay rights allow unlicensed users to
operate in licensed spectrum bands during times or in geographic areas
where licensees are not using the spectrum.
\23\ A bidding credit is a percentage discount applied to the high
bid amount if the bidder meets designated entity criteria established
in the auction rules. In February 2006, FCC issued a notice of proposed
rulemaking to consider whether its general competitive bidding rules
should be modified.
\24\ In February 2006, the Technology CEO Council released a report
entitled, Freeing Our Unused Spectrum: Toward a 21st Century Telecom
Policy (Washington, D.C.: Feb. 2006). This report included
recommendations for FCC and NTIA to examine how efficiently spectrum
bands are being used and encourage more efficient use of bands that are
not found to be used efficiently.
\25\ With the current allocation process, FCC attempts to keep
incompatible service separated to avoid interference. With licensees
exerting greater control, this protection could be reduced.
\26\ In some countries, a single government entity regulates
spectrum for all users. For example, Industry Canada has exclusive
spectrum management responsibility in Canada.
\27\ At a recent NTIA-sponsored workshop addressing spectrum
management, the topics discussed included issues relevant for both FCC
and NTIA, and the participants included spectrum managers from several
government agencies, as well as FCC officials, commercial users, and
other experts.
\28\ Ultra-wideband devices emit a low-power signal over large
swaths of spectrum.
\29\ GAO-02-906.
\30\ GAO-03-277.
\31\ GAO-02-906 and GAO-03-277.
The Chairman. Thank you very much. Let me call for the
attention of the Members. We have six other witnesses after
this panel. So, it is my hope we will keep our questions brief.
STATEMENT OF HON. TRENT LOTT,
U.S. SENATOR FROM MISSISSIPPI
Senator Lott. Mr. Chairman, may I suggest, could we skip
the questions and statements at this time and go to the next
panel because I am really interested in hearing what they have
to say.
The Chairman. I would prefer to do that if these witnesses
would not mind waiting to answer their questions until after
the others have spoken. Will you be able to stay? Is that an
inconvenience? I know it is an inconvenience, but can you do
it?
Ms. Seidel. Yes.
Mr. Kneuer. Yes.
The Chairman. Without objection, then we will ask the next
panel to come up and make their statements and then we will ask
questions of all of these nine witnesses, after that time. The
next panel is Thomas Walsh, General Manager of the Illinois
Valley Cellular Company, and President of the Board of the
Rural Cellular Association. Kevin Kahn, Director of the
Communications Technology Lab of Intel Corporation. Robert
Hubbard, Secretary Treasurer of the Association of Maximum
Service Television and President and Chief Executive Officer of
Hubbard Television Group. Thomas Sugrue, Vice President,
Government Affairs at T-Mobile USA. Jeannine Kenney, Senior
Policy Advisor for the Consumers Union. And Lawrence White, the
Co-Chair of the Spectrum Policy Working Group. We will proceed
in that order if that is agreeable, and we do hope that you
also will cooperate with us by keeping your statements to under
5 minutes. The first witness is Thomas Walsh, General Manager,
Illinois Valley Cellular, President of the Board, Rural
Cellular Association.
STATEMENT OF THOMAS F. WALSH, GENERAL MANAGER,
ILLINOIS VALLEY CELLULAR; PRESIDENT OF THE BOARD, RURAL
CELLULAR ASSOCIATION
Mr. Walsh. Good morning. I am Tom Walsh. I am General
Manager of Illinois Valley Cellular. Our company has 50,000
subscribers in North Central Illinois. We have been in business
for 16 years. I have my wife and my son here at the hearing
this morning. I am kind of proud of that. I am also President
of the Rural Cellular Association. The Rural Cellular
Association represents the interests of nearly 100 small and
rural carriers throughout the United States. Wireless companies
providing wireless telecommunications services to approximately
14.6 million people in more than 135 rural and small markets.
Sincere thanks to the Chairman and Committee Members for
the opportunity to present RCA's views on spectrum policy. RCA
members know firsthand that expanding the options for rural
carriers to purchase spectrum will increase the availability of
competitive broadband services beyond the urban areas.
Providing opportunities for small and rural carriers to compete
for spectrum will also deliver increased economic development
and improved 911 and E-911 emergency response services,
especially in rural communities that lack those services today.
As Congress considers spectrum reform, RCA asks that
Members not lose sight of the core challenges faced by smaller
carriers who have the responsibility to offer rural residents
and businesses the same services and choices that are available
to the public in urban areas. Those challenges include, the
inability of small carriers to compete effectively for licenses
auctioned by large geographic areas.
Second, FCC policies that allow inefficient use of
spectrum. We are disappointed to see ``wasted'' spectrum where
licensees of large areas do not construct facilities to serve
all of their market areas.
Third, FCC's procedures that would hide the identity of
bidders during spectrum auctions and in some auctions provide
for ``closed'' bidding on certain licenses.
RCA believes rural areas are best served by policies that
increase smaller carrier access to spectrum. Small carriers are
at a disadvantage during FCC spectrum auctions, whenever
licenses combine both rural and urban areas. When rural
counties are grouped in licensed areas with urban areas, as is
the case with the Basic Trading Areas (BTAs), Economic Areas
(EAs), and the largest geographic license areas known as
Economic Area Groupings (EAGs). The auction prices can be
expected to soar beyond the means of most small carriers.
However by separating the rural counties from urban licensed
areas through the use of small cellular market areas, such as
Rural Service Areas (RSAs) and Metropolitan Service Areas
(MSAs), companies of all sizes can participate in the auction.
Each participant can focus attention on the licenses that best
conform to their individual service plans. Use of the RSAs and
MSAs as license areas allow all bidders to mix and match rural
and urban areas, according to their individual business plans
and financial capabilities.
My second point today is that spectrum policy should
encourage spectrum use by those who purchase the licenses.
Frequently, large license areas lead to spectrum lying unused.
The FCC addressed this problem in the context of cellular
service and required all cellular companies 5 years after
obtaining a license to file maps showing where the service was
provided and where more importantly not provided within their
licensed area. The FCC then allowed interested companies to
file applications for the unserved areas of a minimum size
announced by the FCC, and if there were multiple applicants,
auction off the available areas to the highest bidder. Congress
should require the FCC to use a similar unserved area licensing
process for PCS and other radio services. This would allow
companies willing to use this spectrum to obtain licenses and
provide service.
My third and final point is that spectrum policy should
promote participation in auctions by smaller rural carriers
because rural area build-outs lead to improved 911 and E-911
emergency response services, and economic development in rural
areas. Many rural communities are lacking 911 services today.
To allow more emergency calls to be completed and to help first
responders locate and assist persons in distress, Congress
should take into consideration the special needs of rural
carriers as they prepare for upcoming spectrum auctions.
Small and rural carriers are also a significant contributor
to economic development in rural areas. The availability of
advanced wireless services in rural areas provides jobs, and
encourages business expansion. There is no better way to add to
the economic base of a rural market then to have an
infrastructure in place that allows businesses to move to the
rural market and have essentially the same wireless
communications available that exist in urban areas.
RCA is concerned about an FCC proposal that would result in
``blind bidding'' during auctions. That change would create
problems for small and rural carriers because they depend on
roaming agreements with large carriers in order to serve
customers who travel outside of rural markets. Small carriers
can pay more for licenses--if they have confidence that roaming
partners with compatible networks are bidding actively in urban
areas that are nearby the rural markets of their interest.
Finally, RCA believes spectrum policy should not include
use of ``closed bidding'' for certain licenses. These set-
asides are problematic because there has been extensive use of
shell companies by large wireless carriers to avoid attribution
of large carriers gross revenue to the applicants. The FCC is
working now to end that tactic and RCA encourages the FCC in
that regard. But if licenses are no longer set aside for closed
bidding there would be less incentive for large companies to
find ways around the rules.
In conclusion, technology and innovation has created an
exciting new world in telecommunications. Few people imagine
that the demand for advanced wireless services in rural areas
of the country would be as compelling as it is today. A fresh
review of how spectrum should be auctioned in terms of market
size and auction procedures is much needed. It is RCA's hope
that to ensure greater availability and the expansion of
quality telecommunications services in rural areas, Congress
will take our observations into consideration in any spectrum
reform effort. Thank you for your time and attention to this
important matter. I will be available for questions.
[The prepared statement of Mr. Walsh follows:]
Prepared Statement of Thomas F. Walsh, General Manager, Illinois Valley
Cellular; President of the Board, Rural Cellular Association
I. Introduction
I am Tom Walsh, General Manager of Illinois Valley Cellular. Our
company has provided wireless service for over sixteen years to small
rural towns in north central Illinois such as Ottawa and La Salle-Peru.
I am also President of the Board of Rural Cellular Association (RCA),
the trade association for approximately 100 of the Nation's smallest
rural wireless providers. RCA is pleased to offer the Committee its
views on spectrum policy.
Rural Cellular Association represents the interests of nearly 100
small and rural wireless licensees providing wireless
telecommunications services to approximately 14.6 million people in
more than 135 rural and small metropolitan markets. RCA members
historically have led the industry in making the investments required
to offer wireless services in the most rural areas of the country.
RCA believes that high quality wireless service is the key to
allowing customers in rural areas to gain full access to broadband and
other advanced telecommunications services. To achieve that goal the
Federal Communications Commission (FCC) must adopt auction plans that
allow equitable participation in rural areas by the small businesses
that serve rural Americans. Because RCA members live, work and play in
the rural communities we serve, we know first hand that expanding
options for rural carriers to purchase spectrum will increase rural
access to advanced telecommunications services and accelerate the
availability of competitive broadband services beyond metropolitan
areas. Providing opportunities for small and rural carriers to compete
for spectrum will also deliver increased economic development and
improved 911 and E-911 emergency response services, especially in rural
communities that lack those services today. Policies that encourage
rural carriers' participation in spectrum auctions open the door to
rural consumers having the health, safety, and economic development
opportunities that are critical to bridge the technology gap between
urban and rural America.
RCA asks that Congress not lose sight of challenges faced by
smaller entities that have a sincere desire to offer rural residents
and businesses the same services and choices that are available to the
public in metropolitan areas. Those challenges are:
(1) Inability of small entities to compete effectively for
licenses auctioned for geographic areas larger than MSA/RSA;
(2) FCC policies that allow inefficient use of spectrum. We are
disappointed to see ``wasted'' spectrum where licensees of
large areas do not construct facilities to serve all of their
market areas; and
(3) FCC procedures that would hide the identity of bidders
during spectrum auctions and in some auctions provide for
``closed'' bidding on certain licenses.
II. Smaller License Areas Would Open Opportunities to Small Businesses
and Expedite Competitive Wireless Broadband Services to Rural
Areas
As to the first problem I identified, small carriers desiring to
provide broadband and other wireless services in rural areas typically
cannot afford to compete at auction for licenses that have service
areas that combine rural and major metropolitan areas. For this reason,
RCA believes the most effective means to foster the prompt availability
of competitive wireless services to rural markets is to make available
more licenses in any spectrum auction with service areas no larger than
Cellular Market Areas (CMAs) which are the Rural Service Areas (RSAs)
and Metropolitan Service Areas (MSAs) that were used by the FCC for
licensing cellular systems. Unfortunately, when rural counties are
grouped in license areas with metropolitan areas, as is the case with
Basic Trading Areas (BTAs), Economic Areas (EAs) or the largest
geographic license areas known as Economic Area Groupings (EAGs), the
auction prices for licenses can be expected to soar beyond the means of
most small entities, at least those that are not owned in part by large
companies. Large-companies have a built-in advantage in the auction
system because their purchasing clout can edge out smaller entities
attempting to acquire spectrum. Furthermore, wireless service history
shows that large entities that acquire licenses for large geographic
areas do not make a priority of bringing the benefits of the latest
wireless technologies to the rural portions of their license areas. In
sharp contrast, RCA members historically have built and continue to
build out their license areas even in the most rural of areas. In fact
the small rural carrier is often the sole provider of wireless services
in rural towns away from major highways. Partitioning, disaggregation
and spectrum leasing do not provide the best solutions because
specifications for service are typically dictated by the large company
license holder. The effect of excessively large or inefficiently sized
geographic license areas is a lost opportunity to allow spectrum to
reach an entity that would make best use of it.
However by separating the rural counties from metropolitan license
areas, by the use of CMAs with RSA/MSA boundaries, entities of all
sizes can participate in the auctions and each participant can focus
attention on the licenses that best conform to their individual service
plans. Use of RSAs and MSAs as license areas is the proper balance in
market size and allows all bidders to mix and match rural and urban
areas according to their individual business plans and financial
capabilities. The availability of RSA licenses, which by definition
encompass only counties that are outside of all MSAs, is especially
important to small wireless carriers, and it does not disadvantage the
large carriers because they can make an independent choice of whether
to pursue licenses for rural markets in addition to metropolitan
markets.
III. Improving Access To and Use of Spectrum in Rural Areas
The second problem I wish to bring to your attention involves
``wasted'' license rights as the result of unused spectrum in rural
areas. The FCC's current policies allow inefficient use of spectrum.
Rural consumers are best served by the creation of small license areas
that encourage more efficient use of spectrum. Spectrum reform should
not allow licensees to retain rights to spectrum in areas where
facilities are not constructed after a reasonable period of time. The
FCC recognized this problem years ago in the context of cellular
service and required all licensees, five years after obtaining a
license, to file maps that showed where service was provided and where
markets were unserved. This allowed interested companies to file
applications for unserved area of a minimum size announced by the FCC.
If multiple applications are received the FCC can conduct an auction of
the available area, and re-license the area to the highest bidder.
RCA supports adoption of a ``substantial service'' alternative
construction requirement for all wireless services that are licensed on
a geographic area basis. Geographic area and population-based criteria
would be available to show ``substantial service'' to an area.
Rural markets are best served by spectrum policies that require
carriers to ``use it or lose it,'' thereby providing an incentive for
carriers to build out the rural areas for the present and potential
customers and revenues they offer. Spectrum reform policy should not
impose a draconian license forfeiture penalty where a market is not
totally constructed, rather only the portion of the market not
constructed should be subject to the unserved area re-licensing
process.
IV. Spectrum Policies that Promote Construction in Rural Areas Lead to
Enhanced Public Safety and to Rural Area Economic Development
Spectrum policies that promote participation in auctions by small
and rural carriers will lead to improved 911 and E-911 emergency
response services as facilities are constructed in the rural areas.
Many rural communities lack E-911 services today. To allow more
emergency calls to be completed and to help first responders locate and
assist persons in distress, Congress should take into consideration the
special needs of rural carriers as they prepare for upcoming spectrum
auctions.
Small and rural carriers are also a significant contributor to
economic development in rural areas. They employ people in rural areas
but perhaps more importantly, the availability of advanced wireless
services in rural areas encourages business expansion in rural areas.
There is no better way to add to the economic base of a rural market
than to have infrastructure in place that allows businesses to move to
the rural market and have essentially the same wireless communications
available as exist in metropolitan areas.
Encouraging small carrier participation in auctions is largely
within the control of Congress and the FCC. In addition to small
geographic license areas the auction procedures should be designed so
as not to favor large entities over small entities. RCA is concerned
about a proposal by the FCC to alter auction procedures for the
upcoming auction of Advanced Wireless Services spectrum. That proposal
would shield the identity of bidders from other bidders during the
course of the auction. A ``blind bidding'' process would deter
participation by RCA members who want to know, round by round in the
bidding, what other entities are bidding for the same licenses, and for
licenses in the region that surrounds a market of interest. This is a
problem because small wireless carriers depend upon roaming agreements
with larger carriers in order to allow customers to continue to have
wireless service available when they travel beyond the rural carriers'
markets. In a blind bidding scenario RCA members would not know if they
should bid on licenses because they would lack confidence that their
networks would be compatible with the networks of bidders for
surrounding markets in the region.
Lastly, RCA urges Congress to avoid policies that create ``set
asides'' or closed auctions as a way to encourage small carrier
participation in auctions. Because of the realities of the
telecommunications market place, set asides discourage participation in
auctions and lower auction revenues by disqualifying a meaningful
number of rural carriers because their own gross revenues exceed a
threshold stipulated by the FCC. The FCC rule stipulates that a
spectrum purchaser must not exceed revenues of $125 million in each of
the last two years. The FCC's attribution rules cause the gross
revenues of owners of applicants to be counted, often disqualifying
them from eligibility. To circumvent that rule there has been extensive
use of ``shell companies'' by large wireless carriers to avoid
attribution of large carriers' gross revenues to the applicant. The FCC
is working now to end that tactic, and RCA encourages the FCC in that
regard. But if licenses are no longer set aside for closed bidding
there would also be less incentive for large companies to find ways
around the rules. Bid credits remain a useful tool to promote small
business participation in auctions, and RCA asks that any legislation
in this area require the FCC to continue to make use of bid credits in
future auctions.
V. Conclusion
In conclusion, technology and innovation have created an exciting
new world in telecommunications where no one could imagine that the
demand for such services in rural areas of the country would be as
compelling as it is today. A fresh review of how spectrum should be
auctioned, in terms of market size and auction procedures, is much
needed. To ensure greater availability and the expansion of quality
telecommunications services in rural areas, Congress should:
1) Ensure that spectrum made available by the FCC through
auctions is offered according to geographic license areas,
specifically Cellular Market Areas comprised of MSAs and RSAs,
which are small enough to encourage participation by small
businesses. MSA/RSA licensing plans will encourage expansion of
wireless facilities in rural areas which will accelerate rural
broadband deployment which, in turn, will promote public
safety, educational opportunities and economic development in
rural areas;
2) Require the FCC, to extend the ``unserved area licensing''
process to PCS and other radio services to allow entities
willing to use spectrum where current licensees have not
constructed facilities to apply for and obtain licenses for
unserved areas; and
3) Promote spectrum auction procedures that encourage small and
rural carrier participation in auctions. The FCC's proposed use
of ``blind bidding'' in auctions should not be permitted to
occur, nor should licenses in future auctions be set aside for
small entities because that practice encourages circumvention
of rules by large companies.
Chairman The next witness is Kevin Kahn, Director of the
Communications Technology Lab of Intel Corporation.
STATEMENT OF KEVIN C. KAHN, SENIOR FELLOW AND
DIRECTOR, COMMUNICATIONS TECHNOLOGY LAB, INTEL CORPORATION
Mr. Kahn. Thank you, Mr. Chairman, Members of the
Committee. I am a Senior Fellow with Intel Corporation. I am
the Director of our Communications Technology Laboratory, which
is a worldwide research and advanced development lab,
obviously, involved in communications topics of all sorts. I
have been at Intel nearly 30 years, and in that time, I have
been heavily involved in the development in our communications
policies and our technology positions relative to those. I am
honored to be here today, invited to discuss some of these
complex issues with you. Clearly, the increasing use of
spectrum we are seeing today is creating an increasing pressure
to use that spectrum well.
Spectrum is an artificially scarce resource, heavily
allocated, but often not really used all that efficiently or
well, if you look at the deployment of real equipment. When the
only users of spectrum really were radio/television and the
government for the most part, perhaps this kind of inefficiency
was tolerable. Certainly, the pressure to do better wasn't
there. However, today with the explosion of cellular use,
mobile e-mail, WiFi, broadband access, and innumerable new
applications for consumers, this efficiency must be increased.
And in that regard, Intel commends Chairman Stevens and
Senators Allen, Sununu, Kerry, Boxer and Dorgan for sponsoring
the ``American Broadband for Communities Act'' and the
``Wireless Innovation Act of 2006,'' respectively. And we also
applaud Senator Smith's support of the ``white spaces''
legislation.
Now in my written testimony I point you to the Technology
CEO Council recommendations, which set a broad agenda for
spectrum reform, including such things as more flexible license
spectrum, greater use of unlicensed spectrum and a general
movement toward capitalizing on modern technologies. But in the
rest of these comments, I really want to focus on the so-called
TV ``white spaces'' issue. I would like to make three points.
First, there really is a public benefit to be had by moving
to broader controlled use of the TV bands. Second, there is
spectrum available to do this throughout the United States to
allow new uses of the resource. And third and most importantly,
it is technologically feasible without impact to TV services to
get much more efficient use of these bands by allowing the use
of the ``white spaces.'' We have filed extensive, technical
comments from Intel with the FCC in response to its proceeding
in this matter and those are all available as well for
reference.
To the first point, there is actually a benefit to be had
by doing this. I think you have already heard reference to the
importance of rural broadband services and these are difficult
to provision using wired solutions. On the other hand, wireless
can open up broadband services to low-density populations and
do it cost effectively. The TV spectrum represents excellent
frequencies for this application due to its propagation
characteristics. We estimate anywhere from 3 to 4 times fewer
base stations, and that makes a huge difference in the costs
associated with deploying such a service and therefore the
attractiveness of actually getting that service out to the
American populace.
As far as low power uses of the bands are concerned, there
are a lot of cutting edge consumer applications that can be
made available with low power radios within the home. The
signal reliability range within the house of those same
frequencies is quite attractive for that. And finally, this is
a class of reform that I think we will need to see much more of
as we try to move toward a modern regime of spectrum allocation
and management.
Second, the spectrum really is available throughout the
United States. We have done very conservative studies, even in
congested areas, that show that there is significant ``white
space'' available for low power applications. Even in places
like New York City or Los Angeles, one finds 20 to 30 MHz in
the worst situations. When you get to even somewhat less dense
population areas, such as a place like Salt Lake City, you will
find 90 MHz available. In the rural areas, of course, much,
much more spectrum becomes available for things like broadband
access.
Finally, I would like to point out that really this is
technologically feasible. High power broadband access
applications really can be handled very well by siting
restrictions. We have very good geo-location capabilities and
it is certainly possible to identify what frequency bands are
available in rural areas and then make them available for use
for broadband access with no danger to any of the TV channels.
Low power applications could certainly be handled through
sensing of the spectrum. Contrary to some of the other comments
filled in the FCC proceeding, sensing is in use today
successfully in a number of places. This is not an unproven or
untried technology. In fact, the experience in the 5 GHz band
with the Department of Defense required that industry be able
to sense something far more difficult to detect than a
television station. Namely radar systems that were specifically
designed not to be detected and yet agreements were reached on
how to do that demonstrably between the Department of Defense,
a very difficult customer, and the industry. So, I think there
is certainly evidence that this is not technologically
undoable.
So, finally, I would like to summarize by pointing out that
this combination of public value, the fact that the spectrum
exists and is inefficiently utilized today and the fact that we
now have the technology to take advantage of it, really come
together and make it an important time to act on revising the
way in which we handle the spectrum. We certainly, strongly
encourage both the FCC and the Congress to move ahead on this
important topic. Certainly, Intel stands ready to assist in
answering any relevant questions that we can help with as we go
forward.
I thank you for your time this morning.
[The prepared statement of Mr. Kahn follows:]
Prepared Statement of Kevin C. Kahn, Senior Fellow and Director,
Communications Technology Laboratory, Intel Corporation
I. Introduction
I am Kevin Kahn, Intel Senior Fellow and Director of Intel's
Communications Technology Laboratory. In my current position, I manage
a research and development lab that explores future technologies in
optics as well as wired and wireless communications. During my 29 years
at Intel, I have worked in a variety of areas including software
design, processor and systems architecture, and data communications.
Intel Fellows, our company's highest technical position, provide
strategic technical guidance to the company. Therefore, I have been
deeply involved in the development of Intel's technology policy
positions in broadband and wireless communications. I have also served
on advisory committees and panels at the Federal Communications
Commission, the National Science Foundation, and the National Academy
of Sciences.
It is an honor to appear before this Committee to testify on
wireless issues and spectrum management reform, including the
deployment of unlicensed wireless services.
II. Need for Spectrum Reform
All wireless technologies require radio spectrum. And, as
innovative technologies are developed by companies like Intel, their
success in the marketplace ultimately depends upon appropriate and
sufficient radio spectrum being made available by government
regulations. Thus, as demand grows for an established standard, such as
WiFi (IEEE 802.11), or as new standards based around new technology are
readied for the marketplace, such as WiMAX (IEEE 802.16), regulations
need to change to allow their use and broad acceptance. Standards
provide international interoperability and the opportunity to achieve
economies of scale and scope, but none of this is possible without the
necessary spectrum.
Unfortunately, traditional means of spectrum management are
inefficient and have resulted in large portions of our radio spectrum
being allocated to specific technologies and services. The result is
that today there is not sufficient room for new usage.
A. Artificial Scarcity
Indeed, spectrum is artificially scarce because under the current
regulatory structure--which is primarily based on an outdated system of
``command and control'' spectrum management--much of our radio spectrum
is locked into old uses and old technologies. More importantly, this
antiquated spectrum management regime locks out new uses and
technologies. As a consequence, available spectrum for new wireless
technologies is artificially scarce and very expensive--a problem,
which in recent years, has only become more severe.
The FCC, NTIA, and Congress are to be commended for their efforts
at spectrum management reform to date including authorization of
innovative technologies such as UWB, software defined radios, and
cognitive radios; making more radio spectrum available for wireless
technologies such as WiMAX, 3G, and WiFi at 2 GHz, 5 GHz, and 70/80/90
GHz; and efforts to free up critical spectrum below 1GHz via the DTV
legislation and the proposed TV ``white spaces'' rules and legislation.
These efforts recognize that, as innovation continuously advances,
so must our approach to radio spectrum. Indeed, our national policy
needs to advance so as not to suppress market forces. As the Technology
CEO Council (or TCC)--the information technology industry's public
policy advocacy organization comprising CEOs from Applied Materials,
Dell, EMC, Hewlett-Packard, IBM, Intel, Motorola, NCR, and Unisys--
states in its February 2006 paper ``Freeing Our Unused Spectrum: Toward
a 21st Century Telecom Policy'':
How we address and manage spectrum scarcity is one of the most
important public policy challenges our country faces as we move
deeper into the 21st century. Efficient spectrum policy can
drive technological innovation and productivity and, thus, our
entire economy. Indeed, if our Nation manages its spectrum
resources well, it will have a competitive advantage in the
global market that will benefit all our citizens . . .'' \1\
\1\ Technology CEO Council, ``Freeing Our Unused Spectrum: Toward a
21st Century Telecom Policy,'' Feb. 2006, at 2 (available online at
http://www.techceocouncil.org/index.php?option=content&task=view&id=248
(TCC Paper). The information referred to has also been retained in
Committee files.
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B. Spectrum Reforms
For these reasons, Intel supports policies that maximize spectrum
efficiency and reduce artificial spectrum scarcity. Widespread adoption
of market-based spectrum policies will allow carriers and manufacturers
to make market-driven deals to deploy WiMAX and other efficient new
technologies.
1. TCC Recommendations
To this end, Intel believes that the solution to the current lack
of spectrum for wireless and other technologies lies in the adoption of
certain fundamental reforms--many of which are set forth in the TCC
paper as ``recommendations'' for maximizing our Nation's spectrum
efficiency and wireless potential. Among the TCC recommendations are
the following:
(i) Undertake spectrum inventories to identify inefficient
spectrum use. And then transfer underutilized Federal
Government spectrum to commercial use or sharing such spectrum
with commercial users.
(ii) Allow more flexibility within licensed use. (Licensed use
refers to technology, such as TV and cellular, for which users
must have an FCC license before using the spectrum to transmit
a signal.) Licensed use is preferable in congested areas to
assure quality of service and promote investment. Enabling
flexible licenses that permit assignment, lease, or transfer of
spectrum rights, as well as negotiation of interference rights,
leads to increased innovation and spectrum efficiency.
