[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





   PROMOTING BROADBAND, JOBS, AND ECONOMIC GROWTH THROUGH COMMERCIAL 
                           SPECTRUM AUCTIONS

=======================================================================

                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 1, 2011

                               __________

                           Serial No. 112-53






      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov

                                _____

                  U.S. GOVERNMENT PRINTING OFFICE
71-057                    WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001






                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
JOE BARTON, Texas                     HENRY A. WAXMAN, California
  Chairman Emeritus                     Ranking Member
CLIFF STEARNS, Florida                JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                EDWARD J. MARKEY, Massachusetts
JOHN SHIMKUS, Illinois                EDOLPHUS TOWNS, New York
JOSEPH R. PITTS, Pennsylvania         FRANK PALLONE, Jr., New Jersey
MARY BONO MACK, California            BOBBY L. RUSH, Illinois
GREG WALDEN, Oregon                   ANNA G. ESHOO, California
LEE TERRY, Nebraska                   ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan                 GENE GREEN, Texas
SUE WILKINS MYRICK, North Carolina    DIANA DeGETTE, Colorado
  Vice Chairman                       LOIS CAPPS, California
JOHN SULLIVAN, Oklahoma               MICHAEL F. DOYLE, Pennsylvania
TIM MURPHY, Pennsylvania              JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas             CHARLES A. GONZALEZ, Texas
MARSHA BLACKBURN, Tennessee           JAY INSLEE, Washington
BRIAN P. BILBRAY, California          TAMMY BALDWIN, Wisconsin
CHARLES F. BASS, New Hampshire        MIKE ROSS, Arkansas
PHIL GINGREY, Georgia                 ANTHONY D. WEINER, New York
STEVE SCALISE, Louisiana              JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                 G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington    JOHN BARROW, Georgia
GREGG HARPER, Mississippi             DORIS O. MATSUI, California
LEONARD LANCE, New Jersey             DONNA M. CHRISTENSEN, Virgin Islands
BILL CASSIDY, Louisiana                   
BRETT GUTHRIE, Kentucky 
PETE OLSON, Texas 
DAVID B. McKINLEY, West Virginia 
CORY GARDNER, Colorado 
MIKE POMPEO, Kansas 
ADAM KINZINGER, Illinois 
H. MORGAN GRIFFITH, Virginia         

                                  (ii)
             Subcommittee on Communications and Technology

                          GREG WALDEN, Oregon
                                 Chairman
LEE TERRY,                           ANNA G. ESHOO, California
  Vice Chairman                      EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               MICHAEL F. DOYLE, Pennsylvania
JOHN SHIMKUS, Illinois               DORIS O. MATSUI, California
MARY BONO MACK, California           JOHN BARROW, Georgia
MIKE ROGERS, Michigan                DONNA M. CHRISTENSEN, Virgin 
BRIAN P. BILBRAY, California             Islands
CHARLES F. BASS, New Hampshire       EDOLPHUS TOWNS, New York
MARSHA BLACKBURN, Tennessee          FRANK PALLONE, Jr., New Jersey
PHIL GINGREY, Georgia                BOBBY L. RUSH, Illinois
STEVE SCALISE, Louisiana             DIANA DeGETTE, Colorado
ROBERT E. LATTA, Ohio                JOHN D. DINGELL, Michigan
BRETT GUTHRIE, Kentucky              HENRY A. WAXMAN, California, ex 
ADAM KINZINGER, Illinois                 officio
JOE BARTON, Texas
FRED UPTON, Michigan, ex officio










                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     1
    Prepared statement...........................................     3
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     4
Hon. Lee Terry, a Representative in Congress from the State of 
  Nebraska, opening statement....................................     5
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     6
    Prepared statement...........................................     6
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7
Hon. Edolphus Towns, a Representative in Congress from the State 
  of New York, prepared statement................................   100

                               Witnesses

Todd Schurz, Chief Executive Officer, President, and Director, 
  Schurz Communications, Inc.....................................     8
    Prepared statement...........................................    11
    Answers to submitted questions...............................   119
Burt Ellis, President, Titan Broadcast Management................    32
    Prepared statement...........................................    34
    Answers to submitted questions...............................   128
Christopher Guttman-Mccabe, Vice President, Regulatory Affairs, 
  CTIA--The Wireless Association.................................    38
    Prepared statement...........................................    40
    Answers to submitted questions...............................   133
Michelle P. Connolly, Associate Professor of the Practice, 
  Department of Economics, Duke University.......................    44
    Prepared statement...........................................    46
    Answers to submitted questions...............................   137
Dean Brenner, Vice President, Government Affairs, Qualcomm 
  Incorporated...................................................    52
    Prepared statement...........................................    55
    Answers to submitted questions...............................   151
Harold Feld, Legal Director, Public Knowledge....................    61
    Prepared statement...........................................    63
    Answers to submitted questions...............................   155

                           Submitted Material

Articles by Radio Ink, May 27, 2011, submitted by Mr. Kinzinger..   102
Letter of April 6. 2011, from 112 economists to President Obama, 
  submitted by Mr. Walden........................................   105
Letter of May 31. 2011, from 10 groups representing minority 
  interests, submitted by Mr. Walden.............................   111
Letter of May 31. 2011, from 33 IT equipment innovators, 
  submitted by Mr. Walden........................................   114

 
   PROMOTING BROADBAND, JOBS, AND ECONOMIC GROWTH THROUGH COMMERCIAL 
                           SPECTRUM AUCTIONS

                              ----------                              


                        WEDNESDAY, JUNE 1, 2011

                  House of Representatives,
     Subcommittee on Communications and Technology,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 12:03 p.m., in 
room 2123 of the Rayburn House Office Building, Hon. Greg 
Walden (chairman of the subcommittee) presiding.
    Members present: Representatives Walden, Terry, Stearns, 
Bilbray, Blackburn, Scalise, Latta, Guthrie, Kinzinger, Eshoo, 
Matsui, Barrow, Rush, DeGette, Dingell, and Waxman (ex 
officio).
    Staff present: Caroline Basile, Staff Assistant; Ray Baum, 
Senior Policy Advisor/Director of Coalitions; Nicholas Degani, 
FCC Detailee; Neil Fried, Chief Counsel, Communications and 
Technology; Debbee Keller, Press Secretary; Carly McWilliams, 
Legislative Clerk; Andrew Powaleny, Press Assistant; David 
Redl, Counsel, Telecom; Charlotte Savercool, Executive 
Assistant; Alex Yergin, Legislative Clerk; Roger Sherman, 
Democratic Chief Counsel; Shawn Chang, Democratic Counsel; Jeff 
Cohen, Democratic FCC Detailee; Sarah Fisher, Democratic Policy 
Analyst; Phil Barnett, Democratic Staff Director; and Alex 
Reynolds, Democratic Legal Intern.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. I would like to call the Subcommittee on 
Communications and Technology to order, and begin our hearing 
on ``Promoting Broadband, Jobs, and Economic Growth Through 
Commercial Spectrum Auctions,'' and welcome all of our 
witnesses who are here today.
    Spectrum legislation presents a tremendous opportunity to 
promote wireless broadband to spur economic growth, to create 
jobs, and generate significant revenue for the American 
taxpayer. This hearing will focus not only on how we might 
advance our goals by auctioning currently available spectrum, 
but also how we might create a marketplace where licenses can 
voluntarily return spectrum for broadband in exchange for a 
share of auction proceedings.
    The communications industry in America is in a time of 
massive change. Americans' voracious appetite for mobility has 
made wireless service an overwhelmingly popular way for 
Americans to stay connected. In fact, nearly one in four 
Americans has cut the cord, as it were, relying solely on 
wireless for their voice communications needs. Similarly, 
wireless is the fastest growing area of broadband connectivity. 
The convenience of mobility that moved us towards wireless 
voice is having the same effect in the broadband arena.
    Last week we had our hearing on public safety spectrum, and 
I continue to have concerns that reallocating the D block 
rather than auctioning it may be a mistake. The Advanced 
Wireless Services 3 spectrum is another block already available 
for auction, although many believe it would best be paired with 
spectrum currently occupied by federal users. All of this 
spectrum needs to be part of the discussion.
    Another avenue for consideration is voluntary incentive 
auctions, something that both the FCC's National Broadband Plan 
and the President's budget identify. Current license holders, 
such as some television broadcasters and satellite operators, 
might be willing to relinquish spectrum and use the auction 
proceeds to fund operations of new innovative ventures. For 
example, the DTV transition has allowed broadcasters to 
transmit in high-definition and add additional over-the-air 
channels. Additional funding could help pay for expanded 
mobile, Internet, and even broadband offerings. We can, and 
should, act to preserve and promote this important service.
    I support incentive auctions. But any incentive auction in 
which a licensee forfeits spectrum rights must be voluntary. 
This is not only good spectrum policy, it is good economic 
policy. Incentive auctions help match willing buyers and 
willing sellers. If a broadcast station values its spectrum 
more than a potential wireless broadband provider is willing to 
pay, the station will not be forced off the air. However, as 
Mr. Ellis will attest in his testimony today, there are 
broadcasters interested in participating in incentive auctions.
    This opportunity for broadcasters presents opportunities 
for our Nation's economy, as well. Broadcasters who agree to 
surrender their licenses through an incentive auction, or those 
who choose to only return a portion of the license and channel 
share with another broadcaster, could provide the U.S. 
government with the opportunity to re-auction their licenses to 
wireless providers who desperately need additional spectrum to 
meet consumer demand. Those auctions will generate revenue for 
the Treasury for debt reduction. Moreover, they will help 
create badly needed jobs. Build out of wireless networks is an 
infrastructure project that requires the labor of Americans 
across a broad cross-section of geography, education, and skill 
levels. And of course increased wireless broadband will boost 
productivity and create new and innovative lines of business.
    The wireless industry's track record for innovation is 
second-to-none. But wireless is not the sole venue for 
innovation. As we move forward with additional changes to the 
broadcast television service, we should work with broadcasters 
to identify regulations that are hindering additional 
innovation within their service. Over-the-air broadcasting 
remains a vital and important part of the communications 
infrastructure of America-fostering its innovation is in 
everyone's interest.
    I remain confident that a properly crafted incentive 
auction can benefit broadcasters, whether they participate or 
not, as well as wireless providers, the U.S. Treasury, and the 
American economy. So today's hearing is designed to help 
explore how the auctions can be structured to ensure a positive 
outcome for everyone involved.
    I thank the witnesses for their participation today. I look 
forward to your testimony and your responses to the questions 
that our subcommittee has.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    Spectrum legislation presents a tremendous opportunity to 
promote wireless broadband, spur economic growth, create jobs, 
and generate significant revenue for the American taxpayer. 
This hearing will focus not only on how we might advance our 
goals by auctioning currently available spectrum, but how we 
might also create a marketplace where licensees can voluntarily 
return spectrum for broadband in exchange for a share of the 
auction proceeds.
    The communications industry in America is in a time of 
massive change. Americans' voracious appetite for mobility has 
made wireless service an overwhelmingly popular way for 
Americans to stay connected. In fact, nearly one-in-four 
Americans has ``cut the cord,'' relying solely on wireless for 
their voice communications needs. Similarly, wireless is the 
fastest growing area of broadband connectivity. The convenience 
of mobility that moved us toward wireless voice is having the 
same effect in the broadband arena.
    Last week we had our hearing on public safety spectrum, and 
I continue to have concerns that reallocating the D block 
rather than auctioning it may be a mistake. The Advanced 
Wireless Services 3 spectrum is another block already available 
for auction, although many believe it would best be paired with 
spectrum currently occupied by federal users. All of this 
spectrum needs to be part of the discussion.
    Another avenue for consideration is voluntary incentive 
auctions- something that both the FCC's National Broadband Plan 
and the President's budget identify. Current license holders, 
such as some television broadcasters and satellite operators, 
might be willing to relinquish spectrum and use the auction 
proceeds to fund operations or new innovative ventures. For 
example, the DTV transition has allowed broadcasters to 
transmit in high-definition and add additional over-the-air 
channels. Additional funding could help pay for expanded 
mobile, Internet, and even broadband offerings. We can, and 
should, act to preserve and promote this important service.
    I support incentive auctions. But any incentive auction in 
which a licensee forfeits spectrum rights must be voluntary. 
This is not only good spectrum policy, it is good economic 
policy. Incentive auctions help match willing buyers and 
willing sellers. If a broadcast station values its spectrum 
more than a potential wireless broadband provider is willing to 
pay, the station will not be forced off the air. However, as 
Mr. Ellis will attest to in his testimony, there are 
broadcasters interested in participating in an incentive 
auction.
    This opportunity for broadcasters presents opportunities 
for our nation's economy, as well. Broadcasters who agree to 
surrender their licenses through an incentive auction-or those 
who choose to only return a portion of the license and channel 
share with another broadcaster-will provide the U.S. government 
with the opportunity to re-auction their licenses to wireless 
providers who desperately need additional spectrum to meet 
consumer demand. Those auctions will generate revenue for the 
Treasury for debt reduction. Moreover, they will help create 
badly needed jobs. Buildout of wireless networks is an 
infrastructure project that requires the labor of Americans 
across a broad cross-section of geography, education, and skill 
levels. And of course increased wireless broadband will boost 
productivity and create new and innovative lines of business.
    The wireless industry's track record for innovation is 
second-to-none. But wireless is not the sole venue for 
innovation. As we move forward with additional changes to the 
broadcast television service, we should work with broadcasters 
to identify regulations that are hindering additional 
innovation within their service. Over-the-air broadcasting 
remains a vital and important part of the communications 
infrastructure of America-fostering its innovation is in 
everyone's interest.
    I remain confident that a properly crafted incentive 
auction can benefit broadcasters-whether they participate or 
not-as well as wireless providers, the U.S. Treasury, and the 
American economy. Today's hearing should help explore how the 
auctions can be structured to ensure a positive outcome for all 
involved. I thank the witnesses for their participation today 
and look forward to your testimony.

    Mr. Walden. And with that, I would yield back my--I only 
have 36 seconds left. I will yield back the time and will go to 
Ms. Eshoo for an opening statement.

