[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
 OVERSIGHT OF THE FEDERAL COMMUNICATIONS COMMISSION--THE 700 MHZ AUCTION
=======================================================================

                                HEARING

                               BEFORE THE

          SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               ----------                              

                             April 15, 2008

                               ----------                              

                           Serial No. 110-106


      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

JOHN D. DINGELL, Michigan,Chairman
HENRY A. WAXMAN, California
EDWARD J. MARKEY, Massachusetts
RICK BOUCHER, Virginia
EDOLPHUS TOWNS, New York
FRANK PALLONE, Jr., New Jersey
BART GORDON, Tennessee
BOBBY L. RUSH, Illinois
ANNA G. ESHOO, California
BART STUPAK, Michigan
ELIOT L. ENGEL, New York
ALBERT R. WYNN, Maryland
GENE GREEN, Texas
DIANA DeGETTE, Colorado
    Vice Chairman
LOIS CAPPS, California
MIKE DOYLE, Pennsylvania
JANE HARMAN, California
TOM ALLEN, Maine
JAN SCHAKOWSKY, Illinois
HILDA L. SOLIS, California
CHARLES A. GONZALEZ, Texas
JAY INSLEE, Washington
TAMMY BALDWIN, Wisconsin
MIKE ROSS, Arkansas
DARLENE HOOLEY, Oregon
ANTHONY D. WEINER, New York
JIM MATHESON, Utah
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana               JOE BARTON, Texas
                                         Ranking Member
                                     RALPH M. HALL, Texas
                                     J. DENNIS HASTERT, Illinois
                                     FRED UPTON, Michigan
                                     CLIFF STEARNS, Florida
                                     NATHAN DEAL, Georgia
                                     ED WHITFIELD, Kentucky
                                     BARBARA CUBIN, Wyoming
                                     JOHN SHIMKUS, Illinois
                                     HEATHER WILSON, New Mexico
                                     JOHN B. SHADEGG, Arizona
                                     CHARLES W. ``CHIP'' PICKERING, 
                                         Mississippi
                                     VITO FOSSELLA, New York
                                     STEVE BUYER, Indiana
                                     GEORGE RADANOVICH, California
                                     JOSEPH R. PITTS, Pennsylvania
                                     MARY BONO, California
                                     GREG WALDEN, Oregon
                                     LEE TERRY, Nebraska
                                     MIKE FERGUSON, New Jersey
                                     MIKE ROGERS, Michigan
                                     SUE WILKINS MYRICK, North Carolina
                                     JOHN SULLIVAN, Oklahoma
                                     TIM MURPHY, Pennsylvania
                                     MICHAEL C. BURGESS, Texas
                                     MARSHA BLACKBURN, Tennessee
_________________________________________________________________

                           Professional Staff

 Dennis B. Fitzgibbons, Chief of 
               Staff
Gregg A. Rothschild, Chief Counsel
   Sharon E. Davis, Chief Clerk
 David L. Cavicke, Minority Staff 
             Director

                                  (ii)
          Subcommittee on Telecommunications and the Internet

               EDWARD J. MARKEY, Massachusetts, Chairman
MIKE DOYLE, Pennsylvania             FRED UPTON, Michigan
    Vice Chairman                        Ranking Member
JANE HARMAN, California              J. DENNIS HASTERT, Illinois
CHARLES A. GONZALEZ, Texas           CLIFF STEARNS, Florida
JAY INSLEE, Washington               NATHAN DEAL, Georgia
BARON P. HILL, Indiana               BARBARA CUBIN, Wyoming
RICK BOUCHER, Virginia               JOHN SHIMKUS, Illinois
EDOLPHUS TOWNS, New York             HEATHER WILSON, New Mexico
FRANK PALLONE, Jr., New Jersey       CHARLES W. ``CHIP'' PICKERING, 
BART GORDON, Tennessee                   Mississippi
BOBBY L. RUSH, Illinois              VITO FOSELLA, New York
ANNA G. ESHOO, California            GEORGE RADANOVICH, California
BART STUPAK, Michigan                MARY BONO, California
ELIOT L. ENGEL, New York             GREG WALDEN, Oregon
GENE GREEN, Texas                    LEE TERRY, Nebraska
LOIS CAPPS, California               MIKE FERGUSON, New Jersey
HILDA L. SOLIS, California           JOE BARTON, Texas (ex officio)
JOHN D. DINGELL, Michigan (ex 
    officio)



                            C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Edward J. Markey, a Representative in Congress from the 
  Commonwealth of Massachusetts, opening statement...............     1
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, opening statement..................................     3
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................   104
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................   106
Hon. Mike Doyle, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................   107
Hon. Charles W. ``Chip'' Pickering, a Representative in Congress 
  from the State of Mississippi, opening statement...............     8
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     9
Hon. Lois Capps, a Representative in Congress from the State of 
  California, opening statement..................................    10
Hon. Jane Harman, a Representative in Congress from the State of 
  California, opening statement..................................    10
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................    12
Hon. Mary Bono, a Representative in Congress from the State of 
  California, prepared statement.................................   238
Hon. Eliot L. Engel, a Representative in Congress from the State 
  of New York, prepared statement................................   238
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, prepared statement......................................   239

                               Witnesses

Kevin J. Martin, Chairman, Federal Communications Commission.....    13
    Prepared statement...........................................    17
    Answers to submitted questions...............................   283
Michael J. Copps, Commissioner, Federal Communications Commission    44
    Prepared statement...........................................    46
    Answers to submitted questions...............................   290
Deborah Taylor Tate, Commissioner, Federal Communications 
  Commission.....................................................    49
    Prepared statement...........................................    51
    Answers to submitted questions...............................   295
Jonathan S. Adelstein, Commissioner, Federal Communications 
  Commission.....................................................    52
    Prepared statement...........................................    55
    Answers to submitted questions...............................   300
Robert M. McDowell, Commissioner, Federal Communications 
  Commission.....................................................    65
    Prepared statement...........................................    66
    Answers to submitted questions...............................   305
Harlin R. McEwen, chairman and CEO, Public Safety Spectrum Trust.   102
    Prepared statement...........................................   104
    Submitted questions \1\......................................
Robert F. Duncan, Rear Admiral, U.S. Coast Guard (retired), 
  senior vice president, Government Services, Rivada Networks....   113
    Prepared statement...........................................   116
Morgan E. O'Brien, chairman, Cyren Call Communications 
  Corporation....................................................   120
    Prepared statement...........................................   122
    Submitted questions \2\......................................
Charles F.Dowd, deputy chief, New York City Police Department....   132
    Prepared statement...........................................   134
Steven E. Zipperstein, vice president and general counsel, 
  Verizon Wireless...............................................   137
    Prepared statement...........................................   138
    Answers to submitted questions...............................   309
Robert Irving, senior vice president, general counsel, Leap 
  Wireless International, Inc., Cricket Communications, Inc......   145
    Prepared statement...........................................   147
Harold Feld, senior vice president, Media Access Project.........   158
    Prepared statement...........................................   160
Coleman Bazelon, Ph.D., The Brattle Group........................   185
    Prepared statement...........................................   188

                           Submitted Material

Karen P. Tandy, senior vice president, Global Government Affiars, 
  Motorola, Inc., statement......................................   228
The Brattle Group, letter of May 18, 2005, to Messrs. Barton, 
  Dingell, Upton, and Markey.....................................   241
Committee, letter of June 29, 2007, to the Federal Communications 
  Commission.....................................................   253
``An Auction That Google Was Content to Lose,'' Miguel Helft, The 
  New York Times, April 4, 2008..................................   257
Steven E. Zipperstein, general counsel, Verizon Wireless, letter 
  of April 24, 2008, to Mr. Markey...............................   260
    Attachments submitted by Mr. Markey..........................   264
Elizabeth R. Sachs, Lukas, Nace, Gutierrez & Sachs, Chartered, 
  letter of May 12, 2008, to Amy Levine, Senior Counsel to the 
  House Committee on Energy and Commerce.........................   277

----------
\1\ Mr. McEwen did not answer submitted questions for the record.
\2\ Mr. O'Brien did not answer submitted questions for the 
  record.


OVERSIGHT OF THE FEDERAL COMMUNICATIONS COMMISSION--THE 700 MHZ AUCTION

                              ----------                              


                        TUESDAY, APRIL 15, 2008

              House of Representatives,    
         Subcommittee on Telecommunications
                                  and the Internet,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:35 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Edward J. 
Markey (chairman of the subcommittee) presiding.
    Members present: Representatives Markey, Doyle, Harman, 
Gonzalez, Inslee, Eshoo, Stupak, Engel, Green, Capps, Dingell 
(ex officio), Stearns, Upton, Shimkus, Pickering, Fossella, 
Bono Mack, Walden, Terry, Blackburn, and Barton (ex officio).
    Staff present: Amy Levine, Mack Seifert, Tim Powderly, 
Maureen Flood, Colin Crowell, David Vogel, Philip Murphy, Neil 
Fried, and Garrett Golding.

OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN 
        CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS

    Mr. Markey. Good morning.
    The recently completed auction for licenses in the 700 MHz 
band had a certain Dickensian quality to it. It was the best of 
auctions and the worst of auctions simultaneously. First, 
despite the so-called D block license not selling, the auction 
raised over $19 billion. This is no small feat in current 
economic conditions.
    Second, I am pleased that the C block license did sell 
successfully. This license for which the Commission had the 
wisdom to adopt openness requirements that I strongly advocated 
for will unleash hundreds of millions of dollars in investment 
in wireless devices and applications and create new jobs in an 
economy that sorely needs them.
    I congratulate Chairman Martin and all of the commissioners 
for this initiative. However, in spite of these success 
stories, this is essentially a tale of two auctions and so with 
the good news, there is also some bad news. Obviously the D 
block is disappointing, yet I believe that pursuing ways for 
public safety entities and the private sector to partner toward 
achieving a network that possesses nationwide interoperability 
and broadband capability remains our best option going forward 
on the D block.
    There are several routes toward realizing an interoperable 
state-of-the-art network for public safety entities, however, 
and multiple ways of implementing public-private partnerships. 
I encourage the Commission to be open to new ideas in this 
area. If the Commission takes the opportunity to weigh new 
proposals that correct deficiencies in the previous plan, puts 
in place barriers to unjust enrichment, clarifies important 
details prior to a re-auction and recalibrates the D block 
license conditions to account for what has transpired in the 
recently completed auction, the D block's recent failure to 
sell may ultimately prove fortuitous and we may yet achieve a 
successful re-auction that can advance several public policy 
objectives simultaneously.
    Finally, we must also remember that the sheer amount of 
money that an auction brings in to the Treasury is only one of 
many objectives that Congress instructed the FCC to try to 
achieve in this or any auction. Last Friday, I released a 
report from the Government Accountability Office on media 
ownership issues. That report highlighted the abysmal track 
record in our country of having women-owned and minority-owned 
radio and television broadcasting licensees. Those broadcast 
licenses were originally given out in the 1940s and the 1950s. 
We cannot go back in time to correct the unfairness of 
distributing these public assets in such unbalanced form, and 
it is difficult in the broadcasting area to correct this 
injustice now unless an incumbent wishes to sell their license.
    Yet in wireless, we have a new opportunity with the 
beachfront property of the spectrum, and what is the result so 
far? Well, at present it looks like two megaresorts are going 
up on the beachfront in the form of Verizon and AT&T 
solidifying their wireless market and spectrum real estate 
positions. Yes, EchoStar has won almost a nationwide footprint 
not to compete with Verizon and AT&T in the mobile wireless 
market but rather to have spectrum as an adjunct to their 
satellite television service. Women-owned and minority-owned 
businesses did not break through. There is no new national 
competitor to provoke new broadband competition, innovation, 
and consumer choice coming out of the auction. As a result, the 
wireless third pipe to compete with the telephone and cable 
industry is proving either elusive or simply allied with one of 
the two existing providers in much of the country. This is too 
cozy and not nearly competitive enough.
    The decision to eliminate spectrum caps by the FCC under 
Chairman Powell is proving highly ill-considered. Spectrum caps 
had ensured that incumbents couldn't gobble up all of the 
available spectrum and effectively box out would-be competitors 
from reaching the market. And the so-called spectrum screen of 
95 MHz that has substituted for the original cap has been blown 
away in this auction by AT&T and Verizon in eight of the top 
ten markets and 17 of the top 25 markets where that amount of 
spectrum has now been exceeded.
    The FCC must revisit these policy decisions in light of the 
recently completed auction and take corrective action going 
forward. The Commission has the responsibility to learn from 
the licensing mistakes of the past and to widely disseminate 
licenses and promote greater broadband competition and should 
endeavor to do so.
    I look forward to working with each of the commissioners as 
they wrestle with all of these policy issues in the weeks 
ahead. We have two excellent panels today. I look forward to 
hearing from our witnesses.
    Mr. Markey. The time for the opening statement of the chair 
has expired. I now recognize the gentleman from Florida, the 
ranking member of the Committee, Mr. Stearns.

 OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. Stearns. Good morning, and thank you, Mr. Chairman. I 
think your comment about ``a tale of two cities'' is perhaps 
good because the recently completed 700 MHz auction has some 
good and some bad. Perhaps this hearing could be a movie called 
``May Yet Achieve'' in our attempts to try and solve some of 
the problems that were created.
    Auction of this 700 MHz spectrum was enabled, of course, by 
this subcommittee in enacting the DTV transition. Other than 
the C block open access spectrum and the D block public safety 
spectrum, auction 73 did achieve excellent results for the 
taxpayers, to whom the airwaves do belong. While the auction 
raised $19 billion, many of us including yourself, I think, 
would agree that it could have done better. Although the CBO 
estimated that the auction would raise just over $12 billion, 
there are other studies, Mr. Chairman, that suggest the 
spectrum was worth anywhere up to $30 billion. With that in 
mind, I ask unanimous consent to introduce one of those studies 
by the Brattle Group into the record.
    Mr. Markey. Without objection, it will be included.
    [The information appears at the conclusion of the hearing.]
    Mr. Stearns. These studies appear to have been right, 
considering the C block may have sold for half of its value 
because of the open access condition and of course, as you 
mentioned, the D block did not sell at all.
    My colleagues, furthermore, the auction failed to produce a 
candidate to build a nationwide public safety network. I, along 
with Mr. Barton and 14 other members of both sides of this 
aisle, bipartisan, warned on June 29 of last year in a letter 
to the FCC that this would happen. We predicted this. I ask 
unanimous consent, Mr. Chairman, that this letter also be made 
part of the record.
    Mr. Markey. Without objection, it will be included in the 
record.
    [The information appears at the conclusion of the hearing.]
    Mr. Stearns. So the question is, we offered the possibility 
this might happen, sort of a Cassandra type of prophecy, but 
the FCC went ahead anyway, even though we sort of, it appears, 
predicted this outcome. Perhaps the FCC should have heeded our 
warning or at least replied to us and said you are all wet, but 
we didn't hear from them. So I guess the question is, under the 
circumstances--in our letter from Mr. Barton, the ranking 
member, Mr. Barton, why did we go forward anyway?
    Furthermore, what are the FCC's plans to remedy the problem 
or, as you mentioned, Mr. Chairman, in your opening statement, 
may yet achieve what success can we yet achieve? How can we 
ensure that the FCC, in the urgency to clean up the mess, 
doesn't rush to judgment and perhaps make additional poor 
judgment? The FCC's conditions allowed companies such as Google 
to ride free rather than seriously challenge a bid to AT&T and 
Verizon, and I suspect that if Google had been interested in 
more than just maneuvering within the system, it could have 
prevailed in the C block and become a new entree but, according 
to the April 4, 2008, New York Times, Google's goal was not to 
win but to make sure that the reserve price was met. I suppose 
we cannot really blame them for trying to get free access to 
the spectrum. What is more concerning is that even though we 
knew what they were doing, we let them maneuver this way 
anyway.
    But now that the auction is behind us, I am excited, like 
my colleagues are, about the plans for deployment of the 
spectrum and what it means obviously for the consumers of this 
country, particularly with respect to the deploying of 4G 
wireless services. These new services and applications will be 
limited only by the imagination. The future for wireless 
consumers never looked brighter and I look forward to hearing 
more about this today.
    And lastly and most importantly, I want to focus on public 
safety interoperability and the D block. Achieving public 
safety interoperability remains a top priority and we are all 
disappointed in the results of the D block. There was only one 
bid, at $472 million, which was a mere one-third of the reserve 
price. However, in hindsight, the results are not all that 
surprising, given the cost challenges of building and operating 
a network from scratch, coupled with the conditions imposed on 
the spectrum by the FCC. That said, we must take stock of what 
went wrong with the D block and consider any and all 
alternatives.
    Mr. Chairman, one option is to do what we proposed in our 
letter, that Ranking Member Barton proposed and we all signed 
onto in the first place: auction the D block for commercial use 
and let public safety negotiate with all comers for 
construction of a network outside the confines of an auction. 
First responders might still be able to gain access to an 
additional 10 MHz of spectrum in exchange for giving a 
commercial partner subscriber revenue and access to the 
separate 24 MHz the DTV legislation cleared for public safety. 
If there were a consensus, Congress could also pass a law 
allowing public safety to use the proceeds from the re-auction.
    So Mr. Chairman, there is a suggestion for how we may yet 
achieve in this tale of two cities, and I look forward to this 
hearing and I appreciate your providing it.
    Mr. Markey. The gentleman's time has expired. The chair 
recognizes the gentleman from Pennsylvania, Mr. Doyle.
    Mr. Doyle. Thank you.
    Mr. Markey. I am sorry. Excuse me. If the gentleman would 
hold, the chair notes the arrival of the chairman of the full 
committee, Mr. Dingell. The chair recognizes the gentleman from 
Michigan, Mr. Dingell.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Dingell. Mr. Chairman, I thank you and I commend you 
for holding the hearing and I want to express my thanks to our 
distinguished witnesses for appearing before us today.
    The goal of the subcommittee is twofold. First, we examine 
the results of the 700 MHz auction and consider how these 
results will affect the public interest, the consumers, and the 
industry. We also want to look at the public safety D block 
where the auction failed. We must consider how the Federal 
Communications Commission can craft a workable plan for the D 
block that will bring true interoperability for our Nation's 
first responders.
    At the outset, I congratulate the Commission for its 
courage in adopting open access requirements for the C block. I 
note with approval that as a result, Verizon Wireless is 
already taking concrete steps to open the network. I commend 
them for that action. The Committee will be watching these 
matters closely, and the Commission should do so as well. I 
also look forward to learning more about the announced plans of 
AT&T and other carriers to provide for more openness. If done 
correctly, we will see more technological innovation and 
greater consumer choice.
    I am particularly interested in how our witnesses view the 
results of the auction. For instance, should we be concerned 
that new entrants for broadband services have emerged from the 
auction? Should it be a matter of concern that the Nation's 
largest carriers came away with the most spectrum? How should 
this increase in spectrum consolidation guide our discussions, 
if at all?
    The most important issue, however, is that of public safety 
interoperability. There is high concern, which I share, as to 
how to proceed with the re-auction of the D block. This is an 
opportunity for the Committee and for the Commission to make 
sure that our Nation is more secure and has given our first 
responders a crucial tool they desperately need. I urge my 
colleagues to keep this goal in mind and proceed deliberately 
and carefully, as indeed we should do.
    I support the concept of public-private partnerships for 
very practical reasons. We can all agree that the state of 
public safety interoperability must be improved upon. This 
problem cannot be solved solely at the State or local level. 
This is a national problem, requiring federal participation. 
The public safety community does not have sufficient funds to 
do it themselves, and the spectrum is a national resource.
    I believe the Commission, public safety, and the industry 
should continue to work together to craft a viable solution. If 
done correctly, the private sector will help provide a world-
class interoperable public safety network. I ask the Commission 
to make a serious, exhaustive effort to solve this problem. I 
am also open to other ideas and I expect that we will receive 
thoughtful analysis from today's witnesses.
    That said, I am presently unmoved by suggestions that we 
should simply auction the 10 MHz D block for purely commercial 
use and to hand the proceeds to public safety. This is a fine 
opportunity to squander not only a resource but massive amounts 
of money, which are desperately needed to provide the services 
which can properly be provided by a proper auction and proper 
use of this part of the spectrum. At this moment I consider 
such an approach to be an admission that we are not serious 
about obtaining true interoperability. It is much more 
important to me and should be much more important to the 
Commission and everyone else that we take the time necessary to 
craft a workable plan and that we do the things necessary to 
assure that that workable plan is properly implemented.
    I thank you for your courtesy, Mr. Chairman.
    Mr. Markey. The chairman's time has expired. The chair 
recognizes the gentleman from Michigan, Mr. Upton.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Thank you, Mr. Chairman. I too would like to 
welcome our FCC commissioners back.
    By some measures, the 700 MHz auction was a success, but by 
others we missed our mark and we failed to live up to the full 
potential of this landmark spectrum sale. From the beginning, I 
viewed the auction rules that the FCC put into place as an 
experiment. I believe that the experiment shorted the taxpayer 
perhaps billions of dollars in auction revenue and left the 
public safety spectrum in an uncertain state. I have always 
been a staunch defender of the taxpayers. Our folks back home 
deserve the most out of that auction. Taxpayers will receive 
nearly $19 billion in the auction proceeds, an impressive 
number nearly double what the CBO predicted, although industry 
experts and some of us on this committee always believed that 
the spectrum would in fact fetch even more than the $20 billion 
had it not been for the Commission's open access social 
engineering in the C block. We feel that we have been 
shortchanged.
    The free markets do work best and successful auctions work 
best without encumbrances. Google, by its own admission, was 
successful in gaming the system to achieve its goals without 
having to purchase a spectrum block or build out the network. 
Google is one of the richest companies in the country with a 
market cap of $140 billion. That is $40 billion more than 
Verizon. Google was within striking distance of Verizon's 
winning bid, yet Google never even made an attempt to top it, 
and without the open access rules, Google would have had more 
incentive to win the auction and would have been free to 
operate the network as it proposed.
    Clearly the auction yielded a wide variety of winners. 
According to the Commission, a bidder other than a nationwide 
incumbent won a license in every market, and 99 bidders other 
than the nationwide wireless incumbents won 754 licenses, 
representing almost 70 percent of the 1,090 licenses sold in 
the 700 MHz auction. In the B block, there were 87 different 
license winners. In the E block, EchoStar's frontline wireless 
won 168 licenses. And at the end of the day, I am confident 
that consumers all across the country will cheer the deployment 
of the 700 MHz spectrum which will bring not only the benefits 
of increased access to broadband, but also the rollout of 4G 
services. This represents an exciting evolution in the wireless 
marketplace.
    At past hearings and in a letter to the FCC that Mr. 
Stearns referenced, we all expressed our skepticism with the 
proposal to combine the first responder network with a 
commercial broadband network to create a public-private 
nationwide interoperable broadband public safety network. I 
wish that I was wrong but the experiment in fact was a failure 
at the expense of public safety. Auction participants were 
reluctant to bid on the 10 MHz of D block spectrum and, given 
the investment needed, potential bidders avoided this block 
since they did not know in advance all the terms of the public-
private partnership. As a result, that D block auction was a 
failure.
    Lastly, I want to express my concern with the Commission's 
allegation of resources at the critical moment. Public safety 
and the successful DTV transition should be the top priority of 
the Commission. I don't see how the FCC can hope to be an 
effective proponent of the digital TV transition if it gets 
sidetracked by contentious policy debates, such as proposed 
mandates on wholesale a la carte and price controls on TV 
programming. I wish to urge the Commission to stay focused on 
the task at hand so that we don't move down the other road.
    Thank you, Mr. Chairman.
    Mr. Markey. The gentleman's time has expired. The chair 
recognizes the gentleman from Pennsylvania once again, Mr. 
Doyle.

   OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Doyle. Thank you. Mr. Chairman, it was 1980, right 
around tax day, just like today. I had gotten a pretty good tax 
refund that year and I was going to this electronics show and I 
came home with a Zenith Advanced System III console television, 
and the reason why I bought it, Mr. Chairman, is it had a space 
phone, so you hook it up and if you get a phone call, your 
television rings, the set mutes the volume off and you get to 
talk to the person over the television speakerphone. I thought 
it was a brilliant idea until I was in the middle of watching a 
Steelers game and my set kept cutting off to get calls from 
telemarketers. My son, 28 years later, still has that 
television set in his house.
    But Mr. Chairman, the point I am making, the only reason 
that set was available was because of FCC Carter phone 
regulations that allowed for competitive phone products. As 
some talk about the exciting future potential for home 
networking, Internet connected devices and more, I have to say, 
been there, done that, have the manual somewhere in my attic.
    So I want to thank Chairman Martin and the members of the 
Commission who voted for the item at the FCC that would spur 
innovation for devices and applications that will use the C 
block. I look forward to seeing how Verizon, the winner of the 
C block, will implement those rules across their entire 
spectrum for their open development initiative, and I will 
continue to closely watch this to make sure that those rules 
spur a new openness across all of the wireless industry.
    But Chairman, the results of the auction did not fulfill 
all of its promises. I agree with what several of the 
commissioners here have said, that the auction could have been 
about more than revenue or open devices. For instance, we did 
not find a bidder willing to build a national public safety 
broadband network. We need to figure out why before trying to 
fix it. We also get to meet the new wireless boss. They are the 
same as the old boss. Among the top markets, only one, Boston--
that is a strange coincidence, Mr. Chairman--will see a new 
company come in and compete. AT&T and Verizon won the entire 
spectrum in most metropolitan areas. Perhaps blind bidding, 
bidding credits, and designated entity rules help, but maybe it 
is market power that is the best determinate of who wins an 
auction. Perhaps we should have done what the Conservative 
Party in Canada did late last year and prevented incumbents 
from participating. Perhaps we need to make sure we won't get 
fooled again on creating new competition.
    Mr. Chairman, with those questions in mind, I look forward 
to hearing from the witnesses today and I yield back the 
balance of my time.
    Mr. Markey. The gentleman's time has expired. The chair 
recognizes the gentleman from Illinois, Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman. I will reserve my 
time for questions.
    Mr. Markey. The gentleman reserves his time. The chair 
recognizes the gentleman from Mississippi, Mr. Pickering.

  OPENING STATEMENT OF HON. CHARLES W. ``CHIP'' PICKERING, A 
    REPRESENTATIVE IN CONGRESS FROM THE STATE OF MISSISSIPPI

    Mr. Pickering. Thank you, Mr. Chairman. Thank you for this 
hearing.
    As we consider how to successfully achieve the objectives 
as we go forward, I think there are three primary public 
interests. One, public safety. Our first constitutional 
obligation is to meet those needs, and as we look at post-9/11 
and post-Katrina, I believe that the same critical urgency 
exists that we have yet to achieve as policymakers in creating 
a national interoperable public safety network. So that should 
be our first priority.
    Second, we should maximize competition. Now, why should we 
maximize competition higher than maximizing revenues? Because 
for free market capitalism to work, we do not need undue 
concentration, and for Republicans from Roosevelt to Reagan, 
with the breakup of AT&T, they understood the more competitors 
you have, then the greater the investment and innovation, and 
the greater the freedom for people all across the country. If 
we look at 1993 and the rules that came out that took us from a 
duopoly in wireless service to up to seven competitors in a 
market, no one could argue that that policy decision of 
maximizing competition in wireless markets led to an explosion 
of service and investment. We do not want to see a retrenchment 
from seven competitors down to 3 or 4 or 5 years from now just 
two competitors. A duopoly, as Wall Street and private equity 
experts have testified before this committee, will lead to a 
decline in investment and a punishment of the incumbent 
carriers if they try to deploy broadband services. So first, 
public safety. Second, we need to look at how we can maximize 
competition when in so many of the markets we are now exceeding 
the FCC merger condition of the Dobson purchase of 95 MHz per 
market.
    So we are seeing undue concentration, we failed on the 
public safety, and the third thing, and it should be in this 
order, is to try to maximize the revenues to the taxpayers, and 
if we can do in the first two, then look at how we can, I 
believe, increase what was the reserve price, I think that we 
can achieve all three objectives in a very effective manner.
    I look forward to hearing from the panel today as we talk 
about these things. Thank you very much.
    Mr. Markey. The gentleman's time has expired. The chair 
recognizes the gentleman from Texas, Mr. Gonzalez.
    Mr. Gonzalez. I waive opening.
    Mr. Markey. The gentleman waives his opening statement. The 
chair recognizes the gentlelady from California, Ms. Eshoo.

 OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Eshoo. Thank you, Mr. Chairman, for holding this 
hearing, and welcome to the Commission.
    I can't help but think that the recent auction will 
probably not be duplicated in my lifetime. I think this is the 
Super Bowl of auctions and certainly the dollars that have come 
in are very important and how history will view this auction 
obviously has yet to be determined, but I do think that it is 
important to try and look at it, examine it through a historic 
lens. We know that about 70 percent of the spectrum was won by 
two companies. There is not a new nationwide licensee and the 
status of the public safety spectrum remains in considerable 
doubt, and I think each one of my colleagues has made some 
reference to that.
    I am pleased that the C block, which contained important 
new access provisions, met the reserve and was won by Verizon, 
and I am eager to see how Verizon is going to implement these 
requirements and promote greater openness in the wireless 
industry. It is very, very important for the people of our 
country. I think it is important for auction winners to 
understand that they don't own public airwaves in fee simple. 
That is a notion that if anyone is attached to it really needs 
to be discarded. As licensees, they hold spectrum in a public 
trust, and I think that we have gotten way off base with this 
in our country and it is troubling to me, I think it is 
troubling to others, and I think the people in our country 
really care about it. It is an agreement that obligates the 
companies to utilize the spectrum in the public interest in 
exchange for their exclusive control.
    So the Commission has an obligation always to act in the 
public interest. I am concerned that there has been a decision 
to quickly re-auction the D block, which may continue the 
failed policies that led us to where we are now. Without a D 
block licensee, I think that the Commission has to undertake a 
more thoughtful process that produces a licensee that has the 
resources to quickly build out a public safety network. It is a 
high obligation that the Congress has and the FCC has. So, the 
innovation for the spectrum I think is boundless and I hope its 
limitless uses will be fully realized by the American people.
    So I look forward to questioning the commissioners, and Mr. 
Chairman, thank you for holding this important hearing.
    Mr. Markey. The gentlelady's time has expired. The chair 
recognizes the gentleman from Oregon, Mr. Walden.
    Mr. Walden. Mr. Chairman, I am going to waive opening 
statement.
    Mr. Markey. The chair recognizes the gentleman from 
Nebraska.
    Mr. Terry. Waive opening.
    Mr. Markey. Mr. Terry along with Mr. Walden have waived 
their time and their time will be reserved. The chair now 
recognizes the gentleman from Michigan, Mr. Stupak.
    Mr. Stupak. Mr. Chairman, I am going to waive and save my 
time for questions.
    Mr. Markey. The chair recognizes the gentlelady from 
California, Ms. Capps.

   OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Capps. Mr. Chairman, I want to thank you for holding 
this very important and timely oversight hearing. I thank our 
commissioners for once again appearing before our committee.
    I would point out, as has been mentioned already, the 
status of interoperability and public safety being topic number 
one and I want to thank all of my colleagues who have been 
pushing forward with this. I particularly want to acknowledge 
my colleague from California, Representative Harman, for 
drilling us on this and it is very important.
    The results of the 700 MHz auction are bittersweet for all 
of us who followed it closely. I was happy to learn that open 
access requirements were triggered and hope that leads to 
innovations yet unknown for consumers but I am equally 
disappointed that participation by women and minorities was 
negligible and that the D block failed to attract a winning 
bid. From my perspective, the creation of an interoperable 
public safety network was by far the most important aspect of 
this auction, so I approach this hearing eager to hear where 
the D block auction went wrong and how we can all work together 
to forge a new and better plan.
    Our first responders, our firefighters, our policemen, 
others on the frontline, need, actually must be able to 
communicate effortlessly in the face of incredible disaster. We 
have had too many lessons where it has been brought home to us 
that this is before us, lives depend upon it, and I am 
disappointed that what transpired with the D block but I do 
remain hopeful. I continue to believe that this Nation hast he 
technology, has the capacity, the expertise and the ingenuity 
to still and hopefully quickly make this public safety network 
a reality.
    So I am looking forward to the testimony of our witnesses. 
Thank you again, Mr. Markey, for holding this hearing. I yield 
back.
    Mr. Markey. The gentlelady's time has expired. The chair 
recognizes the gentlelady from California, Ms. Harman.

  OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Harman. Thank you, Mr. Chairman.
    Mr. Chairman, building a national broadband network for 
interoperable communications is my highest priority on this 
committee, and as you know, I have written a letter to you and 
the ranking member setting out some of my thoughts about how to 
get there. In my view, our work with others may bring 
telecommunications benefits to consumers, but the ability of 
public safety agencies to communicate is a matter of life and 
death. Nearly 7 years ago, as dust billowed from Lower 
Manhattan, members of this House stood on the steps of the 
Capitol and sang God Bless America. We said never again, never 
again would we let merciless killers destroy thousands of 
innocent lives on our soil. Never again would we be unprepared 
for acts of terror. But today, nearly 7 years later, we remain 
unprepared. Our Nation's thousands of emergency communications 
systems remain fragment, outdated and costly. Many first 
responders face the same communications problems that led to 
over 300 deaths on 9/11. All levels of government failed our 
first responders that day and we must not fail them again. The 
DTV transition could be our last chance for years to get this 
right.
    Today, committee members and our witnesses will describe 
their ideas for achieving a national broadband network for 
public safety, the real measure of the DTV transition's 
success. Some would retain the structure of the first D block 
auction, some would modify it and some would do away with it. 
As I said in my letter to you, I do not believe we should 
quickly abandon the public-private partnership model. D block 
spectrum is the carrot to bring new, innovative commercial 
partners to the table. Once it is gone, we can't get it back.
    No matter what we decide is the best course, several key 
changes are imperative. First, clarify. The FCC and the public 
safety spectrum trust must give bidders a sense of what their 
obligations are before the auction. These obligations have to 
be realistic. The perfect is the enemy of the good. Second, 
transparency. Backroom dealings and murky business 
relationships poison oversight and good government. The parties 
must explain their relationship to the satisfaction of Congress 
and conduct their dealings in public. Third, avoid D block 
light, or at least a second auction that does not correct the 
flaws of the first. We should act with urgency informed by hard 
evidence of what caused the auction to fail.
    As I have often said, Mr. Chairman, our children and 
grandchildren, brothers and sisters and mothers and fathers in 
communities across America are at risk until we solve this 
problem. The DTV transition is about this issue, not converter 
boxes, not digital broadcasting. The issue is about the public 
interest, not self-interest. Whose interest will we protect?
    Mr. Markey. The gentlelady's time has expired. The chair 
recognizes the gentleman from Washington State, Mr. Inslee.
    Mr. Inslee. I will reserve, Mr. Chairman. Thank you.
    Mr. Markey. And that completes all time for opening 
statements by members of the subcommittee.
    Marsha Blackburn from Tennessee is here. She is not a 
member of the subcommittee but by unanimous consent she could 
make an opening statement. I hereby make that motion. I hear no 
objection. The gentlelady is recognized for that purpose.
    Ms. Blackburn. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here. I will waive an opening statement so 
that we can get to the witnesses. I will submit an opening 
statement for the record.
    Mr. Markey. We appreciate the gentlelady and that gesture, 
but just by adding that extra 30-second conversation, we have 
made it possible for the ranking member of the full committee, 
Mr. Barton, to appear in time for an opening statement, and he 
is recognized at this point for that purpose.
    Mr. Barton. Mr. Chairman, I am going to submit it for the 
record. I have been busy with my avatar and I wasn't able to 
get here earlier.
    [The prepared statement of Mr. Barton follows:]

                      Statement of Hon. Joe Barton

    Thank you, Mr. Chairman.
    The recently completed 700 megahertz auction will benefit 
Americans by making spectrum available for next-generation 
wireless services. This was one of the reasons Congress cleared 
the spectrum with the DTV legislation. Still, the auction could 
have gone even better.
    As I, along with Mr. Stearns, Mr. Upton, and 13 of our 
colleagues from both sides of the aisle warned in a June 29, 
2007 letter, ill-conceived auction conditions cost American 
taxpayers $5-10 billion in lower auction revenues, encouraged 
Google to free ride on someone else's spectrum rather than 
seriously bid to build a competing wireless network, made it 
harder for rural and smaller providers to get spectrum, and 
failed to produce a candidate to build a nationwide public 
safety network.
    Although the auction raised $19 billion, it should have 
raised more. True, the congressional Budget Office estimated 
the auction would raise $12.5 billion. But Mr. and Upton and I 
disagreed with that figure based on studies estimating that-
unencumbered-the spectrum would raise $25-$30 billion. Those 
estimates proved right, considering that the open access 
conditions may have cut the C-block revenue in half, and the D-
block did not sell at all.
    Of greater concern, however, is the failure to produce a 
public-private partnership. We must now pick up the pieces.
    We could try letting the FCC determine as many of the 
obligations up front and re-auction the D-block with weaker 
public safety requirements to attract more bidders. This runs 
the risk, however, of not meeting public safety's needs and 
still not finding a bidder. My fear is that, despite the best 
of intentions, trying to shoe-horn a negotiation into the 
middle of an auction, where neither public safety nor the 
commercial provider can walk away if their needs are not met, 
will only result in another failure. As our letter explained, 
setting just the right rules in advance would be more like 
winning the lottery than running an auction.
    A second option would be to scrap the public-private 
partnership and oversee the public safety network ourselves. 
Unfortunately, the Federal Government does not understand in 
enough detail either First Responders' needs or how to manage 
an interoperable communications network for such a large 
endeavor to work.
    A third option is to do what the FCC initially set out to 
do and what I endorsed in the June letter: auction the D block 
for commercial use and let public safety negotiate for 
construction of a network independently. First Responders can 
still gain access to another 10 megahertz of spectrum in 
exchange for giving a commercial partner subscription revenue 
and sharing some of the 24 megahertz the DTV legislation 
separately cleared for public safety.
    The issue may be public safety funding. If that's the case, 
we need to address it straight on. With consensus, Congress 
could pass a law to use proceeds from the commercial re-auction 
for the public-private partnership.
    I look forward to the witnesses' testimony as we tackle 
these issues.
    I yield back.
                              ----------                              

    Mr. Markey. I appreciate that. You know, IBM announced the 
very next that day that 6,000 of their employees were going to 
be given avatars for working with other members of the IBM 
empire. So I think we were really at the cutting edge, and I 
appreciate the chairman now having an avatar himself and I will 
be looking forward to seeing you in Second Life after this 
hearing.
    But we will turn now to the Federal Communications 
Commission, and we welcome you back. You have been frequent 
visitors to this subcommittee, and this is at the very top of 
the priority list to get these particular issues correct for 
public safety and for competition reasons, and we are very 
honored to have you back, Chairman Martin, to represent the 
Commission, and if any of the other commissioners wish to make 
opening statements, they will be welcomed to do as well. So we 
will begin by welcoming Chairman Kevin Martin of the Federal 
Communications Commission.