(iii) Give the FCC explicit authority to use certain market-
based auction mechanisms, and reform the FCC's auction
procedures. The FCC should be encouraged to use combinatorial
or package bidding to facilitate optimal combinations of
spectrum rights. The FCC also should consider whether market-
based mechanisms, such as ``two-sided auctions'' and the use of
``auction vouchers,'' \2\ could be adopted to encourage more
efficient spectrum use. These mechanisms encourage users to
transfer underutilized spectrum to those who can provide more
valuable services.
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\2\ In two-sided auctions, spectrum voluntarily offered by
incumbents is auctioned together with any unassigned spectrum. Bidders
can efficiently aggregate spectrum that is currently highly fragmented
by making all-or-nothing bids on packages of assigned and unassigned
licenses. In voucher auctions, incumbents are given auction vouchers in
exchange for turning back their licenses. The value of vouchers is
determined in an auction of the returned spectrum and unassigned
spectrum held by the government.
(iv) Allow more unlicensed use in rural areas and where
otherwise appropriate. (Unlicensed use refers to technology,
such as WiFi radios, for which manufacturers must have their
devices certified by the FCC before deploying, but do not
require users to have a license to use the spectrum.) As we
have seen with WiFi, permitting more unlicensed use spurs
technological innovation and enables viral growth of new
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technologies.
All of these reforms are critical to 21st century spectrum
management and innovation.
2. Flexible Licensed Use
Flexible licensed use means allowing existing licensees to use
their spectrum in ways that utilize new technology without having to go
back to the government to get permission for each new innovation. A
standard requirement is that the new technology does not cause harmful
interference to existing licensed users, either by causing co-channel
interference (interfering with others on the same frequency) or
adjacent channel interference (interfering with others on different
frequencies).
One example of allowing more flexible licensed use was in the FCC
``wireless cable'' proceeding. This proceeding dealt with spectrum in
the 2.5 GHz range, which is adjacent to WiFi. Licensees who were using
their spectrum for one-way video broadcasting were permitted to use
their spectrum for much higher-valued wireless broadband applications
such as WiMAX. In congested urban areas, such licensed services may be
the best way to proceed in order to encourage deployment, ensure
optimal quality of service, and manage interference. WiMAX can be used
to distribute signals to WiFi hotspots or it can be used as a longer-
reach fixed service. A desktop box with an antenna can become a digital
subscriber line (DSL) alternative. WiMAX has enormous potential for
benefiting consumers, but it cannot fulfill that potential without
spectrum reforms.
Intel has similarly encouraged the FCC to allocate the 3650-3700
MHz band in a manner which would provide access to this spectrum for
rural WISPs and promote efficient use of this spectrum in congested
Metropolitan Service Areas (MSAs). Specifically, Intel has supported a
compromise proposal whereby the FCC would prescribe non-exclusive
licensed use in rural areas, and licensed use in the Top 50 MSAs--where
exclusive use is necessary to promote investment and quality of service
for long range services in congested areas.
3. Unlicensed Use
Allowing more unlicensed use is readily achievable through the
exploitation of new technologies that enable unlicensed users to
operate in the same spectrum as licensed users of traditional radio
technology--without causing harmful interference to those users.
Importantly, in May 2004, the FCC initiated the so-called ``Vacant TV
Channels'' proceeding, in which it proposed to allow cognitive radios
to overlay channels 2-51 of the TV spectrum. Cognitive radios can
discern spectrum use at their location and modify their frequency and
power to operate only in spectrum that is ``vacant'' at any given time.
\3\
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\3\ TCC Paper at 5. Because spectrum use varies by time and
location, cognitive radios can use vacant spectrum only temporarily and
do so without interference to others, maximizing the number of users
and services accessing given frequencies.
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Intel filed Comments and Reply Comments in the FCC's ``Vacant TV
Channels'' proceeding in November 2004 and January 2005, respectively.
\4\ Intel's filings strongly supported the Commission's proposal to
permit operation by new unlicensed wireless devices in the TV ``white
spaces''--primarily in channels 21 through 51. We continue to work with
the FCC to advance this proceeding.
---------------------------------------------------------------------------
\4\ Comments of Intel Corporation, In the Matter of Unlicensed
Operation in the TV Broadcast Bands; Additional Spectrum for Unlicensed
Devices Below 900 MHz and in the 3 GHz Band, ET Docket Nos. 04-186, 02-
380, Nov. 30, 2004; Reply Comments of Intel Corporation, In the Matter
of Unlicensed Operation in the TV Broadcast Bands; Additional Spectrum
for Unlicensed Devices Below 900 MHz and in the 3 GHz Band, ET Docket
Nos. 04-186, 02-380, Jan. 31, 2005.
---------------------------------------------------------------------------
In the meantime, Members of this Committee are seeking to expedite
this process. In this regard, Intel commends Chairman Stevens and
Senators Allen, Sununu, Kerry, Boxer, and Dorgan for sponsoring the
``American Broadband for Communities Act'' (ABC Act), \5\ and the
``Wireless Innovation Act of 2006'' (WINN Act), \6\ respectively. Intel
also applauds Senator Smith's support of legislation directing the FCC
to allow unlicensed use of the TV ``white spaces.'' \7\ The ABC Act and
the WINN Act recognize the vast untapped potential of the TV ``white
spaces.'' Intel stands ready to work with the bills' sponsors and other
Members of this Committee and the Congress to move forward on this
important issue. Given the timeliness of these bills and their
importance to our country, I will devote the remainder of my testimony
to detailed consideration of the most important issues in the TV
``white spaces'' debate.
---------------------------------------------------------------------------
\5\ S. 2332, ``American Broadband for Communities Act,'' introduced
on Feb. 17, 2006, by Chairman Ted Stevens (R-AK), 109th Congress, 2nd
Session.
\6\ S. 2327, ``Wireless Innovation Act of 2006,'' introduced on
Feb. 17, 2006, by Sens. George Allen (R-VA), John E. Sununu (R-NH),
John F. Kerry (D-MA), and Barbara Boxer (D-CA), 109th Congress, 2nd
Session.
\7\ Remarks of Senator Gordon H. Smith (R-OR), before the American
Electronics Association, Cyber Series Luncheon, Washington, D.C., Feb.
8, 2006.
---------------------------------------------------------------------------
III. TV ``White Spaces''
Requiring the FCC to make the TV ``white spaces'' available for
unlicensed use--as contemplated by the ABC Act and the WINN Act--would
be a big step forward in maximizing our Nation's spectrum efficiency.
A. Significant ``White Space''
At almost any location in the U.S., many channels in the TV bands
are not being used by licensed services. For example, Intel's internal
analysis estimates that there is a minimum of 24 MHz of ``white space''
in channels 21-51, throughout the New York City TV market--the most
congested market in the country. \8\ In areas with fewer TV stations
like Honolulu, Hawaii and Charleston, West Virginia, Intel estimates
that there is a minimum of 114 and 126 MHz of ``white space'' in
channels 21-51, respectively, throughout the TV market. And, in areas
like Anchorage, Alaska and Billings, Montana, Intel estimates that
there is a minimum of 156 and 174 MHz of ``white space'' in channels
21-51, respectively, throughout the TV market. These ``white spaces''
represent a significant amount of spectrum that could be easily
detected and utilized by cognitive radios for a variety of valuable new
wireless applications--thereby providing substantial consumer benefits.
---------------------------------------------------------------------------
\8\ Intel estimates that there is an average of 48 MHz of ``white
space'' throughout the New York City TV market (DMA).
---------------------------------------------------------------------------
B. Substantial Consumer Benefits
Indeed, the TV ``white spaces'' could be used to provide
significant benefits to consumers.
1. Rural Broadband
For example, this spectrum could offer enormous advantages for wide
area wireless broadband services such as WiMAX in rural and other
underserved areas. The highly favorable propagation characteristics of
the TV spectrum--including the ability to pass through buildings,
weather, and foliage--make transmission less dependent on line of sight
and better for low-cost deployment in rural and bad weather areas.
Compared to the 2.5 GHz frequencies--a likely alternative spectrum band
for wireless broadband--the TV spectrum requires fewer antennas and
uses less power for a given level of service quality to a given
coverage area.
Given its propagation characteristics, the TV ``white spaces''
could be particularly useful in rural areas. In contrast, we estimate
that the 2.5 GHz frequencies would require approximately four times as
many base stations to achieve equal geographic area coverage, for a
given air interface and bandwidth. The upshot is that opening the TV
``white spaces'' to unlicensed wireless broadband use could
dramatically accelerate broadband deployment in this country. Indeed,
the TV ``white spaces'' could be used to provide better broadband
service or a first broadband service in many rural areas.
2. Cutting-Edge Consumer Applications
The TV ``white spaces'' could also be used to provide new, cutting-
edge consumer applications that take advantage of this spectrum's
improved signal reliability and range. Wireless local area networks
using low power and battery operated devices could enable new
capabilities that bring safety, convenience, and comfort to consumers
in their homes and workplaces. For example, such devices could provide
improved energy efficiency through intelligent home automation and
power monitoring; home security with robust low power wireless video
feeds; and other interesting new home entertainment applications. For
example, companies such as Dell Inc. are considering some interesting
applications for data and video distribution within the home.
3. Public Safety Uses
Additionally, in emergencies, the TV ``white spaces'' could be used
to provide auxiliary services to augment public safety communications
on licensed networks. For example, rescue efforts could be enhanced by
placing remote video cameras at a disaster site to relay images to a
command center; or using portable ``helmet cams'' to provide real-time,
point-of-view command/control information.
C. No Harmful Interference
All of these innovative unlicensed applications are possible
without causing harmful interference to authorized users. Indeed, Intel
filed detailed technical analyses with its FCC Comments and Reply
Comments demonstrating that unlicensed use of the TV ``white spaces''
is both achievable and practical. These analyses clearly refute the
misleading and incorrect claims made by TV licensees that unlicensed
use will interfere with their operations.
Furthermore, as both the ABC Act and the WINN Act contemplate,
before any new unlicensed devices could be deployed in the TV ``white
spaces,'' they would have to go through the FCC's rigorous
certification process--a process that has been used for years to
authorize new devices in this country. Pursuant to the certification
process, the device manufacturer will have to demonstrate that the
device meets the technical requirements for unlicensed devices to
operate in the TV ``white spaces.'' These technical requirements,
including interference criteria, are set forth by the FCC's Office of
Engineering and Technology. No new device could be deployed without
first complying with the FCC's certification process.
1. TV Reception
Permitting new unlicensed wireless devices to share the TV bands
would not cause harmful interference to TV reception. To begin, the
potential for harmful interference to TV reception by high power
``fixed/access'' services such as WiMAX is not a concern. Not only are
the locations of TV stations known, but also the unlicensed devices can
utilize various mechanisms (e.g., frequency coordination, professional
installation, and output power control) to preclude any harmful
interference to TV receivers.
Moreover, claims that new unlicensed ``personal/portable'' devices
operating in the TV ``white spaces'' would cause harmful interference
to authorized services from out-of-band emission is misleading. Because
radiated emissions outside the channel of operation are unintended and
unwanted emissions, these devices are not designed to maximize their
emissions level. In fact, the actual radiated level emitted by an
unlicensed device will almost always be far below the permitted
maximum.
In addition, only approximately 15 percent of U.S. homes rely
solely upon an over-the-air TV signal. The majority of these over-the-
air viewers live in areas of strong signal strength (where the received
signal would easily overcome radiated emissions from other household
electronics). The remainder of over-the-air viewers--those located in
areas of marginal signal strength--receive their signal using an
individual- or MATV-based antenna system, which is far removed from the
proposed unlicensed devices (and thus is less likely to be susceptible
to harmful interference). Further, tens of millions of TV viewers and
their neighbors already operate similar electronic devices, which would
cause the same type of supposed harmful interference to TV receivers as
the unlicensed devices in question--and, yet, such interference has not
been an issue.
For example, numerous devices found in the average American home,
such as cordless telephones, WiFi cards, and Bluetooth solutions, are
subject to the same levels for unwanted emissions in the TV bands.
Operation of these devices has proven to be compatible with TV viewing
in American homes for years. Moreover, devices operating in the TV
bands, such as common door openers and remote controls, are permitted
far higher emissions levels than those allowed under the FCC's proposed
rules. Even with these increased emissions levels, the operation of
door openers, remote controls, and similar devices does not cause
harmful interference to TV reception.
The radiated emissions limits set forth in the FCC's proposed rules
for unlicensed operation in the TV ``white spaces'' already apply to a
variety of digital devices, such as personal computers and electronic
toys. Operation of these digital devices does not interfere with TV
viewing. Furthermore, the limits for these digital devices, as would be
found in some office-type environments, have emissions levels that are
higher than the level for the proposed unlicensed devices. Even in this
environment, both over-the-air and cable- and VCR-connected television
receivers operate successfully.
2. Direct Pick Up
Direct pick up (DPU) is the amount of signal a television tuner
receives over-the-air, in the absence of an external antenna. The
potential for DPU interference in cable-ready television receiving
equipment from new unlicensed wireless devices is highly improbable
today. In fact, the immunity level for such receiving equipment--i.e.,
the power level above which interference is perceptible to the viewer--
was developed years ago (when TV sets were generally poorly shielded)
in order to minimize the effect of interference to cable television
(CATV) viewing from over-the-air TV stations.
Indeed, this immunity level was specified more than 20 years ago to
accommodate the susceptibility of some older TV set/receiver designs
that were prevalent when the rule was written. So-called old school
``hot/cold chassis'' designs are inherently more susceptible to DPU
interference, as the input connection is partially unshielded. The most
vulnerable targets for DPU interference are the handful of remaining
older TV sets connected to set-top boxes and tuned to channels 3 or 4.
However, TV set-top boxes and newer TV receivers do not use the ``hot/
cold chassis'' design; rather, they have fully shielded tuners--which
render them nearly invulnerable to DPU interference.
Moreover, local TV stations--the reason for immunity levels--and
the new devices in question are quite different in a very important
way. Users cannot change the fixed location of licensed high power
local TV stations. In contrast, operators of new ``personal/portable''
devices can and will reconfigure, relocate, or simply disable their
equipment to avoid DPU interference in their CATV receiving equipment
(similar to how consumers handle cell phone interference with TV and
computer equipment today). Thus, the immunity level requirements are
not necessary with respect to ``personal/portable'' devices--because
any potential for interference is in the user's control--and thus
easily avoided.
Also, industry experience demonstrates the extent of the
improbability of DPU interference today. Over the past nine years, as
DTV stations have commenced operation, approximately 1,550 new high
power broadcast TV stations have begun transmitting, essentially
simultaneously. Yet, reports of DPU interference to CATV viewing
equipment from even these new powerful transmitters have been
negligible.
3. Cable and Satellite
In addition, allowing new unlicensed wireless devices to share the
TV broadcast spectrum would not cause harmful interference to cable or
satellite TV service. Indeed, because the CATV signal is typically
terminated at both ends, there is no interference to CATV operation
using RG-6 cable for distribution throughout the home. (RG-6 cable is
the most widely used cable for home installation of cable TV and
satellite TV systems.) Interfering signal ingress only occurs when one
end of the cable is not connected--an unrealistic scenario.
And where a house has multiple CATV outlets in several rooms and
some of the outlets are not used, the unused outlets are typically
terminated with screw-in terminators. Even where unused outlets are not
terminated in this manner and signal ingress occurs to the unused
outlets, such ingress will not cause harmful interference to the
outlets that are connected to TV receivers because of the high degree
of isolation between outputs. Indeed, most multiple outlets are
connected to a CATV feed via directional couplers. These couplers have
a high degree of isolation between their ``tap'' and ``output''
connections. Furthermore, even where simple hybrid signal splitters are
used to connect multiple outlets to a CATV feed, the splitters exhibit
high isolation between outputs--and thus does not cause harmful
interference to the connected CATV outlets.
Finally, the operation of new unlicensed ``personal/portable''
devices in the TV bands would not cause harmful interference to DBS
systems. The TV bands in question encompass frequencies below 698 MHz,
whereas DBS satellite systems use frequencies in the range of 1 GHz to
2.2 GHz on the downlink cable between the DBS Low Noise Block
Converter/Feedhorn on the dish antenna and the DBS set-top box. Thus,
the proposed unlicensed devices and DBS services use different bands,
such that the operation of unlicensed devices in the TV ``white
spaces'' would have no effect on--much less cause possible ingress to--
DBS systems.
D. Military and Defense Radar
Notably, spectrum sharing similar to that proposed in the TV
``white spaces'' bills, is already occurring in far more complex
scenarios. For example, the 5 GHz band--which is used to transmit
classified military and defense radar signals--now shares spectrum with
unlicensed 802.11a (WiFi) radio technology. Such radios switch
frequencies when the presence of radar is detected, thus continuing
operation without causing interference to the classified signals.
Recognizing the benefits of wireless broadband networks at 5 GHz, the
FCC worked with NTIA, the Defense Department, and the private sector to
allow these sophisticated unlicensed devices to share the 5 GHz band
with highly sensitive military and government systems.
This example powerfully demonstrates the public benefits gained
when government and commercial spectrum users collaborate to adopt
innovative technological approaches to spectrum sharing. Through this
collaboration, the private sector was afforded a new unlicensed
platform on which to innovate--without interfering with critical
military needs. Significantly, the 5 GHz example of spectrum sharing is
considerably more challenging than the TV ``white spaces'' scenario.
Indeed, military signals in the 5 GHz band are intended to not be
detected by other technologies, whereas TV stations are fixed and
easily detectable by cognitive radios.
IV. Conclusion
In sum, Intel, like consumers, wants broadband and other new
technologies to become widespread, high quality, and affordable. Over
the years, we have consistently supported policies that encouraged
wired and wireless broadband investment and competition. We believe
that is what will give consumers the broadband and technologies that
they want. In that regard, we believe that modernization of the
Nation's spectrum management system is essential to ensure that the
Commission's policies evolve with the consumer-driven evolution of new
wireless technologies, devices, and services.
Allowing more flexible licensed use, as well as more unlicensed use
(e.g., in the TV ``white spaces''), will enable spectrum users and
companies like Intel to innovate and respond to market forces without
having to go back to the government and get regulations changed to
accommodate every new innovation. Spectrum reforms will enable cutting-
edge technologies, as well as higher-powered new uses of existing
technologies. With a progressive approach to our spectrum policy, we
can drive the innovation that keeps the U.S. economy dynamic and
competitive.
The Chairman. Thank you very much. Our next witness is
Robert Hubbard, Secretary and Treasurer of the Association for
Maximum Service Television and President and Chief Executive
Officer of Hubbard Television. Mr. Hubbard?
STATEMENT OF ROBERT W. HUBBARD, PRESIDENT/CEO,
HUBBARD TELEVISION GROUP; VICE PRESIDENT, HUBBARD BROADCASTING,
INC.; SECRETARY/TREASURER,
ASSOCIATION FOR MAXIMUM SERVICE TELEVISION, INC.
Mr. Hubbard. Thank you. Thank you very much, Mr. Chairman.
I come from a long line of broadcasters. My family, my
grandfather started his first radio station in 1923. We have
been providing public service to Americans ever since that
time.
We currently operate in large cities, such as Minneapolis.
We also operate in very rural areas in Minnesota and New
Mexico. As a matter of fact, in order to provide our television
service to our markets, we operate over 100 low-power
transmitters to provide that service to these very, very small
geographic areas. We understand the rural area. We understand
the importance of the rural area. We understand the importance
of bringing rural broadband solutions to the rural area. We
think there are ways to do that. It must be balanced with the
importance in the television service. New ideas and new
technologies are very important but we can't do them in a way
that jeopardizes the fundamental television system that this
country has relied upon for so long. This balance can only come
with proper engineering, with proper testing, and actual real
world, not theoretical, testing and engineering.
There is a huge difference between providing rural
broadband opportunities and unlimited access with unlicensed
devices. On the one hand, rural broadband solutions, we believe
are quite manageable, if done properly. Where as, unlimited
access to the unlicensed devices within the television band is
quite problematic. Quite frankly, we do not know what the
solutions are for that environment.
These interference concerns that we talk about are very
real. It is not just the broadcasters. We are not alone. IEEE,
the world's leading standard organization has expressed these
same concerns. Many consumer electronics companies have
expressed these concerns. All of the translators--people who
operate translators all across the United States and low power
television stations have expressed these concerns. Not to
mention the additional interference, will be problematic to
news gathering, and sporting events because of interference to
wireless microphones. These concerns have been exhibited by all
of the major news associations, manufacturers of wireless
microphones, and other equipment, and sports leagues.
It is important for us to understand what interference
means. It is easy to say interference. What interference means
in a digital television world is no television picture, no
television service. It is a very, very harsh reality for a home
that has that interference. There are at least 20 million homes
in this country that rely solely on over-the-air television.
Quite frankly, many of them are in rural areas, but they are
all over. They are everywhere. There are 73 million homes that
have television sets that are not connected to cable and
satellite and rely on over-the-air television in some respect.
None of the proponents for these unlicensed approaches has
really given data. They give theoretical data. They give data
in other bands and in other circumstances. MSTV is an
engineering organization. It is the only group that has
actually provided data in the bands that we are talking about.
Let's be clear, what we are talking about is unlicensed
devices, which are unlimited in nature and putting them in the
television band and potentially interfering with people's
television reception. Other unlicensed devices aren't allowed
to operate in this band; that is why there has not been a
problem with these types of devices in the past. This is a
crossroad. This is a fundamental distinction that has never
happened before.
The responsibility for interference, the responsibility
shouldn't be on the backs of the hundreds of millions of homes
in this country, who have hundreds of millions of receiving
sets that had been in use and continue to be in use today. It
needs to be on the new entrants, to make sure that these
systems don't disrupt. We need engineering and testing to
ensure that interference will not disrupt the American
television service. We can't legislate this. It is not just a
matter of legislation. This takes invention. It takes
creativity. You can't make it happen with a finger snap. This
takes everybody working together; industry, government,
standards, organizations and importantly, there is a process.
IEEE, which is established, IEEE 802.22, which is the wireless
standards body, is currently developing a rural broadband
solution. As a matter of fact, IEEE has recommended testing of
such a system, starting in December of this year. The broadcast
industry is a major and active participant in this process and
we have continued to be so.
Done prematurely, we run the risk of disrupting American's
television service, that has served us so well and can continue
to serve us so well in the future. Done incorrectly, we run the
risk of bringing no new service. There is no guarantee of new
service here in rural areas, and while at the same time
completely disrupting those homes that today rely on television
for information, news and most importantly emergency
information at times of great crisis.
Thank you very much for your time.
[The prepared statement of Mr. Hubbard follows:]
Prepared Statement of Robert W. Hubbard, President/CEO, Hubbard
Television Group; Vice President, Hubbard Broadcasting, Inc.;
Secretary/Treasurer, Association for Maximum Service Television, Inc.
Mr. Chairman and Members of the Committee, thank you for the
opportunity to appear before you today to discuss policies affecting
the public's spectrum resource and the important services delivered
over that spectrum. My name is Robert Hubbard, and I am the President
of the Hubbard Television Group, Vice President of Hubbard Broadcasting
and serve as a member of the Board of Directors of the Association for
Maximum Service Television, Inc. (MSTV).
The issues surrounding spectrum management are important for this
Nation. Spectrum is a vital national resource, and must be managed
wisely. Today there is considerable debate among economists and legal
scholars regarding the best approach to spectrum management. Proponents
of an unlicensed approach assert that it will lower the cost to new
entrants while preventing interference to licensed services. Leading
economists and legal scholars, however, have also voiced strong
opposition to an unlicensed model. They believe that such an approach
eliminates market discipline for entry, leading to overuse and
increased interference among users. Whatever the merits or problems
associated with an unlicensed approach, unique issues arise when the
government attempts to employ two different regulatory regimes (i.e.,
licensed and unlicensed) in the same band. Recent proposals would do
just that, for the first time attempting to interleave an unlicensed
model with licensed broadcast and other services. From an engineering
and scientific perspective, the government should approach these
unprecedented proposals with extreme caution.
MSTV has over five decades of practical, real world experience in
spectrum management. Since 1956, we have worked to maintain and enhance
the technical integrity of the American public's free, over-the-air
television service as that service grew from less than 100 stations to
over 1,600 full-power broadcast stations. We also provided the FCC with
the engineering expertise that made it possible to ``squeeze in''
during the transition channels for DTV service within the current 408
MHz allocation for television broadcasting. MSTV has also assisted
policymakers in introducing other licensed services, including public
safety communications and sophisticated Part 74 equipment essential to
provide live news and sports coverage. And most recently, it helped
design the process by which television broadcasters will complete the
transition to digital transition (DTV), using the efficiency of digital
technology to enable migration from the current band (channels 2
through 69) to the final condensed ``in-core'' band (channels 2 through
51). As a result, the television broadcast service will occupy only 294
MHz of spectrum as of 2009, in comparison to the more than 700 MHz of
spectrum already available to unlicensed devices at or below the 5 GHz
band.
The peaceful coexistence of so many licensed services in the same
spectrum band has not happened by accident; it has required careful
planning that takes into account the unique architecture of broadcast
television service and the interference characteristics of the
different services. Based on its knowledge of the difficulties in
coordinating licensed services in the same band, MSTV is deeply
concerned by proposals to allow an unlimited number of unlicensed
devices into allegedly ``vacant'' channels within the spectrum reserved
for the public's free, over-the-air television service. Studies and
field tests conducted by well-respected scientists and engineers show
that the introduction of unlicensed devices into the television
broadcast spectrum threatens to create significant interference to the
public's television service. As a result, the unlicensed devices
proposal would unfairly burden the over 21 million households that rely
exclusively on free, over-the-air television services--a group which
disproportionately includes minority, lower income, and elderly
persons. In fact, these proposals threaten to create interference to
approximately 73 million existing television sets that rely on an
antenna to receive over-the-air television service. We are especially
concerned about the interference to new digital television receivers
and the government-subsidized digital-to-analog converter box program.
Finally, by interfering with licensed production equipment in the
broadcast bands, it would undermine coverage of emergency news, sports,
political, and other events of importance to local communities.
Licensed public safety services using broadcast spectrum in many major
markets would also suffer.
When asked about these concerns, the relatively small but vocal
group of unlicensed device advocates tells policymakers: ``trust us.''
MSTV respectfully submits that the public's spectrum resource should be
managed based on facts and engineering science, not on unsubstantiated
promises. This Committee should take note of the world's leading
industry standards body, IEEE 802.22, which is currently determining
whether, and if so, how, new wireless services can safely be authorized
to operate in the broadcast spectrum. Proposals that would force the
FCC to introduce unlicensed devices into the broadcast spectrum in as
little as six months would short change the scientific discovery
process, short circuit the IEEE's important work and would wrongly
prejudge complicated engineering questions. Once millions of unlicensed
devices are placed into the marketplace and allowed to populate the
spectrum, they cannot be removed. MSTV accordingly believes it would be
unwise to place unlicensed devices into the broadcast spectrum before
it is even known whether those devices can safely coexist with the
important licensed services which are delivered to the public over that
spectrum.
I. Congress Should Protect Consumers by Preserving the Technical
Integrity of the Free, Over-the-Air Television Service.