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

    Ms. Eshoo. Thank you, Mr. Chairman, and good afternoon 
everyone and thank you to all the witnesses that are here 
today. I am looking forward to your testimony and to the Q&A.
    Today's hearing continues our in-depth examination on 
spectrum reform. As we evaluate ways to promote broadband, 
jobs, and economic growth, we should be guided by, I think, a 
simple principle. Use spectrum to its maximum efficiency, and 
be fiscally responsible in the plan that we commit to.
    Thirty years ago, most Americans relied on over-the-air 
broadcasting as their only means for news, information, and 
entertainment. Then cable and satellite established an 
alternative vehicle for delivering television into the home, 
giving consumers access to hundreds of channels.
    The world is changing once again, and today, broadband is 
enabling a new set of programming options like Hulu, Amazon 
Instant Video, Netflix, that can be watched at home or on the 
go. Voluntary incentive auctions are one such way to address 
the growing demand for wireless while providing a financial 
incentive for broadcasters wishing to give back spectrum.
    Legislation developed in this subcommittee, I think, should 
incorporate feedback from impacted stakeholders and provide the 
FCC with sufficient flexibility to carry out an auction and 
handle the repacking process. We should also consider the 
significant benefits of dedicating spectrum for unlicensed use. 
Unlicensed spectrum has unlocked tremendous innovation, and in 
the coming years will drive the growth of smart grid, access to 
patient records in hospitals, and much, much more. By one 
estimate, unlicensed applications could generate between $16 
and $37 billion per year in economic value for the U.S. economy 
over the course of the next 15 years.
    The TV white sp ces and 5 megahertz band are two areas 
which I hope today's witnesses will address. Our panel provides 
a broad range of views, and I look forward to hearing their 
thoughts on how best to structure a voluntary incentive auction 
while providing fair compensation to broadcasters who chose to 
relinquish their spectrum or must relocate as part of the 
repacking process.
    And with that, I will yield the balance of my time to 
Representative Matsui.
    Ms. Matsui. Thank you very much, Ranking Member Eshoo, for 
yielding to me, and I would also like to thank the witnesses 
for being with us today. Thank you very much.
    We all know there is a looming spectrum crisis and we must 
get additional spectrum into the marketplace. The FCC should 
have the flexibility to structure and conduct incentive 
auctions that would truly maximize the economic and social 
values of the spectrum.
    I also believe that comprehensive spectrum policy moving 
forward should offer our innovators and entrepreneurs an 
opportunity to be creative and have a forum to develop advanced 
technologies and applications.
    To help spur greater innovation, I am working on spectrum 
legislation that incentivizes R&D efforts and promotes 
unlicensed spectrum use, not only for emerging wireless 
technologies and applications, but also as a way to support and 
further advance American leadership in existing unlicensed 
technologies. It is important that we continue to promote 
policies that lead to greater innovation and the ever-evolving 
telecommunications and technology sectors.
    And with that, I yield my time to--I yield back the balance 
of my time.
    Mr. Walden. The gentlelady yields back the balance of the 
time, and now I would recognize the gentleman from Nebraska, 
the vice chair of the subcommittee, Mr. Terry.

OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE FROM THE 
                       STATE OF NEBRASKA

    Mr. Terry. Thank you, Mr. Chairman. It is our 
responsibility to ensure that the process by which we allocate 
the lifeblood of wireless information delivery, spectrum, 
promotes the needs of broadband carriers while simultaneously 
recognizing the value of this spectrum to the existing license 
holders, not only for existing critical uses, but for the 
future innovations. This process must be fair, economically 
sound, and provide certainty and predictability to existing 
holders of spectrum licenses. By doing so, economic growth will 
lead to job creation, innovation can flourish, and critical 
broadcast resources will remain secure and available.
    This hearing is a great opportunity for us to learn more 
about how to best structure this process. Any spectrum auction 
must be--must account for several important factors. First, we 
must ensure that we are not coercing existing license holders 
into giving up spectrum they wish to continue to utilize. If 
and when existing holders do choose to participate in either an 
auction or reallocation, not only must we compensate them 
fairly and be consistent with the spectrum's value to the 
existing holder; any repacking of spectrum should be done in 
such a way that the consumer's access to critical information 
and resources is not adversely affected by interference or 
signal degradation.
    With these goals in mind, I look forward to working with my 
colleagues in crafting solutions. Our witnesses today here 
bring much expertise from across stakeholder community, and I 
look forward to listening and learning from then here today.
    I yield back.
    Mr. Walden. Mr. Stearns, do you have comments?
    Mr. Stearns. Thank you, Mr. Chairman. I will just take a 
little over a minute.
    Last October, the FCC estimated that a spectrum deficit 
approaching 300 megahertz is likely by the year 2014, not very 
far away. Simply the benefit of releasing additional spectrum 
is unlikely to provide $100 billion to the Treasury, not a very 
small figure, in fact. So I think we should, Mr. Chairman, act 
quickly to draft legislation that provides the FCC with 
authority to conduct commercial auctions so that by 2014 we 
will not face this crisis of shortage.
    We know that the convergence of the smartphones and tablets 
and TVs and broadband is continuing onward, and we see that day 
to day. They continue to guzzle up the broadband. So the demand 
for these devices is increasing, and we need to get more 
spectrum. I would like to emphasize that the incentive auctions 
is the way to go, so it is truly voluntary, and when 
broadcasters are repacked, they should be able to maintain the 
same service areas that they originally held, and be 
compensated for switching channels.
    So I look forward to our testimony, and I think everybody 
on the panel should provide some recommendation of what type of 
flexibility the FCC should have. Should Congress specify to the 
FCC on how to do the auction, or should the FCC be unfettered? 
I think that is the key question we have today.
    I thank you, Mr. Chairman, for the opportunity to have my 
opening statement.
    Mr. Walden. Mr. Latta or Mr. Guthrie, do you have any 
comments?
    Mr. Latta. Thank you very much, Mr. Chairman, I appreciate 
it.
    Just real briefly, I thank you very much for having these 
hearings today. I recently introduced legislation for a 
voluntary incentive auction, and the revenue sharing, and we 
are looking at the jobs and the technology out there that we 
can be moving forward. Also, additional revenue then to the 
Treasury to reduce the deficit. I applaud you for the hearings 
today. Thank you.
    Mr. Walden. Thank you. Mrs. Blackburn, do you have an 
opening statement you wanted to share?

 OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE 
                  FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you, Mr. Chairman. I do, and I will 
submit my full statement for the record.
    I just wanted to say, I think that when it comes to 
spectrum that we have to make some bold, tough decisions. I 
think one thing that we should all be focusing on a bit is the 
FCC has demonstrated that what they call a spectrum deficit 
approaching 300 megahertz is likely by 2014. We need to be 
looking at that and be serious in how we go about approaching 
this and resolving that need for spectrum.
    I was visiting with someone last week and they were talking 
about how we will soon have 1 trillion devices attached to the 
broadband, and why it is so important for us as we look at the 
use of the spectrum to think in terms of how we accommodate 
whether it is through the line or wireless, all of the use that 
is coming toward us.
    So I thank you for the hearing, and I yield back.
    [The prepared statement of Mrs. Blackburn follows:]

              Prepared statement of Hon. Marsha Blackburn

    Thank you, Mr. Chairman.
    Policymakers must make bold, tough decisions on spectrum.
    Congress should allow for auctions and repackaging so 
commercial broadband can facilitate capital investment, job 
growth, and deficit reduction.
    Instead of underutilizing spectrum to serve a diminishing 
number of Americans, Congress should put spectrum to its most 
efficient use.
    Consumer demand for mobile broadband has exploded. Everyone 
agrees that we are facing a spectrum crisis.
    The FCC has demonstrated that ``a spectrum deficit 
approaching 300 megahertz is likely by 2014, and that the 
benefit of releasing additional spectrum is likely to exceed 
$100 billion.''
    Inaction is too costly. Let's focus our spectrum policy on 
what Americans are asking for--more opportunities, jobs, and 
deficit reduction.
    I look forward to today's testimony.

    Mr. Walden. Thank you. All time is expired for opening 
statements--no, we go to Mr. Waxman. I almost did that again, I 
am sorry. Mr. Waxman?

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Mr. Chairman.
    Since April 12, the Communications and Technology 
subcommittee has held three hearings on the spectrum policy. 
Last week, we focused on public safety spectrum and needs for 
public safety spectrum, while this week we will examine how we 
might make additional spectrum available for commercial 
broadband through incentive auctions. I am pleased that 
Chairman Walden and Ranking Member Eshoo are working together 
to focus the subcommittee's attention on spectrum matters.
    Smart spectrum policy can help improve public safety, 
promote broadband, create jobs, and reduce the deficit. I know 
members on both sides of the aisle recognize what a rare 
opportunity we have to accomplish several important policy 
goals by enacting legislation in this area.
    Incentive auctions are not the only element of smart 
spectrum policy that we need to address. We also should 
consider how to utilize federal spectrum resources better, how 
to encourage spectrum sharing, how to maximize spectrum 
efficiency across all spectrum bands, and how to balance our 
mix of licensed and unlicensed spectrum. But authorizing the 
FCC to conduct incentive auctions, that should be the 
foundation of our spectrum policy efforts. This is a concept 
that has bipartisan, bicameral support. At the Energy and 
Commerce Committee, Representatives Barrow and Latta have both 
introduced measures that would grant the FCC the ability to 
conduct incentive auctions. It is also backed by economic 
experts. In April, more than 100 prominent economists with 
varying political perspectives wrote to President Obama to 
endorse incentive auctions as a good way to repurpose spectrum 
while minimizing transaction costs. Notably, these economists 
believe that Congress should give the FCC great flexibility to 
design appropriate auction rules to maximize the benefits of 
incentive auctions. They note that in 1993, Congress took the 
then-controversial step of authorizing spectrum auctions and 
allowing the FCC flexibility to design how spectrum auctions 
should work. The result was a huge success.
    Since Congress authorized spectrum auctions, the increase 
in consumer welfare has been dramatic, and the economic 
benefits to our Nation substantial. The system implemented by 
the FCC has been replicated around the world.
    As we move forward towards authorizing incentive auctions, 
and I hope we will do so soon, we need to be wary about 
limiting the FCC's flexibility to design an efficient auction. 
We should take full advantage of the FCC's world-class 
expertise on auction design, and give the Agency the ability to 
work with auction experts to set up the best possible incentive 
auction. We should not micromanage the Agency in this area.
    I recognize some are concerned about whether we can ensure 
that incentive auctions are truly voluntary. I remain confident 
that we can find a way to avoid unfairly disadvantaging 
broadcasters in this process, and I appreciate that 
broadcasters' stated willingness to work with us to figure this 
out. Broadcasters provide vital services that should not be 
interrupted or degraded. Our job should not be to focus on the 
specific legislative language that would provide--our job 
should be to focus on the specific legislative language that 
would provide assurances to broadcasters that they are not 
being forced to sell spectrum in the voluntary auction.
    We have an excellent panel today. I look forward to hearing 
testimony from them. Thank you, Mr. Chairman, for recognizing 
me for this opening statement.
    Mr. Walden. Thank you, Mr. Waxman. We look forward to 
working with you and others on both sides of the aisle on this 
issue.
    Now I think all members have had a chance for opening 
statements, so we will now go to start with Mr. Todd Schurz, 
who is the Chief Executive Officer, President, and Director of 
Schurz Communications, Incorporated. We look forward to your 
testimony, and thank you for coming today.
    You may want to push that microphone button, and just for 
everybody on the panel, these microphones, for those in 
broadcasting, you actually have to work very closely. If they 
float away we don't hear as well, and then the little button 
should light up, I think. Then the little boxes in front of you 
should light up and tell you as your time is running out, you 
will get a yellow and then a red, and then I can't tell you 
what happens after that. It is not pleasant.

STATEMENTS OF TODD SCHURZ, CHIEF EXECUTIVE OFFICER, PRESIDENT, 
    AND DIRECTOR, SCHURZ COMMUNICATIONS, INC.; BURT ELLIS, 
  PRESIDENT, TITAN BROADCAST MANAGEMENT; CHRISTOPHER GUTTMAN-
MCCABE, VICE PRESIDENT, REGULATORY AFFAIRS, CTIA--THE WIRELESS 
 ASSOCIATION; MICHELLE P. CONNOLLY, ASSOCIATE PROFESSOR OF THE 
   PRACTICE, DEPARTMENT OF ECONOMICS, DUKE UNIVERSITY; DEAN 
     BRENNER, VICE PRESIDENT, GOVERNMENT AFFAIRS, QUALCOMM 
INCORPORATED; AND HAROLD FELD, LEGAL DIRECTOR, PUBLIC KNOWLEDGE