STATEMENT OF KEVIN J. MARTIN, CHAIRMAN, FEDERAL COMMUNICATIONS 
                           COMMISSION

    Mr. Martin. Thank you, and good morning as well to you, 
Chairman Markey, Ranking Member Barton, and all the members of 
the Committee. Thank you for inviting me to be here with you 
today to discuss our reasoning and the results of our most 
recent auction.
    The 700 MHz auction achieved a number of significant 
milestones. The wireless networks to be deployed with these 
licenses will be significantly faster and will extend to urban 
and rural areas alike and they will bring increased competition 
to a broadband sector currently served primarily by DSL and 
cable, and wireless consumers will now be able to use the 
wireless devices and applications of their choice.
    There have been some significant misperceptions about our 
auction and I appreciate the opportunity this morning to debunk 
what I would call the six myths of the 700 MHz auction. Myth 
number one: the auction was not a success. The auction was the 
largest in FCC history, raising a record $19.6 billion in bids. 
Even in a difficult economic climate, revenues raised in this 
auction will exceed congressional estimates, nearly doubling 
the $10 billion that Congress had anticipated would be raised. 
In comparison, the 2006 Advance Wireless Service Auction sold 
approximately 50 percent more spectrum yet generated only a 
one-third less revenue. Even with the open platform 
requirements and aggressive build-out obligations, each of 
these blocks sold for more than the AWS-1 blocks with 
comparable bandwidth and license areas.
    [Slide shown.]
    As this first slide shows, all other 68 auctions conducted 
by the FCC in the past 15 years collectively produced a total 
of only $19 billion in actual receipts, roughly equivalent to 
the amount of money raised in the 700 MHz auction. But while 
clearly a success in terms of dollars, this auction also 
obtained significant public interest objectives that benefited 
consumers. With open platform requirements and one-third of the 
spectrum, consumers will be able to use the wireless device of 
their choice and download whatever legal software or 
applications they choose. A network that is more open to 
devices and applications will help foster innovation on the 
edges of the network and give consumers even greater freedom.
    Ensuring that rural and underserved areas of the country 
benefit from the new wireless services this spectrum offers, 
the Commission adopted the most aggressive build-out 
requirements ever applied to wireless spectrum and as a result, 
the spectrum will quickly be put to use by all auction winners. 
And finally, as I will discuss below, we created what will be 
new wireless broadband providers to compete with the incumbent 
telephone and cable companies in nearly every home in the 
country.
    Myth number two: Verizon and AT&T won everything. In fact, 
a total of 99 bidders other than Verizon and AT&T won 754 
licenses, almost 70 percent of the licenses sold, and a bidder 
other than Verizon or AT&T won a license in every market. Small 
businesses eligible for bidding credits were successful in the 
auction. Indeed, 56 of the 101 total winning bidders claimed 
designated entity bidding credits.
    [Slide shown.]
    As you can see in the next slide, Exhibit 2, this is very 
similar to past auctions.
    [Slide shown.]
    And in the next slide, we see that small businesses 
eligible for bidding credits won almost 35 percent of the 
licenses, which again is very similar to past auctions.
    [Slide shown.]
    And finally, as this next map illustrates, these licenses 
covered a large portion of the country, including primarily 
rural areas. In fact, much of the money spent by Verizon and 
AT&T, almost 70 percent, was used to obtain spectrum in only 
the top 15 markets. The small and rural providers won 500 
licenses, covering almost 60 percent of the megahertz pops 
available outside of the top 15 markets. And finally, most 
auction winners are new entrants. Of the 101 winning bidders, 
72 are new entrants who won 675 licenses.
    Myth number three: Small carriers weren't able to win even 
in rural areas. Some have argued that small and small and rural 
providers were unable to win any spectrum, particularly in 
small communities. This is simply not true. In fact, new 
entrants, small and rural providers did especially well in 
rural areas.
    [Slide shown.]
    As you can see in this slide, Exhibit 5, in the A and B 
blocks alone, small and rural providers won spectrum that 
covered almost the entire country. Where they were unsuccessful 
was not in rural America or even in medium-sized markets, but 
in the 20 large metropolitan areas such as New York, Los 
Angeles, Dallas, Chicago, and Atlanta, and despite what some 
have argued, the percentage of spectrum available in smaller 
geographic areas was in fact comparable to what we did in AWS-
1.
    [Slide shown.]
    As you can see in this next slide, the percentage of 
spectrum available and licenses that cover the smallest areas 
was actually higher in the 700 MHz auction than it had been in 
the most recent AWS auction. In the largest cities, it did not 
matter whether the license was a smaller CMA, a medium sized EA 
or a regional REAG; the large carriers won. Unless the 
Commission had banned the nationwide incumbents, an idea that 
few had advocated, small and rural providers would likely not 
have succeeded in the largest markets.
    Myth number four: There will be no third pipe and the 
licenses were all won by the incumbent telephone or cable 
companies. In much of the country, consumers have a choice of 
only two broadband services, cable or DSL. Although the auction 
did not result in a single nationwide new entrant, in every 
market a third provider will be able to use a wireless 
broadband platform to compete against the incumbent telephone 
and cable companies. For example, in Chicago, Verizon is not 
the incumbent DSL or cable provider but won licenses in that 
area. The same can be said of Metro PCS in Boston and AT&T in 
New York City. In all of these areas, companies will provide a 
wireless broadband service that competes with the incumbent 
telephone and cable companies wireline offerings.
    [Slide shown.]
    In fact, as this next slide shows, a bidder other than the 
incumbent DSL or cable company won in almost every area of the 
country.
    Myth number five: Everyone knows that Verizon was going to 
go open anyway. The auction had an impact on innovation in the 
wireless industry even before the bidding began. In less than a 
year, many wireless providers evolved from vocal opponents to 
vocal proponents, embracing the open platform concept. Verizon 
Wireless is now committed to open its entire network to devices 
and applications, but when the open access issue was proposed, 
they were adamantly opposed. For example, Verizon said to 
Congress last June that what most concerns us is the open 
access which threatens to disrupt the positive consumer 
experience and that open access would threaten to shift the 
business of wireless network operators to primarily offering 
subscriber airtime. In July, Verizon argued that such limits 
placed on devices and applications were critical to maintaining 
the quality of its network and serving its consumers. Finally, 
Verizon took the Commission to court over the open access 
provisions, going so far as to seek a stay of our auction. If 
Verizon was planning to open its network regardless, why would 
they pay its lawyers' fees for this court case?
    And myth number six: We would have achieved a public safety 
network another way. During a crisis, public safety has to be 
able to communicate regardless of where they are from or the 
uniform they wear. Some critics seem to suggest that if we just 
auctioned the D block without conditions, a public safety 
network would have materialized on its own, or that we should 
have ignored public safety's conditions requiring a more robust 
network. But 6 years after September 11, there is still no 
nationwide public safety network in place. The simply reality 
is that public safety does not have the funds to build a 
network. It would have been better to take the auction proceeds 
and provide the public safety community with the resources 
needed to build their own interoperable network but we do not 
have the authority to directly fund such a network. As a 
result, the public-private partnership was the only means 
available to us to address this crucial issue. My colleagues, 
both Republican and Democrat, agreed. The Commission 
unanimously adopted the public safety private partnership 
approach for the D block as an innovative means to address the 
critical needs for our nationwide public safety.
    The Commission will, however, need to take into account why 
the D block did not attract a successful bidder. The Commission 
needs to consider whether the demands that were placed on the 
prospective D block winner such as network expectations and 
build-out requirements were just too great. But absent funding 
legislation, I believe that a public-private partnership 
remains the only tool at the Commission's disposal to solve the 
public safety interoperability challenge.
    The auction stands as the most successful FCC ever 
conducted but there is still more work that needs to be done 
and I look forward to working with the committee and my 
colleagues on these challenging issues in the months to come. 
Thank you.
    [The prepared statement of Mr. Martin follows:]
    
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
        Mr. Markey. Thank you, Mr. Chairman, very much.
    And now we will turn to Commissioner Michael Copps, the 
senior Democrat on the Federal Communications Commission. 
Welcome back, Mr. Copps. Whenever you are ready, please begin.

     STATEMENT OF MICHAEL J. COPPS, COMMISSIONER, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Mr. Copps. Thank you, Mr. Chairman, Ranking Members Barton 
and Stearns, all the members of the committee. Thank you for 
holding this hearing.
    My time is short so I will focus on what is far and away my 
top priority for the 700 MHz proceeding, public safety. It is 
top priority for the country too, and the bad news is that 
America's heroic first responders still don't have the 
communications tools they need to protect themselves and 
protect us. I still favor trying to make a public-private 
partnership work. I have never said it was the ideal way to go. 
In fact, as some of you may recall, I have long believed that a 
federally-funded interoperable wireless network dedicated 
exclusively to public safety use would have been the right 
solution. If the previous Commission in those anxious days 
following 9/11 had dedicated itself to working with the 
Congress towards this end, we might actually have made it 
happen, but that was then, this is now, and different realities 
prevail.
    So last summer I accepted the novel idea of public-private 
spectrum partnership because it likely represents our last best 
hope to build a workable public safety network combining the 
technical sophistication of a commercial operator with the 
ubiquitous coverage, robustness, redundancy and 
interoperability that this network must have. Leaving 
jurisdiction to do its own thing just isn't enough when we are 
talking about large-scale natural disasters and the ever-
present threat of terrorist attacks. The network I envision 
must work not only for public safety but also for the 
commercial partner, providing it with a reasonable rate of 
return and long-term profitability. There is work to be done 
here. But we also have to guard against the design and 
operation of this network being hijacked for purely commercial 
purposes, and let me be very blunt: we need to know upfront who 
among the potential bidders in a new auction is dedicated to 
making this model work. There are those who have the power to 
derail this whole effort, and we are not going to get another 
chance after the next auction.
    To make this all happen, we need an honest broker between 
public safety and the commercial interest. I devoted much of my 
last year to make the FCC that honest broker. I pushed hard at 
every turn to get the FCC oversight authority over network 
negotiations as well as the final say in approving, modifying 
and enforcing any agreement that the parties eventually 
reached. I know that this would not be an easy role, of course, 
but given the stakes, it was an essential one and I say again 
today, if this effort is going to really work, we all need to 
understand how involved and proactive the Commission will have 
to be. Our role must be more than just reviewing a final 
agreement. It is clear now that we need to be active up front 
in the process as well. If we can't deliver on what I am 
talking about, we shouldn't even be proceeding down this road. 
So allow me very quickly to identify five principles that I 
believe can lead us to a better outcome this time around. I 
mention them briefly, and my written statement provides 
elaboration.
    First, we must resolve as many technical details as 
possible about the network before we begin the auction. Last 
time we were operating on a short timeframe with a drop-dead 
date for conducting the auction staring us in the face. Many 
details were left to negotiation between the parties after the 
auction closed and the FCC was to render its judgments after 
that. This time we need at least 90 percent of that network 
sharing agreement worked out in advance of the auction. If we 
put enough blood, sweat and toil into it now, we can avoid the 
tears of a failed effort.
    Second, we need to clarify the roles and the rules of 
public safety and the commercial licensee, again, before the 
auction. While this should be a nonprofit operation for public 
safety, we should not preclude the public safety licensee from 
hiring experts including those who charge market rates. I want 
public safety to have the Nation's best experts on tap as soon 
as possible, people who know how to build and operate cellular 
networks, who understand clearly how much it costs to do so and 
who can give independent, unbiased advice about public safety's 
needs. One avenue for resolving these issues may be for the 
public safety representative to receive some modest funding 
from Congress or from one of the federal agencies that 
currently funds interoperability projects. It wouldn't have to 
be a large amount, just enough to support planning and some 
operational expenses as the effort gets launched.
    Third, the FCC needs to make sure that it has the expertise 
it needs to contribute network and technical knowledge to this 
effort. We need to assess whether we have that expertise in-
house today. If not, we either need to contract for experts or 
convene technical advisory panels.
    Fourth, the FCC needs to perform or otherwise obtain a 
careful economic analysis, the same kind of analysis that a 
business would perform before building a multibillion-dollar 
network. This auction is unlike other FCC auctions. Ordinarily 
there is no question that the spectrum will say. While 
conditions can affect total revenue, there are takers usually 
at some price. If we put forth rules or create too much 
uncertainty or don't allow a reasonable expectation for profit, 
we will again find that no entity is willing to bid.
    Fifth, when the FCC has done the hard work of formulating a 
set of network and operational specifications, we need to put 
them out for public comment. All this is a tall order, I 
realize, and there are those who will say, well, better to just 
make a few tweaks and get on with the auction, but for me the 
time for small tweaks has passed. Sure, we can change the 
reserve price, which I opposed in the first place, and we can 
tweak the default penalty, but that alone won't give us what we 
need to do.
    Each of my colleagues wants to deliver for public safety. I 
commend them and I command Chairman Martin for the thoughtful 
and receptive approach he has brought to this matter and I look 
forward to working with him, my colleagues, with all the 
parties and with this committee to finally build America's 
brave first responders the networks they deserve.
    My comments on the commercial side of the auction are in my 
written testimony. I view the outcome as decidedly mixed. A lot 
of money was raised, far surpassing expectations, but we did 
not see as many smaller bidders as I hoped nor did we get a 
nationwide new entrant. In retrospect, it is clear that 
imposing a wholesale obligation on the C block would have cost 
minimum revenue to the Treasury and would likely have produced 
a new entrant. That would have been a good news story for 
American innovators, including especially women and minority 
entrepreneurs who would have had a way into the wireless market 
without the need to raise staggering sums of capital. The 
consolidation we see in the auction results with the two 
largest wireless companies in the country winning 85 percent of 
the licenses by value also underscores the huge mistake this 
Commission made when it eliminated spectrum caps. We are coming 
dangerously close to foreclosing competition in the wireless 
marketplace, which is bad news for consumers and innovators 
alike.
    Thank you for the opportunity to testify today. I look 
forward to your comments and guidance and questions, and in the 
spirit of Charles Dickens cited by the chairman, God bless us 
all, everyone.
    [The prepared statement of Mr. Copps follows:]

                     Statement of Michael J. Copps

    Good morning Chairman Dingell, Chairman Markey, Ranking 
Members Barton and Stearns and Members of the Committee and 
thank you for holding this hearing.
    Auction 73 brought us both good news and bad, but on the 
most important score-providing for the public safety--the news 
is still out and the really hard work is just beginning. We are 
still nowhere near improving the sad state of communications 
infrastructure available to America's heroic first responders. 
And remember this: public safety was a primary, and in some 
minds the hands-down most important reason, that we reclaimed 
TV channels 52 through 69 in the first place. So there is no 
more important mission for the FCC in 2008 and beyond than 
finishing this job and doing it right.
    Even after the bumpy auction ride of the past year, I still 
favor trying to make a public-private partnership work. I've 
never said it was the ideal way to go. In fact, as some of you 
may recall, I have long believed that a federally-funded, 
interoperable wireless network-dedicated exclusively to public 
safety use-would have been the right solution. If the previous 
Commission, in those anxious days following 9/11, had stepped 
forward for such a commitment and dedicated itself to working 
with the Congress, we might have actually made this dream a 
reality. But that was then and this is now and different 
realities prevail.
    So last summer, I accepted the novel idea of a public-
private spectrum partnership because it probably represents the 
last, best chance we have to build a network that will work for 
public safety. A viable partnership would combine the technical 
sophistication of a commercial network with the demanding 
coverage and reliability that public safety must have in order 
to provide the Nation's first responders, at long last, with 
access to a national, interoperable broadband network. The most 
important part of this decision, in retrospect, is that for the 
first time the FCC recognized that we can no longer just assign 
public safety licenses to states and localities, full stop, end 
of FCC involvement. Responding to regional and national 
disasters and coping with the threat of terror require much 
more than every jurisdiction just doing its own thing. Report 
after report has documented that such an approach has left too 
many licensees without the ability to achieve interoperability 
and without the funds to build out even local networks. Put 
more bluntly, we have left them without the tools they need to 
protect us and to protect themselves. Seven years after 9/11, 
this is a profoundly unacceptable result.
    As we considered the details of the public-private model, 
my number one concern was that the network actually work for 
public safety. In terms of ubiquity, robustness, redundancy and 
many other qualities, the public safety network is a different 
animal than the purely commercial model. If we cannot ensure 
these attributes, we shouldn't even be proceeding down this 
road. As I have said before, I would rather have no network 
built-and let public safety go back to the drawing board-than 
tie up first responders' spectrum in a network primarily or 
disproportionately dedicated to serving purely commercial 
interests. We simply cannot let this precious opportunity to 
serve public safety be derailed by those who may prefer to 
enrich private interests at the expense of the public well-
being. Let me be more blunt: we need to know up-front who among 
potential bidders in a new auction is dedicated to making this 
model work because there are those who have the power to derail 
the whole effort, and we're not going to get another chance 
after the next outing.
    At the same time, I also recognized that this network had 
to provide the commercial partner with a reasonable rate of 
return and an expectation of long-term profitability-or else 
the whole arrangement would collapse, leaving public safety 
without a network. Clarity about this is still lacking. 
Finally, and just as importantly, I believed the partnership 
required an honest broker between public safety and the 
commercial interest. And I devoted much of my effort last year 
to make that honest broker the FCC. I pushed hard, at every 
turn, to give the FCC oversight authority over network 
negotiations as well as the final say in approving, modifying 
and enforcing any agreement that the parties eventually 
reached. I knew that this would not be an easy role, of course; 
but given the stakes, it was an essential one. And I say again 
today: if this effort is going to really work, we all need to 
understand how involved and proactive the Commission must be. I 
believe we made substantial progress in carving out that role 
before the auction. But then we did so prospectively. This time 
the FCC needs to assume that more active role up-front in the 
process.
    So as we embark on this critically important work, I'd like 
to identify five principles that I believe can lead us to a 
better outcome this time around:
    First, we need to resolve as many technical details as 
possible about the network before we begin the auction. Last 
time we were operating on a short time-frame with a drop-dead 
date for conducting the auction staring us in the face. Many 
details were left to negotiation between the parties after the 
auction closed. Our rules specified, as you know, that the 
Commission would thoroughly review whatever the parties agreed 
upon to ensure it was viable, efficacious and squarely in the 
public interest. But now--although time is precious and the 
urgency still high--we can do it smarter. Our agency must roll 
up its sleeves this spring and summer, bring the parties 
together, and work with them to make sure the expertise is 
available, the untold minutia of how to build and operate a 
nationwide wireless network is mastered, and everyone knows 
where this is going before the bidding opens. To me, this means 
that at least 90% of the network sharing agreement must be 
worked out in advance of the auction. If we put enough blood, 
sweat and toil into it now, we can yet avoid the tears of a 
failed effort.
    Second, we need to clarify the roles of each of the 
partners--public safety and the commercial licensee--again 
before we hold the auction. This means specifying the precise 
duties and responsibilities of the public safety licensee and 
how it will fund itself in the period before the network is 
built, as well as on a long-term basis. Of particular 
importance, we must ensure that this is, at its heart, a non-
profit operation. But that should not preclude the public 
safety licensee from hiring experts, including those who charge 
market rates for their services. Indeed, I think it is 
essential that public safety get the nation's best experts on 
its staff as soon as possible-people who know how to build and 
operate cellular networks, who understand clearly how much it 
costs to do so, and who can give independent, unbiased advice 
on what kinds of equipment and specifications will serve public 
safety's needs. Drawing the line between that kind of 
legitimate and necessary budgeting and allowing someone to 
profit unduly by advising public safety is one of our larger 
challenges in the months ahead.
    One avenue for resolving these issues may be for the public 
safety representative to receive some modest funding from 
Congress or from one of the federal agencies that currently 
funds interoperability projects--it would not have to be a 
large amount, just enough to support planning and some 
operational expenses until the effort becomes self-sustaining.
    Third, the FCC needs to make sure that it has, in-building 
or via contract, the expertise it needs to contribute network, 
technical and operational knowledge to this effort and to play 
its honest broker role. We need people who understand how to 
build cellular networks and how much it costs to do so. For 
example, as we decide the geographic coverage requirements for 
the new network, we need to know what the cost difference is 
for building out to 90 percent versus 99 or 99.3 percent of the 
Nation's population. We need to understand the costs and 
benefits, in sparsely-populated areas especially, of 
supplementing terrestrial build-out with satellite technology. 
There are hundreds of highly technical questions, I recognize, 
but we cannot write rules that strike the right balance if we 
are not fluent in these details.
    So my message is that we need the experts. If we don't have 
enough experts today, we need to contract for them or to 
impanel a technical advisory group. If we can't get our hands 
on this kind of advice, then the FCC has no business even 
attempting to write rules for this auction.
    Fourth, the FCC needs to perform, or otherwise obtain, a 
careful economic analysis--the same kind of analysis that a 
large carrier would perform before building a multi-billion 
dollar network or an investor would perform before loaning 
money to a new venture. After all, this auction is unlike other 
auctions we hold here at the FCC. Ordinarily, there is no 
question that spectrum will sell. To be sure, the conditions we 
impose can affect total revenue, but there will be takers at 
some price. But here we are offering the chance to participate 
in a public-private partnership that has substantial costs as 
well as benefits. If we put forth rules that create too much 
uncertainty, or don't allow a reasonable expectation of profit, 
then we will find that no entity is willing to bid. As all of 
us in this room are well aware, this is not a purely academic 
concern--it's what happened last time. So we need to do better 
this time.
    Fifth, when the FCC has done the hard work of formulating a 
set of network and operational specifications, we need to put 
them out for public comment. We can't afford to learn too late 
that one or another provision would unnecessarily exclude an 
otherwise willing bidder. And we can't afford to learn that any 
of our network specifications won't work for public safety or 
that we have left ambiguity in our rules that could cause 
harmful uncertainty.
    All this is a tall order, I realize. And there are those 
who will say to us, ``Better just to make a few tweaks in what 
you did last time and get on with the next auction.'' But, for 
me, the time for small tweaks has passed. Sure, we can change 
the reserve price (which I opposed in the first place), and we 
can even tweak the default penalty provision (though there 
needs to be some incentive for the auction winner to negotiate 
in good faith). But I don't believe that will give us the data 
and the understanding we need to achieve better results in the 
months ahead. We have a new situation now, and a new 
opportunity to do this right.
    Each of my colleagues wants to deliver for public safety. I 
commend them, and I commend Chairman Martin for the thoughtful 
and receptive approach he has brought to this matter. I look 
forward to working with them, with all the parties, and with 
this Committee to finally build America's brave first 
responders the network they deserve and to provide our citizens 
with the public safety networks they expect.

                                 * * *

    Let me turn very briefly to the commercial side of the 
recently-completed 700 MHz auction. Here the news is decidedly 
mixed. On the positive side, a lot of money, far exceeding most 
expectations, was raised-and this was smack in the middle of 
some tough economic times. Also on the positive side, we now 
have enforceable open access requirements on the 22 MHz C-Block 
and a commitment by the Commission to resolve complaints within 
six months. As I have stated before, history makes clear that 
open networks are good for consumers and for businesses. 
Without openness requirements, we would never have the fax 
machine, the answering machine, or the explosion of dial-up 
services like AOL that introduced most Americans to the 
Internet.
    But in important respects, as I warned when we launched our 
rules, we end up with the same old, same old. The Nation's two 
largest wireless carriers--who are also the Nation's two 
leading wireline voice and DSL providers--won roughly 85% of 
the licenses, as measured by value. Participation by rural 
telephone companies was disappointing; participation by women- 
and minority-owned businesses was appalling. These trends 
towards consolidation in the wireless marketplace should worry 
all of us. Combined with the additional cross-ownership of 
wireless and wireline assets-which raises serious concerns that 
the wireless data market might develop in ways that are not 
good for American consumers--I find them deeply disturbing. To 
me, these facts underscore the damage that the Commission's 
decision to eliminate spectrum caps has wrought. I think our 
friends to the north have the better idea--Canada will auction 
105 MHz of AWS spectrum next month-with 40% reserved 
exclusively for new entrants! I wish we had followed their 
model in our own auction.
    The auction results also deepen my disappointment that the 
Commission did not impose a wholesale requirement on the C-
Block. It is now clear that that a wholesale requirement would 
have had minimal impact on overall auction revenue, yet would 
have brought a new entrant to the wireless marketplace. This 
new entrant would have introduced welcome new competition. Even 
more importantly, unlike existing carriers, it would have been 
legally obligated to provide spectrum to small entrepreneurs at 
wholesale rates. Imagine what a change that would be--if any 
inventor with a great new technology, or any entrepreneur who 
identifies an underserved market, could simply buy spectrum 
capacity from a nationwide carrier at wholesale rates and offer 
its product directly to consumers. This would also have been a 
tremendous step forward for women- and minority-owned 
businesses eager to get into the wireless market but without 
the staggering capital resources necessary to build a new 
network from scratch. What a huge force for innovation and 
openness in the wireless market this could have been-and I am 
very sorry that a majority of the Commission rejected the 
suggestion of high-tech innovators, public interest groups, 
Commissioner Adelstein and me to travel down that road.
    Thank you for the opportunity to testify today and I look 
forward to your comments, guidance and questions.
                              ----------                              

    Mr. Markey. I thank the gentleman very much.
    And now we will turn to Commissioner Deborah Tate to hear 
her opening statement.

    STATEMENT OF DEBORAH TAYLOR TATE, COMMISSIONER, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Ms. Tate. Thank you. Good morning, Chairman Markey, Ranking 
Member Stearns, and Mr. Barton and distinguished members of the 
Committee. Thank you truly for the opportunity for all of us to 
be here today to have this dialog. I agree that this must be 
and is our number one priority today and going forward.
    Auction 73 raised almost $19 billion, as you all have 
heard, I won't go through all the specifics, given that it is 
tax day. This was a huge financial success, especially as we 
consider what was going on with all the financial uncertainty 
both on Wall Street and on Main Street.
    Further, the auction was a success from a technical 
perspective, which we often overlook. The innovative auction 
software that the FCC employed worked flawlessly. We applied 
anonymous bidding rules for all participants to limit collusion 
and prevent anti-competitive outcomes. Our auction team handled 
over 261 rounds, applied hundreds of pages of rules fairly and 
performed its duties well. Indeed, we can all be proud of the 
Commission's auction, our staff, the procedures and 
capabilities, which have served as a template for officials and 
experts to implement auctions in countries across the world.
    In addition, as you all have heard, a bidder other than a 
nationwide mobile service provider won a license in every 
market. Also, U.S. Cellular, the Nation's sixth-largest mobile 
provider, with 6 million subscribers, won 152 licenses in 26 
States where it provides services. This is clear evidence that 
regional carriers are also providing competition. We also 
helped, as you heard from the chairman, small businesses by 
applying our DE rules to the auction portion with good results. 
More than half of the winning bidders claimed DE status. In 
short, the Commission did make efforts to ensure that small and 
regional providers could not only participate but many of them 
did so successfully.
    I also want to stress other significant benefits, in 
particular, the potential for exciting new players and entirely 
new business models. For example, Cox Communications, as you 
all know, is the third-largest cable company and it won 
licenses in all 35 of its markets and across 18 States. Cox 
currently offers video, Internet and wireline and now will be 
able to offer what more and more of our consumers want: 
mobility and the long-sought-after quadruple play. We see 
another exciting possibility, of course, with DISH Network that 
you heard. The spectrum acquired by DISH might be ideal for 
mobile broadband or mobile video or other uses. So there is 
much promise from this auction for further innovation across 
many other platforms in this dynamic wireless market.
    While some commenters sought full, open access in the 700 
MHz band, the Commission did take a more measured approach. We 
limited this to a single block, the C block, and we didn't 
apply it to any existing or already licensed spectrum.
    However, the potential for networks that are even more open 
is obviously occurring daily. We don't have to wait for 
services necessarily in this block so perhaps our success 
shouldn't be block by block but rather in the overall impact 
that we have had so that consumers can move from device to 
device, market to market. Having just returned from CTIA, I can 
attest to the explosive growth in these devices and 
applications providing mobile broadband in an increasingly open 
environment.
    Certainly the key issue at the FCC and in today's hearing 
is the D block and the spectrum that we set aside for a 
commercial licensee to build and operate an interoperable 
network that would support our public safety users, many of 
whom are here today, and I know we salute them for their 
service. We know that unfortunately, as many of you have noted, 
years later we still lack a truly interoperable network, much 
less a broadband one. Advanced technology brings real 
opportunities to assist our law enforcement, firefighters and 
emergency medical personnel with critical information, whether 
they arrive at a hostage scene, rush into a burning building or 
share real-time information across governmental entities and 
across jurisdictions. Our citizens indeed deserve these life-
saving benefits, especially when we know the technologies are 
already available.
    To that end, with input from you all, from other members of 
Congress, from public safety and industry, last year we did 
establish a unique set of rules to require this licensee to 
partner with and service public safety. Our rules allow public 
safety a significant degree of control over the partnership. 
Unfortunately, no bidder met the reserve price, something 
obviously we need your input on. As a result, we now have the 
opportunity to return to this critical issue, knowing what we 
know now and learning from this experience. The good news is 
that we all share the same goal as we move forward. Since the 
close of the quiet period, like my colleagues, I have met with 
representatives from all these groups to get their 
perspectives.
    I welcome the opportunity to have this dialog today to hear 
your perspectives and hope we will be able to set in motion the 
appropriate rules to successfully complete this mission. To 
that end, I hope we do not limit this to the review and the 
confines of just the D block and our previous rules but that we 
do welcome all types of new creativity, entrepreneurship, and 
plain old American ingenuity. The spectrum is indeed an 
American natural resource. We must enlist our brightest minds 
to maximize its use, harness its scientific attributes and its 
real-world promise to connect our first responders and every 
American citizen in a time of crisis.
    Thank you.
    [The prepared statement of Ms. Tate follows:]

                    Statement of Deborah Taylor Tate

    Good morning Chairman Markey, Ranking Member Stearns, and 
distinguished members of the Committee. Thank you for the 
opportunity to be here with you today. I have a brief opening 
statement and then I look forward to answering any questions 
you may have.
    To effectuate the DTV transition mandated by Congress, the 
Federal Communications Commission will transition 108 megahertz 
of spectrum in the 700 MHz band from broadcasting to other 
uses, including new and exciting commercial services as well as 
critical public safety services. Recently, the Commission held 
an auction for 62 megahertz of this spectrum in the 700 MHz 
band. Auction 73, as it is known, met with historic success, as 
well as some disappointment regarding the D block.
    Auction 73 raised almost $19 billion in net winning bids. 
Given that the congressional Budget Office estimated auction 
receipts of $10 billion to perhaps as much as $15 billion, the 
auction was clearly a financial success, especially considering 
the current climate of extreme financial uncertainty on Wall 
Street and Main Street.
    Further, the auction was a success from a technical 
perspective. The auction software worked flawlessly. The 
Commission also applied anonymous bidding rules for all of the 
participants in Auction 73 to limit collusion between bidders 
and thus prevent anti-competitive outcomes. Our auctions team 
handled over 261 rounds, applied the Commission's rules fairly 
and performed its duties well. Indeed, we can all be proud of 
the Commission's auctions procedures and capabilities, which 
have served as a template for officials and experts from all 
over the world.
    In addition, a bidder other than a nationwide mobile 
service provider won a license in every market. Also, U.S. 
Cellular, the nation's sixth-largest mobile telephony provider 
with 6 million subscribers, won 152 licenses in all 26 states 
in which it provides service. This is strong evidence that 
regional carriers are providing strong competition. We also 
helped small businesses by applying our designated entity (DE) 
rules to the auctioned portions of the 700 MHz band, and with 
good results. In Auction 73, more than half of the winning 
bidders claimed DE status. In short, the Commission made 
efforts to ensure that small and regional service providers 
could participate in this auction, and many of them did so 
successfully.
    I also want to stress other significant benefits of this 
auction--in particular, the potential for exciting new players 
and entirely new business models to be part of our wireless 
future. For example, Cox Communications, the nation's third- 
largest cable company, won licenses in Auction 73 and the AWS 
auction that will give it coverage in all 35 of its markets in 
18 states. Cox--which currently offers video, Internet, and 
wireline phone service--now will be able to offer what more and 
more customers want: mobility, the long sought-after quadruple 
play. We see another exciting possibility with the purchase of 
many licenses by a satellite service provider, DISH Network. 
The spectrum acquired by DISH Network might be ideal for mobile 
broadband, or mobile video, or other uses. The auction results 
thus show great promise for increased competition between not 
only traditional telecommunications providers but further 
innovation across many platforms in this dynamic, expansive 
wireless market.
    While some commenters sought full open access in the 700 
MHz band, the Commission took a more measured approach. 
Specifically we limited this rule to a single block, the 700 
MHz C block, and did not apply it to any other blocks or to any 
existing, already licensed spectrum in which providers had 
already invested in deploying networks. We also limited this 
rule to devices and applications.
    However, the potential for networks that are even more open 
is already occurring today. We don't have to wait for services 
in this particular block, so perhaps our success should not be 
viewed block by block, but rather in the overall impact we have 
had so that consumers can move from device to device, market to 
market. Having just returned from the CTIA 2008 wireless show, 
I can attest to the explosive growth in devices and 
applications that provide mobile video and mobile broadband in 
an increasingly open environment.
    Certainly a key issue of concern in today's hearing is the 
700 MHz D block, spectrum that the Commission set aside for a 
commercial licensee to build and operate a nationwide, 
interoperable broadband network that would support public 
safety users. As members of this Committee know, our public 
safety community unfortunately still lacks a truly 
interoperable nationwide communications network, much less a 
broadband one. Advanced technology brings real opportunities to 
assist law enforcement, fire fighters, and emergency medical 
personnel with critical information as they arrive at a hostage 
scene, rush into a burning building, or share real-time 
information with teams from different governmental entities in 
different jurisdictions. Our citizens deserve such life-saving 
benefits, especially when these technologies are already 
available today.
    To that end, with input from Congress, from the public 
safety community, and from industry, last year the Commission 
established a unique set of rules to require a commercial 
licensee in the D block to partner with and serve public 
safety. Our rules allowed public safety a significant degree of 
control over what that partnership would entail and how the 
network would function. Unfortunately, no bidder met the 
reserve price for this spectrum block in Auction 73. As a 
result, we have an opportunity to return to this critical 
issue, knowing what we know now, and learn from this 
experience. The good news is that we all share the same goal of 
true interoperability and providing our public safety agencies 
with the next-generation technology and safe and secure 
networks to support them, whether responding to one citizen or 
protecting our homeland. Since the close of the quiet period 
for Auction 73, I have met with representatives from public 
safety as well as industry to get their perspective. I welcome 
the opportunity to have this dialogue today to get your 
perspective and hope that we will be able to set in motion the 
appropriate rules to successfully complete our mission in the 
most timely, efficient and effective manner possible.
    Again, I appreciate your invitation to be here with you 
today. I am pleased to answer any questions you may have.

                                Summary

    Auction 73 raised almost $19 billion in net winning bids, 
well above expectations. The Commission's auctions software 
performed flawlessly. The Commission also applied anonymous 
bidding rules for all of the participants in Auction 73 to 
prevent anti-competitive outcomes.
    In adopting rules for the 700 MHz band as a whole, the 
Commission adopted a variety of sizes of spectrum blocks and 
geographic license areas, including small and medium-sized 
areas. The auction results thus show that small and regional 
service providers won licenses, as well as new potential 
entrants such as a cable service provider and a satellite 
service provider.
    With regard to the D block, we have an opportunity to 
return to the issue, knowing what we know now, and learn from 
this experience so that we can effectuate the goals that 
Congress and the Commission share regarding public safety. I 
welcome your input today and as we go forward to address this 
critical issue.
                              ----------                              

    Mr. Markey. Thank you, Commissioner Tate, very much.
    Our next witness, welcome back again, is Commissioner 
Jonathan Adelstein, and we welcome you, sir. Whenever you are 
ready, please begin.