All too often, public policy debates regarding spectrum management
deal with abstract concepts like ``interference'' and ``spectrum
efficiency.'' The impact of these proposals, however, is very real. At
stake are the television sets that exist in every living room, bedroom
and kitchen across America. Most television receivers have not been
engineered to protect against interference from unknown, unlicensed
devices operating on adjacent channels in the television band; rather,
they were designed to accommodate licensed services that operate in
conformity with the FCC's channel allocation plan. For the American
consumer, interference from unlicensed devices is not an abstract
concept. In real terms it means that the DTV set one family just
purchased will not work when their neighbor turns on an unlicensed
wireless device. It means that a new government-subsidized converter
box will not work well when it is connected to another family's analog
set.
Parties urging for the introduction of unlicensed devices into the
television broadcast spectrum have argued that Congress should not be
concerned with the significant interference potential of such devices
because Americans can turn to pay television services for programming.
These erroneous claims overlook the continued importance of over-the-
air television viewing to the American consumer.
Approximately 21 million households \1\ with an aggregate 45
million sets rely solely on free, over-the-air television. \2\ Those
viewers rely exclusively on over-the-air television for local news,
sports, weather, and entertainment. In times of emergency, their lives
may be saved when local television stations disseminate critical
information from government officials to members of a community,
including to viewers receiving that information via portable television
sets commonly used during emergencies. \3\ For example, when it became
evident that Hurricane Katrina was headed towards the Gulf Coast, local
television stations began wall-to-wall hurricane coverage, alerting the
local community about the impending dangers and urging residents,
including those in New Orleans, to evacuate. \4\ Once the hurricane
made its devastating landfall, local broadcasters remained a key link
between government officials--including the governors of Louisiana,
Mississippi, and Alabama--and the public by working cooperatively and
creatively to maintain an on-air presence and thereby keep both local
residents and the country informed of the severe crisis that followed
the hurricane. \5\
When access to a free, over-the-air signal is curtailed by over-
the-air interference in favor of a pay service, some viewers experience
that loss greater than others. For example, in some markets the number
of homes not connected to cable or satellite services may reach as high
as 40 percent. Variations may also occur along cultural lines.
Univision has reported that nationwide, 33 percent of Hispanic
households receive their programming solely over-the-air. \6\ Over-the-
air viewers should not be deprived access to these critical local
services merely because they do not, or cannot, subscribe to a pay
television service.
Cable and satellite subscribers are also affected by loss of free,
over-the-air television service. As the General Accounting Office (GAO)
has reported, over ten million households that subscribe to cable have
at least one television set that is not connected to cable. \7\ Added
to the sets in homes solely relying on over-the-air service, there are
an estimated 73 million television sets not connected to a pay
television service in the U.S. \8\
Protecting the spectral integrity of the broadcast service is
particularly important as the country enters a critical stage in the
transition to digital television. Congress, the Executive Branch, and
the FCC have all made clear that bringing the digital transition to a
successful conclusion is of utmost priority and that it should not be
obstructed by lower-priority goals. Years of hard work by broadcasters,
government officials, consumer electronics manufacturers, and others
have seen considerable progress, with nearly all 1,600 television
stations in the Nation's 208 television markets now broadcasting a
digital signal. \9\ With the transmission side of the equation--
broadcast facilities--virtually complete, the critical factor is to
create incentives for American consumers to turn off their analog
television receivers and switch to receiving signals in a digital
format by the February 17, 2009 ``hard date'' on which analog
broadcasts are to cease. But if unlicensed devices degrade consumers'
ability to receive DTV signals, adoption of digital sets will slow,
undermining the DTV transition.
Concerns about the digital transition also extend to the
development of an inexpensive digital-to-analog converter box that will
ensure continued local broadcast service for consumers' with analog
sets. (As was widely reported last year, MSTV and NAB have entered into
an agreement with LG Electronics and Thomson Inc. to develop a high-
quality but low-cost prototype of such a box.) In recognition of such a
box's importance to concluding the digital transition, Congress has
allocated $1.5 billion to subsidize consumers' purchase of converter
boxes. Like any receiving device, these boxes must use antennas to
receive local television signals, and therefore will be susceptible to
interference, as well the analog sets to which the boxes are connected.
And to meet Congressional expectations that these boxes remain low
cost, there is little room to include additional filters or tuner
selectivity. Even if additional funds were available, absent knowledge
of the types of unlicensed services that will be operating in the band,
it is difficult, if not impossible to include design changes to the box
to further immunize the box from future interference.
In light of the importance of maintaining the public's access to
free, over-the-air television services both during and after the
digital transition, Congress should not use the broadcast spectrum as a
testbed for risky experiments in new spectrum management methods. Any
proposal to introduce new untested and unlicensed wireless technologies
into the broadcast spectrum must contain meaningful mechanisms to avoid
interference. As discussed below, no such mechanism exists today.
II. Unlicensed Devices Would Interfere with Consumer Reception of Over-
the-Air Broadcasts and Other Licensed Services in the Band.
A. Existing Technology Would Not Prevent Unlicensed Device Operation on
Occupied TV Channels.
A key, but faulty, assumption of the proposal to allow unlicensed
devices to proliferate through the broadcast spectrum is that
technology exists by which an unlicensed device can reliably detect
when a television channel is ``vacant.'' In fact, there is no
demonstrated technology that can reliably prevent an unlicensed device
from transmitting on a television channel already in use. Thus, in many
circumstances, unlicensed devices would operate on channels that are
already occupied by local television or other licensed services,
including wireless microphones that are used in the production of
emergency news coverage, sporting events, and political conventions.
Most proponents of the unlicensed devices proposal rely on
``spectrum sensing'' methods as the only potentially reliable method
for protecting the public's television service from unlicensed device
interference. A device using this exploratory technology would
``sense'' the presence of a television signal and would then,
allegedly, select a channel not in use. Yet these ``spectrum sensing''
technologies are wholly unproven in the broadcast context, especially
in light of the uniquely open and diverse architecture of television
sets.
As Motorola cautioned in public statements to the FCC concerning
the unlicensed devices proposal, ``It would be premature to rely on
spectrum sensing until these mechanisms are shown to be reliable via
comprehensive study and real-world testing.'' \10\ Policymakers should
not base real-world policy decisions on unproven promises of technology
to come.
For example, efforts to develop spectrum sensing technology in the
5 GHz unlicensed band took several years of development and testing,
even though in that band the task of ``sensing'' licensed users is far
less complex than it would be in the television broadcast band. There,
unlicensed devices are to be allowed to operate alongside licensed
military radar through use of dynamic frequency selection (DFS).
Development of DFS should have been relatively simple, given that a
single user, the Federal Government, controlled both the transmission
and receiving equipment for the licensed service. Indeed, prior to the
FCC's decision to adopt the new rules allowing unlicensed device
operation in the 5 GHz band, the National Telecommunications and
Information Administration (NTIA) had submitted detailed procedures by
which these unlicensed devices would be tested to determine if they
could reliably detect military radar. \11\ Yet only last month, after
three years of analysis and field testing, did the NTIA, Department of
Defense, and the FCC reach agreement on criteria allowing sale of
unlicensed devices operating alongside the military radar.
The significant efforts undertaken to permit the use of DFS in the
5 GHz band would pale in comparison to the task that would be needed to
create reliable spectrum sensing solutions in the television broadcast
spectrum. For example, unlike military radar in the 5 GHz band, there
are literally thousands of variants among the receiving equipment
(i.e., TV sets and Part 74 devices) at issue in the broadcast spectrum;
this is a reflection of the unique open architecture of television
receivers. Without reliable and consistent information about the
receiving equipment, there can be no way of knowing whether an
unlicensed device can detect a channel where its operation will not
interfere with nearby viewers' television sets or Part 74 devices.
Furthermore, in the broadcast spectrum there are full-power broadcasts,
low power broadcasts, and licensed broadcast auxiliary stations (which
are essential to the delivery of on-the-spot news coverage during
weather disasters, public safety emergencies, political conventions,
and sporting events). A spectrum sensing method would have to reliably
sense all of these services.
Perhaps most importantly, as even Intel has recognized, in its
opposition to the use of spectrum sensing spectrum for higher power
unlicensed operations in the 3650 to 3700 MHz band, sensing ``works
well for short range, low power applications like WiFi where control
resides in one entity or operator-to-operator voluntary cooperation is
feasible.'' \12\ The broadcast spectrum, however, exists below 1 GHz,
where propagation characteristics allow transmissions--and
interference--to travel over very long distances, passing through
thousands of independent locations. Indeed, proponents of the
unlicensed devices proposal have made clear that they would use the
broadcast spectrum to deploy very long-range applications. \13\
B. Field Tests Show That Even an Unlicensed Device Operating on a
Genuinely ``Vacant'' TV Channel Would Interfere With Viewers'
Access to Local Television
Services.
Even if technology were to develop that would allow unlicensed
devices to properly detect when a given television channel is
``vacant,'' significant problems would remain. In consultation with one
of the most respected broadcast laboratories in North America,
Communications Research Centre Canada (CRC), MSTV has developed and
conducted a reproducible laboratory study to measure the effects on a
television receiver of an unlicensed device operating on a genuinely
``vacant'' TV channel. \14\ This study shows that harmful emissions
from unlicensed devices--even when the devices operate on ``vacant''
channels would seriously harm the public's access to free, over-the-air
television services and would prevent the use of licensed wireless
production equipment critical to the coverage of local news, sports,
and other events.
Indeed, unlicensed devices operating in the broadcast spectrum at
the FCC's allowed power levels for out-of-band emissions (i.e., energy
that an unlicensed device radiates outside of its operating channel)
could prevent a viewer from watching over-the-air television even when
the device is as far as 78 feet from a digital TV set, or 450 feet from
an analog set, despite the presence of multiple walls between the
device and the TV set (as would occur in multi-unit dwellings).
Comments filed with the FCC by parties such as Motorola and the
Consumer Electronics Association have seconded these concerns about
out-of-band emissions from unlicensed devices. \15\ It is noteworthy
that IEEE 802.22 agrees with these concerns regarding out-of-band
interference.
To ensure the reliability and credibility of the study, CRC and
MSTV have extensively documented the methodology used and results
obtained, and have submitted that documentation to the FCC. \16\ MSTV
subsequently produced a video, entitled ``Your Neighbor's Static,''
which recreated the CRC/MSTV study in a real-world environment just
outside Washington, D.C. Using an actual townhouse and actual DTV and
analog receivers, this video showed the harmful effect of an unlicensed
device operating on a ``vacant'' television channel on reception of
over-the-air broadcasts. \17\
The CRC/MSTV field study remains the only real-world test of the
effects of unlicensed devices out-of-band emissions on licensed
television services. The unsubstantiated promises of unlicensed device
advocates cannot substitute for hard, scientific data, and this data is
clear: the placement of unlicensed devices into the public's broadcast
spectrum would significantly harm the public's local television
service.
III. Once Interference Occurs, There is No Enforcement Mechanism To
Stop it.
Compounding the serious flaws described above, once unlicensed
devices are in the field, broadcasters and the FCC would have no
reliable means of protecting the public's television service from
harmful interference. Although as a legal matter the FCC's Part 15
rules would privilege the licensed broadcast uses over the unlicensed
transmissions in an interference dispute, as a practical matter this
precedence would be of little value.
Rarely will broadcasters, the FCC, or the public even be aware of
harmful interference from unlicensed devices, because most cases of
interference from unlicensed devices will go unreported. If unable to
receive a station's signal, viewers may simply assume that the
interference is caused by a problem with the broadcaster's transmission
or their sets. They are more likely to change the channel, or return a
new DTV set to the store, than they are to call the broadcaster. It may
thus take years before anything approaching the full impact of
interfering unlicensed devices on the public's access to free, over-
the-air television would come to light.
Even when interference is reported and linked to unlicensed
devices, the FCC would not typically be able to find and shut down the
interfering devices. \18\ Just as spectrum sensing technology cannot
reliably prevent interference, it should not be relied upon to police
it. \19\ Attempts to use traditional means to remedy harmful
interference from unlicensed devices (i.e., finding the offending
transmitter and ordering it to cease operation) would sap both FCC and
broadcaster resources, especially as the number of devices out in the
field proliferates. As Sprint has told the FCC, ``once interfering
unlicensed devices are in the market, it will . . . potentially be
virtually impossible for the [FCC] to recall these devices.'' \20\
IV. The Aggregation of Unlicensed Devices in the Broadcast Spectrum
Could Ultimately Leave the Spectrum Unusable for All Parties.
Even if out-of-band emissions could be controlled and the
unlicensed devices could avoid transmitting on occupied channels, a
fundamental problem would remain: with an unlimited number of
unlicensed devices allowed to crowd the broadcast spectrum, the quality
of broadcast and other licensed communications over that spectrum will
necessarily decline. Although the addition of one or two unlicensed
devices in a given region may not have an appreciable effect, the
addition of hundreds of thousands or millions certainly will. This
trend would be irreversible and continually escalating. Maintaining a
low noise floor is critical if Congress is to uphold its longstanding
commitment to a robust, universal, and free over-the-air television
service.
As William J. Baumol, a professor of economics at New York
University, has explained in an influential 2005 paper, the ``policy of
unlimited entry'' that is the hallmark of an unlicensed device regime
``is likely to have the same detrimental effects upon spectrum usage
that it has on usage of shared resources elsewhere.'' \21\ Over time, a
``tragedy of the commons'' results in which the resource (e.g.,
spectrum) is shared among so many users as to make it of little value
for anyone. As Dr. Baumol notes, ``interference is inevitable under a
spectrum regime in which the market is not constrained by any
restrictions that limit entry: in deciding whether or not to enter,
each entrant takes into account only the consequences of this decision
upon himself, and disregards the effects upon others.'' \22\ The result
is ``overcrowding and overuse.'' \23\ Experience in the unlicensed 2.4
GHz band is instructive. There, cordless phones have ``reap[ed]
devastating effects on 802.11b WLANs'' because the technologies used
are not compatible for minimization of interference. \24\
Even if future technology is able to accommodate some number of
additional users within a given swatch of spectrum, demand will surely
keep pace and the quality of communications in the spectrum will
degrade. \25\ As the economist Thomas Hazlett has noted, the history of
unlicensed device entry is a ``chase up the dial: the 900 MHz ISM band
became congested, leading the FCC to open up the 2.4 GHz unlicensed
band, which became crowded in major markets, leading the FCC to open up
300 MHz for the U-NII 5 GHz band.'' \26\ And once the decision is made
to turn a band over to an infinite quantity of unlicensed devices, the
spectrum cannot be recaptured for future productive use. The television
broadcast spectrum should not be allowed to go the way of other
spectrum that has suffered a tragedy of the commons.
V. Spectrum Is Not Readily Available in Congested Urban and Many Other
Markets.
Driving the unlicensed devices proposal is another mistaken
assumption, reflected in a paper issued by the New America Foundation
(NAF) and Free Press last year: that large swaths of television
broadcast spectrum are ``vacant'' and thus available for use by
unlicensed devices. In fact, studies demonstrate that there is little
or no white space available in congested urban and even many less
populated markets. \27\ The benefits cited by promoters of the
unlicensed devices proposal--``free[ing] up un-used capacity for
innovative new wireless applications''--would thus fail to materialize
in many areas throughout the country. \28\
What has caused unlicensed device advocates like NAF/Free Press to
so overestimate the amount of ``white space'' available? Most notably,
they ignore the minimal interference guidelines for determining a
``vacant'' channel, as proposed by the FCC in its unlicensed devices
proposal in 2004 and recommended by IEEE. Once the FCC's more
appropriate interference methodology is applied, most of the ``white
space'' diminishes significantly, especially in urban and suburban
areas. For example, as MSTV noted in filings before the FCC, there are
very few white spaces available from Boston to Washington, D.C. during
the digital transition. Even after the DTV transition, spectrum may be
tight, because the television band will be reduced by nearly one-third.
For example, in Dallas-Ft. Worth, where NAF/Free Press claims 120 MHz
of television spectrum to be ``vacant,'' only 6 MHz is actually
available.
Even in rural markets where some white space may be available,
there is potential for interference with the existing television
broadcast service. Because of their distance from transmitting towers,
many rural viewers receive very weak signals. To correct this weak
signal condition, rural viewers often use amplified antennas. As a
result, their receiving equipment is more susceptible to interference
that typical antennas. This is one reason why the National Translator
Association has expressed concern about allowing unlicensed devices in
rural areas.
The unlicensed devices proposal also threatens to conflict with
another priority for rural viewers: the digital transition for low-
power and TV translator stations, which is unlikely to be complete when
full-power analog broadcasts cease in 2009. Currently, 2,100 licensed
LPTV and 4,700 licensed television translator stations are eligible to
``flash cut'' to digital operations, and in May the FCC will open a
filing window by which these stations can seek a companion digital
channel. Before taking any action that may disrupt that complex
transition, Congress should take notice that the rural areas into which
Intel and other parties suggest unlicensed devices would be deployed
depend heavily upon low power television services. As FCC Commissioner
Adelstein has stated: ``[t]housands of translators and low power
stations across our country fill a vital need as the primary source of
over-the-air television for people in Rural America. As I've seen
firsthand, often these stations are the only station in an area
providing local news, weather, public affairs and emergency
programming.'' \29\ Those same viewers would be deprived of digital low
power television services if unlicensed devices are prematurely
introduced into the broadcast spectrum before the digital low power
transition is complete.
Moreover, the broadcast industry is currently faced with a crisis
over the availability of spectrum to provide live remote coverage of
news and sporting events. As MSTV has noted on previous occasions,
broadcasters depend heavily on wireless microphones and cameras to
provide live coverage of major events. \30\ Under carefully controlled
and coordinated conditions, these wireless devices currently use the
``vacant channels'' in the UHF band to operate. However, these channels
are used heavily, making it difficult in major markets to find
sufficient spectrum for the proper operation of wireless microphones.
As a result, broadcasters are already experiencing significant
obstacles to covering events of local and national importance. The
unlicensed devices proposal would put wireless microphones in conflict
with unlicensed devices for scarce spectrum. Thus, operation of
unlicensed devices in the broadcast band would seriously undermine
local stations' ability to use existing wireless production devices and
provide remote coverage of important events, including local
emergencies such as weather disasters.
On behalf of MSTV, I again wish to thank the Committee for the
opportunity to discuss important matters of spectrum reform and their
relationship to the public's free, over-the-air television service. As
demonstrated by the progress in the DTV transition, which will free up
108 MHz of spectrum for new wireless and critical public safety
communications, local broadcasters are committed to efficient
utilization of the public's spectrum resource. Spectrum efficiency,
however, requires careful attention to the interference potential of
services sharing the same spectrum band. To simply open the floodgates
to unlicensed devices without resolution of the significant technical
concerns described above would harm the public's interest in
interference-free communications and the continued access to free,
over-the-air television services. MSTV accordingly urges that any
significant changes in use of the broadcast spectrum be made only after
the FCC and respected organizations like IEEE 802.22 have designed and
tested appropriate interference standards.
The Appendix attachments, to this prepared statement, have been
retained in Committee files.
ENDNOTES
\1\ Estimated Cost of Supporting Set-Top Boxes to Help Advance the
DTV Transition: Testimony Before the Subcommittee on Telecommunications
and the Internet, Committee on Energy and Commerce, U.S. House of
Representatives, Statement of Mark L. Goldstein, Director, Physical
Infrastructure Issues, GAO, 7-8 (Feb. 17, 2005) (GAO Study). See also
Comments of NAB and MSTV, MB Docket No. 04-210, passim, Attachment A
(NAB/MSTV OTA Comments).
\2\ NAB/MSTV OTA Comments at 2.
\3\ Because they are typically battery powered, these sets are
crucial when natural or manmade disasters leave viewers without access
to power. As one report recently noted, ``[I]n states in the hurricane
belt . . . small, battery powered TVs have become must-have items to
have during power outages.'' Satellite Business News 2, July 11, 2005.
\4\ A video documenting these efforts of local television
broadcasters in the Gulf Region may be viewed online at http://
www.mstv.org/honoring.html (``Gulf Region Video'').
\5\ For example, after the New Orleans levees broke, WWL-TV
maintained an on-air presence by relocating news operations to a
broadcast facility at Louisiana State University, and later to
noncommercial station WLPB in Baton Rouge. Similarly, after floodwaters
overtook New Orleans station WDSU's facilities, nineteen of the
station's employees relocated to Hearst-Argyle sister station WAPT in
Jackson, Mississippi. WDSU's signal was then sent from Jackson to a
backup TV transmitter in New Orleans, as WDSU's primary transmitter was
under water. See, e.g., Craig Johnson, Hurricane Katrina Tests
Broadcasters: Gulf Coast Area Stations Improvise in Order to Stay on
the Air, TV Technology, Sept. 21, 2005, at http://www.tvtechnology/com/
features/news/n_hurricane_katrina.shtml (last visited Jan. 23, 2006).
\6\ Comments of Univision Communications, Inc., in MB docket No.
04-210 at 8, August 11, 2004.
\7\ GAO Study at 8.
\8\ NAB/MSTV OTA Comments at 5.
\9\ Mass Media Notes, Communications Daily, Feb. 26, 2004 (quoting
an NAB spokesperson as reporting 1,155 local stations on air in
digital). That number has presumably risen in the nine months that have
passed since NAB's report.
\10\ Comments of Motorola, ET Docket Nos. 04-186 and 02-380, at 8
(filed Nov. 30, 2004.)
\11\ See Comments of NTIA, ET Docket No. 03-122, at App. B (filed
Oct. 1, 2003).
\12\ Petition for Reconsideration of Intel Corp., ET Docket No. 04-
151 (filed June 10, 2005).
\13\ See, e.g., Comments of Microsoft Corp., ET Docket Nos. 02-380
and 04-186, at 6 (filed Nov. 30, 2004) (alleging that ``some
[unlicensed] WISP signals could travel over 31 kilometers'' using the
television broadcast spectrum).
\14\ See Appendix A.
\15\ See Comments of Motorola, ET Docket Nos. 04-186 and 02-380, at
12 (filed Nov. 30, 2004); Comments of CEA, ET Docket Nos. 04-186 and
02-380, at 9 (filed Nov. 30, 2004).
\16\ See Comments of MSTV and NAB, ET Docket Nos. 02-380 and 04-
186, Ex. A (filed Nov. 30, 2004).
\17\ See Appendix B for a technical description of the
demonstration.
\18\ See, e.g., High-Tech Companies Defend FCC's Part 15 Regulatory
Scheme, FCC Report, June 14, 2002 (citing experience of amateur radio
systems, which share spectrum with WiFi devices, that the obligation of
unlicensed devices to cease operation if they cause harmful
interference to licensed operations ``is an allusion.'').
\19\ SPTF Report, at 58 (``[O]nce unlicensed devices begin to
operate . . . it may be difficult legally or politically to shut down
their operations even if they begin to cause interference or otherwise
limit the licensed user's flexibility.''); Review of Part 15 and Other
Parts of the Commission's Rules, 17 FCC Rcd 14063, 14067 (2002)
(describing interference caused by unlicensed radar detectors to VSATs
in the 11.7-12.2 GHz band, and noting that the radar detectors could
not easily be identified or, even if identified, controlled).
\20\ Sprint Reply Comments, ET Docket No. 02-380, at 2 (filed May
22, 2003).
\21\ William J. Baumol, Toward an Evolutionary Regime for Spectrum
Governance: Licensing or Unrestricted Entry?, AEI-Brookings Joint
Center for Regulatory Studies, 10 (April 2005).
\22\ Id. at 11.
\23\ Id.
\24\ Interference from Cordless Phones, WiFi Planet, April 15,
2003, available at http://www.wi-fiplanet.com/tutorials/article.php/
2191241 (last visited Nov. 21, 2004).
\25\ Baumol at 11.
\26\ Id., quoting Thomas W. Hazlett, The Wireless Craze, the
Unlimited Bandwidth Myth, the Spectrum Auction Faux Pas, and the
Punchline to Ronald Coase's ``Big Joke'': An Essay on Airwave
Allocation Policy, 14 Harvard J.L. & Tech. 335, 429 (2001).
\27\ The attached Appendix C includes a study by the respected
engineering firm of Meintel, Sgrignoli & Wallace concerning the scarce
amount of ``white space'' available in many markets.
\28\ See Comments of Wireless Unleashed, ET Docket No. 04-186, at 1
(filed Nov. 30, 2004).
\29\ Amendment of Parts 73 and 74 of the Commission's Rules to
Establish Rules for Digital Low Power Television, Television
Translator, and Television Booster Stations and to Amend the Rules for
Digital Class A Television Stations, 19 FCC Rcd 19331 (2004), Separate
Statement of Commissioner Jonathan S. Adelstein, Approving in Part and
Concurring in Part.
\30\ See, e.g., Letter from David L. Donovan, President, MSTV, to
Marlene H. Dortch, Secretary, FCC, ET Docket No. 02-380 (filed June 23,
2003) (attaching transcript of video demonstrating concerns with the
availability of spectrum for wireless microphones).
The Chairman. Thank you, Mr. Hubbard. Our next witness is
Thomas Sugrue, who is President of Government Affairs of T-
Mobile USA. Mr. Sugrue?
STATEMENT OF THOMAS J. SUGRUE, VICE PRESIDENT, GOVERNMENT
AFFAIRS, T-MOBILE USA, INC.
Mr. Sugrue. Good morning again. First, I would like to
extend my sympathy and condolences to Senator Inouye on the
loss of his wife. Our thoughts and prayers are with him as
well. I want to thank the Committee for the opportunity to
appear here this morning and talk about issues affecting
spectrum and other things affecting the wireless industry,
which are keen interests to T-Mobile.
I want to focus my remarks just on two issues. First, it is
essential that more spectrum be introduced into the marketplace
at the earliest possible date for existing and new providers
that deploy advanced innovative wireless services that
consumers demand. We respectfully request the Committee to do
everything within its power to ensure that the AWS auction
stays on track for June 29 of this year.
Second, Congress's policy of regulating wireless services
with a light touch and at the Federal level has been a
tremendous success. We ask the Committee as it discharges both
its legislative and oversight responsibilities to build on this
success and continue to emphasize that this is the right
approach for the regulation of the wireless business.
First, on the need for more spectrum, like Mr. Kneuer, I
would like to congratulate the Chairman and this whole
Committee for its leadership in the passage of the Commercial
Spectrum Enhancement Act in December of 2004. This Act, by
creating a trust fund for auction proceeds to pay for the
relocation of government users in the AWS band, set the stage
for an auction of AWS licenses this summer. And similarly,
through this Committee's leadership just recently, Congress set
a deadline for the transition to digital television
accelerating the auction of spectrum in the 700 MHz band for
new broadband services.
Mr. Chairman, I will say in my 25 years in this business, I
don't think I have ever seen two such major pieces of
legislation passed in two consecutive sessions of Congress that
will have such a profound impact on the wireless business. So,
that is an extraordinary accomplishment and congratulations to
all of you.
Combined, these two actions will result in 150 MHz of new
spectrum being auctioned for advanced services. It will be put
into use during the next 3 years. This spectrum is critically
important for competition and innovation. Just for example, T-
Mobile is the fourth largest nationwide wireless carrier, but
as such we have less spectrum in most markets then most of our
major competitors. In part, as the result of recent mergers and
consolidations, the three largest carriers hold on average
between 42 and almost 60 MHz of spectrum in the top 50 markets.
T-Mobile holds on average about 25 MHz in these areas. We need
access to more spectrum soon, as do other mid-size and smaller
carriers to roll out next generation services. For this reason
it is critically important that the AWS auction proceed on
time.