                    STATEMENT OF TODD SCHURZ

    Mr. Schurz. Thank you very much. Good afternoon, Chairman 
Walden, Ranking Member Eshoo, and members of the subcommittee. 
My name is Todd Schurz, and I am the President and CEO of 
Schurz Communications, based in Mishawaka, Indiana. I am 
testifying today on behalf of the National Association of 
Broadcasters.
    Schurz Communications began broadcasting in 1922, which 
makes me a fourth generation broadcaster. Today, we have 10 
televisions stations and my company has a presence in 14 
States, including Michigan, California, Florida, Georgia, and 
Pennsylvania.
    The beauty of television broadcasting is its one-to-many 
architecture. For high demand programming, like the Super Bowl, 
there is no limit to how many viewers can tune in. The same 
programming delivered on a broadband system would overload the 
network. The transition to digital television has thrown open 
the doors of opportunity and innovation. Whereas in analog, I 
can only provide a single stream of programming; today with 
digital, I can provide that same programming in high 
definition, and at the same time, offer additional multicast 
channels and mobile DTV.
    Hundreds of broadcasters are taking advantage of new 
multicast opportunities, providing viewers with niche foreign 
language programming, religious programming, emergency local 
weather information, and even high school sports. The Bounce TV 
network recently launched by majority owners Martin Luther 
King, III and Andrew Young is the country's first broadcast 
network aimed at African American audiences. It is set to debut 
this fall on many multicast channels.
    Going digital has also delivered on the promise of mobile 
television. With mobile DTV, viewers can tune in to live local 
news, emergency information, weather, sporting events, or 
entertainment programs from the convenience of their car, at 
the beach, wherever they may be. Today, over 70 stations are 
offering mobile DTV service, and hundreds more are moving 
forward with the nationwide rollout of mobile DTV.
    Since the digital television transition, our company has 
added local news in high definition, multilingual newscasts, 
and expanded weather programming in our Tornado Alley stations. 
All of this is available for free.
    The future offers additional possibility, such as data 
casting and 3D TV. Broadcasters want to make sure that viewers 
continue to be the beneficiaries of broadcast innovation, and 
innovation is necessary for us to stay competitive with an 
ever-growing number of new competitors.
    Now remember, it was just 2 years ago that television 
broadcasters completed the digital television transition. As 
part of the DTV transition, television broadcasters returned 
108 megahertz of spectrum, nearly 30 percent of our spectrum. 
This freed up spectrum for both public safety and new 
commercial wireless services. But as part of that give-back, 
the FCC repacked broadcasters under fewer channels, which is 
complex and disruptive for our viewers.
    Now, just a couple of years later, the FCC has returned to 
broadcasters, asking us to do it again and asking for another 
40 percent of our spectrum. We are committed to being a part of 
the broadband solution, but there is only so much that the laws 
of physics will allow us to do without crippling our ability to 
serve our local communities, now and in the future.
    Broadcasters have never objected to truly voluntary 
incentive auctions, but we do feel strongly that protections 
need to be built into the spectrum legislation to ensure the 
future competitiveness and viability of local television 
broadcasting.
    Here are four important safeguards.
    One, no broadcaster should be forced to relocate to an 
inferior spectrum band. Two, any repacking by the FCC is to 
protect viewers by maintaining the current reach of a 
broadcaster's signal. Three, no station should be subjected to 
increased interference, and four, broadcasters should be held 
harmless from the cost of repacking.
    Importantly in the drive to advance broadband and relief 
network congestion, you cannot and should not focus only on the 
spectrum supply. There also needs to be a comprehensive 
examination of how we can capture more efficiencies from 
wireless carriers in the consumer electronics industry, 
including cell splitting and wi-fi technology, improved 
receivers, and--to voice over Internet protocol. We all know 
that the pace of technology is unrelenting, and tomorrow's 
innovations will help solve many of the anticipated wireless 
capacity issues.
    In conclusion, we appreciate the committee's thoughtful and 
deliberate approach to the spectrum issue. Remember, once we 
reallocate the spectrum, once broadcasters who want to continue 
to provide service are repacked in a harmful way, there is no 
going back. We get only one shot at this. We need to do it 
right to ensure that viewers do not lose access to the news, 
entertainment, and vital emergency programming that 
broadcasters provide.
    I am as excited about broadcasting's future as we are proud 
of our heritage. Our company has no plans to return our 
spectrum. For that reason, I ask that any spectrum legislation 
crafted to protect our ability to continue to serve the viewers 
of our local communities.
    Thank you, and I would welcome any questions.
    [The prepared statement of Mr. Schurz follows:]





    
    Mr. Walden. Mr. Schurz, thank you for your testimony, and 
for your family's long history of serving your communities.
    Now I would like to go to Mr. Burt Ellis, who is President 
of Titan Broadcast Management. Mr. Ellis, we welcome you here 
today and look forward to your testimony as well.

                    STATEMENT OF BURT ELLIS

    Mr. Ellis. Good afternoon, Congressmen and Congresswomen. 
My name is Burt Ellis, and I am the President of Titan 
Broadcasting. We currently own and/or operate 13 television 
stations.
    The FCC would like us broadcasters to repack down to 
channels 14 to 30 to free up an additional 120 megahertz of 
spectrum. There are several major problems with this proposal.
    First, there are just too many broadcast signals currently 
on the air and primarily, the top 10 to 20 markets, to repack 
into these 17 remaining UHF channels. Consequently, some small 
number of television stations, 75 by my count, must be 
purchased and shut down, presumably through a voluntary 
incentive-based auction. Now if Dr. Connolly and the FCC can 
design a reserve auction system that is to their advantage, so 
be it, so long as the broadcaster's decision to sell or repack 
is still totally voluntary. Voluntary means the FCC cannot set 
the selling price for these stations via cap, via percentages, 
or any other such valuation restriction, only via market 
forces.
    As the chairman said, my company is under certain 
circumstances willing to sell the spectrum for some of our 
stations. We are open to this consideration. However, the FCC 
still needs to repack all the remaining stations, such that the 
stations are not impaired financially or via signal. Mr. Schurz 
has already addressed this, so I will not rehash that, but I 
stand by those concerns as well.
    But finally, in my view, the FCC needs to use this whole 
process to provide a win/win for the broadcast industry and for 
Americans in general. Fortunately, the FCC and Congress does 
have the power to offer up two very powerful incentives to the 
industry that also advance the national broadband plan.
    Option number one, the FCC and Congress can either mandate 
or use their bully pulpit to convince the wireless carriers and 
the handset tablet manufacturers to incorporate mobile tuners 
into all new handsets and tablets. This would help the 
broadcast industry fast launch mobile services, and not just 
mobile services for personal entertainment, but also mobile 
services that could be the basis for a national emergency alert 
communications network. We have incorporated plans for just 
such a national emergency network into the mobile 500 rollout 
plans that were announced only yesterday.
    Now I have been told over and over and over again that this 
tuner option is DOA, but I just don't believe it. It would seem 
very simple to me to make this a condition of the wireless 
companies participating in the spectrum auctions, as well as in 
the AT&T/T-Mobile merger approval. I am sure Qualcomm, to my 
left, would gladly make these new chips.
    Option two, the FCC can finance and facilitate the 
transition from our current 8 BSB broadcast modulation 
technology to OFDM. A new OFDM broadcast standard would come 
with three huge advantages for the FCC, the broadcast industry, 
and the consumer. One, the FCC--OFDM would the FCC to much more 
densely repack broadcast stations, allowing more channels in 
each market to be used. Two, the broadcast industry--it will 
allow one broadcast channel to broadcast almost twice the 
current capability of 19.4 megabits. This would enable 
broadcasters to support a national LTE-based emergency alert 
network. Mobile broadcasting offers the best and fastest means 
for the U.S. to create such a national emergency network.
    Third, to the consumer, OFDM allows broadcast signals on 
any device to be picked up by one chip. Consequently, this chip 
can be manufactured in large numbers very cheaply and can be 
imbedded in handsets, tablets, computers, and televisions. This 
will allow a seamless mobile viewing methodology. A person can 
watch a newscast, a ballgame, anything on their handset, then 
their tablet, then their television, in a seamless manner. They 
will not miss a frame of viewing. This is the holy grail of 
future mobile. This is what the consumer wants.
    Broadcasters have a great deal to offer, but much of the 
current thinking seems to want to relegate us to the technology 
trash bin. We want to be part of the emerging digital future. 
The four--soon to be three, maybe--major wireless carriers 
already control 90 percent of the available mobile spectrum. 
You want to sell more of our broadcast spectrum to these 
wireless guys and give us broadcasters the opportunity to fully 
compete with them on the mobile front. If they want to go down 
in numbers, let us get in the game with them. Do not let them 
close us out of the mobile--from the mobile consumer.
    All of us in the media business want to be in the mobile 
video business in order to survive and thrive in the future. 
The more competition is better for the consumer. The FCC needs 
to compensate broadcast stations to repack. By their own 
estimate, it will cost about $1 million per station, about $1 
billion. For about $2 billion, $2 to $3 billion, the stations 
cannot only be repacked, but can also switch over to this new 
OFDM technology that can support a broadcast overlay for LTE, 
as I said. This is the time to do both, repack and upgrade our 
technology, and also mandate the mobile DTV chips. Then we can 
have a totally mobile broadband enabled population.
    With such a system in place, we broadcasters can and will 
create an immediately accessible mobile video network for 
instantaneous communications to all of our citizens in the 
event of a local, regional, or national emergency. Mobile 
broadcasting was the technology that worked in Japan during 
their crisis. The one-to-one architecture of the cellular 
system failed, but mobile broadcasting worked.
    There is a win-win agenda here. I support such. Thank you.
    [The prepared statement of Mr. Ellis follows:]





    Mr. Walden. Mr. Ellis, thank you for your suggestions, your 
testimony, and your service.
    Now we will go to Mr. Christopher Guttman-McCabe, who is 
Vice President for Regulatory Affairs of CTIA--The Wireless 
Association. We appreciate your testimony today, and look 
forward to it. Thank you for being here.

            STATEMENT OF CHRISTOPHER GUTTMAN-MCCABE

    Mr. Guttman-McCabe. Sure, thank you. Good afternoon, 
Chairman Walden, Ranking Member Eshoo, and members of the 
subcommittee. On behalf of CTIA, thank you for the chance to 
speak to you today about promoting broadband, jobs, and 
economic growth through commercial spectrum auctions. CTIA 
believes these objectives are achievable, and mutually 
reinforcing. For that reason, we urge you to act at the 
earliest possible date to enact legislation that will authorize 
incentive auctions and allow additional license spectrum to be 
made available for commercial wireless use.
    Today, we are the world's clear leader in wireless 
broadband. Although the United States is home to less than 5 
percent of the world's population and just shy of 6 percent of 
global wireless subscribers, the U.S. claims more than 20 
percent of global high speed wireless broadband subscribers. 
This leadership helps to create a competitive advantage to the 
United States.
    But to maintain this advantage, we need to ensure that 
there is a sufficient pipeline of spectrum available to meet 
the exploding demand for wireless broadband services. We urge 
you to address this with dispatch. A delay puts at risk not 
only our world leadership in this critical industry, but also 
lost or delayed investment, innovation, and productivity that 
are critical to our Nation's economy.
    The growth and the demand for mobile broadband and the 
corresponding need for additional spectrum has been well-
documented both by the government and respective private sector 
parties. Even conservative estimates project U.S. mobile data 
traffic to grow by a factor of more than 20 between the end of 
last year and 2015. This demand is being driven by consumer's 
migration from feature phone to smartphone and tablets that 
while employing advances in spectral and computing efficiency, 
allow consumers to demand more and thus strain wireless 
networks to an unprecedented manner. The evolution of machine 
to machine communications will only exacerbate this challenge. 
Efficiency gains and infrastructure investment will help, but 
neither will be sufficient to answer the challenge we face in 
delivering the critical infrastructure for the economy of the 
21st century.
    The good news is that there are ways to help meet the need 
for additional spectrum. By authorizing incentive auctions and 
repacking the bands allocated for television broadcasting, by 
directing NTIA to facilitate access to bands currently 
occupied, but often underutilized by government, and by 
enacting improvements to the spectrum relocation process, 
Congress can provide the wireless industry with a path to help 
America stay ahead of its Asian and European competitors in 
this critical industry.
    Taking these steps will produce manifest benefits to our 
Nation. The last two auctions produced more than $32 billion 
for the United States Treasury. While I cannot project what 
future auctions might produce, the bands discussed in my 
testimony have significant value and would likely be highly 
desired at auction. Auction revenues, however, are just one of 
the benefits that flow from facilitating the movement of 
spectrum to its highest and best use. Once spectrum is in the 
hands of those who value it, significant investment, 
entrepreneurial activity, and productivity will result.
    Since 2006, CTIA's carrier members have been directly 
responsible for nearly $111 billion in network investment. 
Because a dollar invested in wireless deployment is estimated 
to result in as much as $7 to $10 in expanded GDP, this past 
investment has contributed to keeping the U.S. economy afloat 
during a difficult economic period.
    Going forward, wireless investment and this multiplier will 
be critical to helping create sustainable economic growth in 
the United States. Perhaps more importantly, unlocking 
additional spectrum can help to create new employment 
opportunities, from the forging of steel for new towers and the 
construction of additional cell sites to the development of new 
network equipment, and the writing of our next must-have 
application. Bringing spectrum to market will create thousands 
of American jobs. Some economists estimate that the job growth 
related to the investment in next generation wireless 
technologies could be as high as 200,000 new positions, and 
that estimate does not account for positions in adjacent 
fields, as wireless becomes a key input into areas such as 
healthcare, energy, education, transportation, and logistics.
    Enabling the next generation of service and ensuring our 
world leadership in wireless should be a national imperative. 
Done properly, we can make needed spectrum available for 
ubiquitous mobile broadband, treat relocated broadcasters and 
government users fairly, produce significant revenue for the 
U.S. Treasury, and help grow the U.S. economy.
    CTIA looks forward to working with you to achieve these 
objectives, and I look forward to your questions. Thank you.
    [The prepared statement of Mr. Guttman-McCabe follows:]





    
    Mr. Walden. Thank you, Mr. Guttman-McCabe. We appreciate 
your testimony.
    We are now going to turn to Dr. Michelle P. Connolly, who 
is an Associate Professor of the Practice, Department of 
Economics, at Duke University. We look forward to your 
comments, Dr. Connolly, and thank you for being here today.