   STATEMENT OF JONATHAN S. ADELSTEIN, COMMISSIONER, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Mr. Adelstein. Thank you, Mr. Chairman, Congressman 
Stearns, and members of the subcommittee. I appreciate you 
having this hearing. It is so important to focus our efforts.
    The 700 MHz auction certainly is the most significant 
spectrum auction to date. As Congresswoman Eshoo said, probably 
we won't see another like it in our lifetime. I think its 
results should be measured against its impact on broadband, 
which is the central infrastructure challenge of our age and 
the central challenge that we face on public safety, our top 
priority.
    On both fronts, it isn't a myth to say that we did not 
succeed. Ideally, this auction would have facilitated the 
emergence of a third broadband channel to provide consumers 
another competitive broadband choice. Unfortunately, the fear I 
expressed in July when we adopted this rule came true. We 
missed a golden opportunity to open that elusive third channel 
into the home. In the long run, this may be viewed as one of 
the greatest failings of this auction and a lack of a national 
broadband policy.
    As I previously advocated, a truly open wholesale model 
could stand as an innovative breeding ground, allowing new and 
diverse competitors to flourish and facilitating opportunities 
for small and rural carriers. We could have done more to 
promote open and free markets by adopting a wholesale model. 
And it is really appalling that women and minorities were 
virtually shut out of this monumental auction. Our data shows 
that women-owned bidders failed to win all but the smallest 
fraction of licenses. Minority-owned bidders won less than 1 
percent of them. We truly fell short of meeting the 
congressional mandate to expand diversity in the provision of 
spectrum-based services. It is adding insult to the injury we 
saw in the GAO report that you had issued on Friday.
    I am pleased, though, that the results triggered the open 
access requirement for the C block. Our decision to include 
these conditions, although limited to the 22 MHz of spectrum, 
has directed spectrum policy by creating an open access regime 
for devices and applications. Consumers in this country are 
frustrated by the arbitrary limitations that they face. In 
Europe and Asia, handset portability is only a matter of 
switching out a sim card, but here in the United States, 
consumers are still largely constrained to the choices offered 
by their wireless provider. So this condition means progress 
for wireless innovators. We are now free to bring multimedia 
products to market and we are heading to Congresswoman Eshoo's 
district shortly to hear from some of those application 
providers at a hearing we are holding in Stanford on Thursday.
    It is telling that just a few months after adopting the 700 
MHz rules, some of the biggest carriers, Verizon and AT&T, 
announced plans to voluntarily open their networks, and I 
applaud those concessions. These are significant outgrowths of 
the open access condition, and I think they will prove a clear 
win for consumers. We need to stay on top of the implementation 
of this open access regime.
    Now, some have argued that a different mix of licenses 
could better support a variety of business plans but the open 
access provision, the way that we look at it, was tied, in 
order to get a majority, to the larger spectrum block, which 
some argued would best address the needs of potential new 
entrants to provide a nationwide broadband service. Ultimately 
we struck a compromise, and while we did less than what I 
proposed, I think the outcome was significant.
    With respect to public safety, job number one at the FCC, 
the failure to sell the D block represents a lost opportunity 
to come to grips with our country's public safety dilemma that 
we have been talking about since 9/11, which has gone on for 
far too long. As we develop a model of a shared commercial and 
public safety network, I question aspects of our approach, and 
I did raise the concern that there was no guarantee the 
structure would nurture a nationwide interoperable broadband 
public safety system that would be both commercially viable and 
technically feasible. Though I would have preferred direct 
Federal funding, it became clear that the public-private 
partnership was the only option available to us. Although this 
approach could have succeeded, the rules we ultimately adopted 
simply didn't reach the appropriate balance to meet the needs 
of both partners. I advocated changes to the rules including 
waiving a portion of our designated entity rules to allow a D 
block winner to wholesale greater than 50 percent of the 
spectrum. I advocated reducing the additional default payment 
percentage. But these after-the-fact remedies just weren't 
enough to woo a successful bidder. A true public-private 
partnership must meet the needs of both partners if it is going 
to work. If public safety's needs aren't met, the basic 
objective isn't met, and if a private partner's needs aren't 
met, then that partner won't attract the capital they need to 
build out the public safety system and to meet public safety's 
objectives.
    I think we need to do a top-to-bottom review of what went 
wrong so we can succeed in the next round, which is absolutely 
critical. We need to strike a balance that works for all 
parties if we are going to make this partnership work. This 
time we should provide upfront, detailed guidance to allow 
parties to make an educated financial liability assessment. 
This hearing is certainly a part of that top-to-bottom review. 
We learn a lot from the witnesses that are going to be in the 
next panel. We learn a lot from all of you. I think certainly 
in order to move forward successfully, we need to rely on the 
input of this subcommittee and all the different parties 
involved. Only then will we be positioned to provide a clear 
and proper framework for this re-auction to make sure that it 
works for public safety and works for the safety of our 
citizens.
    Mr. Chairman, thank you for calling this hearing. I look 
forward to any questions and comments that members may have.
    [The prepared statement of Mr. Adelstein follows:]
    
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
        Mr. Markey. Thank you, Commissioner Adelstein.
    Now we will hear from our final commissioner, Commissioner 
Rob McDowell. We welcome you back, sir. Whenever you are ready, 
please begin.

    STATEMENT OF ROBERT M. MCDOWELL, COMMISSIONER, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Mr. McDowell. Thank you, Mr. Chairman and ranking members 
of the committee and all members of the committee.
    As you have heard this morning, Auction 73 raised a record 
amount of revenue and successfully reallocated this valuable 
spectrum to licensees who will use it to roll out new and 
exciting wireless broadband services, enriching the lives of 
all Americans.
    We are here today, however, because two important 
objectives of the auction were not met. First, the FCC failed 
to entice a winning bidder to build a nationwide interoperable 
broadband network for America's public safety users, and 
second, the FCC failed in its quest to attract a new national 
broadband provider, the much-sought-after third pipe. Today 
gives us an opportunity to move beyond rhetoric, analyze the 
lessons learned and move forward together in a positive and 
constructive manner.
    Last summer's 700 MHz Order included a plan to spark a 
public-private partnership by allocating 10 MHz, known as the D 
block, on top of the 24 MHz Congress previously gave to public 
safety. We did this to try to create an incentive for the 
private side of the partnership to invest risk capital to build 
a nationwide public safety network suitable for 21st century 
challenges, something that all of us have been discussing since 
the attacks of 9/11. In the absence of a congressionally 
appropriated funding for this network, the Commission concluded 
that this type of public-private partnership was the best way 
to jump-start funding and construction, and I supported this 
approach.
    I have met with a number of parties since the anti-
collusion prohibitions were lifted. Early critiques reveal that 
potential bidders were deterred by onerous build-out and 
service requirements that required the eventual licensee to 
incur massive costs in an atmosphere of extreme uncertainty 
regarding how many, if any, public safety entities might 
actually sign up as paying customers. I am eager to put this 
matter out for additional public comment and also to hear from 
Congress regarding new ideas.
    With respect to the open access condition in the C block, I 
have long acknowledged that while we could agree on the 
destination, a market that providers consumers with device and 
application portability, my colleagues and I could respectfully 
disagree about the best path to take us there.
    I cast the only dissent against the open access and reserve 
price requirements because the evidence in the record told me 
that the market was already headed toward open access through 
natural evolution. As I pointed out in my dissent, I also did 
not think that the plan would achieve the advertised goal of 
attracting new broadband competition, and I was concerned that 
larger carriers would avoid the encumbered C block and outbid 
smaller players in these smaller, unregulated spectrum blocks. 
Sadly, it appears that my fears proved to be correct, but I 
wish I had been wrong.
    The bottom line is that the smaller, unencumbered blocks 
sold on average for almost three times more than the larger, 
more regulated block. Large and small players have already 
commented that the encumbrance on the C block had an effect on 
pricing because bidders put a premium on the clean spectrum. 
Acting in an economically rational manner, large incumbents 
outbid many smaller players in smaller blocks. Smaller players 
had nowhere else to go, while no new broadband provider 
emerged.
    In their defense, I do not think that my colleagues 
intended these consequences to be the end result and perhaps 
that is the point. The lesson we can draw from this experiment 
gone awry is that attempts to over-engineer markets always 
produce unintended consequences and costs, costs that 
ultimately consumers will pay. The auction's legacy may be less 
innovation and less competition, not more, and consumers could 
be shortchanged as a result, but we may never know for sure.
    Make no mistake, I support licensees rolling out open 
networks if consumer demand so warrants. In fact, the biggest 
unwritten story is that nascent device and application 
portability were already coming to market long before the FCC 
got involved last summer.
    At the end of the day, the lesson learned from this auction 
is that we policymakers should proceed mindful of the 
unintended consequences of our actions, especially as 
technologies and consumer tastes evolve.
    Again, thank you for having us here today and I look 
forward to working with you on these and many other matters.
    [The prepared statement of Mr. McDowell follows:]

                    Statement of Robert M. McDowell

    Good morning Mr. Chairman, Ranking Member Stearns and 
distinguished members of the Subcommittee. Thank you for 
inviting us to appear before you this morning to discuss the 
recently completed 700 MHz auction, known as Auction 73.
    As you know, Auction 73 raised a record amount of revenue, 
over $19 billion. The auction also succeeded in reallocating 
this valuable slice of the airwaves to licensees who will use 
it to roll out new and exciting wireless broadband services, 
enriching the lives of all Americans.
    Nonetheless, we are here today because two important 
objectives of the auction were not met. First, the FCC failed 
to entice a winning bidder to build a state-of-the-art, 
nationwide, interoperable network for America's public safety 
users. Second, the FCC failed in its quest to attract a new 
national broadband provider, the much-sought-after ``third 
pipe.'' Today gives us an opportunity to move beyond rhetoric, 
analyze the lessons learned and move forward--together--in a 
constructive manner.
    Last summer's 700 MHz Order included a plan to spark a 
public-private partnership by allocating 10 megahertz of 
spectrum for public safety use, known as the ``D Block.'' This 
spectrum block was added on top of the 24 megahertz Congress 
allocated to public safety in 1997. The Commission created this 
framework after working closely with the public safety 
community, and I supported it. Hopes were high that this 
additional spectrum would provide an incentive for a private 
entity to construct a nationwide, interoperable, broadband 
network all of us have been discussing since the attacks of 9-
11.
    Even though public safety already had at its disposal 97 
megahertz of spectrum in total to serve America's approximately 
two million public safety users--including 24 megahertz in the 
``beach front'' quality 700 MHz Band, and 50 megahertz in the 
4.9 GHz Band--the Commission allocated an additional 10 
megahertz above and beyond what Congress gave. We did this to 
try to create an incentive for the private side of the public-
private partnership to invest risk capital to build a 
nationwide public safety network suitable for 21st century 
challenges. In the absence of congressionally-appropriated 
funding for this network, the Commission concluded that this 
type of public-private partnership was the best way to jump-
start funding and construction.
    I have met with a number of parties since the anti-
collusion prohibitions were lifted. Early critiques of the 
Commission's efforts reveal that potential bidders were 
deterred by onerous build-out and service requirements that 
required the eventual licensee to incur massive costs in an 
atmosphere of extreme uncertainty regarding how many, if any, 
public safety entities might actually sign up as paying 
customers. I am eager to put this matter out for additional 
public comment and also to hear from Congress regarding new 
ideas.
    A positive attribute of our order was the band plan for the 
remaining commercial blocks of the 700 MHz spectrum, which I 
also supported. The band plan we established was comprised of 
four spectrum blocks of various sizes (ranging from six to 22 
megahertz), each of which was divided into a mix of geographic 
area sizes, including Cellular Market Areas (CMAs), Economic 
Areas (EAs), and Regional Economic Area Groupings (REAGs). The 
plan was advocated by a broad array of interested parties, 
including possible new entrants, technology companies, as well 
as existing wireless license holders. I was hopeful that the 
band plan, minus the open access requirement, would provide new 
opportunities for a wide variety of technologies and business 
plans.
    With respect to the open access condition, which was 
imposed on the large, 22 megahertz portion of the band known as 
the ``C Block,'' I acknowledged that while we could agree on 
the destination--a market that provides consumers with device 
and application portability--my colleagues and I could 
respectfully disagree about the best path to take us there. At 
the same time, I was disappointed that the majority did not try 
to work with industry to forge a consensus solution rather than 
rush to regulate without thinking through possible unintended 
consequences.
    I cast the only dissent against the open access 
requirements because the evidence in the record told me that 
the market was already headed toward open access through 
natural evolution. I also did not think that the plan would 
achieve the advertised goal of attracting new broadband 
competition. Additionally, as I pointed out in my dissent, I 
was concerned that larger carriers would avoid the encumbered C 
Block and outbid smaller players in the smaller, unregulated 
spectrum blocks. Sadly, it appears that my fears proved to be 
correct, but I wish I had been wrong.
    Here is what we know: the price for the ``open access'' C 
Block was 77 cents per megahertz pop, and it was purchased not 
by a new entrant, but by a large incumbent wireless carrier. On 
the other hand, the average price of the unencumbered B Block 
was an unprecedented $2.65 per pop. Even the A Block, 
unencumbered, but which some had argued was ``less desirable'' 
because it neighbors with higher-powered broadcast operations 
and thus might be susceptible to harmful interference, went for 
an average of $1.13 per pop.
    The bottom line is that the smaller unencumbered blocks 
sold on average for almost three times more than the larger, 
more regulated block. Large and small players have already 
commented that the encumbrance on the C Block had an effect on 
pricing because bidders put a premium on the clean spectrum. 
Acting in an economically rational manner, large incumbents 
outbid many smaller players in smaller blocks. Smaller players 
had nowhere else to go, all while no new broadband provider 
emerged.
    Comparing the numbers of licenses won with bidding credits 
in prior auctions with those won in Auction 73 is imprecise at 
best. The fact is, in Auction 73, more than half of the 
spectrum (32 of the 62 megahertz) was available only in 
nationwide slices. The 10 megahertz D Block was carved into a 
nationwide license at the outset. And, although carved into 
REAGs, in practical terms, the 22 megahertz C Block was 
available only as a nationwide license due to the combinatorial 
package bidding allowed in that band. Thus, the open access 
condition aside, the C Block was not a realistic option to 
either those regional and smaller entities seeking to bolster 
holdings in an existing service area, or to those potential new 
entrants that would need a good deal of bandwidth, while 
desiring to purchase more conservatively. As a result, the 379 
licenses won with bidding credits in Auction 73 overwhelmingly 
comprise only the smallest markets as measured by depth (the 
amount of megahertz afforded in each), breadth (the geography 
covered and pops served), or both.
    In their defense, I do not think that my colleagues 
intended these consequences to be the end result. And perhaps 
that is the point: the lesson we can draw from this experiment-
gone-awry is that attempts to over-engineer markets always 
produce unintended consequences and costs--costs that 
ultimately consumers will pay. The auction's legacy may be less 
innovation and less competition, not more; and consumers may be 
short-changed as a result. But we may never know for sure.
    Make no mistake, I support licensees rolling out open 
networks if consumer demand so warrants. Nothing under the 
Commission's prior rules has prevented this development. In 
fact, the biggest unwritten story is that nascent device and 
application portability were already coming to market long 
before the FCC got involved last summer. Take, for example, the 
efforts of two carriers that, in 2006, launched dual-mode 
cellular-Wi-Fi handsets designed to make voice calls on 
cellular GSM networks and at Wi-Fi hot spots--both at home and 
in public--using voice-over-Wi-Fi technology, with seamless 
handoff between the two types of networks. Or the November 2007 
introduction of Android, a Linux-based software stack that 
consists of an operating system, middleware, a user interface 
and applications, which had been in development since 2006. Or 
last fall, and after more than a year in the making, even the 
two largest wireless carriers each announced initiatives to 
allow customers to use any wireless device and to employ 
elective applications on their respective networks. In short, 
consumers were already starting to breach the walled gardens of 
yesterday well before the FCC rendered its mandate.
    It is also worth briefly noting that, even now, it remains 
unclear as to what ``open access,'' in the form of a government 
mandate, means. It may be that the winning bidder will define 
this term in the end, but that remains an unanswered question 
for now. Then again, many important questions remain 
unanswered, and that is why we are here today: to try to arrive 
at some answers so we can move forward together.
    Conclusion. At the end of the day, I respectfully submit 
that the lesson learned from this auction is that we policy-
makers should proceed mindful of the unintended consequences of 
our actions, especially as technologies and consumer tastes 
evolve. Again, thank you for having us here today. I look 
forward to working with you on these and many other challenges.

                                Summary

    Auction 73 raised a record amount of revenue, and 
successfully reallocated this valuable spectrum to licensees 
who will use it to roll out new and exciting wireless broadband 
services, enriching the lives of all Americans. We are here 
today, however, because two important objectives of the auction 
were not met. First, the FCC failed to entice a winning bidder 
to build a nationwide, interoperable, broadband network for 
America's public safety users. Second, the FCC failed in its 
quest to attract a new national broadband provider, the much-
sought-after ``third pipe.'' Today gives us an opportunity to 
move beyond rhetoric, analyze the lessons learned and move 
forward--together--in a constructive manner.
    Last summer's 700 MHz Order included a plan to spark a 
public-private partnership by allocating 10 megahertz, known as 
the ``D Block,'' on top of the 24 megahertz Congress previously 
gave to public safety. We did this to try to create an 
incentive for the private side of the partnership to invest 
risk capital to build a nationwide public safety network 
suitable for 21st century challenges, something that all of us 
have been discussing since the attacks of 9/11. In the absence 
of congressionally-appropriated funding for this network, the 
Commission concluded that this type of public-private 
partnership was the best way to jump-start funding and 
construction, and I supported this approach.
    I have met with a number of parties since the anti-
collusion prohibitions were lifted. Early critiques reveal that 
potential bidders were deterred by onerous build-out and 
service requirements that required the eventual licensee to 
incur massive costs in an atmosphere of extreme uncertainty 
regarding how many, if any, public safety entities might 
actually sign up as paying customers. I am eager to put this 
matter out for additional public comment and also to hear from 
Congress regarding new ideas.
    With respect to the open access condition in the ``C 
Block,'' I acknowledged that while we could agree on the 
destination--a market that provides consumers with device and 
application portability--my colleagues and I could respectfully 
disagree about the best path to take us there. I cast the only 
dissent against the open access requirements because the 
evidence in the record told me that the market was already 
headed toward open access. I also did not think that the plan 
would achieve the advertised goal of attracting new broadband 
competition, and I was concerned that larger carriers would 
avoid the encumbered C Block and outbid smaller players in the 
smaller, unregulated spectrum blocks. Sadly, it appears that my 
fears proved to be correct, but I wish I had been wrong. Large 
and small players have already commented that the encumbrance 
on the C Block had an effect on pricing because bidders put a 
premium on the clean spectrum. Acting in an economically 
rational manner, large incumbents outbid many smaller players 
in smaller blocks, all while no new broadband provider emerged.
    In their defense, I do not think that my colleagues 
intended these consequences to be the end result. And perhaps 
that is the point: the lesson we can draw from this experiment-
gone-awry is that attempts to over-engineer markets always 
produce unintended consequences and costs--costs that 
ultimately consumers will pay. Make no mistake, I support 
licensees rolling out open networks if consumer demand so 
warrants. In fact, the biggest unwritten story is that nascent 
device and application portability were already coming to 
market long before the FCC got involved last summer. At the end 
of the day, I respectfully submit that the lesson learned from 
this auction is that we policy-makers should proceed mindful of 
the unintended consequences of our actions, especially as 
technologies and consumer tastes evolve.
                              ----------                              