We applaud Chairman Martin and the FCC for announcing an
auction start date of June 2006. However, the Commission is
also considering proposals to alter the auction structure,
eliminate transparency and bidding, and amend the rules for
participation by small business entities. We look to the
Committee to encourage the FCC to resolve these issues without
delay. We have views on each of these issues, but we think it
is critically important, no matter how they come out, that they
be resolved promptly so that the auction can proceed on time.
Second, in addition to ensuring the swift release of
spectrum, Congress should continue to recognize that a light
touch Federal regulatory model is best suited for the
competitive wireless industry. In 1993, Congress had a unique
vision to create a competitive and deregulatory environment for
wireless communications. It pre-empted state regulation of
rates and entry for wireless carriers, and it directed the FCC
to exercise its authority only where clearly needed. Results
have been dramatic in terms of growth and the value this
industry and these services are bringing to American consumers
today.
As Congress recognized wireless services are provided
nationally without regard to state boundaries. Not withstanding
this, some state commissions and legislatures are seeking to
dictate what a wireless bill should look like, how to explain
charges, and the precise language carriers should use in
marketing services.
Divergent state requirements can overload the customer,
increase costs of providing service, and in some cases, permit
the state with the most burdensome regime to effectively set
policy for the entire country. It also could prevent companies
like T-Mobile from distinguishing themselves in the marketplace
through its own high quality service and products.
Now, I am not saying the wireless industry is perfect, far
from it. I think it is true that all new industries experience
some growing pains, particularly one growing as fast as
wireless. But I am saying it is a dynamic competitive industry
and that there is no evidence of systemic market failure that
would support extensive government intervention.
So, for these reasons we encourage Congress as it considers
reform of the Communications Act and exercises oversight of the
FCC to affirm that a Federal regulatory framework should apply
to wireless services.
Thank you again for inviting me here today. I will be happy
to answer any questions.
[The prepared statement of Mr. Sugrue follows:]
Prepared Statement of Thomas J. Sugrue, Vice President, Government
Affairs, T-Mobile USA, Inc.
Good morning, Mr. Chairman, Co-Chairman Inouye, and Members of the
Committee. My name is Tom Sugrue and I am the Vice President of
Government Affairs for T-Mobile USA, Inc. Thank you for the opportunity
to appear before the Committee to discuss spectrum and other wireless
issues critical to T-Mobile and the wireless industry as a whole. T-
Mobile is an independent national provider of wireless voice, messaging
and data services. In addition, T-Mobile operates the Nation's largest
commercial WiFi wireless broadband network with service in more than
6,700 public locations across the country under the name T-Mobile
HotSpot.
While T-Mobile is the smallest of the four nationwide wireless
carriers in the United States, its growth during the past several years
has been remarkable. When I joined the company in 2003, it had just
passed the 10-million subscriber mark. We now have more than 22 million
subscribers, an increase of 120 percent in just three years. This makes
T-Mobile the country's fastest growing national carrier in terms of
rate of growth. We believe this growth is attributable in large part to
T-Mobile's focus on excellent customer service and its efforts to
improve coverage, including the addition of 3,500 new cell sites in
2005 alone. These pro-consumer measures are paying off. For two years
running, T-Mobile has finished first in overall customer satisfaction
among all wireless carriers in the J.D. Power and Associates rankings.
I would like to focus this morning on two main points.
First, it is essential that more spectrum be introduced into the
marketplace at the earliest possible date in order for existing and new
providers to deploy the advanced and increasingly innovative wireless
services that consumers demand. We respectfully request that the
Committee do everything within its power to ensure that the advanced
wireless services (AWS) auction stays on track for June 29, 2006.
Second, Congress' policy of regulating wireless services with a
light touch at the Federal level has been a tremendous success. The
extraordinary growth and dynamism in wireless services in the last 10
years are due in no small part to decisions Congress made to a adopt a
pro-competitive, deregulatory model for the industry. However, there
have been recent attempts by state legislatures and regulatory
commissions to become entangled in the details of the customer-carrier
relationship, including specifying the size of fonts used on bills and
advertisements, establishing the length and nature of contracts, and
prohibiting a variety of charges. These types of regulations all limit
customer choice, add to confusion--not clarity--and raise the cost of
providing services, ultimately harming the consumers the states are
trying to protect.
More Spectrum Is Necessary
I think I can speak on behalf of the entire wireless industry in
saying that we sincerely appreciate the Committee's efforts to ensure
that more spectrum is swiftly put into circulation. In particular, I
want to applaud the Chairman, Senator Inouye and the Committee for
taking the lead in successfully pushing for passage of the Commercial
Spectrum Enhancement Act in December 2004. That Act established a trust
fund to relocate government users in certain bands and has allowed the
auction for AWS licenses to take place this summer. Similarly, through
this Committee's leadership, Congress just last month set a date
certain for the transition to digital television broadcasting, thereby
accelerating the auction of 700 MHz spectrum for new broadband
communications services.
These two pieces of legislation will result in 150 megahertz of
spectrum being auctioned and licensed for wireless broadband, and put
into service during the next three years. These infusions of spectrum
are especially important for the overall competitiveness of the
industry. For example, as the fourth largest nationwide wireless
carrier in the United States, T-Mobile has significantly less spectrum
in most markets than the three largest national carriers. Indeed, in
part as a result of recent mergers and acquisitions, the three largest
carriers hold an average of between 42 and almost 60 megahertz in the
top 50 markets, while T-Mobile holds only about 25 megahertz on average
in those areas. To continue to be an aggressive competitor, as well as
to satisfy consumer demand for an increasing range of affordable, next
generation wireless services, T-Mobile needs access to additional
spectrum in the very near future. Many other mid-size and smaller
carriers are in the same position.
For this reason, it is essential that the AWS auction proceed on
schedule. The licenses on the auction block are the most desirable and
readily usable frequencies that have been made available for wireless
services in 10 years. They encompass 90 megahertz of spectrum and
provide a footprint across the entire country. The AWS auction is
likely to be one of the most successful ever held, in terms of the
number and variety of participants, as well as dollars generated for
the public benefit. The substantial spectrum advantage enjoyed by the
three largest wireless carriers, and the increasing demand for mobile
wireless offerings, underscore the need to put valuable AWS spectrum
into the marketplace as soon as possible to promote continued
competition and product choice for advanced services.
The FCC has announced an auction start date of June 29, 2004.
Chairman Martin and the other Commissioners have indicated their intent
to keep this date, and we applaud them for that. At the same time, the
Commission is considering proposals to alter the auction structure,
eliminate transparency in bidding, and amend rules for participation by
small business entities. We look to the Committee to support and to
encourage the Commission to resolve these issues promptly so that they
do not have the unfortunate consequence of delaying the June 29 start
date. The FCC is working hard to keep the auction on track, but some
pending proposals are controversial and we are concerned that they not
be allowed to sidetrack the most important auction fueling competition
in more than a decade.
Too many entrants depend on its successful outcome, including the
Department of Defense and government agencies awaiting relocation, and
companies like T-Mobile and the public safety community that are
waiting to rollout new, third-generation wireless services to benefit
consumers and competition.
In addition to ensuring the swift release of spectrum to market,
Congress should continue to recognize the innovative and competitive
services that the wireless industry has been able to offer since 1993.
Congress had a unique vision to create a deregulatory environment for
wireless communications when it passed the Omnibus Budget
Reconciliation Act of 1993. In doing so, it also created a vibrant and
competitive communications marketplace that empowered customers, not
the government, to pick ``winners and losers.'' Just look at the
results. Since 1993, the number of wireless subscribers has shot up
from 13 million subscribers to more than 200 million today. The average
minutes of use per subscriber has increased more than 500 percent,
while prices per minute have dropped more than 80 percent. Wireless
customers sent 32.5 billion SMS messages in the first half of 2005. And
every day, customers rely on their wireless devices to place 224,000 E-
911 calls to police and emergency workers. More than 95 percent of
Americans live in counties with a choice of at least three or more
wireless carriers. All of this is a result of Congress' vision in the
1993 Act. But now, certain legislative and regulatory actions threaten
to limit the innovation and growth that have become hallmarks of the
wireless industry. I would like to focus on one particular barrier--the
increasing propensity of states to try to force wireless providers to
modify their business procedures.
State Regulation of Wireless Services Is Harmful to Consumers and
Competition
One of the primary means by which wireless providers compete to
secure and retain subscribers is through the provision of excellent
customer service. T-Mobile considers an informative pre-purchase
experience, customer-friendly bills, and responsive customer service to
be critical parts of its overall offerings and is proud to be a market
leader in this regard. Another notable way in which T-Mobile has
differentiated itself is by introducing the interactive ``Personal
Coverage Check'' feature to our website, which enables customers to
check the quality of network coverage where they live, work and travel
before they purchase service. These branding efforts are the direct
result of a competitive market that Congress encouraged by adopting a
light-touch approach to the wireless industry.
In light of Congress' decision to rely on market-based competition
whenever possible to ensure the interests of wireless consumers are
served, there is no justification for new, extensive regulatory
intervention at this point in the industry's development. While all
industries encounter some growing pains--especially one that is growing
as fast as wireless--we believe there is simply no evidence of any
systemic wireless market failure. In this environment, new and
intrusive regulation would inevitably create confusion in the
marketplace, narrow competition among carriers, and drive up costs to
consumers. The likely result would be less consumer satisfaction.
This is particularly the case when micromanagement is occurring on
a state-by-state level. As Congress recognized when it enacted Section
332 of the Communications Act, wireless service is provided on a
nationwide basis without regard to state boundaries. Notwithstanding
the national nature of the wireless industry, some state commissions
believe that they should each have the opportunity to dictate what a
wireless bill should look like, how charges should be explained, and
the precise language carriers must use when marketing their services.
While the states contend that this intrusive oversight is necessary to
protect consumers, it is not clear how 10, 20, or 50 different rules on
a contract's font size or disclosure language could possibly benefit
anyone. To the contrary, divergent state requirements will result
either in information overload to the consumer or permit the state with
the most burdensome regime to effectively set policy for the entire
country. It also would prevent companies like T-Mobile from
distinguishing themselves in the marketplace through high-quality
customer service and differentiated products.
For these reasons, we believe state-by-state regulation of wireless
is not in the public interest, regardless of whether such regulation is
aimed at rates and entry or the other terms and conditions of wireless
offerings. We encourage Congress as it considers reforms to the
Communications Act and exercises its oversight authority over the FCC
to affirm that, in light of the highly competitive and nationwide
nature of the wireless industry, a Federal regulatory framework should
apply to wireless services.
Conclusion
For the reasons stated above, T-Mobile respectfully urges the
Committee and Congress to ensure that the FCC hold to its June 29,
2006, auction date so that valuable spectrum reaches the marketplace
for the continued deployment of advanced wireless services. In
addition, in order to ensure that the wireless industry continues to be
a competitive success story, we urge Congress to confirm that wireless
carriers are to be regulated with a light touch and solely at the
national level.
Thank you again for inviting me here today. I am happy to answer
any questions.
The Chairman. Thank you very much. Our next witness is
Jeannine Kenney, Senior Policy Analyst for the Consumers Union.
Ms. Kenney?
STATEMENT OF JEANNINE KENNEY, SENIOR POLICY
ANALYST, CONSUMERS UNION; ON BEHALF OF THE
CONSUMERS UNION, CONSUMER FEDERATION OF AMERICA, AND FREE PRESS
Ms. Kenney. Thank you, Mr. Chairman. The number of issues
you have before you today is really daunting. I want to touch
on just a few of them, and we have addressed a number of them
more extensively in our written statement.
Like Mr. Sugrue, we are very concerned about the
concentration of spectrum, particularly among the dominant
players. We hear a lot, and you hear a lot, about the
competition in the wireless and cellular phone market and why
we don't need regulation of that market. The number of
competitors, however, belies the spectrum concentration issues,
and it fails to tell the story of the battle for the bundle,
that the dominant cellular providers are also the dominant
wireline providers competing for the high value customer. We
have significant concerns that the low value consumer, the low
margin consumer, who needs a single service and can only afford
that service, will be left behind. The recent announcement by
AT&T certainly exacerbates these concerns. So spectrum reform
in this environment becomes extremely important.
Having agreed with Mr. Sugrue, let me disagree with him
about his concerns about over-regulation of the cellular
market. We get tons of concerns--I hear a lot of concerns by
consumers about their carriers. FCC gets tens of thousands and
the states get hundreds of thousands of complaints. Cellular
carriers rank below cable and HMOs in terms of consumer
satisfaction. There has been widespread abuse in line items in
cellular bills and certainly abuse on early termination fees,
which are numerous. We would urge you to reject efforts to
preempt the states in this area and allow the states to protect
consumers in the way they have for years. Having raised some
concerns about preemption, we don't necessarily think
preemption is always inappropriate. To that end, we do support
Senator Boxer and Senator Specter's bill on Wireless 411
Privacy. Because we have concerns about pre-emption, for the
same reason we are not able, at this point, to support the
Phone Records Privacy Bill the Committee will consider later
this week, but do look forward to working with you on that.
In addition to our concerns about concentration in the
wireless market, we are very concerned about concentration in
the broadband market. You've heard a lot about that in your
hearings this year. We have been looking for a wireless
broadband competitor to compete with the dominant cable and DSL
providers, and we haven't found one yet. That is why spectrum
reform is so critical and I think the most important thing this
Committee can do to enhance competition in broadband and bring
it to those communities that don't have access to it. To that
end, we strongly support the ``white spaces'' legislation,
introduced by you, Mr. Chairman, and by Senator Allen. We think
that legislation will open up significant space for low-cost
affordable broadband to consumers who don't have access to it,
create new opportunities for entrepreneurs to enter the
marketplace and increase our broadband competitiveness in the
world, where we have badly fallen behind. We would urge that,
in tandem with the legislation on the ``white spaces,'' the
Committee move Senator McCain and Lautenberg's legislation on
community broadband. Wireless technologies provide many new low
cost opportunities for communities to serve their residents. We
are very concerned that attempts to pre-empt localities from
offering community wireless services will impede the promise of
the ``white space'' legislation.
Finally, in terms of spectrum reform generally, obviously
making available the reclaimed spectrum after the digital
transition creates a lot of new opportunities for consumers. We
really look to the option of spectrum in the 700 band as an
opportunity to increase wireless broadband competition by
bringing in a new third competitor to the dominant wireline
providers. However, we think Congress will need to act to make
sure that happens. We would be very concerned if spectrum went
to the dominant wireline providers, Cingular and Verizon, and
would like to see them precluded from bidding on the auctions.
We want to see that new market entrants and smaller players
have opportunities to bid for that spectrum as well. Some
reform to the designated entities program is necessary to
ensure that the large, regioned wireless carriers can't partner
with the small companies who are eligible for those bidding
credits. That will help ensure that we have some new players in
the marketplace.
Finally, we are concerned about the size of the spectrum
blocks auctioned. We support Senator Snowe's legislation to
ensure that smaller blocks are made available for bidding, so
that rural areas are not left behind in wireless service and
broadband service.
Thank you very much. It has been a pleasure to be here. I
look forward to your questions.
[The prepared statement of Ms. Kenney follows:]
Prepared Statement of Jeannine Kenney, Senior Policy Analyst, Consumers
Union; on behalf of the Consumers Union, Consumer Federation of
America, and Free Press
Summary
Consumers Union, \1\ Consumer Federation of America, \2\ and Free
Press \3\ appreciate the opportunity to testify on wireless
communications issues and spectrum reform. In light of the recently
announced acquisition of BellSouth by AT&T, critical questions of
market competition and consumer protection are more important than
ever.
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\1\ Consumers Union is a nonprofit membership organization
chartered in 1936 under the laws of the State of New York to provide
consumers with information, education and counsel about goods,
services, health and personal finance, and to initiate and cooperate
with individual and group efforts to maintain and enhance the quality
of life for consumers. Consumers Union's income is solely derived from
the sale of Consumer Reports, its other publications and from
noncommercial contributions, grants and fees. In addition to reports on
Consumers Union's own product testing, Consumer Reports with more than
5 million paid circulation, regularly, carries articles on health,
product safety, marketplace economics and legislative, judicial and
regulatory actions which affect consumer welfare. Consumers Union's
publications carry no advertising and receive no commercial support.
\2\ The Consumer Federation of America is the Nation's largest
consumer advocacy group, composed of over 280 state and local
affiliates representing consumer, senior, citizen, low-income, labor,
farm, public power an cooperative organizations, with more than 50
million individual members.
\3\ Free Press is a national nonpartisan organization with over
200,000 members working to increase informed public participation in
crucial media policy debates.
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If the merger is approved, AT&T will have sole control over
Cingular Wireless, the largest cellular carrier in the Nation that
leads all others not just in market dominance, but also in customer
dissatisfaction and complaints. AT&T will become far and away the
largest provider of phone service and DSL, dominating the market for
bundled services in local, long distance and wireless services within
its 22-state market stretching coast to coast. As the new company rolls
out its multi-channel video service, its market power will dwarf even
the largest cable companies. An integrated voice, video, broadband and
wireless provider with such sweeping market control will have little
incentive to discipline prices or tolerate competition. And competitors
unable to offer the full bundle of services within AT&T's region will
have even less incentive and ability to compete for the lower-volume,
lower margin customers unable or unwilling to buy the bundle.
The centrality of Cingular to this merger demands full
Congressional scrutiny of increasing signs that wireless consolidation
is solidifying regional dominance, and leading toward, at best, a
duopoly that will undermine robust competition and inflate prices,
leaving low and moderate income consumers and underserved communities
facing enormous barriers to participation in our digital economy. As
concentration in wireless phone service has increased, competition in
broadband is, and will remain, moribund without Congressional action.
Last year's announcement that the newly merged Sprint/Nextel will
partner with large cable providers have deflated hopes that the company
would emerge as a broadband competitor to DSL and cable modem. And with
the Federal Communications Commission's decision to allow cable and
telephone companies to exclude broadband competitors from their wires,
most consumers are left with, at best, just those two broadband
providers. As a result, wireless broadband provided by new market
players unaffiliated with dominant phone and cable companies now offers
the only meaningful hope for competition in the broadband marketplace.
In this environment, spectrum policy becomes increasingly important
in ensuring that new competitors to dominant broadband and wireless
phone providers emerge and that broadband becomes available to those
who don't have access to it or can't afford it. Advances in technology
provide the Committee with new opportunities to make currently unused
spectrum within the broadcast band newly available to wireless
broadband competitors for unlicensed use.
In virtually every market in the Nation, between 20 percent and 80
percent of allocated television channels are unlicensed and unused.
They are ripe for transition to broadband technologies and will be
essential in expanding the availability and affordability of broadband.
Today, the inadequate volume and quality of existing unlicensed
spectrum is a significant barrier to expansion of wireless broadband
services. With more and better quality unlicensed spectrum, new
opportunities emerge for vigorous competition in wireless broadband;
for communities to offer affordable broadband service where it has
never before been available; and to spur the emergence of wireless
broadband as a true competitor to dominant wireline broadband
providers. But to ensure that unlicensed spectrum will maximize
broadband access for underserved rural and urban consumers, Congress
must clarify and protect the rights of localities to offer broadband
service.
Additionally, the reclamation and auction of spectrum in the 700MHz
band provides Congress with a new opportunity to enhance competition in
wireless phone and broadband. How and to whom spectrum in that band is
auctioned will determine whether new competition in broadband and
wireless phone service emerges or whether the market position of
already dominant wireless providers is solidified. To ensure that
wireless broadband emerges as a competitor to cable modem and DSL, it
will be critical that at least some spectrum licenses go to providers
unaffiliated with wireline broadband providers, preferably new market
entrants and smaller market players.
Finally, as concentration in wireless has increased and consumer
complaints have grown, the wireless industry has attempted to erode
states' authority to protect consumers from carriers' deceptive and
misleading billing practices; unreasonable, unfair, and anticompetitive
contract terms; and inadequate privacy safeguards for customer calling
records. States have been the first line of defense for
telecommunications consumers, particularly in complaint-ridden cellular
services. They've identified and taken action against carrier practices
that harm wireless consumers. The Federal Communications Commission is
ill-positioned to resolve the hundreds of thousands of
telecommunications complaints that states receive each year. Congress
must either enact strong, enforceable Federal consumer protection and
privacy laws or protect the ability of the states to safeguard
consumers.
As the Committee considers the wireless and spectrum policy issues
before it, we offer the following recommendations:
Provide careful oversight of the proposed AT&T acquisition
of BellSouth, particularly with respect to competition in
wireless phone service, and urge the Department of Justice and
Federal Communications Commission to reject the merger unless
wireless assets are divested to ensure head-to-head competition
between Cingular Wireless and the wireline company. Urge DOJ
and FCC to impose permanent network neutrality conditions to
prevent AT&T from discriminating against users and competitors
on Internet services.
Require that, at a minimum, a portion of the spectrum within
the 700 MHz band is reserved for new market entrants and
designated entities, and that dominant market players Cingular
and Verizon are precluded from bidding on licenses in markets
where they own significant amounts of spectrum.
Report and seek final enactment of legislation comparable to
S. 2332, the American Broadband for Communities Act sponsored
by Senator Stevens, and S. 2327, the Wireless Innovation Act,
sponsored by Senator Allen and cosponsored by other Committee
Members. We strongly support both bills. Each would make new
unlicensed spectrum available in the unoccupied channels of the
broadcast band while protecting existing broadcasters operating
within that band from interference. Action in this area is
among the most meaningful the Congress may take to foster
development of, competition in, and affordable access to
wireless broadband services.
Report and seek final enactment of S. 1294, the Community
Broadband Act introduced by Senators McCain and Lautenberg, to
ensure that communities and the entrepreneurs with whom they
partner can take advantage of low-cost, affordable technologies
to offer new, innovative and affordable wireless broadband
services to local residents.
Report and seek final enactment of S. 1350, the Wireless 411
Privacy Act, which we strongly support, to ensure that any
wireless phone directory that may be created does not trench
upon consumers' right to keep their cell phone numbers private
or result in higher costs to consumers from unwanted incoming
calls.
Report and seek final enactment of legislation prohibiting
fraudulent practices used to obtain consumers' detailed and
private cell, landline or VoIP phone records; imposing tough
penalties on those who engage in fraudulent practices;
requiring tough new Federal standards for telephone companies'
internal safeguards for consumer phone records; and requiring
such providers to seek affirmative consent before private
calling records are shared. Regretfully, Consumers Union cannot
support the Protecting Consumer Phone Records Act because it
preempts the states' ability to require compliance with tough
consumer phone records privacy requirements, while providing no
guarantee that Federal phone record privacy protections will be
strengthened. We look forward to working with the Committee to
strengthen the legislation.
Clarify and confirm the role of the states in regulating
terms and conditions for wireless phone services as provided
under Section 332 of the Communications Act of 1934, and reject
wireless carriers' attempts to undermine the strong consumer
protections against anticompetitive, predatory and unfair
practices by wireless carriers.
Urge FCC to reject the pending wireless industry petition to
preempt state regulation of early termination fees and to
reconsider its 2005 Order preempting states from regulating
line-item billing abuses.
Declining Competition in Wireless Services
Declining Competition in Wireless Telephone Services
If AT&T's acquisition of BellSouth is approved, and we urge that it
not be, AT&T will be the dominant provider of both wireless and
wireline services in its enlarged 22 state region with complete control
over Cingular, giving it unprecedented ability to foreclose competition
not just in bundled services, but also in single components of that
bundle.
Today, competition in telecommunications markets is focused largely
on selling bundles of video, voice (wireline and wireless) and Internet
services to the high-end, high margin customer who can afford it.
Sprint/Nextel's announcement last year that it will enter into a joint
venture with several cable operators underscores this point. To compete
with Cingular and Verizon Wireless in the AT&T and Verizon territories,
Sprint/Nextel needs the additional service components of cable--video
and cable modem. And cable needs a wireless service. The joint venture
reflects market realities that wireless competitors lacking other
bundle components faced significant market disadvantages even before
the announced AT&T/BellSouth merger.
In the face of AT&T's bundled offerings and enhanced market power,
it will be increasingly difficult for single or dual service
telecommunications providers to compete on smaller bundles or
individual products, including wireless, giving AT&T the power to
undermine single-service competitors or relegate them to niche markets.
Moreover, the few companies offering bundled services within their own
territories will have little incentive to invest in and aggressively
market cellular and long distance to low-volume, low-margin customers
within AT&T's market. As a result, over time, it is realistic to expect
inflated prices for low-volume, single-service cellular plans.
In fact, since the most recent wave of wireless mergers, the
dominant carriers have substantially increased the baseline price for
low-volume cell-phone usage plans, forcing consumers to pay
substantially more before they could receive many of the new features
the companies are offering. For example, Cingular's entry-level plan
has shot up from about $30 to almost $40 per month in the last two
years. Verizon is also charging about $40 a month for a similar entry-
level plan--up about 15 percent over the last two years. Clearly, as
these carriers become more dominant in their wireline core territories,
they've been able to raise prices for low-volume cell phone users,
reversing the trend of cellular service becoming more competitive with
unlimited-usage, basic local telephone service, which usually costs
about $20 per month.
As cable enters the voice market with Internet telephony, at best
two competitors emerge: the dominant cable provider and the dominant
Bell. While the consolidation of AT&T with BellSouth strengthens AT&T's
ability to compete with cable, consumers well know that competition
between two competitors is not enough. Moreover, any aggressive
competition that emerges among the two providers will likely be
confined to the bundle, leaving the lower income consumer paying
inflated prices providers charge for unbundled service components.
The end result is likely to be that the consumer at the bottom end
of the market will be faced with few choices and the prospect of
inflated rates. Wireless is not yet a true substitute for wireline
phone service, leaving predictions that consumers unhappy with their
wireline carrier can simply dump their landline in favor of wireless.
Even the lowest cost cellular services exceed prices for local wireline
service, with the exception of still-niche prepaid wireless plans that
account for only a fraction of the market. Therefore, for wireless to
function as a competitor to wireline, rates for the lowest cost,
unbundled wireless plans must fall much more. With the merger
consolidating AT&T's position and the best case scenario of duopoly
competition, that becomes far less likely to occur.
Whether VoIP can become a meaningful competitor in local service
and have some price policing effect on wireless depends entirely on
whether Congress adopts meaningful and enforceable network neutrality
legislation. BellSouth, AT&T, and Verizon have unblushingly stated
their intention to impose access fees on VoIP providers and other
content and service providers. In addition to their unfettered ability
to block or impede data transmission for VoIP calls, their control over
broadband networks and ability to charge access fees gives network
owners like AT&T the ability to impose costs on VoIP that ensure it
cannot compete with local or long distance.
At best, consumers within AT&T's territory will have two choices
for bundled packages of services: AT&T and the dominant cable monopoly.
A choice between two dominant providers intent in competing only on
bundles rather than single service offerings is simply not enough to
protect the so-called ``low-value'' consumer who needs or can afford
just one or two services. And whether cable will even serve as an
effective competitor in bundled services depends upon how aggressively
it enters the telephone market, and upon the terms of its agreement
with Sprint Nextel to offer wireless services in its package of
offerings.
Declining Competition in Broadband
Today, the United States ranks 16th in the world for broadband
penetration per capita. Even as other technology markets are exploding
in growth and innovation, the cost and speed of broadband has remained
relatively constant for years. While American consumers are asked to
settle for the FCC's broadband standard of 200 kbps, companies in
Japan, South Korea, and most of Western Europe are selling connections
100 times faster for similar prices. The digital divide in global
broadband competitiveness is a slow-motion disaster for our long term
economic prospects.