               STATEMENT OF MICHELLE P. CONNOLLY

    Ms. Connolly. Thank you Chairman Walden and Ranking Member 
Eshoo, and other members of the subcommittee. My name is 
Michelle Connolly. I am an associate professor of The Practice 
at the Department of Economics at Duke University. I also 
served as the chief economist at the FCC from 2006 to 2007, and 
then again in 2008 to 2009. I would like to note that I was 
serving under a Republican Administration, so my support for 
this proposal has nothing to do with my political affiliation. 
It is simply because as an economist, I believe that this as a 
great gain economically and socially for our economy, and it is 
in that capacity that I am testifying today.
    From this perspective, when everyone is looking at policy, 
I want to make sure that the gains of choosing this new policy 
outweigh any costs to our economy and to our society, and 
specifically, we are concerned about the cost to the 
broadcasters, and the costs to the people who rely on over-the-
air broadcasts.
    So when I am looking at this, I wanted to bring a little 
bit of information to the discussion. Firstly, we know that 
over-the-air viewing is done by less than--10 percent or less 
of the current TV-viewing population, so we are talking about a 
small and declining population. Secondly, the--two of the three 
options that would be provided to broadcasters do not involve 
cessation of over-the-air broadcasting, so this would minimize 
any impact on television viewers. And thirdly, with an 
incentive auction, broadcasters will only participate if the 
benefits to them outweigh the costs. And to that extent, I 
think this will help minimize any costs to implementing this 
plan. And by costs, I mean welfare costs.
    In terms of the benefits, there has been a lot of 
macroeconomic evidence that suggests that information can lead 
to technology has a great benefit to our macroeconomy. In the 
late 1990s, several studies confirmed that between 56 to 67 
percent of labor productivity growth could be attributed to 
information communications technology. And then from 2000 to 
2006, that estimate was about 38 percent.
    One thing to note is that when firm level studies have been 
done, the gains in terms of productivity are not equally 
spread, so gains in terms of productivity are specific to 
certain communities who are able to take advantage to certain 
industries and certain communities who are able to take 
advantage of broadband. That is on the production side.
    On the consumption side, of course, this is nothing--all 
the gains are to consumers equally and there is no region 
specificity to it.
    I also want to talk a little bit about incentive auctions, 
simply because this is an area that is very complicated. I 
still don't understand it entirely, and I thought it might be 
useful to give a little bit of background on what is really 
being proposed here.
    So the idea is that there would first be what economists 
would call a reverse auction for broadcasters, and in this, the 
FCC would specify certain actions that could be taken, they can 
discuss before, and the broadcasters would offer bids for being 
willing to undertake these different auctions, should the bid 
be accepted. So if the bid is accepted, they would be required 
to then undertake that action. If the bid is not accepted, they 
would not be required to take one of those three actions. And I 
think that this is useful for the broadcasters, because this is 
what makes it a voluntary action.
    I was asked by the committee to try and estimate a possible 
range of bids that broadcasters might make. I am smart enough 
to know that my estimate will be incorrect, but I would 
estimate based on the fact that they have these options that 
the range might be in the range of about $0.05 per megahertz 
POP at the low end, to maybe .08 megahertz POP on the high end. 
This is assuming that there is sufficient competition in the 
auction, and this is, I think, a key point. So there will be 
markets where there may not be--there might be a broadcaster in 
a channel that is in the key area that we need to have 
continuous spectrum. The FCC must be allowed to move people 
involuntarily out of that spectrum to another location, because 
otherwise, you will get holdouts. There won't be enough 
competition. Someone knows that they are placed strategically, 
and they can bid five times their valuation in an attempt to 
extract that extra money because then they know if they don't 
get their bid, they won't be able to be moved, and then the 
whole auction will serve no purpose.
    So the reason why the FCC is requesting that after the 
bidding process occurs that they be allowed to relocate people 
who are still located in that key region, and compensate them 
economically for the cost of the move so that they aren't 
burdened by that is because without that, you will not get a 
true auction. You will not get a true competition. There--even 
with that, there may be other things that might interfere with 
the bids, but if we don't have that bidding we will get true 
valuation bids. There are no two ways about that, so I think 
that is a crucial thing to mention.
    The last thing is the forward option. Once this occurs, we 
can estimate a supply curve that we would need to generate the 
amount of spectrum, conceded spectrum that the FCC would want. 
At that point, there is the forward option. I assume that the 
range of values would be at least on par with the 700 megahertz 
spectrum auction that we had recently, so the range might be 
anywhere from $0.03 per megahertz POP to up to $3.86 per 
megahertz POP. That is a huge range which shows you that 
markets matter. But one keeping is the more rules that are 
imposed on the usage for the winning bids, the lower the 
valuation will be, and any rules that increase uncertainty over 
the usage will lower the value.
    So overall, I think the revenue resources to the government 
can be large, but dwarfing any revenue to the government I 
think is the economic value to our economy, and I think that 
will outweigh any of the gains that the government will have in 
revenue, but those are also greater costs.
    [The prepared statement of Ms. Connolly follows:]





    
    Mr. Walden. Thank you, Dr. Connolly. We appreciate your 
comments.
    Mr. Brenner, we are going to go to you next, Vice President 
of Government Affairs for Qualcomm, Incorporated. Thank you for 
being here, and proceed with your testimony, sir.

                   STATEMENT OF DEAN BRENNER

    Mr. Brenner. Good afternoon, Chairman Walden----
    Mr. Walden. OK, now you got to push the button and bring 
the mic closer. There you go.
    Mr. Brenner. Good afternoon, Chairman Walden, Ranking 
Member Eshoo, and members of the subcommittee. It is a special 
honor for me to testify here this morning. Thirty years ago to 
the day, I began working as an intern for this very 
subcommittee. What a great experience that was for a college 
student.
    I am here today, along with my colleagues, Alice Turnquist 
and John Cozin on behalf of Qualcomm, a company that didn't 
exist 30 years ago. Five years after my internship here, 
Qualcomm was formed. Today, Qualcomm is the world's leading 
manufacturer for cell phones, smartphones, and other wireless 
devices.
    The policies pursued by this subcommittee, in particular, 
the move to spectrum auctions in the early 1990s, the 
reallocation of spectrum for the first PCS auctions, and the 
DTV transition have helped fuel the enormous growth in the 
American wireless industry. At Qualcomm, we spend over $2 
billion each year in research and development to invent the 
most spectrally efficient technologies, to achieve the greatest 
capacity and best performance from every sliver of spectrum, 
licensed and unlicensed.
    We know that spectrum is precious and expensive, based on 
our own experience with spectrum auctions. Although our main 
business is developing wireless technologies, licensing them to 
other companies, and selling chips based on those technologies, 
we purchased licensed spectrum at auctions held in the United 
States, the United Kingdom, and India to facilitate the 
deployment of our new technologies.
    Qualcomm's technologies are used in the 3G and 4G devices 
that Americans just can't get enough of. We all want our mobile 
devices to work all the time and wherever we happen to be, and 
that requires the use of licensed spectrum. Let me explain why 
I say that.
    We make chips that support wi-fi, Bluetooth, and other 
unlicensed technologies to provide wireless connectivity in 
local areas, such as inside homes or on college or corporate 
campuses. In those settings, these chips enable wireless 
traffic to be offloaded from the licensed spectrum that 
wireless carriers use for their 3G and 4G networks.
    This is an important growing business for vendors like 
Qualcomm, and we are excited about it. Just this week we 
announced the new line of wi-fi chips using spectrum in the 2.4 
gigahertz, 5 gigahertz, and 60 gigahertz bands. But to provide 
ubiquitous wide area wireless coverage all over the Nation on a 
cost effective and interference-free basis, licensed spectrum 
is required.
    And that brings me to the topic of today's hearing, because 
there isn't enough licensed spectrum available to keep pace 
with the exploding demand for mobile broadband. The FCC's 
October 2010 report found that by 2014, total U.S. mobile data 
traffic is likely to be 35 times the 2009 level. We are working 
on many new wireless technologies, but we don't have any 
technology on the drawing board that can increase capacity 35 
times. More licensed spectrum is needed. The FCC doesn't have 
nearly enough new spectrum in its inventory to meet this gap. 
To promote broadband jobs and economic growth, we have got to 
close this gap.
    A number of steps must be taken and are being taken in 
parallel to help solve the spectrum crunch. These steps include 
things that the private sector is doing, such as developing and 
deploying new technologies, and things the government is 
working on, such as as reallocating underutilized U.S. 
Government spectrum. But these steps won't be nearly sufficient 
to solve the spectrum crunch. To do that, it is crucial that 
Congress enact legislation to allow the FCC to conduct 
voluntary incentive auctions to reallocate more licensed 
spectrum for mobile broadband.
    The legislation that we support would allow the FCC to 
conduct a two-sided auction, composed of sellers who 
voluntarily decide to sell their spectrum because they think it 
would be worth more to a mobile broadband provider, and buyers 
who want to use the spectrum for mobile broadband. No one would 
be forced to participate as a seller or a buyer in a voluntary 
incentive auction, but under current law, there is no way for 
the FCC to get the spectrum out of the hands of the sellers who 
are willing to sell and into the hands of the mobile broadband 
buyers.
    Current law permits a TV station owner to sell its spectrum 
only to someone else who would use the spectrum to run a TV 
station. A TV station owner cannot sell its spectrum to a buyer 
so that the buyer can use it to provide mobile broadband. The 
legislation would allow the FCC to run a two-sided auction with 
all the station owners who want to sell on one side, and all 
the mobile broadband providers and new entrants who want to buy 
on the other.
    Qualcomm, both on our own and as a member of a group of 
companies who sell wireless equipment, including Alcatel 
Lucent, Apple, Cisco, Ericsson, Intel, Nokia, and Research in 
Motion, urges Congress to pass legislation to give the FCC 
authority to conduct voluntary incentive auctions to free up 
much-needed additional licensed spectrum for mobile broadband. 
Now, our group includes companies that compete against one 
another in the marketplace all the time. We make equipment 
using both licensed and unlicensed spectrum, but we all agree 
on three points. First, the spectrum crunch is real. Second, 
more licensed spectrum is necessary to solve the spectrum 
crunch. And third, authorizing the FCC to conduct voluntary 
incentive auctions is essential to solving the spectrum crunch.
    Passage of legislation authorizing voluntary incentive 
auctions would be a win-win-win-win. The first win would be for 
the sellers in a voluntary incentive auction, those who decide 
that their spectrum is more valuable for mobile broadband than 
in its current allocation will win because the legislation 
would allow them to sell. The second win is for the buyers. The 
buyers will win because they are going to get the additional 
licensed spectrum from mobile broadband so they can keep pace 
with consumer demand. They need the certainty and speed of an 
FCC-conducted incentive auction in which the auction itself 
efficiently and quickly aggregates spectrum. The third win 
would be for the U.S. Treasury. Voluntary incentive auctions 
will raise significant revenues without raising anyone's taxes 
or cutting any programs. Finally, the fourth win is the most 
important win of all. The real winners will be the American 
public. Mobile broadband has the potential to improve so many 
facets of American life. Giving the FCC authority to conduct 
voluntary incentive auctions is essential. Thank you.
    [The prepared statement of Mr. Brenner follows:]





    
    Mr. Walden. Thank you, Mr. Brenner, both for your testimony 
and for your internship, although I was not here to enjoy that.
    We are going to go now to Mr. Feld. Harold Feld is the 
Legal Director for Public Knowledge. We appreciate your input 
in this matter. We look forward to your testimony.

                    STATEMENT OF HAROLD FELD

    Mr. Feld. Thank you, Mr. Chairman----
    Mr. Walden. Before you start, I am just going--they are 
going to ring bells here for a vote, a 15-minute vote. We are 
going to have you finish your testimony, and then when you are 
done we will plan to resume at about 1:25. So that will give 
everybody a little break here before we go into Q&A.
    Mr. Feld, please continue.
    Mr. Feld. My thanks to you, Mr. Chairman, Ms. Ranking 
Member, the subcommittee. I am the Legal Director of Public 
Knowledge. I am pleased to speak to you this morning on behalf 
of the Public Interest Spectrum Coalition about buttons and 
buttonholes.
    Buttons are tangible objects. They are things that people 
easily understand and think about. Buttonholes are designated 
empty space. Most people don't think about the importance of 
buttonholes when they are buttoning their clothes, but without 
those empty spaces, you are not going to keep your coat closed. 
You need both. That is what I am here to talk about in terms of 
spectrum policy, which is the empty spaces in the spectrum, the 
white spaces, particularly in the broadcast spectrum.
    The policy objectives that we have all talked about here 
today of encouraging innovation, increasing economic activity 
which helps to reduce the deficit, as well as improving all of 
our lives, all of these things are critically important and we 
can achieve them, but we must not look at this just through the 
lens of a Congressional Budget Office score. In fact, I will 
state further that if we focus only on raising revenue or more 
precisely, what we think sitting here now, years out from an 
auction, a very complicated structure that we think will raise 
revenue. The spectrum prices will become a spectrum Armageddon, 
resulting in higher costs, stifled innovation, and reduced 
global competitiveness. The worst thing that could happen is 
what if they gave an incentive auction and nobody came because 
we structured it poorly?
    White spaces are unique in spectrum policy. They have been 
enthusiastically supported by Republican FCC chairmen and 
commissioners, and today's Democratic chairmen and 
commissioners. White spaces exist without preconceived uses, 
and so are open to any entrepreneur technologist with a good 
idea. They are the most deregulatory approach to spectrum 
policy we have. As FCC Commissioner McDowell said, ``The 
Commission's actions of proving TV white spaces help to bring 
more broadband to consumers as quickly as innovation, rather 
than as quickly as government will allow.''
    The results have been spectacular for the U.S. economy. The 
short history of unlicensed spectrum has allowed the 
development of what were considered junk bands to yield tens of 
billions of dollars in economic gains and activities. The 
unlicensed spectrum now being considered in the prime broadcast 
bands promises to surpass that previous success. This is truly 
unlicensed 4G.
    Allowing for additional allocation of national unlicensed 
spectrum under the 1 gigahertz band with its superior 
characteristics of penetration in long distance allow for the 
creation of gigabit capacity wireless LANs in offices, schools, 
high density residential areas, mesh networks capable of many 
miles of coverage at a fraction of the cost of current wi-fi 
technology. Such gains don't show up in a CBO score, but they 
result in increased revenues for the Federal Government through 
investment, job creation, and economic productivity on an 
annual basis.
    Rural areas will be able to be served with high capacity 
wireless broadband service. Low barriers to entry for 
unlicensed allow these rural providers to serve their 
communities without winning licenses at auction, which they 
cannot afford to do. Indeed, areas that cannot be profitably 
served with licensed spectrum because of the cost of winning 
licenses are now being served with existing wi-fi without 
universal service subsidies, and will be better served and more 
broadly served with white spaces spectrum.
    Already we are starting to see the fruits of projects like 
these in places as diverse as Claudville, Virginia, with a 
population of 916 to the much larger city of Houston.
    In order for this future to come about, for there to be a 
spectrum for smart grid coordination, machine to machine 
communication, inventory tracking and the rest, Congress has to 
make certain that the white spaces are protected by giving the 
FCC discretion in structuring and conducting auctions. The 
investors and companies that are building this technology today 
must believe there is a future for this here in the United 
States. United Kingdom is also looking at white spaces 
technology, as are China and Brazil, and its investors and 
companies do not believe there is a future here for this 
innovative new technology. They will take their investment and 
their jobs elsewhere.
    Providing the FCC flexible authority to conduct incentive 
auctions and allowing the Agency to pursue a broad approach to 
spectrum policy that is not exclusively tied to raising revenue 
will be the most effective means of promoting broadband, job 
creation, and economic growth. I just want to add that this is 
not an either/or. Rarely in policy do we have a chance to have 
it all. We can keep broadcasting as a vital service for this 
country. We can have significant new licenses for auction, and 
we can have a vibrant white spaces which will provide us with 
exciting new technologies for the benefit of all Americans.
    Mr. Brenner just said he doesn't have the technology right 
now that would allow them to increase their capacity by 35 
times. I don't have one either, but by creating a test bed, a 
place where these technologies can develop at very low cost and 
be deployed quickly and effectively, such as the white spaces, 
I have a very good suspicion of where that technology will come 
from.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Feld follows:]