    Mr. Markey. Thank you, Commissioner McDowell, very much, 
and that completes the time for opening statements from the 
commissioners, so the chair will now turn and recognize himself 
for a round of questions.
    In the headlong pursuit of moving away from thousands of 
public safety entities all developing their own plans and 
networks, which historically has made interoperability issues 
worse, are we actually creating a new problem by having a 
single public entity in Washington and a sole network provider 
for the whole country call the shots for diverse areas of the 
country with distinct needs? Let me just ask this question, yes 
or no. Should there be more focused regional emphasis while 
still insisting on national capability and interoperability? 
Let me come across. Commissioner Adelstein?
    Mr. Adelstein. I think it is an option we should have on 
the table. I think we need to keep all options open and take a 
look at whether regional licenses would make sense as well as 
the national.
    Mr. Markey. Commissioner Copps?
    Mr. Copps. I agree.
    Mr. Markey. Chairman Martin?
    Mr. Martin. I certainly agree that all options should be on 
the table. I think the challenge is how you determine, how you 
solve the interoperability issues when you break up the 
licenses into smaller pieces, which is the thing that public 
safety highlighted for us last year.
    Mr. Markey. Commissioner McDowell--I mean Commissioner 
Tate. I am sorry.
    Ms. Tate. Yes, sir, I think we should be looking at 
everything, and I asked public safety about that when they were 
in my office last week, so you might want to discuss that with 
the next panel.
    Mr. McDowell. I agree with my colleagues. It is something 
we should consider but I would have concerns about the 
interoperable aspect of it and we should ask public safety in 
the next panel.
    Mr. Markey. And what could be done to ensure that the next 
D block auction can simultaneously ensure public safety 
objectives while creating new wireless competition? Could you 
focus on spectrum caps, wholesale requirements, and should we 
have six regional licenses rather than just one license so that 
each region could develop its own public safety and competition 
strategy? Chairman Martin?
    Mr. Martin. You certainly could try to focus on competition 
by having caps or wholesale requirements. I would highlight 
that the public safety community themselves were very concerned 
about implementing those kind of requirements in their spectrum 
last time. So I would think that would be another thing that I 
would be interested in what public safety's concern would be in 
that regarding.
    Mr. Markey. Commissioner Copps?
    Mr. Copps. Yes, and the spectrum caps and looking at 
wholesale and a look at the idea of the six, but cognizant of 
the problems that have been mentioned. But what we need really 
before we make these final decisions or commit to final 
decisions is getting the facts and the data and the analysis 
that we currently don't have and that job is incumbent upon us 
and it is incumbent upon public safety and the commercial 
sector too.
    Mr. Markey. Commissioner Tate?
    Ms. Tate. You know, when you brought up spectrum caps, of 
course Rob and I weren't here and so that is something that I 
would like to have an opportunity to look at, and I agree that 
public safety has got to be part of these discussions going 
forward because I know some of these discussions we had 
previously and that is why we ended up where we are.
    Mr. Markey. Commissioner Adelstein, could the Commission 
just insist that every one of the regional licensees if you 
went to the regional license model have an interoperable 
system? Couldn't you just mandate that?
    Mr. Adelstein. Absolutely. I think that it is not an 
impediment at all to interoperability if we structured the 
rules right. We could require that certain standards would be 
met that would be interoperable no matter who the licensees 
were, so you could have 6 or 10 or 20 different licensees and 
all the systems would be required as a condition to be 
interoperable.
    Mr. Markey. Commissioner McDowell, isn't that something 
that you could do now at the FCC, condition on regional 
licenses that they all have to be interoperable? Wouldn't that 
be a reasonable condition and something that you could enforce?
    Mr. McDowell. Certainly we have the authority to do that 
and it should be something that is considered in a public 
comment period.
    Mr. Markey. Chairman Martin, is that something that you 
could mandate as a condition if you moved to regional licenses, 
that they all have to be interoperable?
    Mr. Martin. I think we can always put that condition on it. 
I think it was practically how that could be achieved from a 
technical perspective, is where the concerns were raised when 
we discussed that option last time.
    Mr. Markey. And do you know how many women-owned businesses 
won licenses, Chairman Martin?
    Mr. Martin. The Commission doesn't actually keep track of 
how many women- and minority-owned businesses. After the 
Commission's changes in policies that occurred after the 
Adarand decision in the mid-1990s, the Commission moved away 
from having designated entities based upon women or minority 
status and moved to them based on small businesses alone. So 
all of the information we have is just what is self-reported, 
so we don't actually keep track of that.
    Mr. Markey. Commissioner Adelstein?
    Mr. Adelstein. Based on self-reporting, there were no women 
bidders who won. That may not be the final number but based on 
those who reported themselves as women, not one out of over 
1,000 licenses that were won were won by women-owned 
businesses.
    Mr. Markey. And if it is more than zero, it is not much 
more than zero out of 1,000. Is that what you are saying? Do 
you agree with that, Commissioner?
    Mr. Adelstein. That is right. There may be some.
    Mr. Copps. I agree with that. I heard that there was one, 
so it is either zero or one.
    Mr. Markey. Commissioner McDowell, have you heard anything 
about women and minorities?
    Mr. McDowell. I have not heard anything different from 
those figures.
    Mr. Markey. Commissioner Tate, have you heard anything 
about women winning licenses?
    Ms. Tate. I did ask and I think that just anecdotally there 
may have been women who won 150 licenses, but again, we are 
prohibited from enforcing race- or gender-specific reporting, 
so it is self-reporting.
    Mr. Markey. No, I understand.
    Ms. Tate. And I am concerned.
    Mr. Markey. We all have to be concerned by this. We all 
have to ensure that we include more minorities and women in the 
future of telecommunications in the 21st century. We gave away 
most of the licenses to white men who were already well 
connected in the 1930s, 1940s, and 1950s, and to dig out of 
that hole is something that we all have to focus on.
    The chair's time has expired. The chair recognizes the 
gentleman from Florida, Mr. Stearns.
    Mr. Stearns. Thank you, Mr. Chairman.
    Commissioner McDowell, I just wanted to start with you 
after hearing your opening statement. From this experience of 
this auction, specifically the auctioning off of the C block, 
doesn't the auction show that conditioning spectrum lets 
different parties who are maneuvering to perhaps gain the 
auction and create the unintended consequences you talked 
about?
    Mr. McDowell. I think there are always unintended 
consequences from regulation, and this was an experiment, and 
of course, this is water under the bridge, so the licensees 
have those licenses at this point. I think a lot of what we 
hear about the end result is complicated and complex. I think 
we could have done better than what we did in the AWS auction. 
I think if we look at the amount of spectrum that actually the 
successful smaller bidders walked away with compared with where 
they got it in terms of geography and population density, it 
becomes a little more complicated, a little more clear as we 
get into those more granular details that there was not as much 
robust bidding by smaller entities as there could have been 
because you had larger, deeper-pocketed bidders coming into 
some of those smaller blocks as a result of being scared away 
by the encumbrance. The largest block, the C block, was taken 
for a song at 77 cents per megahertz pop, whereas some of these 
smaller blocks were at $2.67, about three times the price. So I 
think that tells a story. Also, it tells a story--we talked to 
the largest of the bidders and the smallest of the bidders, and 
they have the same story, that there were unintended 
consequences as a result of that encumbrance.
    Mr. Stearns. Chairman Martin, I just would ask you to 
comment on that. I am not necessarily dwelling on the past. I 
mean, that was part of what our letter that we did on June 29, 
that Ranking Member Barton submitted and we signed but I think 
just as we go to the future, just to think about when you start 
to put conditioning on the spectrum, what happens. So perhaps 
the same question I asked Commissioner McDowell, Chairman 
Martin, you might answer also. I mean, do you feel that those 
conditions hurt the sale and we could have gotten more money 
and allowed this maneuvering by Google?
    Mr. Martin. I think that we end up having to put auction 
rules in place that balance a variety of public interest 
factors, and that raising money alone is not our sole goal. I 
think it is important to get a fair return, which I think is 
very difficult to argue that $19 billion wasn't a fair return.
    Mr. Stearns. Well, let me just say----
    Mr. Martin. But I think the open access conditions were 
much more critical to impose and I think that as a public 
interest, from a public interest perspective, I think they were 
critical to further innovation----
    Mr. Stearns. Let me ask you this question. If you had to do 
it again, would you have done the same thing for the auction 
block for----
    Mr. Martin. For the C block?
    Mr. Stearns. For the C block.
    Mr. Martin. To put open access conditions on it, yes, I 
still would.
    Mr. Stearns. In other words, you would not change for the C 
block anything differently? You would have done the same thing?
    Mr. Martin. I would still impose open access conditions on 
it, yes, I sure would.
    Mr. Stearns. The same access conditions that you had, no 
change at all?
    Mr. Martin. I would still put it the same open access. I 
would still put the open access conditions.
    Mr. Stearns. Commissioner Tate, just the same question for 
you that I asked McDowell is, when you had the C blocks and the 
conditions were put on there, do you think that was a good 
idea?
    Ms. Tate. Well, I think once again----
    Mr. Stearns. Move the mic a little closer to you.
    Ms. Tate. Sorry. Once again I think it is a balancing of 
interests, so I didn't want to go all the way to wholesale.
    Mr. Stearns. So in retrospect, you wouldn't have changed 
anything either?
    Ms. Tate. You know, it is awfully difficult. Hindsight is--
--
    Mr. Stearns. Hindsight gives you great insight.
    Ms. Tate. It is a perfect science, yes. So I am not sure. I 
am not sure how to answer your question.
    Mr. Stearns. Commissioner Copps?
    Mr. Copps. Yes, I would have changed some things. I agree 
with what Chairman Martin said about the open access insofar as 
the device and applications go. I would have gone beyond that 
open access on a wholesale basis and I would have looked at 
some of these other suggestions that have been talked about 
today and possibly trying to use----
    Mr. Stearns. OK.
    Mr. Copps [continuing]. Other approaches for new entrants.
    Mr. Stearns. OK. Commissioner Adelstein?
    Mr. Adelstein. I think your point is correct, that auction 
revenues were reduced as a result of the----
    Mr. Stearns. Yes, I think that is what we have to all 
admit.
    Mr. Adelstein. I think I certainly would admit that. At the 
same time, the goal of the act and law----
    Mr. Stearns. And wouldn't you agree that small guys, small 
people got shut out too, in addition to----
    Mr. Adelstein. I think there was a tradeoff there. 
Unfortunately, I think we could have done the C block in such a 
way as we broke it into smaller pieces, even with the open 
access----
    Mr. Stearns. So in hindsight, you would have done it that 
way?
    Mr. Adelstein. Yes, that is what I asked for at the time.
    Mr. Stearns. Let me ask each of you before my time is gone, 
particularly in light of the fact that Mr. Dingell has given 
his opinion. The question is for all five commissioners. How 
many of you would support re-auctioning the D block solely for 
commercial purposes and then having Congress pass a law to 
allow public safety to use the proceeds from that re-auction? 
Commissioner McDowell?
    Mr. McDowell. That would certainly be an item for public 
comment.
    Mr. Stearns. You would support that, Commissioner Tate?
    Mr. McDowell. Yes.
    Ms. Tate. I would support getting comment and especially 
from public safety, and especially not knowing whether it is 
going to raise enough money to actually fund what they need.
    Mr. Stearns. Commissioner Martin?
    Mr. Martin. Putting any proposals out for comment is easy. 
I think the question is, you asked me, do I support that at 
this time as the conclusion. I would say no. If Congress passes 
a law and gives public safety the amount of money they need to 
build a public safety network, then obviously we wouldn't need 
to put a condition on it, but in the absence of that, I think 
we need to move forward to solve this important 
interoperability challenge.
    Mr. Stearns. Commissioner Copps?
    Mr. Copps. That would not be my first priority. I think we 
have invested a lot of work in the public-private partnership 
and I think we need to see that through.
    Mr. Stearns. Commissioner Adelstein?
    Mr. Adelstein. It is an option I think we should consider. 
I am not sure we would raise enough revenue to build a system 
and of course we would need congressional action before that 
but it is certainly an option I think we should consider.
    Mr. Stearns. Thank you for your candid comments, and I 
yield back, Mr. Chairman.
    Mr. Markey. The gentleman's time has expired. The chair 
recognizes the chairman of the full committee, Mr. Dingell.
    Mr. Dingell. Mr. Chairman, again, I thank you for your 
courtesy and thank you for the hearing.
    Ladies and gentlemen of the Commission, I have some 
questions which, unfortunately, we are going to be so 
compressed, it is going to be hard to do with regard to the 
timing. Could you just please answer this: Is there anyone who 
can tell me that you are not committed to enforcing the 
conditions that the FCC has placed upon the C block? I believe 
you are all committed to that. Is that correct?
    Mr. Martin. That is correct.
    Mr. Dingell. Now, again, members of the Commission, and I 
apologize for this discourtesy, this is the same kind of 
question. In your opinion, do the open network policies 
announced by Verizon meet last year's C block requirements? Is 
there anyone who disagrees that they do meet last year's C 
block requirements?
    Mr. Copps. I think the devil will be in the details to see 
how they are implemented and exactly what they mean. We don't 
know.
    Mr. Dingell. Thank you.
    Any other comments, Mr. Chairman?
    Mr. Martin. No, I think I agree with Commissioner Copps. 
Obviously we will wait and see how they unfold.
    Mr. Dingell. Other members of the Commission?
    Does AT&T's articulation of its policies satisfy the C 
block requirements? Do you agree or disagree with that 
statement, members of the Commission, please?
    Mr. Martin. I don't think that AT&T's current articulation 
would satisfy all those policies, no. I think it is more open 
that they used to be but I don't think that they would satisfy 
the openness requirements.
    Mr. Dingell. Thank you.
    Mr. Copps. My answer is, we need to see.
    Mr. Dingell. Now, could you tell us then about your 
concerns about T-Mobile's articulated policies? Do you agree 
that those comport with the policies of the Commission or not?
    Mr. Martin. I think that T-Mobile's--I think that T-Mobile 
has taken some steps toward a more open platform but I don't 
think they have completely opened up their network yet either.
    Mr. Dingell. Members of the Commission?
    Mr. Copps. Again, we don't know, and all of these questions 
you are asking just point up the need for clarity and knowing 
beforehand and making sure if we are trying to get to an 
objective that we actually get there.
    Mr. Dingell. Other members of the Commission?
    Mr. McDowell. Mr. Chairman, I think it is important to 
point out that only Verizon is subject to the conditions of the 
C block and that AT&T and T-Mobile have responded in kind in 
some regard but I also think it is very important to note that 
the open access conditions that the commissioners came out with 
last summer are not well defined. Verizon is in a terrific 
position to define those themselves.
    Mr. Dingell. Would you want, members of the Commission, to 
also make similar--to address Sprint's announced openness 
principles? Mr. Chairman?
    Mr. Martin. I think that the same--I think of the same 
articulation, that we will have to see what the details are, 
but they haven't announced as open a platform as Verizon has 
thus far, who is the only one that this condition applies to.
    Mr. Dingell. Thank you.
    Other members of the Commission, please?
    Mr. Copps. Again, we don't know any details on the Sprint 
point either. Perhaps this is the reason why we need to go 
forward and act on the Skype petition.
    Mr. Dingell. With apologies again, Mr. Chairman, members of 
the Commission, can you give me a yes or no answer, members of 
the Commission? Do you believe that a plan involving public-
private partnership can be developed that results in successful 
auctioning of the D block, Mr. Chairman and then members of the 
Commission?
    Mr. Martin. Yes, I think that one could be.
    Mr. Dingell. Members of the Commission?
    Mr. Copps. Yes, I do.
    Ms. Tate. Yes, sir.
    Mr. Dingell. I gather you all are in belief that that is 
so. Now, as I think we all agree, it is important to get the 
re-auction done right rather than getting it done quickly. Now, 
members of the Commission, would you agree that the Commission 
should arrive at a structure involving public-private 
partnership that will result in a successful auction of the D 
block?
    Ms. Tate. Absolutely.
    Mr. Martin. Yes.
    Mr. Dingell. I am troubled here that we seem to have a 
situation where there is some kind of delegation away to a 
licensee or some other purpose or to a for-profit advisor. I 
think that your efforts at the Commission to create a workable 
public-private partnership have been very much in the public 
interest and I commend you for it. But I am curious. We seem to 
have here then this public for-profit advisor and I am 
wondering how that is going to work and how the Commission is 
going to supervise or superintend that situation to see to it 
that the law and the public interest is properly protected 
here. Could you, ladies and gentlemen of the Commission, give 
us some counsel on that? Because we are going to have the next 
panel that I hope is going to have some better explanation than 
we have gotten so far. Perhaps you can assist us.
    Mr. Martin. I don't think that the Commission ever 
anticipated or envisioned that the public safety entity would 
try to establish its own for-profit subsidiary, and I think 
that is something that we did not anticipate and I think that 
it is something that has frankly troubled at least myself and I 
know at least one of the other commissioners, I believe, if not 
more, and I think that that is something that we would need to 
try to address going forward.
    Mr. Dingell. Members of the Commission, could you give us 
your thoughts and comments, please?
    Mr. Adelstein. I believe we did not provide adequate 
clarity in the rules that we set. For example, we needed to 
better define the role of the public safety trust. By leaving 
the details for subsequent to the auction, it was allowing an 
enormous amount of flexibility by independent agents to try to 
do what they wanted to do without adequate oversight by the 
Commission. So I feel that it was our mistake. We allowed that 
to happen by not properly defining the terms in advance, and 
this time around I hope we won't make that mistake. We will 
better define the role of the public safety trust.
    Mr. Dingell. Other members of the Commission, ladies and 
gentlemen?
    Mr. Copps. I just think on the whole front of the public 
safety, we need to view that as a nonprofit exercise and I 
would just also emphasize how this points up the need for 
strong, proactive FCC involvement.
    Mr. Dingell. Ms. Tate, I have observed you nodding. Maybe 
you want to make a comment here.
    Ms. Tate. Yes, sir, I would agree. I had assumed that the 
trust would be one that would be nonprofit so now once again 
that we have the luxury of hindsight, we can try to build that 
in going forward, and I would agree with my colleagues, it is 
concerning.
    Mr. Dingell. Sir?
    Mr. McDowell. I would concur that I was surprised by that 
announcement. I think it is a terrific series of questions for 
the next panel and in terms of FCC oversight, something we 
should explore in an open-ended NPRM.
    Mr. Dingell. Mr. Chairman, I note I have used more time 
than I am entitled to but I am very much concerned. I would 
like your permission, Mr. Chairman, and ask unanimous consent 
that I be permitted to submit a letter to the Commission and to 
have that and the Commission's response inserted in the record 
at the appropriate point because I am curious who is going to 
pay this money, how it is going to be paid, for what it is 
going to be paid, what is going to be done, and what all will 
be accomplished by this curious public-private partnership that 
is going to have an additional private partner of some kind. 
Mr. Chairman, I thank you.
    Members of the Commission, I thank you for your courtesy.
    Mr. Markey. The chair recognizes the gentleman from Texas, 
Mr. Barton.
    Mr. Barton. Thank you.
    It is not often that people like myself get to tell people 
like yourself, I told you so, but I told you so. Myself and 13 
other members back last summer or spring sent you guys a letter 
saying if you put all these conditions on the D block, you are 
either not going to get any bids or you are not going to get 
any good bids, and that is what happened. There is not a direct 
analogy in the political arena but if my reserve price is 50 
percent of the votes plus one to stay in Congress and I only 
get a third of that, I am not here. So we had one bid on the D 
block auction, I think it was for $432 million, and I think the 
reserve price was $1.33 billion, so it hadn't been sold. So now 
we are back at square one. What is wrong with doing what I 
thought the FCC was going to do initially and just have an 
unencumbered auction and then perhaps use the proceeds of that 
12 MHz to fund the public safety network? What is wrong with 
that?
    Mr. Martin. Well, let me respond in two ways. First, I 
think there were two sets of conditions that you were concerned 
about in your original letter, not only working with public 
safety but the wholesale and open access conditions. The 
wholesale and open access conditions we didn't impose on the D 
block. We did impose a condition to work with public safety. We 
did so because it was the only way that we could see that a 
public safety network would actually be built. The Congress has 
not yet passed any law that would require any of the funding of 
the auctions to go to public safety networks. We don't have the 
authority to do that. There were several bills that were 
introduced. I think Congressman Stupak actually had one that 
would have said that all the proceeds over the $11 billion that 
Congress had scored it would go to a public safety network and 
then 50 percent of all auctions going forward. That is the--if 
that legislation had been enacted, of course the Commission 
wouldn't have done that but there was no legislation that was 
allowing us to redirect funds.
    Mr. Barton. So that is your only problem, is a funding 
mechanism for construction of the public network?
    Mr. Martin. I think so. I mean, when I testified last year, 
I know Commissioner Copps testified to it as well, and I think 
several commissioners did, that the preferable option would be 
to fund and build a public safety network, but without that as 
an option, I think that the only other option we had to try to 
address public safety's urgent needs was to try to do a public 
safety partnership, and I think the direct funding of the 
network would certainly be preferable.
    Mr. Barton. Does everybody agree with what the chairman 
just said?
    Mr. Copps. I think, Mr. Barton, you raise an option and an 
interesting idea. It has questions of its own. One of them 
would be how do you keep the field of negotiation and the field 
of play level. It is not inherently level between the large 
network carrier and public safety, so that gets then to what is 
the role of the FCC going to be as the honest broker, and I 
think all of these things that we worked for very hard last 
time and obtained in some degree are still vitally important to 
maintain as we proceed down the road.
    Mr. Adelstein. I have to say I agree with the chairman's 
analysis. You know, we all share responsibility, and I hate to 
say it in front of Congress, but Congress has some 
responsibility too. If I could go back in hindsight and redo 
the law, I would say that you could have set aside the overage 
above the amount that CBO estimated, the $12 billion CBO 
estimated, would go into a public safety interoperable network 
and there would have been no cost, there would have been no 
need for a budget offset. But now that can't be done. So the 
fact that we didn't have that legislation in place made it 
impossible for us to channel those revenues directly into the 
interoperable public safety network, which required us to move 
to what is definitely a second-best alternative, the public-
private partnership, and then we of course made major mistakes 
in how we structured the public-private partnership so it 
didn't succeed, so it was sort of mistake compounding mistake. 
Ideally, if Congress could pass legislation now that would 
enable us to put the results, the money coming from that 10 MHz 
plus other auctions potentially that we have coming, that would 
be sufficient to build an interoperable network.
    Mr. Barton. What is the estimate to build the public 
network? What would it be?
    Mr. Adelstein. I have heard different estimates. Six to $7 
billion is one estimate I have heard.
    Mr. Martin. I think that is right. It would be somewhere 
above $5 billion to $6 to $7 billion.
    Mr. Adelstein. Unfortunately, it would be surprising if 10 
MHz sold for that much. If you look at what 22 MHz sold, for 
example, $5 billion to Verizon, it might not generate that 
much, so you might need to identify additional spectrum for 
sale that could be allocated for this purpose as well.
    Mr. Barton. Well, if we were to do this option that I am 
talking about, how long would it take to set the auction up?
    Mr. Martin. I think under any of the potential options on 
how we would set up the auction, I think that we could--we need 
to do an NPRM establishing a new proceeding, setting final 
rules, and it takes several months to conduct the auction after 
that. I think no matter what rules we establish, the earliest 
we could probably conduct this auction is by the fourth quarter 
of this year.
    Mr. Barton. Well, that is my only question, Mr. Chairman. I 
am very concerned about this D block and once you tried 
everything else, go back to basics, and I respect the funding 
issue. I think that is valid. I would hope we could work on 
that, but the only other option that seems viable is the option 
that Commissioner Capps indicated in his opening testimony, 
which is to have the government build and run it, and history 
has shown that doesn't work very well in other things and I 
doubt it would work very well in this area either. So if we 
could have some version of what I talked about and find a way 
to fund it.
    With that, I yield back.
    Mr. Markey. I thank the gentleman. Actually, it is 
Congresswoman Capps and Commissioner Copps, although because of 
his views on spectrum caps and media ownership caps, we could 
call him Commissioner Capps as well.
    Mr. Barton. I apologize.
    Mr. Markey. The chair recognizes the gentleman from 
Pennsylvania, Mr. Doyle.
    Mr. Doyle. Thank you, Mr. Chairman. I want to begin by 
thanking the Commission and Chairman Martin for your recent low 
power FM order. When we talk about public safety, these LPFM 
stations have played an important role in informing the public 
in emergencies, so thank you for that.
    Chairman Martin, recently you gave a speech at CTIA, where 
you indicated your intention to dismiss the Skype petition. 
Now, that petition would have extended your C block openness 
rules to the larger wireless market, to those parts of the 
network where your Commission has acknowledged that carriers 
are not acting in the best interest of the consumers. Can you 
tell me why what is good in the 700 MHz band is not good in the 
broader wireless market?
    Mr. Martin. Well, I think that at this time we should end 
up with not moving forward with it for two reasons. One is 
because we do see some movement as a result of what we put in 
place on the 700 to the other carriers making their networks 
more open, not as extensive as what we put in place in the 700, 
but we do see some movement and we were always hopeful when I 
had proposed the condition on the C block that it would have 
that kind of ripple effect. And number two, obviously if we 
imposed--if we adopted the Skype petition and imposed it 
throughout the industry, then it actually would have been 
unfair to do that in light of the fact that we had just 
auctioned off a piece of spectrum with that condition expressly 
and that would have meant that it was--it would have, as 
Congressman Stearns was raising, it would have lowered the 
revenues for that unfairly because if we adopted the Skype 
petition, that would have meant someone would have gotten an 
especially good deal on the C block. They would have paid less 
for it compared to other pieces because it had this condition 
and then as a result of it, it would now still--everyone would 
have that same condition. So I think we should dismiss it 
without prejudice. I think if the market doesn't--if it doesn't 
have the ripple impact, the Commission could come back and 
consider it later but at this point I think that it would be 
wisest to proceed with just seeing what happens with the C 
block.
    Mr. Doyle. And before I ask the other commissioners the 
same question, Chairman, just as a quick follow-up, what do you 
think is more important in these auctions, the revenues or the 
public interest being served?
    Mr. Martin. I think the public interest being served.
    Mr. Doyle. Thank you.
    Commissioner Copps, what are your thoughts on the Skype 
petition?
    Mr. Copps. I don't think that the petition should be 
dismissed on the basis of some movement. I should think it 
would only be dismissed on the basis of sufficient movement, 
and we don't have that.
    Mr. Doyle. Commissioner Adelstein?
    Mr. Adelstein. Well, I think it may be premature to dismiss 
the Skype petition. It is critical to assess the implementation 
of the C block conditions and the 700 MHz auction, its impact 
on other spectrum. I think we need to ensure that the benefits 
actually come to fruition.
    Mr. Doyle. Commissioner Tate?
    Ms. Tate. Yes, sir. I think Mr. Dingell did a good job of 
kind of working down all the different proposals that have been 
promulgated by the companies about what they do plan to do 
regarding openness, and the other thing goes back to what the 
chairman was saying, that for those people who have already 
invested in their networks, you know, that we were doing this 
going forward on a new block of spectrum.
    Mr. Doyle. Commissioner McDowell?
    Mr. McDowell. I think I would agree with Chairman and 
Commissioner Tate on those assessments but I also think it is 
important to add that some of the announcements we have seen by 
carriers other than Verizon in the context of the C block have 
actually been in the works for about 3 years. These didn't come 
to market in the past 6 months. So I think the market is headed 
that way already. I do think it would also complicate matters 
and be unfair to the winner of that C block who did bid and the 
whole ecosystem that bid on that particular block and that 
encumbrance going forward.
    Mr. Doyle. So, Chairman Martin, tell me, if what you hope 
will happen doesn't happen, if we don't start to see this 
openness spread, what ability do you have? Do you retain some, 
you know, regulatory raised eyebrow to ensure that the carriers 
do what you hope they do, and how will you enforce this if we 
don't see this openness spread in the market like you hope it 
will?
    Mr. Martin. Well, I think first we need to make sure we are 
enforcing the condition of the C block but I think the 
Commission does retain, as you said, the regulatory, I guess, 
eyebrow to continue to look at it, and I think that when I was 
talking about dismissing the Skype petition, as I said, I don't 
think it would be without prejudice for them to be able to file 
it again. But I also don't think that we were prepared to act 
on it now and I just didn't think it was appropriate to 
continue to leave it pending. If we thought we weren't ready to 
act on it, which even the other commissioners who said they 
don't want to dismiss it, I don't think they feel like they are 
ready to act on it and require it, or at least that is what 
some of them have said publicly, and I think that it shouldn't 
be just hanging around. I think we should dismiss it but not 
make a conclusion on it that would preclude it from being 
reconsidered again at a later time.
    Mr. Doyle. Mr. Copps?
    Mr. Copps. I don't think we should expect businesses or 
consumers to depend upon the raised eyebrow of the Commission. 
I think it is good to have rules going in. I think it is good 
to have principles going in that business understands because 
business needs to know the rules, can't operate with a question 
mark, and certainly the same applies to consumers.
    Mr. Doyle. Mr. Adelstein?
    Mr. Adelstein. I think the chairman is correct. How the 
Skype petition is dismissed, if it is dismissed, is very 
important. If it is done without prejudice, it is very 
different than if it is done with all kinds of assessments 
about the need to not have open models. So I want to watch very 
carefully how the item is actually constructed and what its 
implications are.
    Mr. Doyle. I see my time is expired, Mr. Chairman. Thank 
you.
    Mr. Markey. The gentleman's time has expired. The chair 
would just note that the Public Safety Spectrum Trust at no 
point has opposed a whole strategy as part of a D block 
auction, so I just want to put that back out on the record once 
again.
    Let me turn now and recognize the gentleman from Michigan, 
Mr. Upton.
    Mr. Upton. Well, thank you, Mr. Chairman.
    I have got a couple questions I want to ask, the first two 
on DTV. I have been in and out of this hearing meeting with a 
number of constituents and I just finished meeting with the 
Bloomingdale telephone folks, which is a small carrier in my 
district, they provide all three services, and they were quite 
proud to tell me that they had inserted a flyer in their 
telephone billing to all of their consumers aimed primarily at 
those with just telephone service about DTV and they were going 
to offer the boxes. They have a little store. Bloomingdale is a 
blinker-light town, yellow on one side, red on the other. But 
they provide really terrific services and they were proud to 
tell me what they were doing, and I am just--you know, if a 
Bloomingdale Telephone Company can do that to their lifeline 
consumers, I think that was an edict that you all ruled on, I 
just wonder if you considered whether all telephone consumers, 
whether they be mobile or the giants, that may have just 
telephone service, might--if you considered something like that 
for all folks as it related to the information on DTV in terms 
of what they were going to do by the deadline, you know, 
getting a box, getting the coupon, et cetera.
    Mr. Martin. Our initial focus has been on all the telephone 
companies, as you said, that were receiving universal service 
support for things like the lifeline and linkup programs. I 
think that the Commission took some pretty aggressive action in 
trying to require the different industries that the Commission 
regulates to help participate in the education of this effort 
and we thought--and I thought that that was appropriate. It was 
actually something that was suggested by Chairman Markey and 
Chairman Dingell last summer. But if you want us to go back and 
reconsider whether we should broaden that, I am sure the 
Commission would be happy to.
    Mr. Upton. Anybody else want to comment?
    Mr. Copps. I am always for more rather than less. I think 
that is a good idea. In the final analysis, I would go back 
though to the primary vehicle for this conversation, which is 
over television, and I am still worried about, while the effort 
is picking up, I don't think it is anywhere where it needs to 
be right now if we are going to have a relatively seamless 
transition.
    Mr. Upton. I just sort of felt that a flyer might be more 
instrumental. I am sure that you have seen many of the ads as I 
have on--for me, I have cable but I see it on literally all of 
the networks informing folks but perhaps sometimes if they have 
written document saying whether they need it or not and 
particularly if you--me, I am a Comcast subscriber. Assuring 
Comcast subscribers that they will not need because you have 
cable is something that you might not otherwise get if you just 
get it in this area, WGLA or something like that.
    Last week there was some information that was released 
indicating that you all had fined a number of retailers for not 
having the appropriate information in their stores, and I just 
wonder how you came to that conclusion, what type of warnings 
might have been given. I don't know if it was--again, I just 
saw the press story, I didn't see your news release, whether it 
related to actual--as you remember, we actually had legislation 
that passed this committee in terms of the exact language that 
needed to be prescribed but it was struck in the Senate because 
of the Byrd rule. I would be anxious to know a little bit about 
how that all happened.
    Mr. Martin. There were violations of three of our different 
rules that people received notices of current liability for. 
They were both violations that accrued as a result of them 
selling televisions that violated our tuner mandate. They were 
violations of the televisions that they were selling, so they 
had imported televisions post the date that they were allowed 
to. They were selling televisions from their stock that hadn't 
been properly labeled, as you were referencing. That was part 
of the legislation that the House had passed that had been 
struck but that required the television to be appropriately 
labeled as not having digital tuner, and then there were also 
some violations of having a V-chip that was capable of being 
upgraded to receive digital broadcast signals, not analog 
signals, as Chairman Markey had actually identified and had 
signaled to the Commission that there were concerns. All three 
of those areas, because they are involving retailers, we had 
had to submit warnings to people in terms of, you know, 
certifications that they were in violation previously. So in 
all of the cases there were warnings. This was a result of 
inspections that the enforcement bureau had done of thousands 
of retail outlets and also some information that had been 
provided to us. But we had warned people beforehand.
    Mr. Upton. Now, the last question I have is, based on the 
auction results, some have broached the idea of reinstituting 
spectrum caps. Ironically, the same folks that advocated for 
the caps are also decrying a U.S. broadband penetration vis a 
vis European and Asian countries. The original spectrum caps 
were listed by the FCC when it was clear that the mobile 
sources had substantially smaller spectrum allocations. The 
question is, how are we going to increase broadband penetration 
in the United States if we stop the U.S. carriers from 
increasing their spectrum allocations to offer faster and more 
robust mobile broadband services?
    Mr. Martin. I think that is the concern with the 
limitations on how much spectrum that any one carrier could own 
that drove the Commission to raise those caps, or eliminate 
those caps before.
    Mr. Copps. Hopefully I would say new entrants and more 
competition and less consolidation in an industry where 
wireless is somewhere around the 2500 mark regarding the HHI 
index of the Department of Justice.
    Mr. Upton. Thank you. I yield back.
    Mr. Markey. The gentleman's time has expired. The chair 
recognizes the gentleman from Texas, Mr. Gonzalez.
    Mr. Gonzalez. Thank you very much, Mr. Chairman.
    My question will be directed to Chairman Martin. Well, 
first of all, in observation to what Mr. Upton was pointing 
out, I know that in San Antonio, as far as the notice going on 
on the transition, we are trying to actually do it through our 
city public service entity which obviously provides 
electricity, the things that all homes have in common. If they 
have a television, it is obviously electrically supplied. We 
are trying to get that notice out there. We are also having our 
suppliers of the converters, not just the Best Buys or the 
Radio Shacks but we actually have the HEB grocery store chain, 
which are located in those particular neighborhoods that are 
going to be impacted the most by the transition.
    But my question, Mr. Chairman, would be, you state in your 
written testimony, the auction did not result in a single 
nationwide new entrant, and I know there have been similar 
observations by other members of the Commission. The question 
is, did that really come as any surprise? The basis for that is 
we are talking about people that build the highway, and I know 
that we had a lot of noise by people that provide services to 
the others or to the users of the highways, but when it comes 
to really building them, it is just such a tremendous challenge 
in the way of capital investment and so on that the sheer 
magnitude of the endeavor had to mitigate against maybe a new 
entrant, and that is a consideration and I just would want your 
thoughts. That is the first question.
    And then I will allow you to answer on that, of course, and 
then maybe address the other question. Do the principles that 
have been adopted by the Commission that promote the building 
out of broadband and of course as much participation in all 
sectors by as many providers as possible also extend to 
wireless? My understanding is that those principles obviously 
do and as long as you are doing your job, I don't see the need, 
the necessity for a legislative fix. So the second question is, 
do the principles apply? I thought they did, and you can 
expound on that.
    That does not mean that I do not have certain concerns and 
problems that have preexisted and that actions by the 
Commission I don't think really address some of the problems 
that have been created because of the fact that we don't have 
enough highway builders out there and then how they share that 
particular highway, and let me go ahead and be specific. The A 
block--and I just want to know the potential consequences of 
what happened in this auction on preexisting problems that we 
have out there. With the A block, Verizon won nine out of ten 
licenses. In the B block, AT&T won seven of the ten, Verizon 
the remaining three. In the C block, Verizon won the majority 
of those licenses.
    I want to get to roaming charges and the potential impact 
on that, and I am going to read from what staff has prepared 
because they do a darn good job. ``FCC recognized in August of 
2007 that the ability for customers to roam automatically on 
the wireless cell phone networks of other carriers is 
necessary, desirable and in the public interest and therefore 
adopted a rule requiring all wireless carriers to provide 
automatic roaming service at just and reasonable rates upon 
reasonable request. However, the Commission carved out an 
extremely broad in-market exception. The in-market exception 
allows nationwide wireless providers to deny or cancel 
automatic roaming agreements with smaller or regional carriers 
in any area where a requesting carrier has license spectrum.'' 
So the question then comes to, will you be reviewing this 
exception, which I think that you should be with the potential 
impact or maybe the aggravation by the fact that the auction 
went a certain way because the way I see your exception right 
now, it seems that your rule was good and it is to provide 
automatic roaming service, but the way you have the exception 
is, in an unjust and unreasonable rate, even though it may be a 
reasonable request in certain areas of this country. So those 
are my three questions and I would appreciate your response.
    Mr. Martin. Let me try to respond to all three of the 
questions, the second one first. Certainly all of our--I think 
the principles of the Commission do apply not only on the 
telecommunications side but on the wireless side as well.
    Second, your first question about was the Commission 
surprised. Certainly I always thought, and all of the 
commissioners always did, that it is extremely difficult to 
ever talk about a new entrant being able to come in and build 
on a nationwide basis. All we could do in our auction was try 
to provide a framework that would allow it, a group of 
companies that were all advocating the potential for a new 
broadband entrant, a new wireless entrant on a nationwide basis 
to be able to come forward, so there were three conditions that 
they thought were necessary for the auction to have the 
possibility of having a new entrant to come in. They thought 
that they needed to have large blocks of spectrum, at least 11 
MHz, be provided, that it needed to be provided in large 
regional licenses and that it needed to be capable of being 
combined into a nationwide footprint through combinatorial 
bidding. Several public interest groups also supported at least 
the concept of allowing for some of those conditions. They 
would have--the public interest groups would have advocated 
some wholesaling requirements as well. The Commission, while 
not adopting the wholesaling requirements, it did put in place 
the framework that had been advocated by those companies and 
those companies were a combination of technology companies like 
Intel and Google and also EchoStar and DirecTV. I would note 
that EchoStar did purchase almost a nationwide footprint. It 
was just in the E block so it was unpaired block so it is not 
capable of providing that kind of broadband service as easily. 
Some would argue with LTE technologies it will be able to even 
with a smaller footprint but in general it will be more 
difficult for it to. So I think that all we can do is try to 
put in place a framework that would allow for it but it was 
always going to be a daunting task.
    The final question as it relates to roaming charges, the 
Commission actually is very sympathetic to making sure that 
smaller carriers are able to interact on a reasonable basis 
with the largest carriers where they don't have spectrum so 
that they are able to have reasonable roaming charges. The 
concern that you raised related to in-market exception goes to 
our concern with people holding spectrum and not building it 
out. What the Commission said is, you have to be able to 
negotiate with other carriers and have reasonable roaming 
charges unless of course it is an area where you have bought 
spectrum and you were supposed to have built out your own 
network, and in those areas where you are supposed to have 
built out your own network, it is more important that the 
emphasis is not on you riding on someone else's network but you 
using the spectrum that you bought to build out service to 
increase competition and increase that service to other people. 
So you can get roaming--there is a requirement that everyone 
has to interact on a reasonable basis for roaming everywhere 
except where you have purchased your own network, and where you 
have purchased your own network, your emphasis should first and 
foremost be on you building out yourself, and I think that that 
policy actually is one that fully recognizes both the 
importance of roaming but also the counterbalance of making 
sure that people that purchase spectrum are not letting it sit 
idle but rather are trying to build it out to the most 
effective possible use.
    Mr. Gonzalez. Mr. Chairman, I see that Commissioner Copps 
also----
    Mr. Copps. I just wanted to make----
    Mr. Gonzalez. Thirty-eight seconds, sir.
    Mr. Copps. I just wanted to make a quick comment. Thank you 
for raising this question of in-market roaming and I think the 
chairman is right where we were when we began consideration of 
that, but this has had unforeseen consequences, and you are 
right to raise that possibility and that is why I am pushing 
for a reconsideration of that in-market roaming exception.
    Mr. Gonzalez. Thank you very much.
    Chairman Martin, the smaller carriers in my area haven't 
characterized it exactly as you have. I will go back with your 
exact testimony and we will have a discussion and then we will 
back in contact.
    I yield back. Thank you very much, Mr. Chairman.
    Mr. Doyle [presiding]. The chair now recognizes Mr. Shimkus 
for 8 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman, and I apologize for 
not being here. The Science Committee invited me to listen to 
the FutureGen hearing. Of course, that is the clean coal power 
plant and I had to participate in that and just came straight 
down. For my colleagues that have had to wait, I apologize.
    I would like to start with Chairman Martin, and a lot of 
people referred to the April 4 New York Times article, and in 
quotations, ``Google's main goal was not to win but to make 
sure the reserve price was met so that openness conditions 
would become effective.'' In that same article, Google's 
telecommunications and media counsel, Richard Witt, stated, 
``Our primary goal was to trigger the openness condition.'' 
Based on that, do you believe Google was simply gaming the 
system and duping the Commission during the auction?
    Mr. Martin. No, I don't, because I don't think that our 
goal was to actually--our goal in adopting the openness 
condition was not to prohibit someone else from winning but to 
actually have whoever won that spectrum have an open platform. 
It was not to try to prevent some of the people from--or at 
least my goal wasn't. You can ask the other commissioners. My 
goal was not to----
    Mr. Shimkus. I don't think it is your goal I am asking you.
    Mr. Martin. My goal was to make sure that whoever won the C 
block had an open platform.
    Mr. Shimkus. Yes, I think the question is, what do you 
think Google's intention was? To really bid in an honest way or 
was it to push the price up to a level where then they would 
have a free access platform without having to pay for it?
    Mr. Martin. I mean, you will have to ask them exactly. You 
will have to ask them what their goals were. But like I said, I 
think ours was a focus on openness, not just on whether or 
not----
    Mr. Shimkus. No, I understand what yours is and I think 
part of this debate is, C block, D block, what is the return on 
investment, and even my friends on my side of the aisle have 
different views of whether this is helpful or harmful for 
deploying. I think it is harmful and I think the auction shows 
that it did not encourage a competitive bid. What it did was 
depress the bid, and I think Google tried to get access without 
having to pay for deployment, and I think most analysts, that 
is the lesson learned, and then the question is, where do we go 
from the lesson learned.
    Commissioner McDowell, what impact did the various auction 
conditions have on smaller providers?
    Mr. McDowell. Well, as I said in my opening statement, I 
think it may have driven larger, more deep-pocketed players 
away from the encumbered C block into the unencumbered smaller 
blocks and driven up the price. Verizon got the C block for a 
song at 77 cents per megahertz pop. Some of these smaller 
blocks went for $2.67, or almost triple that amount, so I think 
that tells a lot of the story. Certainly there were a lot of 
smaller players who were able to walk away from this auction 
but I think we could have had a lot more without that 
encumbrance you gave the big carriers a home, the mid-sized 
carriers a home, and entrepreneurs and smaller players, give 
them a chance as well, through a variety of spectrum block 
sizes and market sizes.
    Mr. Shimkus. So encumbering the C block based upon the open 
access restrictions really forced the bigger players into the 
other auctions which in essence they were able to use their 
market power to really defeat smaller bids?
    Mr. McDowell. I wouldn't say they used market power. I 
would say they used superior financial resources.
    Mr. Shimkus. Right. That is right. That is a better word. 
But they were bigger, more powerful, and they had more money?
    Mr. McDowell. Well, because nobody was in the 700 MHz 
market before this auction so there is no market value----
    Mr. Shimkus. That is right.
    Mr. McDowell [continuing]. For 700 MHz space yet so----
    Mr. Shimkus. Let me continue then on, you have answered 
this, but imposing the open access conditions on the C block, 
did it achieve the stated goal of encouraging new entrants to 
build out a rival national wireless broadband network?
    Mr. McDowell. Well, I think the results really speak for 
themselves. I think what happened was, you had Verizon winning 
that for 77 cents, you know, a third of the price of some of 
the other blocks, and I am not sure that we can say that 
Verizon is a new entrant into the wireless base.
    Mr. Shimkus. So in going back, obviously the focus is on C 
block right now. How does--Chairman Martin, how does the 
Commission intend to enforce the open access requirements on 
the C block? And a follow-up question is, also, do you believe 
that the open access requirements in the C block resulted in 
the sale below market value?
    Mr. Martin. We intend to enforce the open access conditions 
by making sure that whoever wins the C block is going to be 
required to be open to any device and any application. I think 
if I was to respond in general to the concerns, as I said, if 
we had wanted to ensure that a new entrant won the C block, we 
should have prohibited the incumbent providers from winning 
there. Instead, I think what we were doing was ensuring that 
there would be an openness, a more open platform to wireless 
devices and applications, which I think we will enforce. I 
don't think that it meant that it was below fair market value. 
The 77 cents per megahertz pop that Commissioner McDowell was 
describing as a song is greater than anybody was willing to pay 
on a per megahertz pop in AWS auction. While it still--so while 
it was less than what was paid in the A and B block, it was 
definitely still more than what was paid in every other auction 
previous that the Commission had ever held. And finally, it is 
not true that small bidders were not able to win anything. 
Ninety-nine out of the 101 successful bidders actually were 
able to win 70 percent of the licenses, covering almost the 
entire country. In the A and B block alone, small providers won 
almost an entire nationwide footprint except for the top 20 
markets. One of the maps that I showed in my testimony, in my 
opening testimony before, demonstrated that the rural providers 
and the small providers did not win--I mean did not lose, in 
rural America. Where they lost was in the top 20 cities in the 
country.
    Mr. Shimkus. Let me finish with this because I have the 
first-line responders here. You all know I have been focused on 
emergency communications along with a lot of us on this 
committee, Anna Eshoo, Jane Harman, D block questions. There is 
a lot of us talking about how do we now get this right. If we 
want to have a D block and redo it, do a do-over or some saying 
if this is going to be a national asset, let us do it and let 
us use revenue to manage that so that we have the ability to 
communicate across the lines. I only have a minute left, so if 
we could go--I don't know what is appropriate. I guess Chairman 
Martin first and then--I don't know what is appropriate, to go 
in order of seniority, I guess. Could you give me a brief 20-
second, 30-second analysis on what do we do with the D block?
    Mr. Martin. I think that absent legislative changes that 
would provide the kind of resources that would be necessary for 
the public safety community to build out their own and have a 
network that is dedicated to public safety exclusively, I think 
that a public safety-private partnership is the only available 
tool for us to try to solve this problem.
    Mr. Copps. I think we proceed down the road we are on with 
the public safety-private sector partnership except now we need 
to frontload the process with the steps that I enumerated in my 
statement rather than coming in afterwards and after the 
auction and ratifying the conditions. Let us get it all out 
front so bidders, and everybody else, public safety knows where 
we are going.
    Mr. Shimkus. Commissioner Adelstein?
    Mr. Adelstein. I think we need a top-to-bottom review and 
we need to really look at all aspects, and one aspect whether 
we could do that the way you suggested, just putting the money 
aside, but if Congress doesn't act, we discussed with 
Congressman Barton, we won't have the ability to direct those 
funds to public safety so the public-private partnership, we 
have to make it work. We have to make sure there is much more 
clarity up front and that both partners can win.
    Mr. Shimkus. Commissioner Tate?
    Ms. Tate. I am from Tennessee and so I would just say it 
can't be a pig in a poke and we are going to have to have a lot 
more clarity going forward, and I totally agree, if you all 
could pass the legislation, then we would certainly look at 
just auctioning it off.
    Mr. Shimkus. Commissioner McDowell?
    Mr. McDowell. Real quickly, I think it is important to note 
that public safety has at its disposal about 97 MHz of 
spectrum, including 24 MHz that Congress authorized a few years 
ago. The Commission used its only tool in the toolbox, which 
was an additional 10 MHz to try to create a public-private 
partnership to be sort of the engine that pulls the train for 
that other 24. So a total of 34 MHz in just the 700 MHz 
neighborhood, which is fantastic spectrum. So absent any other 
congressional action, that is the only thing we can do. 
Otherwise we can't do anything else.
    Mr. Shimkus. And Mr. Chairman, I will just end by thanking 
you for the time and just reiterate September 11, Katrina. This 
is something, public policy, we have to get right. We are going 
to be held accountable and we should be if we don't get this 
right, so thank you, Mr. Chairman.
    Mr. Doyle. I thank the gentleman.
    The chair now recognizes Ms. Eshoo for 5 minutes.
    Ms. Eshoo. Thank you, Mr. Chairman, and I think that this 
has been a worthwhile exchange, all the questions that the 
members are asking, and I am sorry I had to step out for a part 
of it but I do think that this is--it is a good exchange that 
we are having today. I have a couple of questions of Chairman 
Martin and one of Commissioner Copps.
    I will start with Commissioner Copps. Thank you again for 
your extraordinary leadership in the public interest issues 
that relate to the FCC for the American people. I think that 
there are literally millions of people that are very, very 
grateful to you for your leadership in this area. In your 
testimony, you said that you believed that the public safety 
license has to at heart be a nonprofit operation. What kind of 
arrangements with the public safety licensee would you permit? 
Would there be any arrangements that you would prohibit?
    Mr. Copps. Well, first of all, thank you for your very 
generous comments, which are very much appreciated. I don't 
think we have an encyclopedic feel for that but there are just 
basic questions going in if we are going to be talking about 
keeping this nonprofit. Let us understand what the revenue 
flows are all about and what the revenue flows are going to be 
reflecting. Are they going to be reflecting the value of the 
spectrum or are they going to be reflecting rather just 
compensation for the expenses of public safety? Those are the 
types of questions that we really need clarity on. From the 
standpoint of prohibiting any action, I think probably that 
anybody who is in for profit-making purposes, probably 
shouldn't be directing the negotiations or acting as agent.
    Ms. Eshoo. Thank you.
    Chairman Martin, does the FCC have not only access to the 
expertise in house, I don't know, or through consultants that 
can analyze the failure of the D block auction? Are you 
planning to conduct a thorough analysis on proposed conditions? 
How are you going to go at this? Because there is something to 
be learned from it and we have to get the structure of this 
right in order to produce the outcomes that many members have 
described here today. You said in your testimony that there 
needs to be greater certainty in the process with respect to 
the D block and so I would like to hear from you how you are 
going to create this greater certainty. Are you going to 
specify the duties and the roles of the public safety licensee 
in greater detail? Can you enhance or bring some more light to 
how you envision what this process will be, the capability of 
the FCC to do this either internally or otherwise?
    Mr. Martin. I think that the Commission does have the 
expertise to end up trying to address it.
    Ms. Eshoo. So you plan to do this in-house?
    Mr. Martin. Yes, I mean, with the Commission trying to end 
up assessing it and I think that will involve two steps. There 
were allegations as it related to the for-profit aspects of the 
nonprofit entity, that that was--there were allegations that 
that violated----
    Ms. Eshoo. Do you think those are so? I mean, what is your 
opinion of that?
    Mr. Martin. And so we--I have asked the inspector general 
to do an investigation to report to the Commission that they 
would make sure was available prior to us ending up voting or 
considering any further NPRM. So I think that is the first 
step, to just see if there were any violations of any rules 
that occurred. Irrespective of whether any violations occurred, 
I think that the more fundamental question that you asked is 
about should there be for-profit entities involved in the 
nonprofit. As I testified earlier, I certainly was surprised by 
that. I did not think that was what the Commissioner had 
envisioned, and I think that does not necessarily prevent 
compensation from flowing to public safety, as Commissioner 
Copps said. What it does is, it allows that potential 
compensation for use of their spectrum at times to be going to 
public safety purposes to help them reimburse their costs but 
it did not, I think, allow us or we were envisioned by that 
that some of that money would be going to for-profit-making 
companies, and I think that is what Commissioner Copps was 
alluding to in his testimony where he said fundamentally it all 
has to be for nonprofit purposes.
    Ms. Eshoo. Commissioner Copps, do you want to add or do you 
want to say anything?
    Mr. Copps. No.
    Mr. Martin. I think that when I talk about adding 
additional certainty and clarity and also reevaluating those 
conditions, I think that what we need to end up doing is talk 
about the very--some of the conditions that we impose like you 
have to build out to 99.3 percent of the population within 10 
years and ask was that too burdensome and should we lower that. 
There are estimates that for every 1 percent of the population 
you add after about 95 to 95.5 percent of the population, you 
are adding $1 billion in costs, and were those costs just too 
great to reach over 99 percent. And then also when we talk 
about specifying ahead of time, yes, should we take away and 
not leave as much to the discretion of the public safety 
community to negotiate. The public safety community had 
actually advocated a more open process that would allow them to 
negotiate with the private sector for compensation for the use 
of their spectrum and some of that compensation in terms of 
financial support for buying radios and also in terms of build-
out and the hardening of the system that would be necessary to 
serve public safety, not just commercial enterprise. I think we 
need to more adequately address those issues up front and 
clarify what those expectations are.
    Ms. Eshoo. Thank you, Mr. Chairman, and thank you, Mr. 
Chairman.
    Mr. Doyle. The chair thanks the gentlelady.
    The chair now recognizes my good friend, Mr. Pickering, for 
5 minutes.
    Mr. Pickering. Mr. Chairman, thank you.
    Chairman Martin, I want to commend and thank you. I do 
believe that the auction was a success, not perfect but very 
good, and if you look at historically high revenues, if you 
look at the participation of small and independent rural 
companies into the smaller markets, the build-out requirements, 
I do think that the open requirements will be very helpful in 
the long term for competition for consumers and for freedom. I 
think the regulatory signal that was sent on open access did 
lead to an adoption of a practice by Verizon and it was that 
regulatory signal that provided the clarity. I think that the 
open a--essentially requirements had some effect on the revenue 
but I think more importantly, and this is to Commissioners 
McDowell and Adelstein, the size of the C block market, could 
it have been broken down? You might have had a different 
outcome. But I do think overall it was good with the exception 
of the D block and what we all are very passionate and 
concerned about, and that is the public safety network. But it 
may be a blessing in disguise that the first time we didn't get 
it right, and I think we need to look at it that way, and 
Congress often passes something and most of it is good but we 
come back and constantly have to revise, modify, and perfect, 
and I think we should take a chance to look at it in that way. 
So how do we do the public safety, create the clarity, the 
certainty and, what I hope, would also promote competition at 
the same time with what is ahead of us.
    A couple questions. One, would anybody support contracting 
out the public safety services versus having a public-private 
network and build-out?
    Mr. Martin. I certainly think that, as I think all the 
Commissioners have said, everything should be considered as we 
go forward in this rulemaking, so I don't think that we would 
preclude it. I think the challenge is, if it was contracted 
out, how that would solve the interoperability issues. If it 
was contracted out to multiple providers, they might end up 
just replicating the same non-interoperable network today.
    Mr. Pickering. Is there a--and I want to come back to that. 
I know others, they want comment on the contracting. There has 
been talk of taking the proceeds and having a public safety-run 
operated built network. There is a middle ground, or a third 
way, and that is, to keep the public-private partnership, but 
instead of taking the proceeds and saying that it will be 
public safety, it could be used as a grant to public safety for 
buying the access to a commercial network or the devices so 
that you don't have to have a publicly owned and built, but you 
can still have the commercially owned and operated the profit 
incentive but guaranteed access to public safety of the D 
block. Would that be a--now, that would also take legislative 
action which creates the uncertainty long term but would that 
be something that the FCC and the Congress should consider 
jointly of giving the proceeds for public safety to buy access 
and devices that they need to perform their services?
    Mr. Martin. Obviously I think that any and all options 
should be on the table for consideration, and if Congress 
passed that kind of legislation, we would follow it. I think 
the concern with that approach in the past has been that 
actually Congress has provided legislatively grants to solve 
this problem several times and the amount of money you would be 
able to potentially raise in the D block would probably be 
around the same amount that Congress has already provided 
grants in the past and they have been unable to solve this 
problem, at least from public safety's perspective, because the 
grants on the localized basis alone and purchasing capacity 
from others or trying to buy, you know, patches that would 
allow for a kind of interoperability but not true 
interoperability have not--will not solve the public safety 
interoperability challenge like a network on its own would. So 
I think that the concern that public safety has raised with the 
grant aspect in the past has been that grants going out to 
local communities has the potential to just replicate the 
current problems we have.
    Mr. Copps. I guess my concern there would be public 
safety's ability to get the access that it needs and to have an 
equal negotiating stance with whoever the commercial provider 
is, number one, and number two, what are they getting access 
to? Is it a regular commercial network or is it a public safety 
network with the robustness and redundancy and everything that 
it has to have, which goes beyond the normal commercial 
network.
    Mr. Pickering. My time is running out. Let me get to one 
other troubling outcome. Seventeen out of the top 25 markets 
now, where there is--the top two incumbents control over 95 MHz 
in each of those 17 out of the top 25 markets. Now, that is 
above the threshold that was adopted by the FCC in the AT&T and 
Dobson merger. So if it was reasonably adopted in that merger, 
it seems like that is kind of an antitrust competitive 
threshold. Is the Commission concerned that we now have a 
concentration through auction purchases and should we as a 
result adopt a requirement that the D block be auctioned to 
non-dominant providers instead of someone that is already over 
what is considered an antitrust or anti-competitive threshold 
of 95 MHz in a given market, Chairman Martin?
    Mr. Martin. As I said, I think that all options should be 
on the table for us to consider including whether or not there 
should be any kind of restrictions in light of what had 
occurred in the rest of the 700 and I would say that the 95 
percent threshold that we use in the context of previous 
mergers triggers a more-intensive scrutiny of those markets. So 
in the markets in which any carrier exceeds the 95 MHz, then 
what we do is actually look at the competitive impact and 
antitrust analysis that occurs there, and to the extent that is 
necessary require a divestiture to get back below the 95 
percent threshold. In many of the 17 markets, the carriers are 
just above that 95 percent and I think that in Verizon and 
AT&T's instance, many times they are still in the 90s, so it 
would be relatively small amounts of spectrum they would end up 
having to divest to get back below that threshold and they 
would be able to divest any of the spectrum that they have 
there. But the Commission wanted to go to that kind of an 
analysis to the extent that people raise that issue in the 
licensing context just like we do in any licensing.
    Mr. Pickering. But in an auction policy, should we try to 
keep further consolidation above that 95----
    Mr. Martin. I certainly think that that is a--it should be 
an important component but I do think that in the past the 
Commission has been hesitant in the auction to pick winners and 
losers, and what you are really talking about is picking 
losers, saying certain people are prohibited from participating 
and I think that always gives me pause, but maybe that is 
appropriate in light of the success that they had.
    Mr. Pickering. Thank you, Mr. Chairman.
    Mr. Doyle. The chair thanks the gentleman.
    The chair now recognizes the gentleman from Michigan, Mr. 
Stupak, for 8 minutes.
    Mr. Stupak. Thank you, Mr. Chairman.
    Mr. Chairman Martin, in response to the last question, I 
was going to ask the same question, and in looking at the top 
50 CMAs, you have at least 10 of them that are around 119, 124, 
111, 114, 119, 109, another one 119. Is the Commission going to 
take a closer look at this to make sure that there is not a 
monopoly here?
    Mr. Martin. Sure. I think the Commission always does 
whenever we are undergoing our licensing, to make sure that 
when you cross that 95 MHz threshold, that there is still an 
adequate level of competition by other providers, and if not, 
requiring any subsequent action. But I do think that you do 
have to apply that in context and then when you go above that 
it does not mean that the Commission's precedent says you 
automatically have to sell. What it does is, we then do an 
antitrust analysis on that individual market.
    Mr. Stupak. Was any consideration given to that before you 
did this auction, that someone would be going over? Because 
isn't it hard to divest once you have already 124 percent of 
the market share?
    Mr. Martin. Again, it is not 124 percent of the market.
    Mr. Stupak. I know it is not 124 percent.
    Mr. Martin. It is 124 MHz, and that I think was in just one 
market. There were several of those that were over 100. Most of 
the 17 that were identified were actually in the 90s but there 
were a few over 100. But as I said, I think that the 
alternative challenge is to prohibit people from participating 
in the auction up front and I think that that is actually 
potentially more damaging or more difficult. It might be 
something that the Commission should consider in light of where 
we already are in terms of consolidation of the D block.
    Mr. Stupak. All right. So you said should consider. Are you 
going to or not? Because my concern is, you know, you have the 
media ownership that this Congress wasn't in favor of but sort 
of just pushed this thing through and now we have some 
companies over 95 MHz and it is there for a reason. Are you 
going to do something? I mean, I am rather concerned about 
this, and as Mr. Pickering indicated, he is too.
    Mr. Martin. I think that--as I said, I don't think the 
Commission has figured out what we should end up doing with the 
D block, whether or not we would prohibit any of the large 
incumbent providers from participating. I think the Commission 
hasn't spoken to that yet but I think that will be a part of 
the record in front of us in deciding what to do on the D 
block.
    Mr. Stupak. Commissioner Copps?
    Mr. Copps. I just wanted to make one quick point and that 
is that that 95 percent screen is a relatively recent vintage. 
It was 70 MHz and I protested going to the 95 percent, or 95 
percent MHz. There is no question that with the evolution of 
the market you have to go up but we went up pretty far and I 
think we even did so on the presumption that we were including 
the AWS and the 700 MHz auction, which is nowhere near being 
utilized.
    Mr. Stupak. Mr. Chairman, let me ask you this. Do you think 
that the FCC should take a larger role in being an honest 
broker with the industry in the next D block auction?
    Mr. Martin. The larger role as being the honest broker?
    Mr. Stupak. Honest broker, right. Commissioner Copps 
mentioned that in his testimony, and----
    Mr. Martin. I think obviously the Commission has to take a 
larger role. I think that the Commission had tried to end up 
taking a very large role previously but obviously we didn't 
define those roles clearly enough, but I worked with 
Commissioner Copps on doing that before and I will continue to 
make sure that we are trying to be an honest broker.
    Mr. Stupak. Does the FCC have an economic analysis to 
estimate what it would cost to build out the nationwide 
private-public network?
    Mr. Martin. I think that the estimates that have come in 
from the public safety side have been somewhere around $6 
billion or $7 billion.
    Mr. Stupak. Right, but do you have an economic analysis on 
what----
    Mr. Martin. I don't think ours would be anything different 
than that.
    Mr. Stupak. Don't you think it would help to provide 
information to the industry that would inevitably help them 
with this idea of building out? I mean, you are asking them to 
bid but it is sort of guesswork. Wouldn't you want an economic 
analysis on what the model should look like, where we are going 
with this? Wouldn't it help out the industry in trying to make 
this public-private partnership work?
    Mr. Martin. I am not sure that the Commission will be able 
to provide a more detailed analysis than the industry itself 
could end up providing on how much it costs to actually build 
out a network. We certainly could end up evaluating it but I 
don't think there has been anybody who has put anything on the 
record that disputes that a public safety network that would 
have to reach at least 99.3 percent of the population and be 
something that would be more hardened or have more duplicative 
resources or facilities so that it would be able to withstand a 
national security emergency, I am not sure that that wouldn't 
mean that that is not a fair estimate of how much it would 
cost.
    Mr. Stupak. Commissioner Copps, it looks like you want to 
join in.
    Mr. Copps. We have to have the capability to make that 
judgment and yes, we are going to get a lot of information from 
industry but we can't always be relying on industry 
projections. We have to have the capacity to make our own 
economic analysis, and I don't want to pour cold water on this 
idea of building this network but I would be frankly amazed if 
this system could be built for $5 or $6 billion. If somebody 
told me that today, I would say let us buy it.
    Mr. Stupak. I think the Administration actually had an 
estimate one time of $18 billion, if I remember, because I have 
been pushing this for a long time with my law enforcement 
background, and even underneath this plan it is going to take, 
what, a 10-year plan for 99.3 percent coverage. Ten years, in 
my estimation, is too long. We have been talking about this 
since the Air Florida crash in, what, 1978. I don't see us 
going very far.
    Mr. Chairman, let me ask you this. You stated that the 
Commission is considering whether the demands on the D block 
were reasonable. You specifically raised the concern on whether 
the build-out plans were too ambitious. How is the Commissioner 
then going to determine if changes are needed to build out the 
plan?
    Mr. Martin. I think that what we are trying to end up 
determining, when we go through a rulemaking proceeding like 
this, what we would do is, is ask that very question and ask 
parties, both public safety and private sector, to come in and 
comment and say that we estimated that reaching 99.3 percent of 
the population was reasonable and that this was the estimates 
of how much it would cost and ask for the private sector and 
the public safety sector to come in and both comment on the 
reasonableness of the assumption that 99.3 percent of the 
population needed to be reached and how much that would cost. 
So I think that is the process which we always undergo when we 
are trying to make a decision.
    Mr. Stupak. Maybe I should ask it this way. What are the 
factors you are going to have to judge the reasonableness of 
the plan and the build-out, I guess, is a better way to say it.
    Mr. Martin. Sure. The factors when you are trying to end up 
judging the reasonableness of that is, how much extra does it 
cost to gain each, for example, additional percentage in 
population and then what is a reasonable amount that you could 
expect of someone on the private side to be willing to engage 
in if it was necessary they were going to have to reach this 
percentage of the population. So in other words, if some 
estimates have been that it costs about an extra $1 billion for 
every additional percentage over 95 percent, is that accurate? 
And if that is accurate, would it have made a difference for 
someone being willing to bid if we had lowered it from 99 to 98 
percent, and would that extra $1 billion have been the 
difference in someone bidding or not.
    Mr. Stupak. But doesn't your answer just really beg for the 
FCC then to have an economic analysis on their own to make 
those judgments as to the reasonableness?
    Mr. Martin. I don't think it is that we won't have people 
evaluating that at the Commission staff and doing an economic 
analysis to try to assess that but the first step in that is 
actually for asking for the public to come in and give us their 
best estimate. We will do an analysis of what they put forth. I 
don't mean to suggest we won't. And as a part of that, I think 
we will do our best to try to estimate that. I mean, the 
Commission's economists build models to try to determine how 
much things cost to build out and try to do an estimate of that 
to estimate the comments that are filed and their own estimates 
but I think that that is guessing with the inputs that are 
provided by the private sector.
    Mr. Stupak. Let me ask you this then. My time is up. Would 
requesting federal appropriations to assist in funding the 
build-out of the D block network be considered in your review 
as how to proceed with the re-auctioning of the D block?
    Mr. Martin. I think so. I mean, I think I actually had 
reference to a bill earlier today where I had said that the 
legislation had been introduced, for example, but had said that 
all of the proceeds, I think your bill had said over $11 
billion over the CBO's estimate should be provided to public 
safety, the public safety network, and then 50 percent of the 
auction proceeds on a going forward basis until they have been 
able to build it out. I think that the Commission has all said 
they would support an effort to try to provide public safety 
direct resources to build out their network but in the absence 
of--what we are talking about is in the absence of that 
legislation, is there anything we can end up doing. But I 
don't--I think the Commission would already say we support 
that.
    Mr. Doyle. The gentleman's time is expired. The chair now 
recognizes the gentlelady from California, Ms. Harman, for 5 
minutes.
    Ms. Harman. Thank you, Mr. Chairman, and thank you to our 
witnesses. I think the hearing record after 2\1/2\ hours is a 
pretty good record and I would just like to draw you out on 
some of the points I made in my statement and in the letter 
that I sent to the chairman and the ranking member.
    First of all, I have stated that to me, building a national 
broadband network for interoperable communications is the 
primary goal of the DTV transition. Does anyone disagree with 
that? OK. So you all agree with that.
    Second, I talked about three things that I at least believe 
in with respect to redo of the D block auction. I think we 
should do a redo. All of you already answered that question 
when Chairman Dingell asked you, but my three conditions were 
clarity, transparency and avoiding D block light. Let me ask 
you first about clarity. What I meant by that is that the FCC 
and the Public Safety Spectrum Trust, assuming we still have 
one, must give bidders a sense of what their obligations are 
before the auction. Could we just go down the line and see 
whether you agree with that? Let us just start at one end with 
you, Commissioner Adelstein.
    Mr. Adelstein. Oh, absolutely. I think there needs to be 
more clarity. A lot of the problems we have heard have arisen 
from the lack of clarity the last time.
    Ms. Harman. Commissioner Copps?
    Mr. Copps. It took me five points in my statement to get to 
the three points that you more succinctly wrapped it up with.
    Ms. Harman. Thank you.
    Mr. Martin. Yes, I think there needs to be more clarity.
    Ms. Harman. Commissioner Tate?
    Ms. Tate. Yes.
    Ms. McDowell. Clarity is good.
    Ms. Harman. Second, transparency. We have had some 
conversation here about whether there should be a for-profit or 
a not-for-profit entity helping out the public safety trust. My 
point is, whatever we have, there should be absolute 
transparency so that bidders understand up front what is going 
on and oh, by the way, the rest of us understand it too. Views 
on transparency, Commissioner Adelstein?
    Mr. Adelstein. Absolutely. The need for transparency is 
clear, to paraphrase a----
    Ms. Harman. Commissioner Copps?
    Mr. Copps. Ditto.
    Ms. Harman. Chairman Martin?
    Mr. Martin. I think that transparency is helpful.
    Ms. Harman. Commissioner Tate?
    Ms. Tate. Crystal clear.
    Ms. Harman. Commissioner McDowell?
    Mr. McDowell. Transparency.
    Ms. Harman. Boy, I wish Congress worked like this.
    Third, avoiding D block light, at least avoiding a second 
auction that doesn't correct the problems of the first, and I 
said we should act with urgency informed by what caused the 
first auction to fail. Anyone disagree with that? Commissioner 
Adelstein?
    Mr. Adelstein. I think we have to look at this 
fundamentally and make major restructuring.
    Ms. Harman. Do you want to say any more about--I guess you 
have said that before but----
    Mr. Adelstein. Yes, I have. I think there is all kinds of 
requirements we put on that were unrealistic that made it 
impossible for a private partner to join us.
    Ms. Harman. So what would be your number one correction?
    Mr. Adelstein. Well, you know, I think we have to look at 
the reserve price. First of all, we have already met the 
numbers so we don't want to enrich the Treasury at the expense 
of public safety. Let us use those funds rather than having a 
high auction price to build out the network. Allow the private 
partner to build it out. I think the penalties were 
unreasonable and scared away private capital. Again, that is 
not good. Getting everything up front rather than doing it 
afterwards so that the private partner knows going in what the 
expectations are is also crucial.
    Ms. Harman. Thank you.
    Commissioner Copps?
    Mr. Copps. I think we are going to have to be very vigilant 
to avoid an outcome that is D block light. I think there is 
going to be inevitable pressure, let us just get this done, let 
us ease up this a little bit, ease up that a little bit and we 
should not be in the boat of sacrificing away any of the truly 
essential public safety safeguards that we need to have.
    Ms. Harman. Thank you.
    Chairman Martin?
    Mr. Martin. I don't think that we should end up sacrificing 
the essentials that public safety needs to have but I also--I 
am not also sure that just lowering the reserve price would 
resolve the issues. I am concerned that I think even the one 
bid that was placed may have been just placed with parking 
money before they bid elsewhere so I am not sure that that 
alone would end up resolving our problem, so I think we do have 
to assess the underlying requirements.
    Ms. Harman. Well, I am not advocating just lowering the bid 
price either.
    Commissioner Tate?
    Ms. Tate. Well, obviously people need to know the scope of 
the work and this goes back to your point about, we need to 
know exactly what it is that we are trying to build, and I 
don't necessarily think it is just about the reserve price 
either. I mean, the devil is in the details and we need to get 
all those out and have them be transparent.
    Ms. Harman. Thank you.
    Commissioner McDowell?
    Mr. McDowell. I think it is going to be very important to 
get all the parties in the room at the same time, find out from 
the private sector what it was that deterred them exactly. The 
last time public safety had the majority of the say in this. 
Let us let the private sector have a say and see if we can come 
to an accommodation.
    Ms. Harman. Well, I wish things were as easy all the time. 
Let me just add in my 2 seconds my skepticism about a regional 
approach. What I worry about is, some regions will end up doing 
well and some won't and at least based on my in-depth briefings 
on a regular basis about the terror threats against us, I can 
imagine serious terrorist attacks in parts of the country that 
under a regional approach might not be adequately protected or 
might not be able to connect in to the rest of the country, and 
if we have near-simultaneous attacks, I think our country is at 
risk unless we have a national approach.
    Thank you, Mr. Chairman.
    Mr. Doyle. The chair thanks the gentlelady.
    The chair now recognizes Mr. Inslee for 8 minutes.
    Mr. Inslee. Thank you.
    I want to ask about the open devices proposal, and I would 
like to ask how you intend to implement this as far as 
rulemaking or discussions with the industry or how do we intend 
to actually enforce and apply in the real world this open 
appliance standard. That is an open question. Maybe we can 
start with Chairman Martin.
    Mr. Martin. Well, I think that we should both work with the 
winning provider and also the people who had raised that as an 
issue from the technology industry to make sure we are 
establishing a process that will allow for people to be able to 
build devices and applications that can work on that network. I 
think that Verizon has already taken steps to have--they had 
their first openness conference right after the auction and 
results were announced in which they were going to begin that 
process of providing the specifications for how their network 
would work on a going forward basis and I think the Commission 
needs to hear from the industry how they think that process is 
going.
    Mr. Inslee. Will there be a formal rulemaking or a formal 
rule promulgated, or how will the public weigh in to make the 
good intentions of the open appliances in fact are effectuated?
    Mr. Martin. I think that we need to end up hearing from the 
folks on the manufacturing and the technology side on how they 
think we should end up going forward on that basis and I think 
they are probably trying to assess Verizon's steps thus far in 
the conferences that they have had but I think that rulemaking 
may be the most appropriate means of doing that but I think 
both the industry--the industry, both sides, Verizon as the 
carrier who won and also some of those that are most concerned 
about the open access provisions are probably trying to assess 
what they think of Verizon's steps thus far, and I think that 
they will inform what they will advocate that we do as well.
    Mr. Inslee. So would it be a voluntary or a mandatory 
system?
    Mr. Martin. Oh, no, it is a mandatory system but there are 
times when the Commission has very simple directives that we 
enforce through people who file complaints. So it is not that--
I want to be clear. It is not that it is not--it is not that it 
would not--it is not a mandatory requirement. The question of 
whether we need to adopt additional rules to flesh out how the 
requirement says any handset and any device--any handset needs 
to be able to work on the network and any application needs to 
be able to flow through to that consumer, whether we need 
additional rules to enforce that is what you were talking 
about, but absolutely, it is a mandatory requirement already.
    Mr. Inslee. And how would we assure that the consumers in 
the public would have input into that decision one way or 
another?
    Mr. Martin. I think that both the public and the technology 
sector that has been more concerned about this would both have 
input in the Commission's decision of whether we need to have 
an additional rulemaking or not. Oftentimes the Commission 
starts a rulemaking process by someone filing a petition that 
says to the Commission, hey, you need to do another rulemaking 
to flesh out your rules in this area because they are not clear 
enough. So if anybody does, we would obviously respond to it, 
and if not, I think we will still be trying to meet with the 
industry and with consumer groups to understand their 
perspective on it.
    Mr. Inslee. Mr. Copps?
    Mr. Copps. You know, anybody can bring a complaint to the 
Commission and we need to advertise that and do some outreach, 
and we have a 6-month enforcement process that we have so I 
think that is good, but I think the first step is really 
fleshing out, and maybe you can help us today with the second 
panel on what the companies mean by these commitments that they 
have made with regard to open access, and if they are fine, 
that is fine, but if there is something lacking, then I think 
it becomes incumbent upon the Commission to define with a 
little more clarity exactly what we mean by open access so that 
all the world can know that and you have some standards and 
people know when they bring their complaint process what 
standards are going to be used.
    Mr. Inslee. Well, we certainly encourage an open discussion 
of this. The intentions are great but, of course, we have got 
to see to it that the intentions are fulfilled in the real 
world and I suspect there might be some pretty technical issues 
involved in this in really describing what the industry's 
responsibility is here, and I do hope the Commission will do a 
better job in listening to the public than it did in the media 
consolidation issue.
    This is kind of old business, but I did receive 
Commissioner Martin's response to my question as to when he had 
submitted an op-ed in relationship to when the rule came out on 
consolidation, and we will put that into the record. It doesn't 
shine well for the Commission. We hope they will do a better 
job in listening to the public as we go forward on this, which 
I do applaud that we are moving at least in this direction. 
Thank you.
    Mr. Doyle. The chair now recognizes the gentleman from New 
York, Mr. Engel, for 5 minutes.
    Mr. Engel. Thank you, Mr. Chairman. You know, we keep 
talking about C blocks and D blocks. I keep thinking of a 
federal penitentiary or something.
    Chairman Martin, in your statement, you said that the open 
access requirements on the C block offered consumers added 
benefits. Let me ask you, why did you choose to only place 
these requirements on the C block and not the others?
    Mr. Martin. I thought that it was important to try to 
respond to the concerns that had been raised about the ability 
for people that were innovating on the edges of the network to 
be able to get those devices and applications onto the wireless 
networks. I was hesitant, however, to impose that kind of a 
condition across the board without understanding what the full 
implications would end up being so I thought that it was 
appropriate that we try to do that on one particular block and 
I thought the C block was the block that was most likely to 
still be able to sustain that condition and get someone willing 
to build out.
    Mr. Engel. Well, let me ask you this. Do you plan to have 
similar requirements instituted for future spectrum auctions or 
was this a one-time event?
    Mr. Martin. I think that it was--I think that obviously 
whether or not we will do it in the future depends in part upon 
the industry's reaction. Our hope was that this would actually 
spur and have a ripple effect throughout the industry to have a 
more openness approach to more platforms that are move open to 
devices and applications. I think that we begun to see some of 
those steps and I think we will have to wait and see what the 
continuing ramifications are in the industry.
    Mr. Engel. Like Ms. Harman, one of my biggest priorities to 
help facilitate an interoperable communications network that 
all of the first responders can use. Obviously, coming from New 
York, it is even more important to me. I would like to know, 
let me ask everybody, I will start with the chairman, what your 
suggestions are on how we can have a more successful auction 
next time around because obviously if we don't change the 
rules, we won't see much, if any, additional bidding. So I 
wonder if Chairman Martin could answer that and anybody else 
who would care to?
    Mr. Martin. I do think that we need to provide more 
certainty as to what the obligations will end up being for 
whoever wins that, and I think that we had left too much up to 
a negotiation that would occur between the public safety entity 
and the ultimate winner. The public safety community had 
advocated that initially but obviously I think we need to put 
the exact parameters around what the expectations will be.
    Mr. Engel. Anybody else?
    Mr. Copps. It is the clarity and the certainty that Ms. 
Harman talked about and making sure we have the expertise, and 
I mean really incredible expertise, making sure public safety 
has the best and the brightest working for it, and I think that 
is the way to proceed.
    Mr. Adelstein. Just to provide some clarity to the 
committee, I have come up with a lot of detailed suggestions in 
my testimony but the big picture here is that all we have to 
offer to the private sector is the ability to use 10 MHz 
sometimes, and that is not necessarily all that valuable 
because the private partner also has to give up use of its 
spectrum when public safety needs it. So what we are trying to 
leverage here isn't an inexhaustible resource. We don't have 
the ability to demand a gold-plated network for public safety 
because no private partner in their right mind would be willing 
to put up that level of resources in exchange for that limited 
amount of spectrum that is conditioned in its use. So we have 
to achieve a balance, knowing what the limitations of what we 
are offering to the private partner are if we want to make a 
public-private partnership work. Clearly in the last round we 
put so many requirements, and all well intentioned, in order to 
help public safety, that private partners ran away. Wall Street 
said we are not going to finance that because there is too much 
open-ended liability, we don't know what the details are. As a 
matter of fact, the penalty provisions were so severe that 
there could have been $1 billion lost by private capital trying 
to do the right thing working with them the way that our rules 
work. So we have to really come up with a balance. We have to 
work with both sides and make sure it works for public safety 
because otherwise it is not worth doing at all but also make 
sure it works for a private partner as well and that balance, 
given the demands of public safety, is going to be difficult to 
achieve when you think about the limited leverage that we 
actually have.
    Ms. Tate. I think it is not just tweaking one or two 
issues, like the reserve price, and it is not just D block 
light, as Congresswoman Harman said, but you all have the 
opportunity to hear from, you know, some incredible panelists 
about what all the options may be.
    Mr. McDowell. And Congressman, I will incorporate by 
reference all the wise statements of my colleagues but also I 
think it is important for Congress to understand, there are two 
jurisdictions in the country that already have an interoperable 
network in their regions and that is New York City and 
Washington, D.C. So those networks would run on different 
technologies and different standards and will also have to be 
plugged into this nationwide interoperable network and that is 
going to be an added wrinkle to all of this.
    Mr. Engel. Thank you.
    In my last 15 seconds, let me also add my voice to the 
question that I think Mr. Shimkus asked, and that was the 
report in the New York Times about Google's goal in bidding for 
the C block was to trigger the reserve price for the open 
access rule to come into effect. I really am concerned about it 
if indeed that was the case and just wanted to add to what Mr. 
Shimkus said. I know, Chairman Martin, you had answered him. I 
don't know if there is anything else you want to say about it. 
OK.
    Thank you, Mr. Chairman.
    Mr. Markey. The gentleman's time has expired.
    Let me just ask you one final question, Chairman. Going 
forward, are you also open to looking at the wireless roaming 
ability of regional players who won't have fully built-out 
networks on day one or in all areas and need to provide service 
to compete effectively against national carriers?
    Mr. Martin. Sure, I am open to it, but I do want to make 
sure that we are not undermining their incentives and/or 
requirements that they build out their networks as well.
    Mr. Markey. And much of the AWS spectrum is still 
unencumbered by government users so this is an ongoing issue 
and do you all agree with the----
    Mr. Martin. Oh, sure. Obviously if they have a license that 
they are not able to be building out on, that is a significant 
different story. What we were concerned about was the people 
who had licenses who had not built out but were trying to take 
advantage of roaming on someone else's, but if they have got a 
license but they have not built out, that is certainly a 
different--that is a different exception.
    Mr. Markey. OK. Great. Well, again, I want to commend the 
Commission for the open devices and open applications 
conditions on the C block. I think that is working out well so 
far, and I think it has really changed the dynamic out in the 
marketplace. The auction is moving industry along and I believe 
if implemented correctly and enforced fully will unleash 
billions and billions of dollars of investment and give more 
choices to consumers across the country. I want to commend 
Verizon as well for moving to embrace it and the auction. I 
think that is an important step.
    And clearly what we hear from every member today is that 
public safety is issue number one. So we are not debating over 
public safety here. That is not a debate in our committee. We 
are now debating over--well, my mother used to say--she would 
first say, Eddie, your father and I are going to donate your 
brain to Harvard Medical School as a completely unused human 
organ, and that would be immediately before she would say, you 
have to learn how to work smarter, not harder. So that is our 
goal. We have multiple objectives that we can achieve here but 
we have to be very smart, and if we do it and deal with the 
reality of what is left over after the completion of the rest 
of this auction, then I think we can accomplish it.
    And with that, and with the thanks of the Committee, we 
thank you for your testimony and we would like to continue to 
work closely with you towards the formulation of a policy here 
that finishes off this auction in a way that achieves those 
goals. Thank you so much for being here.
    And then we would ask our second very distinguished panel 
to move up to where their name cards will be placed over the 
next minute or so.
    Ladies and gentlemen, thank you so much and we thank 
everybody for your patience. This subject merits the quality of 
the panel which has been assembled to discuss it, and there has 
never been a more distinguished panel assembled before the 
Telecommunications Subcommittee in my 32 years here, and I just 
want to thank all of you for being here and the magnitude of 
the problem I think is matched by the expertise of the 
witnesses, and I very much appreciate your attendance.
    We are going to begin by hearing from Chief Harlin McEwen, 
who is the chairman and interim chief executive officer of the 
Public Safety Spectrum Trust Corporation. He has nearly 5 
decades of experience as both an advocate for public safety 
communications issues and as a career law enforcement officer 
and administrator. Mr. McEwen, we welcome you, and whenever you 
are ready. Each of you will have 5 minutes, and please try to 
keep it to 5 minutes because it will otherwise make it very 
difficult for the members to get a chance to ask questions.
    So we will recognize you first, Mr. McEwen. Whenever you 
are ready, please begin.