This Nation's shortcomings in broadband deployment is explained, in
large part, by the lack of competition in the broadband market, the
absence of a national broadband policy, and the disincentives for the
duopoly of network giants to invest in higher capacity service. Cable
and DSL providers control almost 98 percent of the residential and
small-business broadband market. And about a quarter of the U.S. has
access to either cable modem or DSL, but not both. Meanwhile, the FCC's
own data shows that satellite and wireless broadband continue to lose
market share, demonstrating that intermodal competition is virtually
nonexistent in broadband.
Though the total number of connections has increased, the
percentage of U.S. households with no access to broadband has remained
constant at 19 percent. Broadband penetration rates in urban areas are
substantially higher than for rural areas where some 30 percent of
consumers have only one source of broadband: satellite, which is slow
and expensive. The urban/rural digital divide is not closing--it is
widening. According to a recent Pew study, urban penetration rates are
39 percent compared to 24 percent for rural areas. In 2004, the gap was
29 percent to 16 percent. In 2002, it was 18 percent to 6 percent.
Reports of a broadband price war are misguided. Analysis of ``low-
priced'' introductory offers by companies like SBC and Comcast, in an
August 2005 joint report by Free Press, Consumers Union, and Consumer
Federation of America, reveal that these are little more than gimmicks
designed to capture market share. At the end of the introductory
period, usually pursuant to a long-term contract, rates rise
significantly. Moreover, the so-called ``price war'' boils down to
offering half the speed at half the price from comparable offers two
years ago.
Consumers need, at a minimum, a third competitive option--wireless
broadband that is less expensive and which doesn't depend on DSL or
cable modems. It offers the best and perhaps now the only way to close
the digital divide and enhance competition, particularly in light of
FCC's decision to reclassify cable and DSL as information services,
foreclosing competition from other providers through leased access.
Further, we need to promote market conditions that enhance the
development of WiMax and other new wireless technologies as low-cost
infrastructure alternatives for last-mile service delivery. 21st
Century broadband policy must anticipate a future when digital networks
are hybrids of wireless and wireline facilities with robust intermodal
competition.
To date, meaningful competition in broadband from wireless carriers
has not emerged, and promises that mergers among wireless carriers
might bring it have fallen flat. Among the benefits that FCC cited in
its 2005 Order approving the Sprint Nextel merger was entry of another
competitor to DSL and cable modem in the fixed broadband market. Yet
just months after the merger was approved, Sprint Nextel announced a
joint venture with four cable partners--Comcast, Cox Communications,
Time Warner Cable and Advance/Newhouse Communications--to offer a
bundle of voice, video, high-speed data and wireless telephone
services. Sprint Nextel's Chief Operating Officer said the company
would not compete directly against its cable company partners and hoped
to further expand its partnership to other large cable operators
Cablevision and Charter Communications. The venture merely solidifies
the cable modem/DSL broadband duopoly. This development also
demonstrates the difficulty of generating head-to-head competition in a
marketplace where leading providers seek not to compete on individual
services but instead on the bundle. It is wishful thinking to believe
that a wireless carrier owned by a wireline company will offer consumer
broadband service to compete with DSL and cable. Therefore consumers
seeking affordable, unbundled broadband services must look to other
means for affordable, ubiquitous broadband.
The Competitive Potential of Wireless Broadband Using Unlicensed
Spectrum
Wireless broadband using unlicensed spectrum offers a new
opportunity to provide affordable broadband to rural and other
underserved areas. But, equally important, wireless broadband can offer
an affordable competitive alternative to areas that have access only to
a single high-priced, monopoly provider. Wireless broadband providers
currently operate in a vigorously competitive marketplace--unlike their
wireline cousins. But wireless services currently rely on a limited
band of unlicensed, or open-market, spectrum in the 2.4 and 5.0 GHz
bands, long dubbed the ``junk bands.''
Broadband is offered today by thousands of Wireless Internet
Service Providers (WISPs) using unlicensed spectrum. Wireless broadband
is already an economic generator for thousands of small and midsized
businesses that provide ``hot spots'' in places where people gather,
like coffee shops, conference centers and airports. But companies,
communities and non-profits are also using wireless broadband to
connect parks, neighborhoods, and even entire cities and towns. To
date, over 300 communities ranging in size from tiny rural villages to
major metropolitan areas have put wireless broadband to good use--
offering affordable broadband to local households, often for the first
time. With off-the-shelf affordable technology, communities, working in
partnership with entrepreneurs, are creating high-speed wireless
networks at a fraction of the cost of wired facilities. WiFi has been
deployed in densely populated urban areas and sparsely populated rural
areas.
But the growth potential of this industry is limited because under
current licensing schemes, unlicensed wireless broadband is limited to
the high-frequency junk bands. This, though well-suited to carry a high
volume of data, does not easily permit signals to penetrate through
obstacles, such as trees or walls. Moreover, the bands are also
extremely crowded; unlicensed wireless broadband transmitters share
this spectrum with other consumer electronic devices.
In order for wireless broadband to become an option for more
Americans, providers need access to unlicensed low-frequency spectrum
below 1 GHz--less crowded spectrum with propagation characteristics
that allow signals to travel though buildings, trees and other
obstacles. Lower frequency spectrum will allow wireless broadband
networks to reduce the number of transmitters necessary to cover a
square mile. The cost savings will be passed on in the form of lower
consumer prices. Not only will this open the market for new services
and new entrants, it will open the public airwaves for further
innovation. If the history of high-frequency WiFi is any indicator, the
emergence of low-frequency wireless broadband will become an explosive
economic engine.
Unlicensed Spectrum in the TV White Spaces--The Means to Affordable
Broadband & Renewed Competitive Opportunities
Among the most important priorities for broadband policy is finding
low-frequency spectrum to make available for unlicensed use. To enhance
broadband access to those who lack it and increase broadband
competition where it is currently limited, the Committee should approve
legislation to open unoccupied broadcast channels--or white spaces--for
unlicensed, non-interfering uses. Consumers Union therefore strongly
endorses S. 2332, the American Broadband for Communities Act sponsored
by Chairman Stevens, and S. 2327, the Wireless Innovation Act,
sponsored by Senator Allen and cosponsored by other Committee Members.
Moving these bills forward is among the most meaningful action Congress
could take to foster development of, competition in, and affordable
access to wireless broadband services.
Both bills make available unused broadcast spectrum below 698 MHz
for use by unlicensed devices, and call on the FCC to complete a
proceeding it began more than two years ago. FCC's proceeding would
establish technical and device rules to facilitate use of white spaces
by unlicensed devices, while providing for strict protections against
interference with television signals. Despite a flood of support from
industry groups, engineers and the public interest community, this FCC
proceeding has stalled. It is time for Congress to step in by enacting
white spaces legislation.
Vacant TV channels are perfectly suited for wireless broadband and
other unlicensed wireless Internet services. Signals can travel far and
pass through dense objects and topographical barriers. And greater
access to vacant TV channels would facilitate a market for low-cost,
high capacity and mobile wireless broadband networks. Using these white
spaces, the wireless broadband industry could deliver Internet access
to every American household at high speeds and low prices--for as
little as $10 a month by some estimates. At a time when more than 60
percent of the country does not subscribe to broadband either because
it is unavailable or unaffordable, this would represent an enormous
social benefit and a catalyzing economic engine, particularly in rural
areas.
According to a November 2005 analysis by Free Press and the New
America Foundation, ``Measuring the TV `White Space' Available for
Unlicensed Wireless Broadband,'' virtually every market in the country
has unoccupied broadcast channels allocated for television broadcasting
but not actually in use. The study found that rural areas, which suffer
most from lack of broadband access, have the greatest amount of
available white space. Yet even in urban areas, substantial white
spaces are also available. The following summarizes the percentage of
the digital broadcast spectrum the study found would remain unused even
after the digital transition, in select markets:
Juneau area--74 percent
Honolulu area--62 percent
Phoenix area--44 percent
Charleston area--72 percent
Helena area--62 percent
Boston area--38 percent
Jackson area--60 percent
Fargo area--82 percent
The Dallas-Ft. Worth area--40 percent
San Francisco area--37 percent
Portland area--66 percent
Tallahassee area--62 percent
Portland area--58 percent
Seattle area--52 percent
Las Vegas--52 percent
Trenton area--30 percent
Richmond area--64 percent
Omaha area--52 percent
Manchester area--46 percent
Little Rock area--60 percent
Columbia area--70 percent
Baton Rouge area--44 percent
We applaud Chairman Stevens and Senator Allen for their leadership
in working to make more and better spectrum available for wireless
broadband and other innovations yet to come. We look forward to working
with Members of the Committee toward enactment of this important
legislation.
Protecting the Rights of Communities to Offer Wireless Broadband
Systems
State laws preventing or deterring communities from providing
wireless and other broadband services is additional roadblock to
broadband roll out--a deterrent that dominant carriers have sought to
erect even as they deny service to many small towns, villages and rural
areas. More than a dozen states have laws on the books that prohibit or
restrict the ability of a local government to offer broadband to its
citizens, either as a public provider or (as in the majority of cases)
as a partner with a private sector provider. In the last 18 months,
fourteen states have attempted to enact or expand such restrictive
statutes. In states without such laws, community broadband has been a
critical force in the telecommunications market, bringing service to
rural and low-income consumers, attracting business, and narrowing the
digital divide.
Congress must ensure that communities cannot be preempted from
launching their own community broadband networks. We therefore strongly
endorse S. 1294, the Community Broadband Act, introduced by Senators
McCain and Lautenberg, to ensure that communities and the entrepreneurs
with whom they partner can take advantage of low-cost, affordable
technologies to offer new, innovative and affordable wireless broadband
services to local residents.
Spectrum Auction Policy--Making Room for New Entrants and Smaller
Players
Congress also has the unique and important opportunity to ensure
that reclaimed spectrum in the 700 MHz band will be used to facilitate
robust competition in both the broadband and wireless telephone market.
It should be no surprise that as wireless phone carriers have merged,
ownership of spectrum has been concentrated in the hands of a few
dominant market players. Even after the Department of Justice required
AT&T Wireless to divest some of its spectrum assets as a condition of
its merger with Cingular, Cingular still retains ownership of up to 70
of 189 MHz available in some markets. In many others, it controls one-
third of the available spectrum.
Congress should put a stop to consolidation of spectrum ownership
by ensuring that at least a portion of the reclaimed spectrum will be
allocated for smaller existing players and new market entrants who may
offer new competitive opportunities across a range of wireless
services. In addition, major players Cingular and Verizon, in which
spectrum ownership is already highly concentrated, should be precluded
from bidding on spectrum in key markets. If large, already dominant
telecommunications providers are the only entities that can
successfully bid on spectrum licenses in the valuable 700 MHz band, the
risk of foreclosing enhanced competition in both wireless phone and
broadband service is great. Large market players already offering wired
broadband services are unlikely to use new spectrum to offer affordable
wireless Internet services that compete with their wired offerings.
They're more likely to use new spectrum to expand existing wireless
service offerings to high-value consumers rather than provide new,
affordable services to average consumers. The battle for the bundle,
and only the bundle, will continue.
In addition, Consumers Union has recommended in recent comments to
FCC, that small, minority and women-owned businesses have meaningful
access to spectrum licenses during its upcoming 2006 wireless auctions.
To do so, the Commission must enhance the effectiveness of its
``designated entity'' (DE) program by preventing ``large, in-region
wireless carriers,'' from partnering with DEs in order to access
additional spectrum. A designated entity is a small business that is
eligible for an auction bidding credit in order to allow it to compete
in a spectrum auction. We also urged the Commission to conduct
additional study regarding ways to further improve access to spectrum
licenses for small businesses, particularly minority and women-owned
businesses, in order to decrease barriers to market entry and pass
along the benefits of competition and access to consumers.
Consumer Protection in Wireless Services
State Preemption: Unfair Contract Terms & Deceptive Billing Practices
In light of growing concentration in wireless telephone markets, we
are increasingly concerned about efforts to preempt state regulatory
authority over terms and conditions of cellular service. Under Section
332 of the Communications Act of 1934, states retain regulatory
authority over cellular carriers, preempted only from regulating market
entry and rates, with regulation of terms and conditions expressively
reserved for them. Under this authority, states have aggressively
sought to regulate and take other action against deceptive, misleading
and anti-consumer practices of the cellular industry.
Through court challenges, petitions to the Federal Communications
Commission and appeals to Congress, carriers have sought, in some
cases, successfully, to erode this vital and distinct role for state
regulation of wireless carriers. Last year, the FCC preempted state
regulation of line-item bill abuses--a decision currently under appeal
in the 11th Circuit. And a cellular industry petition pending at the
FCC seeks preemption of state efforts, including generally applicable
laws, to curb coercive, anti-competitive early termination fees. If
successful, these preemption efforts will badly erode the consumer
gains made by states regulating deceptive and misleading carrier
tactics.
Low consumer satisfaction with their carriers, growing numbers of
consumer complaints about cellular bills and service, and the
substantial, artificial barriers that prevent consumers from switching
carriers, belie the cellular industry's argument that competition in
wireless renders regulation unnecessary. Last year, the Federal
Communications Commission received more than 25,000 complaints about
wireless service. While down slightly from 2004, the number remains
disturbingly high. The complaints FCC receives are just a fraction of
the hundreds of thousands handled by the states. And even those
underreport consumer dissatisfaction. A 2003 study by AARP found that
nearly half of all cell phone users (46 percent) reported not knowing
whom to contact in case their cell phone provider could not resolve a
billing or service problem to their satisfaction. Only four percent
cited the Federal Communication Commission (FCC) as a potential
contact, and 18 percent said they would not contact anyone but their
provider.
Consumers Reports' recent and largest-ever annual survey of 50,000
cell phone users across 18 major metropolitan markets found that
consumers rank cell phone carriers below HMOs and digital cable service
in terms of overall satisfaction. Only 47 percent of our respondents
said they were either completely or very satisfied with their service--
a low showing for any service. And notably, consumers ranked the
Nation's largest carrier, Cingular, either lowest or second lowest
among all carriers in every market surveyed. It received consistently
low marks in handling customer questions and complaints. That finding
tracks FCC's own complaint data. In 2004, the complaint rate for AT&T &
Cingular Wireless was nearly four times the rate for Verizon Wireless.
Meanwhile, some smaller regional carriers Alltel and U.S. Cellular had
some of the lowest complaint rates.
Billing complaints, including questionable line items, top the
types of complaints received by regulators. Consumers pay inflated
prices when line-items not included in the advertised cost of the
package are added to their bill. A 2004 NASUCA petition asked FCC to
prohibit the nearly ubiquitous carrier practice of including line-items
purportedly to recover ``regulatory'' fees or charges where none have
been authorized or imposed by government. In denying NASUCA's petition
last year, the Commission simultaneously classified regulation of line-
items as rate regulation, fully preempting the states from protecting
their consumers.
Early termination fees (ETF)--penalties for switching carriers mid-
contract--range from $150 to $240 per phone and are almost never pro-
rated by the elapsed contract period. Contract terms often extend
beyond the one or two years from the original agreement, because the
contract length is usually extended when consumers upgrade their plan
or buy a new phone. Early termination penalties erect enormous
financial disincentives for consumers to switch carriers, even if they
are unhappy with the current carrier's service, quality or price or
could get a better deal elsewhere. A 2005 survey by the U.S. Public
Information Research Group found that 36 percent of respondents said
early termination fees had prevented them from switching carriers and
that nearly half of all cell phone customers would switch if early
termination fees were eliminated. Consumer Reports' 2005 survey found
comparable results: half of consumers who wanted to switch said they
wouldn't because of their long-term contracts. Elimination of non-
prorated early termination fees would promote greater competition,
improve quality and enhance customer service.
Federal preemption of state authority over cellular carriers would
leave consumers without redress and protection. FCC is ill equipped to
handle the thousands of consumer complaints it receives, let alone
resolve them. Congress should urge the FCC to reconsider its 2005
decision preempting state authority over line-item billing abuses by
cell phone providers and urge its rejection of the wireless industry
petition to prohibit state regulation of early termination fees.
Protecting Private Calling Records
In recent months, widespread media attention about the ease with
which one's private and detailed calling records may be obtained and
how widely carriers may share those records with other businesses has
only intensified consumer demand for privacy protections.
We applaud the leadership of Chairman Stevens, Co-Chair Inouye,
Senator Allen and Members of this Committee who have worked to address
consumer concerns about carrier breaches of private phone records. And
while we respect the Committee's effort to craft a solution to the
problem of phone records privacy breaches, we cannot support S. 2389,
the Protecting Consumer Phone Records Act, as introduced, due to our
strong concerns about its preemption provisions. While we support
provisions prohibiting pretexting and authorizing new penalties against
bad actors, the bill's broad preemption provision clearly represents a
step backward in consumer privacy protections. The bill fails to
mandate new Federal regulations requiring carriers to safeguard
consumer proprietary network information or give consumers the right to
opt-in before CPNI is shared, while simultaneously preempting states
from taking either action.
Many states already have enhanced privacy protections for consumer
phone records. For example, California requires opt-in consent prior to
sharing of CPNI. Arizona is about to implement new regulations, several
years in the making, that will require carriers to confirm their
subscribers' intent to allow their CPNI to be shared with others. Other
states are working to improve phone record privacy protections.
Illinois Governor Blagojevich recently announced his intention to
propose legislation to require carriers to implement tougher privacy
safeguards. S. 2389 would preempt all of these efforts and others
currently contemplated without putting in their place meaningful
Federal privacy protections.
We look forward to working with the Committee to strengthen the
bill and suggest the following additional provisions:
First, in addition to enhanced penalties and explicit prohibitions
on pretexting, Congress should require that the Federal Communications
Commission prescribe regulations requiring carriers and VoIP providers
to maintain stringent internal technical, physical and administrative
safeguards to help ensure that phone companies diligently protect the
security of their customers' phone records. Consumers have entrusted
their most private calling information to their carriers who have a
duty to closely guard them. That the safeguards phone companies
currently have in place are inadequate to protect consumers' privacy is
demonstrated by the explosion in the unscrupulous businesses that offer
to sell phone records.
Second, Congress should require that all carriers receive
affirmative consent prior to sharing their customers' proprietary
network information (CPNI) with joint venture partners, contractors or
others. Carriers have a first obligation to their customers, not their
business partners. CPNI includes, among other things, customers' most
private calling activities including who they called, when they called
them and how long they talked. Prior to a decision by the United States
Court of Appeals for the Tenth Circuit, the Federal Communications
Commission required that consumers provide affirmative ``opt-in''
consent before their CPNI could be shared. FCC Chairman Kevin Martin
noted in his testimony to the House Energy and Commerce Committee
earlier this year that the shift from opt-in to opt-out consent has
resulted in much broader dissemination of consumer phone records and
may have contributed to the proliferation of online businesses offering
to sell consumer phone records.
We look forward to working with the Committee to strengthen the
privacy protections in S. 2389 by including these key provisions or
eliminating the Federal preemption of state phone records privacy laws.
Wireless 411--Protecting the Privacy of Cell Phone Numbers
The privacy of consumer's cell phone numbers and calling records
has rightfully gained significant attention in recent years. The
cellular industry's interest in creating a wireless phone directory
provoked widespread consumer concern when it was first contemplated
several years ago. And although plans for such a directory may have
temporarily stalled, consumer concern about the privacy of phone
numbers has not.
We therefore support S. 1350, The Wireless 411 Privacy Act,
introduced by Senators Specter and Boxer. The legislation would give
consumers greater control over whether and with whom their cell phone
number is shared. That approach stands in stark contrast to the near
absence of control consumers have over the sharing of far more detailed
CPNI.
Consumers view cell phones as more private than landline phones.
When their cell phone rings, they expect that the person on the other
end to be someone to whom they personally gave their phone number.
Because most cell phone customers pay for their incoming calls,
consumer control over their number should be viewed through the lens of
both privacy and out-of-pocket costs.
The legislation will help ensure that the more than 180 million
cell phone customers in the U.S. have control over how and when--or
even if--their cell phone numbers are included in any directory of cell
phone numbers. It is imperative that Congress codify privacy
protections for cell phone consumers so that all consumers, in
particular those who wish to remain unlisted, will be protected. It is
not adequate to merely rely on industry promises to protect privacy,
since such voluntary protections could easily disappear in the future.
Moreover, carriers have a strong financial incentive to ensure that as
many subscribers as possible are listed in the directory; it has been
estimated that a directory would cost as much as $2 billion per year
through directory assistance charges and additional usage minutes by
2008.
Importantly, the bill ensures that carriers receive affirmative
opt-in consent before any subscriber is listed in a wireless 411
directory. Experience tells us that opt-out consent is entirely
inadequate in protecting consumers. When the wireless directory was
contemplated, several carriers began securing opt-out ``permission'' by
inserting language in wireless phone contracts allowing the carrier to
include the cell phone number in a directory and, in some cases, charge
fees to consumers if they choose to have their name removed.
The ``Wireless 411 Privacy Act'' is a common-sense solution that
allows the wireless industry to develop a new business while still
respecting the privacy wireless consumers have expected for more than
20 years. It provides consumers a means to control their cell phone
bills by remaining unlisted, thereby limiting exposure to uninvited
calls.
Conclusion
We appreciate the opportunity to present our views on the many
critical questions of wireless market competition and consumer
protection and look forward to working with Congress to ensure that all
consumers have access to the benefits of the digital age.
The Chairman. Thank you very much. Our last witness is
Lawrence White, Co-Chair of the Spectrum Policy Working Group.
This was the Digital Age Communications Act Project. We thank
you for the booklet you have given us. We are pleased to have
your comments.
STATEMENT OF LAWRENCE J. WHITE, CO-CHAIR, SPECTRUM POLICY
WORKING GROUP, THE DIGITAL AGE
COMMUNICATIONS ACT (DACA) PROJECT, PROGRESS & FREEDOM
FOUNDATION (PFF); PROFESSOR OF ECONOMICS, STERN SCHOOL OF
BUSINESS, NEW YORK UNIVERSITY
Mr. White. Thank you, Mr. Chairman. My name is Lawrence J.
White. I am a Professor of Economics at the NYU Stern School of
Business. As you just indicated, I am Co-Chair, along with Dr.
Thomas M. Leonard, of a Working Group that has been convened by
the Progress & Freedom Foundation to propose a new spectrum
policy for the United States. This Working Group is part of the
PFF's multi-faceted effort to provide a ``Digital Age
Communications Act,'' which has now come to be called DACA,
that would guide the reform of U.S. telecommunications policy.
Our Working Group, just last week, unveiled its ``Release 1.0''
of its New Spectrum Policy Report, which I would like to submit
for the record of this hearing. I request that the ``Release
1.0'' be entered in the record. *
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* The information referred to has been retained in Committee files.
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In my written testimony, I try to summarize the basic
thrust of that report. In my oral comments, I will have to
summarize my summary. Basically, the report urges policymakers
to fundamentally rethink spectrum management policy. As I
indicated on the first page of my written testimony, the
current system of command-and-control regulation and licensing
of the electromagnetic spectrum has yielded and will continue
to yield large and growing inefficiencies in spectrum use. A
propertization of the spectrum, a system that would rely
primarily on a framework of fully developed property rights and
markets in spectrum, would yield great benefits for the U.S.
economy.
Now, as you have heard from a number of speakers, the basic
problem in spectrum is interference: one party's transmissions
interfering with another. There are three basic ways of dealing
with interference: First is the traditional FCC, command-and-
control and licensing approach, with very detailed
specification of geographic areas, frequency bands, service
parameters, and specific uses and then the selection of
specific parties through what used to be called ``beauty
contests'' to serve those geographic areas in those frequency
bands with those service parameters and those particular uses.
This approach is now widely recognized as inefficient and
discouraging innovation and discouraging competition. Indeed,
you heard a little bit from JayEtta Hecker earlier today about
those problems.
A second approach, which also has been discussed today, is
the ``Commons or Unlicensed'' approach, and it has had some
successes. When you look closely at it, it really comes down to
another version of command-and-control regulation, where some
entity has to be specifying power limits and has to be
specifying protocols, so as to deal with interference.
There is a third approach, however, and that is one of
propertization--of the creation of explicit property rights in
spectrum and the reliance on markets to allocate spectrum to
its most efficient uses. This idea was first proposed by Nobel
Prize winner Ronald Coase in 1959. This is the approach that
the report endorses.
In essence, the propertization system would create a system
of property rights. Think in terms of a geographic area with
boundaries and a spectrum frequency band with boundaries, and
the owner of this spectrum ``plot'' would have the ability to
transmit within that geographic area, within that frequency
band, so long as that party did not exceed power limits at the
geographic border and at the frequency band border. Also,
because of the special physics of the spectrum there would need
to be inband limits. Within those parameters, the party could
do anything that he or she wanted with the spectrum, so long as
he or she did not in essence trespass on his or her neighbors
and so long as the antitrust laws are also observed in terms of
agglomerations of spectrum. In essence, think real estate. This
is the way spectrum plots could develop.
The real issue is how do we get from here to there: from
the current command-and-control system to a propertized and
market system. The report lays out five options for getting
from here to there. We endorse three of those options. We also
have some strong suggestions as to how to encourage greater
efficiency in governmental holdings of spectrum, along the
lines of some that were suggested by Mr. Kneuer earlier today.
In summary, the report urges policymakers to think
creatively and in essence to think in terms of propertization
and markets as the direction for spectrum policy reform.
I would be very happy to answer questions. Thank you very
much, Mr. Chairman.
[The prepared statement of Mr. White follows:]
Prepared Statement of Lawrence J. White, Co-Chair, Spectrum Policy
Working Group, The Digital Age Communications Act (DACA) Project,
Progress & Freedom Foundation (PFF); Professor of Economics, Stern
School of Business, New York University
I am pleased and honored to have this opportunity to appear before
this Committee on the important topic of today's hearing: ``Spectrum
Management Reform''. Spectrum management reform is an area that, if
policy moves in a sensible direction, could yield great benefits for
the U.S. economy.
I am currently the co-chair (along with Dr. Thomas M. Lenard) of a
Working Group convened by the Progress & Freedom Foundation (PFF) to
propose a ``New Spectrum Policy'' for the U.S., as part of PFF's multi-
faceted effort to provide a ``Digital Age Communications Act'' (DACA)
that would guide the reform of U.S. telecommunications policy. Our
Working Group recently unveiled ``Release 1.0'' of its Report, which I
would like to submit for the record of this hearing.
As the ``Release 1.0'' characterization indicates, the New Spectrum
Policy Report is still a work in progress and will likely go through
some refinements in the coming months, as well as being accompanied by
specific legislative language. Though no member of our Group--composed
of one or more economists, lawyers, and electrical engineers--may agree
with every single word in the current Release, we all agree on the
major thrust of the Report: that the current system of ``command-and-
control'' regulation of the electromagnetic spectrum has yielded and
will continue to yield large and growing inefficiencies in spectrum
use, and that a ``propertization'' of the spectrum--a system that would
rely primarily on a framework of fully developed property rights and
markets in spectrum--would yield great benefits for the U.S. economy.
In the rest of this written testimony I will summarize the
``Release 1.0'' of our Report. (Since ``Release 1.0'' is being
submitted for the record together with this written testimony, the
interested reader of this testimony who wants more detail, support, and
citations can find them in that Report.)