    Mr. Walden. Mr. Feld, thank you very much for your comments 
as well. We appreciate the testimony of all our witnesses.
    We are in the middle of a vote now, so again, please plan 
to return no later than 1:25, and we will resume the hearing at 
that point for questions from the members.
    With that, we stand in recess.
    [Recess.]
    Mr. Walden. We will call the subcommittee back to order, 
and I think we had concluded testimony from all of the 
witnesses prior to our recess for the vote on the House floor. 
We anticipate another vote in about 45 minutes or so.
    I am going to start with the first round of questions, and 
I want to address the first questions I have to Mr. Schurz and 
Mr. Ellis.
    I would ask if you could elaborate on some of the efforts 
by broadcasters to bring new and innovative services to the 
broadcast spectrum. One of the purposes of this hearing was 
really to evaluate since DTV conversion, you know, what is 
happening out there in the marketplace? What are you able to 
do? I know Mr. Ellis, you touched on this a bit, but I would 
also like to explore what the hurdles are in the way of 
innovation in the spectrum that you have going forward.
    So if you could each take a minute or so just to kind of 
address what you are doing with it now, and what you think you 
could do with it.
    Mr. Schurz. I think what we have done with it now in almost 
all of our markets, we have multitasked channels, serving 
different audiences. We have three stations, two are right in 
the middle of Tornado Alley, one is on the edge. All of them do 
a 24-7 weather channel with regular forecasts so people who are 
very interested in the weather can always get that.
    What has also happened--the DTV transition happened 2 years 
ago. Mobile television, the standard was developed with that. 
Both Mr. Ellis and I are involved in those efforts. And so you 
are seeing that just starting now. A little over 70 stations 
are in mobile television.
    But I think the other thing is I don't want to not talk 
about high definition in terms of the clarity and the quality 
of the picture and what that means for our constituents. High 
definition local news takes a lot of bandwidth, but is also a 
great consumer value proposition.
    Mr. Walden. Mr. Ellis, do you want to use a minute or so to 
comment on new technologies?
    Mr. Ellis. The company we are putting together this time--
this is my third broadcast group. The first couple groups I bet 
on the emergence of new programming. That was the trend I was 
trying to follow. This time, we are betting on the emergence of 
new technologies. The mobile technology is the most unique and 
different technology for broadcasters. That is where--you know, 
use the sports analogy, go where the puck is going. Mobile is 
where it is going. We are spending an awful lot of time on 
that, and the inhibitions of that business is the ability to 
get, you know, a signal into the mobile device. This is where 
the consumer is going we want to be able to access that device.
    Mr. Walden. All right. Mr. Brenner, I want to go to you, 
because Mr. Ellis I believe mentioned OFDM and the ability to 
put chips in. Tell me what that would take and whether there 
would be acceptance of that in the market?
    Mr. Brenner. Yes, I am not exactly sure what Mr. Ellis is 
referring to, Chairman Walden. OFDM refers to an interface that 
is at the core of long term evolution, LTE, which is the 4G 
technology. OFDM is also used in wi-fi. OFDM is a modulation 
technique, and so it can mean all kinds of different things.
    I think what Mr. Ellis was suggesting is that Qualcomm 
would incorporate some kind of mobile DTV capability into our 
chips. Obviously, we look very hard at the business pros and 
cons of adding a new capability to our chips. Our chips support 
multi-frequency bands, multiple technologies, and we strive to 
pack the most power into our chips at the least cost.
    Mr. Walden. Is that capability you have now today to put 
mobile TV in a chip?
    Mr. Brenner. No, we have looked at it. We are--mobile DTV 
has been talked about--I looked back through my e-mail--since 
at least 2007 was the first announcement about it. We have 
looked at it extensively. We haven't seen a business case for 
it in our end. Whenever we consider putting a new technology 
into our chips, Chairman Walden, it is a very interactive 
process. We go back and forth with the device manufacturers, 
with the carriers and with application providers. We don't just 
make that decision in a vacuum, and we--it is not mature. We 
just don't see demand.
    Mr. Walden. All right. Mr. Ellis, do you want to comment 
briefly on that?
    Mr. Ellis. In essence, if the carriers are not going to pay 
Qualcomm to put this thing in their chip, he is not going to 
make it.
    Mr. Walden. Mr. Brenner?
    Mr. Brenner. That is a little too simple, quite frankly. So 
it is true, someone is going to have to give us a return on our 
investment when we put a new capability into our chips, but 
there is a web of relationships. There are folks who make 
devices, there are folks who come up with applications. We are 
also in a highly competitive market. If I don't put a 
capability--I shouldn't say I. When Qualcomm decides to pass on 
a capability, we consider very carefully the competition. 
Qualcomm is the leading chip set manufacturer, but it is hyper-
competitive, so it is a little too simple to just say the 
carriers won't pay us. We have to see a business case to make a 
rate of return.
    Mr. Walden. I want to go to Dr. Connolly now on a different 
issue. I am trying to get a rough range of what this spectrum 
is worth.
    You say in your testimony that similar spectrum was sold 
for between 3 cents and $3.86 per megahertz POP, as I 
understand it. Is this correct?
    Ms. Connolly. Yes.
    Mr. Walden. With approximately 300 million people in the 
country, that means that even on the low end, each megahertz of 
a licensed spectrum could raise $9 million, and on the high 
end, each megahertz could raise $1 billion. Is that correct?
    Ms. Connolly. Yes.
    Mr. Walden. OK, all right.
    My time has expired. I would turn to the gentlelady, my 
ranking member, Ms. Eshoo, for 5 minutes.
    Ms. Eshoo. Thank you, Mr. Chairman, and I want to thank 
each one of the witnesses. I think you did a terrific job 
coming from where each of you is coming from, but it was really 
valuable, valuable testimony.
    To Mr. Feld, I loved your button and buttonhole analogy. I 
think we will remember that one for a long time. In your view, 
how much spectrum is needed to make the white spaces 
commercially viable for applications like smart grid and RFID 
tagging?
    Mr. Feld. Well, the most important thing is to ensure that 
there is white spaces available, particularly in the largest 
urban markets, because that is what is going to drive economies 
of scale is the ability for people to put this into their 
laptops and their wi-fi routers.
    In terms of an amount, the National Broadband Plan said we 
would like to have 20 megahertz of contiguous pure unlicensed 
spectrum. That would be real nice, but the beauty of unlicensed 
is it's a technology. You don't need that. As long as you have 
at least one or two available channels in the largest urban 
markets and sufficient--by which I mean not directly next to a 
broadcaster so you could use full power, and then sufficient in 
the rest of the country, which I think is not where the 
challenge is. There will be interest in developing and 
investing in this technology.
    Ms. Eshoo. Thank you.
    To Mr. Ellis, is Titan Broadcasting planning to offer 
mobile broadcasting, and what is your assessment of the 
potential market demand for this type of service?
    Mr. Ellis. Yes, we do intend to offer mobile broadcasting 
in our assessment. You know, it depends on whether the consumer 
can actually see our signal on a mobile device.
    So we have to figure out whether you are going to start 
with the handset, which is controlled by the wireless carriers. 
Do you go to laptop, do you go to the N-card device, and how do 
you get the mobile consumer to actually see our signal?
    Ms. Eshoo. You stated in your testimony that you are 
testifying as a broadcaster that may sell of the spectrum of 
some of your stations under the right conditions. Can you tell 
us what the right conditions are, in your view?
    Mr. Ellis. The right price.
    Ms. Eshoo. There you go. Everybody has their price, right? 
And to Mr. Guttman-McCabe, Thank you for your testimony and the 
work that CTIA does.
    The DTV transition freed up spectrum in the 700 megahertz 
band that's been auctioned. But in some cases, has yet to be 
deployed on a commercial basis. I think it's Mr. Barrow that 
has legislation that also mentions as part of the bill that 
there has to be an inventory done.
    I'm concerned about those who have purchased spectrum and 
have yet to use it, 3 years after the auction was completed. So 
while we know that the wireless usage is growing at an 
exponential rate, how do we determine future spectrum needs 
when there is still spectrum sitting unused?
    Mr. Guttman-McCabe. Sure. Thank you, Congresswoman.
    That is sort of a broad question and I will take it 
piecemeal, if you don't mind.
    First of all, while the 700 megahertz auction was completed 
a little while back, it wasn't cleared until about a year ago. 
And it takes time to--Mr. Brenner and Qualcomm and companies 
like that, and Ericcson that do the infrastructure need to make 
sure that this spectrum is available and clear, then they begin 
the process of developing technology to implement on the 
network side and on the----
    Ms. Eshoo. What is the average length of time to prepare 
the spectrum that is bought to bringing it to making use of it 
on the market?
    Mr. Guttman-McCabe. Sure. I guess it depends upon if their 
standards have been developed, but it could be, you know, a 
year to 3 to 4 years. You must keep in mind that these 
companies spend tens of billions of dollars the last two 
auctions and raised $33 billion, so they need to answer to Wall 
Street. They need to have a return on their investment, and 
they do move forward, and they move forward, you know, really 
quickly. In the last 10 years since I have been at CTIA, we 
have gone from analog to digital to third generation and now 
we're looking at fourth generation deployments, all in a 10-
year period.
    As far as your question about how do we determine what the 
future need is in terms of spectrum, whether it's Kleiner 
Perkins in your area or the folks in Silicon Valley or the 
Informa Group, or you could sort of go on and on. They've all 
suggested that there will be upwards of a 35 times increase in 
demand. We've tried to simplify that. I've tried to simplify 
that in my mind, and the simplest example I have is if someone 
came to you and said that California was going to experience a 
35 times increase in the amount of cars on its roads, after 
you've picked yourself up off the floor, I think we would think 
OK, what can we do in terms of driving efficiencies? What do we 
have in terms of new roads planned? And that's what we're 
asking Congress is we can work on the efficiency side of the 
equation. We can implement picocells and femtocells. We need 
help with the roads, and our roads are spectrum. We need help 
preparing for that tremendous increase, which is happening. I 
mean, you say preparing, data traffic doubled from '09 to '10, 
so we're seeing that.
    Ms. Eshoo. Thank you very much.
    Mr. Walden. Thank you. We now go to the vice chair of the 
subcommittee, Mr. Terry.
    Before I do that, Mr. Kinzinger has a document he would 
like to put into the record with unanimous consent from Radio 
Ink regarding radio stations involved in helping residents in 
Joplin after the tornadoes, Clear Channel especially, so----
    Mr. Kinzinger. Thank you.
    Mr. Walden [continuing]. Mr. Kinzinger, without objection 
that will be in the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Walden. Mr. Terry?
    Mr. Terry. Thank you.
    So Mr. Schurz, despite your affinity for Notre Dame----
    Mr. Schurz. Yes, sir.
    Mr. Terry. I think Mr. Ellis probably answered this very 
bluntly, but I think a case has been made that more spectrum is 
needed. TV stations have spectrum and as I said in my opening, 
it is important that there is not a taking of your spectrum, 
that it has to be voluntary. But what will it take to get you--
I am not negotiating here, but you on behalf of others, 
generally. Define voluntary for me. What is it going to take so 
that you would volunteer to give up some of your spectrum?
    Mr. Schurz. The definition of voluntary means that there 
are no negative ramifications for participating or for not 
participating. So I think the FCC can design such an auction. 
My concern principally is that for those people who choose not 
to participate, that you--and kind of the things I chatted 
about in my statement in terms of no one being forced to 
relocate to an inferior spectrum band that all viewers can 
keep, seeing the channels and stations I see now. No station is 
subject to increased interference and that broadcasters should 
be held harmless from the cost of repacking.
    I never heard the term win-win-win-win before today's 
hearing, and I like that term. I think what we are looking for 
is people want to stay in the business. It is don't lose. And 
really, it is not the broadcasters, it is the viewers in our 
communities.
    Let me also add to the don't lose, that if there are 
spectrum fees and other costs, I think that is probably not in 
the spirit of voluntary.
    Mr. Terry. Such as?
    Mr. Schurz. Such as that if we choose not to participate in 
the auction, repacking is involuntary. We understand that. We 
like to have the safeguards and protections on a going forward 
basis so there is no harm to the business and to the viewers in 
communities, but we would--we certainly don't expect or want to 
see increased fees--spectrum fees if we choose not to 
participate.
    Mr. Terry. And how do you answer Dr. Connolly's statement 
that if there isn't some mechanism for--to force holdouts, that 
it will actually degrade the value of the spectrum that may be 
auctioned off?
    Do you agree that that could happen?
    Mr. Schurz. From all the discussions I have seen about the 
way the auction is being considered, and there is no definitive 
auction yet, but there is a lot of discussion. My expectation 
is I think that they will probably find a way that will be 
equitable and maybe you would limit the holdouts.
    The question is, no one is--Mr. Ellis is here because they 
said GU might sell, and he said that--people ask how much 
spectrum, who is selling? No one knows the answer to that 
question.
    Mr. Terry. Dr. Connolly, why don't we work though this a 
little bit more. How do we--how do you see that we can provide 
enough incentives to win-win-win or not lose-win-win, and not 
have a situation where we have to engage in a taking?
    Ms. Connolly. If the incentive--I mean, if the reverse 
auction is correctly designed, the broadcasters will only 
participate if they win. No one is going to participate and not 
win, because--and that is by definition. And they can list 
different prices of which they are willing to do different 
things so they may be willing to do one thing and they offer a 
certain price. They may be completely unwilling to do other 
things, so they offer, you know, a every exorbitant price that 
they know won't be accepted, or simply refuse to participate in 
that auction.
    The costs of any new packaging are, at least from what I 
hear, the FCC is offering to cover those. And so as long as 
what they are bidding on is well specified, then by definition, 
if their bid is accepted, they will win.
    Mr. Terry. Right. But we are talking about--and you look at 
any development and you always see that one little old house on 
the corner, because that person wouldn't sell out.
    Ms. Connolly. And that is why we do need the ability to 
relocate, because they will hold out. And even--well, there is 
a possibility of hold out. There is also the possibility that 
if you--I mean, when you are bidding within a market, you are 
competing against the other broadcasters in that market, so if 
someone is not in the range that they know they are tying to 
empty, they are not true competitors to those in the range that 
they are trying to vacate.
    So by making relocation possible, you might have someone 
say on channel 21 who is willing to give up their location--
their spectrum, go off the air or share or go somewhere else, 
and if someone on channel 40 is unwilling to, then 21 can sell 
their spectrum, you know, their rights to that spectrum and 
then we can move someone to channel 21.
    So it means that more broadcasters within a given market 
will be competing for these bids to vacate spectrum, and by 
having that forced relocation, then the other people outside 
that key band become competitors. So not only is it an issue of 
hold out, but just general competition. The more competition 
there is, the more the bids are going to become true valuations 
for the broadcasters themselves. So it is not just for the one 
hold out, it is a general statement of overall competition in 
the bids.
    Mr. Walden. Thank you. Mr. Dingell, Chairman Emeritus of 
the committee, we turn to you now for 5 minutes.
    Mr. Dingell. Thank you for your courtesy, and I want to 
thank the distinguished gentlewoman from California, Ms. 
Matsui, thank you.
    This is not the first time we have visited this question. 
In earlier hearings, I have expressed my strong doubt that such 
auctions can, in fact, be truly voluntary. A great source of my 
alarm comes from the National Broadband Plan itself, where it 
states at page 79 that ``The government's ability to reclaim, 
clear, and reauction spectrum is the ultimate backstop against 
market failure and is an appropriate tool when the voluntary 
process stalls entirely.'' I would note that we are looking at 
this against a lot of actions by the Commission and the Office 
of Management and Budget, which have taken place without us 
having a real understanding of what spectrum is going where and 
being used by who, and sat upon by who else.
    So this seems to imply that the Commission's action could 
be forcefully taking this spectrum away from broadcasters if 
too few or none at all participate in the voluntary spectrum 
auctions.
    Now to all witnesses, starting with Mr. Schurz, yes or no. 
Would you support such action by the Commission, yes or no?
    Mr. Schurz. Which action?
    Mr. Dingell. Picking and taking the spectrum forcefully 
from broadcasters.
    Mr. Schurz. No.
    Mr. Dingell. Mr. Ellis?
    Mr. Ellis. No.
    Mr. Guttman-McCabe. We support voluntary auctions.
    Mr. Dingell. Ma'am, yes or no?
    Ms. Connolly. Yes.
    Mr. Dingell. You, sir?
    Mr. Brenner. I always talk about voluntary incentive 
auctions.
    Mr. Dingell. And sir?
    Mr. Feld. Voluntary auctions.
    Mr. Dingell. All right. Now to all witnesses again, do you 
agree that broadcasters who are willing to participate in an 
incentive auction should be committed to do so in exchange for 
a fair share of such auctions proceeds, and set the reserve 
price of the spectrum it wishes to auction, yes or no? Mr. 
Schurz?
    Mr. Schurz. Yes.
    Mr. Dingell. Mr. Ellis?
    Mr. Ellis. Yes.
    Mr. Guttman-McCabe. Yes.
    Mr. Dingell. Ma'am, yes or no?
    Ms. Connolly. Who defines fair proceeds?
    Mr. Dingell. Well, I am not quite sure I can, but----
    Ms. Connolly. That is the question, so I would say no 
because I don't think anyone can define that, other than by the 
bid value.
    Mr. Dingell. Thank you. Next witness?
    Mr. Brenner. I am sorry to just raise a quibble here, but 
the use of the term reserve price, I don't quite understand.
    Mr. Dingell. Well, I am assuming the reserve price is the 
price that is fixed by the Commission as the price below which 