STATEMENT OF HARLIN R. MCEWEN, CHAIRMAN AND CEO, PUBLIC SAFETY 
                         SPECTRUM TRUST

    Mr. McEwen. Thank you, Chairman Markey and members of the 
Committee for this opportunity to appear before you today. As 
you said, my name is Harlin McEwen and I am the retired police 
chief for the city of Ithaca, New York, and I am retired as a 
deputy assistant director of the Federal Bureau of 
Investigation here in Washington. I also serve as the chairman 
of the Communications and Technology Committee of the 
International Association of Chiefs of Police, a position I 
have held for almost 30 years.
    Most recently, I was honored to have been elected as 
chairman of the board of directors of the Public Safety 
Spectrum Trust, and the board has also named me as the interim 
chief executive officer. The Public Safety Spectrum Trust is a 
nonprofit corporation. Its purpose is to serve as licensee for 
the 700 MHz radio spectrum allocated by the FCC for public 
safety broadband purposes. The public safety broadband license 
was granted to the PSST by the FCC on November 19, 2007. The 10 
MHz of public safety broadband spectrum is intended to be one-
half of the spectrum that will be used to develop a shared 
commercial public safety network. The other half of the 
spectrum will come from the so-called D block. I and other 
members of the board of directors of the PSST take our duty 
very seriously and I appear today on behalf of not only the 
PSST but also the local, tribal, State and Federal public 
safety community that we serve.
    First, I am sure each of you knows why having a national 
public safety broadband network is so important and we applaud 
the efforts of the committee members and other Members of 
Congress for your support in the creation of this network. Any 
review of major crisis such as 9/11 or Katrina shows how much 
the personal efforts and effectiveness of our Nation's first 
responders, the police, firefighters, emergency medical 
personnel and others, are undermined when the communications 
infrastructure that supports our efforts fails or is 
insufficient for the needs of public safety professionals. We 
need to move to broadband technology but we also need a network 
that for public safety is more reliable than today's commercial 
networks, hardened to withstand catastrophes like Katrina, that 
has extended backup power, priority for public safety, enhanced 
security features, and a satellite component that does not 
exist in the current commercial networks. Establishing and 
building out the public safety broadband network will be a 
significant challenge but it is one that very much needs to be 
done to meet our national security and public safety needs for 
the years to come.
    We were deeply disappointed that the D block did not 
attract a winning bid in the recently concluded 700 MHz auction 
but the PSST is committed to working with the FCC to develop 
the rules for a follow-on D block auction that will result in a 
winning bidder and also meet the critical communications needs 
of the public safety community. We welcome any suggestions from 
Congress and the members of this committee to help us ensure 
that failure is not an option in a D block re-auction.
    The FCC's Second Report and Order assigns important tasks 
to the PSST as the Public Safety Broadband Licensee to ensure 
that the needs of first responders are met. These tasks include 
working with the D block winner to develop and construct a 
network that meets public safety's critical communications 
needs at the outset over the entire term of the 10-year license 
and into the future. Public safety's needs and technology 
available to meet those needs will not remain static. There 
will be a continuing need for input from the public safety 
community with regard to network upgrades being implemented by 
the commercial operator. We see the PSST in a continuing role 
as the public safety representative in these matters.
    The responsibilities expected of the PSST have not been 
matched by an appropriate source of funding. The FCC order did 
not and could not provide funding for the Public Safety 
Broadband Licensee. There is no allocation in existing law nor 
in pending legislation for the funding to meet the PSST's 
needs. In the total absence of conventional funding 
alternatives, the PSST has suggested that the commercial D 
block operator be the principal source of funding through some 
type of lease as is set forth in the FCC Report and Order.
    In conclusion, we in the public safety community wish to 
applaud the efforts of the FCC as reaffirmed in their testimony 
this morning of the members of this committee and of Congress 
for their support of the public safety broadband network and 
the public-private partnership approach. We look forward to 
working with this committee to make the public safety broadband 
network a reality in the near future. You can count on us for 
flexibility, focus on solutions and dedication to our one goal: 
an effective broadband communications network available to meet 
the needs of public safety in providing critical first 
responder services to our Nation.
    Thank you very much.
    [The prepared statement of Mr. McEwen follows:]
    
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
        Mr. Markey. Thank you, Mr. McEwen, very much.
    Our second witness is retired Rear Admiral Robert Duncan. 
He serves as senior vice president of Business Development and 
Government Services of Rivada Networks. Prior to joining 
Rivada, or Rivada?
    Admiral Duncan. Rivada, yes, sir.
    Mr. Markey. Rivada. Mr. Duncan served as a--I have learned 
that you don't say Nevada, you say Nevada, and I unfortunately 
learned that in the presidential race helping somebody, they 
don't appreciate the mispronunciation-- served as a rear 
admiral of the United States Coast Guard in a career that 
spanned more than 34 years. We welcome you, sir, and we thank 
you for your service to the country.

 STATEMENT OF ROBERT F. DUNCAN, REAR ADMIRAL, U.S. COAST GUARD 
 (RETIRED), SENIOR VICE PRESIDENT, GOVERNMENT SERVICES, RIVADA 
                            NETWORKS

    Admiral Duncan. Mr. Chairman, thank you for allowing me to 
appear, Ranking Member Stearns, and I did serve in Boston and 
am an Eagle from Boston College so your pronunciation is 
probably the correct one. I will defer to that.
    Mr. Markey. And how about winning the Frozen Four?
    Admiral Duncan. We could have a whole hearing on that 
subject. I know our time is limited, sir, but----
    Mr. Markey. I will extend your time.
    Admiral Duncan. Thank you, Mr. Chairman.
    At the outset, let me observe that I have seen unanimity in 
the goal of being recognized as providing modern, capable 
communications in the hands of people such as Chief Dowd and 
others whose phone could ring at 2:00 tomorrow morning and put 
it in their hands today, as soon as possible. I hope you will 
indulge one more request and that is to incorporate by 
reference the sage advice that your mother gave, to work 
smarter and not harder.
    I am offering my comments today informed by two particular 
frames of reference, one as a first responder for over 34 years 
and most recently leading the Coast Guard's response to and 
recovery from Hurricane Katrina and shortly after that, 
Hurricane Rita. I was the Eighth District commander covering 
the Gulf of Mexico and the inland river system, responsible for 
all or parts of 26 States, and while we received a great deal 
of attention and the praise of the Senate and it was my great 
pleasure to take that, we also took a look at what we did and 
how we could do better as real professionals, and one of those 
observations I will offer here, and that was communications. We 
have made others and those are part of the record of the Senate 
Homeland Security Government Affairs Committee, but I thought 
the communications was something that we should spend time in.
    The reason that I felt that way and what led me to take the 
position as senior vice president at Rivada was traveling 
around the impact area of complete devastation, using what the 
Federal Government had provided me, seeing what others were 
using, seeing what my peers in DOD were using. I would 
encounter young lieutenants who would be typing on a PDA or 
something. I would say, ``What are you doing'' and they would 
say ``nothing.'' I would say, ``Really, what are you doing?'' 
And that is when I learned about text messaging and SMSing and 
I said, ``Is it working for you? Go ahead and use it.'' Go at 
risk. Put this information out. Use the tools that you give to 
your children when they go to college. What I gave my daughters 
when they went to college was far more effective than what I 
took out of a helicopter when I put boots on the ground at the 
Superdome. It was just what I needed to take data and send it 
back to people who could evaluate that data from a knowledge 
standpoint and provide me guidance that I would have not the 
national piece to and focus on other things.
    We have seen incredible innovation, several of the 
commissioners and a number of the members have mentioned, but 
this is a sector where innovation leads, where new concepts, 
new ideas are brought in and attracts the best investment, the 
best engineering talent, and we are seeing a massive investment 
and development in communications and that needs to be put in 
the hands of first responders.
    Two years ago the Northern Command, the part of DOD that 
organizes responses with the United States, looked at the idea 
of a private cellular network that could be brought into an 
area of disaster, that ties in LMR technologies, that reaches 
back to a satellite if necessary and reaches into the 
undisturbed part of this massive network that is built out 
across the country and piloted that during Katrina. Rivada 
Networks was the company that built that system and that is now 
presently located in the home States of 19 members of this 
subcommittee. It is presently on standby for the flood control 
measures in Louisiana in the hands of the Louisiana National 
Guard. It is a current system. It is not something that is 
coming in 5 years and it will be improved and others will enter 
this space. There is a great deal of innovation and work in a 
public-private way, and I ask you to think a little more 
expansively perhaps about what public-private is, to shape 
commercial offerings and put those in the hands of first 
responders. We have that capability. It is currently deployed. 
It will be improved. It is obsolescent proof incorporating new 
technologies as they go and not shedding legacy systems that 
need to be incorporated.
    One thing that we learned from Katrina is that we don't 
know who our partners will be. It is hard to sync up with folks 
that you didn't know were going to be in town and are necessary 
for you to do your missions. I mention in more detail in my 
written comments, but in my case, that included people who 
start refineries after they have been flooded, people who bring 
barge loads of materials into certain industries to jump-start 
an economy and down to NGOs and animal control folks, animal 
rescue folks, and some of those become part of your command 
central part of the time, some of them come in later on in 
other processes but having a system that is agile enough to 
incorporate new responders that come to an area, perhaps 
responders you didn't anticipate, given the situation, is an 
imperative and is a current need by first responders today.
    I am with Rivada Networks. We provide systems that bridge 
that gap to provide that kind of dedicated capability to first 
responders, building on that massive amount of investment that 
is already across this country. If I might just say that we 
talk in terms and defense of asymmetric threats, you know, the 
notion that someone is not going to take us on on our 
strengths, the corollary to that is, we have some real 
asymmetric advantages in this country. Take advantage of those, 
incorporate those into the service of first responders. When we 
ask the Pennsylvania National Guard to respond to the Gulf 
Coast, we don't tell them to build a road to get there. It is 
OK to use the Eisenhower interstate highway system. There is a 
great analogy in the communications field. Now, use those 
commercial structures that survive and you will hear some of 
the investment that has already gone into them. It is hard to 
see a new entrant matching that kind of investment and building 
out a spoke system across the country just for first 
responders.
    Thank you, sir.
    [The prepared statement of Mr. Duncan follows:]
    
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
        Mr. Markey. Thank you, Mr. Duncan, and thank you for that 
brilliant Jesuit-backed testimony for the Committee. I 
appreciate that.
    Next we are going to hear from Morgan O'Brien, who is a 
cofounder and chairman of Cyren Call Communications. Cyren Call 
serves as an advisor to the Public Safety Spectrum Trust. 
Welcome, sir.