I. The Problem
The widely recognized problem with uninhibited radio transmissions
is ``interference'': one party's transmissions interfering with those
of another party in the same (or a neighboring) geographic area and/or
spectrum band. Another way of describing this problem is that it is one
of negative externalities or spillover effects.
II. Potential Ways of Managing the Problem
There are three potential ways of managing the use of the spectrum,
so as to deal with interference: (a) the traditional command-and-
control regulation and licensing approach; (b) a commons/unlicensed
approach; and (c) a propertization and markets approach. The first is
the approach that has been prevalent in the U.S. since 1927--first
under the auspices of the Federal Radio Commission and then, from 1934
onward, under the auspices of Federal Communications Commission (FCC).
The second has recently been advocated by a group of technologists and
legal scholars. The third is the approach favored by the Report, taking
as its origin a seminal 1959 article by Nobel Prize winner Ronald
Coase.
III. Traditional Command-and-Control Regulation and Licensing
Since 1927, Federal law has declared the spectrum to be a national
resource, to be managed by the Federal Government for the benefit of
the American people. In practice, this has meant a regime of detailed
command-and-control regulation and licensing by (since 1934) the FCC:
The FCC has traditionally allocated specific spectrum bands and
geographic areas to specific uses, mandated specific service
parameters, and selected specific users (through ``beauty contests'')
to hold the licenses for these bands, geographic areas, uses, and
service parameters.
This approach broke down in the 1980s, when the FCC was swamped by
applicants for the licenses for the newly opening (and clearly seen to
be highly profitable) cellular services. The Congress came to the FCC's
rescue by authorizing lotteries among the large numbers of otherwise
qualified applicants. After the lotteries were revealed to yield rapid
``flips'' and large windfall gains, the Congress authorized auctions in
1993, which have been held for cellular and similar services since
1995.
Despite the widely acknowledged success of these spectrum auctions,
and the FCC's recent efforts to grant greater flexibility to auctioned
spectrum and to encourage a secondary market in spectrum, the
overwhelming bulk of spectrum in the U.S. remains subject to the FCC's
command-and-control regulation and licensing.
The costs to the U.S. economy of this rigid management approach
have been documented and are now widely appreciated. Spectrum is
utilized inefficiently. New products come to market later and at higher
costs. Competition and innovation is impeded. For example, the rollout
of cellular service in the U.S. was delayed for over a decade, while
the FCC tried to figure out how to integrate this new service into its
existing allocation scheme. Even today, after over a decade of auctions
that have authorized larger swaths of spectrum for cellular service,
it's clear that even greater allocations would be worthwhile and could
lead to lower prices and improved services.
IV. The Commons/Unlicensed Approach
The success of the FCC's experiments in allocating some spectrum
bands to ``unlicensed'' low-power uses--e.g., garage-door openers,
WiFi, and Bluetooth--and the advent of newer technologies, such as
cognitive radio and mesh networks, has led some technologists and legal
scholars to advocate the expansion of such unlicensed bands. At the
limit, with sufficiently good technologies, limits on power emissions
of transmission devices, and adherence to courtesy protocols (the
advocates argue), the spectrum could become a vast ``commons,'' where
formal management of the spectrum--either in the FCC tradition or using
the property rights approach discussed below--would not be needed (and
indeed, would introduce transactions costs and would impede full
development of the spectrum). In essence, there would be an abundance
of usable spectrum, so formal allocations would not be necessary.
The Report is highly skeptical of such claims. The demand for
spectrum use is likely to be so price elastic that effective boundless
abundance (i.e., effective supply would exceed demand, even at a zero
price) is unlikely to appear. Further, the power limits and courtesy
protocols necessary for a commons are just an alternative form of
government command-and-control regulation. And the haziness of property
rights and enforcement rights in a commons world would likely
discourage the large-scale investments that would be needed in some
areas for efficient spectrum utilization. The Report expresses the fear
also that the continued governmental regulatory presence would mean
that political considerations would trump efficiency in regulatory
decisions. And, finally, the Report explains that propertization and
markets can handle the kinds of uses--e.g., garage-door openers and
WiFi--that are currently extolled as successful unlicensed uses. For
example, an equipment manufacturer could buy the rights to use a
specific spectrum frequency band (say, for garage-door openers) and
then sell equipment designed to operate on that frequency to consumers.
In any event, the Report advocates ``grandfathering'' existing
unlicensed spectrum bands for continued use along current lines. If in
the future, governments want to create and set aside additional
``spectrum commons,'' they should be required to buy the spectrum in
the open market (as would everyone else in a propertization and markets
framework), and careful benefit-cost analyses should be expected for
any such purchases and uses.
V. Propertization and Markets
The third way to manage the spectrum so as to deal with
interference--the direction that the Report endorses--is the approach
of creating property rights in spectrum. The property rights would
consist of a right to transmit within a specified geographic area and a
specified spectrum frequency band, with limits on the power of the
transmissions at the geographic and frequency band borders, and limits
on in-band power as well. Another way of thinking about the property
rights is that they constitute the right to exclude--exclude others'
transmissions within the property owner's geographic and spectrum band
territory.
Within these limits, the spectrum owner could employ the spectrum
for any use/service, so long as she didn't ``trespass'' with
excessively powerful signals on the property of her neighbors. A
spectrum property holder could add to her holdings, sell some of them
off, divide, lease--and even just not use her spectrum if she so chose.
Indeed, a convenient metaphor for these property rights in spectrum
is that of real estate: The property owner of a bundle of spectrum
rights could think of those rights as roughly equivalent to those
enjoyed by the owner of a piece of real estate. The rights and
activities enjoyed by the spectrum owner could equally well describe
those enjoyed by a real estate owner. The Report envisions spectrum
markets for transactions developing, just as real estate markets have
developed for commercial and residential real estate. Also, of course,
the antitrust laws would apply to any agglomerations of spectrum, so as
to prevent such agglomerations from creating positions of market power.
Any initial specification of these spectrum property rights--the
geographic boundaries, the spectrum band boundaries, the power limits--
ought to be capable of being renegotiated by owners among themselves in
subsequent transactions, as market conditions and technologies of
transmission and reception change. But because such negotiations are
costly, the initial allocations should be structured--initially by the
FCC--with an eye toward minimizing such subsequent transactions. The
FCC's Evan Kwerel and John Williams have suggested that the parameters
that apply currently to auctioned personal communications services
(PCS) spectrum would be a useful starting place for much, if not most
spectrum in a propertized framework. Also, the Report notes that
cognitive radio, whose development is seen by commons advocates as a
boon to the commons approach, may well help reduce transactions costs
in a propertization approach, since the need to amass adjacent spectrum
bands for a particular service would be reduced.
VI. How to Get From Here (Command-and-Control Regulation and
Licensing) to There (Propertization and Markets)
If the U.S. were starting with a clean slate--i.e., if there were
no current users of spectrum with implicit rights to the spectrum that
they use--there could be an initial laying out of spectrum property
``plots'' and then an all-inclusive auction to get those plots into the
hands of those who could use them most effectively. With well-defined
property rights applied to these spectrum plots, secondary markets in
spectrum would quickly develop.
However, the U.S. starts instead with the existing ``legacy''
system of ``encumbered'' spectrum, based on the FCC's command-and-
control regulatory and licensing system described above. Some spectrum
holders have recently purchased their spectrum in the auctions of the
past dozen years. Others received their spectrum gratis through a
beauty contest. Yet others purchased their spectrum indirectly by
buying a company (e.g., a radio or TV broadcaster) that had spectrum
rights. Virtually all are likely to have made substantial investments
in equipment and other complementary inputs to the use of their
spectrum. In addition, there are some spectrum bands that are currently
unassigned or that are lightly used and encumbered. And various
governmental bodies have a claim to approximately a third of the
available spectrum.
Consequently a major challenge to implementing a propertized
spectrum framework is designing the transition from the current legacy
system to a propertized system. The Report identifies five distinct
options for a transition to a propertized system for spectrum. Under
any of the options, a ``National Spectrum Registry'' should be
established (much like land registries), so as to facilitate spectrum
transactions and negotiations. The Registry could be maintained by the
FCC, by the National Telecommunications and Information Administration
(NTIA), or by a private entity.
The five potential options discussed in the Report are as follows:
1) Auction spectrum with the rights to clear incumbents
immediately without compensation. In essence, current spectrum
users would retain no residual rights and could be removed by
the purchasers at will.
2) Auction spectrum with rights to clear incumbents with
compensation. Clearing would entail paying either relocation
costs or, if the value of the incumbent's operations is less
than relocation costs, paying the incumbent to cease
operations. If the clearing costs are readily known or quickly
adjudicated, this option will usually yield efficient outcomes.
3) Auction spectrum without rights to clear incumbents from the
auction spectrum. Buyers of the spectrum would be required to
negotiate with incumbents to change the configuration of the
latter's rights. This option is similar to one recently
proposed by the British telecommunications regulator, Ofcom, as
well as to a proposal by Senator Larry Pressler in 1996.
4) A ``Big Bang'' auction with unassigned and encumbered
spectrum. Incumbents would be encouraged to bring their
spectrum voluntarily to auction. Incumbents could either be
permitted to repurchase their existing rights at no net cost to
themselves, or they could be given transferable vouchers to
compensate them for mandatory clearing.
5) Give incumbents full property rights to the spectrum that
they already use. Current spectrum users would thereby gain
immediate flexibility in terms of adjusting inputs and altering
uses, so long as they did not thereby generate interference
with an adjacent spectrum owner's property rights.
The Report rejects options 1 and 5 as, at best, likely to lead to
great delays in implementation. The Report does, however, endorse
options 2-4 as all reasonable choices and, if properly implemented,
could provide an efficient and timely transition to a propertized and
market-oriented spectrum regime.
VII. Government-held Spectrum
Government at all levels (Federal, state, and local) now hold about
a third of all available spectrum. Even in a propertized framework, so
long as spectrum is a ``free'' resource to a government agency, there
is no clear incentive for the agency to do other than to hoard its
spectrum against the possibility that it may be useful sometime in the
future. The Report does recommend, however, a number of measures that
can encourage greater efficiency in the use of publicly held spectrum:
1) Include government-held spectrum in the National Registry.
2) Require that NTIA prepare and submit annual reports to
Congress on spectrum usage by government.
3) Establish reward structures that encourage government
employees to economize on their agencies' uses and holdings of
spectrum.
4) Government entities at all levels should be expected to
purchase any additional spectrum rights that they want to use.
5) Try innovative ways to promote efficient use of government
spectrum, such as contracts let by government public safety
agencies that would allow contractors to provide public safety
spectrum services in return for rights to use that spectrum
when not needed for public safety.
6) Generally encourage purchase of communications services in
place of grants of spectrum.
VIII. The Legal Standard for Enforcement of Spectrum Property Rights
Spectrum property owners need to be able to have legal recourse in
the event that someone breaches their property right--in essence, if
someone trespasses on their spectrum property. It is also critical that
the property rights be as clearly defined and unambiguous--and that the
adjudication process be as simple--as possible.
The Report endorses the concept of using the law of trespass as the
appropriate legal framework. Detection of trespass could be based on
measurements at the (geographic or spectrum band) boundary or could be
based on measurements at the transmitter combined with a radiation
propagation model that indicates the consequent emission levels at the
boundaries. The latter approach currently works well for the quasi-
property-rights regime that applies to the PCS bands. Also, some
allowance may be necessary for the stochastic properties of
transmission power strengths that are due to environmental conditions.
Enforcement could be through the Federal court system or through
adjudicatory proceedings in a reformed FCC (as described in the DACA
Institutional Reform Working Group's report).
IX. International Obligations
The Report recognizes that the U.S. has international obligations
with respect to spectrum usage and interference and advocates that all
spectrum rights that are created in a propertized framework should be
consistent with those obligations.
X. The Role of the FCC
The FCC would have at least one and possibly two additional
important roles in the propertized framework advocated in the Report.
First, the FCC would be responsible for the initial implementation of
the property rights regime--the auctions, the initial specifications of
geographic and spectrum band boundaries, the specification of power
limits at the boundaries, etc. Second, the FCC could be the agency that
maintains the National Spectrum Registry. Third, the FCC could be the
initial forum for the adjudication of spectrum property disputes.
XI. Conclusion
A relatively new approach to spectrum management--based on property
rights and markets--holds great promise for improving the efficiency
with which the spectrum is utilized in the U.S. economy and for
encouraging innovation and competition. The Report describes and
explains this new approach and identifies three sensible options for a
transition from the current command-and-control regulatory and
licensing regime to a propertization and markets framework for
spectrum. A rapid commitment to one of these options would surely be in
the best interests of our country.
The Chairman. Thank you very much.
If I could urge you to sort of move together and bring back
our three witnesses. We are going to have to share six mics
here with nine people. I appreciate your courtesy, the first
three witnesses staying with us. We are going to each have a 5-
minute round to start with. I am going to wait until last this
time and see. Senator Lautenberg you may start off please.
Senator Lautenberg. Thanks very much, Mr. Chairman. Your
management of this wide spectrum, so far it has been pretty
good.
The Chairman. Its properitization of the witness
statements.
Senator Lautenberg. I think some of it has to do with your
position, Mr. Chairman.
[Laughter.]
Ms. Seidel, you are there? Yes. It appears that with the
large wireless companies we have seen something recently--the
gaming of the DE program, a program that was designed to help
small minority and woman-owned businesses. Can the FCC have
this problem fixed by the next auction that is scheduled for
June?
Ms. Seidel. The record on the NPRM has already closed. The
Commission has announced its intention to resolve the issues in
advance of the advanced wireless services auction.
Senator Lautenberg. Let me ask you, do you think, can we
get it done by then? There seems to be considerable doubt among
the witnesses about whether or not this can be done as planned.
Ms. Seidel. That is the Commission's intention at this
point in time.
Senator Lautenberg. Mr. White, yours was, I would say, an
interesting, semi-scathing review of the system as we know it.
It is constructively received, I can tell you. You had a
substantial amount of testimony to give in a very short period
of time. If you had to highlight one principal avenue for
correcting it, what would you say using the property analogy to
just let different suppliers offer different services within
the same spectrum? I am not sure I understand that.
Mr. White. Senator, thank you. My principal avenue is
``think real estate.'' If there is nothing else I could say,
think real estate. You have a geographic area. You have a
spectrum band, and it is yours. You can do with it what you
like, so long as you do not exceed power limits at the boundary
so that you don't trespass on your neighbors. Again the real
estate analogy, so you should not be trespassing on your
neighbors but within your area, within your spectrum brand you
can do what you like. You can add. You can divide. You can
lease. You can flexibly allocate your spectrum to the highest
and best use without the FCC or anybody else telling you what
to do, so long as you don't trespass. And of course we've got
to have antitrust--I am a former Chief Economist of the
Antitrust Division in the U.S. Department of Justice. I am very
sensitive to issues of market power with respect to
agglomeration possibilities. I believe the Antitrust Laws ought
to be applicable here, just as they are elsewhere in the U.S.
economy. It is about encouraging flexibility, and that is what
markets are all about.
Senator Lautenberg. If you use the real estate analogy, one
can build lots of very small apartments or very few very large
apartments. In this case, can the variety of services be given
outside the spectrum on a competitive basis, so that there
would be further inducement for serious competition? How do you
do it, for instance, cellular phone service?
Mr. White. Senator, if you think there is a buck to be made
in cellular, you would be able to go out, buy yourself a swath
of spectrum, and start offering cellular services. You wouldn't
have to go to Washington.
Senator Lautenberg. I can't do it on your property in the
real estate business.
Mr. White. Ah. But you can buy access to a certain wave
band over as big an area as you want. In fact, the new----
Senator Lautenberg. Buy it from the licensing?
Mr. White. Buy it from the existing license holders who may
be using it for something else and you say, ``Hey, do I have a
deal for you.'' (You can tell I am from New York City.) Do I
have a deal for you. Let me have access to your spectrum, etc.,
and you can start offering cellular service. We rely on markets
for much of our everyday life. We rely on markets in the way we
deal with real estate. We rely on the law of trespass to keep
neighbors out. We would rely on the law of trespass to keep
others out of your spectrum, but it could be a very wide,
nationwide swath of spectrum.
Senator Lautenberg. Mr. Chairman, as a courtesy to
colleagues, there is so much to ask here and so many people to
ask it from, but I will yield my turn now.
The Chairman. Thank you. Senator Pryor, you would be next
on the early bird list.
STATEMENT OF HON. MARK PRYOR,
U.S. SENATOR FROM ARKANSAS
Senator Pryor. Thank you, Mr. Chairman. Let's see. I would
like to start with the FCC if I could and I am sorry, is it Ms.
Seidel?
Ms. Seidel. Yes.
Senator Pryor. I would like to just ask about the E-911
Phase II that the FCC is working on. As I understand it, you
set a date in which the various carriers had to meet a 95
percent goal. A number of those carriers have asked for
waivers. They are close to the goal but some of them are not at
the goal yet. My question for you just practically is when will
the FCC rule on the waivers?
Ms. Seidel. The FCC does have a number of waiver requests
pending from Tier I, Tier II, and Tier III carriers. Tier III
carriers are the smaller and often rural carriers. It is a
priority for the bureau. E-911 deployment continues to be a
priority for the Commission and we are working quickly to be
able to provide the Commission with the information they need
to decide these waivers.
Senator Pryor. OK. So are we thinking that will happen in
the next few days? Few weeks? Do you have a timeframe?
Ms. Seidel. It would be difficult for me to say.
Senator Pryor. Now let me ask this, Ms. Seidel, and that is
about the wireless build-out rules and I know that there is--
basically, when you look at the wireless build-out rules, I
know they defer from service to service a little bit, but
generally they have a focus on population coverage rather than
geographic coverage. Has the FCC considered revisiting its
build-out rules to focus on geographic coverage to ensure more
build-out in rural areas?
Ms. Seidel. Certainly, the Commission does have
construction requirements and build-out requirements for the
various services and they do depend upon the nature of the
service and the geographic area of the license. Historically,
the build-out requirements have been based on population, but
as the market has evolved there have been some who have had
advocated build-out requirements based on geographic coverage,
or a use-or-lose approach. These are issues that were teed up
in a rulemaking proceeding by the Commission. We have received
a wide array of comments and those are being considered.
Senator Pryor. One thing I might suggest is the FCC could
consider such an approach where you consider more geographical
ramifications to that as a part of this analog spectrum being
returned. And that maybe there might be some rural build-out
that is auctioned off. But if I can ask the NTIA a question and
I am sorry, is it Mr. Kneuer?
Mr. Kneuer. Yes.
Senator Pryor. Mr. Kneuer, as you well know last year as a
part of the DTV transition, Congress basically told the NTIA to
execute a program that would provide necessary assistance to
certain TV households that will require additional equipment in
order to receive over-the-air digital. I am just curious about
when the NTIA rules will be established for that and if you
need any more guidance from Congress on that.
Mr. Kneuer. Well, the short answer is as quickly as
possible. The DTV Transition Act puts us on a very tight
timeframe, not just to get rules in place but to get forms of
financial assistance for set-top boxes out to the American
public and in sufficient time in advance of the transition.
That is rapidly coming upon us. So we are working diligently on
rules now or at least proposed rules that we will put to the
marketplace to answer those sorts of questions, defining who
are the eligible households, what are the characteristics of
the set-top boxes and so forth.
Senator Pryor. Are there any preliminary rules that are
available now, so we can get a progress report on that?
Mr. Kneuer. The draft rules should be out soon. We do not
have any preliminary rules out. The legislation was signed just
a matter of months ago, so we have been working on it
diligently since. I expect those rules to come out shortly, but
we don't have a preview of the proposed rules.
Senator Pryor. Mr. Kneuer, I am also concerned about user
fees with governmental spectrum and I am curious about
whether--if you take a user fee approach? If a Federal agency
like the Department of Defense or non-Federal agencies like
local law enforcement--local public safety might have to pay
user fees.
Mr. Kneuer. As a part of the President's Spectrum
Initiative, we have a task force working on a variety of
incentives for a more sufficient spectrum use for Federal
agencies. Included in that proposal is the possibility of
imposing fees that would recognize the value of the spectrum.
Currently, the agencies pay fees to NTIA based on the
applications that they process. That is basically just a
recovery of the administrative costs, the funding of the
agency. We are examining the possibility to extend fees in that
regard. With regards to state and local governments, they fall
under the purview of the FCC. The President's budget includes
fee authority for the FCC for non-auction services. I don't
believe that the consideration for that proposal will be
extended to state and local entities--that is for other non-
auctioned systems and non-auctioned licenses.
Senator Pryor. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Allen.
STATEMENT OF HON. GEORGE ALLEN,
U.S. SENATOR FROM VIRGINIA
Senator Allen. Yes, thank you, Mr. Chairman. The Wireless
Innovation Act that I introduced on a bipartisan basis with
Senators Kerry, Sununu, Boxer and Dorgan. I know the Chairman
introduced a measure as well on this, is very important, in
that we want to unleash the power of advancements in technology
and innovation to develop wireless broadband to areas that
presently don't receive it, particularly in rural areas, where
as my friend from Montana says there is a lot of dirt between
light bulbs. It will be more affordable and as this part of the
spectrum that is unused goes forward after the switch from
analog to digital, we ought to utilize it as best we could. For
example, in Richmond it is estimated that 64 percent of the
spectrum allocated to broadcast television use in Richmond will
be vacant and unused after February 2009. Let me ask this
question and I will address it to Mr. Kahn and Ms. Kenney. We
had this plethora of witnesses. We introduced this because we
do believe it is the most robust and efficient use of this
particular unused spectrum. We believe it will lead to rapid
innovation and result in many benefits to consumers. I do want
to talk about interference, but could you elaborate, Mr. Kahn
and Ms. Kenney, on what you would see as the benefits? The
benefits from this to American consumers, if this legislation
became law.
Mr. Kahn. OK, I guess I will try it first. Certainly, we
see two major places where there are benefits. First--and we
tend to categorize them as the sort of so-called higher power
uses of that spectrum and the lower power uses of that
spectrum--the higher power uses of the spectrum really are the
broadband services, the broadband access ability. I think a
number of people have observed the paucity of broadband
availability or uptake by U.S. consumers versus some other
parts of the world. Part of the problem, of course, is the cost
of making broadband available in a relatively low-density
environment. Even when you get out into the more distant
suburbs of the metropolitan area, low-density starts to be an
issue--it is the amount of cost of running a wired
infrastructure. Wireless is very attractive for that. You have
a very natural sort of way to expand your capacity as you get
more people taking it, which tends to argue that you get a
somewhat incremental investment path. Your coverage areas are
relatively large, given the right spectrum. So, the ability to
actually get a good broadband service out there, particularly
in the lower-density parts of the country, would be greatly
enhanced by using this very good quality spectrum. Not all
spectrum is created equal. This happens to be some very good
quality spectrum.
The other place is the low power uses. You only have to
look as far as all of the electronic devices people are
carrying and putting in their homes today to see that there has
been an explosion in innovation around new capabilities for
people to utilize radio-based devices. All those devices also
benefit; they are much lower power. The trade offs are
different when you get into things like the sensing issues we
talked a little bit about. But again, an enormous potential for
new applications for the average consumer, again very cost
effective price points because we know how to build this stuff
very cheaply.
Senator Allen. Ms. Kenney.
Ms. Kenney. Thank you. Well, I think Mr. Kahn summarized
the technological benefits of unlicensed devices in the
broadcast band. One thing I would like to point out is that the
nature of unlicensed allows providers, whether they be
communities or entrepreneurs trying to make a profit, to use
low-cost, off the shelf technology. Because of the propagation
characteristics of the spectrum within the broadcast band, you
need fewer transmitters. So, you have got lower cost equipment
available to you, and with this spectrum available, providers
will need less of it. So, that allows a provider to offer a
very low cost service to consumers. Right now broadband is
available at $30, $40, $50 per month. Some have estimated with
unlicensed devices in the broadcast band, we could see
broadband service available for as little as $10 per month,
which would be significant for those consumers who have access
to broadband but simply can't afford it.
Senator Allen. Good. I have 5 seconds. On our interference
matters, Mr. Kahn, Ms. Kenney, if you would, do you believe the
requirements that we have put in our legislation, the
Chairman's bill is fairly similar, do you believe those
requirements are sufficient to alleviate any interference
concerns?
Mr. Kahn. Absolutely. First of all, any equipment that goes
into the service is going to be certified by the FCC. They have
a pretty stringent certification process. They will work the
technical issues around the details of this.
Second of all, the interference, as I said in my comments,
for the high power people, you know where you are putting these
transmitters. You know that there isn't a television station
within reasonable distance of that. That is an easy one. For
the low power devices, we have very credible ability to do
sensing. Just to give you some analogy there that may be
helpful for the non-engineers (I know most of you aren't): You
know sensing is not about being able to hear the TV station, it
is about being able to hear the fact that it is there. This is
the difference between looking across the room and knowing that
some people must be talking because you kind of hear some
noise, versus being able to understand what they are saying. It
is much easier to know there is noise, and that is all you have
to know to get out of the band. It is much harder to know that
you can decode it. So, our ability to sense the presence of TV
channels, this is not a technically overwhelmingly difficult
challenge. It is very feasible stuff with the FCC, technical
diligence, absolutely. We have no interest in seeing television
stations harmed. It is not in our interest or anyone else's.
Ms. Kenney. If we had any concerns that interference with
television reception for over-the-air-reliant households would
be a problem with unlicensed broadband in this spectrum area,
we couldn't support this proposal. But we have listened to the
experts, we have looked at the evidence and with the
protections in your bill and Senator Stevens' bill, we feel
confident interference will not be a problem.
Senator Allen. Thank you all. Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Burns?
STATEMENT OF HON. CONRAD BURNS,
U.S. SENATOR FROM MONTANA
Senator Burns. Mr. White, I want to activate you again.
Under your system now, you are calling for, I would imagine a
quasi privatization of spectrum. Am I hearing you wrong?
Mr. White. I really want to stay away from the word
privatization.
Senator Burns. I know. I should have too.
Mr. White. There is plenty of room for government use and
holding of spectrum. We can have greater efficiency in its use,
but there is lots of room for government use.
Senator Burns. Now, once we secure a piece of spectrum now,
don't we have property rights over that spectrum?
Mr. White. Well, if you are channel 4, yes, you have some
rights, but you can't just sell it to anybody. You need the
FCC's approval to be able to sell it to somebody. You can't
change your use. You can't decide that, ``Maybe using it for
cell phones, for AWS, might be a better use of that spectrum.''
You can't do that right now. So, yes, there is a set of rights.
They are defined by the FCC, but they are not the way we would
think--again thinking real estate is really useful. They are
like real estate.
Senator Burns. Do you think that spectrum is a national
resource?
Mr. White. So is all 3 million square miles of land in the
United States, and yet we rely primarily on private ownership.
Again, there is room for government ownership, for national
parks, for local parks, of course. We rely primarily on private
ownership to think about how land ought to be allocated,
whether you ought to be growing wheat on it or corn or using it
for housing or using it for automobile assembly plants. Those
are private decisions. You do have to worry about some
harmonization. You don't want a glue factory going up right
next to a residential neighborhood. So there are some neighbor
issues, but primarily law of trespass, law of nuisance, can
help deal with those problems. One of the ironies is that the
advocates of spectrum commons see agile radio, cognitive radio,
as one of the great advances that will make a spectrum commons
more feasible. But it will also make propertization more
feasible because if you wanted to aggregate spectrum to offer
cellular services, you don't have to worry about a holdout
problem--perhaps that Senator Lautenberg is holding this choice
piece of spectrum and without it, you can't offer the service
with cognitive radio. Your receivers and your transmitters will
be able to skip around. There are other suitable pieces of
spectrum that will work for you. You get competition out there.