no auction would take place and no sale would take place. Yes 
or no?
    Mr. Brenner. OK. Just--can I just clarify, Congressman 
Dingell? The reason why I am asking is normally I have the same 
understanding of a reserve price. I bid in three auctions over 
the years, and there is an aggregate price for the entire 
auction that the auctioneer sets. It has nothing to do with the 
individual bid----
    Mr. Dingell. Time is limited, please, yes or no? I will put 
you down as a no.
    Mr. Brenner. I am not sure.
    Mr. Dingell. Next witness.
    Mr. Feld. Depends on what result you want.
    Mr. Dingell. All right. To all witnesses, in other words, 
if the FCC is overly restrictive in how reauctioned spectrum 
can be used, we will end up with a fine mess on our hands, just 
like the auction of the D Block. Am I correct in that? Starting 
with you, Mr. Schurz.
    Mr. Schurz. Yes.
    Mr. Dingell. Mr. Ellis?
    Mr. Ellis. Yes.
    Mr. Dingell. Next witness?
    Mr. Guttman-McCabe. Yes, you are potentially correct.
    Mr. Dingell. Ma'am, if you please?
    Ms. Connolly. Yes.
    Mr. Dingell. Sir?
    Mr. Brenner. Yes.
    Mr. Dingell. Next witness?
    Mr. Feld. Yes.
    Mr. Dingell. Thank you, ladies and gentlemen.
    Now to all witnesses again, similarly, the goal of any 
incentive auction, in addition to fairness to those who 
surrender the spectrum should be to maximize the revenue to the 
Treasury. Yes or no, starting with Mr. Schurz?
    Mr. Schurz. Yes.
    Mr. Dingell. Mr. Ellis?
    Mr. Ellis. No.
    Mr. Guttman-McCabe. That should be a significant part of 
it, yes.
    Mr. Dingell. Ma'am?
    Ms. Connolly. No.
    Mr. Dingell. Sir?
    Mr. Brenner. Yes, a significant part.
    Mr. Dingell. Last witness?
    Mr. Feld. Absolutely not.
    Mr. Dingell. All right. Now I would like to explore this 
channel relocation just a bit more. Now to Mr. Schurz and 
Ellis, both of you have considerable technical experience as 
broadcasters. Are my concerns about shifting from UHF to VHF 
valid? And I want to say that I have fears that doing so might 
restrict geographic reach of a given broadcaster. Second, I 
think going from UHF to VHF will impair the broadcaster's 
ability to transmit digital signals.
    So are my concerns about shifting from UHF to VHF valid, 
yes or no?
    Mr. Schurz. Yes, I know our company has had specific 
incidences of that, no question.
    Mr. Dingell. Mr. Ellis?
    Mr. Ellis. Yes, VHF does not work.
    Mr. Dingell. Now, again to Mr. Schurz and Mr. Ellis. 
Further, do you believe that reducing a broadcaster's ability 
to transmit digital signals puts it at a disadvantage vis-`-vis 
the other content provider, yes or no?
    Mr. Schurz. Yes, I would agree with that.
    Mr. Dingell. Mr. Ellis?
    Mr. Ellis. Digital means over the air broadcasting only, 
yes, we are at a disadvantage to the wireless providers.
    Mr. Dingell. All right, to all of the witnesses, with Mr. 
Schurz's and Mr. Ellis's response and mine, do you believe it 
is fair to broadcasters to require that they move from the UHF 
band to the VHF band, yes or no, starting with our next 
witness?
    Mr. Guttman-McCabe. I think there is a difference between 
the upper and lower VHF bands, a pretty significant difference, 
and I think, you know, that is a difficult question that we can 
work through as part of this process. There are a large number 
of broadcasters currently operating in both bands.
    Mr. Dingell. You can't say that it is--you can't say 
sitting there that it is fair at this time?
    Mr. Guttman-McCabe. Well, Congressman, there are a large 
number of broadcasters operating in both of those bands at this 
moment and doing well.
    Mr. Dingell. But if they have already shifted--well, we 
will put you down as a no. Next witness, please.
    Mr. Walden. Did you have another witness, Mr. Dingell, that 
was going to----
    Mr. Dingell. I don't----
    Mr. Walden [continuing]. Dare answer, because we are over 
the clock here.
    Mr. Dingell. Well, I am willing to forego--I just want 
everybody to know that we are not walking into any tea party 
here. Thank you for your courtesy.
    Mr. Walden. Although some of us have a time or two.
    Mr. Stearns, we are going to yield to you for 5 minutes.
    Mr. Stearns. Let me ask each of you, and I think this is 
kind of basic to start the question off, and I will just start 
with Mr. Schurz. Do you think before we do any auction off the 
spectrum that we should do an inventory? Just right on down.
    Mr. Schurz. As a businessman, before we determine where we 
need to go, we always start with where we are. Yes, I think an 
inventory is a good idea.
    Mr. Stearns. Mr. Ellis, we should do a spectrum inventory 
first?
    Mr. Ellis. Yes, but I think it can be done in a weekend.
    Mr. Stearns. In a weekend, OK. Next.
    Mr. Ellis. Yes, sir, this is not that complicated.
    Mr. Stearns. OK. Next?
    Mr. Guttman-McCabe. I don't think it needs to be done prior 
to an incentive auction process.
    Mr. Stearns. So your answer is no, OK. Dr. Connolly?
    Ms. Connolly. My answer would be no.
    Mr. Stearns. No. Mr. Brenner?
    Mr. Brenner. No.
    Mr. Stearns. No. Mr. Feld?
    Mr. Feld. No.
    Mr. Stearns. OK. Now let us say we do have a spectrum 
inventory, and you find out, you know, who has what and what 
they use. Do you think it is important in this layout that we 
determine how effectively this spectrum that they have is being 
used and what bands aren't yet deployed, and how long until 
deployment? Is that an important--I mean, some of you don't 
think we should do a spectrum, but it seems to me that if we do 
the spectrum inventory, we could find out how efficiently it is 
being used. I think members of Congress want to know that. Mr. 
Schurz, do you agree with that, that if we did a spectrum 
inventory we would want to find out how efficiently it is being 
used and what bands aren't yet deployed and how long until they 
are deployed?
    Mr. Schurz. I think that what we are looking at right now 
is not only the total amount of spectrum, but no question how 
efficiently it is used. I think there is a question on how one 
would define that. Broadcasters have 6 megahertz. We use the 6 
megahertz. So there could be a lot of quibbling over the 
details, but yes, I think it is a good idea.
    Mr. Stearns. Mr. Ellis?
    Mr. Ellis. As a prudent business man, I think you should 
always know what--how you are using your product, yes.
    Mr. Stearns. OK.
    Mr. Guttman-McCabe. Yes, our concern with an inventory is 
that you would--a suggestion that you might need to do it 
before you move forward with incentive auctions, and so----
    Mr. Stearns. That is what I am asking.
    Mr. Guttman-McCabe. Yes, so we believe a solid legitimate 
inventory of the government side of the equation, the 
commercial side is fine----
    Mr. Stearns. Which would include how effectively it is 
being used.
    Mr. Guttman-McCabe. Yes, although I think we would all 
share concerns about who would define that and how it would be 
defined. I mean, in our case----
    Mr. Stearns. Is it hard to define?
    Mr. Guttman-McCabe. Yes.
    Mr. Stearns. OK. Dr. Connolly?
    Ms. Connolly. I agree complete that I have nothing against 
doing an inventory and trying----
    Mr. Stearns. You folks have said no, but----
    Ms. Connolly. No, but I disagree with conditioning----
    Mr. Stearns. I think it is axiomatic, trying to decide how 
efficiently it is being used and what bands are yet deployed 
and how long. I think those are important questions we should 
know.
    Ms. Connolly. But I would not condition the incentive 
auctions on doing that first, because I know that that can take 
years, and the value of the spectrum to our economy----
    Mr. Stearns. Mr. Ellis says it can take a weekend.
    Ms. Connolly. Well, I don't know if he has worked in the 
government.
    Mr. Ellis. I am definitely not working in government.
    Mr. Stearns. Touche. All right, Mr. Brenner?
    Mr. Ellis. If I could----
    Mr. Stearns. Mr. Brenner first.
    Mr. Brenner. So I want to be clear, Congressman Stearns, 
there should be an inventory and we should know----
    Mr. Stearns. But you said no.
    Mr. Brenner. I don't think we should hold up the auction 
process waiting because I am concerned that it will take 
forever, but just----
    Mr. Stearns. How can you auction off something you don't 
know anything about?
    Mr. Brenner. Well, we know--we are going to auction off 
spectrum that we know----
    Mr. Stearns. But don't you want to know how efficiently it 
is being used, by whom, and what bands aren't yet deployed and 
how long until--wouldn't you want to know that?
    Mr. Brenner. So Congressman, when I advise our management, 
I give them a presentation once a quarter or once every two 
quarters on new spectrum bands, what they are being used for, 
what the likely time period would be for an auction, so I think 
those facts are known. What isn't known is there are hundreds 
of thousands of FCC licensees across a whole range of services, 
ranging from private radio services, trucking companies, taxi 
cab companies, and we should find out if they are using the 
spectrum on an ongoing basis, and if they are not, let us get 
it back. I totally agree with you on that.
    Mr. Stearns. OK, Mr. Feld?
    Mr. Feld. Just to clarify, because of the properties of the 
broadcast bands, it is pretty easy to say getting more of this 
stuff out there for use--for a number of different uses is a 
good thing. I don't need an inventory to tell me I would love 
some of that stuff. The inventory, however, is extremely useful 
both on saying where else is there useful spectrum, and where 
are the other services that are in the band, which just aren't 
the unlicensed. It is also wireless microphones, low power 
television translated, a whole bunch of things. Where are those 
going to land if we start to repack the band? So don't need it 
to tell me I want more spectrum out there, but I do need it for 
spectrum planning.
    Mr. Stearns. Thank you, Mr. Chairman.
    Mr. Walden. Thank you, Mr. Stearns. Now we will go to the 
gentlelady from California, Ms. Matsui for 5 minutes.
    Ms. Matsui. Thank you, Mr. Chairman.
    As I mentioned in my opening statement, I believe the FCC 
should have the flexibility to structure and conduct incentive 
auctions. Dr. Connolly, you stressed in your testimony that the 
FCC must have a great deal of flexibility to design and 
implement incentive auctions. In granting FCC this new 
authority, how should Congress balance the need for FCC 
flexibility while providing some legislative certainty to 
ensure that there is enough participation from existing 
licensees to ensure successful auctions, and these auctions 
would bring about the maximum value and public interest 
benefits for our consumers?
    Ms. Connolly. That is a very interesting question. I am not 
sure that there is anything that Congress could do to guarantee 
that people will come to the table. They will come to the table 
if it is in their incentive, and I think that that is why the 
FCC should be allowed to have these incentive auctions. I can't 
imagine that putting restrictions on the auction would somehow 
increase the interest in selling off--or being willing to 
vacate certain spectrum. I think if anything, it would decrease 
it. So I cannot imagine what Congress could put in there that 
would somehow increase the desire of the broadcasters to sell 
these rights.
    Ms. Matsui. So you are essentially saying that the 
marketplace would take care of this, and that therefore even 
though we have oversight, that you believe we should be a light 
touch, some principles, and that is it?
    Ms. Connolly. Yes, but moreover, I think that if the goal 
is to make sure that the auction is as efficient as possible, 
any touches are going to make it less efficient.
    Ms. Matsui. But could you balance out, though, the value as 
far as dollar value plus the public interest?
    Ms. Connolly. I think what would maximize the dollar value 
is also what maximizes the public interest in this case. Now 
there are tradeoffs. For example, when it is decided what are 
the bids that win on both sides, the revenue is based on the 
different demand curves, how much the clients--and how much 
demand. They are not going to choose a price that clears 
everything 100 percent, right, so that is a decision that will 
affect how much megahertz is repurposed, and it will also 
affect how much revenue is given to the government.
    So that will be a call to the extent that they have a 
target of 120 megahertz, I think that gives a certain amount of 
a restriction there in terms of how far they are likely to go. 
But I have had enough experience with auctions to see that, you 
know, anytime additional conditions are put on the--there are 
very strong consequences, and I would say D Block is a very 
good example of that.
    Ms. Matsui. OK, thank you.
    President Obama set out a plan to create a wireless 
innovation fund of $3 billion funded through spectrum proceeds, 
which would go towards research and development of emerging 
wireless technologies and applications. This question is for 
Mr. Guttman-McCabe and Mr. Brenner. We all know that R&D is 
essential to keeping America competitive. In the context of 
spectrum, what does this mean for your industry and its ability 
to develop the next wireless technologies and applications?
    Mr. Guttman-McCabe. Sure. Thank you, Congresswoman.
    CTIA has a large number of members who invest billions, if 
not tens of billions of dollars each year, and Mr. Brenner will 
talk a little bit about his company who is a member. We tend to 
try to do our best to facilitate that in the private sector, 
and we believe there are probably two ways that Congress could 
significantly help that. One is the purpose of this hearing 
today, to talk about getting more spectrum to market and 
funding the network infrastructure, such that people want to 
feel comfortable putting R&D dollars to work. The second is--
and it is something that has been proposed by you and Ranking 
Member Eshoo and Congressman Stearns, and that is taking the 
R&D tax credit and making it permanent. Providing the ability 
for companies like Qualcomm and others to say hey, we have got 
a future that we understand that makes sense, and we are not 
revisiting this every couple years. And for us, that sort of 
making that tax credit permanent will provide a heck of an 
incentive for our industry.
    The last thing that I would add, which we have just 
discovered recently at CTIA, is we talk a lot about R&D within 
the United States, and I think we focus on U.S. companies, 
which is key and important, companies like Qualcomm. But what 
we have learned is because we have become the hub, the 
epicenter of wireless, whether it is the apps world or the 
network world or the device world, we are finding foreign 
companies are moving their R&D facilities here into the United 
States, and we are finding more and more foreign-based 
companies with R&D facilities in California, in Texas, and in 
other States. And we think that is because we have the right 
ecosystem to facilitate that.
    Ms. Matsui. Right. I am sorry, Mr. Brenner, I am out of 
time, but a quick comment from you?
    Mr. Brenner. Well, research and development is synonymous 
with Qualcomm. As I said in my testimony, we spend $2 billion 
every year on research and development, over 20 cents of every 
dollar that we make in revenue, so we are constantly 
researching new technologies. It is essential.
    Ms. Matsui. Thank you very much, and I know I have really 
run out of time. Thank you, Mr. Chairman.
    Mr. Walden. It is all right, we want to get the answers. 
Thank you, Ms. Matsui.
    We will go now to Ms. Blackburn. Thank you for being here, 
and we look forward to your questions.
    Mrs. Blackburn. Thank you, Mr. Chairman, and thank you to 
our witnesses, and thank you for your patience.
    I love hearing you all talk about innovation, and I am glad 
we just touched on the R&D tax credit, because the innovators 
that I am talking to in Tennessee, some of them I have been 
working with for years because I ran the Tennessee Film, 
Entertainment, Music and Interactive Technologies component of 
our State government at one point in my career, and innovators 
want that certainty, and regulatory uncertainty right now is 
just a bear, and they talk about it to us quite a bit.
    Listening to you all, I would imagine each and every one of 
you knows somebody who is innovating some new application or 
attachment for the broadband, and they are waiting to see what 
is going to happen with spectrum. So let us just say Congress 
sits on their hands and that nothing is done. Mr. Brenner, let 
me just throw this to you. What do you think would happen if we 
see this spectrum crunch get worse, because we know that 
capacity demand is outpacing the capacity, and if Congress 
doesn't free up some of the spectrum for commercial broadband, 
what do you see that impact being on the economy and on jobs?
    Mr. Brenner. It would be extremely detrimental impact on 
the economy and jobs, Congresswoman Blackburn. I don't think 
that there is--the world is going to end tomorrow or the next 
day, but I think the FCC and the broadband plan did a very good 
job of laying out short-term, medium-term, and long-term steps 
and I think they have pretty much proven in a--their white 
paper that by 2014, we are going to have a serious problem.
    What could happen? We could have basically the effect of 
brownouts. The devices won't work all the time. Your devices 
won't work wherever you go. That is obviously a problem today. 
The carriers are spending a fortune, billions of dollars every 
year. We almost take for granted to provide better service and 
better coverage. We are spending, as I say, billions of dollars 
inventing more technologies. That whole ecosystem will slow 
down and will ultimately stop, and then also, from an 
international point of view, I was in Canada yesterday. We are 
actually ahead of the Canadians, which we weren't 2 years ago. 
We are ahead of the Europeans with our mobile systems and the 
Asians, and we won't be if we don't have enough licensed 
spectrum coming online.
    Mrs. Blackburn. You know, I find it so interesting when you 
equate it to the brownouts, because so many of our 
entertainment industry innovators in the spectrum have become 
financial service innovators and healthcare delivery system 
innovators, and we are seeing a tremendous amount of parallels, 
if you will, in those industries. And I know that is something 
that they bring forward to us all the time is wanting the 
certainty of the availability of that spectrum.
    Mr. Guttman?
    Mr. Guttman-McCabe. Yes, Congresswoman, just--I would point 
you to an article, a kind of timely article in the Wall Street 
Journal this week that talked about India and the impact of not 
bringing enough spectrum has had on the Indian market. I think 
we all think of India as a really rapidly emerging market, and 
yet in the last 2 years, because of the failure to bring 
additional spectrum to market, their capital expenditures have 
gone down 42 percent, and they said that by 2015 they will not 
be able to serve 1/3 of their mobile broadband customers, which 
could have a 1 percent impact on Indian GDP.
    So the article ties it directly to not bringing spectrum 
and not allowing these companies to really--to move forward. 
And that is a macro level, but I think it is illustrative.
    Mrs. Blackburn. OK. Mr. Ellis?
    Mr. Ellis. I do not think it is a spectrum problem; I think 
it is an architecture problem. The one-to-one architecture of 
the wireless industry, you know, is always going to have a 
problem, no matter how much spectrum. If you--if eventually you 
do run out of spectrum, either because they don't get it now or 
they don't get the next load they are going to need later, what 
is going to--the solution to this is a partnership between 