     STATEMENT OF MORGAN E. O'BRIEN, CHAIRMAN, CYREN CALL 
                   COMMUNICATIONS CORPORATION

    Mr. O'Brien. Thank you, Mr. Chairman and members of the 
Committee.
    In the interest of time, I would like to restrict my 
opening comments just to three points. The first point is that 
Cyren Call, having come together more than 2 years ago and 
brought together wireless experts and public safety experts to 
study this exact problem, has spent 2 years talking to vendors, 
talking to users, talking to literally hundreds of experts and 
analyzing this issue, and we want to make sure we say to this 
committee that regardless of the failure of the auction, we can 
see looking at a business case, the assumptions of which are 
reasonable as we know them to be reasonable. There is a 
business case for a successful public-private partnership and 
we urge you to consider working with that concept. It is in the 
absence of any other reasonable approach and in the last couple 
of years I think it has been indicated that no other reasonable 
approach has come forward. It is something definitely in the 
public interest and something about which we are passionate.
    Number two: The FCC is to be congratulated because in this 
proceeding I believe they have gotten so many things right, and 
one of the things that they got right, in our view, is 
composing, as they have, a single public safety spectrum trust 
made up of 15 member organizations that is really unprecedented 
in public safety communications to have taken a step like this. 
I have had the privilege of working with this group now, since 
we were selected by them as an advisor in October and believe 
me, the view from inside is even more impressive than the view 
from outside, in terms of the unbelievably hardworking people 
and the expertise that is represented on this board.
    However, that licensee must be given the assistance of any 
number of wireless experts if it is going to hold up its end of 
the bargain that the FCC is anticipating here. The relationship 
needs to be clarified. That is clear. The relationship needs to 
be clarified. The structure of the relationship between the 
PSST and a potential D block bidder needs to be clarified, but 
in doing that, advisors up to the task. Naturally, I hope to 
continue to be part of that team but that is nowhere near as 
important as getting the right kind of experts aligned with 
Public Safety Spectrum Trust so that they meet the very heavy 
responsibilities that have been given to them in the 
Commission's Order.
    And thirdly, the time for this--I think from any 
perspective, the time for doing this is significantly behind 
us. The days that we are living in, in which there isn't a 
crisis that once again shows up the failures of the system--to 
a certain extent, we have been lucky. So, needless to say, 
neither we as the advisor nor Public Safety Spectrum Trust 
would be urging rash action. On the other hand, I take with a 
definite grain of salt, and I hope you do too, some of the 
calls for taking what I would describe to be undue deliberation 
and caution in moving to the next step. This is a high-risk 
process of finding a solution for a problem for which there is 
no other reasonable solution that has emerged. With the right 
kind of dedication on the part of experts such as in this room 
and the FCC's clear interest in getting this thing done, I 
believe it has every chance of succeeding, and I thank you.
    [The prepared statement of Mr. O'Brien follows:]
   
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
        Mr. Markey. Thank you, Mr. O'Brien.
    Our next witness is Deputy Chief Charles Dowd, who is the 
commanding officer of the communications division of the New 
York City Police Department. He is responsible for New York 
City's E 09911 system, as well as the police department's radio 
operations, which is the largest public safety radio system in 
our Nation. We welcome you, sir. Whenever you are ready, please 
begin.

   STATEMENT OF CHARLES F. DOWD, DEPUTY CHIEF, NEW YORK CITY 
                       POLICE DEPARTMENT

    Chief Dowd. Good morning, Mr. Chairman, and let me 
congratulate you on Boston's two out of three victory over the 
weekend against the Yankees.
    Mr. Markey. Are you talking about the fact that you caught 
us trying to bury David Ortiz's jersey?
    Chief Dowd. We already detected and removed that vile 
jersey from the----
    Mr. Markey. That was a defeat.
    Chief Dowd [continuing]. Foundations of the new Yankee 
Stadium.
    Mr. Markey. Thank you.
    Chief Dowd. And I guess I am not getting my time extended.
    Mr. Markey. No, you will get your time extended, since we 
took two out of three.
    Chief Dowd. Again, good morning, Chairman Markey and 
members of the Committee, I am Deputy Chief Charles Dowd of the 
New York City Police Department, commanding officer of its 
communications division. My command includes the responsibility 
for the New York City 911 system as well as the police 
department's radio operations, which is, as you pointed out, 
the largest public safety radio system in the Nation. On behalf 
of Police Commissioner Raymond Kelly and Mayor Michael 
Bloomberg, I would like to thank you for this opportunity to 
appear before you to discuss the 700 MHz D block auction and 
the importance of the Federal Communications Commission's 
actions going forward.
    The circumstances surrounding the D block spectrum allow 
the Congress and the FCC to reexamine how best to assist local 
and State public health agencies. It affords an important 
opportunity to improve the responsibility capability of police, 
fire and emergency medical first responders. With the revenue 
projections of the 700 MHz band now realized, the focus should 
now be on how local and State public safety use of the D block, 
working with the Public Safety Broadband Licensee can bring 
mission-critical communications to levels that parallel the 
needs of the citizens facing an emergency and the responding 
officers. We urge the Congress and the FCC to embrace a concept 
where a D block spectrum, in coordination with spectrum managed 
by a public safety partnership, is primarily committed to 
meeting the expanded mission-critical voice and data 
requirements of local and State public safety agencies. This 
premise encompasses public-private partnerships including, 
where possible, commercial access to the spectrum. However, we 
do not believe that the FCC should proceed with another auction 
before considering regional options that would benefit public 
safety. There is no question as to the validity of the public-
private partnership moving this effort forward, but there are 
other options to be considered that may be more beneficial to 
the FCC's goal of providing nationwide interoperability on 
compatible platforms with common spectrum.
    The greatest challenge to improved communications and 
broader interoperability is the lack of spectrum and financial 
resources to construct and deploy network infrastructure. The 
enormous sums of monies associated with network infrastructure 
make improvements beyond the means of all but the largest of 
agencies and jurisdictions. The need to remedy this challenge 
is even more compelling as agencies face an enormous investment 
mandate that many cannot meet. This investment is mandated by 
FCC rules requiring all agencies in the 150-174 and 421-512 MHz 
bands to transition to narrowband technologies by January of 
2013.
    First and foremost, the FCC needs to consider the immediate 
needs of the major urban areas that are confronted with the 
immense task of replacing their existing land mobile radio 
system from the ground up. The FCC should also consider a more 
regional approach regarding the sale or auction of the D block 
spectrum to allow for more flexible solutions to a region's 
specific needs. For example, narrowbanding will require New 
York City to replace its entire radio system at an estimated 
cost of over $400 million. As we explore the existing 
technology, we are faced with a dilemma: our choices are 
limited to existing solutions developed over the last 30 years. 
The specifics of the rules have changed but the basis still 
remains: design technology that fits within the limited amount 
of spectrum. What if a public-private partnership could be 
leveraged to develop a public safety radio system that can 
harness the advances of broadband technology to satisfy the 
desired narrowband end state, spectrum efficiency? The issue is 
not about CDMA versus TDMA or FDMA. It is about the ability of 
the public safety users to determine how best to use this 
spectrum while maintaining focus on interoperability and new 
technology.
    The FCC should consider allowing large metropolitan areas 
and regions to form public-private partnerships that would 
utilize the spectrum in an efficient manner, combining new 
commercially available technology with public safety 
requirements. Unfortunately, the D block rules were not written 
to foster regional solutions to satisfy the immediate needs of 
the large metropolitan areas. The concept of a single 
nationwide licensee assumes that one system will satisfy the 
needs of all agencies, and that is not possible. The FCC was 
innovative by allowing public safety to leverage the value of 
its newly allocated 10 MHz in exchange for capital investments 
from the private sector. However, many large cities have 
already begun designing and building broadband networks on 
other bands, thus potentially reducing the value of the 
spectrum to commercial enterprises.
    One potential solution would be to encourage the FCC to 
revise the rules on distribution of the spectrum to allow 
cities and regions to determine the best way to proceed. Cities 
would then be free to use their 10 MHz to either build their 
own systems or negotiate with the private sector for an 
equitable exchange. As long as all 700 MHz systems, whether 
commercial or government owned, are required to meet compatible 
sign and interoperability standards, the systems will meet 
current and future public safety needs. This would allow the 
FCC to designate spectrum to be auctioned on a regional basis 
to foster local partnerships with commercial entities to 
develop systems that will satisfy local public safety needs. 
Local commercial entities may be more likely to build highly 
adaptable systems responsive to the needs of the region.
    Reconsideration of the D block process will allow public 
safety entities to build in spectrum ``green space'' which will 
foster the development of systems based on new commercially 
available technology. Using clear spectrum in the 700 MHz band 
allows an entity to develop a new system without the need to 
retrofit existing sites and equipment. This green space 
approach is critical in areas such as New York City where 
moving from old but reliable legacy systems to new, potentially 
cutting-edge solutions will require exhaustive testing to 
ensure the reliability first responders have come to and have 
the right to expect.
    Mr. Markey. Chief, if you could wrap up?
    Chief Dowd. OK. In summary, we urge the Committee and the 
FCC to structure use of the D block where the mission-critical 
needs of public safety communications can be the foremost 
responsibility of the public and private interests involved. We 
have also spoken to the radio system managers of both Chicago 
and Boston, who have expressed their support for this concept. 
The spectrum should not default to the private sector nor 
should it default to a specific use or technology. Large 
metropolitan areas, in regionally coordinated public and 
private effort, bear the responsibility of bringing back 
communications networks that parallel public safety 
responsibilities and expand use of the spectrum significantly 
and efficiently.
    Thank you for the opportunity to speak on these important 
issues. I would be happy to answer any questions you may have.
    [The prepared statement of Mr. Dowd follows:]

                      Statement of Charles F. Dowd

    Good Morning Chairman Markey and Members of the Committee. 
I am Deputy Chief Charles F. Dowd of the New York City Police 
Department and the Commanding Officer of the Communications 
Division. My command includes responsibility for New York City 
E-911 as well as the police department's radio operations, 
which is the largest public safety radio system in our nation. 
On behalf of Police Commissioner Raymond W. Kelly and Mayor 
Michael R. Bloomberg, I would like to thank you for the 
opportunity to appear before you today to discuss the recent 
700 MHz D block auction and the importance of the Federal 
Communications Commission's actions going forward.
    The circumstances surrounding the D Block spectrum allows 
the Congress and the Federal Communications Commission to 
reexamine how best to assist local and state public safety 
agencies. It affords an important opportunity to improve the 
response capability of police, fire, and emergency medical 
first responders. With the revenue projections of the 700 MHz 
band now realized, the focus should be how local and state 
public safety use of the D Block, working with the Public 
Safety Broadband Licensee, can bring mission critical 
communications to levels that parallel the needs of the citizen 
facing an emergency and the responding officers. We urge the 
Congress and the FCC to embrace a concept where D Block 
spectrum, in coordination with the spectrum managed by the 
Public Safety Broadband licensee, is primarily committed to 
meeting the expanding mission critical voice and data 
requirements of local and state public safety agencies. This 
premise encompasses public-private partnerships, including, 
where possible, commercial access to the spectrum. However, we 
do not believe that the FCC should proceed with another auction 
before considering regional options that would benefit public 
safety. There is no question as to the validity of the public-
private partnership moving this effort forward. But there are 
other options to be considered that may be more beneficial to 
the FCC's goal of providing nationwide interoperability on 
compatible platforms with common spectrum.
    The greatest challenge to improved communications and 
broader interoperability is the lack of spectrum and financial 
resources to construct and deploy network infrastructure. The 
enormous sums of monies associated with network infrastructure 
makes improvements beyond the means of all but the largest of 
agencies and jurisdictions. The need to remedy this challenge 
is even more compelling as agencies face an enormous investment 
mandate that many cannot meet. This investment is mandated by 
FCC rules requiring all agencies in the 150-174 MHz and 421-512 
MHz bands to transition to narrowband technologies by January 
1, 2013.
    First and foremost, the FCC needs to consider the immediate 
needs of the major urban areas that are confronted with the 
immense task of replacing their existing land mobile radio 
system from the ground up. The FCC should also consider a more 
regional approach regarding the sale or auction of the D Block 
spectrum to allow for more flexible solutions to a region's 
specific needs. For example, narrowbanding will require New 
York City to replace its entire radio system at an estimated 
cost of over 400 million dollars. As we explore the existing 
technology, we are faced with a dilemma; our choices are 
limited to existing solutions developed over 30 years ago. The 
specifics of the rules have changed but the basis still 
remains: design technology that fits within a limited amount of 
spectrum. What if a public-private partnership could be 
leveraged to develop a public safety radio system that can 
harness the advances of broadband technology to satisfy the 
desired narrow band end state, spectrum efficiency? The issue 
is not about CDMA vs. TDMA or FDMA, it is about the ability of 
the public safety users to determine how best to use this 
spectrum while maintaining focus on interoperability and new 
technology.
    The FCC should consider allowing large metropolitan areas 
and regions to form public-private partnerships that would 
utilize the spectrum in an efficient manner, combining newer 
commercially available technology with public safety 
requirements. Unfortunately, the D Block rules were not written 
to foster regional solutions to satisfy the immediate needs of 
the large metropolitan areas. The concept of a single 
nationwide licensee assumes that one system will satisfy the 
needs of all agencies and that is not possible. The FCC was 
innovative by allowing public safety to leverage the value of 
its newly allocated 10 MHz in exchange for capital investments 
from the private sector. However, many large cities have 
already begun designing and building broadband networks in 
other bands thus reducing the value of the spectrum to 
commercial enterprises.
    One potential solution would be to encourage the FCC to 
revise the rules on distribution of the spectrum to allow 
cities and regions to determine the best way to proceed. Cities 
would then be free to use their 10 MHz to either build their 
own systems or negotiate with the private sector for an 
equitable exchange. As long as all 700 MHz systems, whether 
commercial or government-owned, are required to meet common 
design and interoperability standards the systems will meet 
current and future public safety needs. This would allow the 
FCC to designate spectrum to be auctioned on a regional basis 
to foster local partnerships with commercial entities to 
develop systems that will satisfy local public safety needs. 
Local commercial entities may be more likely to build highly 
adaptable systems responsive to the needs of the region.
    Reconsideration of the D block allocation process will 
allow public safety entities to build in spectrum ``green 
space'' which will foster the development of systems based on 
new commercially available technology. Using clear spectrum in 
the 700 MHz band allows an entity to develop a new system 
without the need to retrofit existing sites and equipment. This 
``green space'' approach is critical in areas such as New York 
City where moving from old but reliable legacy systems to new 
potentially cutting-edge solutions will require exhaustive 
testing to ensure the reliability first responders have come 
to, and have the right to expect. The region will be 
responsible to develop the system to standards that will ensure 
interoperability with other 700 MHz users on the regional and 
national level. Allocating the spectrum on a regional basis 
will encourage faster development of the necessary technologies 
by allowing the larger markets to drive the technology and 
standards. Emerging technologies such as CDMA and TDMA can be 
built to satisfy public safety requirements for resiliency and 
redundancy once the manufacturers embrace the public safety 
market.
    The FCC has committed sincere and dedicated efforts to a 
range of areas, reflecting an agency aware of the challenges. 
Specifically, the rules governing the D block spectrum 
envisioned that the private sector would be more likely to 
share a large portion of prime spectrum and deliver advanced, 
interoperable wireless capabilities to public safety agencies 
across the country. By advocating a public-private partnership, 
the FCC recognized that public safety agencies could serve 
their missions better by leveraging commercial networks and 
services, and building and maintaining the systems to public 
safety requirements.
    It made an important contribution in establishing the 
Public Safety Broadband Licensee to use the 700 MHz band to 
bring advanced data type services to all agencies. It allocated 
700 MHz channels to voice communications for individual 
agencies yet the capacity falls far short of requirements faced 
by large metropolitan areas. We think it important that the 
voice and other narrowband requirements of public safety be 
addressed in an overall context, with advanced broadband 
services. The D Block can be the sources of technological 
incentives and public and private investment.
    We urge the Congress and the FCC to move to a D Block model 
allowing public and private investment in the metropolitan 
areas, where the need and risk is highest, to work with the 
Public Safety Broadband Licensee, and establish a 700 MHz 
platform where the voice and data needs of public safety are 
addressed. This will create an ease of interoperability which, 
up until now, was not possible due to a lack of common public 
safety spectrum on a national level. Such an approach can 
promote nationwide efficiencies yet respond to local 
requirements. It will also provide the financial base and 
accountability to build and maintain a network. Our recent 
discussions with agencies in other metropolitan areas indicate 
an embrace of this path. With one or several agencies in a 
region deploying the infrastructure, in coordination with the 
PSBL, a much more pervasive use of the 700 MHz band is 
possible.
    The model we propose is without bias to any technology or 
private interest and recognizes the crucial role the private 
sector has in bringing the concept to reality. It is intended 
to broaden the commercial interests serving the public safety 
sector and create incentives that allow technology to service 
voice and data needs, narrowband and broadband, from one 
platform. It seeks to capitalize on commercial solutions that 
preserve mission critical communications.
    The model also envisions public private partnerships and 
private access to the spectrum where it can coexist with the 
primary public safety use. Yet in contrast to the original D 
Block auction framework, the mission critical requirements of 
public safety will be foremost and not compromised by a private 
entity that must first pay an enormous minimum bid. The auction 
premise imposes a constraint on the private partner to reduce 
its costs and commitment to the public safety sector. Either 
the mission critical standards are diluted or, as occurred, 
inadequate bids are received. It is also important not to lower 
the standard owed to public safety, such as providing public 
safety only ``most favored nation status.'' The mission 
critical requirement will be abandoned. Public safety is then 
reduced to a commercial customer unable to uphold its own 
standards.
    The public private partnership we propose envisions robust 
private partners committed to serving public safety's mission 
critical needs and pursuing the efficiencies that allow others 
to use and coexist in the spectrum. It also includes a 
recognition that public safety communications networks, like 
other local and state resources, contribute enormously to 
national security and preparedness and are deserving of 
investment and support by the federal government.
    In summary, we urge the Committee and the FCC to structure 
use of the D Block where the mission critical needs of public 
safety communications can be the foremost responsibility of the 
public and private interests involved. We have already spoken 
to the radio system managers of both Chicago and Boston, who 
have expressed their support for this concept. The spectrum 
should not default to the private sector. Nor should it default 
to a specific use or technology. Large metropolitan areas, in 
coordination with the Public Safety Broadband Licensee, and 
entrusted with responsibilities paralleling the challenge, are 
capable of bringing about communications networks that parallel 
public safety responsibilities and expand use of the spectrum 
significantly and efficiently. Thank you for the opportunity to 
address these important issues; I will be pleased to answer any 
questions you may have.
                              ----------                              

    Mr. Markey. Thank you, Chief, very much.
    Our next witness is Steve Zipperstein, who is the vice 
president for legal and external affairs, general counsel and 
secretary for Verizon wireless, responsible for the company's 
legal regulatory compliance and Federal and State public policy 
matters. We welcome you, sir.

STATEMENT OF STEVEN E. ZIPPERSTEIN, VICE PRESIDENT AND GENERAL 
                   COUNSEL, VERIZON WIRELESS

    Mr. Zipperstein. Good afternoon, Chairman Markey, Ranking 
Member Stearns and members of the subcommittee. It is a 
privilege to be with you again to discuss the results of the 
700 MHz auction and its important to the Nation's citizens and 
our economy. Thank you for this opportunity to share our views.
    In the 9 months since I last appeared before the 
subcommittee, Verizon Wireless has hired nearly 12,000 
employees, all within the United States, and invested more than 
$4 billion into our wireless network to expand and improve 
wireless services. American consumers expect these 
improvements, even in a tough economy, thanks to the historic 
competitiveness of wireless companies in our company. Simply 
put, if we don't stay ahead of the curve, consumers will leave 
us for one of our competitors. We are optimistic about the 
future.
    Today I would like to discuss three important developments 
which together will drive innovation and economic vibrancy over 
the next several years. First, when the 700 MHz spectrum is 
deployed by us, by our current wireless competitors, and by the 
new wireline cable and satellite entrants, the results will be 
nothing short of transformative for this Nation. In the 
auction, Verizon Wireless won licenses for broad and deep 
spectrum to support a dizzying array of 21st century products 
and services for the American people, things we can't even 
begin to imagine today.
    The second development involves the technology we will use 
to put the 700 MHz spectrum to work, technology known as LTE, 
or long-term evolution. The speed of this IP-based service will 
allow customers to enjoy connections matching the speeds of 
today's landline broadband networks. Customers, application 
developers and device makers are all excited at the promise of 
significantly improved wireless download speeds. Applications 
will not only be brought to market by Verizon Wireless but will 
come from the wave of innovation that LTE technology enables, 
especially in the realm of machine-to-machine applications. We 
see products such as wireless health monitoring, smart home 
management and location-based services as just three of the big 
categories that will benefit consumers but there are many, many 
others. Imagine automobile companies, for example, providing 
new software to cars over the air instead of requiring a visit 
to the shop.
    The third element of how Verizon Wireless is transforming 
the wireless marketplace is through our open development 
initiative. Just a few short weeks ago, we successfully 
introduced our open development initiative to developers and 
others in the wireless ecosystem with more than 400 people live 
with us in New York City and thousands more via webcast. With a 
simple roadmap to bring the big dreams of developers to 
wireless users, new products and services should begin coming 
to market later this year. As we said to the development 
community when we launched this bold initiative last year, how 
about it.
    Let us be clear, though. As I indicated to the subcommittee 
when I appeared here last summer, we didn't think it was 
necessary for the FCC to impose a fixed regulatory brand of 
openness on the 700 MHz spectrum. Dynamic, market-driven 
solutions such as our open development initiative and the open 
handset alliance will spur innovation far more quickly and 
efficiently than static regulatory mandates, especially in an 
industry as intensely competitive as ours. While Verizon 
Wireless is planning how best to use the 700 MHz spectrum and 
working with our minority owner, Votaphone, on global trials of 
4G technology, large and small companies across the Nation are 
conducting similar strategic planning themselves. In 2008, we 
continue to battle with other wireless service providers in the 
marketplace every day but already the competition is lining up 
for tomorrow's 4G world. Of the total of 1,099 licenses for 
sale in the 700 MHz auction, Verizon Wireless bid on 615 and 
won only 109 of those licenses. We won about 18 percent of the 
licenses for which we bid and less than 10 percent of the total 
offered. Clearly, other companies are now set to offer services 
on their own 4G networks. There will be the four existing 
national wireless companies, us, AT&T, T-Mobile and Sprint 
Nextel, plus at least two new national competitors, the Cable 
Joint Venture and EchoStar. Regional companies including U.S. 
Cellular, Metro PCS, Cellular South and Leap Cricket all 
supplemented or expanded their existing footprints either with 
700 MHz spectrum or AWS spectrum.
    Wireless companies will have paid more than $30 billion to 
the U.S. Treasury for these two spectrum auctions, and as the 
technology industry has in the past, we will add billions more 
to the economy, building new coverage, improving existing 
coverage and upgrading to 4G networks. These investments will 
fuel the job creation innovation and robust competition that 
have been the hallmarks of the wireless sector for the past 2 
decades.
    Mr. Chairman, the auctions are now done. Now it is about 
the future. People with incredible new devices and applications 
will connect with each other and with the environment around 
them in ways we can only imagine. Deploying 4G networks on 700 
MHz spectrum will unleash a host of new broadband devices and 
applications to rival anything available today on wired 
broadband networks and yet everything will be mobile. Verizon 
Wireless is pleased and honored to be a leader at this 
transformative juncture in our Nation's history.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Zipperstein follows:]

                   Statement of Steven E. Zipperstein

    Good morning Chairman Markey, Ranking Member Stearns and 
Members of the Subcommittee. It is a privilege to be with you 
once again this morning to discuss the results of the 700 MHz 
auction and its importance to the Nation's broadband future. 
Thank you for this opportunity to share our views.

     The Transformation of Wireless Communications--from Phones to 
                              Connections

    Verizon Wireless considers the 700 MHz spectrum auction as 
nothing short of transformative for the nation and for the 
American consumer. This spectrum will allow our company and the 
wireless sector of the technology industry to accelerate 
growth, offering a broad array of 21st Century products and 
services to the American people, while still remaining 
intensely competitive.
    The results of this auction, along with last year's 
Advanced Wireless Service (AWS) auction, demonstrate that a 
wide range of large and small players, plus several new 
entrants, are poised to deliver the benefits of 4G (Fourth 
Generation) wireless broadband services to Americans over the 
next few years. The competitors in the 4G world will include 
all four existing national wireless service providers (Verizon 
Wireless, AT&T, T-Mobile and SprintNextel), plus at least two 
new national competitors (the Cable joint venture, which 
acquired a 20 MHz nationwide footprint in the AWS auction, 
Echostar, which acquired a 6 MHz nearly nationwide footprint in 
the 700 MHz auction, and Cox Cable, which won over twenty 
licenses in large markets throughout the country in the 700 MHz 
auction), plus several regional carriers, such as US Cellular, 
MetroPCS, Cellular South and Leap/Cricket, all of which 
supplemented and/or expanded their existing footprints either 
with 700 MHz or AWS spectrum. In addition, CenturyTel, a 
regional landline service provider that exited the wireless 
business several years ago, has reentered the market by 
purchasing 700 MHz licenses largely overlapping its existing 
landline territory, enabling it to offer wireline/wireless 
bundles to its customers.
    Taken together, wireless companies will have paid more than 
thirty billion dollars to the United States Treasury in these 
two 4G auctions (700 MHz and AWS). In the coming years our 
companies will add billions more to that amount as we invest 
the capital to build new coverage, improve existing coverage, 
and upgrade networks to new 4G standards such as LTE and WiMAX. 
These investments will fuel the job creation, innovation, and 
robust competition that have been the hallmarks of the wireless 
sector for the past two decades. The biggest winner, of course, 
will be the American consumer.
    Verizon Wireless invested in the 700 MHz spectrum because 
we see an exciting and enormous future in wireless data 
growth--not only the products and services we know today, but 
those not even yet envisioned.
    Wireless data growth is exploding. Text messaging took 
seven years to hit ten billion messages in a single month on 
the Verizon Wireless network, but then only seven more months 
to reach twenty billion messages in a single month to and from 
our customers (February 2008). Soon we will surpass one billion 
text messages per day on our network. Data revenues currently 
comprise more than 20 percent of our revenue, up dramatically 
from just a couple years ago. We can only imagine what the 
future has in store, but we are only at the beginning of 
tremendous growth in this area, with more opportunities and 
challenges than we can fully grasp.
    Since the early days of wireless, companies have measured 
their growth by the number of customers. To begin to understand 
how wireless will grow in the future, we will need to move 
beyond characterizing the scope of the industry in terms of a 
percentage of the population, but instead to thinking about 
people, their devices and their connectedness. In other words, 
we need to think about the future in terms of ``connections.''
    The future is about people and their devices and their need 
to manage those devices-like digital media players, energy 
systems, appliances, medical devices. It is in these 
connections that we see tremendous opportunity for wireless 
innovation. Whether we think about people connecting with 
people, people connecting with their devices, or even devices 
connecting with other devices, wireless will become what some 
are calling ``the third screen.'' All the innovation that has 
been confined to the desktop and the TV screen will move 
rapidly to mobile environments, and the incredible connections 
that simply aren't possible in a tethered world will become 
possible through products and services designed specifically to 
leverage the unique capabilities of advanced wireless 
technology.
    Deployment of the 700 MHz spectrum will unleash a host of 
new broadband devices and applications to rival anything 
available today on wired broadband networks. Doctors will be 
able to access medical records and CAT scans wirelessly; 
firefighters will have wireless access to images of building 
interiors and floor plans. As a nation, we now have all the 
pieces in place to make that explosive growth happen, to move 
toward a broadband future that promises to improve the lives of 
Americans in many ways, to stimulate economic growth, and to 
establish our world leadership in wireless broadband 
deployment.

           Verizon Wireless' Plans to Deploy 700 MHz Spectrum

    Verizon Wireless purchased 700 MHz spectrum to build on our 
unmatched network, widely known for having the highest quality 
and reliability in the nation. We have invested over $50 
billion in our network over the past 8 years to ensure our 
customers continue to enjoy America's most reliable wireless 
service. We were the first wireless company to deploy 3G 
technology in the United States, and we are excited to take 
that to the next level--4G. There are three key components to 
our overall wireless data and broadband strategy:
     The innovation and potential for new services that will 
be unlocked through our Open Development Initiative, which we 
announced prior to the auction start;
     The global reach and IP-based service inherent in the LTE 
platform we intend to deploy for our 4G products and services; 
and
     The depth and breadth of the spectrum won in the 700 MHz 
auction.
    Verizon Wireless' Open Development Initiative. Our Open 
Development Initiative (ODI) invites third parties to develop 
devices and applications customers want that we do not 
currently offer. We announced this initiative last November 
because it made business sense for us to take the market in the 
next logical direction, primarily due to the explosive growth 
we have seen in data services. As I indicated when I appeared 
before the subcommittee last summer, we have never objected to 
dynamic, market-driven open access models. Instead, we did not 
believe it was necessary for the government to hard-wire its 
version of open access into the auction rules, inserting a 
fixed set of rules and a cumbersome and regulatory process into 
a fast-moving and constantly changing high-tech industry such 
as ours. With Open Development we are creating a market-driven 
model that can evolve and adapt quickly to the demands of 
customers, device and application developers, and others.
    To implement this initiative, we hosted an Open Development 
Device Conference last month, at which we discussed the 
technical standards for devices other than those we sell in our 
stores to run on our network. The conference attracted enormous 
interest--more than 400 people attended in person, and 
thousands more watched the webcast in real time or have viewed 
it since. In the coming months, developers will begin 
submitting devices to third party labs to be tested and 
certified for operation on our network. We expect the 
certification process to take as little as four weeks to 
complete. Then, later this year, we will offer a ``network-
only'' option for customers who wish to use these devices on 
America's most reliable network.
    We are embracing Open Development because it will jumpstart 
the pace of innovation to the ultimate benefit of our 
customers. Open Development will spur innovation and expand 
customer choice of products and services available to run on 
our network. Those products and services will not be just 
wireless phones. The growth potential lies in connections--not 
only people-to-people connections, but connections of all 
kinds. Through this openness, we expect a virtual tidal wave of 
applications to move onto our network. Some of the ideas that 
developers are working on are already conceptualized, like 
medical devices and gaming consoles, but many have yet to be 
defined. This is the power of innovation that we expect Open 
Development to bring.
    LTE as the path to 4G. The right technology is essential to 
enable the data opportunities ahead. To achieve the pervasive 
connectedness and to support the devices and media-rich 
opportunities of the future, the speed of wireless broadband 
networks will have to increase to allow connections to behave 
more like landline broadband networks. In LTE (Long Term 
Evolution) Verizon Wireless sees a unique opportunity to adopt 
a network standard with true global scale and compatibility 
with its existing technology. LTE promises improvements in 
download speeds, potentially in the range of 75 Mbps, bringing 
expanded device portfolio and service options that will include 
``machine-to-machine'' communications and real time video. 
Verizon Wireless has chosen LTE to enable our future wireless 
network to operate at very high broadband speeds, benefiting 
customers with exciting new data products and services.
    LTE technology will also offer the benefits of a global 
ecosystem. We are preparing to engage in trials with our 
minority owner Vodafone that will help define our global 
deployment strategies. Infrastructure equipment vendors, 
equipment manufacturers, carriers and others will be able to 
take advantage of the simplicity, efficiencies and economies of 
scale created by using a global standard. Scale economies will 
result in lower device and infrastructure equipment costs. 
Because of an increasing commitment by wireless companies both 
here and overseas to LTE as the preferred 4G technology, and 
fueled by the results of the 700 MHz auction, we expect to see 
an acceleration of the LTE standards, an acceleration of 
equipment delivery, and an acceleration of broadband 
applications reaching the marketplace.
    700 MHz Spectrum Acquisition. The third prong is the 
spectrum we bid for during the recent 700 MHz auction. To 
compete effectively in the wireless data future envisioned in 
our Open Development initiative and to take full advantage of 
the capabilities of LTE, Verizon Wireless knew we needed 
greater depth and capacity in our spectrum holdings. We entered 
the auction with a clear set of objectives, based on what we 
knew was required to support our broadband strategy and provide 
a rich wireless offering to the American consumer.
    Verizon Wireless is extremely pleased with the results of 
the auction. We aggregated several regional ``C Block'' 
licenses to form a nationwide footprint (with the exception of 
Alaska). On this strong foundation we added 102 smaller A and B 
block licenses, thus gaining additional capacity in key 
markets. We now have, on average, 85 MHz in the top 100 markets 
in the United States, where the greatest population densities 
put the most strain on network capacity. For years we have been 
the most efficient user of spectrum--serving 50 percent more 
customers per MHz than the industry average With this purchase, 
we have now increased our spectrum inventory to a level that 
puts us on par with our major competitors (except SprintNextel, 
which averages 123 MHz of spectrum in the top 100 markets) and 
have achieved the depth and breadth we need to preserve our 
hard-won status as providing the nation's most reliable 
wireless network. We can now move forward to the next wave of 
services and electronic devices that the enhanced data 
capabilities of our new network will make possible.
    In addition to adding to our spectrum depth, the specific 
benefits of this spectrum purchase are many. The C block alone 
will give us 22 MHz of contiguous nationwide spectrum on a 
single frequency, giving us the capability to support the 
highest possible data speeds in a seamless nationwide service 
and optimize our 4G broadband deployment.
    The nationwide C Block license also will provide for a 
seamless build-out and thus additional advantages in terms of 
speed, performance and capacity. As history has shown, 
aggregating spectrum post-auction takes many years and is 
costly to consumers. With the purchase of the C block we will 
be able to spend our time on broadly deploying the latest 
wireless broadband technology rather than aggregating spectrum.
    While we stand by our position that the Commission's C 
Block ``open access'' rules were unnecessary, we are, of 
course, committed to live by the Commission's rules. 
Importantly, we believe the FCC's expectations for open access 
will be more than met by what will happen in the market 
generally and as a direct result of our open device initiative. 
We don't expect to be limited in any way by the FCC's 
definition of ``open access,'' but rather will use it as a 
starting point for bringing incredible new products and 
services into the marketplace.
    Verizon Wireless plans to launch its LTE network in 2010, 
only a short time after the 700 MHz spectrum is cleared. Once 
launched, we plan an aggressive and rapid build-out, upgrading 
our existing network infrastructure and moving to full 
deployment. We intend to fulfill the promise of the 700 MHz 
auction by putting this spectrum to use quickly and efficiently 
for the benefit of American consumers and the American economy.

   Smaller Bidders and New Entrants Participated Successfully in the 
                                Auction

    There are many reasons why the 700 MHz auction should be 
viewed as successful by federal policymakers acting on behalf 
of the American people. Our review of the data the FCC released 
after the auction reveals several important facts. Verizon 
Wireless purchased less than ten percent of the licenses for 
sale in the auction (109 of the 1,099 licenses offered), and 
our last bid in the auction occurred in Round 30, even though 
the auction continued for more than 230 additional rounds. As 
Chairman Martin noted in his statement at the close of the 
auction, 99 bidders other than the nationwide wireless 
companies won 69 percent of the 1,090 licenses sold in the 700 
MHz auction. EchoStar, widely viewed as a new entrant, won 168 
licenses in the E block to establish a near nationwide 
footprint for its consumer services. Another new entrant, Cox 
Cable, picked up 22 licenses in large markets throughout the 
United States.
    Small and medium-sized wireless services providers also 
participated effectively in this auction. Many of the most 
successful B Block bidders were smaller, regional operators. 
For example, the second largest B block winner after AT&T was 
US Cellular's partner, King Street Wireless, L.P, which 
utilized the opportunities available for small businesses under 
the FCC's designated entity program to acquire a significant 
stake in the B Block (127 licenses) that overlaps and expand 
upon US Cellular's existing service areas in less densely 
populated areas of the United States. Cellular South also 
acquired licenses in the B Block that overlap and expand its 
existing service area. CenturyTel, which left the wireless 
business several years ago, is now reentering the market by 
acquiring spectrum that overlaps its local exchange areas. The 
fifth largest B Block winner, Triad, also an AWS licensee, 
though affiliated with several small wireless operators, 
appears to be a new entrant and a small business. Fourteen 
other small bidders won five or more B Block licenses. 
According to the FCC, of the 87 winning bidders in the B Block, 
75 were new players winning licenses in 305 rural areas of the 
country.
    Moreover, smaller companies had a fair opportunity to 
participate in the bidding. Because of anonymous bidding, we 
had no idea who we were bidding against during the auction. We 
were outbid on hundreds of licenses, and only won 16.6 percent 
of the licenses we bid for in the B Block and 17.4 percent of 
the licenses we bid for in the A block. Our post-auction 
analysis of the round-by-round data revealed that in the 
majority of cases where we were bidding head-to-head with small 
bidders in the B Block, we won after only one or two bids. The 
average price paid for licenses where we were bidding against a 
small bidder was $.55 per MHz pop, as compared to the overall 
auction average of $1.20 per MHz pop.

                         The C Block and Google

    Prospective new entrants--especially Google--had every 
opportunity to win the C block. Before Verizon Wireless placed 
its first C Block bid in round 27, nine of the twelve bidders 
that had placed a bid on a C Block Regional Area Grouping 
(REAG) had already ceased bidding or withdrawn their bids for C 
Block licenses, as Google had steadily driven up the price and 
eventually pierced through the reserve amount. By Round 30, 
Verizon Wireless became the high bidder in the C block, because 
the total of our bids on the individual REAG licenses exceeded 
Google's previously winning bid on the entire 50-state package. 
Although the auction continued for 230 more rounds, only one 
company chose to outbid Verizon Wireless on just the Alaska 
REAG license. Significantly, in the round just before it 
dropped out of the auction, Google could have topped our entire 
C Block bid for an additional amount of only $242 million, 
substantially less than the average value by which Google's 
market cap increased each Wall Street trading day throughout 
2007.
    Given Google's pre-auction clamor for a new entrant in the 
C block, Google's post-auction declaration that it never 
intended to win the C Block (or any other) spectrum is 
striking. While Google claims it would have tried harder to win 
the spectrum if only the FCC had mandated all four (instead of 
two) of the open access conditions it sought, that reasoning 
rings hollow, as Google obviously could have voluntarily 
implemented the same wholesale and net neutrality conditions it 
wanted the FCC to mandate. Google has now admitted that its 
sole objective was to bid just enough on the C block to trigger 
the open access rules, then exit as quickly as possible. As the 
New York Times put it in the headline to its April 4, 2008 
story, this was ``An Auction That Google Was Content to Lose.''
    Now Google has moved on, launching a new campaign to 
capture control of the so-called ``white space'' spectrum 
without, of course, having to pay for it at auction. The 
campaign initially provoked an outcry from the National 
Association of Broadcasters, and the wireless industry has 
recently added its strong objection. If scientific testing can 
demonstrate that the white spaces may indeed be used without 
causing interference to existing users, then they should be 
licensed and sold at auction, to ensure that American taxpayers 
are not left holding the bag.