Senator Burns. Thank you very much. I have another
appointment. I thank you for your explanation of that.
Mr. White. Thank you.
The Chairman. Thank you. Let me start back with you, Mr.
Kneuer. I seem to hear you say that you are looking at the
concept of allowing agencies that have spectrum, that are not
using it, to lease or to--I guess lease would be the idea--do
you think you have that authority now?
Mr. Kneuer. Well, I think the concept of allowing agencies
to lease their excess spectrum, to the extent they have any, is
something that is captured within a lot of the different issues
that we are looking at.
The Chairman. That is not my question here. Do you think
you have got the authority to do that without an act of
Congress?
Mr. Kneuer. That may require legislation.
The Chairman. I hoped you would say that.
Mr. Kneuer. It is not a proposal that we currently have
formulated.
The Chairman. I would hate to see the NTIA start competing
with FCC in terms of spectrum sales or leases. I think there
should be one national system. I would not like to see that
start. I would be pleased to work with you on whether or not it
should take place, however. I think there is no question about
it. The agencies that have spectrum that do not fully utilize
it should consider how to use it right. I would think that it
would be a job for the FCC to add it to their spectrum sales. I
would like to see the FCC start thinking about the concept of
how to get some temporary use of spectrum that government
agencies have and they don't have the capability of using it. I
think it ought to be made available for use until the agencies
can fully utilize it. Mr. Kahn, how long will it take you to
develop, not you but anyone, but I assume you would be involved
in it, to develop these personal, mobile, unlicensed wireless
devices? I assume that you are confident you can prevent
interference. By the way, this is a stupid question but what is
it going to do to my garage door or someone else's heart
monitor?
Mr. Kahn. It should not do anything to any of those. Not a
stupid question.
The Chairman. Your devices would take into account these
problems?
Mr. Kahn. Yes. The industry has shown it can move pretty
quickly on these kinds of things. If you look at the history of
any of the other unlicensed devices, you know, you are
typically talking about a couple of years of standardization
and development time. You will see early movers that get
product into the market very quickly, within 12 months. Often,
they call it pre-standard, while the industry is still working
out agreements on what the standards really should look like.
You will see those things evolve to be standardized.
The Chairman. Those devices would be distance sensitive?
Mr. Kahn. I am sorry?
The Chairman. They would be distance sensitive? I mean what
if someone from the rural area comes into town and wants to use
their device?
Mr. Kahn. Oh, well. The proposal here, at least the one
that I think is the most reasonable, is that the devices
themselves are responsible for sensing the spectrum. So, you
could take one of those devices and wherever you take it, the
first thing it does is it scans the available channels to find
one that is not in use. I mean if you take a device, you use it
in Anchorage and there are a lot of vacant channels up there.
So it picks one that is open. You go to Salt Lake; it will go
to a different channel. The first thing it is going to do is
find an open channel. The whole design and certification
process is designed to guarantee that those devices settle on
channels that are not otherwise in use. In that sense, they are
aware of the environment that they are operating in. I don't
know if I answered your question.
The Chairman. Yes, it does. I didn't realize the impact of
that, searching for the channel. Ms. Hecker, do you think we
should have a comprehensive survey of spectrum use nationwide
and would that assist us in terms of the reform? If we do that,
what role would the private spectrum users play in that survey?
Ms. Hecker. Well, as I mentioned, we have two
recommendations. One was for FCC and NTIA to get together to
have a comprehensive government plan that would include an
inventory. The other recommendation, actually, was for a
commission that would be much more broadly based dealing with
all of the users, the range of public users, private users, as
well as the government agencies at different levels of
government. The idea of that kind of commission would be to
recognize what we have today is really almost a numbingly
complex issue and set of issues and that what really is needed,
given the absence of clear consensus and the range of views, is
to have that kind of comprehensive independent commission
really look at the use and opportunities for improvement in the
use of spectrum. The status quo in our view is not sustainable.
Substantial reform is needed but there isn't really yet a clear
consensus and that kind of commission would have the
opportunity to represent the Congress and the range of public
and private users on a new agenda.
The Chairman. What timeframe would that commission have to
report in? What are you looking at? What would you suggest?
Ms. Hecker. We never had a specific recommendation. Big
commissions in the past often have 18 months to 2 years. A lot
of it would depend on the depth of the agenda, that the
Congress, if they formed such a commission, provided to the
group, how it would be staffed, and what kind of outcomes.
Would it not only identify what kinds of reforms we needed but
I think as the DACA report, would it have the transition plans
of exactly how to get there? And also would it address what
kind of institutional reforms might be needed as we believe
ought to be considered in the current structure of spectrum
management bifurcated between FCC and NTIA?
The Chairman. Mr. Walsh, could you tell us if national
spectrum licenses are issued to a company, should it be
required to use the spectrum in rural areas or lose it?
Mr. Walsh. Yes, Chairman. The RCA's position on that is
that we feel that spectrum lying fallow should be used. So our
position is that if spectrum is unused that it should be able
to be turned back into the FCC and be able to have an auction
and have those parties that are interested in that particular
piece, take advantage of that.
The Chairman. Ms. Seidel, do you currently keep track of
whether or not spectrum is used?
Ms. Seidel. The Commission does have build-out requirements
and construction requirements, which enable us to keep track to
some extent. In addition, there have been spectrum audits in
the past. Most recently, I think it was in the paging arena
where the Commission did seek information about what licenses
were being used and the extent to which they were.
The Chairman. Do you make that information available to the
public?
Ms. Seidel. I think I will have to get back to you on that
question to make sure I give you a complete answer.
The Chairman. Would you favor this commission that Ms.
Hecker speaks of?
Ms. Seidel. I really couldn't provide you with the
Commission's view on that.
The Chairman. Mr. Sugrue, do you think spectrum reforms
would help lower the price of wireless broadband and help
ensure that that service could reach rural high cost areas?
Mr. Sugrue. Oh certainly. While I addressed my remarks to
getting the auction--that's scheduled in 4 months to take
place--I want to align myself with a lot of the progressive
thoughts on spectrum reform across the table here. Anything
that lowers the opportunity costs of obtaining spectrum and
makes it available to be used more efficiently would do that.
For rural areas, I would also say the 700 MHz auction, which is
scheduled now to take place in January 2008, the propagation
characteristics of that spectrum are very, very good for rural
areas. Much better, for example than the AWS or the PCS
frequencies. As a carrier that doesn't have any of that lower
band spectrum we look forward to the availability of that as an
opportunity to move in an efficient fashion in some areas of
the country that we are not now.
The Chairman. Thank you. Mr. Hubbard. Can you estimate how
much it would add to the cost of DTV set top boxes if they
could warn of the nearby-unlicensed wireless devices? Do you
understand what I am saying? Can we add to those boxes this
warning capability so that they would know unlicensed wireless
devices and would not be interfered with?
Mr. Hubbard. I don't know the answer to that. I am not in
the business of making television sets, but I do know that many
CE manufacturers, and actually I would request that this letter
is submitted into the record, * from consumer electronics
manufacturers who are expressing this grave concern over
interference issues. The second question is what do you do with
existing sets? What do you do with existing equipment that is
out there? There are millions of sets that are already in
existence, so even if you could make a new rule that protected
something moving forward, you still have the legacy issue which
would need to be considered.
---------------------------------------------------------------------------
* The information referred to is printed in the Appendix.
---------------------------------------------------------------------------
The Chairman. Do the rest of you agree that the older sets
could be affected by these devices we are talking about? Mr.,
Kahn, what do you think?
Mr. Kahn. No, I think our position is pretty clear that we
don't want to be transmitting even with low power radios on
occupied television channels. The goal here is not for the TVs
to put up with interference generated by these devices. The
goal here is that the devices are on a different channel. So,
we honestly don't see that as the issue. As I said before, we
have interest in television as well. I mean we are seeing
increasing pressure from our customers who want to put TV
receivers on all their laptops and PCs. So, the idea of getting
good over-the-air television is important to Intel. We have no
desire to see that corrupted in any way. Our position is that
it is extremely feasible to operate on channels that are not
utilized in a given marketplace. When you do that, you are not
interfering with the reception on any television, old or new.
So the issue here is can you identify the channels that are not
in use. Anywhere you go you are going to find channels not in
use, more in the rural areas, fewer in the high density metro
areas, but nevertheless even in the high-density metro areas
there are lots of channels not in use. Then utilize those
channels with very low power devices.
The Chairman. Thank you. Ms. Kenney. To the Consumers
Union, what is the most important item in this spectrum reform
concept we are dealing with?
Ms. Kenney. The most important thing that this Committee
could do would be to pass legislation comparable to that, which
you have introduced, on the TV ``white spaces'' and Mr. Allen's
bill. They are very similar, and have similar goals.
The Chairman. Do you foresee any possibility that people
could use that ``white space'' to the extent where they build
up considerable income? They are still not paying anything at
all for that use. That is your suggestion, isn't it? That there
would be no charge in that ``white space?'' Right?
Ms. Kenney. Yes.
The Chairman. My bill contemplates that, but what if
someone does develop just a significant income from that
``white space'' spectrum? Should they pay something for its
use?
Ms. Kenney. Well, the beauty of unlicensed spectrum is that
a lot of people can compete within that same space. We
certainly don't have problems with people making money by
offering valuable consumer services.
The Chairman. But you are assuming it is only going to be
used in one area, aren't you?
Ms. Kenney. You could have multiple players operating
within the same market.
The Chairman. What about one player operating in many
markets for that ``white space''?
Ms. Kenney. Well, certainly if that is what is required to
offer a competitive service to the dominant wireline providers,
I am not sure we would have a problem with that, as long as
others are allowed to use that space as well.
The Chairman. Mr. White, I have not ignored you. I just
want you to know I hope once we get through this bill, I hope
we can find a time to explore your suggestion. But I don't
think we can put that in this bill at this time. I hope you
realize that.
Mr. White. Thank you, Senator. Yes. I realize that, but we
hope that we are getting people to think creatively and start
understanding the logic of the position of propertization and
markets in spectrum and that next time a major piece of
legislation is considered the role of propertization and
markets can be the center of that legislation.
The Chairman. I recall when my good friend from Hawaii,
Senator Inouye and I were able to finally get the spectrum bill
passed and signed by the President. I called the then-Chairman
of the FCC and asked him if they had a program at the FCC for
bonuses to people who made suggestions that brought in
additional funds for the government. He said, ``yes, they did,
but why was I interested?'' I said, ``Well, the President just
signed that bill.'' He didn't think it was funny.
[Laughter.]
The Chairman. I did. I kind of played the same problem with
you, though. How could you--that is why we want to have a
hearing on your booklet and go through it. It is a good
suggestion but to get from where we are now to there
nationally, it is equivalent of changing from one type to
another. I don't know how you can take this system and transit
to your system without serious disruption in communications
right now. So we want to hold a hearing and I am sure other
people would like to explore that too, but I just have to tell
you, it is too much I think to ask us to be involved in that in
this bill.
Mr. White. I understand.
The Chairman. I thank you for coming. My last request of
all of you is if you think of something that you think we
should have heard today, that relates to this problem we are
dealing with on ``white spaces'' or spectrum reform, we invite
you to send us--not another letter like the one I just got from
you, Mr. Hubbard. I think that is going to take me a little
while to read, but a short letter. We would welcome your
additional comments on what we ought to do in this legislation.
I thank you all very much. I thank the witnesses on the first
panel who have been willing to stay and respond to the
questions that my colleagues and I have had. We do appreciate
your courtesy in appearing here today. Thank you very much.
[Whereupon, at 11:50 p.m., the hearing was adjourned.]
A P P E N D I X
Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii
Last week, this Committee examined the communications challenges
facing rural America and tribal lands. Unlicensed wireless technologies
featured prominently in that discussion. If given the opportunity,
unlicensed technology could very well be a low-cost means of delivering
high-speed Internet services to remote areas.
In a world that has become dependent upon the instantaneous
exchange of information, high-speed Internet access is quickly becoming
a necessity. It is not an option to leave portions of our country
behind. If our rural communities are going to have any hope of
competing in a global marketplace, they will need to have access to
broadband services. It is that simple.
Similarly, we need to put forward a far better effort to reach
these same remote areas with cellular phone signals as well. As we work
to deploy broadband, we cannot overlook the fact that many parts of
rural America lack robust cell phone service.
There have been efforts to ensure that highway travelers do not
lose service as they cross the country, but sadly, wireless providers,
in many cases, fail to provide similar access to nearby rural areas,
which is critical for public safety as well as economic development. I
am hopeful that we can find ways to resolve this as well.
______
Prepared Statement of Shure Incorporated
I. Introduction and Summary
Shure Incorporated (Shure) is the leading manufacturer of wireless
microphones and other high-quality audio products. As a well-known
international innovator in high-quality audio products with over 80
years experience, Shure welcomes this opportunity to offer its
expertise and real-world perspective on important interference concerns
raised by proposed changes to the uses of the ``vacant'' TV spectrum.
Under Part 74 of the Federal Communications Commission's (FCC)
rules, Shure's wireless microphone products operate as low power
broadcast auxiliary stations. Broadcast auxiliary services are licensed
services operating on a secondary basis in the limited amount of open
spectrum not used by television broadcast stations in any given market,
the so-called ``white spaces.'' Despite the moniker, the ``white
spaces'' are not ``white'' or vacant. Numerous important services
currently use the ``white spaces.''
In 2004, then-FCC Chairman Michael Powell initiated a proceeding
aimed at opening the ``white spaces'' within TV spectrum to use by
unlicensed devices. The FCC asked whether unlicensed devices could
coexist in the ``white spaces'' with incumbent services such as
wireless microphones. \1\ Shure and other companies demonstrated that
the FCC's proposal would cause harmful interference to wireless
microphones and other important services. This interference will
disrupt communications important to the American public, including
newscasting, sportscasting, religious broadcasting and entertainment
programming.
The variety of incumbent services in the ``white spaces'' presents
complex and unprecedented interference cases. There is no proven
interference solution available today that allows unlicensed devices to
share ``white spaces'' with incumbent services. ``Smart'' technology is
an intriguing concept that perhaps eventually could be developed into a
reliable tool for resolving interference issues in certain situations.
Shure supports the continued hard work and substantial development
manufacturers in that field that will need to pursue to realize the
full promise of ``smart'' technology. However, it is critical that
today's spectrum management policy is grounded in real-world, tested
interference solutions and not on the mere promise of technologies
hoped to be developed in the future. The stakes are too high to
speculate. Harmful interference caused by permitting new unlicensed
devices to operate in this occupied spectrum today will harm American
consumers and businesses who rely on high quality transmission of news,
sport, religious, entertainment, and business events and programming.
Notwithstanding these significant unresolved interference issues,
the two bills under consideration (S. 2327 and S. 2332) mandate that
the FCC conclude its ``white spaces'' proceeding in 180 days and allow
unlicensed devices to occupy this limited spectrum under certain
conditions. The goal of these bills is to promote wireless broadband
access, particularly in rural areas. Shure is concerned these bills
impose unreasonable deadlines for FCC action and do not adequately
account for the serious interference issues presented by unlicensed
device operation in this spectrum. The public interest would not be
served by unlicensed devices that cause crippling interference to
licensed services.
The purpose of this statement is to explain Shure's concerns and
the technical hurdles that must be cleared before any ``white spaces''
proposal can reasonably move forward. Industry experts are currently
studying these complex interference issues. These experts should be
allowed to do their job and develop proven interference solutions
before unlicensed devices are permitted to run roughshod over important
licensed services. Finally, at a minimum, proposed legislation must be
amended to make clear that (1) wireless microphones are an incumbent
service entitled to protection from interference; and (2) unlicensed
devices will not be permitted access to the ``white spaces'' until
proven technical solutions adequately prevent interference from
unlicensed devices to all incumbent services.
II. Wireless Microphones Are Vital to High-Quality Broadcast
Productions
Wireless microphones are essential to today's high-quality
television and motion picture productions. Wireless microphones are
used by the news industry, by sports and entertainment groups, and by
religious organizations. Wireless microphones allow on-the-spot
coverage of breaking news stories, providing the American public with
critical and sometimes life-saving information. They enable
unparalleled access to sporting events, making viewers feel as though
they are part of the action. Wireless microphones are used at the
Nation's political conventions to bring full coverage to all points of
view. Wireless microphones enhance religious broadcasts, enabling
worshippers to practice their faith in richer, more enjoyable ways. The
American public relies on wireless microphones to deliver these
exciting and innovative communications. \2\ In short, wireless
microphones enable modern broadcast productions.
III. Introducing Unlicensed Devices to the ``White Spaces'' Without
Proven Interference Solutions Would Devastate Wireless
Microphones
Shure conducted an extensive technical analysis to determine
whether wireless microphones could coexist with unlicensed devices,
based on the technical parameters proposed by the FCC. Shure conducted
dynamic ``real world'' testing to simulate an unlicensed device
operating on the same channel in the presence of a wireless microphone.
Shure proved that wireless microphones were rendered virtually useless
in the presence of unlicensed devices. Crystal clear reception from the
wireless microphone quickly began to drop out, and then degenerated to
the point that the wireless microphone turned off completely. Last
month, Shure also conducted its simulation for House and Senate staff
to demonstrate the severe consequences of harmful interference.
Hallmarks of wireless microphones are their superior sound quality
in real-time applications. In order to deliver the high level of sound
quality and reliability that users expect, wireless microphones must
operate in a known, stable interference environment. Unlicensed devices
would disrupt that environment and make it inhabitable for wireless
microphones. This is because there are no ``second chances'' for
wireless microphone transmissions--you can ask someone to repeat what
they said on a cell phone or to resend an e-mail, but you can't ask
someone to re-sing the National Anthem at the Super Bowl. \3\ Once
interference occurs, the damage is done.
IV. Unlicensed Devices Also Present Serious Risks to Other Licensed
Services and Devices
Unlicensed devices present serious interference issues not only for
wireless microphones, but also for a wide range of other important
services operating in the ``white spaces'' including other existing
broadcasting services, public safety services, law enforcement
services, medical telemetry devices, and low power and TV translator
stations.
The broadcast and consumer electronics industries fear that
allowing unlicensed devices as proposed by the FCC would wreak havoc on
the DTV transition. \4\ The ``cliff effect'' of DTV means that it is an
all-or-nothing technology, interference and loss of service means not
just a poor picture, but no picture at all. Numerous consumer
electronics manufacturers caution that ``[a]s a matter of science and
engineering, there is no question that the potential exists for
interference from unlicensed wireless devices to the operation of
digital television receivers and set top boxes.'' \5\ These
manufacturers warn that ``[u]nduly hasty action in establishing the
rules and parameters for the operation of unlicensed devices could
seriously disrupt the digital television transition for millions of
Americans and taint the roll-out of unlicensed devices.'' \6\ These
respected manufacturers at the center of the DTV transition ``urge the
Congress to do nothing that would imperil or disrupt the DTV
transition, including the authorization of new services which would
cause interference with television signals.'' \7\ Knowingly introducing
interference without proven means to mitigate it needlessly threatens
long-standing Commission and Congressional goals to institute DTV
service.
The risks are not limited to DTV service. Set top converters used
for cable and satellite reception, along with other consumer products
connected to TV sets, are also vulnerable to interference from
unlicensed devices.
Rural television reception is also in jeopardy if unlicensed
devices enter the ``white spaces.'' \8\ Millions of people in rural
areas live outside the so-called Grade B contours of broadcast stations
and rely on broadcast service from low power television stations and
translators. There is no protection for service outside the Grade B
contour, exposing these viewers to harmful interference that would
suddenly eliminate their television reception. This is especially
unfair because over-the-air television is the primary source of
emergency information and quality of life information available to
rural America, a need unfulfilled by satellite television with its
limited local channel offerings. \9\
Public safety also operates on several channels in the so-called
``white spaces.'' Such operations are typically mobile and itinerant--
very similar to wireless microphones--making public safety devices very
difficult to protect from interference. \10\ Medical telemetry devices
operate in ``white spaces'' from channels 7-46. \11\ These devices are
used to monitor cardiac patients. Clearly, interference to public
safety or medical telemetry applications risks health and safety and
could have devastating consequences.
V. The Interference Issues Are Extremely Complex and Require Time to
Resolve
In light of the substantial and widespread harm interference would
cause, the key to moving forward is developing proven interference
solutions that prevent interference and adequately safeguard the
variety of spectrum uses in the ``white spaces.'' The range of ``white
space'' incumbents further complicates this charge. Broadcasters
transmit from fixed locations at very high power levels and should not
be very difficult to detect. However, wireless microphones operate
itinerantly at very low power and are therefore very difficult to
detect. Viable technical solutions must be capable of detecting both
types of devices to avoid widespread interference to millions of
Americans. Although ``smart'' technology has been touted as a viable
technical solution, as described below, no ``smart'' technology exists
today that has been proven to remedy interference in the ``white
spaces.''
The FCC's ``white spaces'' proceeding demonstrates that (1)
unlicensed devices would interfere with incumbent services, and (2) no
proven technical solution exists to protect incumbent services. The FCC
asked industry to work together on these complex technical issues to
develop solutions. IEEE, the world's foremost association of electrical
engineering and wireless networking experts, \12\ established a working
group (802.22) to study the interference issues resulting from fixed
installations of unlicensed devices in the ``white spaces.'' \13\ IEEE
is a neutral, impartial forum for consideration of technical solutions.
Shure is an active 802.22 working group member. The experts at IEEE
must be given adequate time to complete their important work to assure
that the American public will not be subjected to widespread
interference.
VI. ``Smart'' Technology Is Far From Ready
There is a widespread but erroneous perception that ``smart''
technology is currently able to resolve ``white space'' interference
issues. This is not true. ``Smart'' technology goes by a variety of
names--spectrum sensing, cognitive radio, dynamic frequency selection
(DFS), and listen-before-talk. A form of ``smart'' technology
eventually may be developed and tested to resolve the ``white spaces''
interference issues, but nothing proven exists today for the ``white
spaces.'' As discussed below, ``smart'' technology is untested and has
not been proven to remedy ``white space'' interference issues. Further,
experience shows that testing ``smart'' technology to make sure it
works as intended stands to be a lengthy, time-consuming process.
A. The Unlicensed Device Community Glosses Over Serious Interference
Issues
The unlicensed device community has not advanced any technical
solution to prevent harmful interference to licensed wireless
microphones, despite the extensive FCC record demonstrating that
unlicensed devices will, in fact, cause such harmful interference. As
Shure has emphasized, the wireless microphone case is particularly
vexing, with no ready solution. Unlicensed device proponents also
underestimate the potential for harmful interference to television
reception. Congress cannot let the unlicensed device community's zeal
to gain access to the ``white spaces'' substitute for sound engineering
judgment and proven interference solutions.
Importantly, unlicensed device proponents acknowledge that before
any new unlicensed devices could be deployed in the ``white spaces,''
the devices would have to go through the FCC's certification process,
through which the device manufacturer will have to demonstrate that the
device meets the technical requirements set forth by the FCC for
unlicensed device operation in the ``white spaces.'' The precise FCC
procedure is still uncertain because those technical requirements are a
long way off. It will take the FCC, with the help of IEEE, substantial
time to finalize those technical requirements because complex
interference issues must first be resolved.
B. Other Attempts to Introduce ``Smart'' Technology Have Encountered
Substantial Delays
On November 18, 2003, the FCC authorized use of DFS-equipped
unlicensed devices in the 5 GHz band so long as they did not cause
interference to the existing incumbent users--including Department of
Defense (DOD) radar systems. \14\ The DOD, the National
Telecommunications & Information Administration (NTIA) and the FCC
(together, the ``Coordinators'') then initiated a joint testing effort
to establish approval procedures for DFS-enabled unlicensed devices.
Despite substantial efforts by the Coordinators, there have been many
setbacks and, to date, there is still no published testing plan for
unlicensed devices.
The original date for the submission of a final testing plan for
devices capable of operating unlicensed in the 5 GHz band was January
17, 2005. \15\ On February 23, 2005, however, the FCC extended testing
for the 5 GHz band for one year stating that ``[t]he industry and the
Federal Government have found the implementation of DFS to be more
complex than originally envisioned.'' \16\ These delays have been
caused by the very fundamental problem that ``smart'' technology is
designed to solve--ensuring that DFS-equipped devices properly
acknowledge occupied frequencies and do not transmit over them. Initial
testing conducted by the Coordinators evidenced serious problems.
Describing the performance of the initial devices the NTIA stated that
``[o]verall, between all the manufacturers the radar detection
capabilities of the devices tested were moderate at best and the radar
detection was highly dependent upon the RF loading of the channel.''
\17\ Later tests resulted in the DFS-equipped devices not only
detecting simulated DOD radar transmissions, but also falsely detecting
``radar'' transmissions emanating from other low powered unlicensed
devices. \18\ This oversensitivity resulted in the DFS-equipped devices
effectively disabling themselves during testing so as not to transmit
over perceived higher priority signals. Further reports fail to clarify
whether the Coordinators have been successful making the devices
sensitive enough to detect radar and other priority transmissions
without disabling themselves when other negligible radio frequency
transmissions are detected. The FCC recently extended testing for
another 180 days on February 16, 2006, stating that the ``Commission,
[NTIA], and the U-NII [unlicensed] equipment industry are continuing to
work together to develop test procedures to ensure that DFS adequately
protects most Federal Government radar systems. . . .'' \19\
Significantly, this example shows the difficulty of implementing
``smart'' technology in what should be a relatively easy case--spectrum
occupied primarily by a single high-powered incumbent. The ``white
spaces'' present a much more complex problem because there are numerous
incumbents in the band--both fixed and mobile--with widely divergent
technical characteristics. An extensive testing effort will be required
to ensure that unlicensed devices are capable of detecting and
preventing interference to incumbent users.
VII. Concerns With Proposed Legislation
In light of these harmful interference issues and the lack of a
proven technical solution, Shure has several concerns about moving
forward with ``white spaces'' legislation. It is unclear whether there
is adequate ``white space'' spectrum to support meaningful broadband
deployment, particularly in urban areas. It is questionable whether a
new strong wireless broadband competitor is likely to develop based on
use of unlicensed spectrum. Finally, if Congress decides to proceed
with ``white spaces'' legislation, specific amendments to the proposed
bills are essential to protect existing services.
A. There Is Little ``Open'' Spectrum, Particularly in Urban Areas
Congress should be wary of claims that large amounts of ``white
space'' spectrum exist. Shure's professional wireless microphone users
often have difficulty finding sufficient ``white space'' spectrum for
large scale productions. Large events like the national political
conventions or the Super Bowl have 300 or more wireless microphone and
audio systems in simultaneous operation. These large productions
already require more ``open'' television spectrum than is currently
available. In addition, after the DTV transition, wireless microphones
will have even less spectrum for their operations as they lose access
to channels 52-69. This will exacerbate the congestion issues wireless
microphones already experience. If wireless microphones have difficulty
finding open spectrum for their operations, it calls into question how
much spectrum will be available for unlicensed devices.
Moreover, low power television stations and TV translators are
still in the process of being assigned their DTV channels, which will
further crowd broadcast ``white spaces.'' Most of these allocations are
expected to occur in rural areas, reducing the amount of open spectrum
that will ultimately be available there.