broadcasters and wireless. We have a very efficient methodology 
for delivering, you know, high content video. They have a very 
inefficient methodology. The two of us could work some great 
things together.
    Mrs. Blackburn. OK. Dr. Connolly, I have got just 30 
seconds left. You have talked around the issue of the auctions, 
the incentive auctions, and I agree with your comment about the 
D Block. We put so many restrictions on that by the time the 
FCC finished, nobody wanted it. I mean, it is lying fallow.
    So in your perfect world, what would those conditions for a 
spectrum auction be to see revenue to the Treasury, and then 
affordability to the private sector so that innovation is 
carried forward on this spectrum? So if you were designing it, 
what would you say it needed to be?
    Ms. Connolly. I would not put conditions.
    Mrs. Blackburn. No conditions?
    Ms. Connolly. That is my personal.
    Mrs. Blackburn. OK, and I appreciate that because that is 
what we need to hear, because that is what we want to do.
    I think we all agree that in a 21st century economy, making 
certain that the creative economy has the space in which to 
work and expand, and knowing that what you all are sitting here 
talking about and representing today touches every economic 
sector in this country.
    When you look at my district in Tennessee, the efficiencies 
that have been derived for small business manufacturing 
primarily have come through looking at the advances that have 
taken place around spectrum. The auto industry, the 
entertainment industry, the healthcare industry, the financial 
services industry, the defense technologies, the list goes on 
and on and on. So I appreciate that, and I am over my time and 
I yield back.
    Mr. Walden. Thank the gentlelady.
    Now go the gentleman from Illinois, Mr. Rush, for 5 
minutes.
    Mr. Rush. Thank you, Mr. Chairman. I have only a few 
minutes to ask questions, so I am going to ask questions of all 
the panelists. If you could respond by a yes or a no, then I 
have a second question I would like to ask you also.
    The FCC's record on auctions as it relates to minority, 
women, and small business success has left much to be desired. 
In fact, that record has led former FCC Commissioner Edelstein 
to conclude that auction results have been appalling in terms 
of gains that minority, women, and rural carrier-owned 
businesses have made as wireless licensees. During the AWS 3 
auctions, for example, large incumbents with deep pockets 
walked away with almost 70 percent of the licenses. Can the FCC 
design incentive auctions in a way using bidding credits, tzx 
incentives, or other mechanisms to increase these appalling 
numbers and indemnify broadcasters who relocate? A simple yes 
or no, beginning with Mr. Schurz.
    Mr. Schurz. That is a complicated question. I think you 
will see less diversity in terms of ownership, and I think you 
will also see--I think you will see as a part of the repacking 
the Hispanic community, one in three watches television over 
the air, so viewers will be hurt----
    Mr. Rush. You can't give me a yes or a no?
    Mr. Schurz. I will go with yes.
    Mr. Rush. Yes. Mr. Ellis?
    Mr. Ellis. Was the question can they design it so----
    Mr. Rush. Yes.
    Mr. Ellis. Yes.
    Mr. Guttman-McCabe. I think that is possible, and I--
Congressman, I don't know if you saw this morning, but a letter 
came in from the NAACP and Rainbow Push and a number of 
Hispanic groups all supporting--10 organizations in total 
supporting incentive auctions.
    Mr. Rush. Dr. Connolly?
    Ms. Connolly. May I ask clarification? You are asking can 
it be done to help diversity among licensees or among those who 
are receiving the services?
    Mr. Rush. The licensees, expand the pool of licensees.
    Ms. Connolly. It can be done, but it can be done very 
poorly, and we have had evidence of that before.
    Mr. Rush. It can be done better?
    Ms. Connolly. I would argue that it is----
    Mr. Rush. My time----
    Ms. Connolly. Scale matters here. Scale matters here. I 
don't know that that should be the goal.
    Mr. Rush. Can you give a yes or a no? Mr. Brenner?
    Mr. Brenner. I think it is possible. I think Dr. Connolly's 
point, which I think is a fair one, is this is a very capital-
intensive business for wireless business, so access to capital 
is a huge determinant in who can bid in an auction and who can 
win, but is it possible? Yes.
    Mr. Rush. It can be done?
    Mr. Brenner. It can be done.
    Mr. Rush. Yes.
    Mr. Feld. One of the great advantages of the white spaces 
is that it allows women and minority-owned businesses to get 
access to spectrum, which is why so many civil rights 
organizations supported us and white spaces. With that said, I 
absolutely agree, the FCC can and should do a better job in 
making sure that women and minority-owned businesses have 
greater opportunity in licenses at auction.
    Mr. Rush. OK. Well, let me ask you this other question. Can 
the FCC design incentive auctions in a way that increases 
minority, women, rural ownership, entices enough broadcasters 
to relocate, and also generates sufficient funds to pay for a 
national public safety network? Yes or no?
    Mr. Schurz. I think the answer to that is yes. I mean, you 
are talking about auction design.
    Mr. Ellis. Yes.
    Mr. Guttman-McCabe. I think it is possible, and I think the 
question about funding a public safety network is going to be 
one that is hashed out with you and others in this committee, 
and I think that is a difficult question that is going to take 
a lot of thought.
    Ms. Connolly. It is a possibility to do.
    Mr. Rush. All right.
    Mr. Brenner. Yes, it is possible.
    Mr. Feld. Yes, and they ought to.
    Mr. Rush. All right. Could incentive auctions create 
additional unintended consequences and problems?
    Mr. Schurz. Yes, no question about it.
    Mr. Ellis. Yes. Solvable, but yes.
    Mr. Guttman-McCabe. Not if done properly.
    Ms. Connolly. I think they would be minor, relative to 
potential--well, they would be inconsequential, relative to the 
gains.
    Mr. Brenner. I think that they will be a huge success.
    Mr. Feld. I think that they are complicated. We don't know 
what the best model is, which is why we need to proceed 
cautiously and give the experts flexibility.
    Mr. Rush. All right. Mr. McCabe, give me some examples of 
unintended problems that might occur under incentive auctions?
    Mr. Guttman-McCabe. Well, I think we have talked at length 
about making sure that we don't try to overly dictate what the 
FCC can and should do here. I think we have seen that it is not 
just the D Block. We have seen it with the C Block and other 
bands of spectrum that have been auctioned, so I think that is 
an unintended consequence for the auction as a whole.
    I think with regard to broadcasters, I think we just have 
to be considerate and think through the process and make it 
something that incentivizes them. It is in our interest on the 
wireless side for the broadcasters to have an incentive to 
participate, and that is what we want. We want them to 
participate. We believe it can be wildly successful, and we 
believe we can't miss this opportunity. We have seen Germany 
and United Kingdom and France and Italy and Spain and South 
Korea and Japan have all identified spectrum for commercial 
mobile purposes and are bringing it to market. We can't fall 
behind.
    Mr. Rush. Mr. Chairman, I thank you. You have been very 
generous with the time you have allotted me.
    Mr. Walden. Thank you, Mr. Rush, for your questions, and 
panelists for your answers.
    We go now to Mr. Latta for 5 minutes.
    Mr. Latta. Thank you very much, Mr. Chairman. I appreciate 
it. To our panel, thanks very much for being here today. Some 
of the questions I would just like to follow up to some of the 
other members who were already asked today.
    If I could, Mr. Guttman, if I could start. We were talking 
a little bit about the ramifications if there isn't a voluntary 
auction out there, and you were talking about what happened in 
India. In this country, how many jobs would be affected or how 
many jobs do you predict that wouldn't be created if we didn't 
have this auction?
    Mr. Guttman-McCabe. Sure. So we have seen numbers between 
100,000 and 200,000 new jobs if we can move forward with 
incentive auction legislation, and that is sort of direct 
employment that we looked at and viewed. But I think if you 
look at sort of what we call the verticals, healthcare and 
smart grid, intelligent transportation and education and areas 
like that, you are talking about a ripple effect that is almost 
immeasurable. We really do strongly believe, you know, no 
matter who you look at who is measuring this, that the change 
that is going to happen in this ecosystem is staggering. Two 
years ago, 3 years ago the hottest selling handset was the 
Motorola Razr. We didn't have application stores. We barely had 
third generation, certainly not fourth generation. We didn't 
have tablets. I think when we looked at--Kleiner Perkins study 
looked at the first three quarters after the launch of the 
iPod, and they went from zero to one million, the first three 
quarters after the launch of the iPhone went from zero to four 
million. The first three quarters of the iPad went from zero to 
14 million. And so we are seeing a ramp up that is almost 
vertical, and I--it is almost impossible to put a number on the 
value and the jobs and the money that will flow to the 
economy----
    Mr. Latta. That is going to be my next question. Is there 
any way to predict what that value would be in dollars?
    Mr. Guttman-McCabe. Well, we have seen numbers that have 
come out of the Administration from Mr. Summers that have said 
for every dollar that goes in in terms of investment, it 
results in $7 to $10 in increased GDP. And so that is a 
multiplier that we think is probably a legitimate number. Dr. 
Connolly might know--she just gave me that look. But you know, 
there clearly is a multiplier effect, and we have seen it 
measured at 7 to $10 for every dollar in investment that----
    Mr. Latta. I see that Mr. Ellis would like to make a 
statement on this.
    Mr. Ellis. I am just wondering if anybody is going to hold 
him to these numbers.
    Mr. Latta. I beg your pardon?
    Mr. Ellis. Is anybody going to hold him to these numbers?
    Mr. Guttman-McCabe. Every time we see them, they go up, and 
so I will say yes. I will be willing to suggest--I mean, Cisco 
put out its networking numbers today, and they went up again. 
We have got a company here that sells solutions to spectrum 
problems saying we need to bring more spectrum to market. If 
that isn't the greatest illustration that we need some help, I 
am not sure what is.
    Mr. Latta. Well I know Dr. Connolly--Mr. Chairman had asked 
initially what that value might be, and you had thrown out a 
low end and a high end. Could you say what those are again?
    Ms. Connolly. Well, I had--the megahertz POP values that I 
was looking at were between $.03 and $3.86 per megahertz POP. 
That is purely based on the 700 auction, but if you aggregate 
that up, that means that based on a 700 megahertz auction, 1 
megahertz at the lowest end would generate $9 million and at 
the highest end could generate $1 billion, approximately.
    Mr. Latta. Mr. Brenner? Please turn on your mic.
    Mr. Brenner. We need to multiply that by the number of 
megahertz that would be auctioned, so if we are auctioning 120 
megahertz, Dr. Connolly's high number is tens of billions of 
dollars, 30, 40, $50 billion in auction revenues. I don't know 
if that is going to happen, but you know, there is no question 
that there is huge demand for spectrum, and if there is an 
auction, there will be people with a lot of money bidding to 
get more spectrum.
    Mr. Latta. Mr. Schurz?
    Mr. Schurz. The 120 megahertz number has been thrown 
around, and I just want to give a little perspective. That was 
in the National Broadband Plan, but that plan did not envision 
Canada or Mexico, and so the amount of spectrum that you will 
successfully get out of broadcast spectrum I would argue is 
significantly less. There are some issues with the plan, and so 
there are a lot of numbers going around. I just want to make 
certain that Canada and Mexico do impact spectrum in the United 
States.
    Mr. Latta. Mr. Feld?
    Mr. Feld. I just want to emphasize, we can't know today how 
many broadcasters will want to participate in voluntary 
auction, but when we talk about both meeting our spectrum 
demand and the value that is being contributed to the economy, 
it is important to consider the value of the unlicensed and the 
white spaces as well. There are a lot of uses that individually 
don't take up a lot of bandwidth, are a poor fit with licensed, 
and when we are thinking about how we are going to meet the 
spectrum demand and the spectrum crunch, particularly when we 
are talking about machine to machine, smart grid, other uses 
where it is really not necessarily a good fit with a licensed 
service. The ability to offload all that traffic to the 
unlicensed and save the licensed space with the higher 
bandwidth uses that people are looking at is critical to 
meeting our spectrum needs.
    Mr. Latta. Thank you. Mr. Chairman, I see my time has 
expired and I yield back.
    Mr. Walden. I thank the gentleman from Ohio.
    I would now recognize the gentleman from Illinois, Mr. 
Kinzinger.
    Mr. Kinzinger. Thank you, Mr. Chairman. It is good to be 
last, always, because you guys know you get to go home maybe, 
unless somebody else shows up.
    I don't have a whole lot to ask because most of it has 
already been asked, but to me, in a way as I am kind of really 
getting to figure this out, it seems like not having the 
voluntary auctions would kind of be a lose-lose. It really 
reduces flexibility for everybody, really, on all sides of this 
debate.
    Let us say we don't move on anything like a voluntary 
auction, we just keep status quo. I know this has been asked in 
different ways, but just very briefly, I will give all six of 
you a chance just to say, you know, what do you see as a 
scenario? So you know, typical Congress, let us say we don't do 
anything and we find ourselves where we are now. What is kind 
of the long-term--and I know there was discussion about 
brownouts, you know, and--where do we see this? We can start 
over here at the--my left.
    Mr. Schurz. I think there is no question that demand is 
growing. I will say that we are in smaller markets, and the 
capacity crunch really does not exist in our markets. So in the 
smaller and rural markets, you won't--it is not a pressing 
issue. I think what you will see is you will see great 
innovation by broadcasters. You are seeing it today. It is 2 
years since the digital transition. You will see more.
    Mr. Ellis. About half my stations are in small markets. 
Same answer as Todd. Half of our stations are in major markets, 
Los Angeles, San Francisco, Boston, New York/Philly corridor. I 
think if there is no auction, you know, and we are allowed to 
do so, we will approach the wireless companies to create 
partnerships where they can offload some of their high 
bandwidth content, you know, their broadcasting type content--
--
    Mr. Kinzinger. So you are saying----
    Mr. Ellis [continuing]. And make partnerships out of that. 
Yes, indeed.
    Mr. Guttman-McCabe. You know, I think there will be 
partnerships. There are partnerships. But I don't think we 
should take away from this notion that the broadcast 
architecture is a perfect architecture. It is great if you want 
to watch the Super Bowl when the broadcasters want to deliver 
the Super Bowl, which I do, and that is one of the times I do. 
But all of you and all of our customers want their content when 
they want it, and so whether it is large or small, I disagree 
strongly with the notion that--I mean, some of our most active 
members on the spectrum issue are smaller carriers who want 
wider channels, who want to be able to deliver in rural areas 
what the large carriers want to deliver in urban areas. They 
want broad, wide channels to deliver the video content, to 
deliver the Powerpoints and things like that. So I strongly, 
strongly urge, with all due speed that Congress consider 
incentive auctions. I don't see----
    Mr. Kinzinger. Well, and it seems like it would be creating 
kind of a--as I see it, it creates a market mechanism for 
broadcasters or anybody really to make a decision which best 
suits them at that moment, is just kind in general how it 
seems.
    Dr. Connolly?
    Ms. Connolly. I agree. This--the incentive auction is, I 
think the most expedient way that I see in front of us to 
achieve something that almost everyone believes has huge value. 
So not doing it, then you are delaying any gains that your 
economy could have, and as a broadcaster, I would worry that 
other mechanisms might be used to get that spectrum that would 
not be as advantageous to them, which is something that the 
broadcasters--I think is why the incentive auction is good for 
them, because they can win from it.
    Mr. Brenner. So to round out my prior answer where I 
referred to brownouts, I mean, what is going to happen if 
Congress doesn't pass the legislation is the folks who do have 
spectrum are going to continue to face this exploding demand, 
and they are going to have to ration capacity. They are going 
to have to assign the bandwidth in some way, and there are only 
two ways to do it. That is to raise prices, and so it just goes 
to the customers who are willing to pay more, and that is a bad 
thing for the economy, or there will be this diminution in 
service. I don't think there is a third alternative.
    Mr. Kinzinger. OK, and just quickly?
    Mr. Feld. There is a fine line between taking a problem 
seriously and panicking. I don't think we need to panic here. I 
do not believe we are going to have significant brownouts if we 
don't pass legislation, and I believe that--we have seen a lot 
of innovation. We have seen a lot of cleverness that has gone 
on as people have confronted technical challenges. That is one 
of the things that actually makes this country innovative and 
great is that when we hit things like what looks like a wall on 
spectrum capacity, we find ways around that.
    Mr. Kinzinger. Yes, we are pretty good at that, aren't we? 
We are good at being innovative, that is what is amazing. I 
also, just to wrap up, I serve a fairly rural district, and you 
know, one of the things I am obviously concerned about is 
continuing to deploy broadband to those folks that are 
underserved, just simply by fact that they don't live around a 
lot of other people. With that, I yield back.
    Mr. Walden. Thank the gentleman for his questions. I thank 
the panelists for their answers. Your testimony has been very 
helpful to our committee to hear from all of you.
    I have asked unanimous consent to submit three letters to 
the record, a letter from 112 leading economists, including Dr. 
Connolly, to President Obama supporting incentive auctions, a 
letter from 10 groups representing minority interests 
supporting incentive auctions, and a letter from 33 IT 
equipment innovators supporting incentive auctions. Without 
objection, they will be entered into our record.
    [The information appears at the conclusion of the hearing.]
    Mr. Walden. Again, I thank all of our witnesses today and 
in the past panels. We intend to tackle this issue head-on and 
in a bipartisan and thoughtful way. I appreciate your input and 
that of others in the audience, and others watching. We intend 
to get this right, not only for our country to grow jobs and 
innovation, but also for public safety, to make sure that they 
have an interoperable network taxpayers can afford and that 
they can always rely upon.
    So thank you all for your participation. We stand 
adjourned.
    [Whereupon, at 2:35 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