               Public Safety Interoperability: Next Steps

    While the 700 MHz auction is generally viewed as a 
tremendous success, it did not achieve one important objective: 
it failed to produce a solution to address public safety's dire 
need for a nationwide, interoperable wireless broadband 
network. Not one of the more than 200 applicants saw sufficient 
economic justification in the D block experiment to bid 
remotely close to the reserve price in over 260 rounds of 
bidding. While Verizon Wireless believes that a public-private 
partnership may very well be an effective way to satisfy public 
safety's need for reliable and secure communications, we were 
not surprised with the result of the D block experiment. The 
vision was right, but the structure was fundamentally flawed.
    The D block failed for many reasons. We spent a long time 
before the auction analyzing the D block rules, meeting with 
public safety and Cyren Call, and trying to construct a 
rational business case to justify the investment. Let me 
explain some of the reasons why Verizon Wireless chose not to 
bid for the spectrum and why we believe the D block auction 
failed.
    First, the D block concept failed because its economics are 
fundamentally flawed. The idea behind the D Block was that 
someone would be willing to spend the money to build a network 
for public safety, in exchange for gaining access to public 
safety's adjoining spectrum. The problem with this approach is 
that the cost of building the network far exceeds the value of 
the spectrum. This would be true even if the network were built 
in accordance with typical commercial standards. It is doubly 
true when we consider the stringent rules the FCC established 
and the onerous requirements demanded by Cyren Call on behalf 
of the public safety licensee (The Public Safety Spectrum 
Trust).
    Consider the minimum conditions the D Block licensee would 
have had to accept. It would have to construct, at its own 
considerable expense, a nationwide broadband network covering 
at least 99.3% of the U.S. population, and ``hardened'' to meet 
public safety's more rigorous requirements. The cost of 
constructing such a network would run to the tens of billions 
of dollars, and would substantially exceed the cost of 
constructing a comparable network built to typical commercial 
standards. Moreover, because public safety users would have 
priority use of the network, it would be difficult to estimate 
how much of the network's capacity would be available for 
commercial use on an everyday basis.
    Thus, the D block structure was fundamentally flawed 
because it could not create enough value on the spectrum side 
of the ledger to make up for the overwhelmingly greater amount 
of capital the buyer would have to spend on the network. This 
value imbalance doomed the D block to failure.
    Second, the D block failed because the rules created far 
too much uncertainty. The FCC's rules require the terms of the 
``network sharing agreement'' to be negotiated after the 
commercial operator has already purchased the D Block license. 
This ``buy now, negotiate later'' approach is backward Far too 
many important details were left to post-auction negotiation, 
leaving prospective bidders in the position of not knowing what 
obligations they might be incurring. If the negotiations failed 
to produce an agreement acceptable to public safety and the 
FCC, the D Block winner would have to forfeit the license, and 
pay a penalty in an amount equal to ten percent of its winning 
bid plus the difference between the winning bid and the amount 
the FCC would collect in a subsequent auction of the D Block--
an enormous ``break-up'' fee. While the FCC's default penalty 
rule is normally necessary to curtail speculators, it 
represents a huge financial risk for serious prospective D 
Block bidders, especially given the great uncertainty inherent 
in waiting until after the auction to conduct negotiations with 
public safety. Is it any wonder that buyers were reluctant to 
step forward under such circumstances? But even if many of 
those details had been known, the economic imbalance discussed 
above would still have caused prospective bidders to stay on 
the sidelines.
    Third, Cyren Call's role created much uncertainty. The 
Public Safety Spectrum Trust, which holds the public safety 
broadband license adjacent to the D block, selected Cyren Call, 
a for-profit entity, as its advisor last October. Verizon 
Wireless met with Cyren Call, as did other prospective bidders. 
In these meetings, Cyren Call indicated that the D Block 
licensee and the Public Safety Spectrum Trust would act as a 
public-private partnership. But the more we heard Cyren Call 
describe how that partnership would work, the more concerned we 
became with the viability of the endeavor. For example, Cyren 
Call indicated the D Block licensee would not be allowed to 
recoup its capital investment through the rates it charged 
public safety users for network access. Cyren Call said this 
requirement was justified, because public safety would be 
contributing a portion of its adjoining spectrum for the D 
Block licensee's use. But Cyren Call also stated that the D 
Block licensee would have to pay the Public Safety Broadband 
Trust a $50 million annual ``spectrum lease payment'' for using 
that same adjoining spectrum. Cyren Call said the payment was 
necessary to cover the expenses of the Public Safety Broadband 
Trust.
    Moreover, we were very surprised when Cyren Call indicated 
that the D Block licensee would not have the ability to serve 
public safety users directly. Instead, Cyren Call and the 
Public Safety Spectrum Trust would ``own'' the right to provide 
service to public safety users by reselling service on the D 
Block licensee's network. Cyren Call also took a broad view of 
the term ``public safety users,'' defining it to include not 
just first responders, but other state and local government 
employees and certain commercial users who interface regularly 
with first responders (for example, ambulance drivers, utility 
workers, transport workers, etc.) This raised serious concerns. 
Verizon Wireless currently serves hundreds of thousands of 
federal, state and local public safety users with no middleman, 
and we do not believe one is necessary to provide service to 
such customers in the future.
    For all these reasons, we chose not to bid for the D block.
    Despite the D Block's many flaws, we continue to believe 
that public safety can benefit when government and commercial 
interests develop effective partnerships. We see examples of 
such partnerships every day, in areas ranging from the 
manufacture of fighter jets and submarines for the military to 
the construction and operation of advanced telecommunications 
solutions for government agencies. These partnerships are 
effective because the requirements and expectations are clearly 
defined up front, because potential partners are solicited 
through transparent and competitive processes, and because both 
the government and the commercial entity have an opportunity to 
assess fully the benefits and risks. Using such an approach to 
develop a nationwide, interoperable broadband wireless network 
for public safety's use would enable both the government and 
the private sector to avoid the tremendous uncertainties 
inherent in the D Block model, while offering a far broader 
range of potential partnership arrangements for public safety 
to consider.
    Thus, the question that should be asked is not necessarily 
``what should we do with the D Block?'' The more important 
question is ``what should we do to ensure our nation's first 
responders have access to effective, reliable, interoperable 
communications in times of emergency?'' The D Block 
``conditioned license'' approach is clearly not the solution, 
as the auction results made so abundantly clear. It is 
economically flawed and fraught with uncertainty and risk--both 
for public safety and the commercial operator. Any new proposal 
that simply tinkers with the D Block rules around the edges but 
maintains the same, fundamentally flawed and imbalanced model 
of trading spectrum value for capital investment likewise will 
fail. Indeed, whether the D Block spectrum even needs to be 
part of the interoperability solution is something that 
Congress and the FCC must evaluate, as part of a more thorough 
assessment of public safety's needs and the role that a true 
public-private partnership could play in meeting those needs.
    The advanced technologies that will facilitate real 
solutions for public safety are readily available today. The 
substantial assets of the private sector, both in expertise and 
existing infrastructure, can help accelerate deployment of 
these solutions. What is needed is a partnership framework that 
provides the proper incentives for private sector 
participation, a clear description of public safety's 
requirements, and sufficient funding to ensure the plan can be 
implemented successfully.
    Thus, whether the D Block needs to play any role in 
creating a successful public-private partnership is a question 
that should be studied thoroughly. If Congress determines that 
the D Block must still play a role in this process, then other 
possibilities should be considered, such as reallocating the D 
Block to public safety, or auctioning it free and clear of any 
conditions (except the same build out conditions applicable to 
the lower A and B blocks should apply) and earmarking the 
proceeds to fund interoperability, rather than continuing to 
rely on a flawed framework that is doomed to failure.
    As we move forward, Verizon Wireless remains committed to 
helping find and being a part of a solution to public safety's 
need for interoperable communications. We already operate the 
nation's most reliable wireless network, and in the not-too-
distant future we will augment that network with 700 MHz 
spectrum and LTE technology, delivering new products and 
applications with tremendous speed and versatility to our 
customers. And, through our Open Development Initiative, we are 
welcoming niche and specialty devices, including those designed 
specifically to serve public safety needs. We stand ready to 
continue serving public safety in every way we can.

  Concluding Thoughts: The Need for Regulatory, Tower Siting and Tax 
                                 Reform

    With the 700 MHz auction behind us, now is the time to 
focus anew on the need to take firm action to ensure the dreams 
of a wireless broadband future can be fully realized for the 
American economy and American consumers. It is vital that we 
not allow backward-looking, state-by-state utility style 
regulation to undermine the investment and innovation necessary 
to our 21st Century broadband future. As I noted during my 
appearance before the Subcommittee last summer, it is 
critically important that we move forward to implement a 
national framework for wireless regulation, with a single set 
of federal consumer rules comprising both the floor and 
ceiling. The States must play a role in enforcing those rules, 
but not in piling on multiple, inconsistent and conflicting 
rules of their own. We will be pleased to continue working with 
the Subcommittee to achieve this important goal.
    Equally important is the need to streamline the antiquated 
and burdensome local approval processes for deploying network 
facilities. Local governments should retain their role in 
approving new cell towers, but the process must be streamlined 
with reasonable deadlines and requirements for local 
authorities to identify alternative acceptable sites.
    Finally, I would be remiss if I failed to mention on this 
day--April 15--that wireless customers continue to be singled 
out for unfair, discriminatory and burdensome state and local 
taxes. It is imperative that policymakers relieve the burden of 
these taxes and help make wireless service more affordable for 
more Americans.
    Thank you again for the opportunity to appear before the 
Subcommittee to address these important issues.
                              ----------                              

    Mr. Markey. Thank you, Mr. Zipperstein.
    Our next witness is Robert Irving. He is the senior vice 
president, general counsel and secretary for Leap Wireless 
International and its wholly owned subsidiary, Cricket 
Communications. Mr. Irving is responsible for the supervision 
of all of Leap's and Cricket's legal affairs.

  STATEMENT OF ROBERT IRVING, SENIOR VICE PRESIDENT, GENERAL 
      COUNSEL, LEAP WIRELESS INTERNATIONAL, INC., CRICKET 
                      COMMUNICATIONS, INC.

    Mr. Irving. Chairman Markey, Ranking Member Stearns, 
members of the subcommittee, Cricket is a mid-sized carrier 
that offers customers unlimited service for a flat monthly 
rate. We designed our business to provide high-quality, high-
volume and low-cost service to customers who are underserved by 
many other providers. Although we launched Cricket 10 years 
ago, our service incorporates many of the features that are 
included in your consumer protection bill today. Our month-to-
month service does not require customers to enter into long-
term contracts. We have no early termination fees. We don't 
require our customers to pass credit checks or place deposits 
for our service. As a result, our customer demographics are 
unique. Sixty-two percent of our customers are minorities, 
predominantly Hispanic and African-American. Fifty-seven 
percent of our customers make less than $35,000 a year and 62 
percent of our customers are under the age of 62--excuse me--
under the age of 35.
    Cricket is growing rapidly. We offer service in 23 States 
to more than 3 million customers. We help lower prices to 
consumers when we enter a new market, and unlimited plans, 
which we spearheaded in 1999, have recently been introduced by 
a number of prominent carriers. Cricket was the first carrier 
to advocate number portability and we also opposed the removal 
of spectrum caps. Small, mid-sized, and rural carriers like 
Cricket create additional competition and increased choice for 
consumers. We also add to vigorous policy debates.
    We and our partners purchased approximately $1 billion of 
licenses in the AWS auction. We launched Oklahoma City, one of 
the first AWS markets in the Nation, last week, and we are 
looking forward to launching additional markets in 2008 and 
2009 including markets in committee members' districts like 
Chicago, and before too long, Washington and Baltimore. So we 
will send you all phones in the near future.
    We are working with government agencies to clear the AWS 
spectrum so we can bring our unique service to additional 
underserved consumers. However, consolidation of spectrum and 
market power in the Nation's largest wireless carriers 
threatens the innovation, growth and increased choice that 
small and mid-sized carriers bring to consumers.
    In the 700 MHz auction, the Nation's two large carriers 
significantly increased their spectrum holdings and purchased 
more than 70 percent of the licenses by megahertz pop. Cricket 
believes policymakers can and should take additional steps to 
help introduce new entrants and new competition into the 
marketplace.
    With respect to the issues before the committee today, 
Cricket has several recommendations to promote competition in a 
continued vibrant wireless arena. First, policymakers should 
ensure that automatic roaming is available to customers on 
reasonable terms and without an in-market exception. Automatic 
roaming is the safety net that provides seamless coverage to 
consumers. Imagine a parent who is traveling when her family 
experiences an emergency. She needs to communicate even if she 
is outside of her home market. Roaming has been a standard 
industry practice for decades and it should be available to 
consumers today without the in-market exception contained in 
the FCC's rules.
    Second, to allow small, mid-sized and rural carriers to 
continue to vigorously participate in future auctions and to 
facilitate new entrants and increased competition, we recommend 
that future auctions focus on smaller geographic service areas 
such as EAs, which were used in the B band for the 700 MHz 
auction. In addition, policymakers and wireless providers need 
to engage in a comprehensive review of the 700 MHz D block 
rules as we have discussed today. The proposed safety rules 
require the D block licensee to commit enormous resources but 
the rules for the road were uncertain and the public safety 
licensee had significant negotiating discretion, which made an 
investment commitment in this block very risky. We need to 
review together how we can clarify the proposed public-private 
relationship so that one or more carriers can determine how 
they can serve the public interest in the D block and at the 
same time earn a reasonable profit in this new public-private 
opportunity.
    Thank you very much for your attention.
    [The prepared statement of Mr. Irving follows:]
    
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    Mr. Markey. Thank you, Mr. Irving.
    Our next witness, Harold Feld, is the senior vice president 
of the Media Access Project, a nonprofit public interest 
telecommunications law firm. Welcome, sir.

 STATEMENT OF HAROLD FELD, SENIOR VICE PRESIDENT, MEDIA ACCESS 
                            PROJECT

    Mr. Feld. Thank you, Mr. Chairman. I am pleased here to 
represent not only Media Access Project but also the Public 
Interest Spectrum Coalition, a broad coalition of citizens' 
groups such as Public Knowledge and Free Press, think tanks 
such as New America Foundation, civil rights organizations, 
consumer organizations and organizations representing higher 
education. and open software developers for open spectrum.
    The tragedy of our spectrum policy is that it has been 
reduced to four words: show us the money. As you have pointed 
out so cogently in your opening statement, the statute has high 
hopes for what we can do with spectrum auctions. The public 
interest goals that were laid out by Congress in 1993 when it 
first adopted the spectrum auction statute tell us that we 
deserve a world in which everyone has access to wireless 
opportunities, to the economic advantages that wireless 
technologies can bring, and in particular, women- and minority-
owned businesses and rural businesses which for historic 
reasons have been denied access to capital or licenses deserve 
a fair shake in these auctions. But instead, our auction policy 
has become about maximizing revenue and not picking winners.
    As Chairman Martin observed, we supported a number of 
things that were designed to bring in new competitors into the 
C block auction, the large size of the C block band, package 
bidding, things that on reexamination may in fact have hindered 
the efforts of new competitors or competitors such as Leap to 
acquire spectrum. But there was a reason why we went with the 
second-best alternative. It was because in this environment, 
the FCC could not adopt the things that it needed to adopt. 
PISC urged the FCC to adopt some kind of spectrum cap or other 
exclusion, which would have prevented any companies from 
monopolizing too much of the public airwaves. We asked for 
wholesale obligations on the spectrum so that in every market 
there would be an opportunity for new entrants and 
entrepreneurs to have access to needed spectrum services.
    There were some positive steps that were taken. The C block 
open device condition is one small but much-needed step forward 
and it seems to have had a positive effect on the market but it 
is far, far too early to declare mission accomplished. The fact 
is that the FCC should be granting the Skype petition, not 
dismissing it, and what is astounding is that there is an 
effort to make even this weak tea of openness appear to be 
powerful poison that drove away bidders and robbed companies 
like Leap of the opportunity to bid on B block spectrum. For 
reasons I have set forth in my testimony, I find the statements 
of AT&T self-serving. I find the likelihood that this depressed 
auction values somewhat skeptical and I find the notion that 
this drove bidders to B block who would not otherwise have been 
in B block bordering on the absurd. The fact is that Verizon 
paid $9.6 billion or so for this spectrum. They came prepared 
to play. If they had been outbid in C block, they would have 
gone to B block like AT&T did.
    But let us pretend for a moment that AT&T is right, that 
they are willing to pay billions of dollars to avoid an open 
device condition. They are a profit-maximizing firm. Where do 
those billions of dollars come from? They come from me, they 
come from you, they come from every American who is paying 
hundreds of dollars for instant messaging if they have teenage 
children, perhaps thousands of dollars if they have teenage 
children, it comes from Americans who are paying dollars for 
ring tones that cost pennies in Europe and it comes from the 
innovators who want to provide new services. They get it from 
the sky decks and the RBTLs who are denied entrance, and worst 
of all, the grant of control over these networks imperils our 
vital free speech interests.
    We may remember when narrow was denied a short code. That 
decision was reversed within 24 hours because of publicity, but 
should the free speech rights of Americans really depend on a 
company's desire to avoid a PR disaster? In the spirit of the 
Passover holiday, I ask please let our people go. Open the 
potential of the spectrum. We can begin rethinking this with 
the D block where we again ask that wholesale be introduced as 
a condition to provide much-needed spectrum. We also say that 
the FCC should move quickly to grant rather than dismiss the 
Skype petition and to open up the potential of the white 
spaces.
    I have personally seen what can be done in rural America, 
what can be done in the inner cities of San Diego and Chicago, 
what can be done with university partners in Champaign Urbana 
when we open up the spectrum and open up the edge to the 
innovation and the power of millions of inventive Americans.
    It was the prerogative of kings to sell licenses for 
monopolies, taking their cut up front while people squeezed the 
last mark and kopek out of the peasants. We should not have to 
live here as peasants in the land of the free. These should be 
public trusts held by responsible corporations making an honest 
living but not squeezing the last penny out of us for ring 
tones, instant messages and putting the squeeze on Silicon 
Valley if they want to access the wireless platform.
    Thank you.
    [The prepared statement of Mr. Feld follows:]
    
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    Mr. Markey. Thank you, Mr. Feld, very much. As a Chaveskoy, 
I am willing to work with you to put the lamb's blood over the 
portholes of competition and consumers so that they can be 
protected against the avaricious and anti-competitive, anti-
public safety strategy, which unfortunately is characterizing 
the way in which we are addressing these issues. I thank you.
    Our next witness is Coleman Bazelon, who is a principal in 
spectrum analysis for the Brattle Group. He has consulted and 
testified on behalf of clients in numerous telecommunications 
matters ranging from wireless license auction, spectrum 
management, and competition policy to patent infringement and 
numerous issues. We welcome you, sir. Whenever you are ready, 
please begin.

     STATEMENT OF COLEMAN BAZELON, PH.D., THE BRATTLE GROUP

    Dr. Bazelon. Thank you. It is an honor to speak here today.
    In the 700 MHz auction, the Federal Communications 
Commission licensed a large portion of America's so-called 
digital dividend. These frequencies are highly desirable. Any 
frequencies below about 3 GHz, those most suited for mobile 
communications, are generally sought after because overall 
there is insufficient spectrum licensed for mobile 
communications. The 700 MHz frequencies are below 1 GHz and are 
considered the most desirable. They allow transmissions over 
great distances with less power consumption and can penetrate 
buildings well. Consequently, lower infrastructure costs 
associated with this band make it particularly suitable for 
firms building new networks.
    Unfortunately, the outcome of the 700 MHz auction was that 
the Nation's two largest mobile phone providers, AT&T and 
Verizon, won most of the license spectrum. Now these two 
providers are poised to dominate the market for high-capacity, 
ubiquitous wireless broadband services. The irony of this 
outcome is that the cellular firms that dominated the duopoly 
marketplace that existed prior to the first FCC auctions are 
the same firms that after a series of mergers and acquisitions 
make up AT&T and Verizon today.
    This unfortunate outcome was caused by ill-configured 
spectrum license blocks and a poorly designed auction. The 
central problem was one of hubris. The FCC thought it could do 
too much, in fact way too much, with the tools at hand. The 
Commission tried to promote rural build-out, create open 
access, encourage new entrants, increase broadband competition 
and, of course, provide a solution to the serious problem of 
deploying a nationwide interoperable public safety network.
    In an attempt to accomplish all of these various goals, the 
700 MHz auction was designed with an astonishing number of new, 
largely untried features including package bidding, high 
reserve prices, open access requirements, mixing of paired and 
unpaired spectrum and a public-private partnership. The failure 
of the results was predicted. Rural build-out will be hampered. 
Verizon, already committed to open access on its existing 
network, won nationwide license on the cheap. There are no new 
entrants of note. There will be increased concentration in the 
wireless broadband market and, of course, we are no closer to 
solving the problem of public safety interoperability. The 
specifics of these policy errors are documented in a paper I 
have submitted with this testimony.
    There were many signs of inefficiency in this auction. 
Foremost, the patterns of prices within the auction were often 
nonsensical. As a former congressional Budget Office analyst, I 
feel compelled to point out that the auction undoubtedly could 
have raised even more money than it did. A year ago, as the FCC 
began shaping the final band plan and auction rules, I argued 
that large C block licenses would have an anti-competitive 
effect on the auction. As configured, the band is only 
attractive to large, nationwide bidders, and as it turned out, 
Google was the only non-incumbent contender for this band and 
they were never believed to be seriously interested in becoming 
a network operator. The majority of the remaining demand on the 
auction was channeled to the A and B blocks, unnecessarily 
driving the prices of those bands out of reach for many 
bidders. This in and itself thwarted the auction goals of 
promoting rural development and additional competition in the 
broadband wireless marketplace. As my analysis shows, had the C 
block been configured differently so that more substitution was 
possible between the A, B, and C blocks, the auction could have 
raised as much as an additional $5 billion from bidders that 
were shut out.
    As a result of this poor auction outcome, it is more 
important than ever to flood the market with additional license 
spectrum. This is necessary to mitigate the negative effects of 
concentration and spectrum holdings that resulted from this 
auction. Fortunately, there exists another reservoir of 
spectrum below 1 GHz that is available, namely the TV white 
spaces. Clearly delineating the usable white space, creating 
overlay licenses and auctioning them would allow the 
significant unmet demand from the 700 MHz auction to be 
satisfied with the added bonus that such an auction would raise 
many billions of dollars in additional revenue.
    As for the pending decisions about the D block, the worst 
thing would be to leave it unused. Freeing it for unrestricted 
commercial use, configuring it as smaller geographic licenses 
and then auctioning it would be best. This would have the 
benefit of adding more commercial spectrum under flexible 
license to the band, which would allow a portion of the 
significant unmet demand from Auction 73 to be met. This 
approach of course would require the needs of the public safety 
community to be met through other means. Many observers view 
this outcome as unlikely.
    The more likely outcome appears to be that the FCC will 
preserve the public-private partnership with the central 
features that the D block spectrum could only be used for 
commercial services that are interruptible and will include a 
requirement to build out and serve the public safety community. 
Any such policy should recognize the economic characteristics 
of spectrum for interruptible services, namely that it will 
come with the advertising slogan ``Guaranteed not to work when 
you need it most.''
    Spectrum such as this will be most valuable to network 
operators that have license spectrum in the same market that 
will not be interrupted, which will allow them to continue to 
offer service during emergencies. It is uncertain whether 
another licensee would more effectively use this spectrum by 
integrating it with its commercial network or by purchasing 
access to it on a wholesale basis. Consequently, this outcome 
should not be predetermined and any wholesale-only restrictions 
should be abandoned.
    Finally, the economics of a public-private partnership 
between a commercial wireless provider and public safety users 
is economically tenuous at best. If the D block is re-auctioned 
with continuing public safety requirements, there should be no 
reserve price. Frankly, the FCC should count its blessings if 
they are able to find a provider willing to take on the 
commitments required of a D block licensee.
    Thank you.
    [The prepared statement of Dr. Bazelon follows:]
    