Finally, Shure notes that spectrum utilization studies can be very
subjective and may reach widely divergent conclusions regarding the
amount of open spectrum in any given market. Consumers Union's
testimony cites large percentages of ``unused'' broadcast spectrum in
various markets that presumably could be used to support unlicensed
devices. \20\ A TechWare, Inc. spectrum analysis, however, indicates
there is substantially less spectrum available. \21\ Congress must
carefully consider extravagant claims of unused broadcast spectrum.
B. Unlicensed Spectrum Is Not the Best Vehicle to Promote Broadband
Deployment
Shure also questions whether allowing unlicensed devices in the
``white spaces'' is the best means to meet Congress' goal of increasing
broadband deployment, especially in light of the widespread
interference unlicensed devices may cause to existing services.
Regulating radio frequency bands under a ``commons'' (i.e., unlicensed)
regime historically results in an inefficient use of spectrum as a
result of overcrowding and device interference (sometimes referred to
as ``the tragedy of the commons''). Past attempts to implement such a
regime demonstrate how the results fall short of new unlicensed users'
expectations, and foreshadow potential harm to existing licensed users.
Experience demonstrates that allowing unlicensed access to spectrum
results in over-crowding and the inevitable demand for more spectrum.
Congestion at the unlicensed 900 MHz band resulted in the FCC opening
the 2.4 GHz band for unlicensed use. \22\ Subsequently, crowding and
interference in the 2.4 GHz band led the FCC to open 300 MHz in the U-
NII 5 GHz band. \23\ The proponents of an unlicensed regime argue that
technological advances will allow unlicensed devices to share spectrum
without causing unwanted interference, but current industry reports
suggest that interference in unlicensed bands remains a problem that
current and pending technological advances cannot overcome. For
example, WiFi hotspots in the 2.4 GHz band can cause direct
interference for other nearby hotspots. \24\ What results is network
unavailability, reduced network throughput, or occasionally, the
network user inadvertently jumping between two competing hotspots. \25\
These interference issues would be exacerbated in urban areas where
there are few, if any, ``white spaces,'' and unlicensed devices would
be forced to share a very small amount of spectrum. \26\
These lessons of past unlicensed deployments call into question
whether opening the ``white spaces'' to unlicensed devices will best
promote broadband penetration. Further, there are no mandatory buildout
obligations associated with unlicensed spectrum. If ``white spaces''
are opened nationwide, what is to keep companies from ``cherry-
picking'' and serving only urban areas? Absent buildout requirements,
areas which are unattractive economically to serve stand to remain
unserved, even in an unlicensed regime. Thus, it is uncertain whether
Congress' goals will be met by pursuing an unlicensed allocation of
this spectrum.
C. If Proposed Legislation Moves Forward, Important Amendments Are
Needed to Protect Incumbent Services
If Congress concludes to move forward with ``white spaces''
legislation notwithstanding these concerns, additional safeguards are
needed to protect incumbents. Although ``white spaces'' legislation is
premised on unlicensed devices not causing interference to existing
broadcast services, \27\ additional protections are necessary to avoid
the unintended consequence of unlicensed devices causing harmful
interference to wireless microphones.
1. Wireless Microphones Are an Incumbent Broadcast Service That Is
Entitled to Interference Protection
Both bills propose to protect ``incumbent licensed services'' from
interference. Pursuant to Part 74 of the FCC's rules, wireless
microphones are authorized secondary users of the broadcast band. \28\
Thus, they are an incumbent licensed service. Shure requests
clarification that wireless microphones be included as an ``incumbent
licensed service'' that is entitled to interference protection.
Further, S. 2332 directs the FCC to establish procedures to address
complaints of harmful interference from licensed broadcast stations. As
stated above, wireless microphones constitute licensed broadcast
stations in the FCC's broadcast auxiliary service. To the extent
proposed legislation requires the FCC to address interference
complaints only from certain classes of users, wireless microphone
users must be entitled to have interference complaints heard at the
FCC. \29\
2. Unlicensed Devices Must Not Be Permitted Access to the ``White
Spaces'' Until There Are Proven Interference Solutions
Both bills specify a 180-day deadline for the FCC to issue an order
setting forth rules and procedures to open up the ``white spaces'' to
unlicensed devices. Shure is concerned that this may be construed not
only as a deadline for FCC action, but also as the date on which
unlicensed devices are authorized to begin operations in the ``white
spaces.'' It is critical that unlicensed devices not be permitted
access to the ``white spaces'' until interference solutions are proven
to protect all incumbent services.
At the hearing, both Senators Stevens and Allen emphasized their
intent that unlicensed devices access ``white spaces'' on a non-
interference basis to incumbent services. As Shure has emphasized
throughout this testimony, there are no proven interference solutions.
Solutions need to be tested and proven effective before the FCC can
write rules and establish procedures that sufficiently protect
incumbent services. Until testing is complete and a proven solution is
developed, it will be impossible for the FCC to define such technical
parameters. Moreover, given the complex technical issues before
industry, it will take time to develop and finalize these parameters.
Thus, the proposed bills should be amended to make clear that any
deadline is a deadline for FCC action only, and not a date-certain for
introduction of unlicensed devices to the ``white spaces.'' Further,
the proposed bills should be amended to make clear that unlicensed
devices will not be permitted access to the ``white spaces'' until
technical solutions have been tested and proven effective to prevent
interference to incumbent services, including wireless microphones.
3. The 180-Day Deadline for FCC Action Is Problematic
Both bills impose a 180-day deadline for FCC to issue a decision in
its ``white spaces'' proceeding, ET Docket 04-186. Despite ongoing
substantial efforts by interested companies, including in the important
IEEE forum, to date, the 180-day deadline is not realistically
achievable. Forcing the FCC to issue a decision before it has all the
necessary technical information will not serve the public interest,
risks severe interference consequences, and may ultimately slow the
``white spaces'' proceeding.
Without adequate, proven technical solutions, it will be impossible
for the FCC to establish the technical rules for non-interfering
unlicensed device operation. In light of the severe and widespread
consequences of interference, technical experts must be afforded
adequate time to test and prove their solutions effective.
As a result of the complex and time-consuming technical work still
to be done, the FCC should be afforded additional time to issue a
decision in the ``white spaces'' proceeding. It would be reasonable to
afford the FCC at least 12-18 months to issue an order to ensure that
the technical issues are fully considered.
4. FCC Must Be Afforded Discretion to Work Out the Technical Details of
``White Spaces'' Operation
Certain elements of the proposed bills are limiting and may unduly
restrict the FCC as it considers an order in the ``white spaces''
proceeding. The FCC must be afforded discretion to define the technical
parameters of ``white space'' operation. This discretion must include
the ability to exclude certain channels in the ``white spaces'' from
unlicensed devices. For example, public safety entities have advocated
excluding public safety channels nationwide from unlicensed device
operation. The current bills do not clearly afford the FCC the
discretion to meet that request.
The FCC should also have the discretion whether to adopt specific
rules regarding interference complaints. As the entity responsible for
adjudicating such complaints--and given its overall responsibility for
adjudicating interference complaints between spectrum users generally--
it is best poised to define rules and procedures for interference
complaints in the context of the ``white spaces.'' The FCC should also
retain the discretion whether to require certification or some other
more rigorous process to ensure that unlicensed devices will not cause
interference to other licensed services.
VIII. Conclusion
Introducing unlicensed devices to the ``white spaces'' presents
complex interference issues with widespread and potentially devastating
consequences for wireless microphones and other services relied upon by
millions of Americans. Today, these interference issues are unresolved,
but technical experts are actively seeking solutions. The American
public deserves proven interference solutions, not theory and
conjecture. The public interest would not be served by unlicensed
devices that cause crippling interference to licensed services.
While the Committee's goal to promote broadband deployment is an
admirable one, it is critical that unlicensed devices not be allowed
into the ``white spaces'' until real-world interference solutions are
tested and proven effective. The key is preventing interference before
it becomes an issue. It will take time to develop proven interference
solutions, and the technical experts studying these issues should be
able to do their job and get the interference solutions right. If a
proposed solution doesn't work, there is no way to remedy harmful
interference after-the-fact--the damage is done. Real-world solutions
are needed before the ``white spaces'' can reasonably be opened to
unlicensed devices.
ENDNOTES
\1\ Unlicensed Operation in the TV Broadcast Bands, ET Docket Nos.
04-186, 02-380, Notice of Proposed Rulemaking (released May 25, 2004)
(``NPRM'').
\2\ Indeed, the News, Sports and Entertainment Production Coalition
stated that millions of Americans have come to rely on the high quality
production in live news, sporting and entertainment events made
possible by wireless microphones and described how the viewing public
would be harmed if wireless microphone operations were impaired. See
Letter to the Honorable Michael Powell from the News, Sports and
Entertainment Production Coalition dated March 11, 2005 filed in ET
Docket No. 04-186. The News, Sports and Entertainment Production
Coalition includes the news branches of the major networks, the NFL,
Major League Baseball, the NCAA, ESPN, Shure, and others.
\3\ Frequency coordination is mandatory for successful operation of
large numbers of wireless microphones (such as a national political
convention). If interference problems require even a single frequency
change during an event, the entire frequency coordination plan may have
to be re-done. Logistically, this may be impossible during a live
performance.
\4\ See Comments of Pappas Telecasting Companies filed in ET Docket
No. 04-186 on Nov. 30, 2004 at p. 7. See also Martin Statement on NOI
(``I fear that these unlicensed devices will create additional
interference problems when digital television gets underway.
Interference already threatens to impede the introduction of digital
television.'').
\5\ Letter to The Honorable Ted Stevens and The Honorable Daniel
Inouye from David H. Arland et al. dated March 14, 2006 at p. 1
(``Consumer Electronics Letter''). Consumer electronics manufacturers
Thomson Inc., LG Electronics USA, Inc. Hitachi Home Electronics
(America) Inc., TTE Corporation, Samsung Electronics, Panasonic
Corporation of North America, JVC Americas Corp., and Sony Electronics
Inc. signed this letter.
\6\ Id. at 2.
\7\ Id.
\8\ See Separate Statement of Commissioner Kevin J. Martin,
Additional Spectrum for Unlicensed Devices Below 900 MHz and in the 3
GHz Bands, ET Docket No. 02-380, Notice of Inquiry, rel. Dec. 11, 2002
at p. 1 (``Martin NOI Statement'') (``I fear that such unlicensed
devices could interfere with the broadcast stations many rural viewers
watch and that rural viewers would lose the few broadcast signals upon
which they rely.'').
\9\ See Comments of National Translator Association filed in ET
Docket No. 04-186 on Nov. 30, 2004 at p 2.
\10\ NPRM, at para. 35.
\11\ NPRM, at para. 5.
\12\ The experts at IEEE developed the standards used for operation
of wireless LANs.
\13\ The issue of personal/portable unlicensed devices is beyond
the scope of 802.22. This is because the interference cases presented
by personal/portable unlicensed devices are even more complex than
those presented by fixed unlicensed devices.
\14\ See Revision of Parts 2 and 15 of the Commission's Rules to
Permit Unlicensed National Information Infrastructure (U-NII) devices
in the 5 GHz Band, ET Docket No. 03-122, Report and Order, 18 FCC Rcd
24484 (2003) (``5 GHz Report and Order''). DFS-equipped devices were
authorized to operate in 255 megahertz of spectrum between 5.470-5.725
GHz.
\15\ See 5 GHz Report and Order at p. 59.
\16\ See Revision of Parts 2 and 15 of the Commission's Rules to
Permit Unlicensed National Information Infrastructure (U-NII) devices
in the 5 GHz band, ET Docket No. 03-122, Order, 20 FCC Rcd 4883 at 4
(2005) (``5 GHz 2005 Delay Order'').
\17\ See NTIA Institute for Telecommunications Sciences, U.S.
Department of Commerce, Development of Performance Testing Methods for
Dynamic Frequency Selection (DFS) 5-GHz Wireless Access Systems (WAS),
at pp. 1-17 (2005) (``NTIA Test Report'').
\18\ See NTIA Test Report at pp. 16-18 (2005).
\19\ See Revision of Parts 2 and 15 of the Commission's Rules to
Permit Unlicensed National Information Infrastructure (U-NII) devices
in the 5 GHz band, ET Docket No. 03-122, Order, FCC 06-12 at 3 (2006)
(``5 GHz 2006 Delay Order'').
\20\ Testimony of Jeannine Kenney, Consumers Union, before the
United States Senate Committee on Commerce, Science and Transportation
Hearing regarding Wireless Communications Issues & Spectrum Management
Reform, Mar. 14, 2006, at p. 55.
\21\ See Comments of MSTV, Inc. filed Nov. 30, 2004 in ET Docket
No. 04-186 at Exhibit A pp. 14-20. The TechWare, Inc. spectrum study
was commissioned by MSTV and shows virtually no channels available
along the northeast corridor from Boston to Washington, D.C. Other
urban areas show similar congestion, including Dallas, Southern
Florida, San Francisco and Los Angeles.
\22\ See William J. Baumol, Toward an Evolutionary Regime for
Spectrum Governance: Licensing or Unrestricted Entry? p. 11 (AEI-
Brookings Joint Center for Regulatory Studies 2005).
\23\ Id.
\24\ Id. at p. 10.
\25\ Id.
\26\ Moreover, because there are relatively few, if any, channels
open in the ``white spaces,'' unlicensed networks may have difficulty
achieving the high data rates possible in spectrum above 1 GHz where
there is much more bandwidth available for unlicensed applications.
\27\ Testimony of U.S. Senator Ted Stevens, United States Senate
Committee on Commerce, Science and Transportation Hearing regarding
Wireless Communications Issues & Spectrum Management Reform, Mar. 14,
2006 at p. 1 (``Senator Allen and I have proposed legislation that will
allow unlicensed wireless devices to provide new services over the
unused or ``white spaces'' of television broadcast spectrum, so long as
such devices do not cause harmful interference to TV service.'').
\28\ 47 CFR Sec. 74.801 et seq.
\29\ Shure notes that it is very concerned about S. 2332's
directive to require field verification of interference as part of an
FCC complaint adjudication. Given the potentially fleeting nature of
interference, it may be impossible to replicate, and thus, may be
impossible to get field verification. Lack of field verification should
not preclude FCC consideration of an interference complaint. A
preferable approach is for Congress to afford the FCC, as the expert
agency, the discretion to fashion rules and procedures for interference
complaints.
______
Joint Prepared Statement of Jerry Ellig, Ph.D., Senior Research Fellow/
Jerry Brito, J.D., Legal Fellow, Mercatus Center, George Mason
University
Mr. Chairman and Members of the Committee:
We appreciate the opportunity to enter written testimony into the
record of the Committee's hearing on spectrum policy reform. We are
research fellows with the Mercatus Center, a 501(c)(3) research,
educational, and outreach organization affiliated with George Mason
University. \1\
---------------------------------------------------------------------------
\1\ This testimony reflects only the views of its authors and does
not represent an official position of George Mason University.
---------------------------------------------------------------------------
As part of the Mercatus Center's ongoing program to assess the
costs and outcomes associated with regulation, we recently examined the
costs of major Federal telecommunications regulations. The attached
paper examines the findings that are most relevant to spectrum policy.
\2\ Out of all Federal telecommunications regulations, spectrum policy
has by far the biggest effect on consumer welfare. Additionally, a
second attached paper explores the efficiency of allocating spectrum
for use as a ``commons.'' \3\
---------------------------------------------------------------------------
\2\ Jerry Ellig, The Economic Costs of Spectrum Misallocation:
Evidence from the United States, presented to the conference on
Spectrum Policy in Guatemala and Latin America, Universidad Francisco
Marroquin, Guatemala City, Guatemala, June 9-10, 2005, available at
http://cadep.ufm.edu.gt/telecom/lecturas/JerryEllig.pdf. The attached
paper has been retained in Committee files.
\3\ Jerry Brito, The Spectrum Commons in Theory and Practice,
Mercatus Center Working Paper in Regulatory Studies, March 2006,
available at http://www.mercatus.org/pdf/materials/1572.pdf. The
attached paper has been retained in Committee files.
---------------------------------------------------------------------------
The costs of the current spectrum policy are large in an absolute
sense--in the neighborhood of $77 billion or more annually. Spectrum
allocation is by far the costliest aspect of U.S. Federal
telecommunications regulation, and it represents a very large share of
the total. Even if the actual costs of U.S. spectrum allocation policy
were only one-tenth the size that scholars estimate, they would still
account for more than 20 percent of the total consumer cost of
telecommunications regulation.
During the past two decades, U.S. spectrum policy has gradually
become more market-oriented. Consumers have reaped significant benefits
as a result. Nevertheless, current policy still generates large
inefficiencies by preventing reallocation of spectrum to its most
highly-valued uses--most likely wireless voice and data communications.
The costs of current spectrum allocation policy can be expected to
fall sometime after 2006, if the FCC carries through on its plan to
auction an additional 90 MHz of spectrum. \4\ However, the multi-
billion dollar cost estimate should only be taken as a rough
approximation of the negative effects of spectrum allocation policy on
consumer welfare. A truly market-based approach would allow market
transactions to allocate spectrum rather than licenses. Potential users
could buy or lease spectrum, then choose how to use it. The amount of
spectrum allocated to wireless telephone, broadcasting, broadband, and
other services would be determined by market transactions and decisions
of users, rather than regulatory proceedings. As Ronald Coase noted in
1959,
---------------------------------------------------------------------------
\4\ ``FCC to Commence Spectrum Auction that will Provide American
Consumers New Wireless Broadband Services,'' FCC press release (Dec.
29, 2004), available at http://hraunfoss.fcc.gov/edocs_public/
attachmatch/DOC-255802A1.pdf. The auction cannot occur until June 2006
because the Commercial Spectrum Enhancement Act of 2004 requires the
FCC to notify the National Telecommunications and Information
Administration at least 18 months prior to the auction of any
frequencies mentioned in the legislation, so that any public sector
users can be relocated to other spectrum.
Certainly, it is not clear why we should have to rely on the
Federal Communications Commission rather than the ordinary
pricing mechanism to determine whether a particular frequency
should be used by the police, or for a radiotelephone, or for a
taxi service, or for an oil company for geophysical
exploration, or by a motion-picture company to keep in touch
with its film stars or for a broadcasting station. Indeed, the
multiplicity of these varied uses would suggest that the
advantages to be derived from relying on the pricing mechanism
would be especially great in this case. \5\
---------------------------------------------------------------------------
\5\ Ronald Coase, ``The Federal Communications Commission,''
Journal of Law & Economics 2 (1959): 16.
A new school of academics and activists, however, has begun to
challenge the spectrum property model. While they agree with Coase that
command-and-control spectrum management is highly inefficient, they
instead propose to make spectrum a ``commons.'' They claim that new
spectrum sharing technologies allow a virtually unlimited number of
persons to use the same spectrum without causing each other
interference and that this eliminates the need for either property
rights in, or government control of, spectrum.
Despite the rhetoric, the commons model that has been proposed in
the legal and popular literature is not an alternative to command-and-
control regulation, but in fact shares many of the same inefficiencies
of that system. In order for a commons to be viable, someone must
control the spectrum resource and set orderly sharing rules to govern
its use. If the government is the controller of the commons--as many
suggest it should be--then in allocating and managing the commons the
government will very likely employ its existing inefficient processes.
Under market-based allocation, the FCC, courts, or another
government body would still have a significant role in preventing
signal interference, but they would not decide which bits of spectrum
could be used for which purposes.
Given the documented tendency of economic research to under-
estimate ex ante the cost-saving effects of deregulation and
competition, the actual benefits of market-based spectrum allocation in
the United States could be truly staggering. We hope these findings and
the attached papers are useful to the Committee as it weighs various
spectrum policy options.
______
Response to Written Questions Submitted By Hon. John D. Rockefeller IV,
to Catherine W. Seidel
Cellphone Early Termination Fees
Many of my constituents are concerned about the practices of cell
phone carriers that won't let them cancel their service without paying
a termination fee of $175 or $200, even if they can't get a usable
signal where they live. That makes it more difficult for people to
switch carriers, which reduces consumer choice and ultimately keeps
prices high. The Commission receives thousands of complaints on this
subject every year. And I receive complaints from constituents about
this. Consumers have banded together in some states (California,
Florida, Illinois and South Carolina) to challenge this practice as a
violation of state business law and consumer protection rules. I
understand that the industry has asked the Commission to rule that
Federal law preempts all of those challenges.
I think that this is a clear case where state laws that protect the
public from unfair business practices should apply.
Question 1. Can you tell me the status of this proceeding at the
FCC?
Answer. The Commission has initiated two proceedings in response to
petitions for declaratory rulings that Early Termination Fees (ETFs)
are ``rates charged'' under section 332(c)(3)(A) of the Communications
Act, as amended. Both proceedings are currently under review. One
involves litigation filed in South Carolina, see Wireless
Telecommunications Bureau Seeks Comment on Petition for Declaratory
Ruling Filed by SunCom, and Opposition and Cross Petition for
Declaratory Ruling Filed by Debra Edwards, Seeking Determination of
Whether State Law Claims Regarding Early Termination Fees are Subject
to Preemption Under 47 U.S.C. Section 332(c)(3)(A), Public Notice, WT
Docket No. 05-193, DA 05-1390 (rel. May 18, 2005) (SunCom Petition),
and the other involves a petition filed by CTIA, see Wireless
Telecommunications Bureau Seeks Comment on Petition for Declaratory
Ruling Filed by CTIA Regarding Whether Early Termination Fees and
``Rates Charged'' within 47 U.S.C. Section 332(c)(3)(A), Public Notice,
WT Docket No. 05-194, DA 05-1389 (rel. May 18, 2005) (CTIA Petition).
Over 25,000 comments and reply comments have been received by the
Commission in these proceedings.
Question 2. I understand that consumers are using state general
purpose contract law to challenge the legality of these extremely high
fees. Why would FCC policy preempt state law that is generally
applicable to all businesses operating in a state? Does this mean that
the FCC would preempt the right of wireless firms to enforce subscriber
contracts in state court? Why is it fair to allow the companies to use
state contract law but not to allow subscribers to use the same law?
Answer. These questions are raised in both the SunCom petition and
the CTIA petition. The Commission will consider the arguments in the
record, analyze the law and FCC precedent, and resolve these issues
consistent with Section 332(c)(3)(A).
Question 3. I also understand that the wireless companies are
arguing that these cancellation fees are actually part of the rate
structure of the cellphone service. How can a fee that is charged after
a customer has terminated their service be a fee for that service? That
doesn't make any sense to me.
Answer. These questions are raised in the CTIA petition. The
Commission will consider the arguments in the record, analyze the law
and FCC precedent, and resolve the issues consistent with Section
332(c)(3)(A).
Question 4. I have heard the argument that the cancellation fee is
meant to pay off the handset, which is generally offered free or at a
discount along with a one or two year contract. Isn't $175 a little
high to pay off a $100 handset to begin with? And, even if the handset
costs $175, if a customer terminates a two-year contract after one
year, shouldn't the cancellation fee be cut in half?
Answer. The record in the SunCom and CTIA proceedings indicates
that the costs of handsets vary, as do ETF charges. The record also
indicates that the ETF practices of CMRS providers also vary. Most
carriers charge flat ETFs, but some ETFs are prorated and decline over
the term of the contract. One CMRS provider charges a flat ETF charge
in some of its states and a prorated ETF charge in others. The question
of whether an ETF is a rate charged is raised in both the SunCom and
CTIA petitions.
______
March 14, 2006
Hon. Ted Stevens,
Chairman,
Hon. Daniel K. Inouye,
Co-Chairman,
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
Dear Chairman Stevens and Co-Chairman Inouye:
We, the undersigned digital television and set top box
manufacturers, are writing to express our views on legislation pending
before the Committee to authorize unlicensed wireless devices to
utilize vacant television channel frequencies, in so-called ``white
spaces.'' We ask that our correspondence be made a part of the official
record of the hearing held by the Senate Committee on Commerce,
Science, and Transportation on March 14, 2006.
As manufacturers of digital television receivers and a wide range
of consumer electronics products, we have a keen interest in this
issue. On the one hand, we share the enthusiasm of the sponsors and co-
sponsors of S. 2332 and S. 2327 about the potential of unlicensed
wireless devices to enhance the communications experiences of many
Americans and to facilitate the more ubiquitous deployment of broadband
services. On the other hand, as companies that have participated in the
creation and development of digital television, in some cases for more
than 20 years, we are absolutely committed to ensuring that American
consumers will be able to enjoy and benefit fully from the marvels of
digital television technology which they have been promised by industry
and the Congress.
We applaud the Congress for having established a hard deadline of
February 17, 2009 for the conversion from analog to digital television
(DTV) transmission and for creating a subsidy program that should
lighten the burden of making that transition for households dependent
on free, over-the-air broadcasting to receive their television
programming. At this critical juncture in the migration to all digital
television service, extraordinary care must be taken to ensure that
government action does not inadvertently undermine the digital
television conversion. The result of the legislative and regulatory
process must be a win-win situation for both wireless unlicensed device
operations and digital television service if American consumers are to
reap the full benefits of our collective technological innovation.
As a matter of science and engineering, there is no question that
the potential exists for interference from unlicensed wireless devices
to the operation of digital television receivers and set top boxes.
There exists a great deal of uncertainty about the operation of
unlicensed wireless devices in vacant broadcast television spectrum. As
a technical matter, we will be operating in uncharted waters. Unduly
hasty action in establishing the rules and parameters for the operation
of unlicensed devices could seriously disrupt the digital television
transition for millions of Americans and taint the roll-out of
unlicensed devices.
Accordingly, we believe that any legislation adopted by the
Congress authorizing the use of ``white spaces'' for operation of
unlicensed wireless devices must require that such operation not cause
interference with television signals. Implementation of this non-
interference requirement should require the Commission to make a
specific finding to that effect, following appropriate testing. The
burden of meeting the non-interference requirement should rest with the
proponent of the unlicensed wireless product or technology seeking to
use this spectrum. Artificial deadlines should not be imposed as they
create heightened risk of approving unlicensed wireless device
operation that could cause interference to television signals. Finally,
as S. 2332 provides, channels 2 through 4 and 37 should not be
available for unlicensed wireless device operations.
Notwithstanding the establishment of a hard date to complete the
DTV transition, much work remains to ensure that our Nation gets it
right. We accept our responsibility to help educate consumers about the
transition and to provide them with abundant choices of product
functionality and affordability. We urge the Congress to do nothing
that would imperil or disrupt the DTV transition, including by the
authorization of new services which would cause interference with
television signals. We look forward to working with the Committee on
all relevant legislation to complete a smooth and consumer-friendly
conversion to digital television for all Americans.
Sincerely,
David H. Arland, Vice President, Communications and
Government Affairs, Thomson Inc.
John Taylor, Vice President, Public Affairs and
Communications, LG Electronics USA, Inc.
Paul Thomsen, Director, Design, Technology and
Standards, Hitachi Home Electronics (America) Inc.
Richard Dinsmore, Vice President of Marketing, TTE
Corporation.
John Godfrey, Vice President, Government and Public
Affairs, Samsung Electronics America, Inc.
Peter Fannon, Vice President, Technology Policy,
Government and Regulation, Panasonic Corporation of North
America.
David Kline, General Manager, Strategic Product
Planning, JVC Americas Corp.
Michael T. Williams, Executive Vice President, General
Counsel/Secretary, Sony Electronics Inc.