               Prepared statement of Hon. Edolphus Towns

    Thank you, Chairman Walden and Ranking Member Eshoo. I am 
very pleased that the Sub Committee is holding this hearing. It 
is very important to get the full perspective on spectrum so we 
can move forward on bipartisan legislation to address this 
issue.
    I am a strong supporter of President Obama's goal of 
improving the way this country uses its spectrum and freeing up 
more for mobile broadband and a national public safety network. 
Incentive auction authority is an efficient tool to put 
spectrum in the hands of those companies that most want it to 
roll out the latest most innovative devices our families will 
rely on in the future. It is critically important that the FCC, 
given its deep expertise in conducting high quality auction, be 
given wide discretion in how it is designed and implemented.
    I am encouraged by the energy of the high tech community 
and the response from the broadcasting community to see this 
through. My constituents still rely on free over the air 
television, and mobile broadcasting has shown particular 
promise in disaster situations. I am concerned that 
opportunities for smaller and minority focused broadcasting may 
be hurt if the smaller broadcasters are first to take advantage 
of the incentive auctions. However, the need for spectrum for 
mobile broadband by ever more users is undeniable, as FCC data 
has shown. I would like to hear from our witnesses whether and 
how both of their preferred outcomes can be achieved.
    Again, I thank the Subcommittee for tackling this subject 
in a broad and comprehensive manner. I look forward to working 
with my colleagues on these and other issues as we move forward 
in this Congress.
    Thank you and I yield back the balance of my time.






                                 