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        Mr. Markey. Thank you, Dr. Bazelon. Any relation to Judge 
Bazelon?
    Dr. Bazelon. Great-uncle.
    Mr. Markey. A really great uncle.
    Dr. Bazelon. Thank you.
    Mr. Markey. Now all time for opening statements has been 
completed so we will turn to questions from the subcommittee 
members.
    Mr. Zipperstein, you state in your testimony that the D 
block concept failed because its economics are fundamentally 
flawed, and that is that the cost of building a network to 99.3 
percent of the country exceeds the value of the spectrum. Mr. 
Duncan suggests that the interoperability can be achieved using 
Rivada's technology on existing networks. When you consider the 
current economic conditions, is it likely that a new, non-
incumbent provider will show up and build a national network 
from scratch?
    Mr. Zipperstein. I think it would be very expensive and 
very costly. It would be difficult for a new entrant to secure 
the financing. In the prior panel there was a figure of $6 to 
$7 billion used. Our estimates would be to build from the 
ground up, it would cost orders of magnitude higher than that, 
Mr. Chairman.
    Mr. Markey. So you are saying it is highly unlikely----
    Mr. Zipperstein. Highly unlikely.
    Mr. Markey [continuing]. That a new company is going to 
come along and build a national network?
    Mr. Zipperstein. Correct.
    Mr. Markey. So then is it useful to look at regional D 
block licensees who could all be interoperable if the FCC 
compels it to be interoperable and also promotes greater 
wireless competition? Is that possible, Mr. Zipperstein?
    Mr. Zipperstein. Yes, although I would also defer to the 
opinions of the more expert law enforcement people on the 
panel, but yes, Mr. Chairman, it is possible.
    Mr. Markey. Thank you.
    Let me get on to you, Mr. Duncan. What do you think?
    Admiral Duncan. I think exactly so, sir. The written 
testimony that Mr. Zipperstein submitted pointed to a $50 
billion investment in his company in 8 years. That is a mature 
system putting on add-ons. The opportunity of incremental 
improvement directed by the needs of first responders to meet 
their needs I think is very attractive rather than, you know, 
create a whole new system from the ground up. I think 
Congresswoman Eshoo's observation that the spectrum is owned in 
trust for the public, you know, gives us some room to examine 
just how that would work, and our own experience is that the 
carriers have been very receptive in providing access to that 
spectrum in terms of emergency to provide services for first 
responders, and it would not be possible but for spectrum 
ownership, cooperation, organizations like ourselves and 
Department of Defense certifying that we could even tie into 
their systems and the FCC being open to new and novel 
approaches.
    Mr. Markey. Let me go to Chief Dowd then. Thank you, Mr. 
Duncan.
    What do you think?
    Chief Dowd. I think the regional approach is a good idea. 
You know, one of the big stumbling blocks for widespread 
interoperability has been the simple fact that spectrum over 
the last 70 years was kind of doled out very haphazardly. There 
is an opportunity now here with different network-type 
platforms to build interoperability because of the commonality 
of the availability of the spectrum nationwide. So having that 
spectrum available, that green space spectrum available across 
the country, makes it much easier, particularly on the 
individual cop or firefighter's side because now it will be 
easier to build, you know, subscriber units, portable radios 
that will allow them to be interoperable from system to system.
    Mr. Markey. Thank you.
    Mr. Irving, what do you think?
    Mr. Irving. I think a single national operator would face 
enormous capital requirements and I think that the possibility 
of a regional approach is something that should be explored.
    Mr. Markey. Thank you.
    Now, one of the--I think this is the direction we are 
heading in actually where this conversation is taking us right 
now but I want to hear other views as well. Here is something, 
Mr. Zipperstein, that bothers me. In the Saturday Boston Globe 
just 3 days ago, the headline on the front page is ``Dead Zones 
Frustrate Drivers.'' Verizon, AT&T, the other cell phone 
companies have yet to figure out how to put wires through the 
Tip O'Neill Tunnel and some of the other tunnels in Boston and 
people as they hit the tunnel all have to say honey, I am going 
into the tunnel, we are going to lose connection. So you can 
imagine how 3 years after we dedicate the Tip O'Neill Tunnel 
how very skeptical I am of the ability of Verizon or AT&T to 
solve a public safety problem if they can't solve a simple 
problem like this, and if I hear it once, I hear it over and 
over again, you know, that people are very frustrated with the 
cell phone companies and so this headline basically says it is 
going to take much, much longer, all the cell phone companies 
are saying, the incumbents, to be able to figure out how to put 
a wire through the tunnel so that people can continue to talk 
as they hit the tunnel. So of course, this has public safety 
implications, Mr. Zipperstein. That is just one little link 
that is a couple of miles long and Verizon and AT&T can't 
figure out how to do it. So what do I tell my constituents 
about public safety if the major companies can't figure out how 
to do something this simple?
    Mr. Zipperstein. Mr. Chairman, we are frustrated as well, 
and I thank you for raising the point. We have been very active 
in trying to improve the process of placing facilities, new 
towers to improve coverage. It is a public safety issue, but 
every so often we have to wind up waiting years and years and 
years for approval. In the case of the Tip O'Neill Tunnel and 
the Big Dig, we have worked with the State of Massachusetts for 
a long time behind the scenes individually and together with 
other carriers to be part of the process to enable the 
placement of facilities in the tunnel and we look forward to 
continuing to be able to achieve that.
    Mr. Markey. Can I say this, Mr. Zipperstein? It is just 
unacceptable. It is just unacceptable. This is a deep insight. 
Do you understand? Post 9/11 6 years later, this is a deep 
insight as to the failures on 9/11 and the failures today, OK? 
It is a deep insight and it reflects actually the flawed policy 
of the FCC even in how all this auction has gone, to be honest 
with you. We don't get down to these core issues of whether or 
not the public is being served and what our expectations are of 
the telecommunications companies.
    What do you do in the Lincoln Tunnel, Chief Dowd, in New 
York City? Do people lose their connection in the Lincoln 
Tunnel?
    Chief Dowd. No, there is cabling that carries the signal 
into those tunnels, the Brooklyn Battery Tunnel, the Lincoln 
Tunnel, the Holland Tunnel.
    Mr. Markey. And you know that we don't like this New York-
Boston differential being publicly exposed.
    Chief Dowd. As long as you don't try to put a jersey in any 
one of those tunnels.
    Mr. Markey. Well, you know, Chief, honestly, we are quite 
proud of the fact that we were able to secure $15 billion to 
build the tunnel in Boston and name it after Tip O'Neill.
    Chief Dowd. A fine Irishman, yes.
    Mr. Markey. And it should be a lot simpler, in other words, 
building a tunnel under a city. You know, Bonnie Franklin said 
it would be simpler to put the city of Boston on stilts than to 
put this tunnel under the city of Boston, but we did it, and so 
I really--I hear so many complaints about the phone companies 
and all of my fire departments, police departments, they 
complain to me about the cooperation they have with the local 
phone companies and how quickly they respond and give them 
access to what they need and so I am going to say to you, Mr. 
Zipperstein, that I am going to use this as an example. If you 
can't solve this, then I am really dubious as to whether or not 
we should be trusting the big companies to be playing a 
meaningful role in providing in a time that is reasonable a 
public safety solution for our country.
    Let me stop there and recognize the gentleman from Florida, 
Mr. Stearns.
    Mr. Stearns. Thank you, Mr. Chairman. Since it is eight of 
you here, let me just ask you to raise your hand. How many of 
you would support re-auctioning the D block solely for 
commercial purposes and passing a law to allow public safety to 
use the proceeds from that re-auction? OK. So there is five, 
and if you don't agree, raise your hand.
    OK, Mr. O'Brien, why don't you agree?
    Mr. O'Brien. It would be significantly a shortfall of what 
was necessary just to build the system, much less operate it, 
by any number that would be reasonable. I think it would be 
important for the Committee if those of us who are testifying 
submit for the record estimates of what it is going to cost to 
build but after having worked on this a couple of years, I have 
never seen a number that I have any confidence in short of 
about $15 billion--that is one-five--to build, and as much as 
several billions a year of operating expenses, which are often 
forgotten. So, I mean, this is a real-world crisis driven by 
the fact that the money necessary to solve the problem is so 
formidable.
    Mr. Stearns. Mr. Duncan, how much would it cost, do you 
think?
    Admiral Duncan. The numbers I have heard are the ones that 
have been presented here today and it counsels to me that 
perhaps we should think whether it is appropriate to build out 
another network that is just for public safety. Perhaps using 
the systems that are there in a better way and driving the kind 
of performance that the chairman is talking about is the way to 
go on that. So to me, that number, even the low end of that 
number says that that is years away. Work on what we have 
presently and make that responsive to first responders.
    Mr. Stearns. How much do you think that would be using the 
existing?
    Admiral Duncan. Our engineers have taken a look at what it 
would cost for us to put the type of capability we are putting 
across the country in first responders' hands that restore a 
damaged network and the best guess we have is about $500 
million, which is quite a bit different than the billions of 
dollars that we were talking about previously. That is for 
restoring in a disaster.
    Mr. Stearns. Dr. Bazelon, could they get this money by 
raising it in an auction?
    Dr. Bazelon. Not $15 billion but----
    Mr. Stearns. I mean the money Mr. Duncan is talking about.
    Dr. Bazelon. Yes, easily. The D block--there was, I 
calculated over $3.5 billion of unmet demand on the A block 
alone, comparable spectrum to the D block in many ways, and a 
couple billion dollars would be very reasonable. But I have to 
add as a former CBO analyst that passing that law may run into 
scoring problems and----
    Mr. Stearns. Why is that?
    Dr. Bazelon. Well, it depends on what is in the baseline, 
sir, and it is only the increase in revenue that you could 
spend elsewhere, which raises the point that perhaps the wiser 
course would be to figure out how much money public safety 
actually needs and give it to them.
    Mr. Stearns. Mr. McEwen?
    Mr. McEwen. I don't think that is a practical solution. 
First of all, I have no expectation that the D block auction 
would bring the kind of money that would be necessary to do 
this. Secondly, we don't have enough spectrum in the public 
safety allocation alone to meet the needs of public safety 
without a partnership. So I think the point is, as Mr. 
Zipperstein has said, that Verizon, who is an established 
commercial network, if we gave them $13 billion to add to their 
network, they could build out the necessary requirements of 
public safety. The problem is that none of the existing systems 
that are out there really provide us the kind of reliability, 
the kind of coverage, the kind of issues that we need, and that 
is of course what I think the chairman alluded to before, if 
you can't through to your wife, why, how are you going to get 
public safety?
    Mr. Stearns. Mr. Duncan, how much spectrum for broadband 
communications do public safety agencies really need? Do they 
have enough already without the D block, either from the 
spectrum cleared for them by the DTV legislation or even using 
their existing inventory?
    Admiral Duncan. We believe they do, sir, and the reason we 
can say that is because we have deployed in support of first 
responders in specific events, and the owners have made 
channels or spectrum available to us to support those events. 
If I could just elaborate on that cost issue, every first 
responder, virtually every first responder is already incurring 
some expense for cellular technology. What we are talking about 
here is in some way shifting the emphasis on that spend and 
putting it into a smarter spend, again, attributing the 
chairman's mother's counsel. Take some of that money that is 
already being spent and put it in another direction. It is not 
an additional amount of money; it is better use of the money 
that is there.
    Mr. Stearns. Let me just close. Mr. Zipperstein, you talked 
about what things we can begin to imagine with the fourth 
generation. Could you just talk about some of these things? I 
mean, I can give you two or three but I would be curious what 
your company is talking about in terms of this 4G.
    Mr. Zipperstein. Sure. The main difference will be the 
incredible speed that LTE technology, when deployed on 700 MHz 
spectrum, can bring to consumers. So sitting at your desktop 
now, you can browse the Internet in a way that you can't 
currently do on your cell phone or on your other wireless 
device. This new spectrum with this new technology will make 
those kinds of browsing experiences a reality for consumers in 
the future.
    Mr. Stearns. So you are downloading things on your phone?
    Mr. Zipperstein. Correct, and all of the applications, and 
there is no limit to the imagination, that can be invented, not 
just by us but through open development and through the 
requirements of the C block, which we will comply with. People 
in their garages, people in their laboratories can bring those 
new applications to our network for consumers.
    Mr. Stearns. And I would think that in the area of 
healthcare, telemedicine and dealing with the safety of senior 
citizens at home with a wireless cell phone would be a whole 
new area.
    Mr. Zipperstein. Absolutely.
    Mr. Stearns. All right. Thank you, Mr. Chairman.
    Mr. Markey. The gentleman's time has expired. The chair 
recognizes the gentlelady from California, Ms. Eshoo.
    Ms. Eshoo. Thank you, Mr. Chairman, and thank you to all 
the witnesses for your testimony. In listening to the 
testimony, I couldn't help but sit here and reminisce a little 
from the time I first came onto this committee, 1995, 1996, 
that is some time ago, and at that time I talked about and 
introduced legislation on interoperability and E-911 and there 
were very few people that were paying attention then, and of 
course, when our country was so tragically attacked and the 
aftermath and the lessons learned and now we are here trying to 
figure out what history--how history is going to judge the 
auction and what worked and what might not work and now the 
shortcomings in the block D, I think, my God, it takes a long 
time to get some of these things done. I am sorry that Mr. 
Shimkus isn't here. He has given wonderful leadership. He has 
been the co-chair along with myself and many, many members, Ms. 
Harman has certainly raised the issue here on interoperability 
and our E-911 caucus. I think that at the end of the day it 
just takes the political will to get things done, to fund these 
things well or to enhance--make sure that there is the right 
kind of public policy that is actually going to make these 
things happen.
    I don't think we have too much time left to do this. I 
really don't. I mean, I think that this is a great country, and 
the fact that we don't have this thing done and now that the D 
block is in the shape that it is in, I guess it is an 
opportunity maybe to go back and do it better. So I just wanted 
to make that observation.
    Now, in this--let me ask a couple of questions. I have an 
observation relative to Verizon. I really think that Verizon 
won the Super Bowl of the spectrum auction, and so you are the 
spectrum world champions, and it is a curiosity to me about why 
you are so concerned about Google. I mean, do any of us think 
that the New York Giants are upset that Tom Brady didn't have a 
better game or that they are upset that the referees made bad 
calls? I don't think so because I don't think it really 
matters. They are the world champions. So I just want to make 
that observation and I think that when you win, you shouldn't 
whine, but that is my view.
    Now, let me ask Mr. O'Brien of Cyren Call, there have been 
various descriptions of the D block and where we should go from 
here. I want to examine a couple of things that kind of led up 
to where we are. Now, you, Cyren Call, act as the advisor and 
the liaison in negotiating with the D block licensee when there 
is one or if there will be done. It has been reported, and it 
is in their written testimony of some here, that before the 
auction several wireless carriers that were exploring their 
interest in the D block met with you and that the following--I 
mean, this seems to be the description--the following is the 
description of what they say happened, that you demanded in 
those meetings that the winner of the D block would be required 
to pay $50 million a year to Cyren Call and also lease access 
to the spectrum to Cyren Call below wholesale rates and that 
Cyren Call would then sell access to the network to public 
safety entities at a premium, and that it would also own the 
right to provide service to public safety users. That seems to 
me like a lot of strings attached. Does this--first of all, is 
this characterization correct, and if so, yes, and if not----
    Mr. O'Brien. No, it is not.
    Ms. Eshoo. It is not?
    Mr. O'Brien. It is in every respect not correct.
    Ms. Eshoo. OK. So what happened? What happened in these 
pre-meetings and what did you request or demand of those that 
were interested at that time in the D block?
    Mr. O'Brien. Well, I certainly welcome an opportunity to 
answer that question.
    Ms. Eshoo. Good. Go ahead.
    Mr. O'Brien. Anybody can look on the Web site that was 
created----
    Ms. Eshoo. No, what happened in the meeting, not on the Web 
site.
    Mr. O'Brien. OK. Fine.
    Ms. Eshoo. Because, see, the reason I am asking this is 
because some assert that these alleged demands caused a lack of 
interest in the D block.
    Mr. O'Brien. I can understand completely. Were they true, 
you would have every reason to be upset.
    Ms. Eshoo. OK. So what happened in the meetings? Did you 
ask for anything or say what you needed or had to have?
    Mr. O'Brien. What we are taking exception to is the 
mischaracterization of the process. The Public Safety Spectrum 
Trust asked us to indicate to bidders where the negotiating 
position that public safety----
    Ms. Eshoo. And what exactly were the thoughts that you 
expressed in the meetings? Did you meet with anyone regarding 
this?
    Mr. O'Brien. Oh, absolutely. We actively sought such 
meetings.
    Ms. Eshoo. And was there anything that you set forward? I 
shouldn't be having to pull teeth on this. Just tell us exactly 
what--was there anything that you requested or that would be a 
must-have for you?
    Mr. O'Brien. These were meetings that took many hours and 
involved literally hundreds of details so that is part of the 
process of trying to give you an answer.
    Ms. Eshoo. Well, to me, it doesn't sound like you want to 
give the answer, but if there are hundreds of things that you 
said, maybe you can list out the 100 and send it to the 
Committee so that we have an idea. In many ways we are after 
the fact but I think that, you know, you have a role to play in 
this, and if the demands are so steep and they caused a 
chilling effect on would-be bidders, then I think that that is 
something in and of itself.
    Mr. O'Brien. Right, but I just want the record to show 
that----
    Ms. Eshoo. My time has run out, so----
    Mr. O'Brien [continuing]. No demands were made----
    Ms. Eshoo [continuing]. If I could ask for your answer in 
writing, I think we would all appreciate it.
    Thank you, Mr. Chairman.
    Mr. Markey. The gentlelady's time has expired. The chair 
recognizes the gentlelady from California, Ms. Bono.
    Ms. Bono. I thank the chair very much, and I would like to 
point out that the three people still here are the gentleladies 
from California, so it is a great committee.
    Mr. Markey. I wish they all--no, wait. Hold on.
    Ms. Bono. First of all, I would like to thank you for this 
hearing and the panelists for being here today. Dr. Bazelon, 
Mr. Zipperstein, even if the FCC creates as many of the 
obligations upfront as possible and lowers the reserve price, 
do you think we are likely to find a commercial partner to 
build a shared public safety network and one that meets public 
safety needs through a conditioned auction approach or are we 
better off using a government contracting model where public 
safety puts out a request for a proposal and negotiates with 
all comers?
    Dr. Bazelon. The reason I think the public-private 
partnership is unlikely to succeed is because spectrum as a 
cost of commercial business, a wireless business model, as I 
have seen it valued in the 10 to 20 percent revenues range, and 
that means that if you gave away the D block, for it to be a 
good idea, it would have to be the case that the public-private 
partnership was almost a good idea on unconstrained commercial 
spectrum and just needed a little bit of a push to push it over 
free spectrum and I think it is very unlikely that the 
economics are such that that is the case. I think much better 
is a procurement model.
    Ms. Bono. And Mr. Zipperstein?
    Mr. Zipperstein. I would agree with that answer.
    Ms. Bono. Thank you.
    Mr. Zipperstein. I would just add that as the chairman 
asked me, the economic imbalance is such that even if we tinker 
around the edges, if we maintain the same fundamentally flawed 
structure, I don't think that we will produce a winner for that 
spectrum. I do think that this issue of interoperability is one 
that we should treat the same way we treat how we resolve our 
country's need for any other national security platform, 
whether it is fighter jets or submarine. Let us marry the 
expertise of the private sector with the needs of the public 
safety. Let us have an open and transparent competition so that 
public safety can select the system that works best for them. 
We have networks in the ground already. We operate and build 
networks. So do our competitors. We can put those to work for 
public safety.
    Ms. Bono. Thank you.
    Mr. McEwen, Mr. O'Brien, have any entities approached 
either of you expressing interest in bidding on restructured D 
block auction and partnering with you? If so, how many and who 
are they?
    Mr. McEwen. Has anybody since the auction approached us and 
said that they are interested in bidding? Is that the question?
    Ms. Bono. Yes.
    Mr. McEwen. No, I haven't had any discussions with anybody 
that said specifically. We have had some indication from people 
that there is an interest but nobody has stepped forward 
anymore than there were before the auction.
    Ms. Bono. All right. Mr. O'Brien?
    Mr. O'Brien. Let me make sure I understand the question. We 
did have conversations with, I would say, a half a dozen 
companies including companies like AT&T and Verizon and Google 
and Frontline prior to the auction at which at length we 
discussed the potential that that might be coming to the 
auction. Of course, that is far from an agreement on their part 
to come to the auction as it turned out. Since then, from like 
the 3rd of April, which is just a handful of days ago, we have 
started the process of reaching out and we have meetings set up 
with a number of potential parties that we will discuss this 
with but I don't think it would be fair to them to characterize 
at this stage what their level of interest was. I will know 
that a lot better after the next couple of weeks----
    Ms. Bono. Can you be----
    Mr. O'Brien [continuing]. But we are in that process.
    Ms. Bono Mack [continuing]. A little more specific as to 
the types of entities or the number?
    Mr. O'Brien. The types of entities are established 
operators, vendors and other players in the telecom space that, 
you know, might be logical to be part of a consortium. We are 
looking at this point that the most likely outcome for the next 
D block will be a consortium of players rather than a single 
player.
    Ms. Bono. All right. Thank you.
    Mr. Chairman, I yield back the balance of my time unless 
you want to finish singing the song.
    Mr. Markey. As a duet I would.
    Ms. Bono. No, thank you. I yield back.
    Mr. Markey. The gentlelady's time has expired. The chair 
recognizes the gentlelady from California, Ms. Harman.
    Ms. Harman. Thank you, Mr. Chairman, and the California 
Mafia is here and ready to take over this committee at any 
time.
    I have to say there seems to be a total disconnect between 
the last panel and this panel. The last panel was very clear, 
certainly in answer to questions by me and others, about the 
need at least to give the public-private partnership another 
shot. I think that is not a universal opinion of the members of 
this committee but certainly some of us think that is the way 
to go. This panel is in a different place. Most of you are in a 
different place. And what worries me about that different place 
is, it seems to me that we have ample evidence 7 years after 9/
11 that letting this--leaving this to the private sector, to 
the marketplace, won't get us a solution.
    So I am sitting here quite disappointed in this panel as a 
whole because I think that many of you understand the 
technology far better than I do, understand the imperative to 
protect our country far better than I do, because many of you 
have been doing this, and understand, and all of you understand 
what a variety of options that could be explored better than we 
have yet explored them, but let me just ask it this way. Would 
you raise your hands if in the years between 9/11 and the call 
by the 9/11 Commission for true national interoperability, 
raise your hands if your company offered in that interim, which 
was about 3 years, to build a nationwide interoperable 
broadband network for public safety users. Did any of you offer 
to do that in those years? Would you raise your hands if you 
know of a wireless company that offered in those years to build 
two public safety specifications a nationwide interoperable 
broadband network for public safety users?
    I do know that after the 9/11 Commission recommended that 
this happen, that some of you did respond, but until that time 
none of you responded and yet some people are telling us that 
the best way to get a nationwide interoperable public safety 
network is to dismantle the D block partnership and hope that 
the wireless industry will build it. Well, I am skeptical that 
that will get us there and I listened up, one of you said, 
``There is a business case for successful public-private 
partnership.'' Well, OK, I think maybe there is a business 
case. I would say there is a public imperative for a successful 
public-private partnership. Regardless of whether we call it 
the D block or we call it a banana milkshake, if we don't marry 
the public need to protect our communities with the private 
sector competence, we won't get there from here. Does anyone 
disagree with that? Any of you? Raise your hand if you disagree 
with what I just said.
    So where does that take me? I guess I would like to hang in 
for 1 minute and 25 seconds with my view that we need to give 
the D block one more shot and also my view that if we proceed, 
as some of you have suggested, to build out connections among 
regions, that we may get a least common denominator connection 
among regions but it is my view that what we will end up with 
is some regions inadequately protected and I believe that if we 
have near-simultaneous attacks around our country or the kinds 
of natural disasters that we have seen lately, that some 
regions of our country won't have adequate communications 
capabilities.
    So let me just ask in 30 seconds whether any of you 
disagrees, if we were to build out or try a second round of 
auction on the D block with these three criteria--one is 
clarity, making it clear up front what people are bidding on, 
the second is transparency, making it clear what the terms are 
between and among the parties and third is avoiding D block 
light, that is, just checking a few boxes and not really 
learning the lessons of what went wrong. Do any of you disagree 
that that is a sensible way to proceed if we are going to try 
another shot at the D block auction?
    Thank you, Mr. Chairman.
    Mr. Markey. The gentlelady's time has expired, and do you 
all remember Perry Mason when at the end of each episode, you 
know, it looked like he couldn't solve the case and then all of 
a sudden right at the end, Della Street would go up to him and 
say, Perry, can I take you off to the side for a second, I 
think I have got some key information, you know, right at the 
end just when you thought it was all over, the show? Well, that 
has just happened to this hearing. Chairman Dingell just walked 
in so he has all new information which I think he would like to 
elicit from the panel, and whenever the gentleman from Michigan 
is ready, he is recognized for as much time as he may consume.
    Mr. Dingell. Mr. Chairman, thank you.
    I have been greatly interested by some of the comments that 
have been set forward today. First, thank you, Mr. Chairman.
    Mr. O'Brien, you made some very interesting comments. You 
said Congress should appropriate monies for PSST to fulfill the 
duties imposed by FCC rules. Cyren Call will continue to assist 
the PSST in negotiating agreements with the winner of the D 
block, and law firms and other entities that provide services 
to the PSST expect to be paid for their services. I gather that 
you and Cyren Call intend then to work for the PSST but not for 
free. Is that correct?
    Mr. O'Brien. That is correct, Congressman.
    Mr. Dingell. All right. Now, I am curious. This is a yes or 
no question. Do you agree that every dollar spent on paying 
advisors to the PSST is a dollar that could be spent reducing 
the costs to public safety of using its broadband network?
    Mr. O'Brien. Yes.
    Mr. Dingell. Now, I am curious. Who then--well, let me go 
to the next set of questions here. This is for Mr. McEwen and 
Mr. O'Brien. In the FCC order establishing the public safety 
licensee, the Commission clearly stated, ``No commercial 
interest may be held in the license and no commercial interest 
may participate in the management of the licensee.'' Mr. 
O'Brien, is it true that Cyren Call received funding from 
venture capital funds?
    Mr. O'Brien. Is that true?
    Mr. Dingell. Yes or no.
    Mr. O'Brien. Cyren Call, yes.
    Mr. Dingell. Mr. McEwen, isn't it true that the PSST 
received funding from venture capital funds either directly or 
through Cyren Call?
    Mr. McEwen. Yes.
    Mr. Dingell. Now, Mr. O'Brien, if PSST is getting its money 
from you and you are getting your money from venture capital 
funds, how does the arrangement not violate the FCC's order?
    Mr. O'Brien. The arrangement is set up as a loan from Cyren 
Call to the PSST, which we did not view to be a violation of 
that provision.
    Mr. Dingell. The order says, ``No commercial interest may 
participate in the management of the license.'' They are making 
money available. And I am----
    Mr. O'Brien. We are not participating.
    Mr. Dingell. What remarkable goodness is compelling them to 
make this money available without expecting some kind of 
control or some kind of return to justify their expenditure to 
their investors?
    Mr. O'Brien. Maybe we should have Chief McEwen answer that 
too, but my answer is, the expectation is that in an 
arrangement to be determined, which has not been determined, we 
would seek to play a role in the next chapter of whatever 
happens between the public safety and D block and that would 
definitely be an interesting opportunity that we have made no 
secret that we were pursuing.
    Mr. McEwen. Mr. Chairman, could I address the question?
    Mr. Dingell. Yes.
    Mr. McEwen. OK. The money that you are talking about is, as 
Mr. O'Brien said, it is a loan to the Public Safety Spectrum 
Trust, a not-for-profit corporation. We have to pay that back 
and that is coming from venture capitalists but the problem 
here is that the Congress nor the FCC nor anybody else has 
offered us any funding nor alternative to solving the problem 
of the expenses that we must incur to meet our 
responsibilities.
    Mr. Dingell. Can you tell us, if you please, who are these 
goodhearted venture capital folk that are making these monies 
available?
    Mr. O'Brien. Yes, sir. It is no secret, there is, like, 
five venture capital firms. We will submit them on the record, 
all major venture capital firms. But let me make sure you 
understand the distinction. They invested in Cyren Call so that 
Cyren Call would be able to loan money to the PSST to bridge 
them from now to some opportunity in which they will get access 
to funding.
    Mr. Dingell. Now, if the PSST doesn't have funding, how 
will it pay back Cyren Call's loan?
    Mr. O'Brien. Well, under the worst-case scenario, it won't, 
and that is the risk we had to take.
    Mr. McEwen. The PSST, Mr. Chairman, has no assets, and 
assuming that there is no other funding that comes forth from a 
D block partnership to pay back those funds, then we really 
basically will have no way to pay it back and those people that 
invested that money in the loan understand that. They 
understand there is a certain risk.
    Mr. Dingell. Are there any written documents supporting 
this funding that is flowing from these venture capital firms 
to Cyren Call?
    Mr. O'Brien. Absolutely. This was negotiated on behalf of 
the PSST through their counsel and the counsel of Cyren.
    Mr. Dingell. Would you submit to us, please, the written 
documents that relate to the transfer of these funds from the 
venture capital firms to Cyren Call and then the written 
documents that relate to the transfer of the funds from Cyren 
Call to PSST?
    Mr. O'Brien. Yes, sir.
    Mr. McEwen. Yes, sir. We have nothing to hide. There is no 
reason for you not to see those.
    Mr. Dingell. I think I have used more time than I am 
entitled to, Mr. Chairman.
    Mr. Markey. No, no.
    Mr. Dingell. All right. Well, with your generosity, then we 
will proceed.
    There are reports, Mr. O'Brien and Mr. McEwen, that Cyren 
Call and/or the PSST informed potential D block bidders that 
the winning bidder would have to pay a license fee of 
approximately $50 million a year for 10 years to use the public 
safety's broadband spectrum. Is that true?
    Mr. McEwen. No, it is not true.
    Mr. Dingell. Is it not true?
    Mr. McEwen. Not as you described it, it is not true.
    Mr. Dingell. Well, what did Cyren Call and the PSST say to 
potential D block bidders?
    Mr. McEwen. I authorized from the PSST--first of all, the 
relationship is very simple with the PSST and Cyren. They work 
for us. We are paying them for their services with the loan 
that we borrowed.
    Mr. Dingell. Now, who is this that works for you?
    Mr. McEwen. Cyren Call is working for us as our advisors 
and we are paying them for their services with the loan that we 
have obtained. So the point is that at the end of the day, they 
do what we ask them to do. They are working at our direction.
    Mr. Dingell. Now, what did you ask them to do?
    Mr. McEwen. Pardon?
    Mr. Dingell. What was it that you asked them to do?
    Mr. McEwen. One of the things that you are raising is, what 
did they say before the auction to potential bidders. We had a 
number of meetings with a number of people who had indicated an 
interest in the process.
    Mr. Dingell. So you had them communicate with the people 
who indicated interest, right?
    Mr. McEwen. They did, and we did.
    Mr. Dingell. What did you instruct them to tell them?
    Mr. McEwen. Well, first of all, they asked a lot of 
questions about what----
    Mr. Dingell. They asked a lot of questions? Who is 
``they''?
    Mr. McEwen. I am talking about the potential bidders, 
people who had an interest in----
    Mr. Dingell. So the bidders asked a lot of questions?
    Mr. McEwen. That is right, and some of them expected more 
information as it related to the kinds of financial 
expectations of the PSST in a negotiated process. In that 
negotiated process, there would be a discussion about how we 
would be reimbursed for our costs in running our side of the 
operation.
    Mr. Dingell. How you would be, how the PSST would be 
reimbursed?
    Mr. McEwen. Right. Exactly.
    Mr. Dingell. And who was it that asked this? Was it Cyren 
Call or was it----
    Mr. McEwen. Oh, no, no, no. The potential bidders were 
people like Frontline Wireless, Verizon, AT&T. There were a 
number of people that talked to us before the auction about the 
process, inquiring about certain aspects of our expectations, 
and in those discussions, I never gave them any number but my 
understanding is that Mr. O'Brien did and we certainly were 
aware of that, and there was an estimate of $50 million but as 
far as I know, nobody ever demanded anything of anybody.
    Mr. Dingell. What did Cyren Call tell them then?
    Mr. McEwen. I will let him tell you that.
    Mr. O'Brien. Sir, yes. In response to meetings, many of 
which took a number of hours and there were a sequence of 
meetings with some of these players, we said that in 
anticipation of a negotiation which would commence after the 
auction, the going-in position in that negotiation was likely 
to be that the PSST would ask for a $50-million-a-year annual 
payment as the transfer of value for use of the spectrum but 
that that was subject to and it was made explicit in our bid 
information document, which is online, that that was subject to 
a half a dozen different conditions which would be part of the 
negotiated process during the NSA.
    Mr. Dingell. What were those conditions and who was fixing 
the conditions? Were those conditions that were fixed by 
statute, by regulation, by the FCC, by----
    Mr. O'Brien. Sir, the expectation----
    Mr. Dingell [continuing]. Some other person? Who was fixing 
those conditions?
    Mr. O'Brien. Under the terms of the FCC's order, the 
negotiation would commence as soon as the auction was over. The 
negotiation would have three parties: the PSST, the D block 
winner, and FCC. And it was our expectation and it was made 
explicit that the FCC would have to approve any such condition.
    Mr. Dingell. So----
    Mr. O'Brien. So what we take issue with is anybody saying 
that in that context the Public Safety Spectrum Trust could or 
would make demands because everything was subject to--
explicitly subject to the negotiation that would commence as 
soon as the auction was over.
    Mr. Dingell. I am curious though, what was your authority 
to inform them that you were going to charge them $50 million a 
year for 10 years?
    Mr. O'Brien. We were engaged by the Public Safety Spectrum 
Trust, which had at that point become a licensee of the FCC, to 
help the PSST prepare for the auction, the negotiation that 
would take place, the network sharing agreement.
    Mr. Dingell. Now, what was the $50 million a year to be 
for?
    Mr. O'Brien. It was to be a lease payment in return for the 
lease of the spectrum and the use of the proceeds would be as 
determined by the PSST to meets its operating cost.
    Mr. Dingell. I am proceeding at the pleasure of the chair.
    Mr. Markey. No, please, and the chair is pleased.
    Mr. Dingell. I am curious. What was the benefit that was to 
be achieved by Cyren Call or Cyren Call's investors? In other 
words, was there a profit? Were there some payments here? What 
were they getting for this?
    Mr. O'Brien. The relationship between the Public Safety 
Spectrum Trust and Cyren--and we will submit to you the 
documents that set that relationship up as it currently exists. 
We are going to put those on the record. Beyond that, there is 
no relationship. There is an expectation once there is a 
successful D block auction and a network sharing agreement is 
reached, that Cyren Call could, and I emphasize could, play a 
role if asked to by the PSST and that is the expectation of our 
shareholders. Of course, as you are undoubtedly aware, there is 
a significant amount of risk to the shareholders of Cyren Call 
in that expectation but that was how we proceeded.
    Mr. Dingell. Did this have any current value at the time 
that the negotiations were going on that would show up in the 
books of Cyren Call or PSST or anybody else?
    Mr. O'Brien. No, with the explicit exception that any funds 
that we were advancing according to the loan documents were 
going to be treated as loans and paid back. No, there was no 
such expectation.
    Mr. Dingell. Well, is there any monetary value to this as 
of that particular time that we can assign to this at all? In 
other words, did it have any worth or was it just sort of 
goodwill, you know, we will do all these good things and we 
will derive our benefit at some future time?
    Mr. O'Brien. Congressman, since April of 2006 when we first 
proposed that something along these lines be done, we made it 
clear that Cyren Call would hope and would do everything it 
could to be selected to play a role in this because we think it 
is such an important role to play and that it should be played 
if not by us, by somebody like us. We have done everything we 
could to make that clear and public.
    Mr. Dingell. So in response to my question, you are telling 
me that you don't believe that this had any exact or definable 
cash value at this point in the transaction? Is that right?
    Mr. O'Brien. Because of the risk, yes, I would say I agree 
with you completely.
    Mr. Dingell. All right. Now, can you tell me what the $50 
million that you were telling them was going to be a payment 
that would have to be made to the PSST, what was that going to 
go for?
    Mr. O'Brien. This would--this is a better question for 
Chief McEwen to answer but what I told the potential bidders 
when asked is, it would meet the expected operating costs of 
the PSST as it met its obligations under the FCC's rules.
    Mr. Dingell. Now here comes John Dingell, fat, dumb, and 
happy. He is walking in and he is talking to his friend, Mr. 
O'Brien, and he says, Mr. O'Brien, what is this going to cost 
me, and you are going to say it is going to cost you $50 
million a year, and I am saying now, what am I going to get for 
that $50 million a year. What am I going to get for that $50 
million?
    Mr. O'Brien. OK. Let me explain something. The bulk of the 
value that the D block winner would get for the $50 million or 
any other lease payment that was negotiated would be use of the 
10 MHz of spectrum being contributed by the PSST when the 
Public Safety Spectrum Trust was not using it. That is kind 
of--as we understand it, that is the essence of the 
Commission's public-private partnership is the D block winner 
buys 10 MHz and then pairs that 10 MHz with a lease for 10 MHz 
coming from the Public Safety Spectrum Trust. So you can have a 
legitimate difference of opinion about what is the value of the 
use of that spectrum, and some of the panelists here say they 
don't put much value on it. What is the value of the use of 
that spectrum that public safety is giving under the terms of 
the lease to the D block? We said acting under instructions 
from the PSST that we would begin the negotiation process to 
determine that number at $50 million. Those were the 
instructions we were given.
    Mr. Dingell. So here is fat, dumb, and happy John Dingell 
saying now, how much is Cyren Call going to get out of this?
    Mr. O'Brien. And the answer to Congressman Dingell would 
be, that would be determined subsequently by PSST when they 
decided how to compensate Cyren for responsibilities that they 
hadn't determined yet and other consultants of Cyren and other 
expenses such as their rent or whatever else.
    Mr. Dingell. Now, do you bring Mr. McEwen in to talk to me 
on this matter? Supposing I say well, now, I would like to talk 
to the PSST and maybe you can raise that so you get----
    Mr. O'Brien. Sir, let me make something----
    Mr. Dingell. Would you then get Mr. McEwen on the phone and 
Mr. McEwen----
    Mr. O'Brien. Let me just make something clear.
    Mr. Dingell [continuing]. Would come in and tell me things?
    Mr. O'Brien. As often as possible, the meetings that we had 
with potential bidders for the D block in a very compressed 
time frame included both Cyren Call representatives and 
representatives from the PSST but Chief McEwen is so busy, he 
could not be at every meeting and the meetings started to be 
sometimes multiple meetings in a day with different bidders. So 
we did the best we could.
    Mr. Dingell. And supposing I had this tremendous curious 
streak in which I say well, I am going to talk to Mr. McEwen, 
so I call Mr. McEwen up or would you produce Mr. McEwen and he 
would then talk to me, or what would happen? Would he have any 
part in this discussion or not?
    Mr. McEwen. Did I?
    Mr. Dingell. I am sorry?
    Mr. McEwen. I am not quite sure I understand your question. 
I mean, the point is, I had many meetings with people, one of 
them sitting at this table.
    Mr. Dingell. We are trying to understand how this 
negotiation takes place so I can kind of understand who is 
telling who what and who is saying who is going to get what for 
what they do.
    Mr. McEwen. OK. Well, let me try to explain it briefly. We 
had many meetings with people, like I said, who were interested 
in the process and they asked a lot of questions about what did 
we expect from public safety's point of view would be included 
as our expectations in some kind of a partnership, this 
network.
    Mr. Dingell. Now, what are you going to do with this $50 
million that you are getting and how much are you going to give 
to Mr. O'Brien for his goodhearted help to you?
    Mr. McEwen. I would be glad to spend as much time as you 
would like but I don't have any of the numbers in front of me. 
It is a complex thing and this was based upon some estimates--
--
    Mr. Dingell. Well, obviously you have got some numbers in 
mind when you are talking about $50 million. We are going to 
give Mr. O'Brien this much and we are going to keep this much 
and so much money is going somewhere else.
    Mr. McEwen. There were some expectations as to what the $50 
million was going to be spent on but I don't have any of the 
numbers in front of me here. I would be glad to sit down with 
any of the members of the committee or give you some further 
explanation but the point is that, I mean, you are suggesting 
that this money is all going to go to Cyren Call and that is 
far from true. We have legal expenses, we have----
    Mr. Dingell. My question is, how much is Cyren Call going 
to get and----
    Mr. McEwen. I can't answer that question at the moment. Mr. 
O'Brien might give you an estimate but I don't have that number 
in front of me.
    Mr. O'Brien. Congressman, I don't know how to answer it 
other than to say we have no arrangement with the PSST under 
which we would be paid anything other than paid back for the 
amount of money that had been borrowed. Did we have an 
expectation, did we make that expectation public, have I 
discussed it with many members of Congress and many staffers 
that are here today that we had that expectation? Yes, subject 
to being selected by the PSST. Let there be no doubt about 
this: The Cyren Call employees, including myself, we have one 
client. It is the Public Safety Spectrum Trust. We worked for 
them under instructions from them. That is what we sought. That 
is what we are. We may or may not have a continuing role after 
a D block auction because the PSST may decide to keep us and 
may not. That was the risk we took. That is the fact.
    Mr. Dingell. Now, let me ask this. Let us say that you told 
me, here I am getting ready to bid on this thing and you say 
oh, but you are going to have put $50 million in to PSST, and 
what would my response--every year. Would I say, this has been 
a wonderful visit, I really thank you, I am looking at my watch 
and I know I am supposed to pick up my wife for a shopping trip 
this afternoon. How many folks did that when you would tell 
them it is going to cost $50 million? Did they all of a sudden 
decide they had to be somewhere else, to do something else?
    Mr. O'Brien. Sir, we are not talking about a large universe 
of potential bidders but in that universe, there was no such 
response.
    Mr. Dingell. Gentlemen, thank you.
    I think, Mr. Chairman, we are going to want to look a 
little bit further at these matters to see what it all means. 
In the meantime, I would request that you submit to us any 
agreements, books, records and papers relative to these matters 
so that we can see whether the committee has further interest 
in these matters.
    Mr. Markey. And we would request----
    Mr. O'Brien. Absolutely, I have agreed to do so.
    Mr. Markey. We request that you submit it in a timely 
fashion. We thank you.
    Without objection, a written statement from Karen Tandy of 
Motorola will be entered into the record.
    [The information follows:]
    
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    Mr. Markey. We thank this panel. You can see that the 
interest level is intense in this subject and it will be 
continuing as well.
    Thank you all. This hearing is adjourned.
    [Whereupon, at 2:15 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                      Statement of Hon. Mary Bono

    Good morning Chairman Markey, Ranking Member Stearns and 
welcome distinguished panel.
    Over the last few months, the FCC conducted the 
congressionally-mandated and long-awaited 700 MHz auction, 
offering coveted spectrum intended to bring consumers advanced 
wireless services and wireless broadband.
    It appears that to the extent the Commission followed 
market-based auction policies, the auction was a success. On 
the other hand, the auction also showed that when the 
government's regulatory hand gets too heavy, problems and 
unintended consequences are likely. For instance, the lack of a 
winning bidder for the D-Block was a major disappointment. This 
commercial spectrum was reserved in order to have a joint 
spectrum sharing agreement with our nation's first responders 
and the private sector. This block, did not receive the 
necessary minimum bid of $1.3 billion.
    Last June, I wrote a letter to Chairman Martin citing my 
support for bringing broadband capability to our nation's 
responders, specifically in the 24 MHz that Congress had 
allocated to public safety in the 1997 Balanced Budget Act and 
for which this Committee, under the leadership of Ranking 
Member Barton, established a transitional ``hard date'' in the 
DTV and Public Safety Act of 2005. I strongly support that 
effort and believe that our nation's first responders need to 
have access to the latest technology.
    Today, I remain concerned about auction rules that have 
onerous service conditions and I am glad our witnesses are here 
today to discuss these issues.
    In the past, disregarding congressional intent for market-
driven auction policy has resulted in spectrum laying fallow 
for years, litigation, and consumers being denied the benefits 
of wireless innovations. The FCC should stay away from devising 
encumbering rules which suppress interest in the spectrum 
auctions and recommit itself to the reason we are all here--
which is not to play politics, but to improve public safety 
communications.
    Lastly, I want to express my concern about another matter 
where it appears the Commission may be on the wrong path. In 
addition to re-auctioning the D block, I think the highest 
priority for the FCC should be a successful transition to 
digital television. I don't see how the FCC can hope to be an 
effective proponent of the digital television transition if it 
gets side-tracked by contentious policy debates, such as 
proposed government mandates on wholesale a la carte and price 
controls on television programming. I urge the FCC to stay 
focused on the important task at hand to ensure their success.
    Thank you Mr. Chairman. I yield back my time.
                              ----------                              


                     Statement of Hon. Eliot Engel

    Chairman Markey, Ranking Member Stearns--
    Thank you for holding this important hearing today. The 700 
MHz auction offers us a number of exciting opportunities. We 
will be able to stream video, browse the Web, and 
videoconference on our mobile phones, at speeds far above what 
we can do today. These technologies will be offered to people 
not just in large metropolitan cities, but even in rural areas 
not currently served by mobile broadband.
    The second opportunity involves public safety and security. 
After we free up 700 MHz spectrum from the digital TV 
transition, we will have the opportunity to create a national, 
interoperable communications network for first responders. 
After the 9/11 attacks, it became extremely clear that the lack 
of interoperable communications was a major impediment to the 
safety of our police, firefighters and rescue workers.
    When the DTV transition freed up spectrum for use, many of 
us have been excited about the potential uses of newer and more 
advanced forms of mobile communications. However, the spectrum 
auction did not go entirely as planned. Although the auction 
garnered far more money than we expected, the D block of 
spectrum failed to receive bids that were even one-third of the 
reserve price. This hearing will be a good opportunity to 
figure out why that happened, and how we can prevent it from 
happening in the future.
    It was my hope that we would see new entrants into the 
national wireless industry. Unfortunately, we did not see a new 
national player emerge to compete with the top players in the 
market. However, I was glad to see that a company other than a 
nationwide incumbent carrier won a license in every local 
market across the country. In addition, 55 percent of the 
winning bidders were classified as a small business. This was a 
very positive development. I appreciate seeing new entrants 
come into the mobile market. As we all know, competition can 
spur greater innovation at better prices for consumers.
    I am glad to see that all five FCC commissioners are here, 
and I especially thank Chairman Martin for taking the time to 
attend this hearing today. I look forward to hearing your take 
on this auction, as well as that of all the other 
commissioners.
    I am also interested to hearing what the private sector has 
to say. They were the companies that were placing these multi-
billion dollar bids, and I want to hear why there was such 
heavy bidding on some blocks but very little on others.
    I am also very glad to see that Deputy Chief Charles Dowd 
is here, coming from my hometown of New York City. As the 
commanding officer of the division of the NYPD that will be 
responsible for implementing interoperable communications, he 
is in a unique position to inform us about the public safety 
side of the D block. Specifically, I hope to hear his 
suggestions for how this auction can be improved, and what he 
hopes to accomplish with the auction.
    As many people on this committee know, I have long been a 
fighter for interoperable communications for our first 
responders. If our police can't talk to our firefighters, and 
if our EMTs can't talk to other rescue workers, it greatly 
hampers their ability to conduct an effective operation. As a 
result, lives can be lost, and they have been lost. I don't 
want to see that happen again.
    This auction provided some great successes in some areas, 
and also created some areas that need work. Chairman Markey, I 
thank you for holding this hearing today so we can discuss 
those areas that need work, and how we can improve them. We 
have two excellent panels today, and I look forward to hearing 
what everybody has to say. I yield back the balance of my time.
                              ----------                              


                      Statement of Hon. Gene Green

    Mr. Chairman, thank you for holding this hearing on the 700 
MHz spectrum auction. It is important we look at the successes 
and short-comings, especially in the public safety block, and I 
look forward to the testimony from our witnesses.
    The failure of meeting the reserve price on the D-block is 
particularly concerning. The creation of a nationwide, 
interoperable broadband network for public safety was the most 
important aspect of clearing this spectrum and holding the 
auction.
    The advanced services and choices for consumers which may 
come from the other blocks of spectrum auctioned are secondary 
to the importance of providing our public safety officials and 
first responders with a nationwide, interoperable network.
    There is no question, the D-block provides the most 
workable solution to our nation's interoperable communications 
problem. In addition to establishing a nation-wide standard, 
the spectrum has unique qualities that allow it to penetrate 
walls, smoke, and obstructions that other spectrum cannot, 
ensuring our first-responders can communicate under the most 
extreme conditions.
    I think going forward, it will be beneficial for both 
public safety and companies interested in bidding on the 
spectrum and entering the public private partnership to know 
what is required of the partnership and the network. It appears 
the post-auction negotiations that were required on the D-block 
provided too much uncertainty for companies to make that 
commitment.
    A workable option could be to allow each company interested 
in working with public safety to develop the public-private 
partnership to submit proposals and allow the Public Safety 
Spectrum Trust to review the proposals, make suggestions, and 
ultimately decide which proposal best fits public safety's 
needs.
    This would allow public safety the opportunity to evaluate 
proposals and make suggestions, and provide companies with more 
certainty on what is required of them prior to making the huge 
capital investment required by purchasing the D-block. I 
believe it is in public safety's interest to allow any party 
interested in the public-private partnership to submit a 
proposal, and no company should be prevented from submitting a 
proposal, or eventually bidding on the spectrum.
    Outside of the D-block, the auction was a success when we 
look at the amount of money raised, but we should learn from 
several shortcomings in this auction. It is clear from the 
price paid per MHz POP in the auction that encumbering 
licensees with conditions on spectrum licenses dramatically 
decreases the value of that spectrum.
    Whether these conditions result in new and advanced 
technologies for consumers will be determined in the years to 
come.
    What is certain is that companies that had no plans to 
actually participate in the auction or invest in wireless 
infrastructure, but simply wanted to manipulate the rules on 
the C-block to their benefit were able to do just that.
    We have had over half a dozen hearings on broadband 
deployment and the future of the internet in this hearing. 
Nearly everyone on this subcommittee has agreed that a 
wireless, third pipe will bring competition to the marketplace, 
benefit consumers, and expand the range and quality of services 
available in today's marketplace.
    The C-block is a prime block of spectrum to create that 
third pipe, given the size of the licenses and the quality of 
the spectrum, however, rather than allowing companies to bid on 
that spectrum unencumbered to develop a network and deliver 
wireless broadband in the most efficient manner, conditions 
were placed on it, making it unattractive to all but a few 
bidders.
    Spectrum auctions are not just about raising money--they 
should promote competition, consumer choice, and introduction 
of innovative and new technologies. However, I think the 
results of the C-block demonstrate that placing conditions on 
spectrum does not accomplish any of these goals. The conditions 
on the C-block limited interest in the spectrum, which both 
drove down revenue, and prevented possibly new and innovative 
companies from bidding on that block.
    Again, I thank today's witnesses for their testimony, and I 
thank the Chairman for holding the hearing. I look forward to 
working with this Subcommittee and the Commission as we move 
forward on re-auctioning the D-block.

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